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Report: Rick Gates Testifying Against Ex-Boss Paul Manafort; Gates Says Emails from Manafort Directed Movement of Secret Money; Gates Testifies That He Committed Crimes Alongside Manafort; "Wall Street Journal" Says Michael Cohen Under Investigation for Tax Fraud; Three Things to Watch in Upcoming Primaries Today; Manafort Trial Shows Reality of a Loyalist Flipping in Mueller's Probe. Aired 2-2:30p ET

Aired August 7, 2018 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[14:00:00] BROOKE BALDWIN, CNN HOST: Hi there, I'm Brooke Baldwin, you're watching CNN. Right now, prosecutors getting done to the nitty-gritty of their case against Paul Manafort and very shortly the defense will get its turn to cross-examine the prosecution's star witness. Manafort's former deputy Rick Gates. Testimony today has focused on the complex system of shell companies and foreign bank accounts that Manafort allegedly used to hide millions of dollars. Money he earned from consulting work for pro-Russian politicians in Ukraine.

Rick Gates testified about his boss's money troubles, 2015 and 2016, Gates admitted to supplying false information to help Manafort get bank loans. Earlier the prosecution presented e-mails showing Manafort directing Gates to move that money around. Let's start with our CNN reporter, Kara Scannell, outside that courthouse in Alexandria, Virginia. Talk to me, he's not on cross-examination yet, correct?

KARA SCANNELL, CNN REPORTER: That's right, Brooke. Gates has been fielding questions from prosecutors for nearly three hours. Just resumed from a lunch break and that's expected to continue for a little bit longer, but the judge has been pressing the prosecutors to move along with their case, so I think cross-examination will begin any time now. This morning, though, Gates has been measured, calm and matter of fact as he connected the dots for jurors about the alleged scheme he participated in. He described how Manafort was paid by Ukrainian businessmen for political work. How he and Manafort met with Cypriote lawyers to set up bank accounts. How he was constantly fielding requests from Manafort to wire money and specifically how he also wired money to some of these vendors that we heard about last week, including the clothing people that ostrich jacket.

He explained how those money flows went there. So, he's connecting the dots for prosecutors. He also explained how he helped falsify documents at Manafort's request for the banks so Manafort could get mortgages and he also explained how they falsified his tax returns, explaining how they moved things that should have been income to loans and back again using back dated documents.

At one point, Manafort was under financial duress. The contracts to the Ukrainian politicians had dried up. Prosecutors showed an e-mail of Manafort sending to Gates which Manafort says WTF, we need to discuss options. This is a disaster. He's instructing Gates to help him come up with some solution with the accountants about how to fix his tax returns so he doesn't get hit with quite a large of bill as he was expecting. So, Gates' testimony is continuing and we expected the cross-examination to begin in a little bit.

BALDWIN: All right. Thank you for that. I have some great legal minds seated next to me, we have now former federal prosecutor, Berit Berger, former head prosecutor from Morris County, New Jersey, Robert Bianchi and federal and white-collar criminal defense attorney Caroline Polisi. Let's look ahead to when Gates is in the hot seat and is cross-examined. Let's start with you, Berit. Won't the defense basically say this is the admitted liar here. This is the master mind. They're going to pin this all on him. This is the reason -- this is the guy who should be on trial, right?

BERIT BERGER, FORMER FEDERAL PROSECUTOR: That's exactly right. I mean, I would expect them to have a whole line of questioning where they said, look, you are an admitted liar. You pled guilty. You sat down face to face with investigators and you lied to them and they believed you, basically trying to insinuate that he is continuing to lie, he's lying to the jury and this is all his fault. This is a common defense argument in these kinds of cases. I think what would be a hallmark of a good cooperator is somebody who would stay calm and stick to the facts. Not make it personal and what Gates has going for him here is this is not just his testimony. His testimony is only valuable in the sense that it is corroborated by all the other witnesses that testified in the trial and by the documents that have come in.

BALDWIN: Caroline is nodding.

CAROLINE POLISI, FEDERAL AND WHITE-COLLAR CRIMINAL DEFENSE ATTORNEY: It might work. It's a tried and true defense tactic to say you lied initially. He pleaded guilty to lying to federal investigators 18 USC 1001 violations which is in of itself lying. The old line is you lied then, why aren't you lying now? But the fact is we heard from Cindy La Port yesterday who is the accountant and she testified that in many instances she was dealing directly with Manafort to falsify these documents, to make it look like he had less taxable income and creating these sham loans so that he was saved essentially $500,000 in taxes.

BALDWIN: So, Bob, you essentially have the admitted liar versus the accused liar. This is how one of our legal analysis said. Who are jurors most likely to believe?

ROBERT BIANCHI, FORMER HEAD PROSECUTOR FROM MORRIS COUNTY, NEW JERSEY: Brooke, as a prosecutor you have to be careful who you put on the stand. When you sleep with dogs, you get fleas. And the only issue is will these fleas kill the dog?

[14:05:00] They had as Carolyn pointed out, a great paper case going in there. They have direct evidence. So, by putting Gates they made Gates now the centerpiece of defense. Here is how this works out in summation, it's very important. They'll argue, ladies and gentlemen of the jury, all that stuff they showed you about the accountants and bookkeeper, they knew that wasn't enough and that's why they had to put Rick Gates on the stand to prove their case otherwise they wouldn't put him on.

You're going to convict my client, a guy who lied to the FBI, all the motive in the world to lie against him because they didn't need him, they wouldn't put him on. I think that is where they're going to go. Of course, the prosecutor retorts with that, who benefitted? And in the end, they're going to try to argue why would Gates be lying about all this when most of the time when he wasn't stealing Manafort's money, Manafort was the one benefitting from it. I think it could have been a risky move to put him on given the case went in so well.

BALDWIN: If you're a juror sitting in this courtroom, there aren't any cameras, we go by bits and pieces we get, we know down to the color in the courtroom. I was reading yesterday describing the death stare that Manafort was giving Gates up on the stand. Today now they're starting to look somewhat in the same direction at one another. How much of that matters to jurors?

BIANCHI: It matters a lot because jurors are watching every single thing that's going on, every nuance, every glance. They're impacted by this. You know what I found interesting, when he was able to -- when Manafort says out loud to his lawyer, no, you got the wrong exhibit number, essentially, it's 25,7 I think what it was. What is the jury going to take away from that, I guarantee there's one juror that says he doesn't know about his finances, he's not a detail guy yet he knew enough about this case based on thousands of pages of documents that his lawyer was using the wrong number? It's little things that show he's smart, sophisticated he's in charge.

BALDWIN: We know, Caroline, Gates revealed details of cooperation with the Mueller team, he met with Gates 20 times ahead of testifying.

POLISI: It's a lot of times, but it's not unheard of. It's the government's job to get Gates ready for this testimony. Now, you can bet, Brooke, that the defense is going to harp on the number of times that Gates met with the prosecutor saying they essentially coached you along and you said what they wanted you to say and things of that nature, but the ultimate Trump card, if you will, on the prosecutor's side is that this cooperation agreement that Gates signed, it's not over yet, right? It's a letter that the prosecutors are going to send to the sentencing judge when he gets sentenced detailing the extent of the cooperation that he provided. If he lies even one little bit on the stand, Brooke, they can rip it up, rip it right up. That's often something that prosecutors will talk about.

BALDWIN: What about how also big picture here, these were two key figures, Manafort and Gates in Trump's orbit? They got a shout out from Trump in July of 2016. We know the crimes that at least Gates is admitted to, Berit, how brazen, how surreal is it that these two figures were part of all things Trump?

BERGER: I don't think that can be underestimated. Another important thing to remember about Gates is that his cooperation agreement is not simply for him to testify against Manafort. So, this is for him to work with the prosecution, to testify against anyone they need him to testify against. So, I think it would be foolish to say, well, after he's done with Manafort, he's done. They got what they needed out of Gates. We don't know the extent they'll use Gates in the future of this investigation. I mean, he may have information that he's given the prosecution about other people right within that inner circle. I mean, both he and Manafort had these incredible positions of trust. They were in the inner circle. And I think we only have to wait and see how else they're going to use Gates' testimony.

BALDWIN: Could -- as Gates has gotten a deal, depending on how this goes, this is all like follow the money, right? So, could there be an 11th hour acceptance or offer from Manafort to cut a deal or is he just sitting there waiting maybe for a pardon?

POLISI: It's not unheard of to cut a deal in the 11th hour. It's been done before.

BALDWIN: It's not.

POLISI: It's been done even when the jurors are out in deliberation. I don't see that happening here. Clearly Manafort is digging his heels in. He feels like he's above the law. That's one of the themes that has run throughout this case.

[14:10:00] He was put on pretrial detention for witness tampering in his other case prior to this trial. So, he has displayed an enormous amount of hubris throughout this. I don't see him taking a deal.

BALDWIN: Thank you so much as we continue to wait and watch for the cross-examination to potentially happen this afternoon.

We have other breaking news, Michael Cohen, President Trump's former lawyer and fixer reportedly under investigation for tax fraud with federal prosecutors in New York specifically focusing on and does it involve Cohen's former boss, President Trump?

Also, developments on Special Counsel Robert Mueller's investigation. Reports that the president's legal team is reluctant to let Trump answer any questions in person on the topic of obstruction. What happens if they refuse?

And my colleague and friend, Don Lemon, responding to President Trump's personal attack on himself and Lebron James. In case you missed it, we're going to play it for you. You're watching CNN, I'm Brooke Baldwin.

[14:15:00] (COMMERCIAL BREAK)

BALDWIN: From the "Wall Street Journal" this afternoon, they are claiming that Michael Cohen, the president's former fixer and personal lawyer, is now under investigation for possible tax fraud. New York federal prosecutors are looking into possible underreporting of his tax medallion business and federal tax returns and failure to provide proper documentation for bank loans. We should point out that Lanny Davis declined to comment out of respect for the ongoing investigation.

Bob Bianchi, Caroline Polisi and MJ Lee joining us, our CNN national political reporter. Just again, reaffirming for you, so possible tax fraud, all going back to his days in New York City with the taxi medallion business.

MJ LEE, CNN NATIONAL POLITICAL REPORTER: Right. We've known for a while that investigators have been very interested in his business dealings and the work that he's done particularly in the taxi medallion business. So, we know that there are wide range of things that they've been looking into. Obviously, we know that investigators have taken a ton of information from his home and his office, his hotel room. I think the big question is whether -- since we are talking about things like loans, financing, potential bank fraud, whether they end up touching on anything that Michael Cohen might have done that is related to his work for President Trump.

You know, if you think about the fact that he was the person who was involved in setting up this payment to Stormy Daniels, we know that that $130,000 ended upcoming from Michael Cohen, as investigators look at his business dealings do they decide, this touches on the work that he did for President Trump and then do they make the calculation that that information might be helpful for them to get directly from Michael Cohen. Those are obviously questions we don't know the answer to yet. But I think, you know, if anything, this is just yet another reminder and sort of confirmation of what Michael Cohen already knows which is that he is potentially in a lot of legal trouble. He doesn't need another headline to tell him that.

BALDWIN: Which we'll get into other potential pressures to cooperate. But first, isn't this just follow the money trail for prosecutors?

POLISI: Absolutely. We know that Michael Cohen's former business associate known as the taxi king of New York recently took a very good what we refer to as sweetheart deal, a no jail time deal. You have to wonder what he gave investigators for that deal. I don't think this was a surprise to anyone, Brooke.

BALDWIN: Smaller fish to the big fish.

POLISI: Yes.

BALDWIN: Why could this be part of the reason why Cohen and his team maybe also declared public war on Trump? Are they looking for a deal, do you think, Bob?

BIANCHI: I think that's a great question. Two great developments happened. First off, classic scenario, almost like the Manafort trial, lot of money, medallion company goes down the tubes. What is happening? Tax evasion and bank fraud. It's virtually the same thing. Fraud people 101 on how to get in trouble. But here is the thing, Brooke, on Sunday when President Trump tweeted out that tweet about Don Jr. -- now, understand prosecutors only want to use you as a cooperator if you have valuable information that you don't know about. Cohen has been gyrating in every way possible, here I am, somebody look at me, please. The president knew about the Trump Tower meeting prior to the meeting

itself. In an odd way, the president is already fit part of what the prosecution needs. It was for political purposes. Therefore, they were trying to get dirt on Hillary Clinton. That could be a violation because you're not allowed to accept money from a foreign entity or foreign person. And now the second piece is what did he know and when did he know it? Cohen now because of that tweet is more important to prosecutors than he was on Saturday.

BALDWIN: So, Cohen, former Trump lawyer, current lawyer being Rudy Giuliani, we also have one more piece of news from dana bash, today, tomorrow we're expecting the volley back from team Trump to Robert Mueller, no, we don't want our guy, President Trump, answering questions in person that have anything to do with obstruction, right? They're OK on collusion, not OK on obstruction. If you're Robert Mueller, Caroline, do you just accept that? Do you say, OK, OK and still get the man in for an interview and then maybe juke left and ask a question any way? I mean, how does that work?

POLISI: Absolutely not. If you're Robert Mueller, you're thinking, OK, I've got the law on my side. We have of course the Nixon precedent, but it's not exactly on point in terms of if this went to a subpoena and went up to the supreme court, I think likely Mueller feels he has the law on his side. That's going to take time, Brooke. They want to get him in there on a voluntary basis to be sure, but not, you know, Giuliani doesn't get to be in the driver's seat in this instance. Mueller is a special prosecutor. He gets to set the guidelines. This back and forth is ridiculous. It's all dramatics. I think quite frankly I think this is all just a front. I don't think President Trump has any one bit of an intention of going in there and sitting down and talking.

BALDWIN: Total ruse. I'll go in.

[14:20:00] POLISI: Good cop/bad cop.

BALDWIN: Quickly, Bob.

BIANCHI: First of all, it's essentially an admission we're not worried about collusion but we're worried about obstruction. Mueller is only playing a little game here. He calls the shots. I was a head prosecutor. This is how it works. You come in or don't come in. Answer all our questions or don't answer our questions. Mueller is protecting the record saying I tried. You don't want what happened Saturday happening in front of federal prosecutors.

BALDWIN: Appreciate that enthusiasm.

Coming up next here, primary night in America with huge story lines unfolding right now including the President Trump effect. Can he give Republican candidates a boost or does President Trump's endorsement do more to rally the resistance? We'll look at the key races unfolding today.

And exploding in size, California's wild fires nearly doubling in recent days, making it the largest in the state's history. Will it get worse before it gets better? We'll be right back.

[14:25:00] (COMMERCIAL BREAK)

BALDWIN: Right now, voters in five states are heading to the polls. Today's results will be yet another chance to see which way voters are leaning as we approach November's critical midterm election. We're watching primaries under way in Kansas, Michigan, Missouri and Washington state but all eyes on the special election in Ohio today where a reliably Republican seat could switch to the Democrats. Looming over all this, of course, President Trump and his very big shadow, so let's go to our chief political correspondent dana bash. Dana, you have a big night ahead of you. Talk me through the big themes for today.

DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: Let's start with what you just laid out there the president. He looms large on and over pretty much everything in politics and elsewhere. And what's going to be interesting to look for is how he plays in different kinds of races. So, first and foremost, we have this special election in Ohio. It's been a Republican seat for almost four decades where Democrats haven't even come close and polls show that the Democratic candidate there is coming close.

The president went out over the weekend and campaigned for the Republican Troy Balderson. Republicans I talked to say that that was really, really critical to getting the base ginned up. This is a special election. But at the same time, his presence there, you see there's some video of the rally, could just as well embolden the so- called resistance or even independents who are just done with the president, done with Republican control in congress and might say, you know what, I'm going to go out and vote for the Democrat because it reminded me to do that when I saw the president. We'll see. The other thing vis-a-vis Trump is how he plays within Republican primaries, Brooke.

In Kansas, there is a Republican primary for the governor's race. There's an incumbent Republican, and the president is supporting the Republican challenger, guy by the name of Chris Kobach who had been a long-time supporter of the friend, supports the notion that the president claims falsely by all accounts that there were millions of people who voted illegally in 2016. But he is somebody who again is sort of a like-minded Republican as the president. When the president has backed other Republicans in primaries, Martha Robe in Alabama, it has had an effect and helped those candidates. We're going to watch to see if he has that pull or has it in the state of Kansas.

BALDWIN: OK. So that's Republicans. Democrats, you sort of have this intraparty battle, right, between the more far left, Bernie Sanders' wing and the Democratic establishment. How is that shaking out?

BASH: We're going to have several tests of how that is going to shake out in various races tonight. You're right, Bernie Sanders along with Alexandra Cortez have been on the campaign trail really trying to support the more progressive candidates in some key races. And one that is perhaps the most notable is also in Kansas. It is a race to see who the Democratic candidate is going to be to challenge a Republican and the Republican's name is Congressman Yoder. This is one of those Hillary Clinton districts, Brooke.

So, it's in a red state, but Hillary Clinton won this particular district. And Democrats on the national level are kind of concerned, are pretty concerned that the more progressive candidate who they want, his name is Brent Welder could win. It would make it tougher to beat the incumbent Republican. And that is going to be one of the tests, first of all, to see if Bernie Sanders and his sort of help get this progressive candidate over the finish line. If they do, whether or not a progressive can win in what should be a very, very competitive district, one that will potentially help seal the fate of Democratic-controlled house in November or a Republican one.

BALDWIN: All these tests, the final ones before, of course, the general in November. We'll look for you tonight, dana, thank you so much.

BASH: Thanks, Brooke.

BALDWIN: We are getting some news just in that the Trump administration wants to limit citizenship for legal immigrants, essentially punishing those who receive government benefits like welfare. Find out who is behind this policy push.

And as Rick Gates testifies against his former partner, Paul Manafort, is President Trump sitting there watching in real time, following what happens when a loyalist flips, makes a deal --