Dumb political question of the week: What did Paul Manafort do wrong?

I’m hoping that readers can help me out here…

The trial of Paul Manafort is basically over. When it started there were headlines saying that he had evaded taxes on $60 million of income by keeping the money in offshore accounts.

Yet the government itself presented evidence at the trial that Manafort was broke. See “Bookkeeper says Manafort was broke in 2016 and lied to banks” (CNN).

If he’d ever had $60 million in taxable income (i.e., actual profit from running his lobbying business), how could he be broke? Did he spend $60 million on personal non-deductible consumption?

16 thoughts on “Dumb political question of the week: What did Paul Manafort do wrong?

  1. Well, given the likelihood that there is a Trump voter on the jury, deadlock seems likely, whatever the evidence, but that won’t mean Manifort didn’t commit the crimes.

  2. Isn’t the point of the Government’s case that he would bill clients offshore, keep the money offshore, fail to declare it as income in the US, and then use that money for non-business expenses? If the government was able to prove this and from the news reports it appears the Government did then that is a pretty clear case of tax fraud. Whether he was “broke” or not is completely irrelevant.

  3. It can be hard to believe, but with some creativity, people do manage to spend that much. I remember that when Bruce McNall (owner of he LA Kings in the ‘90s) went to jail for defrauding banks, he was reported to have assets of $150 million, and a net worth of -$150 million. I’m sure most of that was business related, but it’s still hard for me to believe he found a way to spend $300 million.

  4. Jack: If he owed tax on $60 million in profit (“billing a client” is revenue, not income/profit), as the headlines suggested (based on government info?), he should have been in possession of a $60 million surplus. My point was that therefore, unless he spent $60 million on personal consumption, he shouldn’t have been “broke”. There is an inconsistency here (unless he actually did spend $60 million on non-deductible lifestyle!).

    Vince: Thanks for the CNBC link. It says “The tens of millions of dollars he earned for this work were put in foreign accounts, and Manafort used that money to fund a lavish lifestyle primarily through international wire transfers”. So the implication is that his business earned a profit of “tens of millions of dollars” and no taxes were paid on that profit, which means he would have had to spend tens of millions of dollars in order to be broke. The CNBC article doesn’t make sense. On the one hand, the guy was making huge profits and not paying any tax. On the other hand, the guy had to lie to banks in order to get them to lend money because his business was not actually profitable.

    So… according to CNBC, he is charged by the government with (1) running a profitable business and not paying tax on the profits, and (2) running an unprofitable business and telling banks that it was profitable. I don’t see how both charges can be true at the same time.

  5. I’m an Enrolled Agent and so have a little knowledge in this area. The core charge against Manafort is failing to file a Report of Foreign Bank and Financial Accounts (FBAR) with his tax return.

    If you didn’t know you were supposed to file an FBAR report you’ll get a $10000 fine plus interest and other penalties from the IRS. If the IRS/Treasury department think your failure to report was ‘willful’ the fines are much steeper and you can go to jail.

    There is a box to check on your 1040 if you have foreign bank accounts and a separate report that you are supposed to provide the treasury department. Manafort didn’t check the box or file the report even though it is clear that he had a lot of money overseas. There is some argument that Manafort’s failure to report was not willful because he didn’t know what FBAR was. That’s pretty hard to believe and he did sign his 1040 with the box unchecked.

    Here is a typical FBAR case where the perp got a big fine and six months in jail.
    This individual was given a huge fine and penalties plus six months in Club Fed.


    I feel sorry for the CPA, who signed this return (a bookkeeper did the actual return preperation, as is common among CPAs).

    She used the information provided by her client which is all we’re required to do, but her firm fired her anyway.

    Manafort is also accused of bank fraud over some loans, but I don’t know anything about that.

    You may note that the DOJ wants a 302 year sentence! They have Manafort dead to rights on FBAR, which should result in a huge fine and some jail time.

    Asking for 302 years seems like massive overkill and seems to this non-lawyer to smell of politics.

    If this was a Texas court where the jury usually sets the penalties I’d give Manafort a huge fine and 2 years for FBAR plus something for bank fraud if I found him guilty of that also.

  6. Jim: Thanks for sharing your expertise. What you’re saying makes sense. But that case you linked to seems a lot less confusing than the Manafort one. The guy who went to prison for six months apparently was rich due to his offshore funds, not “broke” at any point.

    (Separately, I don’t see why the guy was trying to hide the money in the first place. The article you cite says “Kim … inherited tens of millions of dollars that he stashed in secret accounts”. The U.S. has an estate tax, not an inheritance tax, right? So he wouldn’t have had to pay tax on this inheritance if he’d reported its existence? HIs goal was avoiding tax on dividend and interest income from these funds? If so, why not just invest it in zero-dividend stocks such as Berkshire Hathaway or in tax-free bonds?)

  7. In the tax business we see people do crazy things to avoid taxes all the time. The most popular thing is to never get around to filing at all.

    Because of the crimal threat we send people with serious FBAR problems to lawyers, but those are always people who could afford to pay taxes in the first place. They underestimate how much the government HATES seeing money hiding overseas.

    There are lots of legal ways ro reduce your tax burden without the risk of jail time and financial ruin hanging over your head.

  8. Manfort made 60+ million from “political consulting.” Consulting is presumably a low overhead, high profit endeavor–no cost of goods, capital expenses, etc. Manafort failed to report some amount of income, and the foreign bank accounts which that income was held. Manafort lived above his means, paying for items by wiring the money straight to vendors from his foreign accounts. Tax evasion, failing to declare foreign bank accounts. Along the way he incurred considerable debt. When the income ran dry, he wired what money was left in offshore accounts to onshore accounts and told his accountants it was “loans.” More tax evasion. He used these funds, as well as other creative accounting in order to secure loans to float his lifestyle. Bank fraud.

  9. It certainly seems like he spend many millions to support his lavish lifestyle. Whether $60 million or not, we don’t know, since he did not declare his foreign bank accounts and seems to have been paying many people directly from them. If you think that is fine and shouldn’t be prosecuted, perhaps you should stop writing posts complaining about high taxes.

    But Manafort’s biggest crime seems to be bank fraud. It is funny that defrauding banks by misrepresenting your income/assets to get a loan carries a much harsher sentence than his tax failings.

    For those that argue that Manafort was just sloppy or careless with forms, remember that he is a trained lawyer with decades experience in financial matters. It is just preposterous to believe he accidentally forgot to tick a few boxes.

  10. Oh crap.. that reminds, I’ve got to file my FBAR for last year (I do it consistently but let it slip)! I don’t owe any taxes though after foreign income exclusion.

    ugh… they should really raise the limit for reporting to something like $1million, because it is a real hassle for us small time expats who can’t afford lawyers and CPAs.

  11. What did Manafort do wrong?
    He associated with a wrongpolitical figure, and he did not back off when that became known. He will be punished for that. He might have violated some laws: but who cares.

    A senior official who announced that Yazidis were safe when they fled ISIS to their holy mountain, because ISIS was not attempting to storm their camp and just besieged them, is not in jail: sexual slavery and ritual killings meant nothing to him (His name is John Kerry). A torturer John Brennan is in the newsroom.

    Manafort is a bad guy. If you have a daughter you must agree, or you are a Nazi!

Comments are closed.