Cohen under investigation for tax and bank fraud. TRANSCRIPT: 08/07/2018. The Rachel Maddow Show

Transcript:

Show: THE RACHEL MADDOW SHOW
Date: August 7, 2018
Guest:

RACHEL MADDOW, MSNBC HOST: It`s good to be back. Thanks for joining us
this hour.

I will tell you I had a great time on vacation. Big thanks to Ari Melber
and to Nicolle Wallace for filling in while I was gone.

Even though that was very nice of Chris to say, I will admit to you that I
can`t totally say I`m happy to be back because I like vacation, I had a
really nice vacation. But news days like this at least make it exciting to
be back when your job is to try and make sense of the news. It`s fun to be
away.

Boy, is it interesting to be back at work today. There`s a lot going on,
not least of which is the fact that there are a whole bunch of elections
tonight – most of them are primaries. But even for primaries, these are
an unusually juicy and interesting bunch of primaries tonight. There`s
also of course that big special election tonight for an actual seat in
Congress in Ohio.

We`re watching vote counts come in. We`re going to have details on all
those interesting and consequential races coming up both this hour and over
the course of the evening here tonight on MSNBC. It is a particularly
interesting primary and special election night tonight.

And, of course, on top of all of that, today was a day where fireworks went
off all day long in the first criminal trial to emerge from Robert Mueller
special counsel investigation. Now in the Paul Manafort trial today, of
course, was the second day of testimony from the president`s deputy
campaign chairman against the president`s campaign chairman. That
testimony by Rick Gates today it took off in all sorts of unexpected
directions, in a lurid direction, in a Russian direction, in a Trump
related direction, and otherwise.

We`re going to get to the nitty-gritty of the Gates testimony in just a
moment. But I also want to sort of stick a flag here right at the top of
the show in one other story. You should also know today that there was a
big new development today in the case against the president`s personal
lawyer, Michael Cohen, and I`m bringing this up here and now at the top of
the show because I think this is an important story that has been
overshadowed a little bit because of all of the dramatic news today out of
the Manafort trial and because of the elections, because there`s so much
else going on.

But I also sort of want to spotlight this Cohen stuff a little bit right
here because I actually think what`s going on in the Cohen trial and what
developed in that today might tell us something important about where
things are about to go next, and the kind of timeline on which things are
about to unfold over the next few weeks, because one of the things that we
have been keeping an eye on in all of these cases is, of course, the
calendar. The reason we got all these primaries to report on tonight is
because the national midterm elections, elections for every single member
of the House and a third of the membership of the U.S. Senate, the midterm
elections are less than a hundred days away now.

And that is not just interesting in terms of those elections, that has very
specific implications for the work of the special counsel and for all of
these unfolding criminal matters that pertain to the president and his
campaign and his family and his lawyer and his business and all the rest of
it. There`s no hard and fast written rule about it, but there is a real
and serious expectation within the U.S. Department of Justice that
prosecutors shouldn`t pursue new criminal charges or take other major overt
legal actions that could have significant electoral consequences, right
before an election takes place. So, they`re not supposed to – you know,
consider how something might affect American politics when they take
prosecutorial action.

You know, you don`t decide to choose – to charge somebody or not or to
pursue an investigation or not because you have a preferred political
outcome, but if what you`re doing is a prosecutor might reasonably affect
the course of an election you`re supposed to back off right before the
election, you`re not supposed to do anything that could affect the election
as a prosecutor too close to when the election is going to happen.

And you know what? I can hear you through the TV right now. I can hear
you at home going Comey, James Comey. I get all – we`re all making the
same joke at the same time, right? We`re all in this together I
understand.

I mean, that`s the reason why Hillary Clinton everybody, who worked on the
Clinton campaign, everybody who voted for Hillary Clinton, everybody who
even thought about voting for Hillary Clinton bursts into flame just a tiny
little bit whenever James Comey tries to justify his notification to
Congress less than two weeks before the presidential election, about what
turned out to be a nonsense nothing development in the Hillary Clinton
emails investigation, right? When Justice Department rules say, no, James
Comey, you aren`t absolutely positively not supposed to do that, you`re not
supposed to take an overt action related to an investigation too close to
what an election is going to happen. I can hear your frustration.

If you`re not James Comey though, if you are a Justice Department official,
if you`re working at main justice or you`re working in a U.S. attorney`s
office, you`re working in the special counsel`s office right now, if you`re
not James Comey and you do actually take that rule seriously, how exactly
do you follow it? How do you follow that Justice Department guidance, that
directs you to not take overt steps and politically sensitive
investigations too close to a forthcoming election? How close to an
election can you get before you have to really stop doing stuff?

Again, we`re told there`s no hard and fast written rule but at least the
common wisdom are the way we understand it from the outside is maybe 60
days is the informal cutoff after which anything politically sensitive
would essentially be put on hold because of a pending election. If 60 days
is the threshold, that would put a cork in any new major legal moves by
prosecutors starting at about Labor Day, right, which is less than a month
from now.

I mean, if that rule is in effect, if it`s being followed when it comes to
potential new charges or any other major overt legal moves by prosecutors,
that means anything new that`s going to happen from the special counsel`s
office or other federal prosecutors that relates it all to the president,
that`s going to have to happen soon. It`s going to happen in the next
three and a half weeks, right, between now and Labor Day. And if it
doesn`t get done in the next three and a half weeks, it`s going to be
delayed for a very long time thereafter.

Now, of course, that rule is sometimes broken – James Comey. It also only
applies the case in question is closely connected to politics well that`s
what`s important today about the big new Michael Cohen development. “The
Wall Street Journal” today was first to report in detail on the type of
charges that federal prosecutors may be considering against the president`s
personal lawyer Michael Cohen. If what “The Journal” is reporting is
correct, the charges that Cohen is likely facing from prosecutors are
actually not related to politics at all, at least not at face value.

Quote: In previously unreported developments, federal prosecutors in New
York are examining whether Mr. Cohen committed tax fraud federal
authorities are assessing whether Cohen`s income from his taxi medallion
business was underreported in federal tax returns. That income included
hundreds of thousands of dollars received in cash and other payments over
the last five years. In addition, quote: federal authorities have been
investigating whether Michael Cohen made misrepresentations or false
statements on loan applications, quote, including whether Mr. Cohen
inflated the value of any of his assets as collateral for loans.

So, in other words, according to “The Wall Street Journal”, which has been
all over the Michael Cohen case, federal prosecutors are looking at Cohen
for allegedly or potentially lying about his true financial situation. On
the one hand, to the IRS, where he allegedly underreported his income to
the IRS, so he wouldn`t have to pay taxes on it, and on the other hand, to
banks where he allegedly overstated his income and his assets so banks
would be essentially duped or conned or schemed into giving him loans for
which he didn`t actually qualify.

If those kinds of alleged crimes sound familiar to you, it`s because you`ve
heard the details of basically those exact same charges laid out against
Trump`s campaign chairman Paul Manafort over the last few days in that
federal courthouse in Virginia, right? From watching the Paul Manafort
case, if from nothing else, we all now understand what a government does to
prove tax fraud and bank fraud charges like that. They get the paper trail
showing those allegedly fraudulent declarations and applications.

They then get people involved, even very low-level people involved who had
something to do with facilitating that alleged fraud or alleged tax
evasion, they get those people up on the stand and have them admit that,
yes, what they took part in was in fact deliberate fraud and tax evasion.
And that`s basically it, right? These are not – these may be like hard to
understand as crimes, but when it comes to proving them as crimes, it`s not
complicated. You don`t have to be a lawyer to get it, right?

As long as they`ve got the paper trail and people involved in the creation
of that paper trail to testify, so those people can you know authenticate
the documents and explain what was going on there, that`s kind of the whole
case that`s all they need to do. It`s not a complicated way to prosecute
someone. And the jail time penalties for these kinds of crimes when
they`re proven, they`re significant. So, if you can get that kind of paper
trail and those kind of witnesses together, you can really threaten
somebody with serious legal jeopardy.

So, “The Journal” is reporting today on these being the potential charges
against Cohen and they`ve got tons of detail down to the – you know, the
name of the specific bank that prosecutors are allegedly looking into to
figure out whether that bank might have had a confederate working with
Cohen to help him file these fraudulent applications. That level of
detail, if those charges are really what Cohen is facing, that`s a pretty
ominous development for the president`s lawyer.

As is the other piece of the puzzle that we just got filled in about him
today and it concerns this unfamiliar but admittedly quite handsome
gentleman. His name is Gene Freidman. He`s Russian born. In the
tabloids, they call him the taxi king.

In May, this May, in a state court in New York, Gene Freidman, the taxi
king, unexpectedly pled guilty to what seemed like some relatively minor
charges and crucially he agreed to start cooperating with prosecutors in
their ongoing investigations. And that was a surprise on a number of
levels, not least because Gene Freidman, the taxi king, had reportedly been
facing a huge pile of very serious fraud and tax evasion charges. And he
didn`t plead guilty to something all that serious, that would imply by the
process of deduction that prosecutors pled him way, way down in exchange
for his cooperation.

He was facing a lot of legal jeopardy. He ended up pleading guilty to
almost nothing in exchange for the cooperation that he offered. Well, what
exactly did he offer them in what cases is his cooperation helpful?

Well, today, “The Wall Street Journal” reports that the Taxi King, Gene
Freidman who again is now cooperating with prosecutors, he and Michael
Cohen apparently shared the same accountants. They both used the same guy
and that accountant we now know has been subpoenaed to testify to the grand
jury in the Michael Cohen case.

So, put all these pieces together, right? Tax fraud and bank fraud
allegations, we know prosecutors have a massive trove of millions of
documents and files seized from Michael Cohen`s home and office. We have
reports that at least one person involved in Cohen`s finances who`s linked
to another person who`s a cooperating witness who was facing serious fraud
and tax charges, that person has testified to the grand jury about Cohen.

You put all those pieces together and you know tick, tick, boom. If this
new reporting about Cohen`s legal jeopardy is accurate, that`s a serious
development about his legal jeopardy, and it may well be the case that the
legal jeopardy he`s now facing is completely unrelated to politics,
completely unrelated to the Donald Trump presidential campaign, could be
completely related – unrelated to Cohen`s work at the Trump Organization,
could be completely unrelated to his personal legal representation of the
president. We don`t know. We don`t know that if that`s how it will all
eventually work out.

But if that is how it goes down with Michael Cohen, bank fraud and tax
fraud related to his taxi business – well, we know that they`ll have
something to squeeze him with and we can surmise that that informal Justice
Department 60-day rule about not doing anything potentially politically
provocative, right before a forthcoming election, that may not hold in the
Michael Cohen case and that may change your summer plans. I mean, whatever
is going to unfold for Michael Cohen in his legal future, it may not have
to be crammed into the next three and a half weeks before that informal
deadline rolls around on Labor Day.

That said, these things can take unexpected turns. We had thought based on
prosecutors claims in court that the Paul Manafort case wasn`t going to be
at all about President Trump or the Trump campaign and certainly not about
Russia. But today in open court in the Paul Manafort case, boy howdy, did
the trial go to all of those places today. In fact, the Manafort trial
went a little bit – went a little nuts today.

I mean, it`s not like it went nuts in the sense that it went insane it just
veered off in a lot of directions at once. Paul Manafort`s defense
attorney at one point elicited from Trump`s deputy campaign chairman Rick
Gates that at some point a decade ago, Mr. Gates had had a secret
extramarital affair on which he spent some of the money that he either
earned alongside Paul Manafort or embezzled from Paul Manafort, depending
on how you count the cash. OK.

Rick Gates today also testified to a lot of nitty-gritty details about how
he helped – how he allegedly helped Paul Manafort lie about his income,
both to evade taxes and to obtain fraudulent loans from banks. But despite
prosecutors having earlier asserted that the manta four case wasn`t going
to be about Russia and wasn`t going to be about Trump and wasn`t going to
be about the Trump campaign, the Manafort trial did veer toward those
places today unexpectedly.

Now, the swerve toward Russia took place while prosecutors were conducting
their direct examination of Rick Gates. So, Rick Gates has their own
witness there`s not hostile interaction between him and the prosecutors,
they`re doing a direct exam of Rick Gates. And in that direct examination,
prosecutors walked Rick Gates through something we previously hadn`t known
about Paul Manafort`s work in the former Soviet Union.

This is from the transcript, quote, question from the prosecutor: you
testified earlier about payments from Ukrainian businessmen to Mr.
Manafort. Did that include payments for policy work? Answer from Gates,
it did.

Question: OK, what type of policy worked that Mr. Manafort do in the
Ukraine? Answer: when Viktor Yanukovych was elected president, when the
Party of Regents took control, Manafort entered into a policy contract. We
described it as policy advisory in the sense of once Mr. Yanukovych was a
elected, he was elected on a platform of issues. So, Manafort worked with
the local political officials there to help implement those policy
initiatives based on those campaign promises.

Question from the prosecutor: and was there an agreement for a two-year
policy contract or payments over a two-year period of time? Answer: well,
it was – it started out as potentially once the president was elected, it
was on an annual basis. But the belief was that it would be for the
duration of the president`s tenure.

Question: and in terms of those two years at least, what were the terms of
the payments? What was the total amount? What were the installment
payments? Answer: Uh-huh. So the total amount was four million dollars a
year and I think one year was actually changed again from a denomination
point of view to four million euros per year.

That`s new and the reason that is a swerve toward Russia today in this case
is that – I mean, what we previously knew about Manafort operating in
Ukraine was that he was being paid by Yanukovych and Yanukovych`s party to
help him win elections in Ukraine. We didn`t know that Paul Manafort was
also being paid four million dollars a year or four million euros per year
once Yanukovych was in office to manage his policies as the leader of
Ukraine, right?

The reason that`s a swerve toward Russia is because once Yanukovych was
elected, his policies took a hard turn away from Europe and toward Vladimir
Putin. The reason Yanukovych was thrown out of office in a popular
uprising of the Ukrainian people, is because once he was in power he turned
hard line away from the E.U. and toward Moscow, apparently while we just
learned today, Paul Manafort was being paid four million dollars a year to
advise him on how he should govern.

In Michael Isikoff and David Corn`s book “Russian Roulette” they
interviewed the career State Department official who was the senior
diplomat on Russia in the U.S. government for years. Isikoff and Corn
asked her about what her reaction was when she learned that Paul Manafort
had been named Trump`s campaign chairman in 2016. She said her answer was
this, quote: Manafort? Manafort? She thought, quote: He has been a
Russian stooge for 15 years.

Well, today, we learned that Manafort was not just getting pro-Russia
politicians elected overseas, he was getting paid millions of dollars a
year to manage the policy positions of at least one overseas politician
while that guy changed the direction of his country to align itself with
Putin and Russia.

So, that was a surprise revelation today. Why`d Trump pick him?

And then there was just this one last thing. Again, prosecutors have gone
out of their way to say that the Manafort trial wasn`t going to be about
Trump or the Trump campaign. That is also where it went today though. And
if you`ve been paying close attention to the Manafort drama as it`s been
unfolding, you might have seen some of this coming for a while. We`ve at
least been reporting on the disparate pieces of it as they`ve sort of come
across the horizon, as we`ve all been paying attention to Paul Manafort.
Today, all of those pieces finally fit together in court.

The first piece that we saw this was when we learned about what happened on
the day that Paul Manafort quit the Trump campaign. In August 2016, under
a cloud of revelations about his work in the former Soviet Union, he quits
the Trump campaign. That same day, Paul Manafort somehow also found time
to set up a company, an LLC called Summer Breeze.

That was weird, right? You`d think he`d have other priorities the day he
was quitting running the Republican nominee`s campaign for president, but
he found time that day to set up Summer Breeze.

Then we learned that Summer Breeze received multiple loans totaling
something like $16 million over a period of just a few months after he left
the campaign, and he got that $16 million in multiple loans from a tiny
little bank in Chicago. Those $16 million worth of loans to Paul
Manafort`s Summer Breeze were kind of a strange foray for that little bank.

It represented a very large portion of the loanable assets from that bank.
That bank was set up explicitly to cater to U.S. veterans. Paul Manafort
is not a veteran.

So, all these little weird pieces about the Manafort story could sort of
tell that eventually, they`ll fit together but we couldn`t tell how. Then
in March of last year, “The Wall Street Journal” gave us another piece.
They were first to report on a strange detail involving the founder and CEO
of that bank that had given Manafort`s Summer Breeze company the $16
million in loans.

“The Journal” reported that the CEO of that bank was, quote, vying to
become Trump`s army secretary. That was a weird detail that made no sense
for months. But then this year in February, we got more almost
unbelievable laugh-out-loud detail about that weird fact.

Quote: Around the time his bank made the Manafort loans in late 2016 and
early 2017, Stephen Calk was seeking to become Mr. Trump`s army secretary,
Stephen Calk, the CEO of the bank. Quote: Mr. Calk was placing calls to
the Pentagon and specifically to army headquarters, asking for briefings to
prepare himself for a possible job.

Quote: Mr. Cox overtures to the army raised questions among military
leaders as to how to respond.

He`s calling the Army saying, I`m ready to be briefed for my new job. Army
is like, sorry, your name is what?

Then three days after that reporting about him calling the Pentagon about
his new job, a local ABC station in Chicago was first to report that those
sketchy loans from this little bank to Paul Manafort had turned up of all
places as an issue in the divorce filings for that little bank president
and his soon-to-be ex-wife. Quote: Former Trump campaign chairman Paul
Manafort`s name has been dragged into a high-dollar Chicago divorce case.
Quote: The divorce case involved Chicago banker Stephen Calk, founder and
CEO of the Federal Savings Bank.

And indeed, we on this show later obtained these court documents from that
divorce case. I think these have never been shown on TV before. But these
documents in fact show that as part of the divorce proceedings involving
this bank CEO, his wife`s attorneys specifically subpoenaed in their
divorce case, quote: the entire loan file for any and all loans made to
Paul Manafort or any agent representative or third-party on his behalf.

The wife`s attorneys then updated the subpoena later to demand, quote,
records evidencing the source of funds used to fund any and all loans made
to Paul Manafort Summer Breeze LLC or any agent representative or third-
party on his behalf. Why are the Paul Manafort loans turning up in the
bank CEO`s divorce filings? What is his wife what the loans to Paul
Manafort to be explained as part of the divorce? How does that?

Next piece of the puzzle came when a federal judge in Manafort`s case,
surprise, unsealed the names of five witnesses who`d been offered immunity
in exchange for their testimony for prosecutors against Manafort. Two of
the five witnesses granted immunity in exchange for their testimony turned
out to be employees of this same little bank in Chicago that made these
loans. Why`d they need immunity?

So, we`ve seen all of these pieces of this puzzle falling into place over
the past more than a year now.

Well, today in court, they finally all got fitted together. Rick Gates on
the witness stand, he gets confronted with exhibit number 399. This email,
was dated Thursday November 24th, 2016. Subject: Defense Department
service secretaries from Paul Manafort to Rick Gates, and then this is the
total of the email, quote: Rick we need to discuss Steve Calk for secretary
of army. I hear the list is being considered this weekend. Signed, Pete.

I mean as crazy as that has seen from the very beginning, as far-fetched
and laugh-out-loud ridiculous as this allegation has seemed, ever since it
was hinted at in the press that there was some connection between Paul
Manafort`s weird bank fraud allegations and his time on the Trump campaign
and the Army, it really looks like one of the things that happened on the
Donald Trump for president campaign is that the campaign chairman really
did apparently sell the promise of a job running the United States Army in
exchange for cash. That apparently really happened. I wonder how the Army
feels about that.

And that leaves me with one last question and we`ll get some expert legal
advice here in a second that may be able to answer this last point. After
that email is produced in court today about the Trump campaign apparently
selling this would be job offer to run the army, the defense counsel for
Paul Manafort asked Rick Gates in open court if anybody else from the
special counsel`s office had questioned him about his own work on the Trump
campaign. This is from the transcript. This is Paul Manafort`s lawyer
Kevin Downing questioning Rick Gates.

Question: now in terms of your cooperation with the office of special
counsel after you took your plea, did you have occasion to be interviewed
by other members of the office of special counsel about the Trump campaign?
Answer by Rick Gates: yes.

Question: and were you interviewed on several occasions about your time at
the Trump campaign? Interjection from the prosecutor Greg Andres:
Objection, your honor. The judge says: all right, do you need to come to
the bench? Prosecutor Mr. Andrews says, please? The judge says, all
right, you may do so.

And then this is the next thing in the transcript. Look at that. Pages
1399 through 1405 are filed under seal, six pages of discussion at the
bench sealed and we`re not allowed to see what happened next.

So, the judge brings the lawyers up to the bench to discuss the matter
without the jury hearing. It does not end up in the transcript. We don`t
know what happened, and then they adjourned for a long recess thereafter.

Paul Manafort case has now become a case that in part is about the Trump
campaign not just because Manafort was Trump`s campaign chair. Prosecutors
themselves went there today by essentially offering evidence in court that
Trump`s campaign chairman was offering the job of running the U.S. army for
sale for cash. Why are they then also objecting to any further discussion
about the Trump campaign during this trial?

I have a feeling that tells us something important about what`s about to
happen next, but we should also probably get a really good lawyer here to
decode it for us. We shall do so coming up. Stay with us.

(COMMERCIAL BREAK)

MADDOW: Ohio`s 12th congressional district is kind of awkward looking.
It`s kind of etch-a-sketch drunk maybe. You still look a little more
normal in terms of its shape but in 2011, when Republicans took over the
state legislature in Ohio, they redrew that district to make it more very
carefully reliably Republican. And that redraw the district pretty much
worked up, until about seven months ago when their Congressman Pat Tiberi,
who held the seat for 17 years decided one day that he`s out, doesn`t want
to be in Congress anymore, would rather go be a lobbyist. Thank you very
much.

I mean, this has been a reliably Republican district for decades, but it`s
all the more so reliably Republican, thanks to the make it extra Republican
ridiculous facelift that that district got in 2011 from that state
legislature. In 2016, Donald Trump won that district by double digits by
11 points. For some reason though, Democrats in Ohio`s 12th district have
recently been making some headway even though that district is specifically
designed to keep them from doing so.

Tonight, there`s a special election in that district to replace retiring
Republican Congressman Pat Tiberi. In one of the final polls leading up to
tonight`s race, the Democratic candidate was actually leading the
Republican even though it was only by a single point. Still, in a district
like that, that`s nuts.

Polls closed in Ohio`s 12th district about two hours ago, and look at this
results is still now are too close to call. We`re looking at a difference
of less than 600 votes. These two have been neck and neck throughout the
night, as we`ve been watching the poll results come in and again right now
NBC says this race is too close to call.

That`s the big race we`re keeping an eye on tonight. It should be safe
Republican district that is national news tonight only because it`s the
kind of district that should be impossible for Democrats to even have a
shot in. Tonight, they`ve definitely got a shot.

Joining us now is MSNBC national political correspondent Steve Kornacki who
has been going through these votes basically one by one as they`ve been
coming in.

Steve, what are you seeing so far in the data?

STEVE KORNACKI, MSNBC NATIONAL POLITICAL CORRESPONDENT: It`s fascinating
because this is a district two different parts of this district reacted to
Trump very differently in 2016, and what we`re seeing here is they`re sort
of reacting similarly to this race. So, this is a tale of two districts
right here. This is the part, Franklin County and then Delaware County,
Democrats need to get huge numbers out of Franklin and they needed to do
well.

They`re probably not going to win, but they need to do well in Delaware.
And then the rest of it is the Trump surge area. Basically, all the vote
is now in from the Trump surge area and I can tell you, Balderson got what
he`s looking for I think at a night like this out of there. There was not
a lot of erosion there.

What we are seeing then right now is a race you say 593 votes, and I`m just
seeing if this has changed, yes that 595, 595 is the gap, right?

Here`s the story right now: this is it. It is a tale of two counties,
Franklin County where O`Connor has been running up the score and we`re
almost 90 percent of the vote is coming in. Now, the number here Democrats
wanted to hit to have a chance with 60 percent. O`Connor is running north
of 60 percent, with not a lot of vote coming in.

That says the Democrats the energy and everything you were looking for in
Franklin County, which is suburban, which is Columbus, which is higher,
which is college-educated higher income suburbanite all of that sort of
stuff. The energy the Democrats are looking for is there and O`Connor is
going to get more votes. He`s going to pad a little bit more out here as
the vote comes in in Franklin county, and that is going to leave one
question that`s going to decide this race and it is Delaware County, and
you see here about 40 percent of the vote is in in Delaware County.

O`Connor won the early vote here, Balderson, same day has been doing
better. That number has been inching up, although it`s sort of stopped
right here for Balderson. We`ve seen him around 51 percent, the last few
updates, the benchmark here, Donald Trump bad for a Republican, did 55. If
Balderson can add a couple points to this in the votes that are left, it`ll
probably overwhelm the games that O`Connor makes in Delaware. If Balderson
can`t do that, if he finishes somewhere around where he is right now, that
would give O`Connor a chance on the strength of what he`s able to net out
of the – out of what`s left in Franklin, that would give him a chance in
this thing.

So, again, Balderson, Delaware is the key for him right now. For O`Connor,
it squeezed as many votes as you can out of what is left in Franklin
County, and then hope you can – hope you`re competitive in the Delaware
County, hope Balderson is not inching up to 53, 54, 55 percent as the vote
continues to come in. I`m just checking to see if we got an update, we do
not.

Again, O`Connor, 88 percent of the vote is in in his base. This thing is a
nail-biter, Rachel.

MADDOW: This is going to be a fun night watching this stuff come in.

MSNBC national political correspondent Steve Kornacki, appreciate your time
tonight. I know we`ll be back with you soon.

Again, this is one of these races – this is not a primary. This is a
special election. It decides who is going to Congress from that district.

It matters both potentially as a bellwether. That`s why Democrats are so
excited about even having a shot in that district because it was such a
Republican district and drawn deliberately to be so. But it also will
decide whether a Democratic or Republican represents that district in
Congress.

And when Democrats are looking at the prospect of trying against the odds
to flip the House back to Democratic control in the fall, every single vote
is going to count. Having a Democratic incumbent there would itself be a
big deal, even if this isn`t a big – even if this isn`t a bellwether
otherwise for Democrats.

All right. Lots more to get to this very busy news night. Stay with us.

(COMMERCIAL BREAK)

MADDOW: Tax returns, and bank records, and receipts and loan applications.
This was supposed to be snooze fest, right? This is going to be a document
trial. You guys aren`t even going to want to cover this. We got so much
advice from people that we`re going to be like, you know what, the Paul
Manafort thing basically proves itself if it`s going to prove itself don`t
worry about it.

Turns out, I went on vacation for the first few days of the trial, see?
See? Turns out the Paul Manafort trial is a soap opera every day and
that`s thanks in large part to the judge in the case judge, Judge T.S.
Ellis, who it turns out is about as friendly as an underfed alley cat
caught in a rainstorm.

Now, to be fair, there were clues that Judge Ellis might be testy in court,
like on day two of the trial when Judge Ellis barked at prosecutors that
they needed to rein in their facial expressions and not roll their eyes.
Turns out the facial expression thing is like a seriously sensitive issue
for Judge Ellis. He has scolded Mueller`s prosecutors for furrowing their
brows. He`s literally criticized prosecutors in open court for quote
looking puzzled.

He also just frequently yells at them. Judge Ellis, quote: look at me when
you`re talking to me. Prosecutor: I`m sorry, judge, I was. Judge Ellis:
no, you weren`t. You were looking down. Prosecutor: because I don`t want
to get in trouble for some facial expression, I don`t want to get yelled at
again by the court for having some facial expression while I`m not doing
anything wrong but trying my case.

Judge Ellis: well, I understand how frustrated you are. In fact, there`s
tears in your eyes right now. Prosecutor: there are not tears in my eyes,
Judge. Judge Ellis: well, they`re watery. Literally said that, with a
watery.

There`s no crying in court. No, you`re crying, you`re crying.

That wasn`t the end of it though. Judge Ellis has insisted that he does
not want the word “oligarch” used in the courtroom. While explaining that
new rule, one of Mueller`s prosecutors glanced down apparently, at which
point, Judge Ellis said, quote: I`m here Mr. Andres. Prosecutor said: I`m
sorry, judge, I`m listening. To which the judge said: I know, but when you
look down, it`s as if to say you know, that`s B.S. I don`t want to listen
any more from you.

Prosecutor: Judge, you continue to interpret our reactions in some way. We
don`t do that to you and we`re not being disrespectful in any way. Judge
Ellis: all right, well then, look at me. Prosecutor: fine. Judge Ellis:
don`t look down, don`t roll your eyes, don`t –

Prosecutor: I`m not rolling, I don`t understand how. Judge Ellis: you may
not have rolled your eyes but you`re not the only person sitting on that
side. Prosecutor: I would find it interesting to see that I was both
looking down and you`re noticing that I was rolling my eyes.

If you are having flashbacks to a nun Sister Jacinta smacking you with a
wooden ruler at catechism class, you are not alone.

Barbara McQuade and Josh Gerstein were in the courtroom for us today.
They`re going to join us next. Stay with us.

(COMMERCIAL BREAK)

MADDOW: We just got in a late transcript from the end of the Manafort
trial, the last part of the hearing today, last part of the trial today.
We just got it right before we came to air, and I`m acting it out and I`m
terrible at this but bear with me.

This is Trump campaign chairman Paul Manafort, his defense attorney cross-
examining the guy that`s turned into the star witness in this trial, right?
And star witness against his client Paul Manafort is Manafort`s former
deputy Rick Gates. So, here`s Manafort`s defense lawyer.

Quote: After all the lies you told and fraud you`ve committed, you expect
this jury to believe you? Rick Gates: yes. Lawyer: Uncorroborated?
Gates: yes.

Lawyer: do you hope the office of special counsel thinks the same way?
Gates: yes. Lawyer: because they`re the ones who are going to write you
the 5k1 letter, that`s the letter that will keep Gates out of jail? Gates:
they will.

Lawyer: They`re the ones that are going to let your lawyer say you get
probation unopposed? Gates: yes. Lawyer: even if you lie? Answer: but I
haven`t and I`m here to –

Question: and the jury is supposed to believe that? Gates: yes, because
I`m here to tell the truth. I`m here because I made a decision to take
responsibility for my actions. Mr. Manafort had the same path. I`m here.
From Rick Gates today: I`m here unlike, your guy.

Joining us now is Josh Gerstein, senior reporter at politico.com who was in
court today who has been since this trial started.

Josh, it`s great to have you with us tonight. Thanks for being here.

JOSH GERSTEIN, SENIOR REPORTER. POLITICO.COM: Hi, Rachel. Good to be
here.

MADDOW: So today was Rick Gates, the second day on the stand. I think
we`ll have him back on the stand at least for tomorrow morning as well.
What do you think is important thus far about his testimony in this case,
other than just the human drama of it all?

GERSTEIN: Well, I mean, there was several hours of testimony this morning
that was pretty dry before we got to the cross-examination and it became
pretty clear that Gates is intimately familiar with Manafort`s finances at
least in the respect that dealt with these overseas companies, these
offshore companies, in places like Cyprus. They eventually moved the
accounts to a place in the Caribbean called the Grenadines. That happened
because of a banking crisis in Cyprus that apparently may have put the
money in jeopardy.

But Gates seemed to be able to recall from memory each of these entities,
the name of it and which specific oligarch. I know the judge didn`t want
to use the term oligarch, so we`ll just say wealthy businessman typically
from Ukraine, each entity corresponded to and what specific projects that
was used for.

So, that portion of his testimony seemed very credible and pretty
incriminating towards Manafort. I think when the cross-examination
started, things got a little more difficult because his testimony became
more kind of halting and it seemed he was a bit more nervous and then
obviously we got into the extramarital affair issue, which I think would
make anybody a little bit uncomfortable.

MADDOW: The extramarital affair issue was brought up as sort of color or
elaboration on Rick Gates basically being a bad guy who should be seen as
an enemy of Manafort`s?

GERSTEIN: Well, I think the nominal reason was that there is this evidence
Gates has admitted now that he embezzled some money from Manafort perhaps
from the oligarchs who were funding Manafort by inflating his expense
accounts, and it seemed that Kevin Downing, the Manafort defense attorney
was trying to suggest that some of the money was needed perhaps by Gates or
perhaps the Gates may have taken more than the several hundred thousand
dollars he admitted to because he was living what Manafort`s lawyer called
a secret life. He said there was another Rick Gates. There was a secret
life of Rick Gates, and this involved, you know, consorting with a woman in
the United Kingdom, on his way to and from the Ukraine and that this might
have been very expensive and might have explained why he was stealing so
much money from Mr. Manafort.

It seemed a little bit like a distraction, but it was certainly enough to
sort of throw a star witness off his rhythm.

MADDOW: We`d heard some sort of – not necessarily gossip but at least
people`s impressions today that Manafort`s team seemed very pleased with
how things went today, that this was what they were aiming for with Rick
Gates, that they – the cross-examination is sort of turning things in
their way. As a matter of substance in terms of the evidence against
Manafort and what the jury will consider, was that your impression as well?

GERSTEIN: I thought that Gates did OK. I thought it was sort of a
middling kind of performance. I didn`t feel like he fell apart on the
stand. I didn`t feel like it was a mistake for prosecutors to put him on.

And remember, the prosecutors are deliberately sandwiching Gates in the
middle of this case between a lot of more dry, technical documentary
evidence and more testimony to come on the other side as if to say whatever
the media or other folks say Gates is not the star witness, that this is
still primarily a document case.

So I think the prosecutors handled it that way to try to take out sort of
an insurance policy and so, they have some time to try to rehabilitate
Gates. They can try to do that directly in some further examination of him
tomorrow morning probably, and then with some other witnesses they can kind
of button up this case and really bring it home to the jury.

MADDOW: Josh Gerstein, covering the trial for politico.com, joining us
here tonight. Josh, thank you very much.

GERSTEIN: Thanks, Rachel.

MADDOW: Much appreciated.

I now want to bring in Barbara McQuade, former U.S. attorney in Michigan.
She`s been in court as well since the trial started.

Barb, it`s great to have you with us tonight. Thanks for being here.

BARBARA MCQUADE, FORMER U.S. ATTORNEY: Oh, thanks, Rachel. I bring
greetings from all of your fans in the courtroom.

MADDOW: Oh that is hard to believe, but thank you.

(LAUGHTER)

MADDOW: Let me ask you a legal question that I don`t – I don`t know who
else to ask but I know you`ve been there. We have been looking at the
transcript and we have been hearing reports from people in the courtroom
about the judge really writing the prosecutors, criticizing their facial
expressions, which direction they`re looking, controlling words they might
want to ask, cutting them off in their questions.

It seems like the judge as being much harder on the prosecutors than he`s
being on the defense attorneys. What`s your impression of that and should
those of us who aren`t lawyers and don`t necessarily know how trials
usually go, should we see this as unusual or important?

MCQUADE: I do think it`s unusual. It`s not unusual the judge wants to
take command of the courtroom. He wants to make everyone understand that
he is going to run a tight ship and he wants the things to move along
quickly. But I have not seen a judge to be so involved in the case as this
one.

To me, the most damaging thing he did is he interjects his own statements.
He asked questions. Today at the end of the day, Rick Gates testified
something like Paul Manafort was very involved in all of his finances and
the judge interjected himself and said, well, apparently not that closely
because you were able to steal all that money from him.

You know, a jury hears that and sees this person as an independent,
impartial decision maker who`s an expert in the law, what are they supposed
to take from that? And so, I think he is far too involved in the case and
could really throw a monkey wrench in the works for the prosecution.

MADDOW: And in terms of the way that monkey wrench might play out, I mean,
could – I suppose either side, depending on how this – how the jury
decides and what the outcome is in this case, could either side use the
judge`s behavior here to potentially question the outcome or appeal the
case on that basis?

MCQUADE: Well, so, the answer to that is no and this is why it can be so
damaging to the prosecution if the defense loses, and there`s a conviction
– the defense has a right to appeal. If the prosecution loses and the
defendant is acquitted, they have no right to appeal because of the double
jeopardy clause of the Fifth Amendment. The defendant cannot twice be held
in jeopardy once the jury is sworn.

As a result of that, you do see this from time to time where the judge is a
little harder on the prosecution, keeps out some questionable evidence and
sometimes they`ll even say to you on the record, prosecution, I`m doing you
a favor because you`re going to not only win the battle but you`re going to
win the war, because you don`t benefit if I allow some evidence in and it
turns out to be an error and you get a conviction here, but it gets
reversed on appeal.

So, sometimes judges do err on kind of reining in the prosecution and their
evidence for that reason. They don`t want to get a reversal on appeal.
But in this instance where they go so far overboard, there really isn`t
much recourse.

There is something called a writ of mandamus for really outrageous
behavior, I doubt we`re going to get to that territory, but I could see
this having a damaging effect on the jury. You really worry about that and
the government basically has no recourse.

MADDOW: Barb, there`s one more element of this case that I want to ask you
about can I ask you to stay with us just for a quick second. We need to
take a quick break and then I`m going to come back around the other side
and ask you about one other matter.

MCQUADE: You bet.

MADDOW: All right. Barbara McQuade joins us again when we come back.
Stay with us.

(COMMERCIAL BREAK)

MADDOW: Joining us once again is Barbara McQuade, former U.S. attorney in
Michigan, who has been in the Manafort trial court since this trial started
a few days ago.

Barb, thank you for sticking with me. Much appreciate it.

MCQUADE: You bet.

MADDOW: I wanted to ask you about the first time it has come up at the
Manafort trial that Manafort actually had something to do with the Trump
campaign. Prosecutors today offered evidence that Manafort had tried to
get a job offer, secretary of the army job offer for a bank president who
had given him what appeared to be some sketchy loans that was introduced by
prosecutors today. But then prosecutors thereafter – shortly thereafter
objected when Manafort`s defense counsel tried to talk to Gates more about
whether or not he`d been interviewed by the special counsel about his time
on the Trump campaign.

That left me really wondering if the Trump campaign is now fair game or not
fair game in terms of what else is going to be discussed at this trial,
whether we should expect more references to the president and his campaign.

MCQUADE: I think if it comes in, it will be very narrow. The questions
that the prosecution asked about relate directly to one of the counts of
bank fraud, this loan from Stephen Calk`s bank. And so, I think that`s why
that piece of it became relevant.

The question that was asked by the defense was a much broader one which
was, they were going to get into what have you told the special counsel
about your time on the Trump campaign, which could really open the door to
information about ongoing investigation relating to the Trump campaign.
So, the prosecution immediately jumped up and objected when that happened.
There was a lengthy sidebar and then a break.

And the next question after that related to a completely different topic.
So, I think if it comes up, it will be very narrow.

MADDOW: So when we see that happen, when the judge brings the lawyers up
to the bench and they talk and we`re not allowed to hear it but then the
conversation starts up again in a totally different direction, does that
imply that the judge sustained the objection and that the defense actually
isn`t allowed to go there?

MCQUADE: I think so. In that, in that scenario, I think so. You know,
not in every scenario, but I think there that was clearly the question that
was asked. And when they came back after the break, he went in a
completely different direction.

So, I surmise that that`s what happened in that moment.

MADDOW: That`s why you need pros in the courtroom watching these things
for us, to explain it to dopes like me.

Barbara McQuade, former U.S. attorney in Michigan – thank you so much,
Barbara. Really, really appreciate it.

MCQUADE: Yes, thanks for having me. I even got to ride an elevator with
Brandon van Grack.

MADDOW: Did you really? The counterespionage prosecutor guy?

MCQUADE: I did, I did.

MADDOW: Did you say hi to him?

MCQUADE: I did. It`s been great fun.

MADDOW: I love your life. Thanks, Barb.

That does it for us tonight. We will see you again tomorrow. May we all
someday have the opportunity to ride in an elevator with a veteran
counterespionage prosecutor when we`re in a position to know who that
person is. Imagine the thrill.

Now, it`s time for “THE LAST WORD WITH LAWRENCE O`DONNELL”.

Good evening, Lawrence.


END



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