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

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.

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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.

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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.

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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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