How Rick Gates' testimony impacts Manafort trial

This is a rush transcript from "Special Report with Bret Baier," August 7, 2018. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

SENATE MINORITY LEADER CHUCK SCHUMER, D-N.Y.: It's not a witch hunt when some of the most senior members of the Trump campaign have been indicted.

REP. HAKEEM JEFFRIES, D-N.Y.: Trump's campaign manager Paul Manafort has been charged with conspiracy to defraud the United States of America.

JUDGE ANDREW NAPOLITANO, FOX NEWS SENIOR JUDICIAL ANALYST: This trial does not allege facts that the government says occurred during the time that Paul Manafort was the president's campaign manager. Really, this trial has zero to do with Donald Trump the person or Donald Trump the president.

(END VIDEO CLIPS)

SHANNON BREAM, FOX NEWS: A lot of folks are conflating the two, so let's talk about it with our panel: Byron York, chief political correspondent for The Washington Examiner; Charles Lane, opinion writer for The Washington Post; and Tom Bevan, Real Clear Politics co-founder and president. Gentlemen, welcome to all of you.

These are smart folks, Byron, who are talking about this trial and what it is and what it isn't about, or they talk about the slew of indictments. But to be clear, are any of them connected to Russian collusion?

BRYON YORK, THE WASHINGTON EXAMINER: To disagree with the judge just a little bit, Judge Napolitano, that is, there is one crime alleged that has to do during Paul Manafort's time with the Trump campaign, and basically it was Manafort, he was broke, he was going loan to loan. He was trying to get a loan from a small bank from Chicago, and he wanted to give the head of a bank a position on the president's economic advisory council, which he did do, and then recommend later that he have a big position in the administration, which he did not get. So that is the only thing that actually occurred at the time that manna for was with the Trump campaign.

The bigger issue, though, of course, is that this so-called Trump Russia investigation, and it has nothing to do with any allegations of conspiracy or collusion to influence the election.

BREAM: We are learning a lot, though, Charles, in the Manafort trial this week. We are hearing a lot of juicy, salacious details today. Rick Gates obviously is the key witness here. He took a plea deal. He was a partner with Manafort. Today he took a tough cross examination, at least the start of it, asking him about his secret life, about him stealing money from Manafort. Will it be enough, though, for the defense to discredit him against all these charges for Manafort?

CHARLES LANE, THE WASHINGTON POST: I don't know. It's a dilemma anytime you're using what's called a flipped witness to make your case, because obviously he's guilty of something otherwise the government could have procured the testimony. So, of course, the first question right out of the box from the defense is, in effect, OK, you were lying then. Are you lying now? Who can we believe, how can we believe you?

And what was especially, I think, damaging to Rick Gates today, and surprisingly so to me because it was a surprise to everyone, was this business of an affair and he was keeping an apartment in London, sort of leading a parallel life. And of course, that's important to the defense's case because Manafort's whole contention is this is the sort of guy who keeps secrets from people who are very close to him. I didn't know he was doing all this tax evasion and so on. It was all his idea. I think for the first time today on cross-examination, I think defense really scored some points in this trial.

BREAM: So in addition to talking about the affair, which I'm sure Gates is not looking forward to, but he knew it, he had to know it was coming. This is some more of what we've heard from the Gates testimony, that Manafort would classify wire transfers as loans to reduce taxable income, that he used offshore money to pay for home upgrades like top of the line video and audio systems. Gates used an electronic signature template of Manafort's signature and gave help initiate wire transfers from accounts in Cyprus directly to high end U.S. vendors to avoid reporting the income on Manafort's taxes. And Tom, there are others folks under immunity deals who are saying some things that are pretty damning for Manafort as well.

TOM BEVAN, REAL CLEAR POLITICS: Correct. But with regard to Rick Gates, because his credibility has been shattered, it comes down to where is the evidence, where is the proof that there was -- that Manafort knew this? There was an email presented today where Manafort said, hey, WTF, I was blindsided by this. The defense trying to make the case that he didn't know and that Rick Gates was operating on his own. So I think it's really incumbent now on the prosecution to produce the evidence that proves, because Rick Gates' word at this point is not going to be not good enough I don't think to get a conviction unless they have the actual proof that shows that Manafort knew what was going on.

BREAM: The testimony of the bookkeepers and the tax preparers have not been good for Manafort to that part separate and apart from Gates, but that has not been a positive develop in for him this week. Meanwhile, this is all going along against the backdrop of the president's legal team talking about whether or not he's going to sit down with Mueller. There's been some back and forth. This is a little bit of what they were negotiating last week. Mueller agreed to reduce the overall questions from the initial list of 49, said he would be willing to accept some answers in writing, but, Byron, he still wants to ask those questions regarding obstruction of justice, and the president's team said you can't even charge him with that crime. It didn't happen. Even if he did, you can't charge him.

YORK: This is has just been going on forever, which maybe was the idea, I don't know. But obviously Trump is getting advice every day, don't talk to Mueller. Don't get in there and expose yourself in this interview. There is the option of answering questions in writing which has been talked about for a long time. There are pluses and minuses for that too. But the president, it seems to me, does have kind of a case if he says, look, I will talk to you about stuff that happened before I became a president, but things are different after I became president, and I don't have to talk to you about those stuff. But this has just been going on for so long, I imagine it will be going on for quite a while more.

BREAM: Yes, probably is not going to wrap up after the midterms which is the key to a lot of this. Former DOJ official Thomas Dupree talked about this idea of negotiating over the president answering on paper versus in person.

(BEGIN VIDEO CLIP)

THOMAS DUPREE, FORMER DEPUTY ASSISTANT ATTORNEY GENERAL: The president obviously would like to do things in writing. That gives them time to think about their answer, to craft the right answer as opposed to a face- to-face interaction where, as we've seen a lot, witnesses sometimes don't quite get it right under the pressure of the moment.

(END VIDEO CLIP)

BREAM: Charles, I used to be an attorney. We would go through these interrogatories, and it was so much safer to put it on paper and have time. but this president seems to like the challenge of possibly going head-to- head with Mueller's team.

LANE: If you do it on paper, it's much more like a civil lawsuit, much more under your control. It's less in the moment and adversarial. So of course that would be to their advantage.

And I agree with you, though, that President Trump seems to be a difficult client to restrain. He seems to want to make an outburst every couple of seconds. And speaking of people with credibility issues, he's one of them. He said various different things about these various different meetings from one time to the next. And once he gets going in a conversation with Robert Mueller, no matter how well prepared he would be, there would be a huge risk that he would blunder into saying something that could be shown to be untrue later on, and that would be disastrous.

BREAM: And Tom, that is what his team is worried about, the so called perjury trap. But he is a strong-willed individual. He's the president. He'll make his own decisions.

BEVAN: He will in the end, but he does trust Giuliani and the folks around him. And Rudy said something interesting today. He said our answers are already out there. The special counsel doesn't even need this. And I think that hints at the idea that they're not going to be meeting, sitting down with him in person anytime soon if at all.

YORK: One last thing is this idea that some people have that the president would just crumble if he were in front of the prosecutorial team. He's been in a lot of litigation in his career. He has been in a lot of depositions. And I think one of the reasons he has some confidence in that is he emerged from most of them relatively unscathed, and he's a kind of master at not saying anything if that's what he wants to do.

BREAM: Stakes very high this time.

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