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Bookkeeper Testifies in Manafort Trial; Gates Testimony at Trial; Accused Spy Bragged about Russia; Houston Murder Manhunt; July Jobs Report. Aired 9:30-10a ET

Aired August 3, 2018 - 09:30   ET


[09:32:45] ERICA HILL, CNN ANCHOR: The bank fraud and tax evasion trial of President Trump's former campaign chairman is about to resume in Virginia and this could be the day the prosecution's star witness takes the stand. Rick Gates was, of course, Paul Manafort's long time business partner and was indicted alongside him almost a year ago. Gates, though, made a deal with the special counsel. Manafort, obviously, has not. At least not yet.

Day four of testimony will take up where day three left off with Manafort's bookkeepers. And so far they've explained in great detail how he allegedly lied on loan applications to keep his business and his lifestyle afloat after his lobbying income dried up in 2015. Now, in 2016, of course, the year he briefly ran the Trump campaign, Manafort was broke, allegedly telling a bank he had more than three million dollars in revenue when actually he lost more than a million.

And with that let's bring in CNN legal analyst, former federal prosecutor, Renato Mariotti.

Good to have you with us.

Now, listen, everybody likes to make a lot of this lavish lifestyle that was laid out here. These $15,000 ostrich jacket obviously is a much more scintillating headline than some of the other nuts and bolts details. But this is where the real information is coming out. What stands out to you, especially from the testimony that we heard yesterday?

RENATO MARIOTTI, CNN LEGAL ANALYST: Well, what we saw was that Paul Manafort had greatly overstated the income of his business when he was communicating with banks. And I imagine viewers don't need me to tell them that that's a bad idea. It is bank fraud when you lie to a bank in order to get their money. And that is one of the central charges that Mr. Manafort is facing.

We also heard from his accountant who said that the accountant -- the accountant said that he had asked Mr. Manafort about foreign bank accounts and Manafort said that he had none, which was not the truth. And it is a crime to hide your foreign bank accounts from the federal government.

So, as you pointed out, you know, yes, there's this lavish lifestyle evidence that's certainly titillating, but this -- the evidence we heard yesterday is really the core of the government's case. And then, as you pointed out, it looks like the government will call Gates. He's going to be a key witness and really, I think, a focus point of the trial because the defense is trying to turn him into kind of a boogie man. You know, the -- he is the real wrongdoer, which is a very typical tactic to do on the defense side (ph).

[09:35:11] HILL: What's the most important thing that the prosecution will need to get out of him on the stand?

MARIOTTI: Well, you know, prosecutors always like when they have a cooperator, because the cooperator is going to say, I committed crimes, so did this man right here, Paul Manafort. And it's always helpful for the prosecution when somebody else, other than them, is saying that there was a crime that's committed. I'm sure that the prosecutors will also use him to give jurors an inside look at how their scheme worked, how their business dealings worked, et cetera.

The real key moment in this trial is going to be the cross-examination of Gates. You know, he is the prosecution's star witness. If the defense doesn't take him down, it's very hard to see how they win. And then, really, the only hope for the defense at that point would likely be the testimony of Paul Manafort. Once a defendant takes the stand, if he does, and that's a big open question at this point, it ultimately comes down to whether the jury believes him or not.

HILL: You've noted too, just sort of following along listening to your thoughts on this and also following along on Twitter, you were talking very specifically about reports of how the judge was handling things yesterday and then what that says to you about how and where this trial is moving.

MARIOTTI: That's right. We have a judge, in this case Judge Ellis, who is clearly a very experienced trial judge. He has control of his courtroom and he is working hard to move things along at a fast pace. And I guarantee you the jurors are very happy about that. They want to get back to their regular lives. They want this to be done in an efficient way. That's good for everyone, including the prosecutors, because, frankly, these white collar trials, I used to prosecute white collar cases and try them, cases just like this one, and, frankly, they can be very boring, they can be very long and tedious. So the judge is moving it along quickly.

He moved the lavish lifestyle evidence particularly quickly. He has slowed things down when it comes to the evidence that we saw yesterday and that's because that evidence is much more central to the case. So I really think Judge Ellis has done a good job, and that -- that's actually a good thing for the prosecution.

HILL: Really quickly before I let you go, "The Wall Street Journal" reporting that Michael Cohen had a deal with a major Trump donor that would pay him $10 million if he helped that donor secure $5 billion in government loans to build nuclear power plants. Anything wrong with that on the surface?

MARIOTTI: Not necessarily on the surface. The question is, you know, whether or not he registered as a lobbyist, for example. There's going to be a number of question marks around that, but the devil will be in the details.

HILL: Renato Mariotti, always appreciate it. Thank you.

MARIOTTI; Thank you.

HILL: New details about how the suspected Russian spy, Maria Butina, infiltrated Republican politics before the 2016 election. And it didn't require some highly sophisticated operations to get it done.


[09:42:00] HILL: New details this morning about how accused Russian agent Maria Butina tried to influence Republican politics ahead of the 2006 election. Reports that she liked to brag about her ties to Russian intelligence when she was intoxicated and that her overly flirtatious behavior left men wondering what she was truly after.

Well, it's not seen as a highly disciplined intelligence operation. The details have exposed one of Russia's more informal tactics to interfere in U.S. politics.

CNN correspondent Sara Murray has the details.


MARIA BUTINA: I would like to present Russia.

SARA MURRAY, CNN POLITICAL CORRESPONDENT (voice over): For an alleged Russian spy, Maria Butina's skills weren't particularly impressive. She liked to communicate via widely available platforms like Twitter and WhatsApp. Her overly flirtatious approach left men wondering what she was really after. And sources say she bragged about her ties to Russian intelligence when she was intoxicated. Two of her classmates found her comments so alarming they reported her to law enforcement, sources tell CNN.

Butina pled not guilty to charges of conspiracy and acting as a foreign agent in the U.S. after her July arrest. Her lawyer insists she's not a spy and says she won't cut a deal with prosecutors if it means saying she is one.

ROBERT DRISCOLL, MARIA BUTINA'S ATTORNEY: I mean that's always the problem. People talk about cutting a deal. But if you're not an agent for a foreign government, you can't lie and say you are in order to get rid of this.

MURRAY: Intelligence experts see Butina's far from subtle approach to allegedly trying to infiltrate GOP political circles as just one of the tools in Moscow's arsenal as Russian President Vladimir Putin tries to meddle in American democracy. An ongoing effort.

DAN COATS, DIRECTOR OF NATIONAL INTELLIGENCE: We continue to see a pervasive messaging campaign by Russia to try to weaken and divide the United States.

MURRAY: Past Russian spies have adopted fake identities, used invisible ink, communicated with coded messages over radio transmitters. But the under-the-radar approach didn't seem to suit Butina.

BUTINA: We promote gun rights.

MURRAY: She touted her gun rights group in a racy Russian "GQ" photo shoot in 2014. In 2015, she questions then candidate Donald Trump about sanctions against Russia at a Nevada political event.

BUTINA: I'm visiting from Russia. So my question --


MURRAY: As an American university student, Butina defended Putin and even claimed in class to be a liaison between the Trump campaign and the Russians, a source says. People who met through her school and political events say she was a little too friendly. She was quick to start playing footsie under the table and boldly sidled up to older men at political events and asked them to be FaceBook friends. Her lawyer admits her activities and contacts caught the attention of the FSB, one of Russia's security services.

DRISCOLL: I think that anyone who is Russian has to meet with the FSB when they go back and forth and frequently is asked at the airport what they're doing in America, if they had any information for the FSB.

MURRAY: And experts say she was probably a valuable asset for Russia.

STEVE HALL, CNN NATIONAL SECURITY ANALYST: I think Maria Butina would have been very valuable to the Russian government despite the fact that she wasn't a classic -- you know, a classically trained intelligence officer, like perhaps someone like Anna Chapman.

But I would expect to see other versions of Maria Butina.

[09:45:09] MURRAY: When investigators searched the home of Butina and her political operative boyfriend, who has not been accused of wrongdoing, they found a note in his handwriting, how to respond to FSB offer of employment. It's unclear which of them it was for.

Sara Murray, CNN, Washington.


HILL: A massive manhunt underway for the suspect in the murder of a Houston doctor. Just ahead, why police searched his home overnight and what investigators say the suspect did in the days leading up to the shooting.


[09:50:04] HILL: New details about the man accused of killing a Houston cardiologist who once treated former President George H.W. Bush. Overnight, SWAT teams searched the home of Joseph Pappas after reportedly seeing a light on in the house. This morning, though, Pappas is still on the run. And investigators now say he no longer owns that house. In fact, that it had been transferred. The deed transferred to someone else the day before police say he shot and killed Dr. Mark Hausknecht.

So Ed Lavandera joining us now with more from Houston.

Interesting developments overnight to say the least, Ed.

ED LAVANDERA, CNN CORRESPONDENT: Yes, you know, the authorities spent much of the evening out here. Nothing really came of it. But it highlights the concern and the urgency that investigators here in the Houston area have for finding 62-year-old Joseph Pappas, as they've been spending much of this week circulating that picture of him.

But we've also learned, as you mentioned, that the house that you see behind me was oddly transferred -- the deed of it transferred over to a woman in Ohio. And this was done -- we learned this from a courier who was called out to the house here just hours before the murder of Dr. Mark Hausknecht. And this courier was given these documents and told to take them down to a courthouse in Houston to be filed. And that courier tells us that as -- and he was in the process of doing that after leaving the house that he received a number of phone calls. He described Joseph Pappas here at this house as being very nervous, really wouldn't open the door, and kind of always looking around to see what was going on around in the neighborhood. Rather suspicious.

That woman in Ohio where -- who received the transfer of this deed, told a local newspaper there that she says that several days after the murder, she spoke with Joseph Pappas. This is a man that she has known for quite -- for some time. And she tells the newspaper that he said that he was suffering from a terminal illness and that he planned to commit suicide.

All of this, you know, kind of leads to the understanding here that police have been saying that they either suspect that Pappas could be armed and dangerous and to approach cautiously and they've also left open the possibility that he could be suicidal. So that explains why police have been saying that.

Investigators also say when they went inside the house here, Erica, they found, quote, painstaking evidence of clues that Pappas had been planning for some time carrying out this murder plot against Dr. Mark Hausknecht. They wouldn't go into the specifics of it. But they said that they found great details that all of this was deliberately planned in the way all of this was carried out.


HILL: Ed Lavandera with the latest for us. Ed, thank you.

Iran's military holding a major exercise in one of the most highly used energy shipping channels. Why the timing of these drills is of such concern to the U.S. military.

(COMMERCIAL BREAK) [09:57:26] HILL: Happening now. A major show of force in the Middle East as Iran's navy holds military exercises in the Persian Gulf. The operations coming at a tense time. The Trump administration is threatening to reinstate sanctions against Iran and President Trump and Iranian leaders have spent the past few weeks exchanging threats on social media. Military officials say the war games could demonstrate Iran's ability to choke off one of the world's most important waterways.

CNN's Nic Robertson joins us now from the Strait of Hormuz.

So, Nic, seems that Iran is trying to send a message here.

Nic, it's Erica, can you hear me?

As is understandable when you're in the Persian Gulf. Sometimes we can have trouble with communication. So we will try to get Nic back up in just another moment.

Our next hour starts right now.

Good morning, everyone, I'm Erica Hill, in for Poppy Harlow on this Friday.

The economy is front and center this morning. First, China retaliates, announcing it will slap tariffs on some $60 billion worth of American goods. That move coming just minutes before the release of the July jobs report, which missed expectations but it does paint a strong overall picture of the labor market.

CNN's Cristina Alesci joins me now with the latest on that.

So missed expectations. There were also some revisions, though, from June.


HILL: Not so bad overall.

ALESCI: It was a relatively strong report, although it missed expectations because we've been on this trend of adding about 200,000 jobs. And that's why Wall Street at least isn't loving this report. It's trying to decide whether or not this is a long-term trend or we're going to see a pullback in the jobs numbers going forward, or whether this is just a seasonal blip. So, Wall Street's kind of working that -- through that right now.

But let's look at the specific numbers. One number I want to highlight is wage growth, 2.7 percent. You know, in and of itself, that is not a bad number. But at this stage in the cycle where we're at near or full employment, we should be between -- or we have historically been between 3 percent and 4 percent. And that is a persistent problem for the administration because that speaks to how people feel. They want to see an increase in wages way above ideally inflation. So that's definitely a big number. When you break it down by sector, you're looking at a strong showing

in manufacturing, business services and construction. Thirty-seven thousand jobs in manufacturing, business services, 51,000, and construction, 19,000.