Paul Manafort's fraud trial: His bookkeeper didn't know about foreign accounts - live updates

CBS News' Clare Hymes, Paula Reid and Parita Desai contributed to this report.

ALEXANDRIA, Va. -- Prosecutors want former Paul Manafort associate Rick Gates to testify in Manafort's fraud trial. Ten witnesses have testified so far, out of the potential 35 the government has offered.

• What you need to know about the Paul Manafort trial
• Day 1: Defense says Manafort trusted wrong person, Rick Gates
• Day 2: Manafort accused of amassing "secret income"

The prosecution is calling more vendors on the third day of the trial, including the landscaper who worked on Manafort's Hamptons home, an electronics home improvement contractor and Manafort's bookkeeper. The money trail, prosecutors are arguing, shows that the former campaign chairman took millions from wealthy Ukrainian clients then hid it from banks and the IRS, often paying for expensive clothing, jewelry and services with money wired from offshore accounts in Cyprus connected to Manafort's Ukrainian consulting payments.

Lawyers have already relayed evidence they said showed Manafort personally directed millions of dollars in international wire transfers to pay for high-end suits and more than $3 million in improvements at various houses.

On Thursday, prosecutors pressed the judge for more leeway to submit more evidence of Manafort's lavish spending, presenting a slightly trimmed down list of evidence from some 500 exhibits.

Manafort's lawyers have signaled they will pin blame for any illegal conduct on his longtime deputy, Rick Gates, who could testify against Manafort, who reportedly seemed calm and prepared for the court proceedings.

The trial is the first to stem from the Russia probe by special counsel Robert Mueller, who was tasked last year with investigating the Kremlin's efforts to sway the U.S. presidential election and potential collusion with the Trump campaign. That investigation remains ongoing, and this week's financial fraud trial is not tied to collusion.

The trial so far has included descriptions of Manafort's $15,000 jacket made of ostrich leather and the more than $6 million in cash he put toward real estate. One witness, Maximillian Katzman, testified that Manafort spent more than $900,000 at his boutique retailer in New York. He said Manafort was the only business client of his who paid via international wire transfer.

Manafort has a second trial scheduled for September in the District of Columbia that would address allegations that he acted as an unregistered foreign agent for Ukrainian interests and made false statements to the U.S. government.

Prosecutors expect to rest their case next week, ahead of schedule.

Follow along with updates below:

Third day of trial comes to an end

Prosecuter Greg Andres went through a series of exhibits, which included loans, financial statements, income statements, salaries, foreign taxes, and payments from offshore entities. He then presented a series of emails that Washkuhn had sent Manafort and Gates when they had asked for copies of their DMP International financial statements.

Andres contrasted financial statements Washkuhn sent with emails Manafort and Gates had sent to the Bank of California, Federal Savings Bank and Citizens Bank to apply for a loan. She confirmed that Manafort and Gates had sent inaccurate income statements to the banks to show that they had net incomes in the millions, when in fact they had net losses.

For example, a financial statement Washkuhn provided as of November of 2016, showed DMP had a net loss of $3,650,00. She added that as of November 30,2011, DMP had no income. However, in a September 2016 email from Manafort to Dennis Raico of Federal Savings Bank, where Washkhun was CC'd, DMP's supposed profit and loss statement showed a net income of $3,011,952.

Washkuhn testified that the falsified statement was for the wrong month (September not November), contained spelling errors (the words 'review' and 'September' were spelled wrong), used a font different from that of her company, and was not something she had ever put together for Manafort.

Philip Ayliff then took the stand. Ayliff, now retired, was formerly the Managing principle of the CPA firm Kositzka, Wicks & Company (KWC).

Ayliff testified to a few things before the court recessed for the day. He was shown Manafort's 2014 individual tax return, and specifically schedule B which asks whether or not the tax payer has foreign "financial interest or signatory authority," to which Manafort responded "no."

Ayliff's testimony will continue tomorrow.

Manafort's bookkeeper didn't know about Cyprus accounts

Heather Washkuhn, managing director at NKFSB, was the bookkeeper for Manafort's personal and business accounts. She testified that she was not aware of any foreign accounts that Manafort held -- and used to pay for millions in personal luxury purchases. She had seen wires of foreign income but attributed them to his work overseas. She told the court she did not know if he was making payments out of foreign accounts, and said if he was, she should have been informed.

Manafort, she said, approved "every penny" of the personal bills she paid for him. Washkuhn's testimony appeared to undercut an argument by Manafort's attorneys that he can't be responsible for financial fraud because he left the details of his spending to others, including Gates. Washkuhn said Gates was only involved in Manafort's business dealings, not his personal expenses.

She said she had met Gates once, and added that if Manafort could not be reached about issues relating to the business account, she would reach out to Gates.

Manafort was a client from 2011-2018 and paid the firm about $100,000 a year. Washkuhn was in frequent contact with Manafort about his accounts because she needed to have a complete picture of his finances for the general ledger, which would be given to the tax preparers at the end of the year before filing his return.

Prosecution intends to call Rick Gates as witness

Prosecutor Greg Andres said that it's the government's "intention" to call former Manafort associate Rick Gates as a witness at some point during the trial. Earlier, the prosecution had said it "may or may not" call him. CBS News' Paula Reid says that Gates is expected to testify Friday or Monday.

In February, Gates pleaded guilty on charges of conspiring against the U.S. and making false statements to the federal government. He said he would cooperate with the special counsel as part of his plea deal. He admitted that while he worked for Davis Manafort Inc., he helped Manafort defraud the U.S. by transferring and wiring millions of dollars from overseas accounts -- income that Manafort is accused of not reporting to the Treasury Department. He also admitted that he helped Manafort mislead his tax preparer by not disclosing the overseas accounts.

Hamptons landscaping, custom karaoke system

The landscaper who worked on Manafort's Hamptons home, Michael Regolizio cared for trees, and maintained the landscape and paving. One project included a large bed of white flowers with an "M" made of red roses in the center. Regolizio told the court that Manafort paid his company, New Leaf, in installments ranging from $4,400 - $144,000 between 2010 to 2014, through wire transfers from the Cyprus accounts.

Joel Maxwell, the COO of Big Pictures Solutions, a custom automation and integration company based in Palm Beach is referred to as "Vendor B" in the Manafort indictment, also testified in the morning. Manafort purchased a variety of systems from BPS including a custom karaoke system. Payments ranging from around $17,00 to $200,000 were made to BPS through wire transfers from Leviathan Advisories Limited, Marfin Popular Bank, Global Highway, Global Endeavors and Lucicle Consultants. All these entities are based in Cyprus.