ALEXANDRIA, Va. — A day after describing in detail how millions of dollars in payments from Ukrainian oligarchs enabled Paul Manafort to live in luxury through 2014, federal prosecutors outlined on Thursday how his financial fortunes reversed so sharply in subsequent years that he made his Manhattan condominium available on Airbnb.
Witnesses for the prosecution in the fast-moving tax and fraud trial, which got underway on Tuesday, said Mr. Manafort, a former campaign chairman for President Trump, went from snapping up lizard- and ostrich-skin jackets worth at least $15,000 to skipping payments on more than $1.1 million in bills. His solution, they said, was to seek bank loans based on financial statements that falsely showed his debt-ridden political consultancy firm was awash in cash.
The testimony fleshed out how Mr. Manafort’s finances were altered by the loss of his main client, Viktor F. Yanukovych, the leader of Ukraine. Mr. Yanukovych was ousted from power in 2014 after a popular uprising and fled to Russia. Mr. Manafort, a veteran Republican operative and lobbyist, advised Mr. Yanukovych for a decade, earning tens of millions of dollars in fees.
By 2016, when he re-entered American politics by joining Mr. Trump’s campaign, his financial troubles had grown acute.
During several hours of questioning, Heather Washkuhn, a bookkeeper who handled the bills for Mr. Manafort’s company, Davis Manafort Partners International, said that it fell so deeply into the red that one insurance company was poised to suspend the firm’s medical coverage by early 2016.
“Please advise when funds will be transferred,” she wrote in an email that April to Mr. Manafort, one of a series of increasingly urgent messages she sent asking how she was to pay his mounting personal and business debts.
In dry but compelling testimony, she compared several financial statements that prosecutors say Mr. Manafort used to convince banks to mortgage some of his real estate with her own firm’s records that showed that his company was losing as much as $76,000 a month in late 2015.
Some statements that Mr. Manafort submitted in hopes of obtaining real estate loans that would enable him to dig out of debt were littered with errors — evidence, prosecutors argued, of clumsy forgeries. One financial statement, which purported to have been prepared by Ms. Washkuhn’s firm, misspelled the name of the month as “Septembe” and the word “review” as “revmw.”
More important, Ms. Washkuhn said, the documents that were presented to bank officials on Mr. Manafort’s behalf falsely showed that his company was thriving. One inflated the company’s income by about $4 million, claiming that at the end of 2015 it had nearly $4.5 million in cash, when her books showed a balance of only $400,000.
The trial is the first stemming from charges brought by the special counsel, Robert S. Mueller III. While the charges against Mr. Manafort do not touch on Mr. Mueller’s main mission of uncovering Russia’s attempts to influence the 2016 presidential election, the testimony on Thursday about his financial troubles raised questions about Mr. Manafort’s motivation in joining the Trump campaign in an unpaid role.
He was hired in March 2016 to manage delegates to the coming Republican convention and was quickly promoted to campaign manager. In mid-August 2016, he was forced out amid revelations about his work in Ukraine. But his right-hand man, Rick Gates, stayed on with Mr. Trump as deputy campaign chairman through the election.
In July 2016, just before Mr. Trump clinched the Republican nomination, Mr. Manafort offered campaign briefings to Oleg Deripaska, a Russian oligarch close to President Vladimir V. Putin of Russia. Mr. Deripaska was engaged in a business dispute with Mr. Manafort, and documents filed in the case by Mr. Mueller’s team show that Mr. Deripaska had lent Mr. Manafort $10 million.
Mr. Manafort’s friends have said the overture was no more than a courtesy and was never accepted.
Defense lawyers for Mr. Manafort, 69, tried to suggest on Thursday that Mr. Manafort took a back seat to Mr. Gates when it came to both his business and personal finances. Mr. Gates worked for nearly a decade as Mr. Manafort’s deputy, a job that paid him about $240,000 a year, Ms. Washkuhn testified.
After hedging earlier this week, prosecutors said Thursday that Mr. Gates, who pleaded guilty this year to related charges, would be called to testify against Mr. Manafort.
Questioning Ms. Washkuhn, Thomas Zehnle, one of Mr. Manafort’s five defense lawyers, repeatedly referred to Mr. Gates as Mr. Manafort’s “proxy” on all financial matters.
But while she acknowledged that she dealt with Mr. Gates when she could not reach Mr. Manafort, Ms. Washkuhn testified that Mr. Manafort was fully in charge of his financial affairs, personally approving every bill that she paid.
Still, she acknowledged that in early 2016, as Mr. Manafort sought to mortgage some of his seven or eight homes, Mr. Gates was the one who peppered her with demands for inaccurate financial statements.
“Does not make sense,” Mr. Gates wrote her when she refused to alter a financial statement to show income that Mr. Manafort’s company was supposedly expecting, as opposed to what it had in hand.
Judge T. S. Ellis III of the United States District Court in Alexandria, Va., has repeatedly tangled with Mr. Mueller’s team over their attempts to present evidence about Mr. Manafort’s extravagant spending when he was flush with funds from his work in Ukraine.
In a brief hastily filed Wednesday night, prosecutors tried to allay the judge’s concerns that they were trying to sway the jury with unnecessary, salacious details. Part of Mr. Manafort’s motive to hide income and deceive banks, they argued, was that he had grown used to his material wealth.
In similar cases, they said, courts have held that “evidence of a defendant’s spending and lifestyle is relevant to his intent and is not unduly prejudicial.”
On Thursday morning, the owner of a company that cared for Mr. Manafort’s home in the Hamptons testified about his client’s landscaping needs. His workers, he said, spent four, if not five, days a week caring for the property, which spanned at least an acre, and planted “hundreds and hundreds” of flowers. Some were arranged in a design, spelling out the letter M for Manafort in red, surrounded by white.
Judge Ellis has tried to cut short such descriptions. “Most of us don’t have pagodas or closets of fancy suits,” he said early Thursday. He told prosecutors that he would continue to carefully weigh what photographs should be shown to jurors lest they judge Mr. Manafort on the basis of his wealth, not the allegations against him.
But he raised fewer objections as prosecutors shifted to evidence of how Mr. Manafort’s financial machinations enriched him and later kept him afloat.
Emily Cochrane contributed reporting.