Manafort Plea Deal Casts New Scrutiny on Lobbyists He Recruited

Manafort Plea Deal Casts New Scrutiny on Lobbyists He Recruited

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Paul Manafort, President Trump’s former campaign chairman, agreed on Friday to cooperate with the special counsel.CreditCreditVictor J. Blue/Bloomberg, via Getty Images

WASHINGTON — In 2012, Paul Manafort had a problem. He was seeking a way to bolster the interests of his pro-Russian Ukrainian clients in Washington, but he did not want to set off federal lobbying rules that would force the disclosure of detailed information about the funding for, and targets of, that work to the Justice Department.

His solution, federal prosecutors say, was to help those clients create a nonprofit group in Brussels. He then recruited a pair of top lobbying firms to represent the group, an arrangement he hoped would allow the evasion of the disclosure rules.

But even some people at the lobbying firms he recruited saw the nonprofit group, the European Center for a Modern Ukraine, as a sham, according to new evidence laid out by prosecutors when they unveiled a plea agreement with Mr. Manafort in federal court in Washington on Friday.

An employee at one of the firms, the Podesta Group, referred to the European Center for a Modern Ukraine in an email as the “European hot-dog stand for a Modern Ukraine.” The employee dismissed it as “a fig leaf on a fig leaf,” its written attestation that it was not controlled or funded by Ukraine’s pro-Russian president at the time, Viktor F. Yanukovych, or his party, which Mr. Manafort represented.

A co-founder of the Podesta Group, Tony Podesta, told his team to operate on the understanding that Mr. Yanukovych “is the client,” while an employee at the other firm, Mercury Public Affairs, called the claim that the nonprofit was independent from Mr. Yanukovych “nonsense,” comparing it to “Alice in Wonderland.”

Nonetheless, neither the Podesta Group nor Mercury registered its engagement with the European Center, which paid them more than $1 million each, under the foreign lobbying disclosure laws until last year. The registrations came about three years after the work ended in 2014, and only after the work came under scrutiny from the Justice Department.

Now, that work, and the decision not to disclose it under the Foreign Agents Registration Act, has turned Podesta and Mercury into targets in a series of linked investigations that have roiled Washington’s lobbying industry by exposing the sometimes surreptitious ways in which foreign interests try to buy influence in Washington.

The investigations were prompted by the inquiry of the special counsel, Robert S. Mueller III, into Russian meddling in the 2016 presidential election.

This year, Mr. Mueller’s team referred cases involving possible illegal Ukrainian lobbying by Podesta, Mercury and the law firm Skadden, Arps, Slate, Meagher & Flom — all of which Mr. Manafort had recruited to do work related to Ukraine — to federal prosecutors in New York. And the evidence that Mr. Mueller’s prosecutors publicly unveiled on Friday could help their New York colleagues build the cases against the firms, including the correspondence that questioned the independence of the European Center. The firms were not named in the court filings, but they do not dispute that prosecutors are referring to them.

The new evidence was included in updated charges filed against Mr. Manafort in connection with his guilty plea for conspiring to obstruct justice and to violate tax, banking and lobbying laws. As part of the plea deal, Mr. Manafort agreed to cooperate with prosecutors on investigations into “any and all matters” they deemed relevant, including providing testimony in Washington and elsewhere.

[Read more about the plea deal]

The plea deal ignited speculation about how prosecutors might try to use Mr. Manafort to build a case against President Trump, for whom Mr. Manafort served as a top campaign official for nearly five months in 2016.

But Mr. Manafort’s friends, and associates who worked with him in Ukraine, say that he might have more valuable information about Russian and Ukrainian oligarchs and politicians, and the Western firms that have helped them, including ones that he recruited, such as Podesta, Mercury and Skadden.

It was based on representations arranged by Mr. Manafort and his longtime deputy Rick Gates that Podesta and Mercury decided not to register under the foreign lobbying law, known as FARA.

Lawyers for the Podesta Group indicated to the Justice Department that the firm was “initially inclined to register under FARA,” because the European Center “was a foreign entity,” according to previously unreported correspondence from the Justice Department obtained by The New York Times under a Freedom of Information Act lawsuit.

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Tony Podesta, a co-founder of the Podesta Group, a lobbying firm that Mr. Manafort recruited to represent the European Center for a Modern Ukraine, a nonprofit based in Brussels.CreditLuke Sharrett for The New York Times

Mercury even prepared a FARA registration statement and the payment for the registration fee in 2012, according to the firm.

But both firms ultimately decided instead to register under less rigorous congressional lobbying rules. They did so after receiving legal advice based on a written certification from the European Center, relayed by Mr. Gates, that the group was not “directly or indirectly supervised, directed, controlled, financed or subsidized in whole or in major part by a government of a foreign country or a foreign political party.”

That was not true, according to prosecutors, who called the group “a mouthpiece for Yanukovych” and his party, and asserted it was controlled by party leaders through Mr. Manafort.

Robert P. Trout, a lawyer for Vin Weber, the former Republican congressman who was the lead partner on Mercury’s work for the European Center, pointed out that Mr. Weber had previously registered other clients under FARA “and he was willing to do so in this instance.” The decision to register under the congressional rules instead “was made only because that is what the company’s outside lawyers advised,” he said.

Some Mercury employees and alumni expressed concern that Mr. Mueller’s team would use Mr. Manafort to paint a damning, but inaccurate, picture of Mr. Weber and the firm. They assert that the correspondence quoted in Friday’s court filing was from junior employees and was taken out of context.

A spokeswoman for Mr. Podesta declined to comment. Mr. Podesta, the brother of the former campaign chairman for Hillary Clinton, was once a leading Democratic fund-raiser and power lobbyist, but his firm collapsed after it became ensnared in Mr. Mueller’s investigation.

In its filings on Friday, Mr. Mueller’s team also cast more scrutiny on another firm that has been embroiled in the investigation thanks to its work with Mr. Manafort — the law firm Skadden and one of its top lawyers at the time, Gregory B. Craig, who served as the White House counsel under President Barack Obama.

Prosecutors provided new details on Friday about how the firm participated in an effort by Mr. Manafort to tamp down international concerns about the prosecution and imprisonment by Mr. Yanukovych’s government of one of his leading rivals, the former prime minister Yulia V. Tymoshenko.

Prosecutors say that the firm’s lawyers privately expressed doubts to Mr. Manafort about Ms. Tymoshenko’s intent and power to perform the crimes of which she was convicted, but that those points “were not disclosed to the public.”

Instead, Mr. Manafort, in a September 2012 memo to Mr. Yanukovych that prosecutors disclosed on Friday, asserted that the Obama administration indicated that if a report written by Skadden on the prosecution of Ms. Tymoshenko “showed that the trial was conducted fairly and the conviction was based on the facts of the case and not politically motivated, it would have a mitigating impact.”

Skadden’s report, released less than two months later, was widely panned as a whitewash of the prosecution. Nonetheless, Mr. Craig and others at the firm disseminated and discussed the report with “numerous government officials” in the executive branch and Congress, as well as The Times, without disclosing that the firm was paid more than $4.6 million for its work, including $4 million from an offshore account controlled by Mr. Manafort.

Mr. Manafort and his associates hid the cost of the report, as well as the fact that the firm had also been retained to work for the Ukrainian government more broadly, because they believed revealing that context “would undermine the report’s being perceived as an independent assessment and thus being an effective lobbying tool for Manafort to use to support the incarceration of President Yanukovych’s political opponent,” prosecutors said in a court filing.

After prosecutors began making inquiries — and issuing subpoenas — about Skadden’s Ukraine work, the firm returned more than $600,000 to the Ukrainian government, and also forced Mr. Craig to leave.

Rebecca Roiphe, a professor at New York Law School who specializes in legal ethics, said that Mr. Mueller’s portrayal of the report and the firm’s fee “does not look good” for the firm.

“If I were the Skadden attorneys who did this, I would be extremely worried,” she said. While the allegations in Friday’s filings might not in and of themselves create criminal exposure for Skadden or its lawyers, she said, there could be legal ethics implications.

Bill Taylor, a lawyer representing Mr. Craig, said his client “was not required to register under the Foreign Agents Registration Act.”

Sharon LaFraniere contributed reporting from Washington, Matthew Goldstein from New York and Milan Schreuer from Brussels.

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