Russia probe snags Democratic interests, too

By JEFF HORWITZ and JAKE PEARSON Markets Associated Press

The indictment that alleges covert foreign lobbying by two former Trump campaign officials is casting shadows on three powerful Washington lobbying and legal firms, with Democratic as well as Republican ties, broadening the stakes of the Russia investigation and drawing in the brother of Hillary Clinton's campaign chairman.

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The Podesta Group, founded by Washington powerbroker Tony Podesta, was among the three firms cited by pseudonym or other references in the indictment, though none is charged with crimes. Prosecutors are implicating all three in covert work for pro-Russian Ukrainian interests, the heart of the criminal case against former Trump campaign officials Paul Manafort and Rick Gates.

The indictment suggests the companies were more involved in the matter than previously acknowledged, even as it stops short of levelling accusations of criminal wrongdoing against the three.

Manafort and Gates, meanwhile, face 12 felony counts, including money laundering, conspiracy and acting as unregistered foreign agents. As described in the indictment, they led the covert lobbying, paying the three firms for performing some of the work.

Podesta stepped down from his namesake group following the indictment. His former partners are scrambling to recreate the firm under a new name and preserve its client base. His brother, John Podesta, ran the Clinton campaign.

Altogether, the episode demonstrates how fiercely competing political interests — Trump officials, the brother of his presidential rival's campaign chief, a former Republican congressman, a former Obama administration attorney and more foes in the public arena — will partner behind the scenes at the intersection of money and lobbying in Washington.  In his campaign, Trump called that intersection the swamp and promised to drain it.

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Trump seized on the development with the Podesta Group as a chance to divert attention from the alleged criminal culpability of his campaign associates as the investigation by special counsel Robert Mueller casts a wide net in its exploration of Russia's attempts to interfere with the 2016 election and of any collusion between the Trump campaign and Moscow.

"The biggest story yesterday, the one that has the Dems in a dither, is Podesta running from his firm," the president tweeted.

The other firms involved in the criminal case against Manafort and Gates are Mercury Public Affairs, a venerable Republican lobbying firm whose Washington office is headed by former Republican Congressman Vin Weber; and prominent law firm Skadden, Arps, Slate, Meagher & Flom LLP, known as Skadden Arps.

Mueller's indictment focused in part on Manafort's and Gates' relationship with the firms and federal requirements requiring lobbyists for foreign governments to register with the Justice Department and disclose their activities.

"This is a textbook example" of undisclosed lobbying, said Joe Sandler, a Washington lawyer and expert on the U.S. Foreign Agents Registration Act, a Nazi-era law intended to reveal foreign influence in the U.S. "If there's reason for you to think that the shots are being called by a foreign agent, there are disclosure rules."  

Mercury was cited in the indictment as "Company A," and the Podesta Group was cited as "Company B." Skadden Arps was cited in the indictment but not by name.

The indictment said the firms were paid from accounts controlled by Manafort and Gates in Cyprus, the Grenadines and elsewhere.

In August 2016, AP revealed details about the covert lobbying campaign by Manafort and Gates that were among the foundations of this week's criminal indictments.  The details included emails of Gates giving instructions to Weber — Mercury's managing partner — and an associate at the firm.

Mercury's managing partner, Weber, flatly told AP in August 2016 that Gates and Manafort didn't arrange for Mercury's hiring for the lobbying effort and did not tell Mercury what to do.

"I don't remember any call in which either Gates or Manafort was on it," Weber said then.

But according to the indictment, Manafort and Gates participated in "weekly phone calls" with the lobbying firms — Podesta Group and Mercury —and routinely delivered orders to both.

Mercury partner Mike McKeon released a statement Monday denying the firm behaved improperly and said it was cooperating with U.S. investigators.  He declined to address discrepancies between Weber's previous statements and what prosecutors said in the indictment.

Unlike Mercury, Podesta's firm acknowledged Gates' substantive involvement in the work earlier.

The indictment also raises questions about payments made by Manafort to Skadden Arps related to a December 2012 report by Gregory Craig, a former White House counsel in the Obama administration. The report played down the political motivations behind the Ukrainian government's imprisonment of Yulia Tymoshenko, an opposition leader widely viewed in Washington as a political prisoner. The official, initial payment by the Ukrainian government for the 2012 report was only $13,000.

But in June, after the matter came under public scrutiny, the law firm returned $567,000 to the Ukrainian government, saying the money had been prepaid for work it never performed.

Now, the indictment puts the cost for the report at $4 million and says the money came from Manafort and Gates.

"Manafort and Gates used one of their offshore accounts to funnel $4 million to pay secretly for the report," the indictment said.

Neither Craig nor the head of Skadden Arps' office in Washington responded to email and phone requests for comment.