Mueller's Probe Kicks Into Next Gear With Charges, Guilty Plea -- 2nd Update

Special counsel Robert Mueller unveiled the first indictments Monday stemming from his probe into Russia's meddling in the 2016 elections, accusing two former Trump campaign officials of not paying taxes on millions of dollars in income and obtaining a guilty plea from a third who admitted he lied to federal authorities about contacts with Russian go-betweens.

The actions represent the most public moves to date from Mr. Mueller, a former Federal Bureau of Investigation director appointed in May to take over the investigation into Russia's election interference and any potential collusion with President Donald Trump's campaign. Taken together, the moves make it clear that Mr. Mueller is entering a higher-profile phase of his investigation, and they suggest that more actions may be coming.

They also fix the spotlight back on the Russia questions that have dogged the White House at a time when Mr. Trump is attempting to sell a major tax overhaul that would give him a needed legislative victory in advance of midterm elections next year.

Former Trump campaign manager Paul Manafort was taken into custody on charges that he laundered more than $18 million between 2006 and 2016 to pay for what prosecutors described as a "lavish lifestyle" -- including rugs, landscaping, cars and clothing -- without reporting the income to the Internal Revenue Service. That income was from work he did for a pro-Russia party in Ukraine headed by the country's former president, Viktor Yanukovych.

Mr. Manafort and longtime business associate Richard Gates were also charged with conspiring against the U.S. and failing for years to register their lobbying activities on behalf of the Ukrainian government. Mr. Manafort is a veteran political operative who has done extensive work overseas.

Separately, according to court documents unsealed on Monday, Trump campaign foreign-policy adviser George Papadopoulos has pleaded guilty to lying to the FBI about his contacts with or people connected to Russian government officials.

Mr. Papadopoulos admitted he spoke to a professor during the campaign who told him the Russians possessed "dirt" on Democratic candidate Hillary Clinton in the form of "thousands of emails," according to court documents. He earlier had told the FBI those contacts only occurred before he joined the campaign. Mr. Papadopoulos also acknowledged he made repeated efforts to arrange a meeting between the Trump campaign and Russian government officials, including through a woman he believed was Russian President Vladimir Putin's niece, the documents said.

The Trump administration has faced questions about the Kremlin's meddling into the 2016 election since before taking office, and U.S. intelligence agencies said in January that Mr. Putin ordered an effort to help Mr. Trump and hurt his Democratic rival, Hillary Clinton, and in the process undermine faith in American institutions. The president has reacted angrily at times to investigations of the matter by lawmakers and prosecutors.

The documents released Monday suggest Mr. Mueller is aggressively pursuing multiple avenues of investigation. The special counsel's team, which includes 16 attorneys versed in public-corruption, fraud and national-security matters, as well as more than two dozen FBI agents, has been presenting evidence before a federal grand jury in Washington since July.

Mr. Mueller also has been investigating whether Mr. Trump obstructed justice in his firing earlier this year of James Comey as FBI director, according to people familiar with the matter. Mr. Mueller was appointed to the special counsel role just after the president's firing of Mr. Comey.

In an appearance before a federal magistrate judge in Washington, attorneys for Messrs. Manafort and Gates entered pleas of not guilty, and both have surrendered their passports. The special counsel's office agreed that Messrs. Manafort and Gates could be confined to home detention.

The judge set bail at $10 million for Mr. Manafort and $5 million for Mr. Gates. A hearing has been scheduled for Thursday before Judge Amy Berman Jackson.

After the hearing and outside Washington's federal courthouse, a lawyer for Mr. Manafort, Kevin Downing, offered a fiery defense of the former campaign chairman, saying there was "no evidence that Mr. Manafort or the Trump campaign colluded with the Russian government." He accused the special counsel of using a "very novel theory" to prosecute Mr. Manafort for failing to register as an agent of a foreign power between 2008 and 2014 and later for allegedly making false and misleading statements on such forms, and he called another aspect of the prosecution to be "ridiculous."

Messrs. Manafort and Gates could face as long as 20 years in prison if convicted on one count of conspiracy to launder money alone. They also face charges of being unregistered agents of a foreign power, making false and misleading statements on forms required under the Foreign Agent Registration Act and failing to file reports of foreign banks and financial accounts.

The charges drew warnings from Democrats that Mr. Trump, after having fired Mr. Comey, not move to fire Mr. Mueller or influence his investigation, a point that has been echoed by some Republicans in the past.

"The president must not, under any circumstances, interfere with the special counsel's work in any way," said Senate Minority Leader Chuck Schumer (D., N.Y.).

House Speaker Paul Ryan (R., Wis.) didn't comment directly on Mr. Mueller's actions in an interview with a Wisconsin radio station, but he said, "Nothing's going to derail what we're doing in Congress, because we're working on solving people's problems."

The White House said Mr. Manafort's indictment and Mr. Papadopoulos's guilty plea weren't related to the White House or the campaign but were about separate matters or, in Mr. Papadopoulos's case, about the activities of a low-level player. Mr. Trump in March 2016 cited Mr. Papadopoulos as one of five people advising him on foreign policy.

"It doesn't have anything to do with us," said White House press secretary Sarah Huckabee Sanders, adding that the president continues to reject any suggestion that he or his campaign worked with Russia to influence the 2016 campaign.

The case against the 30-year-old Mr. Papadopoulos, in particular, who lived in London when he joined the Trump campaign, provides the most detailed look yet at Mr. Mueller's inquiry as it relates to alleged collusion between the Trump campaign and the Russian government. The documents highlighted, in particular, that Mr. Papadopoulos met with Mr. Trump and his foreign-policy advisers and told the group he had connections that could help arrange a meeting between the candidate and Mr. Putin.

"It seems clear that Papadopolous...is cooperating and Mueller's team is building on that cooperation," said Steven Levin, a former federal prosecutor. "Clearly, the special prosecutor wants to obtain evidence and charges against campaign supervisors with Papadopolous' assistance."

According to court documents, Mr. Papadopolous met with the professor, who wasn't identified, several times in March 2016, including once with a woman who was introduced to him as a relative of Mr. Putin's. Mr. Papadopoulos sent emails to Trump campaign officials describing the talks as aimed at arranging a meeting between the campaign and Russian leadership "to discuss U.S.-Russia ties under President Trump." A campaign "supervisor" responded to Mr. Papadopoulos's efforts by telling him "great work," according to the documents.

Mr. Papadopoulos later learned the woman was not in fact related to Mr. Putin, the documents say. But he continued to pursue multiple contacts with an individual in Moscow who claimed to have connections to the Russian ministry of foreign affairs, pushing for a meeting between Messrs. Trump and Putin.

Trump campaign officials appeared to have some hesitation about Mr. Papadopoulos's outreach to Russia, but they weren't clearly opposed to it either. After receiving an email from him describing Russian desires to meet with Mr. Trump, one campaign official forwarded the message to another, adding, "Let[']s discuss. We need someone to communicate that DT is not doing these trips. It should be someone low level in the campaign so as not to send any signal." The initials presumably refer to Donald Trump.

The case against Messrs. Manafort and Gates doesn't touch on the campaign itself. Instead, it alleges a wide-ranging scheme, involving foreign companies and bank accounts in countries including Cyprus and the Seychelles, to use millions of dollars in income from Ukraine in the U.S. without reporting it. As recently as October 2016, according to the indictment, Mr. Manafort's tax preparer asked him whether he had any foreign bank accounts. In response, Mr. Manafort wrote, "NONE."

According to the indictment, Mr. Manafort in fact had many such accounts, using them for varied purchases that included multimillion-dollar properties in Manhattan and Brooklyn. He then took out loans on the properties "to have the benefits of liquid income without paying taxes on it," according to the indictment.

The indictment lists hundreds of purchases by Mr. Manafort dating to 2008, including more than $6.5 million on home improvement and other services in the Hamptons and in Florida; $934,000 in payments to an antique rug store in Virginia; and $849,000 in payments to a men's clothing store in New York.

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Del Quentin Wilber at del.wilber@wsj.com

(END) Dow Jones Newswires

October 30, 2017 16:53 ET (20:53 GMT)