Trump-Insider Manafort’s Alleged Money-Laundering Scheme Appears To Have Kremlin Roots

Moscow-linked Ukrainian billionaire accused of funneling money to Manafort

The criminal indictment filed in late October alleging Paul Manafort engaged in a labyrinth money-laundering scheme involving the washing of at least $18 million, at first glance, appears unconnected to any Kremlin-related activity.

A Narco News examination of public records related to Manafort’s past financial dealings, however, reveals the money-washing activity alleged in the recent indictment appears to intersect with the business dealings of Dmytro Firtash, a Ukrainian billionaire and alleged mob-connected Kremlin asset.

Firtash, who made a fortune reselling Russian natural gas in Ukraine, has been indicted on criminal bribery charges and is fighting an attempt by US authorities to extradite him from Austria to face those charges in federal court in Chicago.

A spokesperson for Manafort, who is the former campaign manager for President Donald Trump, stresses that Manafort is not a party to the Department of Justice case against Firtash, nor is he named in the pleadings.

“To include Paul Manafort’s name in connection with this matter in any way is false and misleading,” Manafort’s spokesperson told NBC News.

Still, some Ukrainian politicians, including former Prime Minister Yulia Tymoshenko and parliament member Sergiy Vysotskiy, claim that Firtash helped to fund Manafort’s work in Ukraine with backing from the Kremlin. That work involved providing strategic assistance and political counsel to the campaign, and later the presidency, of Viktor Yanukovich, the Kremlin-backed president of Ukraine from 2010-2014.

“As I see it, it's impossible that Manafort didn't know about Russia's program of bringing Yanukovich to power, and then to occupy Ukraine in [a] hybrid strategy, if Manafort isn't a complete idiot, which seems highly unlikely to me,” Vysotskiy said in an interview with Narco News.

If there is any merit to those allegations, then the money-laundering activities alleged in the Manafort indictment, and potentially other financial dealings, may well have a purpose beyond lining Manafort’s pockets. They could be part of a larger scheme to fund a Kremlin influence campaign.

The resources required for the Kremlin to stage a covert attack on US democracy to manipulate the outcome of a presidential election would have to be paid for in some way, after all — and in such a way that those funds can’t be easily traced.

Former FBI Director Robert Mueller was appointed as special counsel this past May “to oversee the previously-confirmed FBI investigation of Russian government efforts to influence the 2016 presidential election and related matters,” according to a statement released by the Department of Justice. Mueller has been methodically building a case and working his way up the food chain since then, drawing first blood last month with the indictments of Manafort and his business partner Richard Gates, as well former Trump foreign policy advisor George Papadopoulos — who pled guilty after cooperating with prosecutors.

More recently, the lawyer representing Trump’s former national security advisor, Michael T. Flynn, met with members of Mueller’s team, creating speculation in the press that Flynn may be close to cutting a deal with prosecutors. Mueller’s investigation has already reached into the ranks of former White House officials with the Flynn development and he still has plenty of string to pull, which could well lead to Trump’s doorstep.

In that light, the US criminal charges pending against Firtash and Manafort have the potential to further expand Mueller’s prosecutorial target list by exposing the major players and backbone of the Kremlin’s covert financing system. That could have major ramifications for Trump’s presidency — particularly if Firtash or Manafort were to cut a deal and cooperate with US law enforcers.

The Chicago Case

Firtash was indicted in Chicago in 2013 on racketeering charges stemming from an attempt to pay some $18 million in bribes to Indian government officials to secure titanium mining rights. As part of that conspiracy, U.S. prosecutors claim, Firtash planned to sell the titanium to U.S.-based aerospace manufacturer Boeing, which has not been implicated in the scheme nor charged in the case.

The Boeing connection, however, provides U.S. prosecutors with a legal basis to pursue the bribery charges against Firtash, who claims he is innocent and is fighting both the charges and his extradition.

Firtash has retained a top-notch legal team in the U.S. that includes Daniel Webb, former U.S. attorney in Chicago; Michael Chertoff, former Secretary of U.S. Homeland Security; and Lanny Davis, former special counsel to President Bill Clinton and an attorney and partner in Davis Goldberg & Galper.

Davis has earned a reputation for providing lobbying support and legal counsel for some notorious clients. In 2009, for example, he was retained by a business group in Honduras to lobby the U.S. Congress in support of the governing junta that staged a military coup in that nation that same year and ousted its democratically elected president.

Firtash was arrested in Austria in March 2014 at the request of US officials in the wake of his 2013 indictment in Chicago on racketeering charges. He was subsequently released on a $174 million bond on the condition he remain in Austria.

A lower Austrian court in April 2015 denied a request for his extradition to the US, but that decision was reversed by a higher Austrian court this past February, US court pleadings state. At the same time, however, Firtash was re-arrested in Austria at the request of Spanish authorities, who also were seeking his extradition in relation to money-laundering allegations in that country, according to media reports and US court records.

An Austrian court ultimately rejected the extradition request from Spain this past August, media reports indicate, but the US extradition process continues to drag on in the face of additional appeals and procedural delays. Narco News was unable to determine as of press time if Firtash is currently free on bail in Austria or being held in custody pending the outcome of his US extradition case.

This past July, US prosecutors filed pleadings in federal court alleging Firtash and a co-defendant in the case are “upper-echelon associates of Russian organized crime.”

“Their prosecution will disrupt this organized crime group and prevent it from taking further criminal acts within the United States,” the US government’s court pleadings assert.

A statement released by Firtash’s legal team argues that the charges against Firtash relate to a project “that was never completed” and occurred in India, outside the jurisdiction of the U.S., and in which the U.S. “has no legitimate interest.”

In addition, Firtash’s legal team says, in relation to the allegation that their client is connected to organized crime, “there is no evidence of that accusation, and that is why the government did not include it in its own indictment.”

A former CIA case officer, who asked not to be named, told Narco News that Russian intelligence agencies —overseen by Russian President Vladimir Putin, himself a former KGB officer — are essentially “running the Russian mafia. ”He added that organized crime operatives are used to carry out dirty work that requires a degree of separation from the Kremlin.  

The Kremlin Connection

Firtash, according to court documents and media reports, accumulated his fortune, in large measure, by serving as a middleman for natural gas sales between Russia’s Gazprom and Ukraine. Gazprom is a huge natural gas exporter owned by the Russian state and controlled, ultimately, by Putin.

Firtash and his billions of dollars earned through sweetheart natural gas deals also played a key role in helping to get Putin-backed Yanukovych elected president of Ukraine in 2010 — and in advancing Yanukovych’s pro-Putin agenda over the ensuing four years.

An investigation by the news service Reuters alleges that companies controlled by Firtash, between 2010 and 2014, made more than $3 billion off of a lucrative business relationship with Gazprom. Under that arrangement, the Russian gas giant sold natural gas to Firtash, according to Reuters, through a shell company in Cyprus and priced it “well below market prices.”

In fact, Reuters calculates that the deal with Firtash cost Gazprom some $2 billion in revenue — and, by extension, the Russian people as well. In addition, a Russian bank controlled by Putin’s cronies extended some $11 billion in credit to Firtash during the same period, Reuters reported.

On another front, former Ukrainian Prime Minister Tymoshenko filed a civil lawsuit in 2014 against Firtash, Manafort and a former business associate of President Trump’s father (an individual name Brad Zackson), among others. That lawsuit contained allegations related to Firtash’s business operations that mirrored the findings of the Reuters investigation.

From the litigation:

The initial funds for the operation of defendants’ racketeering enterprise came from the unlawful profits that defendant Dmytro Firtash and others “skimmed” from RosUkrEnergo AG (“RUE”) [emphasis added].

… {RUE] served as a middleman in natural gas dealings between Naftogaz, a Ukrainian state-owned gas company, and Gazprom, a Russian company. Firtash, who largely controls RUE, was able to secure profits from various corrupt Russia-Ukraine gas deals due to his close relationship with, and payment of illegal kickbacks to, Ukrainian government officials.

... Firtash and the US-based defendants and co-conspirators [including Manafort and Zackson] … used the proceeds from the Russia-Ukraine gas deals to acquire various U.S.-based companies and entities, which were then … used to generate unlawful proceeds by means of a series of racketeering acts spanning over a period of several years and continuing to the present. [These include] but are not limited to the laundering of money through various US-based companies and real estate development entities.

The litigation alleges that “a substantial portion of the money that was laundered through New York bank accounts under the guise of supposedly legitimate real estate development projects” was later routed through a series of shell companies and bank accounts controlled by Firtash.

Those shell entities were based in “Europe, Cyprus, Panama and elsewhere so that virtually untraceable funds could be generated” to bribe and payoff politicians and other key players in Ukraine, Tymoshenko’s lawsuit alleges. The goal was to prop up Ukrainian President Yanukovych and to advance the Kremlin’s agenda in that nation.

Tymoshenko’s lawsuit was dismissed in 2015 on jurisdictional grounds before ever making it to trial. The defendants in the case claimed the charges were without merit.

Tymoshenko, however, is not the only Ukrainian politician claiming Firtash, Manafort and the Kremlin are joined at the hip. This past August, prior to Trump’s election, Ukrainian Parliament member Vysotskiy, alleged in an interview with Narco News that the “heads of Ukraine intelligence and security services during the time of [Ukrainian President] Yanukovych were all FSB-connected persons.”

The FSB is one of Russia’s major intelligence agencies, and Manafort worked as a close advisor to Yanukovych, an ally of Russian President Putin, for years, helping to get him elected president of Ukraine in 2010.

“So, is he [Manafort] an idiot and didn't see what's was happening around him?” Vysotskiy asked. “Or he just didn't care that he is building a PR and foreign-relations strategy for criminal, corrupted government that was ready to sell out my country to Kremlin like it was a garage sale?”

Vysotskiy also alleged that Manafort was on Firtash’s payroll, while working as a political consultant for the Ukrainian government.

“He [Manafort] was paid by [officials working for Yanukovich] and [with] Mr. Firtash money,” Vysotskiy said. “They obtained [that money] from RosUkrEnergo scheme, a trade-corrupted scheme of selling Russian gas to Europe from Ukraine.

“[The scheme] was controlled by the Kremlin and international Russian-based criminal boss Semion Mogilevich [who is wanted by the FBI],” he continued. “Then, after Yanukovich became incumbent [president of Ukraine], he was paid by the same people that were involved in Ukraine-Russian corruption with new schemes.”

Firtash’s legal team contends their client is a legitimate businessman and that the corruption claims against him have no merit.

The Manafort Indictment

The allegations in both the Tymoshenko case and the Reuters investigation follow the same pattern as those contained in the recent criminal indictment filed against Manafort, down to the use of offshore accounts in Cyprus to facilitate the alleged schemes. Cyprus is an island nation off the southern coast of Turkey that has earned a reputation as a haven for opaque shell companies.

The indictment filed against Manafort in federal court in Washington, D.C., this past October alleges he and his business partner Gates, “acted as unregistered agents” for former Ukrainian President Yanukovych and related political parties — who were closely aligned with the Kremlin.

Yanukovych was run out of office in 2014 in the wake of massive civil unrest and fled to Russia — four years after Manafort and Firtash helped to get him elected.

The indictment further alleges that Manafort and Gates were paid “tens of millions of dollars” in return for their lobbying work for Yanukovych and his Kremlin-aligned government. That money was, between 2006 and 2016, “laundered … through scores of United States and foreign corporations, partnerships and bank accounts,” the recent criminal pleadings against Manafort allege.

“In total, more than $75,000,000 flowed through the offshore accounts [controlled by Manafort and Gates],” the criminal indictment claims. “Manafort laundered more than $18,000,000, which was used by him to buy property, goods, and services in the United States, income that he concealed from the United States Treasury, the Department of Justice, and others.”

The bulk of the offshore accounts used by Manafort, according to the indictment, were in Cyprus. Manafort allegedly used the offshore accounts to make at least $12 million in purchases between 2008 and 2014, including:

• Paying a Hamptons, New York-based home-improvement company some $5.4 million;
• Buying nearly $1 million in antique rugs from a store in Alexandria, Virginia; and
• Buying some $849,000 worth of goods from a men’s clothing store in New York.

Manafort also drew some $6.4 million from the Cyprus accounts to help purchase three properties in New York and Virginia in 2012, the indictment reveals.

Although the indictment does not comment on whether the goods, services and real estate purchases were made at inflated prices, that is typically the way a money-laundering scheme works.

Dirty money is cleaned up by running it through legitimate-looking enterprises, such as real estate or retail operations, and then representing it as revenue or income from those legitimate operations. By inflating the value of purchases, more of the dirty money can be washed and made to look legal.

Thus, money laundering is a bit like a snake eating a rodent. After the rodent is swallowed and makes its way through the belly of the snake, and is eventually devoured, it disappears and becomes part of the snake.

Following the Money

The money-laundering schemes outlined in the October 2017 federal indictment against Manafort, the 2014 Tymoshenko case and more recently by Ukrainian anti-corruption officials are all oddly consistent in nature. They all involve moving millions of dollars through various overseas shell companies to seemingly obscure the original source of the funds.

One of the specific schemes highlighted in the Tymoshenko case, for example, involves Manafort and Firtash allegedly acting as part of a conspiracy to defraud investors in a New York City real estate deal. The purported scheme involved an effort to launder at least $25 million — the earnest money deposit in a hotel-redevelopment project that never panned out.

As part of that transaction, Manafort allegedly was working in league with a group that included Firtash and Brad Zackson, the former exclusive broker for properties controlled by Donald Trump’s now-deceased father, Fred. The real estate deal involved a fanciful $850 million plan to purchase and redevelop the Drake Hotel in Manhattan, according to the Tymoshenko litigation and multiple media reports.

From the Tymoshenko lawsuit:

In December 2008, Firtash met with Paul Manafort to discuss establishing one of their various funds that would ostensibly enable Firtash, [alleged Russian crime boss Semion] Mogilevich and the other defendants to acquire and purchase real estate investments in the United States.  But [their plan] was solely designed to further the money-laundering activities and to … deprive legitimate Ubusinesses and real estate owners of their money and property.

Firtash and his associates had committed to finance the purchase of the Drake Hotel property when, in truth and in fact, Firtash and his co-conspirators … were only creating the appearance of being seriously interested in closing on the Drake Hotel deal as a disguise for their money-laundering activities.

Firtash [and associated shell companies] never closed on the Drake [Hotel] property, which another company purchased. … Firtash never had any intention to purchase the Drake property, but instead used the real estate project as a vehicle for moving another $25 million into New York bank accounts in furtherance of the enterprise’s racketeering activities.

Ukrainian anti-corruption officials also allege that deposed President Yanukovych and his associates channeled some $12.7 million in secret cash payments to Manafort. The evidence of those payments was contained in a handwritten ledger maintained by Yanukovych’s political party, they claim. Manafort has denied the charges.

Subsequent media reports and documents released by Ukrainian officials, however, seem to show that the ledger entries are grounded in some reality. At least $1.2 million in payments corresponding to entries in the ledger were made to a shell companies in Belize in 2007 and 2009 and subsequently routed to a bank account controlled by a Manafort company, according to a New York Times report.

Manafort has previously told the media that he had no business relationship with Firtash, adding that “there was one occasion where an opportunity was explored [but] … nothing transpired and no business relationship was ever implemented.”

In yet another case with a nexus to Firtash, Manafort in September 2016, shortly after resigning as Trump’s campaign chair, created a shell company called Summerbreeze LLC that borrowed $3.5 million against a home he owned in the Hamptons in New York. That loan was funded by a subsidiary of Spruce Capital, which was launched by an individual who had partnered on hotel projects with Donald Trump in the past, according to an NBC News report.

Spruce Capital also is financed, in part, by a Ukrainian-American real estate tycoon named Alexander Rovt, who donated some $10,000 to Trump’s election campaign. The Trump campaign had to return all but $2,700 of the donation because it exceeded legal limits.

Rovt made his initial fortune by selling his Ukrainian fertilizer-business interests to Firtash. Rovt, through a spokesperson, told NBC that he was not involved in the Manafort loan.

Proving the existence of a money-laundering conspiracy beyond a reasonable doubt in federal court is no easy task because, by design, an effective conspiracy places as much distance as possible between the players in the criminal deed and the money it generates. Still, every money-laundering conspiracy has some weak links. In this case, time will tell if Manafort or Firtash are among them.

If one or both of them do flip and start cooperating with prosecutors, given the Kremlin threads running through their past dealings, and the special counsel’s charge to get to the bottom of Russian interference in the 2016 US election, it’s likely their cooperation would lead Mueller to even bigger fish to fry.

 

Prior Stories on Trump's Circle

Kremlin’s Quid Pro Quo Deal With Trump Camp Comes Into Focus
• Trump’s Business Venture in the Dominican Republic Could Become a Strangling Alliance
• Vice President Pence Has Cause to Support Trump’s Kremlin-Friendly Agenda

 Russian Interference in US Elections Makes More Sense When You Follow the Money
• The Donald and the Snitch
• Trump Campaign Is Still Playing Russian Roulette With Foreign Policy
• Donald Trump’s Past Lobbying Exploits Paint a Picture of a Deft Washington Insider

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