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By PETER STONE AND GREG GORDON
WASHINGTON
The man who headed Donald Trump’s presidential campaign last summer is in a squeeze.
Paul Manafort is not only a key figure in the FBI investigation of whether Trump associates knew of or colluded in Russia’s cyber meddling in last year’s U.S. elections, but he also faces legal issues about his business and personal finances that could give investigators leverage to compel his cooperation.
The FBI, Justice Department and Treasury Department are examining whether any of Manafort’s millions of dollars in consulting income from pro-Russian Ukrainian politicians and oligarchs were laundered from corrupt sources, whether he properly disclosed all his foreign bank accounts each year to the U.S. government and whether he paid taxes on all foreign income, two sources familiar with the inquiry said.
Also at issue is whether Manafort needed to register as a foreign agent on behalf of Ukraine or Russia and failed to do so, said the sources, who spoke on condition of anonymity because the sprawling inquiries are secret and ongoing.
Financial experts at the FBI, Justice Department and Treasury Department are trying to reconstruct the globe-trotting political and business strategist’s trail of cash, the sources said. Over most of a decade beginning in 2005, Manafort and his firm had lucrative consulting contracts with Ukraine’s pro-Russian former president, Viktor Yanukovych, and at least two Ukrainian billionaires with ties to the Kremlin.
Manafort abruptly ended a five-month stint with Trump’s campaign, three months as chairman, last Aug. 19 amid questions about his financial dealings.
White House Press Secretary Sean Spicer, in trying to distance Trump from the Russian investigation, said March 20 that Manafort had “played a very limited role for a very limited amount of time.”
Manafort has hired a crisis public relations firm and a prominent criminal defense lawyer, Reginald Brown, who was a White House aide under President George W. Bush. Manafort also has offered to make himself available to the House of Representatives and Senate Intelligence committees for interviews – but not sworn testimony.
In 2006 and 2007 alone, Manafort bought nearly $8 million in real estate, including a $3.7 million condominium in New York’s Trump Towers, a Palm Beach, Florida, home and a Manhattan condo for his daughters. Property records show that Manafort paid cash for all three homes, two of which were purchased in corporate names.
Jason Maloni, a spokesman for Manafort, confirmed an NBC report that Manafort had 10 businesses and about 15 bank accounts in Cyprus. Maloni said the accounts had been opened at the request of clients and that “no actual legal authority in Cyprus has ever directly accused Mr. Manafort of wrongdoing, nor have U.S. authorities.”
Manafort denies receiving any payments that weren’t fully reported and said that whatever he had earned had been split with a small team he worked with in Ukraine’s capital, Kiev.
All the scrutiny could spell trouble for Manafort, said Louise Shelley, a specialist in international corruption and money laundering.
“The investigations of Paul Manafort are making him vulnerable to several areas of legal exposure,” said Shelley, who teaches at George Mason University. “His long-term association (with) Ukraine, a country that has endemic corruption, makes it problematic to stay clean. . . . Why was Manafort using Cyprus, which has long been associated with Russian money laundering?”
Last summer, a New York Times story exposed a secret ledger showing $12.7 million in allegedly off-the-books payments to Manafort from the party backing former President Yanukovych and, this month, more documents purported to show that $750,000 had been routed through an offshore account held by Manafort’s firm.
Manafort’s possible knowledge of Russia’s plan to unleash a cyber offensive targeting U.S. elections is murkier. U.S. intelligence agencies accused Russia President Vladimir Putin in January of directing the plan aimed at sowing chaos, defeating Hillary Clinton and putting Trump in the White House.
The FBI began investigating possible Trump campaign collusion in Russia’s scheme last July, FBI Director James Comey said in testimony to the House Intelligence Committee on March 20. In July, Christopher Steele — a widely regarded former British spy hired to gather opposition research for political opponents of Trump — notified the FBI that Trump associates, including Manafort, coordinated with Russian officials, though most of his report remains uncorroborated.
The New York Times lent credence to Steele when it reported Feb. 14 that U.S. intelligence intercepts had picked up numerous conversations last year between several Trump campaign aides, including Manafort, and officers of a Russian intelligence service, the FSB. However, the Times said those conversations did not produce evidence that the campaign officials colluded in the scheme. Former national intelligence director James Clapper later affirmed that, as of Jan. 20, when he left office, no evidence of collusion had been found.
Maloni, Manafort’s spokesman, said his client “had no role in Russia’s efforts to tamper with the elections, and no evidence exists to even suggest that.”
But the ranking Democrat on the House Intelligence Committee, California Rep. Adam Schiff, said that even at the start of its inquiry, the panel was aware of “circumstantial evidence of collusion” and “direct evidence of deception” by Trump’s associates.
In his recent testimony, Comey added kerosene to that fire, disclosing that the bureau is investigating possible coordination and indicating the FBI had opened its inquiry because it had either “a credible allegation of wrongdoing or reasonable basis to believe that an American may be acting as an agent of a foreign power.”
Manafort, a onetime political aide to Ronald Reagan, first took a consulting gig in Ukraine in 2005 for the country’s richest oligarch, mining billionaire Rinat Akhmetov, who has been credited with introducing him to Yanukovych.
Manafort also forged business ties with Dmytro Firtash, a billionaire gas mogul who supported Yanukovych. Firtash once acknowledged to the U.S. ambassador in Kiev that early in his career he had gotten a helping hand from Semyon Mogilevich, a powerful mob boss. The United States is seeking Firtash’s extradition on unrelated corruption charges.
Following Yanukovych’s unsuccessful 2006 run for Ukraine’s presidency, Manafort helped remake his image, and Yanukovych won the presidency in 2010. But his pro-Russian tilt, human rights abuses and alleged funneling of billions in public dollars to enrich local oligarchs — and himself — led his own Party of Regions to strip him of power in 2014, and he fled to Russia.
Questions about moving money
Manafort’s biggest legal risk could relate to scrutiny about how he moved his money.
U.S. money-laundering laws bar movements of funds that originated from a criminal enterprise or from an individual sanctioned by the State Department or that were stolen from a foreign government.
Earlier this month, a member of Ukraine’s Parliament, Serhiy Leshchenko, a former investigative journalist, alleged that Manafort had signed a phony $750,000 invoice in 2009 that billed an offshore company in Belize for Yanukovych’s political party to buy 501 computers. The money was to be routed through a Kyrgyzstan bank, according to The Washington Post. The $750,000 payment was among 22 entries associated with Manafort in a ledger recovered a few months after Yanukovych was ousted from power in 2014.
Belize records obtained by McClatchy show that the offshore company allegedly was used to bill Yanukoyich’s party. Neocom Systems Limited was registered in the Central American nation on Feb. 11, 2005, and ceased operating on March 1, 2011 – dates corresponding with several of the years Manafort worked for Ukrainian clients.
Maloni said “the legislator who is making these allegations (Leshchenko) is suspected separately of trying to blackmail Manafort and his family” – an accusation Leshchenko denies.
That type of transaction draws the attention of federal money-laundering investigators, said Stefan Cassella, a former deputy chief of the Justice Department’s Money Laundering and Asset Recovery Section.
“You’re looking for transactions that are unusually or unnecessarily complicated” and make no business sense, he said.
“In general, if someone is conducting transactions in a complicated way, using shell corporations, using offshore bank accounts or using accounts in countries where they otherwise aren’t doing any business, it suggests that there may be a motive to conceal or disguise something,” Cassella said, “and that bears investigating.”
Investigators are also digging into real estate acquisitions Manafort made in New York and Florida a decade ago, to see whether these properties were bought with ill-gotten money, the sources said.
Following that kind of trail can be time-consuming, involving requests for assistance from countries that have signed an international treaty committing them to share financial records and hitting impasses with tax havens that don’t play by those rules. Since most international money moved to the United States must go through a New York bank, grand jury subpoenas for bank records and emails are commonly needed, Cassella said.
Tax issues from offshore accounts
Earlier this year, Treasury obtained Manafort’s records from his Cyprus bank accounts, a development first reported by The Associated Press and confirmed by McClatchy.
U.S. residents with foreign bank accounts must file annual statements showing their taxable income, said Jack Blum, a Washington lawyer and an expert in offshore money laundering.
“The penalties are huge if you file a false statement,” said Jonathan Winer, a Washington lawyer who was the State Department’s chief money-laundering specialist during the Clinton administration.
If the violations are determined to be willful, “they can grab half your assets” in each account, Winer said in a phone interview. A conviction could bring up to 10 years in prison, he said.
In a statement to McClatchy, Manafort defended his use of offshore bank accounts.
“Like many companies doing business internationally, my company was paid via wire transfer, typically using clients’ preferred financial institutions and instructions.”
Maloni, his spokesman, declined to address questions about whether Manafort had filed proper annual tax forms on his offshore accounts or paid taxes on them. He reiterated that Manafort “looks forward to meeting with those conducting serious investigations of these issues to discuss the facts.”
Requirements to register as agent
The Justice Department and FBI are looking into whether some of Manafort’s political and business consulting in Ukraine and for a Russian oligarch ran afoul of the Foreign Agents Registration Act, the sources said.
The 79-year-old law requires individuals who are paid to advocate on behalf of foreign governments, state-controlled businesses or foreign political parties to register with the Justice Department and regularly report on their activities.
The Justice Department rarely pursues foreign agents registration cases, except those with national security implications or “larger foreign policy issues,” said Joe Sandler, a lawyer with expertise in the Foreign Agents Registration Act.
Last week, The Associated Press reported that Manafort had also signed a contract in 2006 to consult for a Russian billionaire, aluminum magnate Oleg Deripaska, worth $10 million annually. Deripaska is known to have close ties to Putin.
Manafort said he assisted Deripaska on business and personal issues, but that his work “did not involve representing Russian political interests.” In ads in The Wall Street Journal and The Washington Post this week, Deripaska denied asking Manafort to do work at the Kremlin’s behest.
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