The Descent: Paul Manafort, Russian Intelligence-Linked Organized Crime in Ukraine, and a Dual Family-Fiscal Crisis
This article examines Paul Manafort’s activities immediately prior to joining the Trump campaign, in particular how he reconnected with his scattered allies in Ukraine following the Maidan Revolution.
It is the first in a series entitled “Black Caviar: Paul Manafort, Russia, and the 2016 Trump Campaign.”
I have published an extensive series regarding Manafort’s activities in Ukraine in the years before joining the Trump campaign. While it is not necessary to read previous entries, it is recommended.
This article is an excerpt from my book, While We Slept: Vladimir Putin, Donald Trump, and the Corruption of American Democracy, available here.
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During the height of the investigations into 2016 Trump Campaign Chairman Paul Manafort, it was a regular refrain in the American media that his earlier activities in Ukraine were somehow separate and unrelated to his involvement with the Trump campaign.
This is exactly wrong.
Prior to joining the 2016 Trump Campaign as its Chairman, Paul Manafort had assumed a reputation as an international man of mystery within the tightly knit community of Washington consultants, lobbyists and insiders. Some had taken to calling Manafort “The Count,” in reference to Alexandre Dumas’ The Count of Monte Cristo.
Manafort’s lucrative business ties to the regime of Viktor Yanukovych, the Kremlin’s preferred presidential candidate in Ukraine, were well known.
Thus it was no surprise that the Maidan Revolution, in which crowds of Ukrainian protestors toppled the Yanukovych government after he refused to sign an Association Agreement with the European Union, had a major impact of Manafort’s lobbying and consulting business.
Following the Maidan Revolution, Manafort vanished from the D.C. circuit, prompting Roger Stone, Manafort’s friend and former business partner, to distribute an email with the subject line, “Where is Paul Manafort?”
Stone listed multiple choice options:
1.) Was seen chauffeuring Yanukovych around Moscow,
2.) Was seen loading gold bullion on an Army Transport plane from a remote airstrip outside Kiev and taking off seconds before a mob arrived at the site, and
3.) Is playing golf in Palm Beach.
Manafort, Post-Maidan Revolution Ukraine, and the Lingering Influence of Eurasian Organized Crime
Immediately prior to joining the Trump Campaign, Manafort had unfinished business in Ukraine.
In September of 2014, he returned to Kyiv to salvage what he could of his business and political relationships. Ukraine had changed profoundly. Former Ukrainian President Viktor Yanukovych, who had been the Kremlin’s preferred candidate and Manafort’s top client, had fled to Russia.
In March of 2014, a top Ukrainian oligarch and financial supporter of Yanukovych with suspected ties to the Kremlin and the highest levels of Eurasian organized crime, Dmytro Firtash, was arrested by Austrian authorities in Vienna on an FBI warrant for bribery charges.
With few allies left in the country, Manafort re-established contact with Serhiy Lyovochkin.
The two knew each other well, as Lyovochkin had provided generous funding for Manafort’s past political influence projects, including providing payments to the former European heads of state who made up the Hapsburg Group, whose lobbying activities Manafort coordinated.
In addition to his political position within the now defunct Party of Regions, Lyovochkin was deeply enmeshed within the corrupt Ukrainian natural gas sector and was a business partner of Dmytro Firtash.
Firtash, a major sponsor of Yanukovych, had made his multi-billion dollar fortune through fronting shadowy intermediary companies that cut sweetheart deals with allies of Vladimir Putin at Gazprom. In return, he generously funded the pro-Kremlin Party of Regions.
In March of 2014, Firtash was arrested by Austrian authorities in Vienna on a FBI warrant for bribery charges.
He had previously admitted to the US Ambassador in Kyiv that he had gotten into the natural gas business with the permission of Semyon Mogilevich, and in subsequent court documents filed by US authorities, Firtash was described as an “upper echelon [associate] of Russian organized crime.”
As described in a previous article, Manafort and Firtash had entered into discussions to purchase the Drake Hotel in New York City years earlier in 2008, a deal which never went through but was later caught up in accusations of corruption and money laundering.
Given the complexity of, and the number of participants involved in, Manafort’s connection to Ukraine, a brief overview is in order.
The corrupt oligarchic clan system that came to define Ukrainian politics emerged during the reign of its second President, Leonid Kuchma.
Kuchma’s administration had close links with the Kremlin and Organized Crime, with some of his main sponsors including the companies Seabeco and Nordex. Owned and operated by Boris Birshtein and Grigory Luchansky, respectively, both companies were linked to the Solntsevskaya Bratva criminal syndicate and Russian intelligence.
Read my article about Birshtein and Luchansky’s role in the KGB’s money laundering activities here.
Serhiy Lyovochkin had served as Kuchma’s secretary and first assistant before later becoming Head of the Presidential Administration under Yanukovych.
In addition Russia’s Imperial past and its cultural and historical linkages with Ukraine, the majority of its Soviet-era oil and natural gas pipelines run through Ukraine, thus making it of central geostrategic and economic importance to the Kremlin.
Establishing control over Gazprom and using it to further the interests of the Russian security state, as well the financial interests of himself and his regime’s cronies, was central to the political project of Vladimir Putin.
A key plank of this plan was the establishment of intermediary companies whose boards consisted of Gazprom executives and their family members, as well as a select group of pro-Kremlin Ukrainians who would use their immense profits to fund pro-Kremlin politicians and political parties.
Knowledgeable sources have hinted to the Russian press that some portion of the billions of dollars generated by these intermediaries was diverted into foreign accounts controlled by Putin and Dmitry Medvedev.
The initial scam, in which natural gas was sold from Turkmenistan to Ukraine by a corrupt third party intermediary using Gazprom’s pipeline system, was devised prior to Putin taking office and involved a company called Itera. Shortly after Putin took power, the lucrative contract was moved to a company called EuralTransGas (ETG).
Dmytro Firtash, who was virtually unknown at that time, was listed as one of the owners of the mysterious new venture, and was immediately suspected by intelligence leaders of being a front for Semyon Mogilevich.
Mogilevich, the US Government’s top Russian organized crime target, has strong ties to Russia’s intelligence services and top political leadership.
ETG was registered in the Hungarian village of Csabdi by Zeev Gordon and András Knopp, the former known to be Mogilevich’s attorney and the latter the former head of Gazprom’s Hungarian office who German authorities believed to be close to Mogilevich. Mogilevich himself was known to have operated out of Budapest, Hungary for years.
Leonid Roitman, a former member of the Solntsevskaya Bratva, told the Russian investigative publication The Insider that Mogilevich and Firtash had made arrangements with the Tambovskaya Bratva, the mafia group which had allied with Putin while he was Deputy Mayor of St. Petersburg in the 1990s, during which time it had seized control of the Petersburg Oil Terminal, to serve as sub-partners with the Solntsevskaya in the lucrative illicit natural gas trade.
In 2005, ETG was replaced by yet another Firtash fronted intermediary, RosUkrEnergo (RUE). Registered in Switzerland, the Zug Commercial Registry listed RUE’s managing directors as Oleg Palchikov and Konstantin Chuychenko. Chuychenko was a former KGB officer and attended university with then-Russian Prime Minister Dmitry Medvedev.
In 2005, Austrian police began looking into RUE and its relationship with Mogilevich. Their subsequent classified report noted that Firtash met regularly with Palchikov and another RUE shareholder and Party of Regions member, Ivan Fursin, in Vienna.
According to the report, Firtash, Palchikov and Fursin are all high-ranking members of the Semyon Mogilevich organization. While certain outlets have reported that Fursin’s 5% ownership stake in RUE is actually a front for Serhiy Lyovochkin, this has yet to be proven decisively.
What is known is that Fursin and Lyovochkin are close business partners.
Fursin and Lyovochkin attended school together and Fursin owned a bank where Lyovochkin’s sister Yuliya was deputy head of investment banking from 2003 to 2007. Nor was that the only connection between the Lyovochkin’s and Fursin.
In 2019, emails leaked to the Organized Crime and Corruption Reporting Project (OCCRP) revealed that, through a British frontman who managed their family office, the Lyovochkin siblings owned just under 10% of the Latvian-based bank Trasta Komercbanka. Another 33% of the bank was owned by Ivan Fursin.
Trasta Komercbanka played a key role in what became known as the Russian Laundromat, a $20 billion Russian money laundering scandal revealed by OCCRP in 2014.
Manafort’s prior relationship with Lyovochkin extended beyond politics. Following Yanukovych’s election as President of Ukraine in 2010, Manafort exchanged emails with Serhiy and Yuliya Lyovochkin about using their political influence to rig the country’s largest telecoms privatization involving the company Ukrtelecom, but Manafort’s involvement fell through when was unable to raise funding for the project in time.
After revolution unseated Yanukovych, Lyovochkin offered to pay Manafort to reorganize what was left of the Party of Regions into a new political entity that he recommended be called the Opposition Bloc (OB). According to Manafort’s thinking, the newly minted OB could more effectively recruit members from the ranks of those critical of the new Western-friendly government in Kyiv.
Another individual key to the establishment of OB was Rinat Akhmetov, the richest oligarch in Ukraine whom Manafort had met years earlier through a recommendation from Oleg Deripaska.
Manafort’s office in Ukraine was managed by an alleged Russian intelligence officer named Konstantin Kilimnik.
Born a dual Russian-Ukrainian citizen in 1970 in Dnipropetrovsk, the diminutive Kilimnik stands at 5-foot-3inches and goes by the nickname Kostya, or occasionally just KK.
Kilimnik attended the Soviet military’s main university for languages in the 1990s and later worked as a translator for the Russian military. The academy was considered a training ground for the GRU, Russian military intelligence. Kilimnik is fluent in English and Swedish.
The FBI has assessed that Kilimnik “has ties to Russian intelligence.”
A report released by the Senate Intelligence Committee in 2020 goes further, stating that “Kilimnik is a Russian intelligence officer.”
The Treasury Department has described Kilimnik as a “known Russian intelligence services agent.”
Fiona Hill, former senior director for Europe and Russia at the National Security Council, and who in the 1990s worked for the Kennedy School of Government and interacted with Kilimnik, stated in sworn congressional testimony that, “all of my staff thought he was a Russian spy.”
Kilimnik has denied these accusations.
While Manafort was shadow-managing the OB’s campaign to win seats in the upcoming October 2014 parliamentary election, Lyovochkin wanted to attack the OB’s political opponents.
Kilimnik brought on Sam Patten for the job, a Republican political consultant whom he had met at the International Republican Institute in Moscow. The campaign was a success, with the OB winning 10% of the parliamentary seats, outperforming by roughly twice its expected results.
Manafort’s Sea of Troubles: A Sordid Family Crisis, Conflict with Oleg Deripaska
Shortly thereafter, Paul Manafort’s personal life descended into a sordid crisis. In November of 2014, Manafort’s wife Kathleen and their two daughters discovered that he had been carrying on an extramarital affair. In the aftermath, Kathleen Manafort explained to her daughters that he had been pressuring her against her wishes to engage in group sex activities that he would watch and film.
The “gang bangs,” as the disgusted daughters referred to them in a series of subsequently hacked texts, took place when Paul and Kathleen Manafort traveled abroad.
While journalistic ethics regarding a concern for the privacy of the family members of public figures generally dictates discretion, the fact that these texts are now public record, and involve a man who was clearly a potential target for kompromat operations, bolster the argument that these facts deserve mention. The texts also show that Manafort’s family was aware of the shady nature of his work in Ukraine.
“Don’t fool yourself,” Andrea Manafort wrote to her younger sister Jessica. “That money we have is blood money.”
Manafort’s personal problems were compounded by a series of professional and legal setbacks. He and Kilimnik believed their new Ukrainian sponsors had failed to pay nearly $2.4 million dollars which they were owed.
In yet another unwelcome development, Manafort’s former client, the Eurasian organized crime-linked Russian oligarch Oleg Deripaska, began legal proceedings to collect “debts” of up to $18.9 million.
Manafort had established an investment vehicle called Pericles Limited which he used to invest in a telecom company based in Odessa, Ukraine called Black Sea Cable. The deal itself was murky, and may have concealed a pay off to Party of Regions officials in Ukraine.
Read my comprehensive description of Manafort’s business dealings with, and potential facilitation of money laundering for, Oleg Deripaska here.
In December of 2014, less than a month after converging personal crises had rocked Manafort’s home life, an attorney representing Deripaska filed a winding up petition in the Grand Court of the Cayman Islands in an attempt to liquidate Pericles.
The petition listed Paul Manafort, Rick Davis, Rick Gates and Konstantin Kilimnik among the key individuals in the partnership.
Rick Gates, a longtime employee of Manafort’s dating back to the days of the infamous lobbying outfit Black, Manafort and Stone, claimed to believe that the petition was brought forward as a publicity stunt to help Deripaska with his ongoing visa troubles in the United States. Deripaska’s lawyers claimed that both Manafort and Gates were unreachable.
“It appears,” the petition read, “that Paul Manafort and Richard Gates have simply disappeared.”
Deripaska’s pursuit of legal action against Manafort can be interpreted several ways. If their original business dealings had been above board, it may be exactly as it appears, simply a businessman trying to collect his debts.
If, however, the Black Sea Cable deal was a means by which Manafort helped Deripaska launder money or facilitate bribes to the Yanukovych regime, Deripaska’s legal actions could have been designed to gain leverage over Manafort before he joined the Trump Campaign.
Nor were Deripaska’s attorneys the only people poking around Manafort’s financial affairs.
As part of a probe into Yanukovych’s theft and laundering of tens of billions of dollars during his tenure as President of Ukraine, Manafort came to the attention of the US Justice Department’s Money Laundering and Asset Recovery Section (MLARS).
DOJ investigators were interested in whether Manafort had used offshore accounts to launder funds and evade U.S. taxes. Manafort was interviewed by the FBI twice, first in March of 2013 and then in July of 2014.
Manafort admitted that, at the suggestion of the Ukrainian oligarchs who paid him, he maintained offshore accounts in Cyprus.
He further told the FBI that he had engaged in work over the years for Rinat Akhmetov and Oleg Deripaska. NBC News reported that the business dealings between Manafort and Deripaska involved nearly $60 million.
The DOJ investigation was a pitiful affair that obtained neither Manafort’s foreign banking records nor his tax returns. Had investigators obtained these documents, they would have discovered that Manafort and Rick Gates were involved in numerous illegal money laundering and tax evasion schemes.
Between 2008 and 2014, Manafort and his Ukrainian patrons engaged in an elaborate shell game moving large amounts of money from offshore into various Manafort- and Gates-controlled accounts. Manafort and Gates were instructed to use Cypriot shell companies by their Ukrainian oligarch sponsors, all of whom were linked to the Party of Regions.
One of the shell companies with which Manafort used to wire millions of dollars to the US, Lucicle Consultants, received money from a Ukrainian businessman and parliamentarian named Ivan Fursin, a known associate of Semyon Mogilevich.
Manafort and Gates were assisted in these matters by an elite Cypriot lawyer named Kypros Chistomides, who also listed Oleg Deripaska among his clients. Konstantin Kilimnik was also involved, conducting a final review of all the payments made.
Manafort and Gates then laundered the money and evaded U.S. taxes through a variety of means, including “loaning” the money to themselves, using offshore vehicles to make expensive purchases on their own behalf from vendors in the United States, and engaging in a complex set of real estate transactions that included purchasing and taking out loans on properties and paying for costly renovations.
Ultimately more than $75 million passed through Manafort’s various offshore accounts, with more than $30 million concealed from the US Department of Treasury.
Russian and Ukrainian Dark Money, Shell Games, and Paul Manafort’s Lavish Lifestyle
Dark money from Ukraine was funneled through a web of Cypriot shell companies to fund Manafort’s lavish lifestyle.
$49,000 was spent on an Italian villa where the Manafort’s vacationed.
Other purchases made through these means included $5.4 million to a home improvement company, $1.3 million to a home automation, lighting and home entertainment company, $934,350 on antique rugs and $849,215 on mens clothing at Alan Couture in New York and another $113,450 at the House of Bijan clothing outlet in Beverly Hills.
Among the more outlandish items Manafort purchased from Alan Couture were a $7,500 pure silk suit and a $15,000 ostrich jacket.
Manafort and Gates also fabricated invoices from various vendors to further obscure their financial chicanery.
Manafort received millions of dollars in “loans” from shell companies connected to Oleg Deripaska. The Manafort-linked John Hannah LLC (John and Hannah being Manafort and Gates’ respective middles names) received $10 million from a company linked to Deripaska in 2010.
Yet another Deripaska owned shell company based out of the British Virgin Islands, Oguster Management Limited, sent an unsecured $7.8 million “loan” to the Manafort-linked Cypriot shell LOAV Advisors. Oguster sent an additional $26 million to the Manafort-linked shell company Yiakora Ventures Ltd.
Serhiy Lyovochkin, who owned the corporate entity Telmar Investments, sent $1.8 million to a Manafort-owned account at HSBC Bank over the course of 2014 and 2015.
The corporate entity Lucicle Consultants, tied to Ivan Fursin, “loaned” $9.9 million to the Manafort-owned company Jesand LLC, a Delaware shell company that is an amalgamation of Manafort’s daughters names Jessica and Andrea.
Lucicle was also used to pay for a $1.9 million home for Andrea Manafort in Arlington, VA in a deal overseen by her father.
Real estate transactions played a prominent role in Manafort’s illicit financial dealings. In 2006, Manafort used the John Hannah LLC to purchase a condo in Trump tower for $3.675 million.
A year later, Manafort used Jesand LLC to purchase a condo on Baxter Street in Soho, Manhattan for $2,545,625.
On February 1st, 2012, Manafort purchased a condominium at 29 Howard Street, also located in Soho,for $1.5 million. The money used to purchase the condo was disguised as a loan from Peranova, a Cypriot shell company linked to Manafort.
On August 31st of the same year, the Arlington, VA home purchase went through via a payment from the aforementioned Lucicle Consultants.
On November 29th, 2012, a brown stone on 377 Union Street in Carroll Gardens, Brooklyn was purchased through a $3 million wire from the Cypriot shell Actinet Trading Limited.
After using Cypriot shell companies for the initial purchases, Manafort would typically transfer ownership of the properties to himself or a member of his family. Then he would proceed to take out a loan on the property to access liquid cash.
An important figure in Manafort’s various real estate dealings was his then son-in-law Jeffrey Yohai, who married Jessica Manafort in 2013. Real estate records show that Yohai, whose real estate career began in 2011, brokered the sale of the Union Street home.
Despite initially being “wholeheartedly opposed” to the union between Yohai and his daughter, Manafort eventually consented to the marriage and went into a 50/50 partnership with Yohai in a real estate business and engaged in a series of mysterious real estate transactions in the Hollywood Hills at a key moment during the 2016 Presidential election which will be explored in more detail in a later installment of this series.
Manafort’s shady financial dealings did not go unnoticed by the banking institutions with which he worked.
By December of 2013, JPMorgan Chase had filed at least eight Suspicious Activity Reports on accounts held by Manafort that handled over $10 million.
By 2017, JPMorgan Chase would eventually flag over $322 million in suspicious wire transfers involving shell companies that had done business with Manafort, $40 million of which directly involving Manafort himself.
First Republic Bank, which loaned Manafort $1.5 million, dropped him as a client based on “the bank’s determination to close all the Manafort-related accounts based on its anti-money laundering policies and concerns about incoming international wires.”
Manafort in the Vice: Pressure from Deripaska and a Further Financial Squeeze
In March of 2015, Deripaska instructed his US-based lawyer Adam Waldman to “look into” the Pericles matter. Despite his best efforts, Waldman’s quest to locate Manafort proved remarkably difficult. He left Manafort several voicemails and sent emails but was initially unable to establish contact.
Waldman, who formerly worked at the Clinton Justice Department, had worked for Deripaska since 2008 when he was hired to address the oligarchs US visa problems. According to his Foreign Agent Registration Act filings, Waldman received a $40,000 monthly retainer for his services.
Subsequent filings show that he also worked with Russian Foreign Minister Sergey Lavrov “gathering information and providing advice and analysis as it relates to the U.S. policy towards the visa status of Oleg Deripaska.”
Manafort, stricken with cascading personal and financial difficulties, seemed to go underground. He eventually responded to Waldman, directing him to Rick Gates. The two held an inconclusive meeting at Waldman’s home in Washington, D.C., where Gates nervously gave a meandering explanation about the Black Sea Cable deal.
“[T]he story became very difficult to follow,” Waldman later testified, “because it wasn’t entirely clear that he’d actually invested in the Ukrainian cable company. It seemed that he’d invested in something somebody owned relating to the cable company, some sort of rights relating to the cable company. This became extremely convoluted . … One of the things that I learned was that the investment was $26 million, but the fees associated with the investment seemed to be about-seemed to be about $8 million.”
Gates was deposed later in the year on the matter and Manafort’s conflict with Deripaska continued into 2016.
Nor was this Manafort’s only problem. In addition to the Opposition Bloc in Ukraine withholding millions of dollars of fees that Manafort felt he was owed, he was faced with an unexpected tax bill. On April 17th, 2015, Gates emailed Manafort informing him that he owed an additional $509,000 in taxes for the previous year.
“WTF?” Manafort replied. “How could I be blindsided by this? You told me you were on top of this. We need to discuss options. This is a disaster.”
Konstantin Kilimnik emailed Gates promising to send $500,000 to “calm down Paul,” but Manafort was on a downward spiral.
The difficulties facing Manafort reached a crescendo in the Spring of 2015, and he appeared to suffer a breakdown, with his daughters speculating that he might even be suicidal. He checked himself into a clinic in Arizona for what one of his daughters described as “sex addiction.”
Despite this low point, Manafort emerged from the clinic with what he described to his daughters as a new sense of self-awareness. The influence peddler and international man of mystery was preparing to embark on a journey that would take him to the heights of the most infamous presidential campaign in American history.
The next article will describe how Manafort was enlisted to become the chairman of the 2016 Trump Campaign with the help of Thomas Barrack and Roger Stone.