The Influence Peddler and the Oligarch: Paul Manafort, Oleg Deripaska and the Anatomy of Global Corruption
This article examines Republican consultant and future Trump campaign chairman Paul Manafort’s history of corrupt activities with the Russian oligarch Oleg Deripaska, and how Deripaska spreads his influence around the world. It is the fifth article in a series broadly examining Paul Manafort’s work in Ukraine on behalf of pro-Kremlin oligarchs and politicians. While it is not necessary to read the earlier entries, it is recommended. There is a brief summary of the previous articles below.
Part 1 covers Paul Manafort’s early career as a Republican political consultant and lobbyist.
Part 2 explains how Manafort met the organized crime-linked Russian oligarch Oleg Deripaska and how Deripaska introduced Manafort to Ukraine.
Part 3 explians how corruption and organized crime seized control of post-Soviet independent Ukraine, and led to the Orange Revolution.
Part 4 shows how Paul Manafort helped get Viktor Yanukovych, the Kremlin’s preferred Ukrainian candidate, elected as President.
Summary of Past Articles: Paul Manafort is a Republican political consultant who made a career lobbying on behalf of foreign interests and providing consulting services to foreign dictators. After working on Bob Dole’s presidential campaign with Republican Rick Davis, together they formed the political consulting firm Davis Manafort Partners. DMP was hired by the investor and financier Nathaniel (Nat) Rothschild and his partner, the Russian oligarch and Putin ally, Oleg Deripaska, to represent their interests abroad. Manafort was sent to Ukraine to advise the Kremlin’s preferred presidential candidate Viktor Yanukovych after his fraudulent election victory had been overturned by vast protests that came to be known as the Orange Revolution. In a stunning turn around, Manafort succeeded in helping get Yanukovych elected as the Ukrainian President.
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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PAUL MANAFORT’S PROPOSAL TO PUTIN AND HIS WORK FOR OLEG DERIPASKA BEYOND UKRAINE
While Manafort played the role of political miracle worker in Ukraine, attempting and ultimately succeeding in resuscitating the political career of the Kremlin’s preferred presidential candidate Viktor Yanukovych, he simultaneously sought to leverage his new relationships with powerful forces in the East to gin up new business opportunities.
In June 2005, according to documents obtained by the Associated Press, Manafort sent his client and patron Oleg Deripaska a confidential strategy proposal to influence politics, media coverage and engage in business dealings within the United States, Europe and the former Soviet Union to promote not only the oligarchs interests but Vladimir Putin’s.
“We are now of the belief that this model can greatly benefit the Putin government if employed at the correct levels with the appropriate commitment to success,” Manafort wrote to Deripaska. The project, Manafort continues, “will be offering a great service that can re-focus, both internally and externally, the policies of the Putin government.”
As part of his pitch, Manafort explained to Deripaska that in the course of his Ukraine work he was utilizing contacts “at the highest levels of the U.S. government — the White House, Capitol Hill and the State Department.” Without naming the firm, Manafort also said he had hired a “leading international law firm with close ties to President Bush to support our client’s interests.”
Manafort claimed that he had employed legal experts from top universities and think tanks, including NYU, Duke and the Center for Strategic and International Studies.
Manafort suggested to Deripaska that he could employ a similar strategy to benefit both him and Putin’s Government and further proposed that he extend the work he was doing in Ukraine to Uzbekistan, Tajikistan and Georgia. Manafort eventually signed a $10 million contract with Deripaska starting in 2006.
Instead of using Davis Manafort Partners, Manafort had the money funneled through a Delaware shell company LOAV Ltd., which he had registered in 1992 and was listed as having the same address as his Alexandria, Virginia home.
According to Russian investigative journalists at Proekt, Deripaska’s company Basic Element paid for both Manafort and his partner, the alleged Russian intelligence officer Konstantin Kilimnik, to travel to Kyrgyzstan following the so-called “Tulip Revolution,” of 2005 which saw pro-Russian President Askar Akayev flee the country following mass protests that erupted following disputed parliamentary elections.
While in the Kyrgyz capital of Bishkek, Kilimnik and Manafort worked to close a U.S. military base in the country, one the only U.S. bases in Central Asia outside of Afghanistan and an important supply hub. “I heard about Kyrgyzstan,” a former member of Manafort’s team in Ukraine told Proekt reporters, “they went there to strengthen Russia’s position.”
Manafort’s next project for Deripaska took place in the small, mountainous Balkan statelet of Montenegro located on the Adriatic sea, the smallest of the six republics that made up the former Yugoslavia.
Montenegro’s president Milo Djukanovic had long been suspected by EU authorities, particularly in Italy, of being complicit in a multi-billion dollar cigarette smuggling racket. Italian prosecutors had wanted to indict Djukanovic for smuggling and links to the mafia but were prevented from doing so by Washington, who saw him as a valuable ally against the Serbian dictator Slobadan Milosevic.
Following Milosevic’s overthrow in October 2000, Djukanovic had hoped the West would support Montenegrin independence. However, U.S. and EU authorities did not want to upset the fragile new pro-West government in Belgrade. So Djukanovic turned his attention eastward, sending his closest ally Milan Rocen to be the Ambassador to Russia.
In 2005, Deripaska’s aluminum company Rusal purchased KAP, a massive aluminum smelter whose output accounted for nearly half of Montenegro’s exports and a sixth of its economy. Overnight, he became the largest employer in Montenegro and one of the most influential men in the country.
Deripaska wasn’t acting independently. He told a close associate that he had bought the plant “because Putin encouraged him to do it,” and that “the Kremlin wanted an area of influence in the Mediterranean.”
Following Deripaska’s purchase of KAP, Russia dropped its opposition to Montenegrin independence. Davis Manafort Partners was signed on for a multimillion dollar contract to help manage the pro-independence campaign in the lead up to a referendum that would take place in 2006.
Both Rick Davis and Paul Manafort participated in the effort. Three specialists who had worked with Manafort on the Yanukovych campaign were also brought on board, including Andrei Ryabchuk, a specialist who had worked on pro-Putin campaigns in Russia.
It was in Montenegro that Manafort became acquainted with Viktor Boyarkin, who was serving as Deripaska’s point man. Boyarkin had previously served as an assistant naval attache at the Russian embassy in Washington, DC and was now just one of many Deripaska employees with military and intelligence backgrounds.
According to the U.S. Treasury Department, Boyarkin “is a former GRU officer who reports directly to Deripaska and has led business negotiations on Deripaska’s behalf.” Manafort’s and Boyarkin’s paths would cross again during the 2016 American presidential election.
In addition to Manafort’s pro-independence efforts in-country, the Montenegrin government had paid Republican Senator Bob Dole $1.38 million since 2001 to lobby in Washington. Manafort had worked on Dole’s unsuccessful 1996 presidential campaign and Dole had previously referred another one of his lobbying clients, Oleg Deripaska, to Manafort’s consulting company.
As covered in Part 2 of this series, Deripaska had paid Dole to lobby on his behalf after the U.S. Government had banned him from receiving an entry Visa due to suspicions of links to organized crime.
By 2005, Dole’s lobbying paid off (Dole was paid $260,000 by Deripaska that year alone) and Deripaska was awarded a U.S. multi-entry visa. At the time, he was looking into a series of international acquisitions that would have given him a significant stake in the U.S automaker Chrysler.
During his trip to the United States, Deripaska gave a speech at the Carnegie Endowment and attended a dinner at Harvard University’s Belfer Center where, following a donation, he was made a member of its international council.
In return for receiving the visa, Deripaska was made to sit down for an extended FBI interview. The interview went poorly, with Deripaska taking umbrage at the inquisitive nature of the U.S. bureaucrats, and after he left the United States the visa ban was reinstated.
Among the decision makers behind the renewed visa ban was a DOJ lawyer and Russian organized crime specialist named Bruce Ohr. Ohr and other officials reinstated the ban partially due to worries that Deripaska would try to launder illicit profits through U.S. real estate.
Following Deripaska’s trip to the U.S., Manafort and his consulting partner Rick Davis turned to an unlikely ally in their push for Montenegrin independence, Arizona Senator John McCain. Davis, who would go on to serve as McCain’s campaign manager for his 2008 presidential bid, was close with the Senator. McCain was known as one Putin’s most vehement critics on Capitol hill.
In January 2006, McCain and two other Republican senators, Saxby Chabliss of Georgia and John E. Sununu of New Hampshire had gathered for drinks in an apartment near Davos, Switzerland when they were greeted by Davis and Deripaska.
The entourage then left for a ski chalet owned by the Hungarian-born billionaire Peter Munk, who after fleeing the Nazi’s in his youth had settled in Canada and established Barrick Gold, the worlds largest gold-mining company. At the gathering, Munk delivered brief remarks before the guests in which he complimented Deripaska. Munk served as a board member on Deripaska’s company Rusal.
“Thank you so much for setting up everything in Klosters so spectacularly,” Deripaska wrote to Davis and Manafort a month after the meeting. “It was very interesting to meet Senators McCain, Chambliss and Sununu in such an intimate setting.”
Deripaska’s letter was sent to Davis at the Reform Institute, a nonprofit established by McCain meant to promote transparency in lobbying and campaign finance. Davis served as the head of the Institute from 2003–2005 during which time he was paid $395,000.
Another part of Deripaska’s letter generated unwanted attention for Manafort and Davis, “Please will you send me information on the metals trading company we discussed and [sic] would be happy to see if I can do anything to help.”
Though it was never firmly established what metals company Deripaska was referring to, suspicions immediately fell on a company named Traxys.
In November of 2005, an investment firm named Pegasus Capital had bought a stake in the metals trading company. A year earlier, Manafort and Davis had been in discussion to become consultants for Pegasus, and while the investment firm never formally hired Davis and Manafort, the Republican consultants won a $120,000 lobbying deal with an Israeli company called Imagesat through a recommendation from Pegasus.
Following the publication of Deripaska’s inquiry into the “metals trading company” by The Washington Post during the 2008 campaign, the McCain campaign issued a written denial that Davis had discussed Traxys with Deripaska. In 2010, Davis quietly joined Pegasus Capital as its COO.
As the May 21st, 2006, Montenegrin independence referendum drew near, Manafort and Davis ratcheted up the pressure and used powerful Deripaska allies to help do so.
Nat Rothschild arrived in Montenegro three weeks before the referendum on his Gulfstream private jet and publicly promised $1 million to counter a threat made by Serb authorities to revoke scholarships to Montenegrin students.
Peter Munk also arrived in Montenegro with pledges of support for Montenegrin students from Canadian universities. As these pledges were made by Deripaska’s wealthy allies, aides of Bob Dole arranged for a teleconference between McCaine’s Senate office and Montenegro’s visiting foreign minister.
In April, a month before the referendum, McCain issued a statement saying that Montenegro’s independence was “the greatest European democracy project since the end of the cold war.”
The referendum passed by a 0.5% margin.
Shortly thereafter, the Arsenal shipyard, a former-Yugoslav cold war era naval base located on Kotor Bay by the Montenegrin resort town of Tivat, was purchased by TriGanit, a property development firm co-owned by Munk and Rothschild. Porto Montenegro, as the luxury development was known, was designed to hold up to 450 berths and accommodate the largest megayachts in the world up to 800 feet.
Backers of the project included Nat’s father Lord Jacob Rothschild, the French luxury billionaire Bernard Arnaud and Oleg Deripaska. Montenegrin Prime Minister Djukanovic was personally involved in the sale. Munk relied on Deripaska, the newly independent country’s largest employer, to use his personal touch with Djukanovic.
“Oleg made the first phone call and opened the door for me,” Munk told Britain’s Daily Mail.
Mere months after the referendum, in August of 2006, McCain and Davis were back in Montenegro celebrating McCain’s 70th birthday at a yacht party hosted by an Italian businessman Raffaello Follieri and his movie starlet girlfriend Anne Hathaway.
Manafort and Davis had been in on-again-off-again discussions with Follieri to use his access to the Vatican to make sweetheart land purchases. The Vatican, according to Follieri, was desperate to sell land to raise cash for their expensive defense related to the child-sexual abuse scandals.
Following dinner, the group took boats out across Kotor Bay to a the Queen K, Oleg Deripaska’s 238-foot superyacht, where they enjoyed champagne and pastries in honor of McCain’s birthday.
A year later, Follieri was convicted of wire fraud, money laundering and conspiracy, in a scam related to the Vatican properties which, while it didn’t ensnare Manafort or Davis, did manage to involve Bill Clinton’s personal aide Douglas Band.
In March 2008, in the run-up to the presidential election, Nat Rothschild and his father held a fundraiser for then candidate McCain at the Rothschild’s mansion at Spencer House in London. Oleg Deripaska was reportedly in attendance.
As far back as 2005, McCain had been warned by a staffer on the National Security Council that Rick Davis and his partner Manafort were working to undermine the Orange Revolution, a cause McCain had championed.
McCain eventually cut ties with Manafort completely, and nearly fired Davis from his campaign, but relented after Davis tearfully begged him to reconsider.
THE CORFU CONNECTION: OLEG DERIPASKA AND CORRUPTION IN EU AND BRITISH POLITICS
McCain’s visit to the Queen K would not be the last nor the most infamous scandal involving Deripaska’s superyacht.
In the last week of August 2008, Deripaska sailed on the Queen K to the Greek island paradise of Corfu and dropped anchor a short distance away from Chateau Rothschild, Nat’s idyllic ten-bedroom holiday home-away-from-home located on the north-east corner of the island.
A year earlier, Rusal had merged with its main Russian competitor SUAL, owned by the oligarch Viktor Vekselberg, and the aluminum assets of Glencore (formerly Marc Rich’s commodities company) to form United Company RUSAL, what was then the world’s largest aluminum company.
Corfu at the time was crawling with a who’s who of the world’s wealthiest and most powerful.
Britain’s conservative Shadow Chancellor of the Exchequer George Osborne and his wife Frances had rented a villa close to Nat Rothschild. Osborne and Rothschild had attended Colet Court preparatory school together in London and then Oxford, where they were both members of the notoriously besotted Bullingdon Club, which counts among its alumni Prime Ministers David Cameron and Boris Johnson.
Also on the island was Lord Peter Mandelson, then the European Trade Commissioner. Mandelson had known Nat and his father since the 1990s and had been a frequent guest at the Rothschild villa on St. Barts.
To round things off, anchored just off shore on the 159-foot superyacht the Elisabeth F was Elisabeth Murdoch and her husband Peter Freud. Elisabeth’s father, the billionaire conservative media tycoon Rupert Murdoch, had also just arrived on his 168-foot superyacht the Rosehearty.
On the afternoon of August 22nd, the Osborne’s and Lord Mandelson joined Deripaska on his yacht for drinks at the invitation of Nat. That evening they made their way to Chateau Rothschild where Nat hosted them for a lavish dinner party.
Over the course of the meal Deripaska, Osborne, Mandelson and Rothschild discussed matters ranging from Russian and British history to contemporary politics. Osborne was reportedly impressed with Deripaska.
The next evening on the 23rd, a birthday dinner was held less than a mile away from Chateau Rothschild at the restaurant Taverna Agni for Elisabeth Murdoch. In addition to the Murdochs, Nat Rothschild, the Osborne’s and Lord Mandelson were in attendance.
Over the course of the meal, George Osborne would later claim that Mandelson “dripped pure poison” about the then British Prime Minister Gordon Brown. Mandelson was a friend of Brown’s predecessor Tony Blair.
The next day, the Osborne’s moved into Chateau Rothschild. That evening Nat Rothschild and George Osborne were joined by Andrew Feldman, at Tory fundraiser and friend of David Cameron’s, and James Goodwin, a former advisor to Bill Clinton. What occurred next is bitterly disputed.
In the fall of 2008, a few months after the rendezvous in Corfu, reports of Lord Mandelson’s links to Nat Rothschild and Deripaska began to emerge in the British press, and there were allegations that Mandelson may have shown Deripaska preferential treatment in his official capacity as the European Trade Commissioner.
Rothschild suspected George Osborne was behind the innuendo and sent a sensational letter to his friend James Harding, editor of The Times of London, claiming that Osborne had solicited Deripaska for a £50,000 donation to the conservative party. As such a donation from a foreigner would have been illegal, Rothschild further alleged that Andrew Feldman had suggested Deripaska make the contribution through one of his UK-based companies.
Clinton’s aide Goodwin signed a letter backing up Rothschild’s statement. Osborne vociferously denied the claim. Questions have been raised as to why Rothschild would betray his longtime friend Osborne, many believe he did so to preserve his relationship with Deripaska, who was already struggling with visa troubles in the U.S. and would not have appreciated the negative press attention.
When the news of their meeting in Corfu became public, Lord Mandelson issued an inaccurate press statement claiming that he had only met Deripaska in 2006. In reality, Nat Rothschild had introduced Deripaska to Lord Mandelson shortly after the latter had been appointed European Trade Commissioner but just before he officially took up the post in October of 2004.
Mandelson joined Deripaska and Russian Trade Minister German Gref in Moscow for dinner at Café Pushkin. Three months later, Mandelson flew from Davos to Moscow in Nat’s Gulfstream where he attended a Rusal sponsored dinner at the Cantinetta Antinori restaurant. Also in attendance was Alain Benda, head of the U.S. aluminum giant Alcoa. The subject of the conversation that evening was EU tariffs.
In December 2005, Lord Mandelson approved a decision to exempt Rusal from EU aluminum foil tariffs. Mandelson met with Deripaska again in August of 2006 at a Rusal sponsored reception for a performance of Swan Lake at the Royal Opera House.
During one of Mandelson’s trips to Moscow in 2005 on Nat Rothschild’s private jet, it was reported by The Evening Standard that Mandelson arrived with the wrong stamp on his passport. Sources in Moscow told the paper that Deripaska intervened with Russian authorities to allow for Mandelson’s entry into the country. The arrangements were reportedly made by Valery Pechenkin, the head of security for Deripaska’s company Basic Element.
Pechenkin was formerly a high-ranking officer in the KGB and a Colonel-General at the FSB before joining Deripaska’s security force. Dating back to the days of the Aluminum Wars, Deripaska had amassed a muscular security force consisting of former KGB agents and Red Army soldiers.
“Pechenkin is a former KGB officer who served as FSB director for counterintelligence when Putin was the agency’s director,” said Mike Carpenter, a Russian policy official at the Pentagon under the Obama Administration. “Basic Element certainly benefits from having a close, symbiotic relationship with the siloviki — the ex-security officials who currently serve as Kremlin power brokers.”
Pechenkin is far from the only Deripaska employee affiliated with Russia’s intelligence agencies. Evgeny Fokin, the Director of International Cooperation at Deripaska’s company EN+, has been identified by the FBI as the SVR’s declared liaison officer with U.S. intelligence in the 1990s.
In his last act as Trade Commissioner, Mandelson provided multinational companies with freer access to raw materials such as scrap aluminum and minerals used in aluminum production. The move directly benefited Rusal. Mandelson left his post in October 2008 and wrote in a letter to The Times that he had “made no personal intervention to support the commercial interests of Mr. Deripaska.”
Mandelson has praised Putin’s economic leadership as “intelligent,” and said that Russia is “moving in the right direction” under his leadership.
He was paid £200,000 a year between 2013–2017 by the Russian defense conglomerate Sistema, during which time he wrote a personal letter to Putin during a business dispute.
The next article in this series will explore Paul Manafort’s corrupt activities and suspected money laundering involving Oleg Deripaska and the allegedly organized crime-linked Ukrainian oligarch Dmytro Firtash.
Part 6 explains Paul Manafort’s money laundering and corrupt business activities with Oleg Deripaska and the Ukrainian oligarch Dmytro Firtash.
Part 7 shows how Paul Manafort and the law firm Skadden Arps laundered Viktor Yanukovych’s reputation.
Part 8 reveals how Manafort assembled a public relations team to smear Viktor Yanukovych’s political opponents.
Part 9 explains how Manafort lobbied on behalf of Viktor Yanukovych in the halls of the Capitol in Washington, DC.