K Street Reels Amid Indictments in Russia Elections Probe

12 counts include conspiracy, tax evasion and money laundering

K Street sign at 15th and K Streets in Washington, D.C. (Bill Clark/CQ Roll Call file photo)
K Street sign at 15th and K Streets in Washington, D.C. (Bill Clark/CQ Roll Call file photo)
Posted October 30, 2017 at 6:00pm

K Street can’t escape the fallout from Monday’s first indictments in the Justice Department probe into Russian interference in the 2016 elections.

Not only were charges revealed against Paul Manafort and Rick Gates, onetime lobbyists who worked on President Donald Trump’s campaign, but the expanding investigation by special counsel Robert S. Mueller III rocked one of K Street’s biggest and most prominent firms, the Podesta Group. This is likely just the beginning.   

A key Senate Republican said he plans to introduce a bill to sharpen the DOJ’s enforcement of the Foreign Agents Registration Act, a law that factored into the Manafort and Gates indictment. Congress typically pushes along new lobbying and ethics laws after being prompted to do so by a scandal, such as the Abramoff affair in the mid-2000s.  

“I’ve been raising concerns about lackluster enforcement of this foreign influence disclosure law for years now, regardless of administration or political party,” Senate Judiciary Chairman Charles E. Grassley said. “The dirty little secret is that lots of people across the political spectrum in Washington have skirted their FARA registration obligations for years with little to no accountability.”

The government charged Manafort, a former Trump campaign chairman, and Gates, a Manafort associate and ex-Trump campaign aide, on 12 counts including conspiracy, tax evasion and money laundering. They were also charged with violations of FARA, a 1938 law that stemmed from fears about covert Nazi propagandists who were active in the United States during the run-up to World War II.      

The government’s charging documents also alluded to two unnamed firms, “Company A” and “Company B.” NBC News, citing three unnamed sources with knowledge of the investigation, reported that Company A is Mercury LLC and Company B is the Podesta Group.

Democrat Tony Podesta — who founded his shop in 1987 with his brother, John — told his colleagues Monday that he was leaving the firm, according to a report from Politico. John Podesta was Hillary Clinton’s 2016 campaign chairman. Mercury employs a number of lobbyists and communications professionals, including former Reps. Vin Weber, a Minnesota Republican, and Max Sandlin, a Texas Democrat.

“Mercury takes its obligations to follow all laws, rules and regulations very seriously,” Michael McKeon, a Mercury partner, said in an email. “Mercury has and will continue to fully cooperate with the Office of the Special counsel in its investigation. Mercury believed our work was intended to serve an important and proper purpose.”

Tony Podesta’s departure from his firm comes months after the Podesta Group retroactively disclosed work for a client it shared with Manafort: the European Centre for a Modern Ukraine, a nonprofit formed in 2012 by three senior members of Ukraine’s Party of Regions led by Viktor Yanukovych, when he was the country’s president.

Disclosure rules

The Podesta Group made the filing in April 2017 but said the effective date of the agreement was April 18, 2012.  

Mercury also filed retroactive FARA disclosures in April for the European Centre for a Modern Ukraine. Weber, a Mercury partner, signed the filing, which also listed the effective date as April 18, 2012.

“The Podesta Group has routinely filed FARA registrations for our various clients,” Podesta Group CEO Kimberley Fritts told Roll Call in a statement this spring. “We have, and will continue to have, no hesitation doing so to underscore our commitment to transparency.”

The foreign agents registration law requires lobbyists, lawyers, and public relations and advertising executives to disclose their representation of foreign governments and foreign political parties. They are supposed to detail the scope of their work and to disclose their contacts with U.S. government officials, including members of Congress.

It comes with potential fines of $10,000 and criminal penalties that could amount to five years in prison, but the Justice Department has pursued only seven criminal prosecutions in the past 50 years, according to a report last year from the DOJ’s inspector general. The officials enforcing the law “told us that they believed that even though criminal penalties are available under FARA, the primary goal of FARA is in fact to ensure appropriate registration and public disclosure,” the IG report said.

Robert Kelner, an expert on lobbying laws including FARA, represents retired Lt. Gen. Michael Flynn, Trump’s former national security adviser and another prominent person in the Mueller probe. He said more than a year ago that FARA prosecutions, on their own, were rare.

“In virtually every reported FARA case, there’s something more serious going on — usually espionage, terrorism, trade sanctions busting or bribery,” Kelner told CQ magazine in September 2016.

Grassley said he was monitoring the ongoing investigation.

“The Judiciary Committee is continuing its work to ensure that the Justice Department and FBI are functioning free from inappropriate influence, consistent with our constitutional oversight responsibility,” the Iowa Republican said in a statement. 

Podesta’s clients

The Podesta Group’s recent publicly disclosed clients include Airbnb, BP America, General Dynamics, General Electric, Lockheed Martin, Wells Fargo and SeaWorld, among others. In recent years, the firm has expanded its foreign lobbying practice and its international clients to include the embassies of Azerbaijan, India and Japan and the Hong Kong Trade Development Council, according to recent disclosures filed with Congress.

Most Podesta clients contacted for comment did not respond. Jennifer Dunn, a spokeswoman for Wells Fargo, said her company had “no comment” on its relationship with the firm. General Dynamics and Lockheed Martin also declined to comment through spokeswomen.

Podesta’s federally reported lobbying revenue has slumped recently. This year, the company has brought in about $15.8 million through Sept. 30, putting it on pace to make less in 2017 than the $24 million it reported last year, according to the nonpartisan Center for Responsive Politics. Still, it is the city’s sixth largest lobbying practice.

Podesta’s best year for federal lobbying revenue was 2010 when it reported $29.3 million, making it, at the time, the city’s third-largest lobbying practice. The lobbying revenue does not include the international work or public relations business.

Podesta, who did not respond to an email, has been a fixture in Democratic, lobbying and political fundraising circles for decades.

“You are only as good as what you did last month, so you need to keep delivering for your clients every day, every week,” said Podesta, according to the Podesta Group’s website. “We have a group of people who can really make that happen.”