(Bloomberg) -- Sara Peterson flew to Moscow in 2012 to take home two Russian orphans just as the Kremlin, angry about sanctions on Russian officials, banned U.S. adoptions. For the next four years she knocked on doors in Washington to no avail. So when she read about a foundation “to help restart American adoption of Russian children,” she set up a meeting.
It was August 2016 when Peterson, of Maryland, traveled to Washington and waited at a train station sandwich shop for a Russian-American man named Rinat Akhmetshin. He wanted to know which members of Congress he should approach, she said. At that meeting and later ones, he said “things would change” after the upcoming elections.
Peterson didn’t know it but Akhmetshin, a former Soviet intelligence officer, had recently met with senior officials of the Donald Trump campaign in New York: the candidate’s son, son-in-law and campaign manager. It didn’t take long for her to realize that the foundation wasn’t all it seemed. As she put it, “I don’t think adoptions were their primary agenda.”
Now Special Counsel Robert Mueller is looking into the foundation. Robert Arakelian, a lobbyist and employee of the foundation, recently testified to the special counsel’s office about the organization and its funding, two people familiar with the probe said. Arakelian didn’t respond to requests for comment, and a Mueller spokesman declined to comment.
Russian Influence Efforts
The foundation, called the Human Rights Accountability Global Initiative (HRAGI), offers a window into Russian efforts to influence U.S. politics before the presidential election. It was financed by $500,000 in donations, mostly from wealthy Russians with ties to Petr Katsyv, deputy director of Russian Railways and a longtime acquaintance of Prosecutor General Yuri Chaika. Rather than a nonprofit helping unite Americans with Russian adoptees, the foundation was a lobbying vehicle against sanctions.
“This whole organization is a sham and a front to pursue the Russian government’s objectives,” said Bill Browder, a U.S.-born fund manager whose accountant, Sergei Magnitsky, died in a Russian prison after accusing Russian officials of fraud. Browder, founder of Hermitage Capital Management, persuaded the U.S. to pass the Magnitsky Act sanctioning Russian officials implicated in his death. He also got other countries, including the U.K. and Canada, to pass variations of it.
On Wednesday, the U.S. added five new Russian nationals to the list of sanctioned individuals under the Magnitsky Act.
The foundation’s website shows pictures of hugging families, but most of its pages have been "under construction" since its inception in 2016. Its Washington address was a building hosting several hundred small organizations and businesses. By setting up a U.S. nonprofit, the foundation effectively concealed its sources of financing, which may have required registering as a foreign agent. The foundation hired high-powered lobbyists such as former Representative Ron Dellums of California to push for repeal of the Magnitsky Act.
Putin Ordered the Ban
Russian President Vladimir Putin, who ordered the adoption ban, and Chaika have made repealing the U.S. sanctions law a priority.
The Magnitsky Act was atop the agenda when Akhmetshin joined Natalia Veselnitskaya, the Russian lawyer, for the Trump campaign meeting in June 2016. Akhmetshin told Peterson that the way to reopen adoptions would be to persuade lawmakers to drop the name “Magnitsky” from the global version of the act then being considered by Congress to punish foreign government officials implicated in human rights abuses worldwide. Peterson said she also met with Veselnitskaya on Jan. 21, 2017 in Washington.
Most of the Russians financing the foundation said in interviews that they knew nothing about U.S. adoptions of Russian children, contradicting the foundation’s U.S. disclosure forms.
The foundation didn’t disclose those donations as a source of funding in lobbying disclosure forms. It reported spending just $50,000, less than the amount reported by outside lobbyists it hired. It disclosed to the Internal Revenue Service $526,740 in contributions and spending of $413,831 on “campaigns relating to human rights issues including foreign adoption."
Money Laundering Accusation
The idea for the foundation dates to December 2015, when Denis Katsyv, Petr’s son and a Moscow businessman, was fighting charges issued by the U.S. Justice Department that his company, Prevezon Holdings Ltd., helped launder money connected to the fraud Magnitsky said he had uncovered. His U.S. lawyers at Baker & Hostetler LLP introduced him to Akhmetshin and the American lobbyist Ed Lieberman, according to a person familiar with the effort.
While discussing how to lobby against the Magnitsky law, Lieberman proposed setting up a foundation for American families caught up in the Russian adoption ban, the person added. Lieberman declined to comment. Akhmetshin didn’t respond to requests for comment. Prevezon agreed to pay $5.9 million in fines to settle the Justice Department case in May without admitting any guilt.
‘Denis Needed Help’
Katsyv kicked in $150,000 for HRAGI, making him the biggest donor, according to the person. He then began soliciting donations from his friends who were introduced to him by his father. His two business partners in Russia, Mikhail Ponomarev and Albert Nasibulin, each gave $100,000. Ponomarev, who owns a network of gas stations and a real estate business in the Moscow region, said he contributed his personal funds. "Denis needed help, so we provided this help,” Ponomarev said. "We all help each other."
Nasibulin said he never heard anything about adoptions when Katsyv asked him for money. "He explained that a campaign was organized against him, and he needed money to resist it," he said. "I don’t know what the foundation was doing."
Vladimir Lelyukh, deputy general director of Sberbank Capital LLC, a subsidiary of state-controlled Sberbank, said he kicked in $50,000 of his own money to support Denis Katsyv. Lelyukh, a former Moscow regional government official, said he’s known the Katsyv family for a long time.
"I just backed him up as a friend, a man who had become a victim of the Magnitsky Act,” he said in an interview.
The foundation got another $100,000 from a company called Berryle Trading Inc. via an account in Germany, according to a person familiar with the foundation. It is unclear who owns the company or where it’s registered. Ponomarev, Nasibulin and Lelyukh all said they’d never heard of Berryle Trading. The special counsel, however, had. He questioned Arakelian about Berryle’s sources of funding, according to the person.
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