Skadden Settlement for Manafort Work Suggests Ex-Partner's Peril

(Bloomberg) -- Skadden, Arps, Slate, Meagher & Flom LLP agreed to pay $4.6 million as part of a settlement with the U.S. Justice Department over unregistered work it did with Paul Manafort to benefit the government of Ukraine in 2012 and 2013.

The law firm said Thursday that it should have registered as a lobbyist for a foreign government and agreed to do so to resolve its liability for violations of the Foreign Agents Registration Act, or FARA.

Skadden Settlement for Manafort Work Suggests Ex-Partner's Peril

The government also said the primary Skadden partner on the project made false and misleading statements to the Justice Department’s FARA unit. The partner has been previously identified as Greg Craig, a former White House counsel under President Barack Obama. The development suggests Craig may yet have legal exposure in the matter.

Craig, who hasn’t been charged, couldn’t be reached for comment. A lawyer for Craig declined to comment.

Skadden is the first marquee corporate entity to be sanctioned as a result of Special Counsel Robert Mueller’s investigation of Russian election interference. Handled by the Justice Department’s National Security division, the Skadden probe grew out of Mueller’s investigation of Manafort’s political consulting work in the Ukraine, and his indictment on charges that he failed to register as a foreign agent.

The settlement suggests that the Justice Department has developed an appetite to crack down on FARA regulations, which have rarely been prosecuted. It also shone a light on the work itself -- how Skadden used a legal opinion to lend credibility to a foreign leader under international scrutiny.

Manafort, who was President Donald Trump’s campaign chairman for five months in 2016, helped the Ukrainian government hire Skadden to write a report in 2012 justifying the prosecution of Yulia Tymoshenko, the former prime minister of Ukraine. Tymoshenko’s conviction and subsequent imprisonment raised questions about the rule of law in Ukraine under Prime Minister Viktor Yanukovych, a Kremlin-friendly ruler who employed Manafort on and off for almost a decade.

Skadden Settlement for Manafort Work Suggests Ex-Partner's Peril

In response to the settlement, Skadden said it would register with the Justice Department’s FARA unit. The $4.6 million that it will pay to the U.S. Treasury Department represents the amount it billed for its paper justifying the prosecution Tymoshenko.

“We have learned much from this incident and are taking steps to prevent anything similar from happening again,” the firm said in a written statement.

Amid criticism from the U.S. and the European Union that Tymoshenko’s prosecution was politically motivated, Manafort solicited Skadden to write a report on behalf of Yanukovych’s government. The report, ultimately released publicly, criticized some aspects of the case but concluded that the evidence supported her conviction and that her due process rights hadn’t been violated.

The 38-page appendix to the settlement details some of the irregularities involved in the Skadden engagement, starting with the method by which the firm would be paid. According to the government, the engagement letter between Skadden and the government of Ukraine stipulated that a third party had "agreed to pay the fees, charges and disbursements incurred in connection" with the project.

Before agreeing to take the job, the Skadden partner -- believed to be Craig -- flew to Kiev in April 2012 and met with a Ukrainian businessman who would be involved in funding Skadden’s work, according to the filing. He decided to accept the assignment. In subsequent emails, Manafort and the lawyer agreed that Skadden would receive an advance of $4 million from which its expenses would be deducted. The unidentified third-party businessman would have no further role in the matter beyond arranging for the payment, according to the filing.

In accepting the project, the lawyer insisted that Skadden would be "free to reach its own conclusions based on its own independent work." He also said in an email that the firm wouldn’t engage in any political activities that would require Skadden to register as a foreign agent in the matter. The contract called for Skadden to be paid $12,000 for its work, with no mention of the $4 million retainer.

The report was delivered to the Ukrainian government near the end of the year. A public relations firm retained by Manafort arranged for a copy to be given to the New York Times in advance of its wider release, according to the government. A story published on Dec. 12 included quotes from an interview given to the paper by Craig, who didn’t disclose how much Skadden had been paid.

In April 2013, the DOJ’s FARA unit began asking Skadden about its work on Ukraine’s behalf and made an initial finding that the firm needed to register as a lobbyist for the country. Skadden, according to the Justice Department, wanted to avoid such a filing, in part because it would reveal the firm was paid more than $4.6 million for its work, rather than the $12,000 publicly claimed by Ukrainian officials.

In response to the FARA unit, the firm submitted a response minimizing its role in promoting its findings, saying it took little action to publicize them -- when in fact it had agreed with a plan to grant exclusive access to its report to The New York Times and allow Craig to give the paper’s reporter a background briefing, according to the government. The effort was "part of a public relations campaign to change U.S. public opinion" about the Ukraine and its jailing of Tymoshenko, according to the court filing.

Relying on those misrepresentations, the Justice Department’s FARA unit concluded at the time that Skadden didn’t need to register as a foreign lobbyist.

Last year, Mueller’s team obtained a guilty plea from a junior Skadden lawyer, Alex van der Zwaan, who admitted making false statements to FBI agents asking about the firm’s work with Manafort on the Tymoshenko report. The Dutch national served a 30-day prison sentence.

The Justice Department’s national security division picked up the probe of Skadden’s role in the matter, which diverted from Mueller’s primary goal of investigating Russian interference in the 2016 election. The allegation that the report’s lead partner misrepresented the firm’s role to the FARA unit raised the possibility that he could face charges; making false statements to the Justice Department is a crime.

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