Manafort Joined Trump as Ukraine Work Slowed, Cash Woes Rose

(Bloomberg) -- Among the enduring curiosities of Donald Trump’s presidential run was his announcement that campaign chairman Paul Manafort was an unpaid volunteer.

Why would a longtime political fixer do that? That question has grown more persistent thanks to successive indictments of Manafort by U.S. Special Counsel Robert Mueller, each documenting in finer detail Manafort’s allegedly fraudulent scramble for cash just as he was taking the campaign job in spring 2016. 

“Manafort looks like he’s in dire straits,” said former federal prosecutor Peter Zeidenberg. “Then he drops everything to work for free for Trump. It’s very strange.”

Mueller now has a better view on the mystery. Manafort’s longtime business partner, Rick Gates, pleaded guilty Feb. 23 to conspiracy and false statements. He’s telling prosecutors about crimes he said he committed with Manafort.

The special counsel, who is investigating whether the Trump campaign colluded with Russia in the 2016 election, may seek to determine whether Manafort sought to benefit in some way from his unpaid work, Zeidenberg said. 

Manafort, who denies wrongdoing, appeared in court Wednesday and pleaded not guilty to one of two new indictments unsealed last week by Mueller’s prosecutors. The judge set a Sept. 17 trial date. 

Prosecutors allege that Manafort tried to hide the millions of dollars he made as a political consultant for pro-Russian politicians in Ukraine, and then came under increasing financial pressure after his Ukrainian work began to dry up.

That portrait is bolstered by previously unreported accounts of Manafort’s work for pro-Russian politicians in Ukraine -- including some as recently as six months before he took the job with Trump’s campaign.

Manafort made 17 trips to Ukraine in 2014 and 2015, Ukrainian prosecutors who have records of his travel told Bloomberg. That work is more recent than the undisclosed lobbying activities Mueller has described in his indictments. 

That later work wasn’t as profitable as earlier efforts in Ukraine, largely because Manafort’s top Ukrainian client, former President Viktor Yanukovych, had by then fled to Russia, other people familiar with the situation said. Manafort didn’t get paid for some of the work he did on Ukrainian elections in late 2015, one of these people said.

Manafort, who was indicted with Gates on Oct. 27, reacted to his guilty plea last week, saying he hoped his longtime associate “would have had the strength to continue the battle to prove our innocence.”

New Ally

Gates worked with Manafort for a decade in Ukraine, serving as a loyal wingman. In his guilty plea, Gates admitted that he helped Manafort set up dozens of undisclosed offshore bank accounts, hide their work as unregistered agents for Ukraine and launder millions of dollars into the U.S. Manafort convinced Gates to help him create false documents for banks, urged his son-in-law to lie to a bank appraiser and misled lenders about the use of loans, prosecutors charged.

One reason for Manafort’s depleting cash flow was that the bulk of the work he did with Gates in Ukraine began to dry up when Yanukovych fled to Moscow after widespread popular protest in 2014.

Manafort returned to Ukraine just months after Yanukovych was toppled and Russia annexed Crimea, advising the former president’s Party of Regions to rebrand itself as a catch-all party -- the Opposition Bloc -- that could be the voice of Russians in the east.

Manafort was paid roughly $1 million for his work on the October 2014 parliamentary election, Nestor Shufrych, one of the Opposition Bloc’s leaders told Bloomberg in April.

Manafort’s last consulting assignment in Ukraine ended less than six months before he started working for the Trump campaign: He spent at least a month in Ukraine advising the Opposition Bloc ahead of local elections in October 2015, said the person familiar with the situation, adding that Manafort received payment for only part of that work.

In a 2016 bank loan application, Gates submitted a "fake invoice" on Manafort’s behalf to support a mortgage on his home in Bridgehampton, New York, according to the indictment. The falsified document said Manafort was owed $2.4 million for a "consultancy agreement pertaining to parliamentary elections." The bank requested more information but later turned down the loan application, prosecutors said.

Unpaid Bills

Manafort was still chasing unpaid bills from his Ukrainian work while he was chairman of Trump’s campaign.

In July, with Trump closing in on the Republican Party’s nomination, Manafort made a previously reported effort to patch his soured relationship with Oleg Deripaska, an aluminum magnate who is close to President Vladimir Putin. 

Manafort once did consulting work for Deripaska’s businesses. The men had a falling out over $18.9 million that Deripaska invested with Manafort in a Ukrainian cable television venture in 2007. The venture failed, leading to litigation, including a lawsuit that Deripaska filed in January claiming Manafort and Gates defrauded him.

In an email to an intermediary, Manafort offered to give private briefings about the campaign to Deripaska. “I assume you have shown our friends my media coverage, right?" Manafort wrote, according to an email obtained by the Atlantic. “How do we use to get whole?"

Manafort wanted to meet in hopes of resolving the dispute over Deripaska’s investment, according to two people familiar with the offer. The meeting never took place, they said.

A spokeswoman for Deripaska has said he had “no communications, meetings, briefings or other interactions with Mr. Manafort during, after, or in the run-up to the 2016 presidential election.”

Larger Payoff?

There are many explanations for why Manafort may have taken a job without pay, including a desire to gain a victory on a national stage to help reboot his consulting work. The indictment doesn’t discuss any interactions with Russians or payoffs. 

“If I were investigating the case, I would want to know whether or not he’s expecting to get some kind of larger payoff from his Russian benefactors,” said Zeidenberg, the former prosecutor.

Starting around the time Manafort emailed the intermediary about the Deripaska meeting, he also got the first of two loans totaling $16 million, secured by his homes in Bridgehampton and Brooklyn, New York, from a bank not identified in the indictment. Descriptions of the loans match those extended by the Federal Savings Bank of Chicago. The bank is headed by Stephen Calk, who was part of Trump’s economic advisory council during the campaign. Calk and the bank have declined to comment on client financial matters.

In all, Manafort defrauded banks of $20 million between 2015 and January 2017, the U.S. alleges.

While Gates and other cooperators could lead Mueller into fresh avenues in its Russia inquiry, they may also help prosecutors flesh out their indelible portrait of Manafort’s financial state. Former prosecutors say that Mueller’s team already has the arc of its narrative, should the case go to trial.

“It’s hard to imagine a financial fraud case that sounds more desperate,” said attorney Patrick Cotter, a former federal prosecutor. “I’m very confident that prosecutors will say in their opening statement this is a story about a man who was desperate to get this money to live the lifestyle he had and to get the money he had overseas.”

--With assistance from Daryna Krasnolutska

To contact the reporters on this story: David Voreacos in federal court in Newark, New Jersey, at dvoreacos@bloomberg.net, Stephanie Baker in London at stebaker@bloomberg.net.

To contact the editors responsible for this story: Jeffrey D Grocott at jgrocott2@bloomberg.net, Andrew Martin

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