Campaign Finance Violations Archives

On September 10, 2020, the U.S. Attorney for the Eastern District Virginia brought a criminal complaint against a Russian national for his alleged role in a conspiracy to use the stolen identities of real U.S. persons to open fraudulent accounts at banking and cryptocurrency exchanges. Also on September 10, 2020, the U.S. Treasury Department imposed sanctions against Andriy Derkach. He is a member of the Ukrainian Parliament. Treasury says he has been “an active Russian agent for over a decade.” Treasury accuses him of disseminating “edited audiotapes” and “substantiated allegations against U.S. and international political figures.” The Treasury Department also imposed sanctions against three employees of the Internet Research Agency (IRA). IRA is a troll farm in Russia that disseminates disinformation on social media as part of the Russian election interference campaign in 2016.

Complaint against Russian Project Lakhta Member

The 111-page criminal complaint and affidavit allege Artem Mikhaylovich Lifshits, 27, of St. Petersburg, Russia, operates as a manager in “Project Lakhta.” The latter is based in Russia and engages in political and electoral interference activities. Since at least May 2014, Project Lakhta has tried to hide its conduct by acting through a number of entities, including IRA. Lifshits served as manager since approximately 2017 for the Translator Department, which is allegedly responsible for much of the Project’s ongoing influence operations.

Lifshits allegedly conspired with Project Lakhta members to secure means of identification of real U.S. persons. The conspirators then used these identities to open fraudulent accounts at banking and cryptocurrency exchanges in the victims’ names. Lifshits and the conspirators allegedly employed these fraudulently opened accounts to promote Project Lakhta’s influence operations and personal enrichment.

Treasury Sanctions

Treasury designated Andrii Derkach (Derkach) pursuant to Executive Order (E.O.) 13848 for his efforts to influence the 2020 U.S. presidential election. According to Treasury, “Derkach has directly or indirectly engaged in, sponsored, concealed, or otherwise been complicit in foreign interference in an attempt to undermine the upcoming 2020 U.S. presidential election.”

From at least late 2019 through mid-2020, Derkach conducted a covert influence campaign focused on creating false and unsubstantiated narratives concerning U.S. officials in the upcoming 2020 Presidential Election, spurring corruption investigations in both Ukraine and the U.S. designed to influence the U.S. Presidential election day. The Western media covered Derkach’s unsubstantiated narratives through coverage of press conferences and other news events, including interviews and statements.

Between May and July 2020, Derkach disseminated edited audio tapes and other unsupported information with the intent to discredit U.S. officials. He made unsubstantiated allegations against U.S. and international political figures. Derkach almost certainly targeted the U.S. voters, prominent U.S. persons, and members of the U.S. government, based on his reliance on U.S. platforms, English-language documents and videos, and pro-Russian lobbyists in the United States used to propagate his claims.

The Treasury sanction does not mention that Rudolph W. Giulani, President Trump’s personal attorney, met twice with Derkach since late last year and publicized Derkach’s claims on his podcast and elsewhere. Since late last year, Derkach has operated a campaign against Democratic Presidential candidate Joe Biden and former Ukrainian president Petro Poroshenko from Kyiv. The campaign has included an English-language website and YouTube channel, and a conspiratorial flowchart showing Biden and financier George Soros at the center. fn1

Treasury also designated three IRA actors pursuant to E.O. 13694, as amended by E.O. 13757, and E.O. 13848 for having acted or purported to act for or on behalf of, directly or indirectly, the IRA, an entity designated pursuant to E.O. 13694, as amended, and E.O. 13848. Russian nationals Artem Lifshits, Anton Andreyev, and Darya Aslanova, as employees of the IRA, supported the IRA’s cryptocurrency accounts.

Department of Homeland Security Whistleblower Complaint about Intelligence re Russian Election Interference

On September 9, 2020, Rep. Adam Schiff (D-CA), the Chairman of the House Permanent Select Committee on Intelligence, announced that, as part of its ongoing investigation into the Department of Homeland Security (DHS) and the Office of Intelligence and Analysis (I&A), the Committee received a whistleblower reprisal complaint alleging serious wrongdoing by officials at the Department and reprisal against former I&A Acting Under Secretary Brian Murphy for making protected disclosures. Mr. Murphy filed the whistleblower reprisal complaint on September 8, 2020 with the DHS Office of Inspector General.

Rep. Schiff released a statement that “Murphy’s allegations are serious — from senior officials suppressing intelligence reports on Russia’s election interference and making false statements to Congress about terrorism threats at our southern border, to modifying intelligence assessments to match the President’s rhetoric on Antifa and minimizing the threat posed by white supremacists. We have requested Mr. Murphy’s testimony before the Committee, pursuant to subpoena if necessary, alongside other already scheduled interviews with other DHS officials.”

Analysis

The criminal complaint, sanctions, and whistleblower complaint show that Russian interference in U.S. elections is continuing. The extent of the interference and the cooperation, if any, by members of the Republic National Committee and the Trump Administration are controverted. Depending on the results of the U.S. election, the U.S. sanctions against Russia are likely to deepen. The alleged interference is likely to generate additional sanctions by Europe and other countries. For European sanctions the case of Aleksei A. Navalny, the Russian opposition leader who is recovering from being poisoned, is important. He has spoken to a German prosecutor about the attempt on his life and says he plans to return to Russia as soon as he has recovered. The alleged poisoning of Navalny also potentially trigger sanctions under the the U.S. Global Magnitsky Act, which a number of countries have emulated. The current issue of the IELR will have more discussion on these matters in this blogpost.

FN 1 Paul Sonne, Josh Dawsey and Karoun Demirjian, Treasury penalizes Ukrainian it calls a ‘Russian agent’, Wash. Post, Sept. 11, 2020, at A10, col. 1.

On September 20, two of Rudy Giuliani’s associates were about to leave the U.S. with one-way tickets when they were arrested outside of the Dulles International Airport in Northern Virginia on charges of campaign-finance violations. These charges accused them of funneling foreign money into U.S. elections. The timing is significant as it is known that the Soviet-born men, Igor Fruman and Lev Parnas, were linked to efforts to dig up dirt on Joe Biden and his son in Ukraine.

In total, four men were indicted, and the indictment includes two counts of conspiracy, one count of false statements to the Federal Election Commission (FEC), and one count of falsification of records. It is alleged that the four men’s scheme to avoid campaign finance laws began in March 2018.

Last Thursday, October 10, the two men appeared in federal court in Virginia where the judge set their bail at $1 million each, after prosecutors argued the men were a flight risk.

The men are said to be connected to the ongoing impeachment inquiry and have even been photographed with the president, his son, and Mike Pence. When asked about the men, Trump told reporters, “I don’t know those gentlemen…I don’t know what they do. Maybe you will have to ask Rudy.”

Significance of Indictment

The indictment is momentous because the charges suggest Giuliani’s push on Ukraine had ties to an illegal effort to influence the U.S. political system with foreign monies. In fact, Fruman and Parnas are known to be central to the current impeachment inquiry that is taking place in the House of Representatives.

While there have been quite a bit of speculation from various news outlets, CNN reported that Parnas has operated as Giuliani’s fixer in Ukraine since 2018, claiming that Giuliani, himself, told the organization that Parnas introduced him to current and former officials in the country. Democrats in the House have subpoenaed documents from the former mayor in order to understand more details of the interactions. Guiliani also confirmed to the Wall Street Journal that the two men were clients in May, and both men had dinner with President Trump and met Donald Trump Jr. a year prior.

However, this is the second subpoena relating Giuliani to Parnas, the first being part of a lawsuit filed in Florida seeking Parnas’ financial records and a record for any work he did on Giuliani’s behalf. It is alleged that he collected and distributed hundreds of thousands of dollars in donations to a Trump-allied super PAC.

Furthermore, Fruman and Parnas allegedly asked a U.S. congressman, widely believed to be former Texas Rep. Pete Sessions, to help get the ambassador to Ukraine, Marie Louise Yovanovitch, fired. According to the indictment, this request coincidentally came at the same time that they promised to raise $20,000 for that congressman’s reelection. Fruman allegedly made the donation in Parnas’ name, going beyond the limit on individual donations and violating campaign finance law. Sessions has yet to comment on the matter and has not been charged of any wrongdoing.

After facing criticism from the Trump administration for being ‘biased against the president,’ Yovanovitch was eventually fired in May. On October 10, Yovanovitch gave a powerful deposition to the House Intelligence Committee, testifying that she was ousted due to her anti-corruption work.

Amidst all of this, the indictment also explains how the two men donated more than $300,000 to America First Action, a pro-Trump super PAC, through a limited-liability company whose purpose was to mask the true source of their donations. America First Action spent more than $3 million to reelect Sessions, although he ended up losing his seat. A spokeswoman for the super PAC released a statement last week claiming they, “placed that contribution in a segregated bank account, it has not been used it for any purpose and the funds will remain in this segregated account until these matters are resolved.”

Additional Motivations for Fruman and Parnas’ Scheme

Interestingly, a portion of the scheme involving Fruman and Parnas revolved around an effort to win over politicians who could help them receive licenses for a retail marijuana business they wanted to open. The business’ venture and lobbying costs were allegedly funded by a Russian national, who has only been identified as a ‘businessman,’ which would further violate campaign finance law as the law prohibits foreign political donations. The men are said to have created an outline of a ‘multi-state license strategy’ that planned how to divide the $1-2 million dollars the Russian businessman donated to federal and state committees. In fact, when the businessman made a $1 million wire transfer in 2018 to Fruman, the men supposedly used these funds to donate to multiple political candidates in Nevada that could have helped further their marijuana business plan.

U.S. Brings Criminal Complaint and Imposes Sanctions against Russians for Election Interference

Two of Giuliani’s Associates Arrested on Charges of Campaign-Finance Violations

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