For a convicted felon dumb enough to lie to Robert Mueller after agreeing to a plea bargain, Paul Manafort sure gets a lot of credit. To some, he’s the man who took a drifting presidential campaign and helped deliver an unlikely nomination for Donald Trump. This represented a triumphant return to domestic politics after a decade in Ukraine, where Manafort polished the previously unelectable Viktor Yanukovych and took him to an improbable 2010 victory as that nation’s president.
But dig a little deeper into Manafort’s time in Ukraine and a different picture emerges. Under President Yanukovych, Ukraine was a kleptocracy run by and for a gang of crooks who had carved up the country after the fall of the Soviet Union. Manafort may have introduced Yanukovych to power dressing, a good barber, and a neat line in soundbites. But, in the end, this made little difference in an election already bought and paid for.
So why was Manafort paid vast sums (more than $60 million at last count) if his brand of political consultancy wasn’t essential for victory? It was because Manafort gave the campaign the international respectability it needed to conduct a huge money-laundering operation necessary to handle the theft of the country’s wealth.
Manafort, of course, is now in jail, having been convicted of multiple counts of financial fraud related to his role in Ukraine. In November, he was accused by Robert Mueller, the special counsel looking into ties between the Trump Administration and Russia, of lying to federal investigators, putting his plea bargain at risk.
The underlying criminal charges against Manafort deal with how he tried to bring the money he had earned in Ukraine into the United States by illegal means, but do not fully explain why Manafort was working for players in Ukraine or the nature of their work together. It is true that Manafort’s political savvy and experience were attractive to the men behind Yanukovych. A longtime political consultant who specialized in representing repressive regimes, Manafort knew how to lobby successfully in the United States and elsewhere.
Moreover, Manafort’s record indicates that he didn’t give a damn who he worked for—just as long as the money came in. He had earned significant amounts in the service of military dictators including Ferdinand Marcos of the Philippines and Mobutu Sese Seko of the Democratic Republic of the Congo (then Zaire). He also worked extensively with the Angolan rebel leader Jonas Savimbi. All three resorted to oppression, abduction, murder, and torture to achieve their political goals, and enriched themselves in the process.
None of this perturbed Manafort unduly, and he was paid handsomely for his services, which included helping these figures legitimize the millions they had stolen from their countries. One of Imelda Marcos’s last acts before fleeing the Philippines was to get Manafort on the phone to thank him for his efforts. His reputation in the Philippines was such that one member of Congress there, former journalist Teddy Locsin, said, “Manafort’s name [then] was like Voldemort today.”
Although Manafort’s client was Yanukovych, his route to Ukraine was via Russia. His first contact was with long-time Putin ally Oleg Deripaska, who became one of the richest and most influential men in Russia after emerging on top from the bloody aluminium wars of the 1990s.
Manafort was keen for a role in Russia and pitched for a $10 million a year job to, as one news account put it, “influence politics, business dealings, and news coverage inside the United States . . . to benefit the Putin government.” Instead Deripaska passed him on to Rinat Akhmetov. Akhmetov is Ukraine’s wealthiest oligarch and its most influential power broker.
While Manafort’s role was not key to the 2010 election, it was crucial in legitimizing the Yanukovych presidency and cranking up of the kleptocracy.
Manafort was initially unimpressed with Yanukovych, convinced he could never win. But Yanukovych was Putin’s favored candidate, and he wasn’t going anywhere. He headed the Party of Regions, a criminal organization masquerading as Ukraine’s largest political party. With the backing of most of the country’s leading oligarchs and the full support of the Kremlin, the party seemed likely to be in power for a long time.
But in 2005, when Manafort came into the picture, the Party of Regions was in disarray. The party had been caught rigging the election and was deposed in a popular uprising. With corrupt leaders unseated by the Orange Revolution, rival Viktor Yushchenko assumed the presidency with a mandate to reform the system and root out corruption. Infighting with former President Leonid Kuchma had obstructed party members in Donbas and Crimea, meaning that cheating was their only recourse to assuming power.
They had also been rocked by the 2004 conviction in the United States of former Prime Minister Pavlo Lazarenko for extortion and money-laundering. He is thought to have stolen around $200 million from the Ukrainian government. Lazarenko admitted that he had used his position to make a fortune, but said that this “had been usual and acceptable behavior in the 1990s in Ukraine.”
Yanukovych and the oligarchs behind him saw Lazarenko’s conviction as a threat to their lucrative racket. They needed to improve their image abroad to allow them to clean their money offshore. Manafort was brought in to do that for them.
Manafort went to work on creating a Western-style campaign for Yanukovych, and introduced him to the world’s political elite. He was tasked with coordinating the wide network of offshore accounts, businesses, and banks to ease the movement of money abroad. He developed relations with powerful U.S. political actors who would be friendly to Yanukovych’s Ukraine and worked to improve the image of the oligarchy abroad.
In the process, Manafort got close to Yanukovych, regularly visiting his opulent Mezhyhirya estate, with its private zoo and gilded bathrooms. He was Yanukovych’s preferred tennis partner, usually letting him win, and they would swim naked together in the private lake next to where Yanukovych’s personal galleon was moored.
Manafort began to reassess his view of Yanukovych. He had certainly underestimated Yanukovych’s power base. Russian political consultant Gleb Pavlovsky, who was heavily involved in Ukrainian politics before 2005, recently said in an interview for this article, “Yanukovych wasn’t a weak candidate. President Kuchma had prevented him from mobilizing the Donbas in 2004 and he lost. In 2010 he mobilized the Donbas and Crimea and that made the difference.”
Asked whether Manafort changed the image and presentation of the rough and ready Yanukovych, Pavlovsky said, “Yes, but that was the easy part!” The main political strategy was devised in Ukraine. Manafort went along with it and focused on the presentation.
While Manafort’s role was not key to the 2010 election, it was crucial in legitimizing the Yanukovych presidency and enabling the cranking up of the kleptocracy following his victory. Two major factors in the victory were unconnected to Manafort.
The first was the collapse of the Yushchenko government after a falling out with his Orange Revolution partner, Yulia Tymoshenko. To survive in government, President Yushchenko had to make deals with the oligarch Akhmetov; this strengthened his hold on power, but stifled his ability to enact reforms. He was even forced to accept Yanukovych as prime minister in 2006.
The second factor was the Donbas, a region of Ukraine in which Akhmetov had almost total control. Its industrial base was dominated by coal and steel, all owned by Akhmetov. Essentially, the region’s whole population was his workforce. And where Akhmetov could not direct votes, Yanukovych and the Party of Regions controlled the voting systems, so they had carte blanche to ballot-stuff to bring in the number of votes they needed. Yanukovych received 90 percent of votes in the Donbas region. In several districts, and in all prisons and hospitals, the result was 100 percent.
While Manafort’s role may have been incidental to Yanukovych’s win, it was crucial in what came next—the looting of a country’s assets on an industrial scale.
Brian Whitmore of the Center for European Policy Analysis once said in a podcast: “Corruption in Russia is not a glitch in the matrix. Corruption is the matrix.” This was equally true of post-Soviet Ukraine, where politics and corruption were indivisible.
According to Transparency International’s Corruption Perception Index, in 2014 Ukraine ranked the 142nd worst out of 175 countries for corruption. What was purportedly a modern democracy was in fact a kleptocracy, run by about a dozen men made wealthy by privatization deals following the fall of communism and the breakup of the Soviet Union.
In the Ukraine of the time, it was impossible to separate politics, business, and crime. They were all one. Election campaigns were some of the most expensive in the world. The total amount spent by all candidates in a typical presidential election or in races for the 450-seat parliament was $2 billion, or 1 percent of GDP. In GDP terms, this is 2,000 times more than is spent on an average U.S. election campaign.
Seats in Ukraine’s parliament could be bought and sold, and the millions candidates and parties spent to get elected would be repaid, many times over, with the levers of government at their disposal.
Seats in Ukraine’s parliament could be bought and sold. According to a report by Anders Åslund, then a senior fellow at the Peterson Institute for International Economics in Washington, D.C., “A safe seat in Parliament could fetch up to $5 million.” Speculators would buy a seat and then sell it off to the winning party at a handsome profit. In turn, the winning party would sell off government posts that gave opportunities for graft and personal advancement.
However many millions candidates and parties spent to get elected would be repaid, many times over, with the levers of government at their disposal. The most savvy businessmen would seek to buy and control a bloc of votes to better influence policy and budgets in their favor. The entire political apparatus was set up for corruption. The country never stood a chance.
There were several ways that a Ukrainian oligarch could divest himself of his ill-gotten gains. The first was to reinvest in politics. This might be through rewards or kickbacks to others who had helped, the buying of further political influence, or currying favor with political leaders in either Ukraine or Russia.
For example, “Gas King” Dmytro Firtash, currently in Austria awaiting extradition to the United States on bribery charges, used his wealth to buy up key TV stations in Ukraine, which were then tasked with supporting Yanukovych and the Party of Regions, and attacking the European Union and the West. This was his version of paying a tribute. And to keep the whole system going, Yanukovych is thought to have had $3 billion squirreled away as a war chest for Manafort and the Party of Regions to spend during the next elections, according to the Åslund report.
For the rest, Manafort’s business partner Rick Gates described in court testimony how he and Manafort had laundered money for several Ukrainian oligarchs by setting up offshore shell companies and bank accounts, mostly in Cyprus.
Yanukovych and Manafort’s cozy project came crashing down in early 2014, when the Maidan Revolution toppled the government and sent Yanukovych scurrying to Russia. The Yanukovych clan had gotten too greedy. In his final year in power, Yanukovych had granted hundreds of millions of dollars worth of state contracts to his dentist son, Oleksandr, making him one of the wealthiest men in Ukraine at the time. Another beneficiary was then-twenty-seven-year-old Serhiy Kurchenko, who in a single year built a business empire in oil refining, media, energy, and banking worth more than $3 billion, due to Yanukovych’s patronage.
The Yanukovych family had tried to act against the laws of economics. About 60 percent of the Ukrainian economy was in “shadow,” so the government was not able to replenish public finances through conventional methods like taxation. But the biggest surprise for Yanukovych and Manafort were the Ukrainians, who became fed up with corruption and poverty. Yanukovych’s refusal to sign the Association Agreement with the European Union, followed by the promise of a $15 billion loan from Putin, kick-started the chain of events that led to the Maidan Revolution. [Editor's note: The original and print version of this article incorrectly stated Yanukovych's refusal to sign this agreement with the EU followed the loan promise, when the refusal actually preceded it. A correction will appear in the magazine's next issue.]
What began as a peaceful demonstration about the nonsigning of a treaty escalated quickly into a bloody conflict due to a series of desperate and disastrous decisions, which cranked up the tension and made the protesters feel that they had less to lose. Where was the skilled political strategist in all this? Was Manafort counseling Yanukovych on the folly of his actions? He was surely aware how it looked to the Western world.
Could Manafort have had an even more direct role in the last bloody days of the Yanukovych regime? In a series of hacked SMS messages between Manafort’s two daughters, Andrea Manafort suggested that it was her father’s strategy to cause “the revolts and what not . . . as a tactic to outrage the world and get focus on Ukraine.” She claims it was their father’s idea to “send those people out and get them slaughtered” on the fateful morning of February 20, 2014.
On the morning in question, the riot police suddenly retreated from their positions surrounding the protesters in Independence Square in Kiev. Sensing victory, the protesters pursued the police up the hill in the direction of parliament. Back at the main square, people around the stage started to suspect something was amiss. It looked too easy. Through the public address system, they implored the protesters to return. But it was too late.
The protesters flooded into the area vacated by the riot police only to be met by sniper fire. With their wooden shields and yellow construction helmets, they were picked off one by one. Many were killed trying to treat fallen comrades or to drag them back to the barricades. More than fifty protesters lost their lives in the bloodiest day of the revolution.
More than fifty protesters lost their lives in the bloodiest day of the revolution.
It’s no wonder that Manafort’s daughter, in the hacked SMS messages, described their family’s wealth as “blood money.”
After Yanukovych fled, Manafort stayed in Ukraine for a while to rebrand the remnants of the disgraced Party of Regions as the Opposition Bloc and establish them as a parliamentary force. He then returned to America and offered his services for free to the Trump campaign.
It is out of character for Paul Manafort to work for nothing, particularly when he’d just lost such a lucrative income stream. As Kiev-based political commentator Paul Niland recently said in an interview for this article, “Manafort’s an opportunist. He always went wherever the money was. When there was a way of getting onto Trump’s team, there will have been money coming to him from somewhere or an assumption that in the future there would be.” We can only speculate who or where the source of that money would be.
The Paul Manafort who presented himself to Trump certainly had an impressive track record in political campaigning in America and around the world. But he also had a back story of dishonest failure. A trail of corruption and crime, always leaving countries under a cloud, his clients fleeing or incarcerated. A man who, in the words of his own daughter, “had no moral or legal compass.”
The smallest amount of due diligence would have brought this to Trump’s attention and highlighted the dangers of associating with a man like Manafort. Or Trump may have known about all the dirt on Manafort and just didn’t care. Or could it be that Manafort’s experience and contacts from his time in Ukraine were exactly what Trump was looking for?
Sidebar: How a Ukranian Leader Robbed His Own Country
It is difficult to get a handle on the total amount that Ukrainian President Viktor Yanukovych and his allies took out of the country during his time in office, from 2010 to his removal in 2014. That’s because they used a myriad of methods and shadow accounts to achieve their aims. Economist Anders Åslund gave a detailed estimate of the amounts and the methods used in his 2014 report, “Oligarchs, Corruption, and European Integration.”
1. The gas trade
For any oligarch wanting to acquire serious wealth, control of state gas monopoly Naftogaz was the most effective method. Government subsidies kept the price of natural gas piped from Russia artificially low, which benefited Ukrainian households during the cold winters.
However, 8 percent of the nation’s GDP was spent each year on subsidizing Naftogaz, and the main beneficiary was not the Ukrainian consumer. A few businessmen in Russia and Ukraine managed to shave off billions by diverting some of the gas and selling it to industry at vastly inflated rates. Gas could be bought at $53 per 1,000 cubic meters and sold for as much as $410.
It is thought that corruption in the gas sector yielded profits of more than $3 billion a year. And then there was the opportunity cost. Today, a properly regulated gas industry is Ukraine’s biggest taxpayer, contributing 14 percent of the total revenues of the state budget.
2. Infrastructure tenders
Each year, Yanukovych doled out large infrastructure projects to friends and family. There was little to nothing by way of oversight or transparency. He was fortunate to become president just as Ukraine was preparing to co-host the prestigious UEFA European Championship, so there was a lot of money to go around.
It’s thought that the state paid double the real cost of each project. Corruption is not unheard of in government procurement around the world, but kickbacks of 50 percent are unusually high. The process is believed to have enriched the Yanukovych clan to the tune of $2 billion a year.
3. State budget
It is telling that Ukrainian has its own word—deriban—for theft from the state budget. It’s difficult to do, but there is an art to it, and Yanukovych clearly mastered this art. He is reported to have stolen $3 billion to $5 billion per year from state budgets.
Åslund has calculated that during his five years in power, Yanukovych and his clan plundered between $8 billion and $10 billion per year from the Ukrainian state. And that was only due to public corruption; they made a lot of money privately, too. A key method was “corporate raiding,” where the Yanukovych family forced a sale of a company at a price way below its market value.
Ukraine’s general prosecutor has estimated that Yanukovych and his associates stole a total of $40 billion from the state during Yanukovych’s time as president, and he personally amassed a fortune of $12 billion, according to Åslund’s report. Even in a region where corruption is rife, the scale of the theft is shocking.
“My assessment is that Putin and his cronies steal $15 billion to $25 billion a year from the Russian government,” Åslund says in an interview. “But the Russian economy is $1.6 trillion and the Ukrainian economy under Yanukovych was $180 billion, so the share of the economy that Yanukovych stole was much greater.”