Democracy Decoded: Bonus Episode 2 Transcript

Foreign Interference with Far-reaching Consequences

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Simone Leeper:  

Why does American democracy look the way it does today, and how can we make it more responsive to the people it was formed to serve? I'm Simone Leeper and this is Democracy Decoded, a podcast where we examine our government and discuss innovative ideas that could lead to a stronger, more transparent, accountable and inclusive democracy. 

In this bonus episode, we're bringing you another story of foreign interference in our elections, this time through illegal campaign spending. Bad actors are sometimes able to funnel money into our elections through things like straw donors or shell corporations. And today, we'll look at one such story involving two Ukrainian-American Trump donors. 

We'll uncover the real backstory behind their arrest and their plot to remove the American ambassador to Ukraine. As the situation in Ukraine continues to unfold, this incident has become even more relevant. This episode will explore the way our current campaign finance system allows bad actors to undermine American interests with the consequences of this extending well beyond our borders. 

In October of 2019, two Ukrainian American businessmen, Lev Parnas and Igor Fruman, were apprehended at Dulles International Airport near Washington D.C. They had one way tickets out of the country, but they were stopped and arrested on criminal campaign finance charges. 

 

Geoffrey Berman:  

Today, we unseal an indictment charging Lev Parnas, Igor Fruman and two co-defendants for their alleged participation in schemes to violate the federal campaign finance laws by repeatedly using straw donors and foreign money. 

 

Simone Leeper:  

The pair had laundered six figure contributions to then president Donald Trump's super PAC through a shell corporation. Now this is a complex case with a complex backstory. To help me tell this story, we recruited Brendan Fischer, formerly director of federal reform at Campaign Legal Center, and Maggie Christ, formerly a senior researcher at CLC, to be our guides for this part of the episode. 

 

Brendan Fischer:  

So this goes way back, back in May of 2018. President Trump's super PAC, America First Action received a $325,000 contribution from what it reported to the FEC as being a company called Global Energy Producers, LLC. 

 

Maggie Christ:  

And so this was about a year and a half into the Trump presidency. And the super PAC at issue here was doing a lot of fundraising in this period. So we didn't know about Parnas and Fruman until this point when there was this particular entry on this super PAC's report that started this whole thing. And we were certainly not the only ones who were noticing something weird going on. Lachlan Markay, who was then at The Daily Beast, initially flagged this particular contribution. 

 

Brendan Fischer:  

That was a red flag for us because we were already on alert for shady LLC contributions. There's this history of wealthy donors after the Citizens United decision funneling money to super PACs through LLCs. 

 

Simone Leeper:  

Here's an explanation in layman's terms of what Brendan is describing when it comes to wealthy donors funneling money to super PACS through LLCs, or limited liability companies. The way it would work is that wealthy donors would set up an LLC. Then, they would put six or seven figures into the LLC and then have the LLC give to the super PAC. 

And the super PAC would report the contribution as having come from the LLC, rather than from the actual source of the money. The Federal Election Commission, the federal agency tasked with overseeing the integrity of our elections, had failed for years to take action on the use of LLCs to launder money to super PACs. But then, in 2017, the FEC actually did lay down a standard. And effectively, they said that if a newly created LLC, with no history or no evidence of legitimate business revenue gives a big super PAC donation, then the FEC will at least investigate. 

 

Brendan Fischer:  

After a little digging, we figured out that this Global Energy Producers fit that profile. It had been created and then just about five weeks later made this six figure contribution to Trump's super PAC. 

 

Maggie Christ:  

The LLC had basically no public presence that we could find anywhere. So then the question was, okay, well, is there anything we can find out about who might actually be behind this contribution and who might have had a role in perhaps setting up the LLC and directing the contribution? 

 

Brendan Fischer:  

So Maggie began to search Federal Election Commission records and public records, was able to tie Global Energy Producers back to Parnas and Fruman. 

 

Maggie Christ:  

Lev Parnas and Igor Fruman had actually used those same addresses that this LLC had used in making political contributions in their own names. So this sort of opened this new, very potentially interesting door, but we still really didn't know what was going on. 

 

Brendan Fischer:  

We started to look into who Parnas and Fruman were, and there was really not much information about them in English language media or on English language websites. But we began to see these little snippets in Russian language media. 

 

Maggie Christ:  

Brendan found some Russian language news articles that referred to some meetings that Fruman and Parnas were allegedly having with Trump himself at some donor event. 

 

Unidentified Speaker:  

All right, everybody. Once again, the president. Thank you for being here. 

 

Donald Trump: 

Thank you all very much. Great to be with you. 

 

Maggie Christ:  

But that was basically it. That, with the address matching, was really kind of all we knew. 

 

Brendan Fischer:  

But ultimately what we did in July 2018, filed a complaint with the FEC alleging that Parnas and Fruman and Global Energy Producers had violated the law by making a contribution to Trump's super PAC in the name of Global Energy Producers, rather than in the name of the individual or entities that actually provided the funds. 

 

Simone Leeper:  

I asked Maggie to explain what's problematic about this practice, about Parnas and Fruman donating in the name of Global Energy Producers. It's a key issue surrounding foreign meddling in U.S. elections. 

 

Maggie Christ:  

For a very long time, it has been illegal to make a contribution under the name of someone other than its true source, and that's often referred to as the straw donor ban. This applies to individuals as well as to corporations, so I can't give you a thousand dollars to then give to a candidate in your name. And it's the same logic that—and the same law—that prohibits an individual from hiding behind a corporate entity to make a contribution. You can't set up an LLC for the purpose of hiding the true identity of the sources of funds. 

 

Simone Leeper:  

It's an interesting story so far, but as I was talking with Maggie and Brendan, I learned that hidden contributions were just the tip of the iceberg. 

 

Maggie Christ:  

In 2019, we started to hear from a number of sources and including some really diligent reporters who were doing some great work following these guys. And there were these whisperings, that then became much more than whispers, that Parnas and Fruman were doing a number of things at once in this period. 

 

Brendan Fischer:  

We don't know all of what they were after, but we do know that Parnas and Fruman made a number of political contributions, both to Trump and to individual congressmen like Pete Sessions, and tried to use the face time that their contributions afforded them to push for the ouster of the Ukrainian ambassador, who is known to really fight against corruption in Ukraine. 

 

Lev Parnas:  

The biggest problem there, I think, where need to start is we got to get rid of the ambassador. She's still left over from the Clinton administration. 

 

Donald Trump:  

Where? The ambassador for Ukraine? 

 

Lev Parnas:  

Yeah, and she's basically walking around telling everybody, "Wait, he's going to get impeached. Just wait." 

 

Donald Trump:  

Get rid of her. 

 

Unidentified Speaker:  

One of the first things- 

 

Donald Trump:  

Get her out tomorrow. Okay. Get her out tomorrow. Take her out. 

 

Brendan Fischer:  

Then, they also teamed up with Rudy Giuliani in an effort to dig up dirt on Biden. And that effort in Ukraine eventually led to the famous phone call between President Trump and the newly-elected president of Ukraine, where Trump urged the president to announce an investigation into Biden. So what Trump did was try to extort Ukraine. Trump was conditioning military aid to Ukraine upon Ukraine helping Trump with his reelection effort. 

 

Simone Leeper:  

Looking at it now, we can see how one illegal donation could alter the course of a presidency, even a nation. Brendan Fischer had more to say on that as well. 

 

Brendan Fischer:  

When you look at what Parnas and Fruman were doing, they were not acting on behalf of Ukraine or in the interest of Ukraine. They were instead pushing their own financial interests. Parnas and Fruman's illegal super PAC contribution bought them access to Trump, and they leveraged that access to push for the removal of the U.S.'s anti-corruption ambassador. 

And eventually they worked with Rudy Giuliani to lay the groundwork for Trump withholding military aid to Ukraine while they were in the midst of a shooting war with Russia in the Donbas region. And because Ukraine is so reliant on the U.S. and the U.S. support, Ukraine was therefore more vulnerable. Russia exploited Ukraine's perceived vulnerability when it invaded in early 2022. 

 

Simone Leeper:  

Stepping back to look at this story as a whole, we can really see how it's not just a simple campaign finance violation. This was a crime with far-reaching consequences, which makes it all the more concerning that our broken campaign finance system allowed this to happen in the first place. And so I have to ask, what can we learn from this whole incident? 

 

Brendan Fischer:  

It's clear that Parnas and Fruman saw the U.S. campaign finance system as an opportunity. And it's clear that Parnas and Fruman saw that pouring six figures into a super PAC and five figures into campaign committees would be the way that they could make their voices heard. 

And Parnas and Fruman are not the kind of people that should have a powerful presence in our government, but they were able to despite their history of fraud and ill misadventures were able to buy face time with the president of the United States, simply because they were able to scrape together a six figure super PAC contribution. They wanted access to people in power, and our broken campaign finance system allows people like Parnas and Fruman to use money to buy access to people in power. 

 

Maggie Christ:  

It raises a concern when you have individuals who are channeling interests, including foreign interests, and who are also making political contributions without disclosing the true source of those contributions. And if individuals are able to give via sham corporate entities or in the name of people who aren't actually the true sources of those funds, then it just raises all these questions. And it does offer this opportunity, if not now then down the line, for foreign interests seeking to influence U.S. elections to make contributions to U.S. political committees or candidates without detection. And that's very concerning. 

 

Simone Leeper:  

That is very concerning. So what can we do about it? 

 

Brendan Fischer:  

The FEC has to be much more diligent in making sure that funds that come from a foreign address did not, in fact, come from a foreign source. And that's important, but really the bigger problem is that the FEC has allowed dark money to flourish. The way that foreign money is most likely to flow into U.S. elections is not through a disclosed contribution to a campaign committee. It's going to be through a nondisclosed contribution to a dark money group. 

 

Simone Leeper:  

Wait, but I thought Campaign Legal Center filed a complaint with the FEC about Parnas and Fruman back in 2018. What ever happened with that? To get the latest information on how that played out, I spoke with Tara Malloy, CLC's senior director of appellate litigation and strategy. 

 

Tara Malloy:  

There are a lot of updates in the Parnas and Fruman case. Both Lev Parnas and Igor Fruman have been convicted by the Department of Justice on criminal campaign finance violations. Parnas was sentenced to 20 months and Fruman to one year. However, the Federal Election Commission deadlocked on the Parnas and Fruman complaint that CLC filed and voted to close the matter. This effectively dismissed CLC's complaint and ended their entire proceeding. 

 

Simone Leeper:  

So these two men have literally been convicted on criminal charges and the FEC can't even agree that this warrants further investigation? 

 

Tara Malloy:  

That's exactly right. The FEC stopped the matter before it even investigated. And it's probably worth noting that it's not that uncommon for the FEC to dismiss a civil complaint after there's been a criminal conviction. But here it was a bit of a different situation. And the career attorneys in the Office of General Counsel of the FEC, they had recommended at least opening a limited investigation in this case so that the public record could be corrected and clarified. 

But, nonetheless, the three Republican commissioners on the FEC voted to the dismiss CLC's complaint. And their theory was that Parnas' and Fruman's illegal activities had already been fully investigated and punished and so it just wasn't worth the expenditure of any more FEC resources. But this only focuses on whether the wrongdoers were punished. It doesn't actually mean that the broader transparency interests are addressed because still the public doesn't really know what's happened. 

The FEC disclosure reports, at least as they currently stand, they provide an inaccurate and incomplete picture. They don't indicate that there was a straw donor scheme. They don't show that $325,000 was funneled into America First Action. That was a pro-Trump super PAC. And all of this was clearly revealed in the DOJ's criminal trial, but it’s not reflected in the public FEC reports that you or I or another voter might read. So it's yet another example of FEC deadlock, another example of the FEC refusing to do its statutory duty and vindicate voters’ rights to know exactly who is influencing their votes and who are financing even presidential campaigns. 

 

Simone Leeper:  

This story makes it clear that we have some work to do on our campaign finance system, that the way it's set up currently makes it all too easy for bad actors to get away with illegal activity. The power of wealthy special interest money in our politics really threatens our First Amendment right to have our voices heard. So in order to reduce political corruption, we need a stronger Federal Election Commission to enforce campaign finance laws and hold political candidates and their donors accountable. 

Special thanks to Brendan Fischer, Maggie Christ and Tara Malloy for appearing in this episode. You can find additional background information on the topics discussed in the show notes, along with the full transcript of the show. 

This podcast was produced and written by Casey Atkins and Brendan Quinn, with additional script writing by Bryan Dewan. It was edited by Parker Podcasting and narrated by me, Simone Leeper. Democracy Decoded is a production of Campaign Legal Center, a nonpartisan, nonprofit organization, which advances democracy through law at the federal, state and local levels, fighting for every American's right to responsive government and a fair opportunity to participate in and affect the democratic process. You can visit us on the web campaignlegalcenter.org.