How Skadden, the Giant Law Firm, Got Entangled in the Mueller Investigation

The law firm Skadden, Arps, Slate, Meagher & Flom, whose headquarters are in Manhattan, has come under scrutiny in the Russia investigation.

WASHINGTON — For much of its 70-year history, Skadden, Arps, Slate, Meagher & Flom has been a go-to firm for Wall Street, representing corporations like Pfizer and DuPont in acquisitions and becoming the first law firm in history to broker $1 trillion in mergers in a year.

But when one of its former lawyers, Alex van der Zwaan, admitted this past week that he lied to the special counsel investigating Russian election interference, his guilty plea shined a light on a profitable line of business that Skadden mostly keeps quiet: its work for unsavory foreign figures and their Washington lobbyists.

Mr. van der Zwaan, 33, acknowledged that he misled investigators about his communications related to the firm’s work for the Russia-aligned former president of Ukraine, Viktor F. Yanukovych, done in tandem with the former Trump campaign aides Paul Manafort and Rick Gates. Both were indicted on money laundering and other charges related to their work in Ukraine. Mr. Manafort has denied wrongdoing; Mr. Gates pleaded guilty on Friday and agreed to cooperate with prosecutors.

The interest of the special counsel, Robert S. Mueller III, in Skadden appears to go beyond Mr. van der Zwaan. Mr. Mueller’s team has requested and received documents from Skadden related to its Ukraine work, according to two lawyers familiar with the investigation. The special counsel has investigated $4 million in secret payments that Mr. Manafort and Mr. Gates are accused of funneling to Skadden and other firms from accounts in Cyprus, and could get more information on Skadden from Mr. Gates, who worked closely with the firm. Lawyers at Skadden are on edge, according to people who have worked with the firm.

Mr. Mueller’s inquiry threatens the delicate balance that Skadden has struck between lucrative sources of revenue. The firm has made huge profits from corporate work for image-conscious United States companies, while also representing riskier international clients, such as Russian oligarchs and companies with close ties to President Vladimir V. Putin and former Soviet states.

Skadden’s work advising controversial foreign clients was probably prompted by the same aggressive risk-taking that fueled the firm’s rise from scrappy upstart to top-grossing legal giant with a range of practice areas, said Lincoln Caplan, a research scholar at Yale Law School and the author of “Skadden: Power, Money, and the Rise of a Legal Empire.”

“The mentality is that Skadden wouldn’t be afraid of doing something like this, if there was a chance to utilize their skills and status to take advantage of what sounds like a very lucrative business, and they saw no legal or ethical proscription against their taking on the matter,” he said.

Skadden’s work is part of a trend in recent years of lobbyists and lawyers earning increasingly larger paydays by marketing their connections in Washington to foreign politicians, countries and companies willing to pay hefty fees to burnish their reputations in the United States and on the international stage.

Among those reaping windfalls are large international law firms like the Washington-based Akin Gump Strauss Hauer & Feld, which represents the governments of Japan, the Maldives, Nicaragua and South Korea, among others.

Newer lobbying upstarts like Ballard Partners have won foreign clients by capitalizing on ties to President Trump. Founded by Brian Ballard, a lobbyist based in Tallahassee, Fla., who was a leading fund-raiser for Mr. Trump’s campaign, transition and inauguration, Ballard Partners has signed contracts with government entities or political parties in Albania, the Dominican Republic, Kosovo and Turkey, all since the inauguration.

Those firms, which have not been accused of impropriety, disclosed the foreign contracts to the Justice Department under the Foreign Agents Registration Act. The law requires anyone who lobbies or does public relations for foreign individuals, companies, governments and political parties to reveal detailed information about their work and payments for it. The act is intended to prevent foreign actors from surreptitiously influencing American public policy.

But for years, many American consultants have skirted the law’s requirements. Mr. Mueller’s inquiry has focused on such undisclosed lobbying among some of its leading practitioners, including Mr. Manafort, who helped pioneer the model for international consulting three decades ago. The investigation has left other firms rushing to ensure their own compliance.

“This is creating concern in the Washington lobbying community about not only complying with FARA, but also a new emphasis on enforcement that perhaps folks didn’t think was happening or would happen,” said Thomas J. Spulak, a lawyer in the Washington office of King & Spalding who specializes in lobbying compliance.

Mr. Mueller has scrutinized Skadden on two fronts — its own work for Mr. Yanukovych’s government, and its role advising to two other powerhouse Washington lobbying firms paid to bolster his government, Mercury Public Affairs and the Podesta Group.

Mr. Mueller accused Mr. Manafort and Mr. Gates of orchestrating a complicated scheme through which Mercury and Podesta were paid about $1 million each through a nonprofit front group to advocate on behalf of Mr. Yanukovych’s government.

As part of his plea agreement, Mr. Gates admitted that he knowingly misled Skadden — though the firm is not named in court filings — in a scheme to avoid FARA registration by indicating incorrectly that the nonprofit was not supervised or controlled by Mr. Yanukovych’s government. Relying on that information, Skadden prepared a legal opinion in 2012 that the lobbying firms used in opting not to register under FARA.

Skadden’s opinion, which was written by a partner, Kenneth A. Gross, and an associate, and was reviewed by The New York Times, asserted that the firms were not required to register because their client, the Brussels-based European Center for a Modern Ukraine, “is a private nongovernmental organization” not controlled or funded by a foreign government or political party.

The Justice Department, which enforces FARA, began investigating the arrangement in 2016, and Mercury and Podesta registered, belatedly, under the act last year. The special counsel has continued looking into the matter, subpoenaing the firms for testimony about their Ukraine work.

Despite Mr. Gates’s admission that he misled Skadden, people who worked with Podesta and Mercury privately blame the law firm for the faulty guidance.

Mercury, which relied on Skadden for years for FARA advice and for assistance last year in responding to subpoenas from the special counsel, is no longer working with Skadden, according to three people in the lobbying industry who were briefed on the change.

Lobbyists who worked with the Podesta Group, which largely collapsed under the glare of Mr. Mueller’s scrutiny and attacks from the right, have grumbled that the firm erred in relying on the legal opinion that Skadden prepared for Mercury, rather than paying for its own.

Mercury said in a statement that it “acted appropriately, following our counsel’s advice from the start.” The firm said that Mr. Gates, in pleading guilty, admitted that he “didn’t tell the truth to our lawyers when he spoke to them about this project.”

Representatives from Podesta as well as Mr. Gross declined to comment.

Skadden has been cooperating with prosecutors, a spokeswoman, Melissa Porter, said in a statement. Lawrence S. Spiegel, a partner who specializes in government enforcement and white-collar crime, has been assigned to handle interactions with the special counsel, and Ms. Porter noted that the firm dismissed Mr. van der Zwaan and said that the lying charges he pleaded guilty to are “contrary to our values, policies and expectations.”

But Skadden may not be able to limit its legal exposure by distancing itself from Mr. van der Zwaan if the special counsel can implicate the firm in wrongdoing in the work or payments on behalf of Mr. Yanukovych’s government, said Rebecca Roiphe, a professor at New York Law School who specializes in legal ethics.

“Why he was lying is a big question, and did anyone else at the law firm know he was lying?” Ms. Roiphe said. “If he was lying for his own purposes, I don’t think that knowledge would be imputed to other lawyers at the firm.”

The answers to those questions are not entirely clear.

Mr. van der Zwaan admitted misleading prosecutors about two conversations in September 2016 with Mr. Gates and an unidentified business associate of Mr. Gates and Mr. Manafort. They discussed their belief that Skadden’s work for Mr. Yanukovych exposed the firm to possible criminal charges in Ukraine. No such charges have been filed.

After the conversation with the business associate, prosecutors said, Mr. van der Zwaan called the senior Skadden lawyer on the Ukrainian project, Gregory B. Craig, who served as the White House counsel under President Barack Obama. Court filings do not reveal what was discussed, and Mr. Craig was not identified by name by prosecutors.

Skadden worked for the Ukrainian government on a 2012 report analyzing the prosecution of one of Mr. Yanukovych’s leading political rivals, the former Prime Minister Yulia V. Tymoshenko. Mr. Manafort and Mr. Gates used an offshore account to “funnel $4 million to pay for the report,” according to court papers, which note that the financial arrangement “was not disclosed.” It is not clear how much of the $4 million went to Skadden.

Adding a layer of intrigue, a consultant who worked on the report said that it was facilitated in part by Konstantin V. Kilimnik, a former Russian Army linguist and longtime associate of Mr. Gates and Mr. Manafort who is “assessed to have ties to a Russian intelligence service,” according to court papers. Mr. Kilimnik did not respond to a request for comment.

The study was used by Mr. Yanukovych’s allies to rebut international criticism that the prosecution and jailing of Ms. Tymoshenko was politically motivated and lacked sufficient evidence. But it was widely dismissed as a flawed attempt to paper over concerns about Mr. Yanukovych’s abuses, and other lobbyists promoting Mr. Yanukovych’s government said they declined to promote the report for lack of credibility.

Skadden did not respond to questions about the financing of its Ukraine work, but it said in a statement that the report was independent and noted that it found that Ms. Tymoshenko “was denied basic rights under Western legal standards.”

The Washington lobbyists who worked on the issue with Mercury and Podesta said that Mr. Craig himself was involved in promoting the report to journalists and members of Congress — activity that experts said should have prompted FARA registration requirements.

Skadden internally reviewed the FARA implications of its Ukraine work before deciding not to register, according to the consultant who worked with the firm on the report.

Ms. Porter, the Skadden spokeswoman, said that neither Mr. Craig nor any of the firm’s other lawyers “engaged in any activity that required them or the firm to register under FARA.” Mr. Craig did not respond to requests for comment.

Less than a year and a half after the release of the Skadden report, Mr. Yanukovych fled Ukraine for Russia amid street protests over his government’s corruption and its pivot toward Moscow. Mr. Yanukovych’s government collapsed and Ms. Tymoshenko was freed.

And last year, as the Justice Department was inquiring about the Ukrainian work, Skadden returned about half of the reported $1.1 million it was paid by the Ukrainian government.

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