Trial of High-Powered Lawyer Gregory Craig Exposes Seamy Side of Washington’s Elite

WASHINGTON — It is a trial tailor-made to grab the attention of this city’s power brokers: In a federal courtroom this month, one of Washington’s most prominent lawyers — a former White House counsel and attorney to global statesmen and other icons — is battling criminal charges of lying to investigators about his work for a shady foreign client.

But the most riveting aspect of the case against the lawyer, Gregory B. Craig, is not his innocence or guilt. Rather, it is the depiction of the seamy world of power brokers like Mr. Craig that prosecutors have painted during nearly two weeks of testimony and in an array of court filings.

Mr. Craig’s trial has supplanted any image of Washington’s elite as sage Brahmins with a vivid picture of the ruling class at its avaricious worst. The details include a $4 million payment shunted through a secret offshore account to Mr. Craig’s law firm, a backdated invoice, a lying publicist, a scheme to net one player’s daughter a cushy job and a bungled wiretap by a suspected Russian intelligence asset nicknamed “the angry midget.”

Taken together, they illustrate how lawyers, lobbyists and public relations specialists leapt onto slippery ethical slopes to cash in on a foreign government’s hopes of papering over its sordid reputation.

Seven years ago, Mr. Craig teamed with Paul Manafort, then a political consultant for the Ukrainian government, to help President Viktor F. Yanukovych respond to criticism over a prosecution of Ukraine’s opposition leader. Mr. Craig’s law firm collected more than $4.6 million to produce a report concluding that while the trial was flawed by Western standards, the conviction was supported by evidence.

For Mr. Craig and his law firm — Skadden, Arps, Slate, Meagher & Flom — getting too close to Mr. Yanukovych’s corrupt and increasingly authoritarian government posed perils, chiefly the prospect of tainting its prestigious white-shoe law practice.

Mr. Craig, now 74, faced an even more direct problem: If he went beyond producing the report to promoting it to journalists and others, he could run afoul of a decades-old federal law that requires those who represent foreign powers in the United States to disclose their actions to the Justice Department.

Those worries faded after Skadden’s report was published in 2012. But then prosecutors began to draw back the curtain on the project, described by one publicist for Ukraine as “a loony job” for a government seeking to bolster “a terrible reputation.”

The saga began in February 2012 when Douglas E. Schoen, a high-profile Democratic pollster, contacted Mr. Craig to discuss a “potentially substantial piece of new business” — an independent review of the prosecution and imprisonment of Yulia V. Tymoshenko, Ukraine’s charismatic former prime minister and Mr. Yanukovych’s political rival. This account is based on witness statements, court filings and evidence presented at Mr. Craig’s trial, now nearing its conclusion.

The Ukrainian government was the client, but Victor Pinchuk, a Ukrainian steel magnate represented by Mr. Schoen, was footing the bill. “When Ukraine has to pay for something like this,” Rick Gates, Mr. Manafort’s longtime deputy, told one associate, “the president asks whichever oligarch whose turn it is to cover the costs.”

The main contact between Mr. Craig and the Ukrainian government was Mr. Manafort, who had become fabulously rich working for Mr. Yanukovych and was hiding his income in offshore bank accounts. Later, after Mr. Manafort served as Donald J. Trump’s campaign chairman, the special counsel investigated his financial misdeeds and brought a pair of cases that netted a seven-year prison term for Mr. Manafort.

Mr. Craig told the F.B.I. that he saw Mr. Manafort as a “tough” character and thought they could not be friends. But they could do business.

Despite misgivings by some Skadden lawyers, Mr. Craig flew to Ukraine’s capital, Kiev, to seal the deal over breakfast at Mr. Pinchuk’s palatial home. He and Mr. Manafort agreed privately that Mr. Pinchuk would pay Skadden $4 million to produce a report that Mr. Yanukovych hoped would convince Western governments that Ukraine should be allowed to join the European Union and partake of its financial benefits.

Mr. Craig had already dispatched five lawyers to Kiev when Mr. Pinchuk notified him that Mr. Yanukovych’s office had not authorized him to wire the half of the money that was due up front. Mr. Craig was furious and threatened to quit.

“We will leave tomorrow, go home and say that we are lucky to be out of it,” he wrote to Mr. Manafort, who promised to deliver the money “a different way.”

The Ukrainian government planned to capitalize on Mr. Craig’s luminous reputation. Best known as the White House counsel during the first year of the Obama administration, he had represented luminaries including Kofi Annan, the former United Nations secretary general, and the Soviet dissident Aleksandr I. Solzhenitsyn, Ukraine’s Ministry of Justice noted in a statement announcing the inquiry.

But Skadden’s fancy reputation cut the other way, too. Publicly, Ukraine’s financially strapped government said the firm would be paid only the legal limit for outside contracts of $12,000. In an August 2012 editorial with the headline, “Skadden Stink,” The Kyiv Post called that assertion “ridiculous,” noting that would cover only about 12 hours of Mr. Craig’s services alone at his standard rate. Ms. Tymoshenko’s lawyer refused to cooperate with the project unless Skadden disclosed more information.

Scrambling, Mr. Craig and Mr. Manafort agreed to raise the “official” fee to $1.25 million. Bypassing his own firm’s billing system, Mr. Craig submitted a new invoice for that amount, although the firm had already collected more than three times that sum from Mr. Pinchuk, routed through offshore bank accounts controlled by Mr. Manafort. At Mr. Manafort’s request, Mr. Craig backdated the document to before the newspaper editorial was published.

Fearing more bad publicity, he also delayed work on a follow-up project involving a second trial of Ms. Tymoshenko.

The fees were not Mr. Craig’s only problem. He also had to placate Mr. Manafort, who wanted Skadden to hire his daughter Andrea Manafort, a recent law school graduate. While Mr. Craig sought interviews for her, Skadden sent her a standard rejection letter in response to a résumé that had arrived with no cover letter.

“Thanks for your help,” Mr. Manafort wrote sarcastically in an email to Mr. Craig, attaching the rejection letter. “I see Skadden knows how to show appreciation for a $4 MILLION gift account.”

“I am pissed,” Mr. Craig replied. In an email to the firm’s Washington head of litigation, Mitchell S. Ettinger, he wrote, “This could not have come at a worse time.”

Mr. Manafort told Mr. Craig that he would generate “seven figure annual fees,” adding that “it goes without saying that I will push all future business to wherever” his daughter ended up.

Mr. Ettinger told Mr. Craig to stress the prospect of further business because that “is the only factor that will matter” to the firm’s leaders. Describing the Ukraine report as a $1 million-a-month engagement, Mr. Craig said Ms. Manafort’s connections made up for her unimpressive grades.

Five days later, she had a job offer.

“You are the MAN,” her father wrote Mr. Craig, calling his daughter “sky high.”

At least one Skadden lawyer wondered how Mr. Yanukovych would react if the report was critical. Mr. Craig reassured him that anything would be better than the condemnation Ukraine already faced.

But while Mr. Craig insisted the report be independent, Mr. Yanukovych’s aides were apparently tracking its progress by eavesdropping on phone calls.

After Jonathan Hawker, one of the Western public relations experts hired by Ukraine, worried in a phone call that the report would be too negative, he heard from Konstantin V. Kilimnik, a Yanukovych aide. Mr. Kilimnik, whom prosecutors have linked to Russian intelligence, was nicknamed the “angry midget” for his short stature and temper.

“The president’s office was very angry and concerned” about what it had heard, Mr. Kilimnik warned. He demanded a memo explaining what Mr. Hawker had meant.

The report was of limited value unless it generated publicity, so the public relations team drafted about 18 versions of a rollout plan. The team expanded to include a supposedly independent European think tank headed by Vin Weber, a former Republican congressman from Minnesota, and Tony Podesta of the now-defunct Podesta Group lobbying and public affairs firm. Prosecutors now claim Mr. Yanukovych’s political party funded the organization.

In late September 2012, Mr. Hawker laid out the strategy to Mr. Craig, Mr. Manafort, Mr. Gates and another Skadden lawyer, Alex van der Zwaan, over lunch at the opulent Harvard Club in Manhattan.

Privately, Mr. Hawker found the whole project distasteful. He ironically nicknamed it “veritas,” Latin for truth. During weeks holed up in the basement of the Kiev building where Ukraine’s prosecutors worked, he had learned they were readying new charges against Ms. Tymoshenko, including buying the wrong ambulances, tax evasion and murder.

For his part, Mr. Craig had grown increasingly worried that Mr. Yanukovych would ignore the report’s mixed conclusions and declare that Skadden had exonerated his government. That would be damaging “to the project, to this law firm, to your guy and to me,” he wrote to Mr. Manafort.

The media strategy envisioned releasing the report in advance to chosen American and European news outlets whose coverage would set the tone for others. Witnesses testified that Mr. Craig wanted to give an advance copy to David E. Sanger, a New York Times reporter in Washington.

But Mr. Craig kept changing his mind about whether he could be directly involved. Under the foreign lobbying disclosure law, if he engaged in public relations for Ukraine in the United States, he would have to register as a foreign agent.

He also had well-founded concerns about the professionalism of the public relations team. On the witness stand, Mr. Hawker acknowledged that he doctored Mr. Craig’s quotes to one publication without his permission and also lied to a Radio Free Europe reporter, denying that he represented Ukraine’s government.

Mr. Hawker warned Mr. Manafort that the strategy would fall apart without Mr. Craig, who eventually agreed to participate for two reasons: to please his foreign paymasters and to protect his reputation, Mr. Gates told the F.B.I.

Two days before the report was released, Mr. Craig hand-delivered a copy to Mr. Sanger’s home, then granted interviews to reporters from The Times and The Daily Telegraph in London. He insisted to both that Skadden never looked at whether Ms. Tymoshenko’s trial was politically motivated.

Although the Times article turned out more skeptical than Mr. Manafort, Mr. Gates and Mr. Hawker had hoped, all three proclaimed the strategy a great success.

The news coverage caught the attention of the Justice Department, but Mr. Craig, concerned about protecting his career prospects, convinced officials there that he did not need to register as a foreign agent. In a letter to the department, he insisted, erroneously, that he had responded to journalists’ inquiries only after the report was published to correct mischaracterizations.

Had he acknowledged that Skadden was involved in Ukraine’s media plan, the need for him to register as a foreign agent “would have been a slam dunk,” the federal official in charge of enforcing the foreign lobbying statute told the F.B.I., according to a summary of her interview.

The official, Heather Hunt, testified Monday that Mr. Craig told her that he had spoken to journalists on his own, not at the Ukrainian government’s request or direction.

Four years passed before federal prosecutors questioned Mr. Craig again. By then, they were deep into an inquiry into the financial misdeeds of Mr. Manafort, a sprawling investigation that led to the prosecutions of Mr. Manafort, Mr. Gates, Mr. van der Zwaan, Mr. Kilimnik — and eventually Mr. Craig.