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An All-American Campaign Finance Scandal

The indictment of two shady cronies of Rudy Giuliani only proves that the real crime is what's legal.

Gent Shkullaku/AFP/Getty Images

There is nothing particularly special about Lev Parnas and Igor Fruman, who were indicted by federal prosecutors on Thursday for violating campaign-finance laws. The two Ukrainian-born Florida businessmen have not achieved anything of note in business, culture, or politics. Both men, nevertheless, have finagled their way into the upper levels of American power.

Parnas and Fruman spent most of the last year working alongside Rudy Giuliani, President Donald Trump’s legal henchman, in a scheme to scour Ukraine in search of dirt on Trump’s Democratic rivals. John Dowd, a former Trump lawyer who now represents the two men, told Congress this week that they had “assisted Mr. Giuliani in connection with his representation of President Trump.” (Trump told reporters outside the White House on Thursday that he didn’t know the men.)

The duo’s rise and fall is a product of the American campaign-finance system itself. As Thursday’s indictment shows, the two men largely plied their way into the Republican Party’s political structures with raw cash, effectively transmogrifying it into congressional influence and presidential favor. Parnas, Fruman, and their co-conspirators understood a fundamental dynamic of modern American politics: Money becomes access, access becomes influence, influence becomes power, and power becomes more money.

The two men “had no significant prior history of political donations” until last year, according to federal prosecutors in Thursday’s indictment. The two men are U.S. citizens who were born in the Soviet Union and later emigrated to the United States. According to a BuzzFeed News investigation, Parnas previously worked as a stockbroker and an entrepreneur of sorts in southern Florida, where he faced multiple legal battles for allegedly stiffing his creditors. Fruman’s business interests largely lay in Ukraine, where he owned a hotel and an export business.

Their fortunes changed in the spring of 2018. Around that time, Parnas and Fruman “began attending political fundraising events in connection with federal elections and making substantial contributions to candidates, joint fundraising committees, and independent expenditure committees with the express purpose of enhancing their influence in political circles and gaining access to politicians,” the indictment alleges. The goal was to “advance their personal financial interests and the political interests of at least one Ukrainian government official with whom they were working.” The indictment alleges that an unnamed Russian oligarch bankrolled their influence campaign.

The two men donated more than $500,000 to Republican candidates ahead of the 2018 midterms. The bulk of those contributions came in the form of a $325,000 donation to America First Action, one of the top Trump-aligned superPACs. Once that influx of cash hit the system, the perks quickly followed. One of the largest recipients of their largesse was Pete Sessions, a Republican representative in Texas who faced an uphill battle for re-election. While raising money for his campaign, the indictment claims Parnas met with Sessions and “sought [his] assistance in causing the U.S. government to remove and recall [Marie Yovanovitch,] the then-U.S. Ambassador to Ukraine.” Those efforts were allegedly “conducted, at least in part, at the request of one or more Ukrainian government officials.”

According to The Daily Beast’s Lachlan Markay, Parnas posted photos of a meeting with Sessions last year two days before the Texas representative sent a letter to Secretary of State Mike Pompeo raising concerns about the career diplomat’s job performance. “I have received notice from close companions that Ambassador Yovanovitch has spoken privately and repeatedly about her disdain for the current administration,” he wrote. Markay reported that those claims echoed similar assertions from Parnas. Giuliani also reportedly pushed Trump to recall Yovanovitch, arguing that she had impeded his campaign to pressure Ukraine into investigating the Bidens. The State Department recalled her from her post in May at Trump’s behest.

Parnas and Fruman’s donations also apparently gave them access to President Trump and his inner circle. Photographs on their social media accounts show them having breakfast at a Beverly Hills hotel in May with Donald Trump Jr., the president’s eldest son, as well as Tommy Hicks, the Republican National Committee’s co-chairman. The two men reportedly dined with Trump himself and took photographs next to him, Vice President Mike Pence, and former New York City Mayor Rudy Giuliani. Soon after, they began working with Giuliani as middlemen of sorts between him and various figures in Ukraine’s fractious, oligarch-dominated political scene, making introductions and setting up meetings with individuals who claimed to have dirt on Clinton and Biden.

Parnas and Fruman’s arrival had fortuitous timing. As special counsel Robert Mueller’s Russia investigation began to wind down this spring, Giuliani began laying the groundwork for a counter-attack against the president’s political foes centered on the Ukraine. One line of inquiry drew upon a medley of conspiracy theories surrounding Hillary Clinton and allegations of Ukrainian collusion in the 2016 race. Another involved spurious allegations of corruption against Joe Biden for his role in forcing out a top Ukrainian prosecutor in 2016. In so doing, Giuliani hoped to validate Trump’s victory in the last presidential election and smear his top rival in the next one.

Parnas and Fruman hoped to reap substantial reward for participating in these exploits. According to NBC News, the two men sought entry into the liquified natural gas business in Ukraine and touted their close links to Giuliani and the White House to grease the wheels. They reportedly told Ukrainian business figures that Yovanovitch was an obstacle to these plans. Their donations to state-level candidates in Nevada last year also came as they tried to join its legalized marijuana market. According to the indictment, one of their co-defendants claimed their application for a retail marijuana license wasn’t timely, and that they needed the support of state officials to “green light” it. Their funder earmarked more than $1 million to donate in Nevada races so they could set up the necessary meetings; they only spent a fraction of it.

It’s tempting to think that Thursday’s indictment shows that the current campaign-finance system functions as it should. But the path to their current legal woes doesn’t inspire confidence. It’s unclear whether federal prosecutors would have uncovered the scheme if not for outside scrutiny. Markay, the Daily Beast reporter, first noticed Global Energy Producers, one of the vehicles for their donations, last summer on FEC reports and dug deeper into its background. The Campaign Legal Center, a nonprofit watchdog group, also filed a complaint with the Federal Election Commission about Parnas and Fruman in July 2018 that cited both their own research and Markay’s reporting on them.

The charges that Parnas and Fruman face also point to the limits of federal campaign-finance laws. Two of the charges accuse them of falsifying Global Energy Producers’ records to make it appear to be a legitimate business and lying to the FEC about it. Another charge, conspiracy to commit fraud, involves their alleged use of straw donors to make contributions beyond the legal limit. The last charge is for conspiracy to commit fraud by allegedly using a foreign national’s money for donations in federal elections.

In other words, all of the charges center on how they structured their donations to Republican candidates, not the purposes for which they used them. Had they donated their own money, stayed under individual contribution limits, and chosen a more opaque legal vehicle instead of Global Energy Producers to donate to superPACs, they likely would have flown under the radar. Their overall scheme—using campaign contributions to worm their way into legislative and presidential policy-making for personal gain—isn’t actually that remarkable in American politics today. That’s a scandal in and of itself.