In The Federalist Papers No. 21, Alexander Hamilton warned that “One of the weak sides of republics, among their numerous advantages, is that they afford too easy an inlet to foreign corruption.” Republics, he explained, were more vulnerable to foreign influence than monarchies, whose absolute rulers commanded so large a portion of national wealth that no foreign power could muster enough assets to subvert them. Ironically, Hamilton met his end at the hands of Aaron Burr, whose plot to hive off a large part of the western U.S. sought British cooperation.
Casey Michel’s Foreign Agents begins his history of the foreign corruption of American politics and policy, appropriately enough, with Russia … in 1867. The crumbling Tsarist empire, desperate for cash, looked to offload Alaska; offering it to England or France, who had defeated Russia in the Crimea, was a nonstarter. The U.S., its hands full with Reconstruction, railroad building, and a mountain of Civil War debt, was uninterested in a territory best known as an “icebox” and a “polar bear garden.”
Enter the Russian ambassador in Washington, Eduard de Stoeckl, who hired former Mississippi senator and treasury secretary Robert J. Walker to spread around largesse to legislators and newspaper publishers. Within several months, congress appropriated the necessary funds, some of which de Stoeckl absconded with.
Lobbyist origins
From its first pages, Michel’s book fairly bursts with narratives unfamiliar to even the most ardent history buffs. Ulysses Grant, for example, enjoyed the odd drink, especially at the bar at the Willard Hotel (which more recently figured in the planning for the events of January 6, 2021). To get there he had to run a gauntlet of gentlemen representing the railroads and other commercial concerns who hung out in the lobby. He detested them, and called them “lobbyists.”
In the 1880s, King Leopold of Belgium coveted the riches of a huge swath of central Africa – the Congo – as his private preserve. The British and French had outgunned Leopold in the ongoing rush to colonize Africa, so the Belgian king deployed a more subtle approach. He employed the services of a former U.S. ambassador to Brussels, Henry Shelton Sanford, who befriended president Chester Arthur, a mediocre New York pol who had ascended the presidency just six months after the assassination of James Garfield.
Soon enough, Arthur was spouting Leopold’s talking points about the civilizing influence of Belgian rule; the new American interest waved off the Brits and French, both of whom wished to not spoil their improving relations with the rising North American colossus. In the end, about 10 million souls – roughly half the region’s population – perished and millions more were maimed under Leopold’s murderous rule.
De Stoeckl and Sanford, though, were pikers compared to the man who invented the public relations craft in the early 20th century: Ivy Lee. In 1914, national guard soldiers hired by John D. Rockefeller’s Colorado Fuel and Iron Company slaughtered dozens of striking miners, their wives, and their children in a tent camp in the town of Ludlow with gunfire and an ensuing blaze.
Rockefeller, who had previously told legislators that opposing strikes was a sacred duty to be upheld at all costs “even if it costs all your property and kills all your workers,” realized he had a PR problem. He hired Lee, who not only buffed the mean old buzzard into a benefactor of mankind, but also smeared the dead strikers: not only had they fired first, said Lee, but the subsequent deadly fires had been caused by their carelessness with stoves.
Nazi ties
Other corporate interests took note of the PR magic of Lee, who proceeded to corner the domestic market so successfully that within a decade he had decamped in search of customers to Europe, where, unbounded by any fixed ideology, he courted the continent’s budding authoritarian rulers.
First stop, Rome, where Mussolini’s charisma and intellect fascinated Lee, then Russia, where, he informed Americans, everyone could vote freely and no one feared the secret police. Finally, in Germany, Lee did a lucrative business with I.G. Farben, which functioned as an arm of the Nazi regime (and would later work tens of thousands of slave laborers to death and manufacture the poison gas used at the death camps). While there he compared notes on propaganda techniques with Joseph Goebbels and eventually met Hitler, with whom he had problems getting a word in edgewise.
It would be Lee’s Nazi connections that finally did him in at House Un-American Activities Committee meetings, driven in no small part by Samuel Dickstein, a long-serving Jewish representative (ironically found, decades later, to be an agent for the Soviet Union’s NKVD). Soon after, Lee died a broken man, of brain cancer.
The resultant 1938 Foreign Agents Registration Act (FARA), which theoretically mandated that lobbyists for foreign governments register, soon became a dead letter when congress starved its enforcement by the Justice Department of funds; it lay essentially fallow for more than a half century after its passage.
The rise of Paul Manafort & Co.
If the first half of Foreign Agents belongs to Ivy Lee and his predecessors, the second half belongs to his professional heir, Paul Manafort Jr., and his followers.
The young Manafort had caught the political bug from his father, who had served as mayor of New Britain, Connecticut. He earned his first spurs by boosting another young man named Roger Stone into the leadership of the Young Republicans. This provided Manafort entrée to the grandees of the national party, especially James Baker III, who would later serve as presidential chief of staff and Secretary of State. By 1984, he was providing much of the campaign horsepower behind Ronald Reagan’s overwhelming electoral defeat of Walter Mondale.
Manafort and Stone then teamed up with a lobbyist, Charlie Black, and a Democratic operative, Peter Kelly, to found their eponymous firm, which the quartet built into the most powerful influence-peddling operation in the history of politics. In reality, Black, Manafort, Stone and Kelly (BMSK) was two firms: one that advised political campaigns and one that lobbied for large corporate clients.
More than anything else, the combination of these two services defines the D.C. swamp; it’s hard to imagine a greater conflict of interest than peddling access to BMSK’s powerful elite campaign clients to the nation’s wealthiest corporations.
And just as Ivy Lee, having conquered domestic influence peddling, sought greener fields abroad among the world’s authoritarian dictators, so too did Manafort, who sold the most bloodthirsty and larcenous actors on the world stage to both legislators and the American public: the Philippine’s Marcos, Nigeria’s Abacha, Zaire’s Mobutu, Indonesia’s Suharto, Somalia’s Barre, and Angola’s Savimbi, among many others.
Besides the atrocities visited by this cast of characters on their hapless populations, they also stole from their countrymen to the tune of tens of billions of dollars, some of which went to line the coffers of BMSK. (To cite a typical example of the firm’s prowess, national security advisor and U.N. Ambassador Jeanne Kirkpatrick, taking direction from Manafort, praised Savimbi not only as “one of the few authentic heroes of our time,” but also as a “linguist, poet, philosopher, politician, and warrior” to boot.) Sniffed Roger Stone, “Dictators are in the eye of the beholder.”
Intensifying corruption
Just when the reader thinks things can’t get any worse, Foreign Agents serves up yet another flavor of sleaze; BMSK’s ethical horrors soon morphed into an instruction manual on foreign influence peddling for the nation’s largest white-shoe law firms, which perfected the art of the “foreign policy auction.” The law firms essentially laundered monies – paid to them by foreign rulers and corporations – into campaign donations to the lobbied legislators. Often, these funds were recycled from the law firms’ foreign customers to politician’s campaign accounts on the same day. In other words, foreign policy by the highest bidder.
Bob Dole, after serving as Senate Majority Leader and Republican presidential nominee, sold his services to Turkmenistan, the most repressive and corrupt of the former Soviet republics, and to AsiaUniversalBank (AUB), which laundered the billions stolen by Turkmenistan’s kleptocrats, a firm so shady that even the Russian central bank wouldn’t deal with it. A Kyrgiz official found himself “disgusted by how cheap U.S. politicians were for sale.”
When the State Department denied Russian oligarch and Putin ally Oleg Deripaska a visa, he hired Dole to help. And when the Ukrainian Orange Revolution of 2004 threw out the country’s pro-Kremlin Prime Minister, Viktor Yanukovych, Deripaska, backed by Putin, hired Manafort to portray the Ukrainian reformers as corrupt and Deripaska as a “brilliant businessman.” When U.S. marines arrived in Ukraine in 2006 for routine exercises, they were attacked by a hired mob arranged, according to Ukrainian prosecutors, by Manafort.
After Yanukovych defeated Prime Minister Yulia Tymoshenko in the 2010 presidential election, he imprisoned her and, with Manafort at his side, proceeded to loot the country and slaughter protestors. Manafort was no longer a lobbyist or consultant, but an active participant in Yanukovych’s crimes.
Along the way, Manafort brought in former White House Counsel Gregory Craig of the legendary law firm Skadden, Arps, Slate, Meagher & Flom to whitewash the regime for the American domestic audience. It succeeded beyond Yanukovych and Manafort’s wildest expectations.
In late 2012 The New York Times David Sanger swallowed a Skadden “investigation” of Tymoshenko’s show trial: Yes, the Gray Lady informed its worldwide readership, the proceedings, although technically flawed by Western standards, were justified.
The charade held until a bloody popular uprising in 2014 finally drove Yanukovych out of the country. Manafort stayed with him until the end. Manafort’s acquaintances suspect that he advised the president on his deadly response to the uprising. One of Manafort’s daughters texted her sister,” You know he [had] people killed in Ukraine? Knowingly. Don’t fool yourself, that money we have is blood money.”
One would have thought that this would be the end of both Gregory Craig and Paul Manafort, but Craig, although indicted for making false statements relating to Manafort’s legion FARA violations, was acquitted. Meanwhile, Manafort went to ground, and then, astonishingly, got hired as Donald Trump’s 2016 presidential campaign manager.
Eventually federal and state prosecutors filed a blizzard of indictments on charges ranging from FARA violations to witness tampering to tax and bank fraud, which resulted in a plea deal. However, Manafort almost immediately violated it and was hit with a 43-month sentence in 2019. He was released to home confinement in 2020 because of the pandemic and pardoned by Donald Trump just before he left office.
The pardon was all the more remarkable considering that a few short months before the GOP-led Senate Intelligence Committee reported that Manafort had conspired with Konstantin Kilimnik, a known Russian intelligence agent, to spread misinformation about the Ukraine and about the Mueller investigation into Russian election interference. Incredibly, in March of this year he was rumored to be under consideration for a presidential campaign role, but by May both he and the campaign organization backed away from the idea.
Bipartisan foreign influence exposed
Michel’s prose at times tends towards the purple, and his leftish ideology can lapse over the line, but he saves himself often enough by skewering his own kind. He is particularly critical of the Clinton Foundation, which garners massive contributions from some of the same kleptocrats who employ Manafort and the Skadden firm. The foundation’s cash flow is startlingly correlated with Hillary’s proximity to power, skyrocketing when she was Secretary of State and when she appeared a shoo-in in the 2016 presidential election, then vanishing after she left Foggy Bottom and again after she was defeated by Donald Trump in 2016. And Michel also showers plenty of scorn on Hunter Biden’s well-paid “work” for a Ukrainian oil firm, for which he had no visible qualifications beyond sharing half a sitting vice president’s DNA.
Michel also points out that liberal bastions like the Atlantic Council, Harvard University, and the Brookings Institution all sit downstream from a fire hose of dirty money. Brookings’ president John Allen, for example, a retired four-star general and NATO commander in Afghanistan, effectively functioned as a paid emissary of Qatar. Refreshingly, Michel gives credit to Donald Trump’s Secretary of State Mike Pompeo for finally requiring think tanks to disclose their sources of foreign income.
Foreign Agents provides a powerful and depressing master class in the famous warning of Hamilton’s Federalist No. 21. To quote another founding father, Benjamin Franklin, “a republic, if you can keep it” indeed.
William J. Bernstein is a neurologist, the co-founder of Efficient Frontier Advisors, an investment management firm, and a writer with several titles on finance and economic history. He has contributed to the peer-reviewed finance literature and has written for several national publications, including Money Magazine and The Wall Street Journal. He has produced several finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of the early 19th century, the history of world trade, the effects of access to technology on human relations and politics, and financial and religious mass manias. He was also the 2017 winner of the James R. Vertin Award from the CFA Institute.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Read more articles by William Bernstein