When special counsel Robert Mueller indicted Donald Trump’s former campaign chairman Paul Manafort in the fall of 2017, he implicated two prominent Washington, D.C. lobbying powerhouses as being complicit in a scheme to essentially hide foreign influence-peddling.
Mercury Public Affairs and the Podesta Group appeared, in that moment, to be directly embroiled in the biggest scandal to hit K Street since the days of Jack Abramoff. But in the year that has followed, the two lobbying shops have gone in remarkably different directions.
Mercury, dubbed “Company A” in the federal indictment, has become one of the top foreign influence-peddlers in Trump’s Washington, having signed a host of major lobbying clients this year. It’s winning some big victories for those clients, and bringing on top talent sure to boost its standing with Trump administration policymakers. In the first quarter of 2017, Mercury reported lobbying on behalf of 38 clients, which collectively paid the firm $1.26 million. A year later, it took in $1.79 million from 49 clients. For the firm, the future looks bright.
The Podesta Group, or “Company B” in the Manafort indictment, has no future. Its eponymous principal, Democratic fundraiser Tony Podesta, resigned from the storied lobbying firm, and was later revealed to have mismanaged the firm’s finances. Most of the firm’s principles tried to rebuild at a newly formed successor called Cogent Strategies. But attempts to rebrand haven’t managed to stem a client exodus in the wake of revelations of Podesta’s role in Manafort’s allegedly illicit work with a Ukrainian leader close to the Kremlin.
The two firms’ wildly divergent paths underscore just how volatile political crises can be for Washington’s influence industry. With ample connections to people in power, and the value that those connections bring, a firm can survive a public-relations bombshell. But a competitor facing the same scrutiny, but reliant on the good graces of a political loser, will struggle to keep afloat.
The Podesta Group, co-founded by Tony Podesta and his brother, Hillary Clinton campaign chairman John Podesta, was well positioned for influence in a Clinton administration and likely lost significant business when Trump prevailed. Its ties to the Manafort scandal and reported internal financial mismanagement proved too great a burden for a firm without that political lifeline.
Mercury, by contrast, has capitalized effectively on its connections to Trump and other prominent Republicans. The firm has become a go-to lobbying shop for clients looking to get in the administration’s good graces. And despite its ties to figures at the center of the Mueller probe, it has continued doing business with a company owned by a Russian oligarch at the center of the Russian meddling investigation.
That oligarch, Oleg Deripaska, was accused by Mueller of funding much of the influence-peddling work that Manafort performed, which the Department of Justice alleges was done without proper registration under the Foreign Agents Registration Act, which requires U.S. lobbyists and propagandists for foreign governments and political entities to disclose details of their work.
In the wake of revelations regarding Russian efforts to influence the 2016 presidential election, the U.S. government sanctioned Deripaska and companies with which he’s associated. One of those companies is Rusal, the world’s second largest aluminum producer. And in an effort to escape those sanctions—and get back on the good side of U.S. officials—Rusal’s parent company, En+, has sought to marginalize Deripaska’s role.
As part of that effort, the company’s chairman has looked for a helping hand in Washington. And it’s turned to, none other than, Mercury Public Affairs.
The firm has worked for months to get En+ delisted from the Treasury Department’s sanctions list. Its tactics have included enlisting foreign ambassadors to the U.S. to send letters to Treasury and the State Department urging sanctions relief. Mercury even provided suggested language for those letters, and at least one of those ambassadors copied that form language verbatim.
The campaign appears to be on the verge of paying off. Deripaska has resigned from En+’s board, and the company is working to reduce his 70 percent ownership of the company to a minority stake. Citing those steps, Treasury Secretary Steve Mnuchin announced Friday that he is considering lifting the sanctions against En+ and Rusal.
Were that Mercury’s only foreign client, it would constitute a remarkable success story. But in 2018 alone, the firm has signed eight new FARA-registered clients, including En+’s chairman; Chinese firm ZTE Technologies, another entity for which it has successfully pushed for U.S. sanctions relief; the Turkish embassy in Washington; and a Turkish business association overseen by the country’s finance ministry.
With business swelling domestically and from foreign clients, Mercury has beefed up its roster of lobbyists with top Republican talent sure to further boost its standing with the Trump administration. Days after Trump was inaugurated, the firm hired Bryan Lanza, a senior Trump campaign aide who works on the ZTE account. Just last week, the firm brought on Ian Prior, a former top DOJ spokesman and veteran Republican operative.
The firm is doing so well, in fact, that it has managed to successfully navigate a fraught policy fight on behalf of En+, despite its ties to Deripaska, the Russian billionaire at the center of a foreign-influence controversy involving Manafort himself.
The controversy stemming from those allegations proved too much to bear for the Podesta Group. Even before the Mueller indictment, the firm had been dealing with fallout over its representation of a state-owned Russian bank, and Russian agents’ hacking of John Podesta’s emails, which revealed some embarrassing—and legally problematic—private communications between the brothers.
Tony Podesta left the firm in late 2017, and it closed shop shortly thereafter. A number of the firm’s principals attempted to rebrand as Cogent Strategies under the leadership of Kimberly Fritts, a veteran lobbyist and former Jeb Bush aide. Cogent was paid $870,000 in the first quarter of 2018 for work on behalf of 21 domestic lobbying clients. That was a dramatic drop from the first quarter of the prior year, when 90 clients paid the Podesta Group nearly $5.5 million.
A Cogent spokesman said comparing the numbers for the two firms is apples-to-oranges, and that Podesta veterans went on to join other firms this year as well. Nevertheless, an examination of lobbying records indicates that even where Cogent was able to hang on to Podesta business, it’s been forced to charge less than its predecessor did.
The new firm’s foreign practice has diminished as well. From October through December of last year, the Podesta Group terminated foreign lobbying contracts with political and government entities in India, Japan, Hong Kong, Saudi Arabia, Azerbaijan, and Moldova. According to records on file with DOJ, only the Moldovan and Japanese clients have re-signed with Cogent. Its monthly fees from the former dropped from $20,000 to $5,000. From the latter, they dropped from $16,000 to $5,250.
The chain of events that set that decline in motion stemmed from Podesta’s connections to the Mueller probe. According to indictments against Manafort and his one-time deputy Rick Gates, both Mercury and Podesta were key components of Manafort’s undisclosed foreign-influence campaign on behalf of former Ukrainian leader Viktor Yanukovych and his political party. The Justice Department hasn’t charged either firm with any crime, but Mueller alleges that both took direction from Manafort and received payments from him that were first routed through offshore shell companies.
But the explanation for why Mercury prospered and Podesta failed is two-fold, industry experts say. The first is simple electoral politics. Tony Podesta was a major fundraiser for the Clinton campaign that his brother chaired. The firm was well-connected in the Obama administration, and looked to exercise the same influence over policymaking under a President Hillary Clinton.
The second is the organizational structure. The Podesta Group was a highly centralized shop focused intently on Washington—and dependent on political outcomes there. Mercury’s operations, by contrast, are more dispersed. The firm has offices in 18 U.S. cities, and in Mexico and Singapore. Many of its clients seek localized advice—even the Japanese consulate, which it signed this month, is looking for insights on state and local politics in New Jersey—making its work less reliant on partisan fortunes in D.C. That likely made it easier for the firm to weather the Manafort controversy.
There are lessons in those divergent paths for other lobbying firms looking to take on highly controversial, politically fraught clients. But Mercury’s ability to not just survive but thrive in spite of the Manafort scandal means those lessons likely won’t include avoiding such controversial clients in the first place.
As Meredith McGehee, the executive director of good-government group Issue One, told The Daily Beast, that sort of work is simply too lucrative. “If you represent a particular type of client, the money to be made out there is only restrained by your internal moral compass. And the more controversial an interest is, the more money you make,” McGehee said.
That all but guarantees future controversy. “These scandals pop up in a cyclical way because the amount of money that’s potentially on the table is huge,” McGehee said. The only question is whether the influence-peddlers involved can weather the storm. The cases of Mercury and Podesta may give them a roadmap for doing so.