Firm With Obama Ties Cashes in Overseas

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Michael Isikoff

After helping to elect Barack Obama, a group of the president's top campaign strategists moved quickly last spring to capitalize on their success as the new masters of the political universe: they flew off to Kiev, capital of the Ukraine, to sign a lucrative contract to advise Prime Minister Yulia Tymoshenko on her race for that country's presidency.

The arrangement between AKPD Media, the powerhouse political consulting firm founded by senior White House aide David Axelrod (who no longer works with the firm), and Tymoshenko, a billionaire business tycoon once dubbed "the gas princess," has so far gotten no attention in the U.S. press.

But it has raised more than a few eyebrows in the Ukraine and among rival political consultants in the U.S. who charge it potentially poses some of the same kind of ethically problematic entanglements that Obama repeatedly denounced during the campaign.

Nor has it been without problems for AKPD. After dispatching a team of operatives to Kiev, including Larry Grisolano, the former director of paid media and research for the Obama campaign, and John Anzalone, an Obama campaign pollster, AKPD officials soon became concerned that Tymoshenko wasn't paying the firm's fees. Last month, AKPD even pulled its operatives out of the country, creating a potentially awkward business dispute between former Obama campaign advisors and the prime minister of a key U.S. ally, according to three U.S. sources familiar with aspects of the dispute (but who like many others interviewed for this story declined to be identified by name because of political and diplomatic sensitivities.)

But last week, after meeting with Ukranian Deputy Prime Minister Hryhoriy Nemyria (who was in Washington for a meeting with the International Monetary Fund), Grisolano told NEWSWEEK that AKPD's Ukraine contract was back on track. "Not unlike our domestic clients," there are sometimes problems in "keeping accounts current," Grisolano, an AKPD partner, said. But "we have an agreement on payment schedules and we expect this will work out. We are engaged with the campaign."

There is, to be sure, nothing unusual about American political consultants working overseas and especially in the Ukraine where the fees for such work have been estimated to run into the millions. Clinton strategist Doug Schoen, pollster Stan Greenberg and, most famously, Paul Manafort, the business partner of former John McCain campaign manager Rick Davis, have all raked in hefty fees advising various Ukranian political figures.

And Grisolano emphasized that AKPD was in no way engaged in lobbying the White House or the Obama administration on behalf of Tymoshenko (and therefore had no need to register as foreign agents). He did, however, acknowledge that he had mentioned the firm's Ukranian work to Axelrod in a few "Hey, how's it going? What are you up to?" conversations. (Asked about his knowledge of AKPD's Ukranian contract, and whether he approved of it, Axelrod responded by e-mail: "I sold my interest in the firm in January and have no involvement in the business or their client decisions. As such, I see no conflict.")

But in the minds of foreign officials and other prospective clients, those lines can sometimes get blurry. An American businessman who has had extensive dealings in the Ukraine and has discussed the AKPD contract with some of the prime minister's associates -- said that forging closer ties to the Obama administration was a main reason the prime minister turned to the firm in the first place to run her campaign in the Jan. 17, 2010, presidential election. Tymoshenko, one of three candidates in the race and generally considered pro-Western, is the chief rival to the pro-Russian former prime minister Viktor Yanukovych.

The goal of finding a connection to Obama became an especially top priority for Tymoshenko, along with other Ukranian political figures, after Vice President Joe Biden announced that the White House wanted to "push the reset button" on its relations with Russia, the Ukraine's traditional nemesis--a comment that set off alarm bells in Kiev that the country's interests would get shoved aside in the process, the businessman said.

"They thought they were building relationships with Obama--no question about it," said the businessman, who is not a campaign consultant but who cited the political sensitivity of the issue as his reason for asking for anonymity when discussing the AKPD contract. "That was the premise behind it. She hired them because she believed it would give her an 'in' with the president."

In an e-mailed response to NEWSWEEK, Nemyria, the deputy prime minister, said that that Tymoshenko hired AKPD because she was "impressed by the skill and discipline of President Obama's campaign"-- and not because of any perception it would enhance her standing with the Obama White House. "We were well aware before we contacted AKPD that David Axelrod was working in the White House and had severed his connections to AKPD," he wrote. "We understand how America works. ... We have never expected and therefore we have never asked the AKPD to provide contact with [the U.S. government].” Nemyria also declined to discuss what he called "the financial aspect" of how much the prime minister's team was paying AKPD but denied there had been any dispute over fees.

Still, if the businessman's account is true, it's not hard to see why some in the Tymoshenko campaign might have gotten that impression. AKPD touts its connections to Axelrod on its Web site, prominently displaying numerous photographs of the White House advisor (including one with Obama) as well as a display quote from Axelrod next to the firm's logo: "Change is something you have to fight for."

The White House aide's son, Michael Axelrod, also works for the company and AKPD still owes David Axelrod $2 million in severance payments over the next four years, starting with a $350,000 check due by the end of the year, according to Axelrod's financial disclosure. (A related company, ASK Public Strategies, which specializes in corporate and non-profit advocacy work, owes Axelrod another $1 million in severance payments with $200,000 due by the end of the year.)

This isn't the first time that questions have been raised about AKPD's post-campaign work. Bloomberg recently reported that AKPD and another firm had received $12 million in advertising business to run ads promoting health care reform that were partly funded by the Pharmaceutical Manufacturers and Research Manufacturers of America (PhRMA).

But Grisolano rejected any suggestions that AKPD is "cashing in" on its connections to Obama or that there is anything untoward about the firm promoting its ties to Axelrod. "When you succeed in a project," he said, referring to the company's success in running the Obama campaign, "you promote that success and other people come to you because of that. We're growing and doing well because of the success we had in the Obama campaign."

Still, some critics say it is more than a little disorienting to see former Obama campaign aides raking in fees in the Ukraine -- given all the attention the Obama campaign and the news media focused on the foreign business ties of the McCain camp, especially Manafort and Davis's work with Yanukovich, Tymoshenko's rival.

"This is beyond irony, if that is possible in Washington," said John Weaver, the former senior aide to John McCain who fought--and lost--an internal battle to purge his campaign of figures with foreign lobbying ties.

Tag(s): Barack Obama, foreign relations

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Russian arms dealer Viktor Bout after his verdict at the Criminal Court in Bangkok on August 11, 2009. The Thai court rejected a request by the United States for the extradition of Bout, dubbed the "Merchant of Death." (Pornchai Kittiwongsakul / Getty