RUSSIA FIGHTS U.S. FRACKING USING SHELL COMPANY TO FUND ENVIRONMENTAL CAMPAIGNS, INVESTIGATORS SAY

By Dan Boylan - The Washington Times - Sunday, July 16, 2017

http://www.washingtontimes.com/news/2017/jul/16/russia-fights-us-fracking-using-shell-company-to-f/?

Russia’s propaganda schemes and shell companies are so complex that investigators call them “matryoshkas” for the Russian nesting dolls that hide one inside the other. Capitol Hill lawmakers say they are now wrestling with one that appears to have twisted American oil and gas policy in Moscow’s favor.

Adding fresh intrigue to the multiple Russia probes underway across Washington, top Republican lawmakers are demanding that the Trump administration immediately investigate a Bermuda-based shell company with suspected Kremlin ties that is accused of working in the shadows to move millions of dollars to anti-fracking activists across the U.S.

Capitol Hill investigators say the Bermuda fracking case underscores the complexity of recent Russian influence operations that attempt to use Americans as pawns in money laundering or propaganda schemes.

“If you connect the dots, it is clear that Russia is funding U.S. environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracking,” Rep. Lamar Smith, Republican Texas, said in a statement.

The fracking revelations dovetail with a recently declassified report from the Office of the Director of National Intelligence that concluded that Russia’s state-owned media outlet Russia Today, or RT, also engaged in a vigorous anti-fracking campaign to benefit the leading Russian state-owned energy firm Gazprom.

In recent years, NATO chiefs have criticized Russia for conspiring to undermine technology in Europe by supporting anti-fracking protesters in Romania and Bulgaria. Former NATO Secretary-General Anders Fogh Rasmussen has claimed Russian President Vladimir Putin was behind the efforts.

Fracking involves blasting shale rock with water, sand and chemicals to release trapped natural gas. Although it has led to a boom in U.S. gas production, environmental groups have voiced opposition, saying it contributes to global warming.

Russia has aligned itself with the anti-fracking movement for fear that aggressive U.S. fracking will cut into Moscow’s global gas profits, analysts say.

An investigator speaking to The Washington Times on the condition of anonymity for security reasons said Moscow does not care whether it’s using Democrats or Republicans in an influence campaign.

“The Kremlin seeks to influence American debate in ways that look natural,” the investigator said. “To do this, they use what we call ‘useful idiots,’ or people who are unaware they are being used.”

Shell companies

On Capitol Hill, worries over the Russian anti-fracking scheme led Mr. Smith, who chairs the House Committee on Science, Space and Technology, to send a letter late last month to Treasury Secretary Steve Mnuchin.

The six-page letter asks Treasury officials to investigate “what appears to be a concerted effort by foreign entities to funnel millions of dollars through various nonprofit entities to influence the U.S. energy market.”

Co-signed by Rep. Randy K. Weber Sr., Texas Republican, the letter targets the San Francisco-based environmental group the Sea Change Foundation, which is alleged to have taken $23 million in 2010 and 2011 from Bermuda-based shell company Klein Ltd., which reportedly has ties to Russian oligarchs.

According to IRS documents, Sea Change Foundation is a 501(c)(3) private foundation.

After receiving funds from Bermuda, Sea Change is suspected of passing millions of dollars to U.S.-based environmental groups opposed to fracking, including the Natural Resources Defense Council, the Sierra Club and the League of Conservation Voters.

Last week, Klein Ltd. responded to the Capitol Hill accusations and denied funneling Russian money to environmental groups.

“Our firm has represented Klein since its inception, and we can state categorically that at no point did this philanthropic organization receive or expend funds from Russian sources or Russian-connected sources and Klein has no Russian connection whatsoever,” Klein attorney Roderick M. Forrest said in an email to The Times last week.

House investigators, led by Mr. Smith, believe the scheme potentially violates federal statutes pertaining to agents of foreign governments or those lobbying on behalf of domestic and foreign interests, but others on Capitol Hill are less sure. They note that private U.S. foundations may accept foreign contributions and that Moscow might have exploited that loophole in this particular case.

The League of Conservation Voters also denies all charges that it has any Kremlin associations.

“This seems like nothing more than an attempt at distraction away from the Trump campaign’s well-publicized interactions with Russian interests to influence the election,” league spokesman David Willett said in an email. “We have no connections to Russia and have been an effective advocate for environmental protection for over 45 years.”

Other environmental groups have blasted the House Republicans’ call for an investigation as “pathetic,” and Klein insists all its work is legal and operates within Bermuda’s strict regulations against money laundering.

Long shadows

Russia’s propaganda shadow has hung over environmental groups for some time. Former Secretary of State Hillary Clinton is on record calling out Russia for creating “phony environmental groups” opposed to pipelines and fracking.

“We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort — ‘Oh that pipeline, that fracking, that whatever will be a problem for you’ — and a lot of the money supporting that message was coming from Russia,” Mrs. Clinton said in a June 2014 speech.

House investigators are unsure how much more they will be able to unearth about Sea Change, which was first exposed in a 2014 report by the Senate Environment and Public Works Committee. That report closely connected Klein with Russia’s state-owned oil giant Rosneft and Russian energy investment groups including Firebird New Russia Fund and VimpelCom Ltd.

The report singled out that Sea Change functioned as a “pass-through” financing organization. Investigators say such opacity is what they confront when they attempt to prosecute complex international Russian schemes.

One investigator compared the Sea Change probe to a recent Interpol investigation into a suspected Russian mafia money laundering operating that infiltrated Portugal’s top football teams. Because of the Portuguese scheme’s complexity, which included multiple shell companies, tax fraud, corruption and forgery of documents, Portuguese law enforcement code-named the case Operation Matryoshka Dolls.

• Valerie Richardson contributed to this report.