Broker, Trader, Lawyer, Spy - Eamon Javers [12]
Exxel Group invested in Diligence, reportedly taking a $15 million stake in it. Baker cashed out, selling his remaining 15 percent stake in Diligence to Exxel as part of the transaction. Barbour Griffith and Rogers cashed out, too. No one involved will reveal the exact numbers regarding who got what. But even if the deal valued Diligence at a relatively small amount of money, it’s likely that Baker walked away from the deal with more than $1 million in cash, a tidy profit from his five-year involvement with the company.
Now it would be up to Day, running Diligence on his own, to deploy the remaining money and generate the kind of growth his new investors were expecting. Soon, his attention would turn to a new client that Baker had been working hard to sign just before leaving the firm, Russia’s largest commercial bank, Alfa Bank. Alfa was already a client of the lobbying firm Barbour Griffith and Rogers, which in 2005 received $680,000 in fees from Alfa.
What’s more, the lobbyists disclosed in federal filings that they didn’t do any lobbying at all that year for Alfa. That’s a lot of money to pay a lobbying firm that’s not doing any lobbying. Often, lobbying firms are paid not to lobby—the technical definition of which is contacting public officials on behalf of a client—but to “consult,” which means simply to provide advice to the client about how to handle Washington.*
Before he left Diligence, Baker says, he pushed the lobbyists to provide an introduction to Alfa. The huge Russian bank would make a great client for Diligence. Barbour Griffith and Rogers made the connection, and soon after that, Nick Day was in Bermuda fetching KPMG’s documents out from under rocks.
The anonymous document drop at KPMG in October 2005 put a stop to that operation. On November 10, 2005, KPMG Financial Advisory Services filed suit against Diligence, alleging fraud.4 But the legal complaint filed by KPMG was heavily censored. Page after page of the publicly available version of the document was left blank, simply stamped “REDACTED” in bold letters.
Perhaps the complaint was so heavily shielded from view because the company feared letting even more sensitive details of the case into the open. But perhaps, too, KPMG held back so much of its filing because the company was embarrassed at how easily an employee had been duped out of its most secret corporate work product. After all, KPMG is one of the world’s largest accounting and consulting firms. It routinely handles the deepest secrets of the biggest companies in the world. What would its clients think if they knew those documents could leak out to corporate spies?
Indeed, the entire case was filed under seal, and it wasn’t until months later that any of the documents began to surface into public view. At Barbour Griffith and Rogers, the move to release the documents set off panic. The prestigious firm didn’t want the public or the press to know that it had been involved in the spy game.
On January 24, 2006, the firm’s lead lobbyist on the Alfa account, Keith Schuette, sent an e-mail to his boss, the legendary Washington fixer Ed Rogers. Under the subject heading “Legal,” Schuette wrote, “Ed: Judge has unsealed the complaint against Diligence from KPMG. It has attracted no attention thus far, but I cannot imagine that it will remain quiet forever. Neither we, nor the client are mentioned in the complaint. Current strategy if it comes alive in the press [is] for Diligence to stonewall. Will keep you posted.”
“What does it say??” responded Rogers, twenty minutes later.
“Basically that KPMG was harmed by Diligence stealing materials under false pretences etc…. and that they must cease and desist,” wrote Schuette. “Critical issue now is KPMG’s request for expedited discover[y] and judge ruling on the question of jurisdiction.