Christopher Steele contradicts U.S. on election hacking funding

Dossier writer Christopher Steele’s assertion that Moscow bankrolled its election hacking through laundered pension funds via Russian diplomats in Washington isn’t supported by two official U.S. reports.

Mr. Steele, whose anti-Trump work was financed with money from the Hillary Clinton campaign and the Democratic National Committee, wrote of an elaborate money-skimming operation by the embassy and other consulates. A diplomat/spy in Washington, he said, was involved in laundering Russian veterans’ pensions to pay for hacking Democratic Party computers and stealing documents.

Special counsel Robert Mueller’s indictment of 12 Russian intelligence officers on Friday offers what appears to be the first official report on how Moscow paid for the hacking. The indictment makes no mention of diplomats or pension funds. The indictment says the Russians used crypto, or digital, currencies to pay vendors for the use of servers and internet domains.

The indictment does not state the ultimate source of money to purchase cryptocurrencies, whose owners’ identities are easier to hide than those using traditional bank transactions. What’s more, the operation was not expensive. The Mueller indictment puts the cost of servers and domains at $95,000 to try to wreck the 2016 U.S. presidential election.

In a second report on hacking on March 22, Republicans on the House Permanent Select Committee on Intelligence also made no mention of any Russian Embassy role or pensions. A congressional source said the committee heard no evidence of pension money laundering.

Overall, the Republican majority concluded that there was no evidence the Trump campaign colluded or coordinated with Moscow in its concerted 2015-16 effort to hack Democratic Party computers and spread false anti-Clinton stories on social media.

Because the FBI and Democrats have put so much weight on Mr. Steele’s findings and relied on them to guide investigations, The Washington Times has examined each of the former British spy’s collusion charges. To date, The Times has found none that has been confirmed publicly.

For example, Mr. Steele said Trump campaign manager Paul Manafort and campaign volunteer Carter Page jointly coordinated the Russian interference with Moscow, but there is no evidence that the two knew or talked with each other.

Mr. Steele’s dossier describes an unverified “extensive conspiracy” between the Trump campaign and the Kremlin. Russia raised the money, he said, by skimming money from pensions to Russian nationals living in the U.S.

He wrote of this supposed network after the anti-secrecy group WikiLeaks began posing in July thousands of Democrats’ emails presumed at the time to have come from Russian hacking. A month earlier, the firm CrowdStrike reported that Russian hackers had penetrated the party’s network.

Here is Mr. Steele’s description: “In the wider context campaign/Kremlin co-operation, Source claimed that the intelligence network being used against CLINTON comprised three elements. there were agents/facilitators within the Democratic Party structure itself; secondly Russian [agents] and associated offensive cyber operators based in the [U.S.] and thirdly, state-sponsored cyber operatives working in Russia.

“All three elements had played an important role to date. On the mechanism for rewarding relevant assets based in the US, and effecting a two-way flow of intelligence and other useful information, Source claimed that Russian diplomatic staff in key cities such as New York, Washington DC and Miami were using the [veterans] pension distribution system as cover. The operation therefore depended on key people in the US Russian [emigre] community for its success. Tens of thousands of dollars were involved.”

The House intelligence committee report said there was no Democratic Party insider, as Mr. Steele asserts.

Mr. Mueller’s indictment said the cyberoffensive was financed with cryptocurrency, principally bitcoin, and run out of an office suite in Moscow called the “tower.” The indictment doesn’t mention pensions.

The Justice Department’s press release Friday described the operation: “To avoid detection, defendants used false identities while using a network of computers located around the world, including the United States, paid for with cryptocurrency through mining bitcoin and other means intended to obscure the origin of the funds. This funding structure supported their efforts to buy key accounts, servers, and domains. For example, the same bitcoin mining operation that funded the registration payment for DCLeaks.com also funded the servers and domains used in the spearphishing campaign.”

Bitcoin mining involves solving mathematical puzzles on a network to win bitcoins as the reward for time and computer power. Bitcoins can be purchased and stored online.

The hackers set up DCLeaks as a repository to dump stolen Democratic Party emails. (The fact that the press release says the hackers had “other means” to hide funding suggests the full story of how the Russians financed the two-year operation has not been told.)

Count 10 of the indictment says the 12 GRU officers launched a “conspiracy to launder money in which the defendants laundered the equivalent of more than $95,000 by transferring the money that they used to purchase servers and to fund other costs related to their hacking activities through cryptocurrencies such as bitcoin.”

“The pool of bitcoin generated from the GRU’s mining activity was used, for example, to pay a Romanian company to register the domain dcleaks.com through a payment processing company located in the United States,” the indictment says.

Mr. Steele’s tale of laundered pension funds contained an accusation directed straight at the Russian Embassy in Washington: He accused Mikhail Kalugin, chief of the economics section, of “heavy involvement” in the pension scam. Mr. Steele said he was whisked out of Washington on “short notice” as news of Russian hacking gained steam.

Mr. Kalugin returned to the Foreign Affairs Ministry in Moscow, which denied he was a spy and had any role in pensions.

Two Americans who worked with Mr. Kalugin during his six-year stay in Washington told The Times that he had said 10 months before his departure that he planned to move his family back home.

They said he often attended economic meetings in Washington, accompanying the Russian ambassador. These were friendlier times during the Obama administration when the policy was to encourage commercial exchanges.