The ITERA/Weldon Link: Congressman flacked for daughter's client despite being briefed on its shady practices

In early 2002, the Russian energy firm ITERA needed to overhaul its image. Investment fund managers with interests in Russia and numerous press accounts had suggested that Gazprom, a state-controlled conglomerate, had transferred billions of dollars worth of natural gas resources to ITERA and received little or nothing in return. Gazprom insiders involved in those transfers were alleged to have received massive kickbacks in return.

The controversy led the U.S. Trade and Development Agency to withdraw a pending $868,000 grant to ITERA in March of 2002. That was a serious setback for the company, which had planned to open offices in the United States in order to expand its access to Western investment capital and markets.

Two months later, however, things began to look up when congressman Curt Weldon flew to Moscow to meet with the firm's executives. Weldon publicly praised ITERA and called it “a great source” for U.S. energy firms seeking foreign partnerships. After he returned home, Weldon attacked the Trade and Development Agency for withdrawing the grant and contacted Karl Rove and Energy Secretary Spencer Abraham on the firm's behalf.

Four months later, ITERA signed a $500,000 contract with Solutions North America, a firm led by Karen Weldon, the congressman's twenty-nine-year-old daughter. Karen's job, according to lobbyist disclosure filings, was to create “good public relations so in the future ITERA may sell goods and services to U.S. entities.” Representative Weldon—who is now the target of an unfolding federal investigation—helped create that good P.R. by continuing to make favorable pronouncements about the controversial Russian firm.

This is all very interesting when you consider that Weldon was aggressively flacking for ITERA even after he received a detailed briefing that outlined how ITERA reaped the benefits of Gazprom's corruption. I was able to obtain a copy of this briefing, which was prepared by a Russian businessman who worked closely with Weldon. In the letter the businessman stated that ITERA had quickly emerged as a multibillion dollar energy firm for one reason: “the cover of Gazprom higher management and its personal interest in [ITERA's] prosperity.”

Had Weldon been interested, a simple Google search would have turned up plenty of dirt on ITERA. Between late 2000 and early 2001, a number of prominent publications, including the New York Times and the Wall Street Journal, had written about shady dealings at Gazprom. Beginning in the late 1990s, the conglomerate sold off companies and assets reportedly worth nearly $6 billion, for which it received little more than $300 million.

ITERA was a primary beneficiary of Gazprom's discount prices. According to press accounts, Gazprom awarded ITERA a stake worth roughly $850 million in one project in exchange for only a promise to contribute to future investment funding—and with no money down. ITERA offered no compensation at all for a 35 percent share in Belarus's hugely lucrative gas market, a stake reportedly worth about $500 million annually.

The Russian business official who prepared the briefing, Vladimir Petrosyan, returned to Moscow earlier this year. Several people who knew Petrosyan told me that he worked closely with Weldon on Russia-related issues but otherwise appeared to have plenty of time on his hands. He was an almost nightly fixture at the bar of The Caucus Room, a favored watering hole for Washington insiders. (Attempts to locate Petrosyan in Moscow were unsuccessful. Weldon's office did not return calls seeking comment.)

The six-page briefing Petrosyan prepared was undated but, according to its introductory section, was delivered to Weldon in 2002 following “the summer holiday season.” This suggests that the congressman received it around September of that year—at exactly the moment ITERA was finalizing its fat deal with Karen Weldon. The briefing, which was clearly prepared at Weldon's request, opened with its author thanking the congressman for the “high faith” that was being placed in him and expressing gratitude for the “opportunity of cooperation that you opened to me.” Petrosyan then offered a lengthy survey of the “general political and economic picture taking place in Russia today,” before turning his attention to ITERA.

Petrosyan provided Weldon with a forthright, honest assessment of ITERA's operations. He described a network of shell companies set up by ITERA and detailed a series of maneuvers through which Gazprom had transferred vast resources to the firm. The briefing described the “brilliantly simple” strategy by which Gazprom sold gas to ITERA at a “wholesale, non-market” price—about one-tenth of what ITERA could charge for it. “The same scheme was realized everywhere,” the briefing said. “Resale of cheap Gazprom gas at a high price.”

The briefing also detailed how Gazprom had sold ITERA a variety of assets at bargain-basement rates. For example, Petrosyan wrote, ITERA had picked up from Gazprom a firm worth several billion dollars for “the ridiculous price” of $280 million; furthermore, ITERA “processes all the major finance transactions through off-shore accounts . . . In case of a serious violation of law ITERA practically loses nothing because all funds are concealed in off-shores.”

This was post-Soviet corruption of the worst sort, but none of it appears to have troubled Weldon. In late September of 2002, he helped organize a dinner at the Library of Congress in honor of ITERA's CEO, Igor Makarov. Karen Weldon's firm also lent a hand and was paid for its efforts as part of its contract with ITERA. Two days after the dinner, Weldon praised ITERA in a speech on the House floor; then, in late 2002, when Weldon led a congressional delegation to Eastern Europe, ITERA paid for Karen Weldon to join him. During a stop in Moscow, Rep. Weldon called for an increase in U.S. imports from ITERA and other Russian energy corporations. And in January 2003, ITERA opened an expanded U.S. headquarters in Jacksonville, Florida, and flew Weldon down to attend the gala affair. “I can think of no other company,” said the congressman, “that represents what Russia is today and offers for the future.”

News accounts alone should have given Weldon pause about advocating for the Russian firm. The private briefing provided by Petrosyan offered even more incriminating information, making it incredibly hard to fathom what—other than his daughter's lucrative contract with the company—would have led the congressman to support ITERA in Washington.

Note: ITERA also had a powerful Democratic friend, Congresswoman Corrine Brown, who represents Jacksonville, Florida. (Brown, by the way, gives Weldon a run for his money when it comes to questionable ethics.) Like Weldon, she has publicly praised ITERA and, according to The Hill, “led a . . . celebration of ITERA's 10th anniversary in Florida that featured entertainment from Oscar winner Isaac Hayes and two Russian pop singers.” Brown's daughter, Shantrel, is a lobbyist for Alcalde & Fay and represents ITERA.

If the Democrats win the House, Brown will be in a line for a top spot at the Transportation and Infrastructure Committee. And that should make Shantrel's employer very happy—since Alcalde & Fay represents quite a few clients who are more than a little interested in the committee's decisions.

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