Records recently posted online by the FBI indicate that it did little to investigate allegations from private sources connected to Republicans about a scheme in which associates of Secretary of State Hillary Clinton tried to exploit their connection to her to profit from the turmoil in Libya in 2011.
The FBI received the documents in June 2016, around the same time it launched an exhaustive, three-year investigation of the Trump campaign’s ties to Russia based, in part, on information from private sources connected to Democrats that in the main would prove to be false – the Steele dossier.
The bureau’s different responses to these documents also came during the same period when FBI Director James B. Comey controversially cleared Clinton, in his first of two exonerations, of criminal wrongdoing in the bureau’s probe of her unauthorized and insecure email setup.
The documents, quietly released as part of the FBI’s case files for the “Midyear Exam,” its code name for the Clinton email investigation, revive a lingering mystery from Clinton’s tenure as the nation’s chief diplomat: Why did Sidney Blumenthal, the former journalist and Bill Clinton White House aide, send her a series of detailed memos and reports about Libya beginning in 2011?
The documents offer an answer. They allege that Blumenthal sent the emails as a "quid pro quo" to free up classified State Department financial intelligence to help Libya recover as much as $66 billion spirited offshore by slain strongman Moammar Gadhafi.
Out of that, Blumenthal and associates stood to gain a brokers' cut of perhaps hundreds of millions of dollars.
The private Libya inquiry leaves important issues unsettled. The documents do not include emails or other original source material to support the allegations within. While claiming to possess evidence that Blumenthal and his associates had contracts and offshore accounts to repatriate the money, the documents say "no concrete evidence" was found suggesting Clinton acted to support the effort.
Yet if verified, the files might shed light on why Clinton kept her emails, tens of thousands of which have gone missing, out of normal government communication channels.
They do offer tantalizing connections between the Libya and Trump-Russia affairs. Previous reporting from multiple outlets has established Blumenthal worked on Libya with Cody Shearer, another longtime Clinton operative. Shearer would later join Blumenthal in passing anti-Trump claims similar to those in the Steele dossier on to the State Department and across the federal government. The FBI's acquisition of the Libya files made it freshly aware of Blumenthal's possible past motives - including personal financial gain - as he spurred an investigation meant to help defeat Donald Trump and elect Clinton.
In addition, one FBI agent played an especially pivotal role in the bureau’s response to both sets of allegations: Peter Strzok, who would eventually be fired by the bureau because of his anti-Trump bias.
The new material certainly adds twists to an already tangled web of intrigue.
Birth of an Inquiry
The heavily redacted files are part of a 428-page FBI document dump posted on FBI.gov in June, which can be downloaded here (relevant pages: 318-380). The documents are labeled by the FBI as having been received on June 6, 2016 – a month before the first of Comey’s two exonerations of Clinton and roughly seven weeks before the FBI opened its counterintelligence probe of the Trump campaign, relying on the Steele dossier. They are watermarked as having been declassified in December 2016, after the presidential election.
Describing the genesis of the Libya inquiry, FBI notes say its methodology was conceived by private entities with data recovery expertise and that former House Speaker Newt Gingrich referred them to the watchdog group Judicial Watch for financial support. Gingrich, a Republican, did not reply to a request for comment from RealClearInvestigations.
Tom Fitton, president of Judicial Watch, confirmed that his organization funded the freelance investigative project, including research on the encrypted “dark web,” after the work was already underway -- “and then we found a key Libya-linked document suggesting Mrs. Clinton’s server was hacked by the Russians.”
He said his group passed the probe’s information on to the FBI team led by Strzok, the agent in charge of the Clinton email inquiry.
The FBI files do not indicate how, or if, the allegations in the documents were pursued. The only hint is a few handwritten notes of an FBI interview with someone apparently involved in the private probe, with the names redacted.
Fitton said he does not know why the alleged Libyan asset-repatriation plan had not been publicized earlier. He would not identify the private investigator or elaborate further on the investigation.
The FBI and Justice and State departments declined to comment for this article. Spokesmen for Clinton did not respond to requests for comment. Shearer could not be reached.
After an earlier version of this article was published, Blumenthal contacted RealClearInvestigations objecting that its contents were "false and defamatory." He said that, contrary to the article's earlier assertion that he did not respond to a reporter's inquiry, he had received no inquiry from the reporter seeking his comment or perspective.
Blumenthal continued: “At no time did I seek to obtain classified information from the State Department. It is completely false that I ever sought to recover any of Gadhafi’s assets. It is completely false that I stood to gain a broker’s cut as a result as falsely stated in the article.”
'We Came, We Saw, He Died'
The turmoil in the oil-rich North African nation of Libya and its troubled aftermath created a fraught period in Obama-era foreign policy, marked by the phrase “leading from behind” to describe the administration’s backstage role in the allied-backed ouster of Gadhafi, and Secretary Clinton’s awkwardly triumphal comment afterward, “We came, we saw, he died.”
During that period, Clinton heard often from Blumenthal – a controversial infighter, dubbed “Sid Vicious” by detractors, whom the Obama administration prevented from joining her at State. He emailed the secretary on a range of foreign policy issues, some of which he had financial interests in. He began regularly emailing Clinton about Libyan affairs at the start of that country’s civil war in 2011, the year before the infamous attack on the American consulate in Benghazi that killed U.S. Ambassador Christopher Stevens and three other Americans.
Reporting by ProPublica and Gawker in 2015 established that Blumenthal was working with Shearer and former CIA officer Tyler Drumheller, who died in 2015, as part of what the publications called a “secret spy ring” to funnel information to Clinton.
Over the next few years, Blumenthal sent her intelligence reports prepared by Drumheller, a former chief of the CIA’s clandestine service in Europe who left the agency in 2005. Emails between Blumenthal and Drumheller suggest that Shearer may have been in contact with the Libyan authorities.
The group’s interest in Libya came to light after Marcel Lazăr Lehel, the notorious Romanian hacker who goes by the name “Guccifer,” stole Blumenthal’s emails in 2013 and published his correspondence with Clinton online. The hack also revealed that Clinton was conducting sensitive State Department business on a personal email account, though her email practices didn’t become a high-profile controversy until 2015, during the congressional investigation into the Benghazi attack.
A 2015 New York Times article on the hack reported that “[m]uch of the Libya intelligence that Mr. Blumenthal passed on to Mrs. Clinton appears to have come from a group of business associates he was advising as they sought to win contracts from the Libyan transitional government.”
Nevertheless, the Times reported that Clinton passed Blumenthal’s memos on to other State Department officials, though a Clinton aide would obscure the source of the information, saying “they had come from an anonymous ‘contact’ of Mrs. Clinton.”
A Lucrative Opportunity
The documents recently released by the FBI purport to spell out the exact nature of business Blumenthal and company were pursuing:
“Our evidence shows that Mr. Blumenthal was involved with a group of intelligence professionals seeking to repatriate asset[s] which were plundered and then exfiltrated by the [Gadhafi] family and hidden in various offshore localities.”
The documents continue with an apparent reference to the Mossack Fonseca law firm in Panama, which was implicated in the 2016 Panama Papers media exposé on shady offshore finance:
“One of the devices used by [Blumenthal’s] lawyers and advisors was the infamous Panama papers law firm that has recently been referenced in the news. This program is better known as Rogue National Judgment Recovery Litigation, for which we have much experience, sources, and knowledge generally.”
The findings continue:
“However, in order for Mr. Blumenthal and his associates to be successful with this program, they needed high quality FINCEN [Financial Crimes Enforcement Network] intelligence analysts that formerly worked as liaisons with the CIA; he needed complete access to the Libyan Central Bank to do the financial traces; and most important of all, needed access to the State Department Intelligence Bureau file regarding the Libyan Frozen Assets Fund, which consisted of about $30 billion in frozen and recovered assets.”
It’s estimated that Gadhafi and his family may have squirrelled away some $66 billion in assets around the globe. Recovering that money was likely to be extremely lucrative, the private inquiry stated.
“As an illustration of how profitable this program could be, since the Blumenthal group had a contingency contract with the coalition government [in Libya], if they found just $1 billion in assets and the contingency fee was 10% of the funds recovered (which is extremely conservative and considerably below industry standards), it would mean the group would earn a windfall of $100 million gross. Assuming expenses of 10% of the gross, which would be extremely generous, the net to the group would be nearly $90 million. The only obstacle separating Mr. Blumenthal and the money was the State Department intelligence; and the key to getting it was Mrs. Clinton, his longtime patron.”
The private inquiry asserts that the “constant Libya memos” Blumenthal and his associates were passing on to Clinton were meant as “bait to entice the State Department to release the data” and an “official example of quid pro quo.”
The documents released do not include evidence regarding this and other claims, though one person connected to the private inquiry told RCI supporting material was provided to the FBI. The investigation further mentions that another person whose name is redacted began contacting senior intelligence analysts about recovering Libyan assets in January 2012, nine months after the March 2011 American military intervention in Libya. This person, described as having a “rather controversial history within the U.S. intelligence community,” also claimed that he had contacts in the Libyan coalition government and was dealing with “high-level political types in the U.S." in the State Department.
The documents published by the FBI claim Blumenthal and his associates were working on the Libya “scheme” as late as December 2015. The documents assert that they got as far as obtaining a draft agreement for asset recovery with Libya’s coalition government and setting up an “offshore corporate vehicle” – with the help of Mossack Fonseca, the Panama Papers firm. But the findings of the private investigation state that “what we do not know is whether the team was actually operationalized or if the attendant publicity surrounding [Clinton’s] email server” — which ramped up throughout 2015 — “effectively shut down the Blumenthal team’s efforts.”
Still, the private inquiry’s broader assessment is confidently stated: “For these reasons, we assess that the true motivation behind Mr. Blumenthal’s willingness to move mountains of data about Libya to Mrs. Clinton was all about the money and to get access to or actually obtain the State Department intelligence file, notwithstanding the fact it would be highly illegal for the file to be released to a private citizen.”
To date, these claims are unverified. Still, the FBI’s subdued handling of the matter appears to contrast with its all-hands-on-deck response to another set of unconfirmed memos that it also received in mid-2016 – the Steele dossier – and the fact that Blumenthal and Shearer were deeply involved in the effort to tie Trump to Russia.
The Second ‘Dossier’
During the 2016 presidential campaign, Blumenthal and Shearer were actively preparing opposition research on behalf of Hillary Clinton. Two memos prepared by Shearer claimed, as did the Steele dossier, that Donald Trump had been compromised by the Russians.
One of the people they used to pass on these false allegations to the FBI was Jonathan Winer, then a U.S. deputy assistant secretary of state for international law enforcement and former special envoy for Libya.
Winer declined to comment for this article, but in a Washington Post op-ed in February of last year, he explained his meeting with his “old friend” Blumenthal. When the two met in September 2016, Winer had already met with Steele and was familiar with the contents of Steele’s dossier on Trump. “What struck me was how some of [Shearer’s] material echoed Steele’s but appeared to involve different sources,” Winer wrote. For instance, both reports contain unproven allegations that Trump was filmed during sexual acts at a hotel in Moscow.
After the Blumenthal meeting, Winer passed Shearer’s material on to Steele. “[Steele] told me it was potentially ‘collateral’ information. I asked him what that meant. He said that it was similar but separate from the information he had gathered from his sources. I agreed to let him keep a copy of the Shearer notes,” Winer recounts. He further states: “I did not mention or share his notes with anyone at the State Department. I did not expect them to be shared with anyone in the U.S. government. But I learned later that Steele did share them — with the FBI, after the FBI asked him to provide everything he had on allegations relating to Trump, his campaign and Russian interference in U.S. elections.”
In a previous RealClearInvestigations report by Lee Smith detailing the contents and genesis of Shearer’s dossier, former CIA agent Robert Baer said that he spoke to Shearer about his work collecting dirt on Trump in “March or April” of 2016, which would roughly coincide with the time that the Democratic National Committee was hiring the Fusion GPS research firm to employ Steele and create the primary dossier. Given Blumenthal and Shearer’s close ties to Clinton and their previous work doing opposition research for the Clintons, there’s a possibility that one or both men could have been aware of the Steele dossier and its findings as the work was ongoing — and that perhaps Shearer’s dossier was not an independent corroboration but part of a larger operation to manufacture credibility for the Steele dossier.
A memo released by the Senate Judiciary Committee last year appears to reference Steele’s use of the Blumenthal-Shearer Trump dossier to corroborate his own:
"One memorandum by Mr. Steele that was not published by BuzzFeed is dated October 19, 2016. Mr. Steele’s memorandum states that his company ‘received this report from [REDACTED] US State Department,’ that the report was second in a series, and that the report was information that came from a foreign sub-source who ‘is in touch with [REDACTED], a contact of [REDACTED], a friend of the Clintons, who passed it to [REDACTED].’ It is troubling enough that the Clinton campaign funded Mr. Steele’s work, but that these Clinton associates were contemporaneously feeding Mr. Steele allegations raises additional concerns about his credibility."
As Smith’s RCI article notes, it is also significant that Steele provided the FBI with only the second of Shearer’s opposition research reports on Trump. The first identified a Democratic funder: Shearer relates that Glenn Simpson and Peter Fritsch of Fusion GPS had been hired by the DNC to “rack [sic] down Trump compromised story.”
Did Steele obtain both Shearer reports? Winer is vague in his Washington Post op-ed on the exact nature of the “notes” Blumenthal passed on to him. But if Winer provided both reports to Steele, that suggests that Steele would have been aware of who was funding his efforts, and that he withheld that information from the FBI by not sharing the first report. The FBI’s FISA warrant application to surveil the Trump campaign includes no mention that Steele knew of the dossier's politically motivated funders, the DNC and the Clinton campaign. Instead, citing the Steele dossier, the application states that Simpson “never advised Source No. 1 [Steele] as to the motivation behind the research into candidate’s #1 [Trump’s] ties to Russia.”
The newly posted material says Blumenthal and Shearer’s efforts to recover Gadhafi’s pilfered funds involved reaching out to many people in Washington familiar with Libyan affairs.
Winer was a State Department envoy to Libya and an expert in international organized crime. As such, he was well-positioned to know that Blumenthal was actively engaged in passing on Libyan intelligence to the State Department and whether he had tried to obtain State Department information in order to profit off recovering Libyan assets. If Winer knew what Blumenthal was working on regarding Libya, then he had to be aware that Blumenthal might have a large financial interest in seeing Hillary Clinton become president.
Similarly, if the FBI had been made aware in mid-2016 that Blumenthal and Shearer might have had financial motives tied to presidential candidate Clinton, Steele’s decision to pass on information obtained by Shearer later that year should have been a red flag about the reliability of Steele’s information. The FBI cited Steele’s dossier in its first application for a FISA warrant to surveil former Trump campaign aide Carter Page in October — months after the bureau received the Libya documents.
In May of this year, former Rep. Trey Gowdy, who chaired the House Oversight and Benghazi panels, told Fox News that he had seen Blumenthal’s name on an FBI spreadsheet that attempted to list independent corroboration for specific factual assertions in the Steele dossier. Apparently referring to Blumenthal’s reputation for pro-Clinton political machinations, the Republican said the operative’s past should have concerned the FBI. “When the name Sidney Blumenthal is included as part of your corroboration, and when you’re the world’s leading law-enforcement agency, you have a problem,” Gowdy said.
Editor's Note, 6:30 PM Eastern, Sept. 9, 2019
This article has been updated to include Sidney Blumenthal's response.
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