Exclusive: New Unredacted Emails Show How Deeply OMB Misled Congress on Ukraine

“Can we call you in 5, DoD is being extraordinarily difficult.”

It was almost 6 p.m. on Monday, Aug. 12, and Mark Paoletta, the general counsel at the Office of Management and Budget (OMB), wanted to talk to his boss, Russell Vought, the acting director of OMB, about President Donald Trump’s hold on military assistance for Ukraine. 

When the Trump administration released this email under court order to the nonprofit group American Oversight on Jan. 22, Paoletta’s complaint about DoD was redacted.

Just Security obtained this email without the redactions, as well as the others released on Jan. 22, under the condition that they not be reprinted. Similar to the unredacted emails Just Security reported on in January, these new emails shed further light on the standoff that took place between the Pentagon and OMB over Trump’s hold on Ukraine funding. 

They confirm that OMB, including the general counsel’s office, was fully in the loop about the Pentagon’s concerns and took active steps to bury them. They also expose the extent to which OMB misled, and even lied to, the Government Accountability Office (GAO), a congressional investigative body, as the GAO tried to understand the circumstances surrounding the funding hold. 

To this day, and through these redacted documents, OMB is continuing its efforts to keep its knowledge of the Pentagon’s legal worries a secret, blacking out the portions of the emails where DoD officials voiced their concerns and where OMB staffers acknowledged them. The Washington Post reported earlier this month that Paoletta reviewed the redactions before the documents were released. 

This would include his Aug. 12 email to Vought. So, why was he so frustrated with the Defense Department? 

It had come time for OMB to issue a new apportionment footnote — the technical process being used to withhold the money — and DoD wanted to put it in writing that these delays were now putting the full $250 million for Ukraine at risk. That’s because with each day that passed, it was becoming increasingly difficult for the Pentagon to be able to spend all of the money by September 30, the last day of the fiscal year, should the president change his mind and lift the hold. If DoD didn’t spend all of the money in time, it would be returned to the U.S. Treasury Department, violating the Impoundment Control Act,  which mandates the executive branch spend money as Congress appropriates it. 

But, it was Paoletta’s view that when the new footnote was issued, it shouldn’t mention any of this. This is what he wanted to discuss with Vought. While we don’t know what the two men discussed that evening, we do know that OMB won this battle because the next time the hold was extended, it did not contain the Pentagon’s warning. 

However, several months later, we also know that the Pentagon was right: The hold violated the Impoundment Control Act, not to mention it was part of a larger pressure campaign to get Ukraine to announce an investigation into former Vice President Joe Biden. When Trump finally lifted the hold on Sept. 11, DoD did everything it could to get the money out the door by Sept.  30, but it was too late to be able to spend all of it. In the end, $35 million of the Ukraine funding lapsed and required new congressional legislation to make it available again. 

While OMB was fully aware that this is what was at stake, it has tried to hide that fact from Congress and the public. 

While these emails provide new evidence about how and why the Trump administration withheld military assistance to Ukraine, the Senate never subpoenaed them or any other documents or witnesses in Trump’s impeachment trial. If it had, senators, as well as the public, could read these emails in unredacted form for themselves. The Senate acquitted the president last week.

Here are the main takeaways from this new batch of fully unredacted emails.

“Everyone was in the loop.”

In a Dec. 11 letter to GAO, Paoletta wrote that 

In fact, at no point during the pause in obligations did DOD [Office of General Counsel] indicate to OMB that, as a matter of law, the apportionments would prevent DOD from being able to obligate the funds before the end of the fiscal year.

Up until now, there was no evidence that the general counsel’s office at DoD had alerted OMB about these concerns, but there was plenty of documentary evidence showing its comptroller’s office had. Acting Pentagon Comptroller Elaine McCusker sent multiple emails to OMB throughout August and September outlining the Defense Department’s concerns, including inquiries about whether OMB had started the impoundment paperwork for the Ukraine money. She had even shared with Michael Duffey, who is in charge of national security programs at OMB, a draft letter from the deputy defense secretary to OMB’s acting director informing OMB of the Pentagon’s concern that the law required notification to Congress through “a special message proposing rescission or deferral of funding.” 

And, while the Pentagon may not have said the apportionments would prevent DOD from spending the money by the end of the fiscal year as a matter of law, it did warn that could happen as a matter of fact. But still, there was no evidence until now that the Pentagon lawyers were also sounding the alarm.

However, included in the batch of emails released to American Oversight is an Aug. 22 email from Edwin “Scott” Castle, DoD’s principal deputy general counsel, to Paoletta, and CCing DoD General Counsel Paul Ney. In other words, here is an email directly from DoD’s general counsel’s office raising the kind of concerns Paoletta claimed he didn’t know about in his letter to GAO.

While most of Castle’s email has been blacked out, Just Security was able to view what was underneath the redaction. It reads: 

Sir/Mark,

Elaine McCusker asked that I contact you and underscore her ongoing discussions with Mike Duffey concerning DOD’s obligation of funding for the USAI.

As I know you appreciate, expediting the interagency review of the USAI will facilitate DOD’s ability to fully and prudently obligate all $250 million appropriated for the initiative by September 30th, the date on which the funds expire. Thanks for your assistance in moving that review along. 

As you know, we’re currently operating under an OMB-directed pause in obligations until August 26th. We previously obligated approximately $22 million and the Defense Security Cooperation Agency (DSCA) recently distributed $126 million to the MILDEPs for execution; those funds are pending obligation (and will not be obligated until OMB approves and OSD directs). Obligation deadlines for the remaining $102 million presumably are in the early-to-mid-September timeframe. 

Castle’s email also mentions that staffers on Capitol Hill are asking DoD about the hold on Ukraine funding. He tells Paoletta that a congressional delegation traveling in Ukraine earlier in August heard that the money had not been obligated and wanted to know why. This seems to contradict a point that Trump’s defense team made repeatedly throughout the impeachment trial: That Ukraine didn’t know about the funding hold until POLITICO reported on it on Aug. 28. There is other evidence that also upends this Trump team argument. 

Four days later, on Aug. 26, Paoletta wrote back. His entire response was redacted when the email was released in January.

It reads:

Hi Scott,

Thank you for your note. OMB appreciates the Department’s concerns that funds for the Ukraine Security Assistance Initiative (“USAI”) should be made available for obligation as soon as possible in order to facilitate DOD’s ability to fully obligate the funds before the funds expire on September 30th. However, the interagency process to determine the best use of these resources is still ongoing, and until such process is resolved, such funds shall remain unavailable for obligation for the USAI. That said, OMB has not taken any action that would impair the Department’s ability to process these funds in order to obligate them in a timely manner, and certainly not later than September 30th.

Pursuant to Presidential delegation, OMB has a responsibility to carry out section 1512 of title 31, U.S. Code, which directs that appropriations should be apportioned by time, purpose, or a combination of both. As such, it is OMB’s responsibility to ensure that any apportionment of appropriations is consistent with the administration’s policy priorities, to the extent such priorities are supported by the law. To ensure that OMB’s apportionment action is consistent with the President’s policy priorities, OMB has included a footnote on an apportionment directing that the Department may not obligate funds available for the USAI until an interagency process has been resolved to determine the best use of those funds. OMB’s original footnote for the USAI funds and e-mails to DOD staff explaining the footnote made clear that even while operating under the footnote, DOD could proceed with ALL steps necessary short of actually obligating these funds, including being authorized to run any competitive bidding process for the obligation of these funds. In addition, your chart set forth that although a great majority of the funds would be committed by mid-August, the Department would not obligate such funds until mid to late September. As noted in a previous e-mail to the Department, commitments are not legally binding obligations under the recording statute, and therefore, the Department’s commitment of these funds would not be impacted by the OMB footnote. Therefore, to the extent that the information captured in your chart is still accurate and that the Department would still plan to obligate the USAI funds by mid to late September, we still see no reason why the footnote would impair the Department’s ability to obligate the funds before they expire. It is our understanding that the interagency process to determine the best use of the USAI funds will be resolved in the coming week, and that following the resolution of such process, the Department will have sufficient time to obligate these funds before the funds expire on September 30th.

In addition, with respect to the USAI funds (approximately $8.5 million) that are listed on the chart as being ready to obligate last week, we were surprised to see this entry given DOD has represented that the Department had to start moving forward on all funds immediately in order to make sure the funds are obligated before September 30th. Given that these funds were ready to be obligated in less than a week and that the President wanted to run a policy process on these funds, we believed it was imperative not to undermine the President’s prerogatives on determining where foreign military assistance is spent consistent with his policy preferences, and of course consistent with the law. As you know, this account allows for a wide variety of spending for Ukraine-related activities, and is not limited to this particular spending. Given that we expect this policy process to be complete this week, we are not aware of any reason why the Department would not be able to obligate these funds as currently planned within 48 hours of a decision, and therefore well before September 30th.

Please let me know if you have any questions.

Thanks,

Mark

(emphasis added) 

In his carefully worded note back to Castle, Paoletta acknowledges the concerns coming from DoD general counsel’s office, the very thing he doesn’t do in his letter to GAO. He goes on to remind DoD that it is supposed to be doing everything it can up until actually spending the money to get ready for the moment when (or if) the president lifts the hold. This is OMB’s way of saying: The president’s hold shouldn’t cause any delays if you take all of these preparatory steps, and if it does screw things up, that’s going to be on you, the Defense Department. 

It’s a defensive posture to counter the growing frustration coming from the Pentagon, and a reflection of the tension building between the two departments. But in response to a question from the Wall Street Journal in January, OMB spokeswoman Rachel Semmel said “There was agreement every step of the way between DOD and OMB lawyers, who were responsible for working out the details of the hold, in line with the President’s priorities.”

In his email to Castle, Paoletta also refers to an “interagency process” taking place, even though there is no evidence of this, and notes that this “will be resolved in the coming week.” Previously released emails show that officials were expecting the Ukraine money to finally be released after an Aug. 30 meeting between Trump, Secretary of State Mike Pompeo and Defense Secretary Mark Esper. The officials thought that Pompeo and Esper would be able to finally change Trump’s mind. Presumably this is what Paoletta is referring to when he says the matter will be resolved “in the coming week.” But following the Aug. 30 meeting, Duffey emailed McCusker, “Clear direction from POTUS to hold.” Trump’s closest advisers had failed to convince him to release the money. 

It wasn’t the first time senior OMB officials thought the problem would be quickly solved with a conversation with the president. On Aug. 11, Duffey emailed McCusker to say, “Elaine – just got off the phone with Russ [Vought]. We are working to get a phone call with the President on this topic tomorrow to get this resolved. I will let you know as soon as I know what time it will take place.” 

Meanwhile, the email from DoD’s principal deputy general counsel isn’t the only new evidence showing that Paoletta was fully aware of DoD’s concerns. Within the batch of emails released to American Oversight are also multiple examples of Duffey forwarding his correspondence with McCusker on to Paoletta. 

This includes her Aug. 12 email to Duffey, in which she proposes adding new language to the footnote indicating the Pentagon’s concern about time running out. 

Mike, 

Current apportionment document indicates we should be executing USAI today. Will need revised written guidance asap for further pause and can no longer say the pause will not preclude timely execution. 

One option for revised language below — taking the pause from now till this Friday. I have copied our [general counsel] team above. Time is critical in getting this revised direction.

Amounts apportioned, but not yet obligated as of the date of this apportionment, for the Ukraine Security Assistance Initiative are not available for obligation until August 16, 2019, to allow for an interagency process to determine the best use of such funds. Based on OMB’s communication with DOD on August 12, 2019, OMB understands from the Department that this additional pause in obligations may not preclude DOD’s timely execution of the final policy direction but that execution risk increases with continued delays. DOD may continue its planning and casework for the Initiative during this period. 

(emphasis added)

Duffey forwarded her note to Paoletta, writing “FYSA.” To which Paoletta responded with his own “alternative language,” which basically excised the Pentagon warning:

Amounts apportioned, but not yet obligated as of the date of this apportionment, for the Ukraine Security Assistance Initiative are not available for obligation until August 16, 2019, to allow for an interagency process to determine the best use of such funds. DOD may continue its planning and casework for the Initiative during this period. 

It was after this back and forth that Paoletta complained to Vought that DoD was being “extraordinarily difficult.” 

Meanwhile, McCusker told Duffey that Paoletta, “appears to continue to consistently misunderstand the process and the timelines we have provided for funds execution.” When it released this email from McCusker, the Trump administration blacked out her words. 

As the funding hold continued into September, concerns only intensified. In a Sept. 6 email, an OMB official asked Duffey, “Did [Office of General Counsel] confirm that another extension won’t violate the Impoundment Act?” Duffey responded, “I’m waiting for the confirmation and won’t sign until I receive it.” 

Clearly, the legality of what they were doing was being questioned not just by DoD officials, but by OMB staffers too. While OMB senior lawyers, like Paoletta, kept signing off on it at the time, GAO concluded in January that holding the Ukraine funding was a clear violation of the Impoundment Control Act, and it was not a tough call. 

Why was the hold in place? Why was it lifted?

The emails also show OMB and Pentagon staffers fielding multiple requests from Capitol Hill in early August, before the hold was made public, asking: Why is the money being held up? And then, after the hold is lifted on Sept. 11, journalists start asking: What happened to get it lifted? No one seems to have any good answers.

On Aug. 23, after an OMB staffer talks with someone in the office of Rep. Mac Thornberry (R-Texas), the staffer reports, “He’s not super worked up or anything, just looking for information, but I didn’t really have much beyond our timeline here with the apportionment.” 

On Aug. 27, a journalist emailed OMB’s press office, asking about the hold on the Ukraine money, and Duffey is copied on the request. That night, he asks the press officer, “How did this go?” referring to the response to this journalist. The press officer writes back, “I am ignoring.” 

Another OMB staffer tells Duffey on Sept. 6 that someone from the House Appropriations Subcommittee on Defense is asking about Ukraine, but that they have “a couple of days to put them off,” if needed. 

What interagency review? 

In the emails, officials sometimes refer to a “deliberative” or “interagency” process taking place to review the Ukraine funding, but by early August there is no sign that any such a review is taking place. Laura Cooper, who oversees Ukraine policy at DoD, testified to House investigators that she participated in a series of interagency meetings on the Ukraine military assistance in late July, but that at these meetings unanimous support was voiced that the hold should be lifted.

“At every meeting, the unanimous conclusion was that the security assistance should be resumed, the hold lifted,” Ambassador Bill Taylor also testified

As for Ukrainian corruption, DoD had certified that Ukraine met its statutory anti-corruption requirements in May. According to Taylor, the Pentagon was asked at some point in late July “to perform an analysis of the effectiveness of the assistance,” and within a day returned its response: “The assistance was effective and should be resumed.” DoD also provided the White House with requested information about burden sharing with European allies in June and then never heard anything back about it. 

On Sept. 12, following the hold being lifted, Duffey sent draft talking points to another OMB staffer, noting that the “deliberative process” should only be referenced “if asked.” These talking points were fully redacted when the emails were released publicly.

1) The President has decided to release all military and security assistance funding to Ukraine, and the Departments of Defense and State have been notified to proceed with the obligation of those funds

2) The Administration supports Ukraine efforts of reform and self-defense, and these funds will advance Ukrainian efforts toward those ends

a)With this funding we will have provided over $1.5B to the Ukraine in 5 years

3) The administration continues to strongly encourage our European partners and allies to increase their financial support of the Ukraine’s defense in their own backyard 

[IF ASKED]

4) This was a deliberative process that the President directed to ensure the most effective use of these funds in the interests of the United States.

Even if the president were holding up the funding for legitimate policy reasons and not part of a corrupt scheme to tarnish his political opponent, he did not have the authority to do so. As GAO concluded, “Faithful execution of the law does not permit the President to substitute his own policy priorities for those that Congress has enacted into law.” 

These emails reveal that DoD was worried about exactly this and that OMB didn’t want to hear it. And now, with these redactions, it doesn’t want the public to hear it either.  

About the Author(s)

Kate Brannen

Editorial Director of Just Security; nonresident senior fellow at the Brent Scowcroft Center on International Security at the Atlantic Council. Follow her on Twitter (@K8brannen).