Podesta Group faces uncertainty as CEO exits

Podesta Group faces uncertainty as CEO exits
© Greg Nash

Kimberley Fritts’s last day as chief executive of the Podesta Group was Friday, as she begins work on launching a new firm.

The move is creating new uncertainty for the Podesta Group following the departure of its founder, longtime Democratic operative Tony Podesta, on Oct. 30. Podesta stepped away after he and the firm were pulled into special counsel Robert Mueller's Russia investigation.

Fritts announced her exit at an all-staff meeting late Thursday afternoon.

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Multiple employees who spoke to The Hill but asked to remain anonymous said the mood at the firm is mostly optimistic, though some noted that many of the firm's dozens of employees could be in limbo as the new firm Fritts is setting up makes its staffing decisions.

Politico first reported details of the meeting on Thursday evening.

Fritts's resignation puts in motion a plan first unveiled last week. She will be creating a new firm and bringing Podesta Group talent and clients with her. 

There have been talks over the last several months, as far back as April, about the next steps for the firm. But only a few knew what would happen last week.

“It was never clear until Tony stood up and said that he was resigning,” said one source familiar with the talks. 

“It wasn't clear until it happened,” the source added, saying that some have been “bewildered at how quickly” the process has gone.

The transition to the new firm will be in weeks, not months, staff say.

Neither Fritts nor a representative for Podesta returned a request for comment.

Higher-ups at the firm have been working to keep as many clients as possible. A second Podesta employee said they have mostly received a positive response from clients.

There have been internal announcements of other planned departures, according to one source, and other K Street firms are likely trying to woo some of Podesta Group's lobbyists and public affairs team. 

At least one Podesta principal, Paul Brathwaite, has announced plans to hang a shingle of his own. 

“The overwhelming majority of folks here want to be a part of this new entity [with Fritts]. I think some will make other decisions,” a third Podesta employee told The Hill, “everyone has to do what's right for them.”

But the changes are sparking new questions. Foremost, what will happen to Podesta Group if the new firm, whose name has not been revealed publicly, takes away a significant portion of its employees and client base.

A fourth person told The Hill on Thursday that although Podesta has stepped away, he's not expected to quit altogether. 

Podesta reportedly told staff last week that he “wouldn’t go quietly,” according to Politico.

A representative for Podesta did not respond to questions from The Hill about his future or the firm's. But Podesta told The Washington Post he's taking some time off to travel and refresh.

"I'm not bowed. I'm not retreating," he told the Post, saying he'll be back throwing parties and holding political fundraisers. "These are perilous times for the country and for the world. I hope we get through them."

In the meantime, the Podesta Group is trying to continue with business as usual.

“The fact of the matter is ... the vast majority of the client managers are still here,” the first Podesta employee told The Hill.

But the employee also added: “I've taken all the pictures off my wall because I'll be moving at some point or another.”

Employees are discussing what may happen next, one source said, both openly and behind closed doors. But largely, work at the firm is moving forward as normal.

“The client work goes on, everybody's dealing with it. I have the exact same team working on clients that I had three weeks ago,” the source said. “So we're all waiting to see what happens as this evolves.”

Podesta and his firm, the Podesta Group, have been thriving for more than three decades, becoming a powerhouse K Street firm known for both lobbying and — increasingly in recent years — public relations. 

Although largely billed in media reports as a Democratic-leaning firm because of the Podesta name and his presence at the firm and in Washington, Fritts — a Republican who worked on Jeb Bush's Florida gubernatorial campaign — has been running the day-to-day activities as CEO since 2007.

“There's a big difference between working for someone and being the captain of the ship,” said the third Podesta employee. “In the coming weeks as this thing comes together, I think that will be very clear."

“Tony Podesta built an amazing business, he has proven himself over and over again,” the employee added. “It got to the point where clients and people over here felt it was time for a change.”

Two people told The Hill that the issues surrounding the firm had become a “distraction.”

Podesta stepped away from his firm on the same day Paul Manafort, a longtime lobbyist and foreign consultant who was President Trump's campaign chairman, was indicted in Mueller's Russia probe.

Podesta Group was one of the firms mentioned in the indictments against Paul Manafort, described as "Company B."

Prosecutors allege that Manafort and his deputy Richard Gates knowingly evaded lobbying disclosure laws by doing work for a nonprofit called the European Centre for a Modern Ukraine.

Mueller has targeted the Podesta Group and another K Street firm, Mercury, because the two worked with Manafort to help the nonprofit with lobbying from 2012 to 2014. The nonprofit had ties to a pro-Russia Ukrainian political party. 

Although Podesta and Mercury disclosed the work under domestic lobbying disclosures, both firms retroactively registered with the Justice Department earlier this year, under a law governing U.S. advocacy for foreign governments, political parties or political officials. Their disclosures attest that the advocacy ultimately benefitted the Ukrainian government. 

Both firms have said they had the client vetted by attorneys prior to choosing not to register as a foreign agent, and have signed affidavits from the client saying that no funds came from any foreign political entity.

Those at the Podesta Group say they just want to return the focus to their work.

“There are a bunch of people here who just want to get back to doing what we do best,” the second Podesta employee told The Hill last week.

“This group believes we should always win on the merits, and that whether we were sufficiently transparent with the government should never, ever, be an issue. We want this behind us.”