WASHINGTON, June 2 (Reuters) - Robert Mueller, the special counsel investigating possible ties between the Trump election campaign and Russia, is expanding his probe to assume control of a grand jury investigation into former national security adviser Michael Flynn, three sources told Reuters.
The move means Mueller's politically charged inquiry will now look into Flynn's paid work as a lobbyist for a Turkish businessman in 2016, in addition to contacts between Russian officials and Flynn and other Trump associates during and after the Nov. 8 presidential election.
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Federal prosecutors in Virginia are investigating a deal between Flynn and Turkish businessman Ekim Alptekin as part of a grand jury criminal probe, according to a subpoena seen by Reuters.
Alptekin's company, Netherlands-based Inovo BV, paid Flynn's consultancy $530,000 between September and November to produce a documentary and research on Fethullah Gulen, an exiled Turkish cleric living in the United States. Turkish President Tayyip Erdogan blames Gulen for a failed coup last July.
Alptekin, an ally of Erdogan, told Reuters he hired Flynn to provide research on how Gulen is "poisoning the atmosphere" between Turkey and the United States.
Gulen has denied any role in the coup and dismisses Turkey's allegations that he heads a terrorist organization.
The grand jury in Virginia has issued subpoenas to some of Flynn's business associates involved in the work for Inovo, two people familiar with the probe say. The subpoena seen by Reuters seeks bank records, documents and communications related to Flynn, his company, Flynn Intel Group, Alptekin and Inovo.
Flynn's lawyer, Robert Kelner, did not respond to questions about Flynn's work for Inovo or Mueller's investigation. A spokesman for Mueller declined to comment.
Alptekin declined to comment when asked about the investigation into Flynn and whether he or anyone he knows has been subpoenaed.
Mueller's move to take over the Virginia grand jury's criminal investigation highlights his broad powers as special counsel. Reuters could not determine when the grand jury was first convened, but its existence has been previously reported.
Until now the investigation has been led by Brandon van Grack, an espionage prosecutor in the Justice Department, and federal prosecutors from the Eastern District of Virginia.
It is not clear whether Van Grack and others who have been working on the case will continue to do so.
Deputy U.S. Attorney General Rod Rosenstein appointed Mueller, a former FBI director, on May 17 to oversee an investigation into any links or collusion between Russia and individuals associated with the Trump campaign. Rosenstein also gave him authority to pursue "any matters that arose or may arise directly from the investigation."
Some members of Congress have asked the Justice Department to define the scope of Mueller's inquiry.
Mueller's appointment followed an uproar over Trump's firing of FBI Director James Comey, who had been investigating alleged Russian meddling in the 2016 election. Democrats and some of the president's fellow Republicans had demanded an independent probe of whether Russia tried to sway the outcome of November's election in favor of Trump and against Democrat Hillary Clinton.
Trump, who has said there was no coordination between his campaign and Russia, has decried the investigation as a "witch hunt."
One of Trump's most trusted aides during the election campaign, Flynn had a long career in the military. He set up the Flynn Intel Group, an Alexandria, Virginia-based intelligence consultancy, after President Barack Obama dismissed him as head of the military's Defense Intelligence Agency in 2014.
Mueller, who takes over leadership of an FBI investigation that began last July, can present evidence to grand juries and hear testimony from witnesses.
Trump fired Flynn in February after it became clear that he had falsely characterized the nature of phone conversations he had with Russian ambassador Sergei Kislyak in December, just after the Obama administration imposed new sanctions on Russia for what U.S. intelligence agencies had concluded was a Kremlin-led effort through computer hacking, fake news and propaganda to boost Trump's chances of winning the White House.
Flynn's work for Inovo came under scrutiny after he published a commentary on a political news website on Election Day calling Gulen a "radical Islamist" who should be extradited to Turkey.
Along with the editorial, the Flynn Intel Group also produced a 75-page report on Gulen based mainly on news reports and some video footage for a documentary that was never made, according to three people familiar with the project.
Alptekin, who is chairman of the Turkey-U.S. Business Council, told Reuters he was satisfied with Flynn's research because it had helped him understand how Gulen's network operates in the United States.
He said the $530,000 payment to Flynn's firm came "mostly" from his personal funds. The rest came from Inovo's corporate revenues, Alptekin said.
On Nov. 18, the day after Flynn was appointed Trump's national security adviser, Trump transition team lawyer William McGinley raised concerns on a call with the Flynn Intel Group and others involved in the Inovo project over who had paid for Flynn's commentary, according to two people with knowledge of the conversation.
Flynn did not participate in that call, they said.
At the time of the call, Flynn had not disclosed that his work for Alptekin meant he was being paid to represent Turkish interests during the election campaign. Flynn Intel Group had said in a September 2016 filing that it was lobbying for Inovo but did not disclose its Turkish links. In March, Flynn retroactively registered under the Foreign Agents Registration Act.
In a letter accompanying the March filing, Flynn's lawyer, Kelner, said the disclosure was being made because Flynn's work for Inovo "could be construed to have principally benefited the Republic of Turkey," which he noted was seeking to extradite Gulen.
The House of Representatives intelligence committee, which is also investigating Russian interference in the election, subpoenaed records from Flynn on Wednesday. The Senate's intelligence committee, which has a separate probe under way, has also served subpoenas on Flynn and two of his businesses, and earlier this week Flynn indicated that he would start turning over relevant materials. (Additional reporting by Julia Harte in Washington, editing by Kevin Krolicki and Ross Colvin)