Trump’s Real Estate Deals Took Money From Russian Crooks

The U.S. president's connections to alleged and actual gangsters are immense

Trump’s Real Estate Deals Took Money From Russian Crooks Trump’s Real Estate Deals Took Money From Russian Crooks
This is part two of a two-part series. Read part one. By the mid-2000s, Donald Trump was having a hard time finding investors. He... Trump’s Real Estate Deals Took Money From Russian Crooks

This is part two of a two-part series. Read part one.

By the mid-2000s, Donald Trump was having a hard time finding investors. He had just declared bankruptcy in 2004 for one of his major casino businesses to the tune of $1.8 billion in debt–and would declare another bankruptcy in 2009–and all major Wall Street lenders stopped offering Trump loans, in part because of his frustrating and suspicious business practices.

That is, all but one–Deutsche Bank. Yet even that relationship “frayed” starting in 2008 because of Trump’s untrustworthiness as a business partner.

So Trump was clearly hurting for investment after that 2004 bankruptcy, and yet, somehow, by 2008, Donald Trump, Jr. was able to publicly remark that “Russians make up a pretty disproportionate cross-section of a lot of our assets” and that “we [i.e. the Trump Organization] see a lot of money pouring in from Russia.”

This was a time when Trump was aggressively courting Russian business. In fact, a report from Reuters noted how in just seven Trump luxury towers in southern Florida, 63 Russian passport/address-holders have bought $98.4 million in property. They include “politically connected businessmen and other elites,” though “none of the buyers appear to be from Putin’s inner circle.”

One buyer, Alexander Yuzvik, was senior at Spetstroi, a Russian state-owned company that has done construction for Russian military and intelligence agencies, including the GRU and the FSB, with Yuzvik stepping down in March 2016.

The above figures may even be a conservative estimate–at least 703 out of 2,044 of the units in the seven towers were owned by limited liability corporations (LLCs), often designed to mask their owners’ identities. Many owners’ nationalities could not be identified, and Russian-Americans without a Russian passport/address were not included.

One of Trump’s point men in these efforts was Felix Sater, the son of a mob captain of Russian mobster Semion Mogilevich. The offices of Bayrock, Sater’s real estate company where he was Chief Operating Officer and eventually the dominant force within, were even in Trump Tower itself.

Donald Trump

Sater, a man with a violent and criminal past of his own, had himself previously been caught up in an elaborate $41 million stock fraud scheme on Wall Street that had used the Russian mob to launder money when Mogilevich was active in large-scale stock fraud and laundering in the North America.

Sater ended up assisting U.S. authorities for years, even, apparently, on CIA-related national security issues involving missile terrorism-related purchases in either Afghanistan or Russia, and the details on all this remain something of mystery. His operations with the government remain secret and the juiciest details of the Wall Street case were sealed and remain so despite repeated efforts to unseal them.

They were sealed at the time, interestingly enough, by Loretta Lynch, then-U.S. Attorney for the Eastern District of New York, who just stepped down as U.S. Attorney General the day Trump was inaugurated president.

As a result, there is also virtually no information on the specifics of the Russian mafia’s activities in Sater’s Wall Street scam, but there is a reasonably good chance or even higher that Mogilevich was running the Russian mob’s involvement in it, or was at least involved, since he was actively pursuing similar schemes in the United States at the time.

Now, that last point should not be taken lightly, considering that, just a few years later, Mogilevich was a primary actor in laundering billions of dollars on behalf of Dmitry Firtash, Paul Manafort and Viktor Yanukovych. Is it more or less likely that he would turn to an old connection—one with experience laundering money who had come to have the favor of the U.S. government, no less—for help?

Even without the Wall Street capers, Sater would have been an attractive candidate based on family ties alone, as would his nominal entry into real estate, as the real estate market in the United States has been an ideal avenue for money laundering for some time and is a top concern of U.S. officials, in part due to lax state, local and federal laws.

Sater began working with Trump in the early 2000s, trying to help him land real estate deals in Moscow, even showing Ivanka and Donald Trump, Jr. around the city in 2006 and introducing the Trumps to influential Russians. None of these potential Moscow deals ever went through.

But a number of deals in the United States between Trump and Bayrock produced a far more interesting—and incriminating—history.

Trump SoHo. Orijinal photo via Flickr. At top–Photographing Travis via Flickr

The Trump-Sater-Bayrock deals

Sater’s most famous partnership with Trump was an infamous deal to develop a SoHo property in Manhattan.

The deal was concocted in 2006 by Trump, Sater and two other partners from former Soviet states. One was Bayrock chairman Tevfik Arif, an ex-Soviet government official from Kazakhstan whose built a fortune in the rare metals trade. The other was Tamir Sapir from Georgia, who studied at the academy of the Soviet Ministry of Internal Affairs and later established ties to numerous important Soviet officials after immigrating to the United States.

Sapir, whose wealth had long been subject to rumor-fueled suspicion, had introduced Trump to Bayrock. His former business partner had also pleaded guilty to racketeering conspiracy charges spanning 13 years with the Gambino crime family.

It turns out that the SoHo deal had a significant portion of its Sater-and-Arif facilitated financing—some $50 million for it and three other projects—flow from the Iceland-based firm FL Group linked to the Panama Papers revelations and widely known as a hub for the money of Russian elites “in favor with Putin.”

Financing for these projects was also secured from Alexander Mashkevich, a Kazakhstani billionaire with a history of money laundering.

Considering Sater had helped pave the way for this investment and recalling his Mogilevich connection, it’s reasonable to question whether some of the money coming in from Russia was tied directly or indirectly to the aforementioned Eurasian gas scheme, as this period was especially a time when Putin-aligned Russian businessmen and operating through Manafort, Firtash and Mogilevich were aggressively trying to funnel money away from the prying eyes of the Ukrainian government.

Besides the Russian financing, some of the transactions involving the property were clearly carried out by shell corporations for the purpose of laundering money, transactions from which Trump profited. The SoHo deal was also structured to cheat the U.S. government out of tens of millions in taxes, as the investments were illegally restructured as loans to avoid paying hefty taxes on them–loans that would also give FL Group a big chunk of theoretical future profits over time.

In the end, the deal went terribly for Trump, who was sued for fraud—his children Eric and Ivanka had inflated the level of interest in order to attract buyers—and in a 2011 settlement, he refunded 90 percent of the deposits on the building’s condos.

One must wonder why likely Russian investors were so eager to invest $50 million in this deal, and if it was an excuse to launder money rather than an actual investment, as was the case with the Park Avenue deal involving Manafort.

Even as construction on Trump SoHo began in 2007, another of the Trump/Bayrock projects was rising in Fort Lauderdale, Florida. This one, the Trump International Hotel & Tower, would also result in disaster and lead to more than a dozen lawsuits, with more than 100 condo buyers suing for $7.8 million.

The project was supposed to have been completed by the end of 2007 but fell way behind schedule. Sater and his Bayrock partners secretly and seemingly cashed out their stakes in this project and several others—including the SoHo project—in a move specifically approved by Trump. Trump eventually pulled his name from the project, and when its buyers learned this in May 2009, this only increased their outrage and added to lawsuits accusing Trump and Bayrock of fraud.

As in the SoHo deal, confidential settlements ensued, and Trump refused to accept any responsibility, blaming the problems on the economic crisis. Florida courts declined to rule that Trump or his partners had committed fraud, including a state appeals court in 2016.

The project finished years late, cost some $200 million, and was eventually sold for merely $115 million at a foreclosure auction. And while the evidence of money laundering in this cause is not as explicit or solid as the information publicly reported on in the SoHo deal, it is still a similarly structured deal with the same partners that led to a similarly dubious result.

Another Bayrock partnership with Trump in Fort Lauderdale was originally conceived of as the Trump International Beach Club. Arif provided an initial $2 million in capital in 2003, and from that point, Sater and Arif conned a friend of Arif’s who was also Sater’s landlord, lying about the value of the club, hiding their own investment in the project, and convincing the landlord to provide a $1 million investment for a mere four percent of the club, allowing them to make a 1,125 percent profit on her investment.

As in the SoHo deal, they illegally labeled the investment a loan to avoid paying taxes on it and were using their fraud to hide skimming $1 million off the top. When the project finally generated income in 2005, they defrauded their partner of her rightful share, who then filed a lawsuit in 2006.

The project was apparently eventually reconceived of as the Trump Las Olas Beach Resort, but Trump suspended it in a declining market in October 2007. Another deal among the four which received FL Group financing was a failed project that never even got off the ground in Phoenix, Arizona.

Trump began eyeing Phoenix’s Camelback area for a luxury residential tower back in late in 2003. Trump’s team, and then Trump himself, met with the mayor, who wasn’t impressed with Trump, and at a meeting in January 2005, local residents showed up to argue against the development. Yet by September, the appropriate city bodies had approved the plans.

Sater’s associates relied on intimidation, bribery and deception as tactics to deter residents from gathering enough signatures to force a public referendum that could override the city’s approval. Under this pressure, the city council voted to reverse its decision and pressed the developers and the neighborhood association to reach a compromise, at which point Trump himself abandoned the project, not wanting to be part of anything that would be scaled down any further in scope and ambition.

Ernie Mennes, the owner of the Camelback property who had gone into a partnership with the Bayrock/Trump developers, sued Bayrock in 2007 in federal court, accusing Sater of threatening to “cut off his legs and leave him ‘dead in the trunk of his car’” and of stealing money from the project for himself.

The judge oversaw a settlement and the case was sealed, likely because of Sater’s special relationship with the government. This property was part of the $50 million pseudo-offloading to FL Group, and by June 2009, Bayrock was relieved of the property, which it had left $36 million in debt, when it was “sold out from under” the company at a trustee auction for a mere $10 million.

The final in the group of four projects was a Waterpointe property in Queens that apparently did not involve Trump but is still illustrative of general Bayrock practice. Bayrock bought the property in 2008 for $25 million, but the land was contaminated. Bayrock then had to have the contaminated soil replaced–which it did with other contaminated soil–and was fined $150,000 for doing so.

Eventually, Bayrock sold the property for only $11 million, losing over half of its investment.

As for FL Group, it failed in spectacularly 2008, along with Iceland’s other major banks during the great global financial meltdown.

In an initial lawsuit filed with the New York State Supreme Court in May 2013, former and then-business partners of Sater’s at Bayrock—Jody Kriss and Michal Ejekam—sued Sater and his accomplices for damages and nonpayment related to Sater’s hiding of his past and his use of Bayrock primarily as a vehicle for criminal activities.

In this suit, Donald and Ivanka Trump and the Trump Organization are named as defendants, and the federal government is accused of illegally concealing Sater’s past crimes in such a manner that contributed to him defrauding victims.

The New York State Supreme Court removed the Trumps from the suit. They had been the lowest levels of defendants and the plaintiffs had only sought declaratory relief in regards to them–i.e. they asked the court to determine what liability the Trumps had in regards to the case, and they were removed “without prejudice.”

Felix Sater

Taken together, these examples amount to catastrophic losses and colossal mismanagement on the part of Sater and Bayrock and, at the very least, gross negligence and incompetence on the part of Trump. At most, he might have been aware of some of what was going on and turned a willful blind eye, or, even worse, he might have been in on it, though no evidence exists that proves this.

The performance of Bayrock was so bad, one would not be faulted for concluding they did not care at all about performance. If that were the case, it’s possible these schemes were designed to move large amounts of money, often Russian-tied, into temporary projects that never came to fruition, but that would benefit Sater, Trump and others high-up in the deals, but rarely if ever the investing partners outside this upper echelon.

Furthermore, since FL Group was a stupendously bad performer even by the standards of the 2008 financial crisis, and given its close ties to Kremlin-connected Russian money, one could also be forgiven for thinking there was something more going on there than met the eye.

Sater’s history also reveals him to be a cunning person–one who has been busted multiple times by law enforcement but has not served jail time in America with the exception of one year for stabbing a man in the face with a margarita glass. Or as Trump put it under oath, Sater “got into a barroom fight, which a lot of people do.”

Sater’s saga

None of this stopped Sater from being brought into the Trump Organization in 2010 as a “Senior Advisor to Donald Trump” even after Trump was made aware of Sater’s criminal past. For his part, Trump has issued his typically contradictory and slippery statements—more aptly called lies—in regards to these dealings and, in particular, his relationship to Sater.

And there is no distancing Trump from Bayrock. One of Bayrock’s flagship presentations from 2008 lists its three Trump-named projects discussed above, and lists the Trump Organization as its first “strategic partner,” Donald Trump as its first “reference” and “Trump Tower” in New York as its address.

The Huffington Post also recently discovered that Sater owns three companies—Global Habitat Solutions (GHS), United Biofuels Company LLC, and Sands Point Partners GP LLC—that are apparent fakes that “sell no products and have no customers.”

GHS had collaborated with another company named Titan Atlas in promoting itself, a company co-founded by Donald Trump, Jr. and in which Trump, Jr. also invested. Sater used promotional images from Titan Atlas’ website for GHS’s own after Trump, Jr. introduced him to Titan Atlas’ other co-founder, Jeremy Blackburn. The company is now controlled by another company owned by the Trump Organization and run by Trump, Jr. since his father became president.

Sater even donated the maximum amount allowed to Trump’s 2016 presidential campaign. All the while, the White House is using Sater as a back-channel diplomatic go-between for Trump’s person lawyer, Michael Cohen, and pro-Putin Ukrainian legislator Andrii Artemenko, who are discussing a Ukraine “peace plan” being pushed by close Putin aides. Artemeno also claims he has information damaging to Ukrainian president Petro Poroshenko,

In an only partially-verified dossier on Trump compiled by a respected ex-MI6 British intelligence officer, Christopher Steele, Cohen is said to have secretly met with Russian government officials during the late stages of the presidential campaign, though it is not clear if this—or what—specific information has been corroborated by U.S. officials, with journalists having been unable to thus far verify the information on Cohen, who denies playing this role.

One reason information about Sater and his past misdealings are publicly available is because of the intrepid efforts of two of the lawyers who often represented plaintiffs against Sater in court–Richard Lerner and Frederick Oberlander.

During the 2013 lawsuit filed by Sater’s former business partners, Assistant U.S. Attorney Todd Kaminsky was included in these accusations for illegally aiding and covering up for Sater. Preet Bharara, the U.S. Attorney for the Southern District of New York, ended up being involved tangentially by defending him in his capacity as a U.S. Attorney, trying to moving the suit from the state court system to SDNY jurisdiction.

Ultimately, the case was moved because of Sater’s ties to the government, not Kaminsky. Once in the hands of the Federal Court, Kaminsky was removed without prejudice from the proceedings.

Which bring us to one of the untold stories of this election, and one which may never be told in full–how Sater’s cooperation with the government gave him protection from being held liable in many cases for his misdeeds while also helping to suppress information about him.

That the public, including Trump’s and Bayrock’s clients and customers, were kept in the dark about Sater because he cooperated with the U.S. government, adds quite a what-if twist to the tale of Trump and his dramatic rise over the last decade to become the most powerful man in the world.

What if the government hadn’t protected Sater, and all that evidence was out in the open while Trump and Bayrock were courting buyers and were fighting court battles? What would that have done to Trump’s reputation if he became most known for defrauding customers and money laundering with a Russian mafia-deluged violent felon?

In a much less chaotic, less exciting world than the insanity that confronts us today, one can be sure such a salacious story involving a playboy New York tycoon would have been front, center and dominant in national and international media coverage. Lawsuits, trials and investments may also have gone differently for Trump if such information was common knowledge, too.

This abetting may very well be unwitting, but the two aforementioned lawyers—Lerner and Oberlander–believe differently, that Sater fooled and tricked the government into helping him in exchange for dubious assistance of questionable value; and that this arrangement may have been such an embarrassment for the government that they covered up Sater’s past to save face and protect the careers of those involved.

No court rulings have affirmed these assertions, yet it is notable that in the U.S. Supreme Court proceedings involved in arguing over Sater’s information being withheld from the public, the court tacitly admitted that at least some of the points made by Lerner and Oberlander were valid when they ordered many of the documents surrounding Sater be made public–the only reason that much of information about him is now publicly available.

PhotographingTravis photo via Flickr

Epilogue of intrigue

As for Arif and Mashkevich, two other major players in the whole saga, Arif was arrested in Turkey in September 2010 when he was at a sex party with apparently underage girls on board a yacht–which had been once belonged to none other than Atatürk–under suspicion of running a complex prostitution and human trafficking ring in a scheme of which it seems Mashkevich was also a part.

Arif was later acquitted under mysterious circumstances and Mashkevich was not charged.

Going back to Trump’s sole major Wall Street lender, Deutsche Bank, since 2012, it has loaned Trump more than $300 million, a sum that is still owed.

This amount presented a major conflict of interest for the newly inaugurated President Trump in late January 2017, because Deutsche Bank was under investigation by the U.S. Department of Justice for orchestrating $10 billion in illegal fake trades from 2011-2015 that might have been part of a massive Russian money laundering scheme.

U.S. and U.K. officials levied $630 million in massive fines against Deutsche at the end of January 2017, but DoJ was not part of this and is still investigating, raising the question of the independence and impartiality of Trump’s own new Attorney General, Jeff Sessions, himself under fire for possible improper interactions with Russian officials.

Deutsche Bank itself is under pressure to allow an independent investigation into Trump’s accounts, even after its own investigation apparently found no link to Trump’s accounts and Russia.

Deutsche Bank was also involved in another major laundering scam of Russian money to the tune of $24 million, including the specific division that Trump owes $300 million, with the overall laundering scheme involving dozens of Western banks and a sum ranging from $20-$80 billion through the years 2010-2014.

The hundreds involved in the scheme include Russian oligarchs and the FSB, with Putin having longstanding intimate ties to both and with some of the money in the scheme apparently being used to further Putin’s and Russia’s interests.

As if there weren’t enough bad connections to Trump Tower, Russian mafia boss and apparent all-around celebrity Alimzhan Tokhtakhounov was overseeing an illegal high-stakes international gambling ring for wealthy clientele that in part operated out of Trump Tower in New York.

Among other prolific activities, Tokhtakhounov had gained notoriety for apparently fixing 2002 Olympic ice skating matches to help get a gold medal for a fellow Russian, as well as one for a pair of French skaters in exchange for a French visa, but was soon after in Russia and safe from prosecution.

The gambling ring connected to Trump Tower, run by two of Tokhtakhounov’s associates, Vadim Trincher and Anatoly Golubchik, was popular with Russian and Ukrainian oligarchs in both Russia and Ukraine. Besides the gambling ring, they also engaged in some $100 million in money laundering.

Trincher himself in 2009 bought an apartment in Trump Tower just below an apartment owned by Trump himself, in which he nearly held a fundraiser for Newt Gingrich two years later, but had to cancel because of a mold problem and a water leak.

Another linked gambling/laundering ring was run by one of Trincher’s sons, who owned an entire floor in Trump tower, and another son of Trincher’s ran multiple illegal poker rooms throughout New York City.

An indictment naming Tokhtakhounov and his associates was filed by U.S. Attorney Preet Bharara, who Trump fired in March 2017.

It should be noted that several of the past and ongoing cases involving Trump and/or his associates occurred in the jurisdiction of SDNY, and that a number of potential future cases would also occur there if they moved forward and would have been handled by Bharara if he had not been fired by Trump in March 2017.

It was Bharara’s indictment that led to a 2013 raid on Vadim Trincher’s Trump Tower apartment, and arrests made there and elsewhere nabbed 29 suspects. A mere seven months after he was indicted, a nonchalant Tokhtakhounov was a red-carpet VIP guest at Trump’s 2013 Miss Universe Pageant in Moscow, a city where, to this day, he is regularly seen at trendy public places.

We also have the curious case of the Trump’s fabulously ostentatious mansion—the “Maison de l’Amitie”—in Palm Beach, Florida, that he bought back in 2004 for $41 million.

A representative of Trump claimed Trump put $25 million of his own money into renovating the house, but this is doubtful. The improvements appeared to be relatively minor, and typical of Trump, he seemed to be lying through his teeth. When taking a local reporter on a tour, he claimed he installed gold fixtures in bathroom, but when the reporter scratched a faucet, gold paint came off.

Trump set his asking price at $125 million when he listed the property early in 2006, but had trouble finding a buyer. Then in March 2008, he brought his price down to $100 million, but it still wasn’t until that July that he got Russian oligarch billionaire Dmitry Rybolovlev to buy the mansion for $95 million after some haggling in a deal said to be the largest U.S. residential real estate deal ever.

If you’re thinking that Trump might have swindled Rybolovlev, that’s very possible. He has a habit of falling for tricksters, especially when it comes to art deals. The house was appraised at less than $59.8 million in 2013, and though it rose to $81.8 million in the summer of 2016, which was still about 15 percent less than what he had paid.

Just months after Rybolovlev bought the house, he ended up in a messy divorce drama with his wife, who was after the house. There are also plans to demolish the house, and Rybolovlev has not physically entered it.

But unlike other major Russian oligarchs doing business with Trump or his allies, either directly or indirectly, Rybolovlev is no apparent friend or ally of Putin or the Russian mafia, which seems to put this story in the category of mere trivial.

Then again, multiple reports that Rybolovlev’s private jet had repeatedly been tracked to cities where and when candidate and later president Trump was–Las Vegas in October, just five days before Election Day in North Carolina, and in Miami in February, creating a sense of intrigue. One might be tempted to say this is meaningless, yet on top of this, his accounts of the mansion deal have changed, making people wonder if he has something to hide.

And oh, we just found out that during the campaign, Republicans paid a private intelligence firm that works closely with an ex-K.G.B. officer to dig up dirt in Clinton. And another Russian businessman, Alexander Torshin–who the Spanish Civil Guard describe a Russian mafia godfather–abruptly canceled a meeting with Trump in February 2017, according to El Pais.

Not a pretty picture

Sorry, Trump fans, but it’s time a reality check. It’s more likely that you will soon be struck by lighting than that all of these threads tied together by a Russian mafia godfather end up as innocent, harmless coincidences when it comes possible connections between Team Trump and Team Putin.

It is also crucial to note that the whole Russian operation in Ukraine—using Russia’s natural resources, deals related to them, and the profits from selling them to influence political elites of other countries along with hacking—is hardly unique to Ukraine.

Putin is trying to do much the same thing throughout Europe, and it was clear he successfully threw his weight around last year during the U.S. election to help Trump win.

Such hybrid warfare and “Cold War”-type methods being directed at America should not only not surprise Americans, it should be expected. And it seems that, along with Manafort and Page, the record-fast-recently-resigned National Security Advisor Michael Flynn and longtime Manafort and Trump confidante Roger Stone are all under an official FBI “counterintelligence”—to use FBI Director James Comey’s exact word—investigation.

Manafort, Page and Stone have all volunteered to testify before Congress. Should those hearings be public, that would be epic.

Brian E. Frydenborg is a freelance writer and consultant based in Amman, Jordan. You can follow him on Twitter: @bfry1981. This is a condensed and edited version of the original story. The full version with expanded analysis is available here.

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