While Donald Trump's embrace of white supremacists and the KKK has been dominating the news headlines, special prosecutor Robert Mueller has been continuing his investigation of the Trump campaign's possible collusion with Russia and, perhaps most importantly, following the money in Trump's seemingly Russian financed projects where suspicions of money laundering abound. A very lengthy piece in The New Yorker looks at what Mueller may find and the possibility that Trump may yet try to fire Mueller if he gets too close to exposing the truth about the ugly underbelly of Trump's real estate empire. The article suggests that Trump has good reason to fear Mueller's scrutiny of his deals since many appear to (i) have ties to Kremlin cronies, and (ii) been structured to launder money. Here are article highlights:
Donald Trump’s attorney Jay Sekulow recently told me that the investigation being led by Robert Mueller, the special counsel appointed by the Justice Department, should focus on one question: whether there was “coördination between the Russian government and people on the Trump campaign.” Sekulow went on, “I want to be really specific. A real-estate deal would be outside the scope of legitimate inquiry.” If he senses “drift” in Mueller’s investigation, he said, he will warn the special counsel’s office that it is exceeding its mandate.[I]f Mueller and his team persist, Sekulow said, he might lodge a formal objection with the Deputy Attorney General, Rod Rosenstein, who has the power to dismiss Mueller and end the inquiry. President Trump has been more blunt, hinting to the Times that he might fire Mueller if the investigation looks too closely at his business dealings.
Several news accounts have confirmed that Mueller has indeed begun to examine Trump’s real-estate deals and other business dealings, including some that have no obvious link to Russia. But this is hardly wayward. It would be impossible to gain a full understanding of the various points of contact between the Kremlin and the Trump campaign without scrutinizing many of the deals that Trump has made in the past decade. Trump-branded buildings in Toronto and the SoHo neighborhood of Manhattan were developed in association with people who have connections to the Kremlin.
Other real-estate partners of the Trump Organization—in Brazil, India, Indonesia, and elsewhere—are now caught up in corruption probes, and, collectively, they suggest that the company had a pattern of working with partners who exploited their proximity to political power.
One foreign deal, a stalled 2011 plan to build a Trump Tower in Batumi, a city on the Black Sea in the Republic of Georgia, has not received much journalistic attention. But the deal, for which Trump was reportedly paid a million dollars, involved unorthodox financial practices that several experts described to me as “red flags” for bank fraud and money laundering; moreover, it intertwined his company with a Kazakh oligarch who has direct links to Russia’s President, Vladimir Putin. As a result, Putin and his security services have access to information that could put them in a position to blackmail Trump.
Trump did very little to develop the Batumi property. The project was a licensing deal from which he made a quick profit. In exchange for the million-dollar payment, he granted the right to use his name, and he agreed to visit Georgia for an elaborate publicity campaign, which was designed to promote Georgia’s President at the time, Mikheil Saakashvili, as a business-oriented reformer who could attract Western financiers. The campaign was misleading: the Trump Tower Batumi was going to be funded not by Trump but by businesses with ties to Kazakh oligarchs, . . . few Western investors or brands were willing to put money into the country. Saakashvili himself was increasingly unpopular, and the Trump deal was meant to help salvage his reputation.
Virtually none of the things that Saakashvili and Trump said about the deal were true. The budget of the Trump Tower Batumi was not two hundred and fifty million dollars but a hundred and ten. Trump, meanwhile, could hardly have invested such a sum himself. He professed to be a billionaire, but a few months earlier an appeals court in New Jersey had shut down Trump’s legal campaign against Timothy O’Brien, the author of “TrumpNation,” which argued that Trump had wildly inflated his fortune, and was actually worth less than a quarter of a billion dollars. . . . The country’s economy was floundering, and shortly after Trump’s visit it was revealed that the government had been torturing political opponents.
The developer that had paid Trump and invited him to Georgia—a holding company known as the Silk Road Group—had been funded by a bank that was enmeshed in a giant money-laundering scandal. And Trump, it seemed, had not asked many questions before taking the money.
It would have taken only a Google search for the Trump Organization to discover that the Silk Road Group had received much of its funding from B.T.A. Bank, which, at the time of the Batumi deal, was mired in one of the largest fraud cases in recent history. The Silk Road Group had even been business partners with the central figure in the scandal: Ablyazov and the Silk Road Group were two of the owners of a bank in Georgia.
When I described to John Madinger, the retired Treasury official, the various entities and transactions involved in the funding of the Trump Tower Batumi, he said, “That is what you would expect to see in a money-laundering operation: multiple shell companies in multiple countries. It’s designed to make life hard for people trying to follow the transaction.”
With minimal due diligence, Trump Organization executives would have noticed that the Silk Road Group exhibited many warning signs of financial fraud: its layered and often hidden ownership, its ornate use of shell companies, its close relationship with a bank that was embroiled in a financial scandal. Trump’s visit to Georgia occurred while his company was making a series of similar foreign deals.
Trump had defaulted on loans multiple times, and nearly every bank in the U.S. refused to finance deals bearing his name. And so Trump turned to people in other countries who did not share this reluctance to give him money. In 2012 alone, the Trump Organization negotiated or finalized deals in Azerbaijan, Brazil, Canada, Georgia, India, the Philippines, the United Arab Emirates, and Uruguay. . . . . According to former executives at the Trump Organization, the company lacked rigorous procedures for assessing foreign partners.
A month after Trump visited Georgia, he agreed to license his name to, and provide oversight of, a luxury hotel in Baku, Azerbaijan, a deal that I examined in an article in The New Yorker earlier this year. Trump received several million dollars from the brother and the son of an Azerbaijani billionaire who was then the Minister of Transportation—a man who, U.S. officials believe, may have been simultaneously laundering money for the Iranian Revolutionary Guard.
The Financial Action Task Force, headquartered in Paris, is led by representatives from thirty-seven nations. In 2007, the task force issued a report about the use of real-estate projects for money laundering. The report makes note of several red flags. It warns of “complex loans” in which businesses “lend themselves money, creating the appearance that the funds are legitimate.” It also warns of the use of offshore shell companies and tangled corporate legal structures, especially those in which third parties are hired to administer a company and conceal its true ownership. These intertwined companies can then trade property among themselves, in order to create inflated valuations: “An often-used structure is, for example, the setting up of shell companies to buy real estate.
The report states that money launderers often find that “buying a hotel, a restaurant or other similar investment offers further advantages, as it brings with it a business activity in which there is extensive use of cash.” Casinos—like the one planned for the Trump Tower Batumi—are especially useful in this regard.
So many partners of the Trump Organization have been fined, sued, or criminally investigated for financial crimes that it is hard to ascribe the pattern to coincidence, or even to shoddy due diligence. In criminal law, there is a crucial concept called “willful blindness”: a person can be convicted of a crime even if he was unaware of certain aspects of the crime in which he was engaged. In U.S. courts, judges routinely explain to juries that “no one can avoid responsibility for a crime by deliberately ignoring what is obvious.”
The Trump Organization, with its extensive experience in the luxury real-estate market, could surely sense that it would not be easy to enlist hundreds of wealthy people to buy multimillion-dollar condominiums in Batumi. I asked several New York real-estate developers to assess the proposed tower. One laughed and said that the Batumi deal reminded him of “The Producers,” the Mel Brooks movie about two charlatans who create a horrible musical designed to fail. Another New York developer, who spent years making deals in the former Soviet Union, told me, “A forty-seven-story tower of luxury condominiums in Batumi is an insane idea. I wouldn’t have gone near a project like this.”
Keith Darden is a political scientist at American University who has written extensively on the use of compromising information—kompromat—by former Soviet regimes against people they want to control. He told me that Kazakh intelligence is believed to collect dossiers on every significant business transaction involving the country. This would be especially true if a famous American developer was part of the deal, even if it would not have occurred to them that he might one day become the U.S. President. “There is no question—they know everything about this deal,” Darden said.
Darden explained that Kazakh intelligence agents work closely with their Russian counterparts.
Robert Mueller has assembled a team of sixteen lawyers. One of them is fluent in Russian, and five have extensive experience investigating and prosecuting cases of money laundering, foreign corruption, and complex financial conspiracies. The path from Trump to Putin, if one exists, might be found in one of his foreign real-estate deals.
When Mueller was appointed special counsel, his official writ was to investigate not just “any links and/or coordination between the Russian government and individuals associated with the campaign of President Donald Trump” but also “any matters that arose or may arise directly from the investigation.”
When investigating a businessperson like Trump, “you have to follow the money and go wherever it leads—you must follow the clues all the way to the end.”
While Trump's embrace of white nationalists and white supremacists may well reveal the true Donald Trump, the ensuing media storm may be welcomed by Trump as a distraction that takes media attention off of his many questionable transactions.
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