The Kremlin’s Man: How Donald Trump’s Businesses are Financed by Russian Cash (Part 2 of 5)

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The Kremlin’s Man: How Donald Trump’s Businesses are Financed by Russian Cash (Part 2 of 5)

Time and time again, Donald Trump has proven that he will get into bed with anyone in order to make a buck. From constructing a hotel in Azerbijan built with a partner from the government ministry whom U.S. diplomats suspect launders money for Iran’s military, to one under criminal investigation in Brazil, to investments under serious scrutiny in Turkey, Toronto (more on that later), Scotland and Ireland, among many others—it is clear that Trump is not as discerning about his business partners as his bluster indicates.

His extensive dealings in Atlantic City could not have been done without help from the mob, and he has intimated as such, when he told Chris Matthews last February:

“I’ve known some tough cookies over the years. I’ve known the people that make the politicians you and I deal with every day look like little babies.”

Upon his initial foray into Atlantic City, he partnered with Kenneth Shapiro and Daniel Sullivan. The former was a bag man for Philadelphia’s Scarfo crime family, while the latter was a mafia associate-turned FBI informant. However, when he was looking to acquire a gambling license in 1982, Trump told regulators that he didn’t “think there was anything wrong with [Shapiro and Sullivan]” and that they “have been in Atlantic City for many, many years and I think they are well thought of.”

Yet, a year before that, Trump spoke with FBI agents, and per the memorandum produced from that meeting, “Trump advised Agents that he had read in the press media and had heard from various acquaintances that Organized Crime elements were known to operate in Atlantic City…Trump advised that he wanted to build a casino in Atlantic City but he did not wish to tarnish his family’s name.”

As his infamous bankruptcies demonstrate, Trump did build casinos in Atlantic City, and this was simply the start of his relationship with organized crime figures. His mentor—Roy Cohn—who is most well-known for being Senator Joseph McCarthy’s chief witch hunter, also advised a litany of mafia figures after leaving public life for a private practice on East 68th Street in New York City. Some of his clients included Anthony “Fat Tony” Salerno and Paul “Big Paul” Castellano among many other mobsters. According to Wayne Barrett’s 1992 book Trump: The Deals and the Downfall, Cohn told a reporter that Trump called him “fifteen to twenty times a day, asking what’s the status of this, what’s the status of that.”

With Cohn’s help, Trump’s Grand Hyatt New York on East 42nd street was practically built by the mafia. According to the FBI, the demolition company was secretly owned by a top Philadelphia mobster with extensive ties to Atlantic City; Biff Halloran—who was later convicted in a price gouging racket run by the mob—poured the concrete for the hotel; and the carpentry contract was given to a Genovese family-controlled enterprise, as later discovered through a federal probe.

Donald Trump  partnered with John Staluppi, and slapped his name on a line of stretch limousines for his casinos. According to the FBI, Staluppi was a made member of the Colombo crime family, yet Trump claimed to know nothing about Staluppi’s mob ties. Trump’s ties to another mafia figure he claimed to not know—Joseph Weichselbaum—are much more extensive. While living out of Trump Tower in 1986 (part of his rent was paid by allowing Trump access to his fleet of private helicopters), Weichselbaum plead guilty to federal charges of cocaine smuggling. Trump and Weichselbaum were so close that Trump provided a letter to the court on behalf of his friend as someone who was “conscientious, forthright and diligent.” After his three-year sentence ended, Weichselbaum came home to an even nicer apartment at Trump Tower, and when Trump was asked about his letter to the judge by casino officials in 1990, he said he did not remember writing it.

Robert LiButti was such a heavy hitter at Trump’s casinos that they complied with his wish to not have any African Americans or women deal while he lost over $20 million at his tables between 1984 and 1990. Trump’s casinos were subsequently fined hundreds of thousands of dollars for these violations, and in 1991, LiButti was banned from Atlantic City entirely as regulators concluded that he was an associate of John Gotti—the boss of the Gambino crime family. When a reporter later asked Trump about LiButti, Trump responded: “I wouldn’t know him if he was standing in front of me.”

Now to be fair, no federal probe has ever labeled Trump a “mob associate,” which is what the FBI calls someone under the sway of organized crime, but Trump clearly has a pattern of getting into bed with bad dudes and conveniently forgetting about them when it eventually blows up in his face. So if you are of the opinion that any Trump-Russia business connections are farfetched, ask yourself, if he’ll tie himself to almost any member of the Italian mob, what’s stopping him from working with people connected to the Russian mafia? (who are inherently tied to Russian oligarchs, who are inherently tied to the Kremlin)

Bayrock

“I don’t settle lawsuits—very rare—because once you settle lawsuits, everybody sues you.” — Donald Trump in March 2016

In part one, I chronicled Trump’s statements related to Russia over the years, and in the late 2000’s, he clearly became much more interested in doing business with Moscow. This is exemplified by perhaps his most high-profile failure, which is filled with shady Russian connections and a settlement that was made on the condition that those settling could not cooperate with a parallel criminal investigation into the project. Per the New York Timesreport on Trump SoHo, a 46-story luxury condominium/hotel in Lower Manhattan:

He and his co-defendants settled the case in November 2011, agreeing to refund 90 percent of $3.16 million in deposits, while admitting no wrongdoing. The backdrop to that unusual denouement was a gathering legal storm that threatened to cast a harsh light on how he did business. Besides the fraud accusations, a separate lawsuit claimed that Trump SoHo was developed with the undisclosed involvement of convicted felons and financing from questionable sources in Russia and Kazakhstan. And hovering over it all was a criminal investigation, previously unreported, by the Manhattan district attorney into whether the fraud alleged by the condo buyers broke any laws, according to documents and interviews with five people familiar with it. The buyers initially helped in the investigation, but as part of their lawsuit settlement, they had to notify prosecutors that they no longer wished to do so. The criminal case was eventually closed.

The Times provided additional details about the portion of the settlement requiring those cooperating with the criminal investigation:

That part required the plaintiffs to notify any investigative agency with which they “may have previously cooperated” that they did not want to “participate in any investigation or criminal prosecution” related to matters in the lawsuit, according to a confidentiality agreement signed by more than 20 people. The plaintiffs could respond to a subpoena or court order, but would also have to notify the defendants that they had received it, the agreement said. The criminal investigation was closed sometime afterward.

Bayrock is a development company with offices based out of Trump Tower in Manhattan, and it is largely inactive these days, save for fighting any remaining lawsuits against it. They were one of two partners on Trump SoHo. As far as Bayrock’s involvement in the project, Trump said in a deposition that he and Arif worked on “numerous deals all over the world” and:

“Bayrock knew the people, knew the investors, and in some cases I believe they were friends of Mr. Arif. And this was going to be Trump International Hotel and Tower Moscow, Kiev, Istanbul, etc., Poland, Warsaw.”

Arif grew up in Kazakhstan, which was part of the Soviet Union until 1992. He worked in the Soviet Ministry of Commerce and Trade as Deputy Director of Hotel Management for 17 years. After the collapse of the Soviet Union, he worked for a short while in Turkey, before moving the states, buying property in Brooklyn, then subsequently founding Bayrock in Trump Tower.

Bayrock is connected to a litany of shady figures in the former Soviet Union—one being Viktor Khrapunov, the ex-mayor of Almaty, Kazakhstan. According to the Financial Times, lawyers for the city told a U.S. court in March 2016 that Khrapunov and his family “conspired to systematically loot hundreds of millions of dollars of public assets…and to launder their ill-gotten gains through a complex web of bank accounts and shell companies…particularly in the United States.” Three of the networks in Almaty’s case were Soho 3310, Soho 3311, and Soho 3202—all LLC’s, which enabled them to hide their ownership.

After they were created in April 2013, property records show that they paid $3.1 million to purchase apartments in Trump SoHo, and bank statements tied those purchases to Khrapunov’s daughter in California, Elvira Kudryashova—a purported central link in this laundering scheme. The same amount of money was shown to leave Kudryashova’s Wells Fargo account to New York lawyer Martin Jajan, who signed the purchase documents for the apartments in Trump SoHo, with the central benefits going to Bayrock/Sapir Organization LLC.

A 2007 Bayrock investor presentation cites Alexander Mashevich’s “Eurasia Group” as a partner. Along with two other Kazakh billionaires—Patokh Chodiev and Alijan Ibragimov—the three who would come to be known as “the Trio” who ran the Eurasian Natural Resources Cooperation.

The Trio has been involved in the standard bribery, money laundering and racketeering that defines the post-Soviet republics, and they subsequently controlled a huge portion of Kazakhstan’s mineral and gas reserves. State Department cables leaked by Wikileaks in 2010 demonstrate a very close relationship between the Trio and Nursultan Nazarbayev—who has been Kazakhstan’s president since its independence from the Soviet Union in 1991, with his last “reelection” coming with a Saddam Hussein-like 98% of the vote. This is the world that Trump was referring to when he said “Bayrock knew the people, knew the investors.”

However, the former Soviet Republic is not where Arif’s most damning Kremlin connections come into play, but through an Icelandic fund called FL Group which tends to find its way into many of Trump’s investments. According to James S. Henry’s must-read deep dive into Trump’s business ties to Russia in The American Interest:

For purposes of our story, the most interesting thing about Iceland is that, long before this crisis hit and utterly bankrupted FL Group, our two key Russian/FSU/Brooklyn mobster-mavens, Arif and Sater, had somehow stumbled on this obscure Iceland fund. Indeed, in early 2007 they persuaded FL Group to invest $50 million in a project to build the Trump SoHo in mid-town Manhattan.

The 2007 Bayrock investor presentation linked to above named FL Group as the Trio’s other “strategic partner” in this venture. The Trump Organization denied any connection with FL Group despite the fact that with an 18% stake in Trump SoHo, Donald Trump personally had to sign off on the deal.

In the 1990s, Iceland turned their banking industry into a neoliberal paradise, and this produced massive returns for their investors obscured by the cloak of privatization up until the financial crisis of 2008, where Iceland was hit incredibly hard. Iceland’s largest private investment fund prior to the 2008 crash? FL Group, who had a dizzying series of connections to all of Iceland’s major financial institutions. Per Henry’s investigation in The American Interest:

Fourth, Iceland’s largest banks also made a series of extraordinary loans to Russian interests during the run-up to the 2008 crisis. For example, one of Russia’s wealthiest oligarchs, a close friend of President Putin, nearly managed to secure at least €400 million (or, some say, up to four times that much) from Kaupthing, Iceland’s largest bank, in late September 2008, just as the financial crisis was breaking wide open. This bank also had important direct and indirect investments in FL Group. Indeed, until December 2006, it is reported to have employed the FL Group private equity manager who allegedly negotiated Felix Sater’s $50 million deal in early 2007.

Fifth, there are unconfirmed accounts of a secret U.S. Federal Reserve report that unnamed Iceland banks were being used for Russian money laundering. Furthermore, Kaupthing Bank’s repeated requests to open a New York branch in 2007-08 were rejected by the Fed. Similar unconfirmed rumors repeatedly appeared in Danish and German publications, as did allegations about the supposed Kazakh origins of FLG’s cash to be “laundered” in the Kriss lawsuit.

Toronto’s Trump Tower and Hotel

Alex Shnaider is a Russian-Canadian billionaire who partnered with Donald Trump to co-finance Toronto’s Trump Tower and Hotel, which was the tallest building in Canada before going out of business this past year. Shnaider is connected to FL Group in a litany of ways—one simple example being a €45.8 million loan to him from Kaupthing Bank to buy a yacht. Kaupthing Bank is one of the poster children of how the financial crisis wrecked the Icelandic economy—as more than 70 percent of the liabilities of the three biggest banks in Iceland (Kaupthing, Landsbanki and Glitnir) were denominated in foreign currency, with the banking system comprising eight times Icelandic GDP. In what I’m sure is a completely unrelated fact—in 2013, the CEO, chairman of the board and two other executives at Kaupthing Bank were sentenced to five years in jail for fraud.

An Icelandic Bank swimming in Kremlin cash is just the tip of the iceberg of Shnaider’s Russian connections, as his ex-father-in-law is Boris J. Birshtein. According to the FBI, Birshtein was a close business associate of Sergei Mikhaylov, who allegedly runs the largest branch of the Russian mob—Solntsevskaya Bratva. According to Fortune, this is the highest grossing organized crime group in the world. In a 1996 intelligence report compiled by the FBI, Birshtein put together a meeting in his Tel Aviv office to discuss “sharing interests in Ukraine” that included Mikhaylov, along with several other leaders of the Russian mafia. In the early 1990s, investigators tracked transfers for millions of dollars between bank accounts of Ukrainian government officials, Mikhaylov and Birshtein.

In 1993, Boris Yeltsin—the first president of Russia following the collapse of the Soviet Union—accused Birshtein of illegally exporting seven million tons of Russian oil and then laundering the gains from it. According to the New York Times, Dmytro Iakoubovski—a former associate of Birshtein’s—was cooperating with this investigation, and a gunman fired three shots into his home, then left a note telling him to stop collaborating with the detectives. Birshtein laundered this money as part of a larger project at Seabeco, a company that former KGB chief Vladimir Kryuchkov said “was created in order to apply the KGB money.” According to the Belgian newspaper Le Soir, two of the three members of the Trio—Chodiev and Mashkevich—were also involved in this KGB front known as Seabeco.

So how does this connect to Alex Shnaider—Trump’s Toronto financier? Well, aside from Birshtein being family for a portion of Shnadier’s life, according to the Toronto Globe and Mail, Shnaider started working for Birshtein at Seabeco’s headquarters in Zurich in 1991. The Toronto Globe and Mail reported that Shnaider left Seabeco in January 1994 to start his own company with an unknown Belgian partner. Kudos to James Henry of The American Interest for finding this Le Soir article showing that Mikhaylov and Birshtein co-founded MAB International in Antwerp, Belgium at that exact same time. If this were a tweet, this is where the thinking face emoji would go.

So to recap, Trump’s Toronto financier came up through the ranks a company which was quite literally created by the KGB in order to swim in untraceable cash; was able to obtain a massive loan to buy a freaking yacht from a Kremlin-connected bank holding a significant stake in an investment fund which helped finance Trump’s New York SoHo debacle—one which Trump settled a civil lawsuit filed against him where one of the central provisions was that those helping with the criminal investigation had to stop talking to the feds. Nothing to see here.

Now this brings us to the last part of this whole triumvirate—one that is ongoing to this very day.

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