Wednesday, December 6, 2017

Something to Know - 6 December

Several months ago, there was a flurry of articles in magazines that detailed very questionable financial practises (mostly about money laundering) by the Trump organization.   Russian oligarchs were at the heart of most of the tales, and mostly about them having huge gobs of money that they "stole" and had to legitimize some way.   Trump was more than obliging and worked his deals. In the middle of all of this, Deutsche bank was an institution that money passed through to give appearances of legitimacy.  Every link in the chain of dirty money made out: the oligarchs got theirs by having dirt become clean, the bank got its billions in cuts from the money that passed through (in and out), and Trump got his cut.   This article is but one of many that narrated this scenario.   What is happening now, is that the Special Prosecutor has submitted a subpoena to Deutsche Bank for the financial records as they pertain to Trump and the movement of money.   Don't forget that Trump got his ass into a pickle because he stiffed contractors, lawyers, banks, and other creditors along his nefarious path of his business ways, to the point that the only bank that would lend him money is Deutsche Bank of Germany.   It is this connection with the Russians and Deutsche Bank that Trump because the Chump, and he is on the hook to all of them.   The alleged collusion between the Russians and the 2016 election is what Robert Mueller is investigating, and the intersection of all these nasty players is what could bring Trump down....or will bring him down.  Film at 11:

All Eyes On Trump


The Russian money trail leads right through the president's troubled project in downtown Manhattan. A series of e-mails reveals new details..

Trump SoHo, the gleaming 46-story condominium and hotel that bears the president's name in Lower Manhattan, was a troubled project even before it broke ground. It was initially marketed to wealthy foreigners enthralled by the Trump brand and the building's opulent hotel-style amenities, but it never attracted nearly as many buyers as its developers had anticipated. Then, a few years before it was set to open, in 2010, an unusual complication came out of the blue. On December 17, 2007, veteran New York Times reporter Charles Bagli revealed that Felix Sater, managing director of the Bayrock Group, one of the building's developers, had a hidden sordid past.

In 1991, Sater, then a stockbroker, got into a bloody bar fight with a commodities broker, stabbing him in the face with a broken margarita glass. The resultant wounds caused nerve damage and required 110 stitches. Then, in 1998, Sater pleaded guilty to participating in a "pump and dump" stock fraud. The maneuver, which was tied to the Mafia, involved laundering money, and eventually defrauded investors of $40 million. This checkered history appeared to catch his latest partner by surprise. "We never knew that," Bagli quoted Donald Trump as saying about Sater's criminal past. "We do as much of a background check as we can on the principals. I didn't really know him very well."

Since Sater's run-ins with the law had not been previously disclosed to its investors, Bayrock was suddenly in crisis. Given that the company had raised money without revealing Sater's convictions, could Bayrock be vulnerable to charges of bank fraud? Would its backers pull out? Were Bayrock's principals and its partners—including Trump—in legal jeopardy? One problem, however, had to be dealt with immediately. Trump and his family had plenty to be unhappy about with Bayrock—budgetary overruns, the article in the Times, a construction disaster at the sales office, vicious internal politics, and more—and, as a result, they had requested a meeting with the firm's principals. The gravity of the situation was underscored by the fact that all of the Trumps—Donald Sr., Ivanka, Eric, and Donald Jr.—were to attend.

As the meeting approached, Bayrock counsel, Julius Schwarz, was so apprehensive that he sent a cautionary e-mail to Sater and other Bayrock employees on January 21, 2008. "I think it is a trap," he wrote, adding that the meeting with the Trumps was likely to become "a royal ass fucking." But half an hour later, Sater, who appears to have talked with Trump about the crisis, sent a reply that was intended to calm things down. "I agree with all," he e-mailed, "but we can't cancel the meeting. They will still show up and tear is [sic] apart. . . . Go to the meeting but stand our ground and be prepared." Sater's criminal record, it seemed, did not appear to be a deal breaker for Trump. "Donald is happy with me," Sater said in one of a series of e-mails obtained by Vanity Fair from a lawsuit against Bayrock. "I will explain when I see you." (Some of the Bayrock e-mails are exclusive to Vanity Fair, but others were first published last October by Richard Behar in Forbes.)

A decade later, of course, much has changed. Bayrock, which was once located in Trump Tower, is now defunct. Trump SoHo has been involved in ongoing litigation, including a lawsuit claiming that it was partly financed from "questionable sources," as the Times would put it, from Russia and Kazakhstan. More recently, it has again found itself at the center of a new scandal. As Bloomberg News reported on July 20, Trump SoHo is among the targets special counsel Robert Mueller is scrutinizing in his probe into ties between the president and Russia. Mueller's mandate, of course, is investigating possible collusion relating to the 2016 presidential election. The fact that Bayrock, which began working with Trump nearly 15 years ago, is now in his sights suggests that he understands that Russian-intelligence tradecraft is often indistinguishable from business, with its operatives navigating international flows of capital. In Vladimir Putin's regime, business and organized crime and intelligence are often intertwined, and can all be used as weapons of the state. Mueller's investigators are looking to unravel this web by following the money. And one company that potentially questionable Russian money flowed through was Bayrock.

Bayrock has been enmeshed in legal imbroglios since 2010, when its former finance director, Jody Kriss, and another Bayrock employee, Michael Ejekam, sued the company and its principals for $1 billion. In 2002, Kriss, then an aspiring 28-year-old developer who had done real-estate deals in Miami, was dazzled when Sater showed him Bayrock's lavish Trump Tower offices and made promises that Kriss would get 10 percent of the firm's profits, Kriss claimed in his lawsuit. "Felix knew how to be charming and he knew how to be brutally nasty," Kriss told Bloomberg. "He has a talent for drawing people in. He has charm and charisma. But that's what con men do." But in the end, as his lawsuit asserts, Kriss felt "deprived of fair compensation by means of fraud"—this after working for years in a company he characterized as a criminal enterprise.

His complaint alleged that Bayrock was "covertly mob-owned and operated," "backed by oligarchs and money they stole from the Russian people," and "engaged in the businesses of financial-institution fraud, tax fraud, partnership fraud, human trafficking, child prostitution, statutory rape, and, on occasion, real estate." The suit claimed that Bayrock had defrauded Kriss and Ejekam and "never intended to honor" promised payments. Instead, the real purpose of the company, it said, in addition to marketing expensive condos bearing the Trump brand, was "to launder many millions of dollars and evade taxes."

On the top left: Eric Trump, Tevfik Arif, Donald Trump Jr, Ivanka Trump, Donald Trump, Tamir Sapir, Alex Sapir and Julius Schwarz at the Trump Soho Launch on September 19, 2007. On the bottom, Tamir Sapir and Felix Satter also attend Trump Soho Hotel Launch Party. On the right, the Trump Soho Hotel.

Clockwise from top left: by Mark Von Holden/WireImage, BEHAR ANTHONY/SIPA/AP Photo, by WILL RAGOZZINO/Patrick McMullan/Getty Images.

His filing soon morphed into multiple lawsuits after attorneys Frederick Oberlander and Richard Lerner found out that Sater's records had been sealed as the result of an immunity agreement, and they filed a writ of certiorari before the United States Supreme Court in hopes of unsealing them. Later, in 2015, Oberlander and Lerner also filed a qui tam suit against Bayrock, that is, a civil suit that rewards private entities working to recover funds for the government. In this case, they charged Bayrock with laundering $250 million in profits from Trump SoHo and other projects, and set up elaborate mechanisms to evade more than $100 million in state and federal taxes. Sater's attorney, Robert Wolf,characterized the allegations of "their extortionate litigations" as "baseless and highly defamatory."

President Trump has not been accused of wrongdoing in the suits, but the internal e-mails from Bayrock shine new light on the president's relationship with Sater and the company, raising questions about what Trump might have known about the sources of Bayrock's funds and whether he had a fiduciary duty to further investigate Sater and Bayrock. "It's certainly a question for [special counsel Robert] Mueller to look into," said Jonathan Winer, former deputy assistant secretary of state for international law enforcement during the Clinton administration. "What anyone in Trump's position should have done is investigate those allegations [about Sater's criminal past] to ensure that there was not a money-laundering operation." (President Trump and the White House declined to comment for this story, but a spokesman for the Trump Organization issued a statement saying, "The Trump Organization's involvement in the Trump SoHo project was limited to licensing its brand and managing the hotel. The company was not responsible for and had no involvement in the financing of the project.")

Sater's history, after all, would have likely raised eyebrows. In order to stay out of prison in the wake of his 1998 conviction for stock fraud, he became a clandestine asset for the F.B.I. and other government agencies. His case came up during Loretta Lynch's confirmation hearings for attorney general in 2015. Asked why the records in Sater's fraud conviction were sealed, she responded that Sater had provided "information crucial to national security and the conviction of over 20 individuals, including those responsible for committing massive financial fraud and members of La Cosa Nostra."

There are differing accounts of exactly what Lynch may have been referring to, but according to one of his business associates, Salvatore Lauria, Sater became involved in a plan to buy anti-aircraft missiles on the black market for the C.I.A. As Lauria tells the story in his autobiography, The Scorpion and the Frog,with Langley's backing, Sater agreed to participate in a complicated scheme to buy a dozen Stinger missiles from Afghanistan with tracking devices. The missile deal fell through, but after 9/11, Sater called Lauria to say the terrorist attacks had made them so valuable that they "were now going to be the F.B.I.'s new best friend," according to the writ. (Sater's attorney, Wolf, described the book as "completely false.")

Meanwhile, Bayrock's relationship with Trump dates back to 2002, when the company first leased space in Trump Tower and Trump was still licking wounds over his Atlantic City over-expansion a decade earlier, after which he had a more difficult time borrowing money. British billionaire Richard Bransonsaid he once had a one-on-one lunch with Trump in which the future president vowed to spend the rest of his life seeking revenge against those who failed to help him. "He began telling me about how he had asked a number of people for help after his latest bankruptcy and how five of them were unwilling to help," Branson wrote in a blog post last fall. "He told me he was going to spend the rest of his life destroying these five people. He didn't speak about anything else, and I found it very bizarre."

Meanwhile, in Russia, oligarchs and mafioso were on the ascent. According to James Henry, a former chief economist at McKinsey & Company who consulted on the Panama Papers, since the 1990s, some $1.3 trillion in illicit capital had poured out of Russia, meaning that hordes of cash needed to be laundered. In Manhattan luxury real estate, the Russians, among many other nationalities, found an ideal vehicle. "We in the U.S. government repeatedly saw a pattern by which criminals would use condos and high-rises to launder money," said Winer, who oversaw anti-money laundering operations in the Clinton administration. "It didn't matter that you paid too much, because the real-estate values would rise, and it was a way of turning dirty money into clean money."

Foreign money, often untraceable, began transforming the high-end Manhattan real-estate market, and the pools of cash that Bayrock promised appealed to Trump. By 2003, Sater was working there in a position variously described as managing director and chief operating officer. His actual proximity to Trump is unclear. On the one hand, Trump had famously testified under oath that he barely knew Sater, that he probably wouldn't recognize him if they were in the same room, and that he had no knowledge of Sater's criminal past. But it has been widely reported that Sater did business deals with Trump, that he took Trump's kids to Moscow, and that he was given a business card identifying him as a senior adviser to the Trump Organization.

Its other principals—wealthy émigrés from the former Soviet Union who knew how to get backing from Russia's richest oligarchs—were more than familiar with the clientele who sought Trump-branded luxury condos. And under his agreement with Bayrock, Trump would not have to put up a single penny, but he would still get 18 percent of the profits—merely for licensing his name—as Bayrock financed and developed the 46-story Trump-branded luxury condo in SoHo. In 2006, Trump plugged the building on The Apprentice, referring to it as "my latest development." "When it's completed in 2008," he said, "this brilliant $370 million work of art will be an awe-inspiring masterpiece."

There were other Trump-Bayrock projects on the boards as well, in Phoenix, Fort Lauderdale, and elsewhere. In order to execute the plans, however, Bayrock and a partner, the Sapir Organization, had to raise roughly $1 billion. But there was one major problem: presumably no banks would lend to Bayrock if they knew about Sater's convictions. On the other hand, according to Oberlander, hiding Sater's past invited serious legal jeopardy. "Inducing a bank to lend money based on fraudulent loan application—i.e., concealing Sater's criminal past—is bank fraud," said Oberlander. "If you know that the loans were procured by fraud yet stay involved, it's a conspiracy to violate money laundering and racketeering statutes."

When Bayrock began to develop Trump SoHo, Sater led the way, now spelling his name "Satter," as he told the Times, to "distance himself from a past" and to throw off anyone searching his name on Google. Two days after Bagli's piece appeared in the Times, on December 19, 2007, Trump gave a deposition in a lawsuit he filed against author Timothy O'Brien. When Trump was asked, under oath, if he had learned about Sater's criminal past, Trump testified that he was "looking into it because I wasn't happy with the story. So I'm looking into it."

Because this deposition was marked "Confidential" and kept under seal, Trump may not have expected it to become public, said attorney Lerner. Regardless, Trump's knowledge of Sater's past was now a matter of court record. And, according to Winer, if someone in Trump's situation failed to investigate such allegations that person would be "open to charges of 'willful blindness' in terms of the knowledge he had."

"The responsible course of action would have been to have Sater resign and to disclose Sater's past to interested parties," said Lerner. But, according to Sater's e-mails, rather than extricate himself from the deal with Bayrock, Trump apparently saw the predicament as an opening to renegotiate his fees; in an e-mail written to two investors sent a few days later, Sater wrote: "Donald . . . saw an opportunity to try and get development fees for himself."

In the end, Sater remained managing director of Bayrock through 2008. Trump also continued to participate in the venture and enjoy its profits. Once condos in the building were finally for sale, however, its problems began in earnest. The building's no-man's-land neighborhood—not really SoHo—with its grand entrance beside Varick Street and the chaotic approach to the Holland Tunnel—made it a difficult sell. It was explicitly marketed to prospective buyers overseas as a second or third home, with the challenging proviso that owners could live in their apartments only 120 days a year, and never for more than 29 consecutive days in any 36-day period. In 2010, 15 condo buyers filed suit, charging the Trumps and Bayrock with "an ongoing pattern of fraudulent misrepresentations and deceptive sales practices." According to The Daily Beast, among the claims made to spur sales were Ivanka Trump's proclamations to Reuters and to The London Times in June 2008 that 60 percent of the 391 units in the building had been sold. Documents later submitted to the New York attorney general showed that only 15 percent had found buyers.

The suit was eventually settled, and the plaintiffs received 90 percent of their deposits back. But that wasn't the end of it. In 2014, four years after its opening, more than two-thirds of its condos remained unsold. The Web site Curbed headlined a story: "Trump SoHo Heads to Foreclosure Due to Unsellable Condos."

As other lawsuits unfolded, more charges about Bayrock came forth, among them allegations that the condos themselves were being used as vehicles for money laundering. These transactions are the ones that Robert Mueller's team of investigators seems designated to unravel. One case, as reported by the Financial Times last year, was that of Viktor Khrapunov, a former Kazakh energy minister and ex-mayor of Almaty, the biggest city in Kazakhstan. According to the F.T., lawyers for Almaty charged 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."

The lawyers further charged that Khrapunov's network used dozens of shell companies, among them three limited-liability companies—whose ownership could be easily concealed—called Soho 3310, Soho 3311, and Soho 3203, which corresponded to apartments of the same name in Trump SoHo. The vendor of the apartments was Bayrock/Sapir Organization L.L.C., which was named after the developers of the Trump SoHo, Bayrock, and the Sapir Organization founded by the late Tamir Sapir. The F.T. also reported that, according to regulatory filings, Bayrock/Sapir had a third co-owner—Donald J. Trump. (In response, Jan Lawrence Handzlik, an attorney for Khrapunov, issued a statement to Vanity Fairsaying, "These allegations are more than a decade old. . . . For seven years ending in 2004, Viktor served with honor and distinction as administrator, or akim, of Almaty, a political subdivision of the Nazarbayez government. He then served as Nazarbayez's administrator of the East Kazakh Region until 2007. It was then that Viktor had a political falling-out with the Nazarbayez regime. Since then, Viktor has been relentlessly pursued by the regime, which has sought to discredit him in the eyes of the Kazakh people. Now persona non grata in their own country, Viktor and his family look forward to refuting these old allegations in a fair public trial in a country that guarantees justice to those who come before its courts.")

The Oberlander and Lerner lawsuit further alleged that $250 million of Bayrock's projected profits as the co-developer of Trump SoHo and three other projects were "to be laundered, untaxed, through a sham Delaware entity to Iceland (and reportedly then Russia), intending to evade up to $100,000,000 of U.S. taxation." Initially, Sater had helped the Khrapunov family buy apartments in the building, but last month he reportedly turned on the family and began cooperating with lawyers and private investigators who were pursuing multiple cases against the Khrapunovs on three continents.

As for the Trump SoHo, the building changed hands in 2014, after a foreclosure sale, but, according to Pro Publica, the Trump Organization still manages and markets the property, for which it pays Trump 5.75 percent of the condo tower's operating revenues. In 2015, according to federal financial-disclosure reports, Trump made $3 million off the building.

Patriotism is not a short and frenzied outburst of emotion but the tranquil and steady dedication of a lifetime.
- Adlai Stevenson

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