House of Trump, House of Putin2

by Craig Unger

  Birshtein seemed to have followed the dictates of the KGB under Kryuchkov’s guidelines to set up enterprises abroad,46 but it was unclear how successful this initiative was. Colonel Veselovsky himself maintained that most of the ideas for shifting communist assets overseas never got beyond the planning stage.47 Regardless, many of the apparatchiks chosen by the KGB went ahead and launched their careers as independent businessmen. Moreover, Birshtein understood the importance of having mutually beneficial relationships with strategically placed bureaucrats. And so it was that Birshtein hired Veselovsky and introduced him to the world of private jets, immense limousines, and extravagant mansions.48

  In 1991 and 1992 alone, Seabeco gave birth to at least six highly profitable joint ventures, and went on to create many more all over the world. “You shouldn’t think that people like Birshtein and Veselovsky are financial geniuses,” Sergei Sokolov, a journalist for Komsomolaskaya Pravda, told the Washington Post.49 “What mattered in the old days—and what matters now—is personal connections.”

  And so, a decade later, those connections resurfaced in ventures tied to Trump. In the early 2000s, Alexander Shnaider, a former Seabeco executive who was Birshtein’s son-in-law, began to develop the tallest building in Canada, the sixty-five-story Trump Tower and Hotel in Toronto. When it came to financing the skyscraper, Shnaider, a billionaire of Russian extraction, turned to Raiffeisen Bank International AG in Vienna,50 a bank whose affiliate has been called “a front to provide legitimacy to the gas company [US-indicted Russian crime boss Semion Mogilevich] controls, RosUkrEnergo,”51 according to Scott F. Kilner, deputy chief of mission for the US embassy in Austria. So it followed that it was likely that funds from the Mogilevich-Firtash money pipeline were behind the Trump project in Toronto.

  In addition, the Wall Street Journal reported,52 Vnesheconombank, or VEB, at the time, bought $850 million of stock in a Ukrainian steelmaker from Shnaider, about $15 million of which went into the Trump Toronto project. At the time, the chairman of VEB’s supervisory board was Vladimir Putin.

  Later, Symon Zucker, Shnaider’s lawyer and the initial source of that information, changed his statement and said he was not able to confirm that VEB funds went into the project. “Trump was never a partner,” Zucker told Business Insider. “He never had an equity interest. We licensed his name and there was a contract for him to manage the hotel.”53

  Once again, an arrangement in which Trump was merely licensing his name was used to exculpate him. Nevertheless, the VEB deal did go through, and Trump did collect fees from the project.* (Shnaider did not respond to messages left for him.)

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  Trump fostered similar relationships all over the world. In 2003, Trump had whetted Latin American interest in the Trump brand by staging the Miss Universe pageant in Panama City, Panama.54 Three years later, he struck a deal in Panama to develop the Trump Ocean Club International Hotel and Tower, a sail-shaped seventy-story waterfront complex that included residential apartments and a casino. According to an investigation by Global Witness,55 an anticorruption watchdog, Trump was entitled to a licensing fee, 1 percent of any financing he secured, and a cut of every unit sold—all of which would add up to more than $75 million.56

  Many of the problems behind the project led to a man named Alexandre Ventura Nogueira, the tower’s primary broker. According to a report by Reuters, Nogueira, who, with his partners, sold more than half the apartments in the project, marketed the condos largely to Russians because, a colleague said, “Russians like to show off. For them, Trump was the Bentley” of real estate brands.57

  But the Reuters investigation also found Nogueira did business with a Colombian who was later convicted of money laundering; a Russian investor in the Trump project who was jailed in Israel in the 1990s for kidnapping and death threats; and a Ukrainian investor who was arrested for alleged people-smuggling while working with Nogueira and later convicted by a Kiev court. In addition, Reuters reported, he was alleged to have “either failed to pass on all the deposits he collected to the project’s developers, or sometimes sold the same apartment to more than one client, with the result that, on completion of the project, some clients had no clear claim on a property.”58 Nogueira said that half of his buyers were Russian, and that some were allegedly part of the Russian Mafia.59

  According to conversations secretly recorded by a former business partner, in 2013 Nogueira said he had laundered tens of millions of dollars through real estate. “More important than the money from real estate was being able to launder the drug money—there were much larger amounts involved,” he said in the recording. “When I was in Panama I was regularly laundering money for more than a dozen companies.”60

  Nogueira told Reuters that he became the leading broker for the project thanks in part to the support of Trump’s daughter Ivanka, who appeared in a promotional video with him.61

  The Trump Organization went into overdrive with the new model. Why not? Since Trump did none of the financing and almost none of the development, its risks were minimal and the upside was high. The Trump Organization’s role in the Panama project “was at all times limited to licensing its brand and providing management services,” said Alan Garten, the company’s chief legal officer. “As the company was not the owner or developer, it had no involvement in the sale of any units at the property . . . No one at the Trump Organization, including the Trump family, has any recollection of ever meeting or speaking with this individual [Nogueira].”62

  Similarly, one Trump-branded project after another was beset by corruption, lawsuits, and the like. In Baku, Azerbaijan, the New Yorker reported, Trump licensed Trump Tower Baku to close relatives of Ziya Mammadov, a transportation minister who was described in a diplomatic cable as “notoriously corrupt even for Azerbaijan.”63

  Now Trump licensing projects got under way all over the world, from White Plains, New York, to Kolkata and Pune, India; from Vancouver to Washington to Jersey City and more. Which did not necessarily mean that they did well. Though it was almost completed, Trump Tower Baku never opened. Likewise, one after another, Trump Tower projects were launched and then either canceled or never completed—in Fort Lauderdale, Tampa, Charlotte, Phoenix, New Orleans, Dubai, Rio, Stuttgart, Tel Aviv, Baja, and more.

  In the face of such chaos, most organizations would fail or be forced to change their approach. But not Trump’s operation. In fact, what would become Trump’s most significant new real estate ventures were being hatched on the twenty-fourth floor of New York’s original Trump Tower, where Felix Sater had taken charge of Bayrock and had his sights set on Russia.

  CHAPTER FOURTEEN

  MOTH, FLAME

  During his years in Moscow, former CIA agent John Sipher, who worked undercover in the US embassy, heard all about businesses like Boris Birshtein’s Seabeco and came to the conclusion that the United States had absolutely nothing like them. Both the KGB and CIA had long staffed embassies with undercover operatives as a standard practice.1 In addition, the CIA also provided “non-official cover” for operatives such as Valerie Plame, whose association with the agency was famously leaked to the press by the George W. Bush administration. However, such “cover” was largely limited to providing false identities—in Plame’s case, that she was an energy trader in Brussels.2

  But, Sipher told me, launching actual profit-making companies like Seabeco was a different story entirely. “It’s very hard for us in the West to distill the idea that you also have a cloudy group of people with ties to the Kremlin, who have intelligence training, and who have made a bunch of money that can support intelligence operations,” he said. “Those of us who worked in the [American] embassy [in Moscow], we instinctively stayed away from it because it was dirty. We knew there was an overlap of crime and assassinations and surveillance and money in Cyprus and real estate in London.”

  If Bayrock was a latter-day version of Seabeco, getting to the heart of it meant dealing with Felix Sater, its most visible, ch
arismatic and authoritative presence. “He has a talent for drawing people in,” said Bayrock’s former finance director Jody Kriss, who later sued the company,3 alleging that it was “covertly mob-owned and operated.” Kriss’s suit claimed that Bayrock had defrauded Kriss and another Bayrock employee and “never intended to honor” promised payments. The real purpose of the company, it said, in addition to marketing expensive condos, was to launder millions of dollars and evade taxes.4

  Bayrock contested Kriss’s claims and described him as a disgruntled employee. The case was later settled on undisclosed terms.

  “Felix knew how to be charming and he knew how to be brutally nasty,” said Kriss.5 “He has charm and charisma. But that’s what con men do.”

  On the one hand, that meant Felix could out-Trump America’s most famous real estate magnate and convince him that he, Felix Sater, had an opportunity no one could possibly pass up. “How did I get to Donald?” Sater asked. “I walked in his door and told him, ‘I’m gonna be the biggest developer in New York, and you want to be my partner.’”6

  On the other, Felix was also the kind of guy who threatened to attach live-wired electrodes to the testicles of a colleague, cut off his legs, and leave him dead in the trunk of a car—as Sater allegedly promised a business associate in Arizona.7 Robert Wolf, Sater’s lawyer, denies these allegations and stated that the claim that Sater had threatened violence was “an outright fabrication.”

  Which was the real Felix Sater? His work with Bayrock as a partner of Trump’s and later his work on behalf of Trump himself raised a number of unanswered questions.

  Sater’s biggest project at Bayrock was the troubled Trump SoHo, the forty-six-story, $450 million hotel-condominium in downtown Manhattan that was beset by one lawsuit after another.* From the start, the mere fact that Sater was a principal in Bayrock created a very serious quandary as it was trying to raise $1 billion for Trump SoHo and other projects. Sater was a twice-convicted felon; no banks would lend to Bayrock if they knew about Sater’s convictions. In fact, when Trump SoHo got under way, Sater began 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.8

  Another complication was the fact that Sater was also a “cooperator” with the FBI and other federal agencies. As a result, he had an immunity deal and, he later asserted, was still carrying out various daring missions for the CIA, the DIA, and the FBI, such as helping the FBI investigate scams run by the Italian Mafia on Wall Street.

  For his help, Sater was given extraordinary latitude by the FBI—so much that Frederick Oberlander, an attorney who represented Jody Kriss in his lawsuit against Bayrock, and other attorneys and journalists sometimes referred to Felix as “another Whitey Bulger.” Bulger, who had been the crime boss of the Winter Hill Gang in Boston, became an FBI cooperator and used his immunity as cover for an ongoing crime spree. He was later convicted of involvement in eleven murders.

  All of which raised the question of whether Felix, like Bulger, was using his immunity as a cover to launder money through real estate for the Russian Mafia. At the very least, it seemed, Sater had a double life. He was a felon, but he was working undercover for America’s secret services. That much was clearly established. But what if he was really working for the Russians? What if he really had a triple life? The answers were difficult to find—in part because the records of Sater’s convictions had been sealed as a result of his immunity deal.

  No one seemed to know the whole story about Sater—especially Donald Trump. That became clear later, when Trump gave a deposition in a court case filed against him, Bayrock, and several other parties, and was asked, under oath, about working with Sater. First, an attorney showed Trump a copy of a December 17, 2007, story in the New York Times headlined, “Real Estate Executive with Hand in Trump Projects Rose from Tangled Past,” and asked if he was familiar with it.

  “Very vaguely,” Trump replied. “Long time ago . . . I just vaguely remember the article, but we weren’t dealing much with him.”

  How many times had Trump conversed with Sater?

  “Over the years?” Trump asked. “Not many. If he were sitting in the room right now, I really wouldn’t know what he looked like. . . . If he would call, I’d take his call because he was representing Bayrock. . . . You should ask those questions to Bayrock. He worked for Bayrock, he didn’t work for me.”9

  Trump was obviously perturbed by the line of questioning, but his testimony was crystal clear about Sater. He barely knew the guy—or so he said.

  Yet there was plenty of evidence to the contrary. In the beginning, Sater and Tevfik Arif had been thrilled to be situated on the twenty-fourth floor of Trump Tower precisely because residents on the upper floors had to get off at the twenty-fourth-floor landing and change elevators to reach street level. That made it easy for Felix to bump into Trump “accidentally” and pitch him new projects—and he took full advantage of their proximity. Others at Bayrock talked to Trump on occasion, but it was a relationship that Felix jealously kept to himself—with considerable success.

  Once they got to know each other, Felix thought nothing of going up a flight of stairs to Trump’s office to chat about business ideas—“just me and him.”10

  After returning from a trip to Russia, Sater said, he’d “come back, pop [his] head into Mr. Trump’s office and tell him, you know, ‘Moving forward on the Moscow deal.’”11

  In 2005, when Trump flew to Colorado to give a motivational speech, he and Melania brought Felix with them.12 Trump and Sater were interviewed and photographed together in Denver and Loveland, Colorado; Phoenix; Fort Lauderdale; and New York.13

  A former colleague of Sater’s told Politico, “Trump called Felix like every other day to his office. . . . They were definitely in contact always. They spoke on the phone all the time.”14 And they occasionally dined together at a restaurant in Manhattan’s Meatpacking District called Kiss & Fly, with what New York magazine described as “a quasi-Roman-bathhouse feel” for its “young, rich, and overwhelmingly European” patrons.15

  Back in Trump Tower, as an inducement for Donald to drop by their twenty-fourth-floor offices, Felix became so fixated on the appearance of female employees that the firm was referred to as Baberock. Taking the bait one day in 2006, Trump ran into Bayrock secretary Rachel Crooks, then twenty-two, on the elevator landing, who introduced herself and then saw him go into action.16 “He took hold of my hand and held me in place like this,” Crooks said. “He started kissing me on one cheek, then the other cheek. He was talking to me in between kisses, asking where I was from, or if I wanted to be a model. He wouldn’t let go of my hand, and then he went right in and started kissing me on the lips.”17

  Crooks has since joined several other women in demanding a congressional investigation into Trump’s alleged sexual misconduct.

  Meanwhile, Trump entrusted Felix with accompanying his children to Moscow to work on Trump projects in the Russian capital.18 On one of the trips, Felix took Ivanka on a tour of the Kremlin and later said he arranged for her to sit in Vladimir Putin’s chair. “It would be bizarre for him to take her into the president’s personal office—presumably while the president was absent—unless Putin and his security service advisers knew about it and viewed the relationship with the Trumps as worth developing,” Daniel Treisman, a UCLA political science professor and an expert on Russian politics, told Business Insider.19

  The Trumps began spending more and more time in Russia. Starting in 2006, Donald Jr., executive vice president of development and acquisitions for the Trump Organization, made about half a dozen trips to Russia over the course of a year and a half. “[I]n terms of high-end product influx into the US, Russians make up a pretty disproportionate cross-section of a lot of our assets,” he later told a Manhattan real estate conference.20 “. . . We see a lot of money pouring in from Russia.”

  Trump himself said he was looking forward to the realization of a major project in
Moscow. “We will be in Moscow at some point,” he said in a deposition.21 He added that he had met with Russian investors at Trump Tower to pursue the Moscow deal, and that Donald Jr. was working on it.

  As for Felix Sater’s role, Trump said nothing. In fact, Alan Garten, the Trump Organization’s general counsel, later asserted to Forbes that Sater’s presence in Moscow while Ivanka and Donald Jr. were there was merely a coincidence.22

  As Donald Jr. saw it, the stumbling block in Russia was corruption. “Several buyers have been attracted to our projects there,” he told a trade publication.23 “It is definitely not an issue of being able to find a deal—but an issue of ‘Will I ever see my money back out of that deal or can I actually trust the person I am doing the deal with?’ As much as we want to take our business over there, Russia is just a different world. . . . It really is a scary place.”

  Of course, how scary Moscow was depended on what kind of company you kept. In addition to his work for Trump, in 2007 Sater began working as an “adviser” to real estate oligarch Sergei Polonsky, a flamboyant, longhaired six-foot-four24 billionaire developer whose company, Mirax Group, had been making a name for itself in Moscow.25

  Polonsky had won both fame and notoriety for a number of reasons, the former for developing Moscow’s ninety-seven-story Federation Tower, which for several years was the tallest building in Europe, and the latter for becoming an icon of excess who declared “anyone without a billion dollars should fuck off.”26