American Kompromat

by Craig Unger

  From Kryuchkov’s point of view, however, Maxwell was doing just fine. “Maxwell showed how an intricate, complex web of shell companies under a group umbrella could move money around the globe,” said O’Neill. “When New York became a target for Eastern Bloc criminal syndicates and we looked at how it operated, the Maxwell model was there for all to see.”

  By 1987, Maxwell had laundered $1 billion through the Bulgarian Cooperative Bank alone. He laundered more through the Daily Mirror. In January 1991, Maxwell bought the ailing New York Daily News and allegedly used it to launder Russian mob money as well. Toronto’s Financial Post reported that the acquisition “made Maxwell a hero in a city that cherishes its heroes, especially flamboyant ones in the mold of Donald Trump. Maxwell, waddling around like a king penguin with a red bow tie, topped every socialite’s invitation list.”44

  In 1989, a year after Maxwell bought Macmillan Publishers, both he and Trump were guests at the so-called party of the century, Malcolm Forbes’s insanely extravagant seventieth-birthday bash in Tangiers with eight hundred guests, among them Fiat chairman Giovanni Agnelli, opera singer Beverly Sills, broadcasters Walter Cronkite and Barbara Walters, publishers Katharine Graham and Rupert Murdoch, and Henry Kissinger.

  The eighties, of course, were the “greed is good” decade, as Gordon Gekko proclaimed in Oliver Stone’s Wall Street, and nobody captured the zeitgeist better than Trump and Maxwell. In addition to inflating their net worth, both projected outsize personalities as they stood astride the world stage, frequently appearing together in the business pages celebrating their latest extravagant acquisition, all while secretly laundering money for Russian mobsters who, by extension, were playing important roles for Russian intelligence.

  Similarly, in 1989, according to the Chicago Tribune, Trump attended a party the elder Maxwell gave on the Lady Ghislaine, at which Trump saw fit to announce that his yacht, the Trump Princess, was bigger than Maxwell’s.45 At roughly the same time, Maxwell had been working with Mogilevich to establish about fifty “legitimate” companies in Israel, Britain, the United States, and Germany, through which they laundered about $40 billion a year for Mogilevich and the Russian Mafia.46 Working with Mogilevich, Robert Maxwell became the bagman, and one of the most powerful Russian operatives helping the Soviet Union renew its dreams of empire.

  Of course, Maxwell wasn’t alone in carrying out Kryuchkov’s plans. After the fall of the Soviet Union in 1991, Semyon Kislin, who had made the first contact with Trump more than a decade earlier, developed a lucrative relationship with Mikhail and Lev Chernoy, the Uzbekistan-born industrialist brothers, who, according to an Interpol report, used Kislin’s firm Trans-Commodities for fraud and embezzlement.47 The Chernoy brothers became billionaires in the bloody and brutal aluminum wars in the nineties, with Mikhail serving as a mentor to oligarch Oleg Deripaska, who has since become a powerful Putin crony, and who was at various times both allied with and an adversary of the Chernoys. Kislin and his electronics-store partner, Tamir Sapir, were also on their way to becoming immensely wealthy émigrés, and they remained close to Trump.

  In 1984, even before Mogilevich consolidated operations in New York, Donald Trump had allowed Trump Tower to launder money for Russian Mafia operatives such as David Bogatin, the alleged gangster who had allegedly participated in the so-called Red Daisy gas tax scam through which billions of tax dollars were siphoned off gas station revenues.

  Not long after his abortive campaign for the 1988 Republican presidential nomination, Trump became mired in one bankruptcy after another because of his disastrous overexpansion into Atlantic City casinos that left him $4 billion in debt.

  Then, on Christmas Day 1991, Mikhail Gorbachev resigned as the leader of the Soviet Union and handed over the powers of his office to Russian president Boris Yeltsin. At 7:32 p.m. Moscow time, the Soviet flag with its iconic hammer and sickle was lowered from the Kremlin and replaced by the white, blue, and red tricolor banner of the Russian Federation.

  The Cold War was over. The West had won. East and West Germany had begun reunification. It was time to declare victory. In his book The End of History and the Last Man, political scientist Francis Fukuyama declared victory on behalf of liberal Western democracies. There could be no more argument as to which system was better. Western capitalism, liberal democracy, had won. Pundits discussed how we would spend the peace dividend. Things had never looked rosier. Agents in almost every sector of national security eased up on the Russians. Maybe now they were our friends.

  But there were other powerful, unseen forces at work. Like the KGB. In the aftermath of the Soviet Union’s demise, attempts to build a market economy in Russia largely lost out to an embryonic Mafia state and an emerging kleptocracy, and wealthy émigrés and oligarchs with ties to the Russian Mafia and the KGB, and later its successor, the FSB, were on the ascent.

  As the leader of the abortive coup in 1991 against Gorbachev, Vladimir Kryuchkov was imprisoned for three years and never became active again. But by starting commodity firms that had links to the KGB, he had set in motion mechanisms that were far more successful than he was—and indeed paid off decades later thanks to their ties to Donald Trump. As I reported in House of Trump, House of Putin, one of the most notable of those was Seabeco, a successful commodities firm run by Boris Birshtein, a Russo-Canadian businessman who had ties to both the KGB and Russian mobsters Sergei Mikhailov and Semion Mogilevich. As it happened, many years later three principals in Seabeco—Alexander Shnaider, Alexander Mashkevich, and Tevfik Arif—rose from the ashes of the Soviet Union to become enormously wealthy partners of Donald Trump, who bailed him out from his financial woes in the 2000s.

  Thanks to the triumphalist tenor of the times, the United States did not exactly have its eye on the ball. Now that the Soviet bear was gone, the national security apparatus no longer saw Russia as a serious national security threat. “We had just had a tremendous success,” Rolf Mowatt-Larssen, the former CIA station chief in Moscow, told me. “No one knew our purpose anymore. We were off our game. The Soviets were dead, and that meant the general mood was to question our raison d’être. Our biggest problem was disinterest.”

  To those counterintelligence agents who had worked the Eastern bloc during Cold War, nothing was what it seemed. “Even after it ended, the Cold War never really ended,” said former CIA intelligence officer Glenn Carle.48 “I thought naively, ‘Well, the Berlin Wall has fallen. The Cold War is over. Communism is dead. Now they can just be Russians.’ But they were still shaped by seventy years of cultural formation and pressures, and the Russian bureaucracies never really changed. In my experience, as individuals and institutions, they all reflexively took the perspective that relations with the United States in particular were invariably a zero-sum game. That there could be no mutual benefit. That if it helps you, it screws us.”

  And as it turned out, while the Americans may have thought the Cold War was over, no one told the KGB or its successors. “My understanding,” said Carle, “is that there were more Russian intelligence officers active in the United States after the fall of the Berlin Wall. They didn’t stand down at all—not at all. Whereas the United States had a reduction of twenty-five percent or so.”49

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  Likewise, it was the same for the FBI after the collapse of the Soviet Union. There, with William Barr overseeing the bureau as attorney general, the FBI had also decided to focus its attention elsewhere. Even though Mark Wauck had reported his suspicions about Robert Hanssen, according to the inspector general’s report on Hanssen, Wauck’s supervisor had not followed through. So instead of investigating and exposing Hanssen’s perfidy, William Barr’s FBI promoted Hanssen to program manager in the Soviet operations section at FBI headquarters, where he supervised operational programs designed to counter Soviet efforts to acquire scientific and technical information.

  And that wasn’t all. Just six months later, in January 1
992, Hanssen was again promoted to chief of the National Security Threat List (NSTL) Unit, charged with rethinking counterintelligence priorities in the wake of the demise of the Soviet Union. It was the highest-ranking position he held at the FBI. Even though Mark Wauck had reported his suspicions that his brother-in-law was a spy, Hanssen was given these promotions without even a standard background reinvestigation and given access to highly sensitive material.

  And thanks in part to his promotions, Hanssen, who wasn’t arrested until February 2001, continued to betray some of this nation’s most important counterintelligence and military secrets, including the identities of dozens of human assets.

  As if that were not enough, Barr went further. Within months of his appointment as attorney general, he transferred three hundred FBI agents, many of them Russian-speaking, from counterintelligence work on the Russian Mafia to investigations of gang violence growing out of the crack cocaine epidemic. The New York Times characterized it as “the largest single manpower shift in the bureau’s history.”50

  Because the crack epidemic was very real, the manpower shift was a politically popular move. But by transferring so many agents away from work on the Russian Mafia and its growing power, Barr may have helped facilitate one of the greatest national security failures in US history.

  Those who remained focused on Russia didn’t have a clue what to do. “We didn’t know if they were friend or foe,” Myron Fuller, a former FBI special agent in counterintelligence, told me.51

  In the beginning, it wasn’t surprising that US intelligence would adopt a holding pattern about what was emerging from the detritus of the Soviet Union. But in the nineties, it gradually became apparent that building a market economy in the former Soviet Union was not as easy as it looked, and that what was taking place instead was the birth of a Mafia state. The fall of the Soviet bloc opened the sluice gates to a torrent of flight capital that could now go into infecting Western democracies with the viruses of a new kleptocracy.

  In Washington, K Street lobbyists had created a lucrative cottage industry by fashioning ingenious loopholes in legislation that served powerful corporate interests—Big Oil, Big Pharma, and the like. Now those doors had opened to foreign interests as well. The Russians learned how to work the system. Russian money went to coal mines in Kentucky to keep Senate majority leader Mitch McConnell (R-KY) happy. Billionaire oligarchs like Leonard Blavatnik, who happened to be a naturalized American citizen, could pour millions from their immense fortunes—$31.7 billion for Blavatnik, according to Bloomberg—into America’s deeply flawed electoral finance system.

  In the decade after the Soviet Union collapsed, KGB operations started by Boris Birshtein and the like began to emerge as forces to launder money, run commodity firms, and help out the likes of Donald Trump. Among them, Birshtein colleague Alexander Mashkevich was later connected to the Bayrock Group, the real estate development company located in Trump Tower that developed Trump SoHo (now the Dominick) in 2002 and pushed unsuccessfully to develop Trump Tower in Moscow. Alexander Shnaider, who was Birshtein’s son-in-law, partnered with Trump in building the sixty-five-story Trump International Hotel and Tower Toronto, which opened in 2012. (The hotel has since been renamed the St. Regis Toronto.)

  In the nineties, Trump had lost billions by overexpanding in Atlantic City casinos at an insane pace. But now, thanks to the Russians, he was back on his feet. He was ready for his second coming.

  CHAPTER TWELVE

  GHISLAINE AND JEFFREY

  No one was more stunned by Robert Maxwell’s death than officials at the YIVO Institute for Jewish Research, a leading repository of information on Eastern European Jewry that had selected Maxwell and his wife, Elisabeth, to be honored guests at its annual benefit dinner scheduled just over two weeks later.1

  At first, officials at the institute weren’t clear on how to handle the situation and considered canceling the dinner entirely. But when Mrs. Maxwell said she wanted to go ahead with it, the institute decided to turn the evening into “a solemn celebration” of Maxwell’s life and his charitable work for Israel.2 Elisabeth, who was known as Betty, was to be honored as well for her research on the Holocaust.

  So on November 24, 1991, Elisabeth arrived at New York’s Plaza Hotel, then owned by Donald Trump, with her daughter Ghislaine and her daughter’s date. Scheduled entertainment included Mandy Patinkin singing Yiddish songs and an appearance by actor and comedian Tony Randall. New York mayor David Dinkins and Senator Daniel Patrick Moynihan (D-NY) were expected as well.3

  But none of that meant it was going to be fun. Ghislaine, still finding her legs in New York, had moved to the city after her father bought the New York Daily News earlier that year, in March. Her role initially had been to do advance work casting her father as a hero who was rescuing a failing New York institution.

  But as must have been clear at the Plaza that night, things couldn’t possibly have gone more wrong. The guest of honor was dead. After Maxwell’s death, his corrupt empire was finally exposed as the catastrophe it was. The whole Maxwell empire was riddled with scandals being played out in the press—with stories of his tragic death yielding to respectful obituaries, which then gave way to mysteries and scandals that unraveled day by day, and raised the question of whether his demise was the result of murder, suicide, or an accident. Moreover, it was now being reported that before his death, Maxwell had stolen as much as $1.2 billion (more than $2.26 billion in 2020 dollars) from his businesses and his employees’ pension funds.4

  The Daily Mirror’s foreign editor, Nicholas Davies, a close confidant of Maxwell’s, was shown to have had longtime ties to Mossad. Pressure was mounting on Ian and Kevin Maxwell, two of Ghislaine’s brothers who were now running the family business, to satisfy bankers who had been stiffed by their father.5 All over the world, newspapers headlined stories about the Maxwell meltdown. The Independent (UK): “Maxwell’s Time Bomb; A Fraud Investigation into Mysterious Events.”6 The Observer (UK): “Banks Close In on Maxwell—Pressure Is Mounting for Kevin and Ian.” The New York Times: “Swiss Bank Is Demanding Maxwell Loan Repayment.”7

  The Scotsman put aside the old saw about not speaking ill of the dead: “If he was despised in life, he was hated in death,” the newspaper reported. “He was, officially, the biggest thief in British criminal history.”8

  Of course, what made his story even more mesmerizing was the lurid mystery behind his demise. The three pathologists at Maxwell’s inquest were unable to agree on the cause of death, and at least one of them, Carlos López de Lamela, left open the possibility of murder. López de Lamela said that a tiny perforation under the publisher’s left ear “could have been caused by a syringe filled with some mortal substance. We certainly haven’t ruled out foul play.” But according to London’s Evening Standard, López de Lamela kept changing his mind.9

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  Meanwhile, in the immediate aftermath of her father’s death, Ghislaine had committed the self-inflicted PR blunder of flying back to New York aboard the luxury supersonic Concorde—in the process, outraging pensioners who had loyally worked for her father and were facing an impoverished retirement, thanks to his extraordinary thievery.10

  Of all Maxwell’s children, Ghislaine was the most sought after by tabloid reporters feasting on the detritus left behind by her father’s death. Ghislaine had shown up regularly in the gossip columns before his death, once on the arm of George Hamilton, the debonair and perpetually suntanned Hollywood boy toy. Afterward, Rupert Murdoch’s New York Post, chief rival to Maxwell’s Daily News, referred to Ghislaine as the “leggy heiress.” Britain’s Mail on Sunday called her “the youngest and most pulchritudinous of the disgraced tycoon’s children.”11

  No wonder she had decamped to New York, where her father’s legacy “. . . was less toxic, where she is building a respectability,” the Mail opined, “which would be impossible in London, where the wounds created b
y her father cut deepest. In New York, they adore the progeny of felons as much as the felons themselves.” And indeed, when Ghislaine was the celebrity invitee at a restaurant opening after her father’s death, she was a hit—no apologies necessary.12

  Oxford-educated, she was smart, sexy, and compelling, a master of the breezy and witty cocktail banter that could win over royalty and posh literary crowds and that delighted even the most jaded New Yorkers. Her pedigree as scion to a corrupt dynasty aside, she had fabulous access to some of the richest and most powerful people in the world on both sides of the Atlantic. She was even able to charm some who hated her father.

  “[Robert] Maxwell was an ass-licker,” recalled Taki Theodoracopulos, the conservative Greek journalist who has chronicled transatlantic society for more than forty years. “I didn’t want to have anything to do with him. But Ghislaine wasn’t like that. She was attractive and friendly. She never pulled rank. She was always polite.”13

  A more unlikely fan of Ghislaine’s was a former colleague of mine at Vanity Fair, Vicky Ward, who famously profiled Epstein in a 2003 article from which reports of his sexual misconduct had been edited out. But in 2011, Ward was back writing about the Ghislaine and Jeffrey for the magazine in a highly flattering piece that extolled Ghislaine’s relationship with Epstein, and her vulnerability.