Why did Trump's plan with Ukraine fail?
How Donald Trump learned to love Russia
“Tell me who you are going with and I will tell you who you are” - Cervantes
"I've always been blessed with a kind of intuition about people that allows me to sense who the sleazy guys are, and I stay a long way from them." - Donald Trump, "Surviving at the Top"
Even before the November 8, 2016 election, many leading Democrats were loudly calling for the FBI to disclose the results of its investigation into Putin-backed Russian hackers. Instead, FBI Director Comey decided to temporarily revive his zombie-like investigation into Hillary's emails. It is quite possible that this decision had an important influence on the election, but it did nothing to clear up the allegations against Putin. Even now, after the CIA released a summary of its own secret investigation, it should be noted that we still lack the equivalent of a smoking gun in cyberspace.
Fortunately, however, for those of us irritated by Trump's Russian connections, there is another readily available body of material that has so far received surprisingly little attention. This suggests that whatever the nature of the relationship between the new President Trump and President Putin, Trump has certainly managed to establish direct and indirect connections - with an extensive private network of overt mafiosi, oligarchs, Fraudsters and kleptocrats in Russia and on the territory of the former Soviet Union. Each and every one of these connections could have come about by chance. But the overall picture is a true "Star Wars" bar scene of shady characters, in which Donald Trump sits right in the middle. The analytical challenge is to map this network - a task most journalists and law enforcement agencies who focused on individual cases have not addressed.
To call this network “private” may of course not be entirely accurate, given that in Putin's Russia even the hardest-boiled mafiosi learn the hard way to maintain a respectful relationship with the “New Tsar”. But here the central question relates to our new tsar. Did the American people really know they were sending such a "well-connected" guy to the White House?
The big picture: kleptocracy and capital flight
A few of Donald Trump's connections to oligarchs and various gangsters have already received sporadic press attention - for example, the reported relationship between former Trump campaign manager Paul Manafort and exiled Ukrainian oligarch Dimitri Firtash. But no one has analyzed the connections as a whole to identify any more relationships and developed an overall picture.
Nobody has related these cases to any of the most important facts about modern Russia: its rise since the 1990s to a world-class kleptocracy - a source of black capital and booty second only to China, with a net offshore escape capital of $ 1.3 trillion (as of 2016).
This tidal wave of illegal capital is hardly Putin's work alone. Rather, it is a symptom of one of the most serious failures of modern political economy - one for which the West bears much of the responsibility. The failure to ensure that in Russia, after the collapse of the Soviet Union at the end of the 1980s, a strong middle class could develop as the basis of the economic and political order that is necessary for democratic capitalism, the rule of law and stable and peaceful Relations with neighboring states. Instead, the West in general operated and financed the US Treasury Department, USAID (the United States Agency for International Development), the US State Department, the International Monetary Fund and the World Bank, the European Bank for Reconstruction and Development, and many leading economists in particular one of the largest transfers of public property to private hands the world has ever seen.
For example, Russia's 1992 "voucher privatization program" allowed a tiny elite of former state-owned company managers and party apparatchiks to take control of large numbers of public companies, often with the help of real mobsters. A majority stake in Gazprom, the state-owned energy company that controlled a third of the world's gas reserves, was sold for $ 230 million; Russia's entire national power grid was privatized for $ 630 million; ZIL, Russia's largest automaker, went for about four million dollars; Ports, ships, oil, iron and steel, aluminum, many of the high-tech arms and air carriers, the world's largest diamond mines, and much of the Russian banking system have also been sold at bargain prices. The main beneficiaries of this privatization - in fact, this cartelization - were initially only about 25 aspiring oligarchs who had the inside connections to acquire these assets and the resources to hold them. The fortunate few who made personal fortune in this stabbing, basically the first of the new kleptocrats, included not only numerous Russian officials, but also leading gringo investors and advisors, Harvard professors, USAID advisors, and bankers from Credit Suisse First Boston and other Wall Street investment banks. As the renowned development economist Alexander Gerschenkron, an authority on Russian development, once said: "If we were in Vienna, we would have said: 'We wish we could play it on the piano!'"
Better dictatorship than chaos: Russia and the Great Depression of the 1990s
For the vast majority of ordinary Russian citizens, this extreme re-concentration of wealth was accompanied by a full blown 1930s-type depression, a shock therapy-induced surge in domestic price levels that wiped out the private savings of millions, rampant lawlessness, one public health crisis and sharp falls in life expectancy and birth rates. Sadly, this neoliberal policy package of “market reforms,” introduced at a downright Stalinist pace from 1992 to late 1998, was endorsed not only by high-ranking officials in the Clinton administration, neoliberal economists and countless USAID, World Bank and IMF staff, but partly even designed and financed. The few dissenting voices included some of the best economic thinkers in the West - Nobel Prize winners like James Tobin, Kenneth Arrow, Lawrence Klein, and Joseph Stiglitz. This included Sergei Glazyev of Moscow University, who now serves as President Putin's chief economic advisor. Unfortunately, these scientific luminaries were not an equal opponent for the folks with the money.
There was also an important political intervention in Russian politics. In January 1996, a secret team of American professional policy advisers arrived in Moscow to discover that, as CNN put it at the time, "the only thing voters didn't like Boris Yeltsin was the prospect of rioting." The experts' solution was one of the earliest “Our Brand Is Crisis” campaign strategies, in which Yeltsin was presented as the only alternative to “chaos”. To support it, the International Monetary Fund also contributed with new loans of $ 10.1 billion, in addition to those of $ 17.3 billion that the Monetary Fund and the World Bank had already extended.
With all this outside help and generous donations from Russia's new elite, Yeltsin succeeded in defeating the Communist Party candidate, Gennady Zyuganov, with 54 to 41 percent in the second round of the elections in July 1996 - although his approval rating was still in January 1996 Opinion polls had been just eight percent. Mainstream media like “Time” and the “New York Times” were delighted with Yeltsin's victory at the time. Very few outside Russia questioned the wisdom of this blatant intervention in post-Soviet Russia's first democratic election or the West's right to do so in self-protection.
By the late 1990s, the chaos resulting from Yeltsin's confused policies had laid the foundations for a pronounced counter-revolution, including the rise of ex-KGB officer Putin and a massive capital flight by the oligarchs that practically continues to this day. For ordinary Russians, as mentioned, it was a catastrophe. For many banks, private bankers, hedge funds, law firms and accounting firms, for leading oil companies like ExxonMobil and BP, and for capital-hungry debtors like the Trump Organization, the chance to feed on the post-Soviet booty was a godsend. It was vulture capitalism at its worst.
Phoenix Trump: The rise after the bankruptcies
Donald Trump, the man with nine lives, had just seen a series of six bankruptcies in a row at the time. But the massive outflows of black capital from Russia and oil-rich CIS states such as Kazakhstan and Azerbaijan from the mid-1990s created exactly the kind of less picky investors he was dependent on. These outflows came at just the right time to fund several of Trump's high-risk real estate and casino projects in the post-2000 period - most of which failed. The son of the new President, Donald Trump Jr., who was Vice President of the Trump Organization at the time and responsible for development and acquisitions, explained on the “Bridging U.S. and Emerging Markets Real Estate ”conference in Manhattan in September 2008 (based, as he said, on“ half a dozen trips to Russia in 18 months ”):“ In terms of investing in high-end products in the United States States make the Russians a rather disproportionate share of our assets; in Dubai, for example, and certainly with our project in SoHo and all over New York. We see a lot of money pouring in from Russia. "
All of this helps clarify one of the most intriguing puzzles of Donald Trump's long, tumultuous business career: how he managed to keep funding it despite a pathetic track record of failed projects.
According to the "official story," this was simply due to a combination of brilliant deal-making, Trump's gold-plated brand and raw animal instincts - with creative tax avoidance of $ 916 million to top it off. But this official story is humbug. In truth, Trump has been helped by ample new sources of global capital since the late 1990s, especially from ailing markets like Russia.
This suggests that neither Trump nor Putin came out of nowhere. They're not exactly bad twins, but they're both byproducts of the same neoliberal political scams that have been hijacked into Russia's struggling new democracy.
A guided tour of Trump's Russia and CIS connections
The following overview of Trump's Russian-Soviet business ties is based on published sources, interviews with former police forces and other experts in the United States, the United Kingdom and Iceland, research into online business registers and a detailed analysis of offshore company data in the Panama Papers. There are no doubt other newsworthy cases, given the sheer volume of Trump's activities, but our concern is with structures.
It should be noted that none of the activities and business relationships reported here necessarily included criminal behavior. Several key players have criminal records, but only small parts of their widely ramified business activities have been thoroughly investigated and, of course, they all deserve the presumption of innocence. In addition, some of these actors reside in countries where activities such as bribery, tax evasion and other financial machinations are either not illegal or rarely prosecuted. As former British Chancellor of the Exchequer Denis Healey once said, the difference between “legal” and “illegal” is often only “the width of a prison wall”.
So why spend time collecting and reviewing material that either doesn't suggest anything illegal or, in some cases, even impossible to verify? Because, I point out, the very fact that such claims are widespread creates a legitimate public interest. In other words, when it comes to judging the integrity of high-ranking government officials - especially that of the most powerful man in the world, the US president - the public has the right to be informed of all relevant allegations against their business partners and their dealings , be they true, false or, most often, unprovable. It is important that this information is clearly marked as legally unproven.
In addition, the case-by-case research and investigative approach of most investigative journalists and law enforcement agencies often misses the big picture: the legal and illegal global networks of influence and finance that exist among business people, investors, kleptocrats, organized criminals and politicians and their helpers , Banks, accounting firms, law firms, and tax havens exist. Every single component of these networks could easily go away without making any difference. But the networks live on. It is these shadowy transnational networks that really should be explored.
Spectacularly unsuccessful - the New York real estate development company Bayrock Group LLC
We begin our tour of Trump's Russia and CIS ties, aside from the bizarre case of Bayrock Group LLC, a spectacularly unsuccessful New York real estate development company that emerged in the early 2000s and practically disappeared by 2014 from a couple of lawsuits. In 2007, Bayrock and its partners reportedly had Trump-branded projects worth more than $ 2 billion in planning. But most of them either never came to fruition or were terrific failures for reasons that are about to become obvious.
Bayrock's bad investments included the 46-story Trump SoHo condominium hotel on Spring Street in New York City, the main developer of which was a partnership formed by Bayrock and the FL Group, an Icelandic investment firm. Completed in 2010, SoHo soon became the subject of extensive civil lawsuits from disgruntled home buyers. Creditors filed their mortgage claims, and in 2014 the building was resold after reimbursing $ 3 million in down payments from customers. Similarly, Bayrock's Trump International Hotel & Tower in Fort Lauderdale was foreclosed and sold in 2012, while at least three other Trump-branded properties were in the US, as well as many other "project concepts" Bayrock had in mind, from Istanbul and Kiev until Moscow and Warsaw, were never realized. Carelessness in scrutinizing potential partners and shareholders is one of the more expected qualities of Trump. Acting on his instinct, he partnered with Bayrock fairly quickly in 2005, became a minority shareholder in Trump SoHo with an 18 percent stake, licensed his brand and took over management of the property.
The prime example in the range of Trump's former business partners is Bayrock's former CEO Tevfik Arif (aka Arifow), an emigrant from Kazakhstan who reportedly moved to Brooklyn in the 1990s. Trump also had extensive contacts with another key Russian-American figure from Brooklyn at Bayrock, Felix Sater (aka Satter), which will be discussed below.
Trump described his introduction to Bayrock in 2013 in his testimony in a process initiated by investors in the Fort Lauderdale project, one of Trump's first projects with Bayrock: “Well, we had a tenant in […] called Trump Tower Bayrock, and Bayrock was interested in getting us into business. ”Recently, Trump has had some difficulty remembering details regarding arifs or saters. But that's hardly surprising, given what we now know about them.
Kazakhstan and Tevfik Arif
According to several reports, Tevfik Arif is originally from Kazakhstan, a Soviet republic until 1992. Arif was born in 1950 and worked for 17 years in the Soviet Ministry of Economy and Trade, at the time of the collapse of the Soviet Union as Deputy Director of Hotel Management. He moved to Turkey in the early 1990s, where he reportedly helped develop properties for the Rixos hotel chain. Not long after that, he moved on to Brooklyn, founded Bayrock, opened an office in Trump Tower, and began pursuing projects with Trump and other investors.
Tevfik Arif wasn't the only connection from Bayrock to Kazakhstan. A presentation for Bayrock investors from 2007 named Alexander Maschkewitsch's “Eurasia Group” as a strategic partner of Bayrock's equity financing. Together with two other prominent Kazakh billionaires, Patoch Shodiyev and Aliyan Ibragimow, Mashkevich reportedly operated the "Eurasian Natural Resources Cooperation". In Kazakhstan, these three are sometimes referred to as "the trio".
The trio has apparently worked together in the metals and other natural resources businesses since Gorbachev's perestroika in the late 1980s. At that time, the three gained a significant amount of control over Kazakhstan's vast mineral and natural gas reserves. Of course, they found it useful to befriend Nursultan Nazarbayev, the longtime ruler of Kazakhstan. In fact, State Department cables released by Wikileaks in November 2010 describe a close relationship between the trio and the seemingly everlasting Nazarbayev kleptocracy.
In any case, the trio has recently attracted the attention of many other investigators and the media, including the September 11, 2001 American Commission of Inquiry, the Guardian, Forbes, and the Wall Street Journal. In addition to appropriating resources, the trio's long catalog of alleged activities includes money laundering and bribery. Shodiyev (who is called "Fatokh Shodiyew") was filmed in 2005 while he was attending the birthday party of alleged Uzbek mafia boss Salim Abduvaliyev and presented him with a "gift" or "tribute" of US $ 10,000.
According to the Belgian daily Le Soir, Shodiev and Mashkevich also became close partners of a peculiar Russian-Canadian businessman named Boris J. Birshtein, who happened to be the father-in-law of another important Russian-Canadian business partner of Donald Trump in Toronto. We will come back to Birshtein later.
What the Panama Papers reveal
The trio also appears in the Panama Papers database from April 2016 as the apparent beneficial owner of a company in the Cook Islands, "International Financial Limited". The Belgian newspapers “Het Laatste Nieuws”, “Le Soir” and “La Libre Belgique” reported that Shodiev paid 23 million euros to obtain a “class B” banking license for this company. That would allow her to do international foreign exchange deals. In the words of a leading Belgian financial regulator, "it makes all money laundering operations undetectable".
The Panama Papers also show that some of Arif's contacts in the Rixos Hotel Group may have ties to Kazakhstan. An offshore company listed in the Panama Papers, “Group Rixos Hotel”, acts as an intermediary for four BVI offshore companies. Rixos Hotels CEO Fettah Tamince is listed as a former shareholder in two of these companies, while a shareholder in another, Hazara Asset Management, bears the same name as the son of a recent Kazakh minister of sports and tourism. An article in the Kazakh edition of Forbes described this official in 2012 as the third most influential member of the Maschilis, the lower house of the Kazakh parliament.
According to a 2015 lawsuit filed against Bayrock by Jody Kriss, a former employee, the company received millions of dollars in capital contributions as of 2004, arguably from Arif's brother in Russia, who allegedly had access to accounts at a chrome refinery in Kazakhstan . This so far unproven claim could only be an attempt by the plaintiff to reach a more favorable settlement with Bayrock and its original owners. But chromium is also one of those Kazakhstan's natural resources that are reportedly controlled by the trio.
Arif's most recent collision with the law, according to the Israeli daily Jediot Acharonot, came in 2010 when he and other members of Bayrock's Eurasian trio were arrested in Turkey during a police raid on an alleged prostitution ring. At the time, Turkish investigators claimed that Arif could be the head of a criminal organization that dealt with Russian and Ukrainian escort women, including some allegedly who were not older than 13 years. Accordingly, major customers made their selection via the website of a modeling agency, with Arif supposedly taking care of the logistics. According to reports, the preferred venue was particularly offensive for the Turkish authorities: a yacht that had once belonged to the revered founder of the republic, Ataturk. It was also alleged that Arif provided accommodations for young women in Rixos Group hotels.
According to Russian media, two high-ranking Kazakh officials were also arrested in the raid, although the Turkish Foreign Ministry quickly dismissed this claim as unfounded. In 2012, all charges against Arif resulting from the incident were dismissed by Turkish courts. And his spokesmen then denied any involvement.
Despite the decline of Bayrock and its legal entanglements, Arif appears to have remained active. Bloomberg reports that he, his son and the CEO of Rixos Hotels, Fettah Tamince, got together in 2013 to pursue a rather controversial business: They advanced certain sums of money to prominent footballers in need in exchange for part of their future marketing - and transfer income. In the case of Arif and its partners, this new form of bondage was reportedly carried out by a UK and Malta based hedge fund, Doyen Capital LLP. The European football association UEFA wants to ban this practice as it opens the door to a wide range of potential abuse, including the possibility of putting undue pressure on athletes or clubs to overwrite valuable rights and fees. But the notorious world football association FIFA is acting slowly as usual. To date, Doyen Capital LLP has reportedly placed financial bets on several well-known players, including Brazilian star Neymar.
Felix Sater Jr. - second generation mafioso
Our second example is Felix Sater, the senior executive at Bayrock mentioned above. Sater worked at Bayrock from 2002 to 2008, negotiating several important deals with the Trump Organization and other investors. When Trump was asked in the 2013 statement quoted above which Bayrock won him over to the Fort Lauderdale project, his answer was: “It could have been Felix Sater, it could have been him - I really don't know who it could have been, but someone from Bayrock. ”Although Sater left Bayrock in 2008, he was reportedly back at Trump Tower in 2010 as a senior advisor to the Trump Organization - at least on his business card - with his own office in the building.
Sater has also testified under oath that he guided Donald Trump Jr. and Ivanka Trump through Moscow in 2006, met with Donald frequently for several years and once flew with him to Colorado. And while it is quite possible that it was a production, it is reported that he visited Trump Tower in July 2016 and made a personal donation of $ 5,400 for Trump's election campaign.
Whatever Felix Sater has been up to lately, the key point is that Tevfik Arif decided in 2002 at the latest to hire him as Bayrock's managing director. He did so despite the fact that Sater already had an amazing record as a professional criminal, with multiple admissions of guilt and convictions, extensive links to organized crime, and - the ultimate price - some form of ID to quickly get out of prison a free man can - on the basis of an informant relationship with the FBI and the CIA, which vaguely reminds of the legendary Whitey Bulger, the "Godfather of Boston".
Sater, who like Arif lives in Brooklyn, was born in Russia in 1966. He reportedly emigrated to the United States with his family in the mid-1970s and settled in Brighton Beach, New York, called Little Odessa. It appears that his father Mikhail Sheferovsky (aka Michael Sater) may have been involved in mafia activities in Russia before coming to the United States. According to a petition filed with the Supreme Court, Felix Sater's liaison officer at the FBI stated that he was "well acquainted with the crimes of Sater and his father, a boss of the (Semyon) Mogilevich gangster syndicate." According to reports, an FBI report from 1998 said that Mogilevich's organization had "about 250 members" and was involved in the trade in nuclear materials, weapons and other things as well as in money laundering (see below).
But Michael Sater may have been less ambitious than his son. His only known conviction in a US criminal case came in 2000 when he pleaded guilty on two counts of extorting restaurants, grocery stores and clinics in Brooklyn. He was sentenced to three years probation. Interestingly, the U.S. Attorney General for the Eastern Borough of New York who was on the case at the time was Loretta Lynch who succeeded Eric Holder as U.S. Attorney General in 2014. In 2000 she was also involved in the developing relationship with the informant and the deal with Michael's son Felix, which may help explain the low sentence for the father.
By that time, in 2000, the young Felix Sater was well advanced on the way to a career as a prototype Russian-American mobster. In 1991, he stabbed a commodity trader in a Manhattan bar with the style of a margarita glass and severed a nerve in the process. According to Trump's account, Sater just got into a "bar fight, which happens to a lot of people". The penalty for this conviction cannot have been very high, because in 1993 the 27-year-old Felix was already a dealer for a brand new raw materials company in Brooklyn called "White Rock Partners", an innovative joint venture between four New York gangster families and the Russian mafia Should bring state-of-the-art financial scams to Wall Street.
Money laundering and illegal arms sales
Five years later, in 1998, Felix Sater pleaded guilty to fraudulent stock trading as one of 19 American and Russian traders with Mafia affiliations involved in a $ 40 million pump and dump securities fraud. Faced with the threat of a 20-year prison sentence in a federal prison, Sater and Gennady Klotsman, a Russian-American compatriot who had been with him the night of the barroom brawl, unpacked and helped the Justice Department prosecute their co-conspirators.
Allegedly, so did Salvatore Lauria, another "trader" involved in the conspiracy. According to the Jody Kriss lawsuit, Lauria later became an unofficial advisor to Bayrock. Initially, their collaboration with the judiciary, which lasted from 1998 to at least 2001, was kept secret until a press release by Federal Prosecutor Lynch inadvertently revealed it in March 2000. Unfortunately, at the same time, New York police reportedly discovered that Sater had been running a money laundering operation and illegal arms sales from a Manhattan warehouse. He and Klotsman then fled to Russia.
According to the New York Times, which cites Klotsman and Lauria, the always creative Sater managed to convey information about the black market for Stinger anti-aircraft missiles to the CIA and the FBI shortly after the events of September 11, 2001 . This strategy, according to Klotsmann, "brought Felix his freedom" and enabled him to return to Brooklyn. It is still unclear what information Sater provided, but in 2015 US Attorney General Loretta Lynch publicly praised him for providing information that was "extremely important to national security."
Meanwhile, the penalty for his financial crimes continued to be postponed, even after his official cooperation with the judiciary ceased in late 2001. His files were kept under lock and key and until October 23, 2009 he managed to avoid any punishment for these acts. When he finally appeared before the judge for Eastern District I, Leo Glasser, he received a fine of $ 25,000 but no prison sentence, including parole, in a silent trial that did not attract press attention. Some compared this sentence to Judge Glasser's earlier verdict against Mafia killer "Sammy the Bull" Gravano of four and a half years in prison for 19 murders in exchange for "cooperation against John Gotti".
His skill allowed Felix Sater to avoid imprisonment and to hide his criminal roots. From 2002 to 2008 he was able to embark on a lucrative new career as Bayrock's managing director. In that position, he was responsible for negotiating aggressive real estate deals around the world and, according to the lawsuits of previous Bayrock investors, engaging in further financial fraud. The only apparent difference was that he changed his name from "Sater" to "Satter".
In his 2013 statement, quoted above, Trump said: "I do not consider Felix a member of the Mafia." When asked if he had evidence to support this claim, Trump admitted: "I have none."
As far as Sater's pal Klotsman is concerned, the past few years have not been auspicious. In December 2016, he was in a Russian penal colony serving a ten-year sentence for a failed armed robbery in Moscow involving $ 2.8 million in jewels. In 2016, Klotsman was reportedly on a top ten list of Americans who would exchange Russians for prominent Russian inmates in US prisons, including the notorious arms dealer Viktor Bout. So far, no buyers have been found. But with Donald Trump as president, who knows?
The island connection
One of the most serious fraud cases brought forward in the recent Bayrock trial involves the FL Group, a private Icelandic mutual fund that truly is a story in itself.
For a long time, Iceland did not immediately think of a large offshore financial center. It is a small, snow-covered island in the North Atlantic, closer to Greenland than to Europe, with only 330,000 inhabitants and a gross domestic product of only 17 billion dollars. Twenty years ago its main exports were cod and aluminum - imported bauxite was smelted on the island because of the low cost of electricity.
But in the 1990s Iceland's tiny neoliberal political elite believed they had come up with a brilliant idea: "Let's privatize our public banks, deregulate the capital markets and let them loose on the world!" When in 2008 all three of these previously privatized financial institutions went bankrupt - likewise like the FL Group - total bank lending was 12.5 times Iceland's gross domestic product - the highest ratio of lending to GDP anywhere in the world.
For our story, the most interesting thing about Iceland is the following: Long before this crisis hit and completely ruined the FL Group, our two central mafia professionals from Russia or the CIS and Brooklyn, Arif and Sater, somehow stumbled upon this obscure island fund. In fact, in early 2007, they convinced the FL Group to invest $ 50 million in the Trump SoHo project in Midtown Manhattan. According to the Kriss lawsuit, Bayrock's FL Group and Felix Sater agreed at the same time to pursue further Trump-related deals worth two billion dollars. The Kriss lawsuit also alleges that the FL Group (FLG) also agreed to partner with Bayrock to enable tax fraud on potential profits in excess of $ 250 million. In detail, she argues that the FLG has agreed to pay 50 million.To pay dollars for a 62 percent stake in the four Bayrock projects with Trump, while Bayrock would structure this contract as a "loan". That meant Bayrock would not have to pay tax on initial earnings, while FLG's expected $ 250 million in dividend earnings would go through a Delaware corporation and would be characterized as interest payments. That would allow Bayrock to avoid paying taxes of up to $ 100 million. Bayrock would pretend to the tax authorities that her actual partner was a partnership in Delaware that she had formed together with FLG, "FLG Property I LLC", instead of FLG itself.
The Trump Organization has denied any relationship with the FLG. But as a shareholder in Trump SoHo, with an 18 percent equity stake in that deal alone, Donald Trump was required to personally sign the BayrockFLG contract.
Iceland and Russia - what did Donald Trump know?
That raises a lot of questions. To answer most of them, we will have to wait for the outcome of the Kriss litigation, which could take years, especially now that Trump is president. But several of these questions literally jump out at you.
First, how much did Trump know about the partners and the inner workings of this business? After all, he held a significant equity stake in it, unlike many businesses where he only licenses his brand name. It was also to finance several of its most important properties on the east coast.
Second, how did the FL Group and Bayrock come to get this dubious deal in the first place? A former FL Group manager claims that the deal was a coincidence and that the "relatively small deal" was nothing special for either party. On the other hand, according to the Kriss lawsuit, the FLG was a well-known source of easy money from dubious sources such as Kazakhstan and Russia, and other Bayrock actors with criminal records such as Salvatore Lauria were also involved in initiating business.
At present, the evidence on this second question is incomplete. But there are already some interesting indications that the FL Group's willingness to generously fund Bayrock's weird CIS Brooklyn team, its poorly planned Trump projects, and allegedly planned tax evasion was not simply due to Icelandic backwoodsmen.
There is still much we need to learn about Iceland's special relationship with the Russian financial world. In this context, there are several puzzles to be solved:
First, it turns out that the FL Group, Iceland's largest private investment fund until its bankruptcy in 2008, had several owners or investors with deep Russian business connections, including several who were also key investors in all three of Iceland's top banks.
Second, it turns out that the FL Group had built an incredible tangle of cross-ownership, credit, and cross-derivative relationships with the big banks. The thicket of cross-border deals made it nearly impossible to regulate employee fraud when financial institution insiders ran a self-service orgy, borrowing and lending money to fund risky investments of all kinds. It became difficult to determine which institutions were net debtors or investors as the concentration of ownership and self-dealing in the financial system increased rapidly.
Third, the FL Group issued a variety of peculiar loans to Russia-related oligarchs, as well as Bayrock. During this time, which we will go into in more detail, Alex Shnaider - the Russian-Canadian billionaire who would later become Donald Trump's business partner in Toronto - secured a 45.8 million euro loan from Kaupthing Bank to buy a yacht. At the same time, a company owned by another Russian billionaire who reportedly owns a major vodka franchise received an even larger loan.
Fourth, Iceland's largest banks also made a number of exceptional loans to Russian stakeholders before the 2008 crisis. For example, one of Russia's richest oligarchs and close friend of President Putin almost managed to secure at least 400 million euros from the Kaupthing Bank at the end of September 2008 (or, as some say, up to four times as much) - exactly that Time when the financial crisis completely broke out. This bank also had direct and indirect investments in the FL Group. In fact, until December 2006, she reportedly employed the FL Group's private equity manager, who allegedly negotiated the $ 50 million deal with Felix Sater in early 2007.
Fifth, there are unconfirmed reports of a secret US Federal Reserve paper that unnamed Icelandic banks were used for Russian money laundering operations. In addition, multiple applications by Kaupthing Bank to open a branch in New York in 2007 and 2008 were rejected by the Federal Reserve. Similar unconfirmed rumors repeatedly appeared in Danish and German publications, as did claims about the alleged Kazakh origins of the cash laundered by the FLG in the Kriss trial.
Sixth, there is a peculiar fact: when the Icelandic banks went bankrupt in October 2008, their private banking subsidiaries in Luxembourg, which managed at least eight billion euros in private assets, were suddenly seized by the Luxembourg banking authorities and turned into a new bank, Banque Havilland , transferred. This happened so quickly that Iceland's central bank learned nothing of the identity and portfolio sizes of the Icelandic banks' offshore retail clients. But again some important Russian names were rumored.
Putin's generous offer
Finally, there is the rather strange phone call from Russia's ambassador to Iceland to the Icelandic prime minister at 6:45 am on October 7, 2008, the day after the financial crisis hit Iceland. According to the Prime Minister's statement, the Russian ambassador informed him that the then Prime Minister Putin was ready to come to Iceland's aid with a rescue operation worth four billion euros. Of course, not long after Putin's alleged offer was modified so that Russia was ready to receive an Icelandic negotiating team in Moscow. By the time the Icelandic delegation finally arrived at the end of the year, Russia's desire to help with loans had waned. Iceland eventually accepted a $ 2.1 billion stabilization package from the International Monetary Fund instead.
According to a member of the negotiating team, the reasons for Russia's U-turn are still a mystery. Perhaps Putin had changed his mind because he had simply decided that Russia had to deal with its own significant financial problems. Or perhaps he had discovered that the Icelandic banks had indeed been very generous in lending to Russian interest groups and, given Luxembourg's actions, all Russian private assets were already secured with Icelandic banks.
On the other hand, there is perhaps a simpler explanation for Iceland's peculiar generosity towards shady partners like Bayrock. After all, up to the last minute before the collapse in October 2008, the whole world had given Iceland an AAA rating: investors queued up in London to open high-yield Icelandic bank accounts, Iceland's bank stocks skyrocketed and the remuneration of its bankers was through the roof shot. So why should anyone worry about closing a few more dodgy deals? Overall, the verdict on these strange ties between Russia and Iceland is still pending. But all of these Icelandic puzzles are fascinating and require further investigation.
Alex Shnaider or: The Fall of the Trump Toronto Tower
Our fourth case study of Trump's business partners looks at 48-year-old Russian-Canadian billionaire Alex Shnaider, who co-funded the seventy-story Trump Tower and Hotel, Canada's tallest building. It opened in Toronto in 2012. Unfortunately, like so many other Trump projects funded by Russians and CIS investors, this large condominium hotel went bankrupt in November 2016 and is now falling to creditors.
According to his online profile at a Ukrainian news agency, Alex Shnaider was born in Leningrad in 1968, the son of Evsei Shnaider. A recent Forbes article states that his family immigrated to Israel from Russia when he was four years old and then moved to Toronto when he was 13 or 14 years old. The Ukrainian news agency said Alex's family was about to write “one of the most successful stories in the Russian quarter of Toronto” and that young Alex with “an entrepreneurial streak” helped his father Evsei Shnaider in the business, putting goods on the shelves and mopping the floors . It turned out to be a great decision, after all - Shnaider was thriving in the New World. Much of it was undoubtedly due to sheer talent. But it seems that at times he also received considerable support from his (according to reports now ex-) father-in-law, another distinctive Russo-Canadian: Boris J. Birshtein.
Originally from Lithuania, Birshtein, now around 69 years old, has been a Canadian citizen since 1982 at the latest. He lived in Zurich for a while in the early 1990s, but then returned to Toronto and New York. One of its most important companies was Seabeco SA, a "trading" company registered in December 1982 in Zurich. By the early 1990s, Birshtein and his partners had established many other Saebeco affiliated companies in a variety of locations including Antwerp, Toronto, Winnipeg, Moscow, Delaware, Panama and Zurich. Several of them are still active today. He often filled them with directors and executives from an extensive network of Russians, emissaries from other CIS countries such as Kyrgyzstan and Moldova, as well as younger emigrants from Russia or the CIS countries in Canada.
According to the "Financial Times" and the FBI, Birshtein not only headed Seabeco, but was also a close business partner of Sergei Mikhailov, the alleged head of the Solntsewskaya Bratwa, the largest branch of the Russian mafia and, according to "Fortune", in 2014 the organization with the highest turnover in the world organized crime. A 1996 FBI intelligence report quoted by the Financial Times claims that Birshtein was hosting a meeting of Mikhailov, Ukrainian-born Semyon Mogilevich, and several other leaders of the Russian and CIS mafia in his Tel Aviv office occurred. It should have been about the division of interests in Ukraine. A subsequent FBI report from 1998 on the "Semyon Mogilevich Organization" repeated the same allegation and described Mogilevich's successful attempts to bring privatized assets in Ukraine under his control.
The Financial Times article also describes how Birshtein and his partners used bribes of up to five million dollars to exert extraordinary influence on high-ranking officials in Ukraine, including President Leonid Kuchma. Citing Swiss and Belgian investigators, the Financial Times also claims that Birshtein and Michailow jointly controlled a Belgian company called MAB International in the early 1990s. At the time, the same investigators were watching millions of dollar transfers between accounts held by Seabeco's agent in Ukraine, Mikhailov, Birshtein, and Alexander Volkov.
In 1993, the Yeltsin government reportedly accused Birshtein of illegally exporting seven million tons of Russian oil and laundering the proceeds. Dmitri Jakubowski, a former Birshtein employee who also moved to Toronto, is said to have cooperated with Russian investigators. One night, an armed man fired three shots in Jakoubowski's house and left a note requesting an end to the cooperation, according to a "New York Times" article published at the time. As mentioned above, according to the Belgian newspaper “Le Soir”, two members of Bayrock's Eurasian trio were also involved in Seabeco at the time - Patoch Schodijew and Alexander Maschkewitsch. Shodiev reportedly first met Birshtein through the Soviet Foreign Ministry and then headed Seabeco's Moscow office before joining the Belgian office in 1991.
With the mafia to Antwerp
All of this is fascinating, but what about the connections between Birshtein and Trump's business partner in Toronto, Alex Shnaider?
Again, the clues are tempting. The Toronto Globe and Mail reported that young Alex Shnaider, still enrolled in law school, began working for Birshtein at Seabeco's Zurich headquarters, where he was reportedly introduced to the steel trade. Apparently this was much more than just a job; the Zurich company register lists "Alex Shnaider" from March 1993 to January 1994 as director of "Seabeco Metals AG". After this description, he left Seabeco in January 1994 to set up his own trading company in Antwerp, in partnership with a Belgian dealer. Strangely enough, “Le Soir” also writes that Michailow and Birshtein jointly founded MAB International in January 1994 in Antwerp.
Is it too far-fetched to assume that Alex Shnaider and the Mafia boss Mikhailov might have run into each other because they were both in the same town and they were both close to Shnaider's father-in-law?
According to Forbes, shortly after moving to Antwerp, Shnaider began visiting the factories of his steel trading partners in Ukraine. His favorite partner was the Zaporozhye plant, the fourth largest in Ukraine. At the plant, he reportedly met Eduard Schifrin, a metals trader with a doctorate in metallurgical engineering. Together they founded Midland Resources Holdings Ltd. in 1994.
When the wave of privatization swept through Eastern Europe, so the "Forbes" article, private investors wrestled to buy the government shares in Zaporozhye. But most traders lacked the financial backing and political connections to build large risky positions. Shnaider and Schifrin, on the other hand, bought unlimited stocks as if their pockets and connections were very deep. By 2001 they had acquired 93 percent of the work for about $ 70 million. That stake was only worth five years when Shnaider reportedly turned down a $ 1.2 billion purchase offer.
Today Midland Resources Holdings Ltd. Reportedly more than $ 4 billion in annual sales and has numerous subsidiaries in Eastern Europe. Shnaider is also believed to be owned by Talon International Development, the company that oversaw the construction of the Trump Hotel Tower in Toronto. All of this wealth apparently convinced Iceland's FL Group to provide Alex Shnaider with a EUR 45.8 million loan to purchase a yacht in 2008.
In December 2016, a search of the Panama Papers database found no fewer than 28 offshore companies affiliated with Midland Resources Holding Limited. According to the database, Midland Resources Limited was a shareholder in at least two of these companies, in addition to a person named "Oleg Shejchametov". The two companies Olave Equities Limited and Colley International Marketing SA were both registered in the British Virgin Islands and were active there from 2007 to 2010. A Russian restaurateur with the same name reportedly runs a business owned by two other suspected members of the Solntsevskaya mafia clan, Lev Kvetnoi and Andrei Skotsch. "Forbes" ranks Kvetnoi at number 55 on the list of the richest Russians and Skotsch, who is now a Duma member, at number 18.
Finally, it is interesting to note that Boris Birshtein is also listed as President of "ME Moldova Enterprises AG", a company initially based in Zurich, which was founded in November 1992, moved to Canton Schwyz in September 1994 and liquidated in January 1999 and has been deleted. Birshstein served on the company's board of directors from November 1992 to January 1994 when he became president of the company. In June 1994 he was replaced as President by an "Evsei Shnaider, Canadian citizen, residing in Zurich", who in September 1994 was also the director of the company. "Evsei Shnaider" is also listed in the Panamanian Commercial Register as Chief Financial Officer and Director of "The Seabeco Group Inc.", founded on December 6, 1991, and as Chief Financial Officer and Director of "Seabeco Security International Inc.", founded on December 10, 1991, guided. In December 2016 both companies still existed and Boris Birshtein is listed as President and Director of both companies.
The case of Paul Manafort's Ukrainian oligarch
Our fifth Trump Companion Profile concerns the Russia / Ukraine ties of Paul Manafort, the former Washington lobbyist who served Trump as national campaign leader from April to August 2016. For his part, Manafort's partner Rick Davis was the 2008 national campaign leader for Republican presidential candidate John McCain, so this may not be just a Trump connection.
One of Manafort's biggest lobbyists was the dubious pro-Russian Ukrainian billionaire Dimitri Firtash. According to his own admission, Firtash maintains a close connection to a character who appears repeatedly in this play, the alleged Ukrainian-Russian mafia boss Semyon Mogilevich. His most important other connection is almost certainly Vladimir Putin. Otherwise it could hardly be explained how this former used car dealer can control the barter of goods for natural gas in Turkmenistan and also how he was able to become a key investor in the Swiss company RosUrEnergo, which controls Gazprom's gas sales to Europe.
In 2008, Manafort teamed up with a former Trump Organization executive to buy the Drake Hotel in New York for up to $ 850 million, with Firtash pledging to invest $ 112 million. According to a lawsuit against Manafort and Firtasch, the deal was not about a carefully planned real estate investment. Rather, it was simply intended to launder part of the huge profits that Firtash had skimmed off by brokering dubious natural gas deals between Russia and Ukraine, with Mogilevich as a silent partner.
Ultimately, Firtasch withdrew from business with the Drake Hotel. The reasons for this are unclear - it was suspected that he had to concentrate on the collapse and nationalization of Bank Nadra in his DF group. But that doesn't seem to have changed his behavior: since 2014 there have been a number of other Firtash-related charges; the United States tried to extradite him from Austria so that he could stand trial on allegations that his octopus DF group bribed Indian officials to secure mining licenses. The Austrian court has asked him to leave a record-breaking bail of 125 million euros while he awaits the decision. And Spain has just tried to extradite Firtash in a money laundering case involving ten million euros through real estate investments in Spain.
After Firtash withdrew from the business, Manafort reportedly turned to Trump, but Trump declined to get involved. Manafort resigned as Trump's campaign manager in August 2016 - because of press reports about his connections not only to Firtash, but also to the pro-Russian Yanukovych government, which was overthrown at the end of 2014. However, after the November 8, 2016 elections, Manafort reportedly returned to advise Trump on personnel decisions to fill his administration. And he got support from Putin: On November 30, a spokeswoman for the Russian Foreign Ministry accused Ukraine of spreading stories about Manafort in an attempt to harm Trump.
Safe in Trump Tower - the "well networked" CIS mafiosi
Finally, other interesting CIS connections are more resident-related, but they give very important clues about the Trump network.
In fact, the Trump Tower in New York - not only the headquarters of the Trump Organization, but also the former headquarters of the Bayrock Group LLC - has caught the attention of the press: In addition to its many honest residents, there are numerous tax evaders, bribers, arms dealers, convicted cocaine dealers and corrupt former FIFA officials - partly because there is no nosy cooperative committee there.
A typical example is the alleged Russian mafioso Anatoly Golubchik, who was jailed in 2014 for operating an illegal gambling ring from Trump Tower. This operation reportedly occupied the entire 51st floor. According to reports, Mafioso Alimsan Tochtachunov was also involved in them. He made it onto the Forbes list of the world's ten most wanted criminals in 2008, and the FBI believes that his organization is linked to the Mogilevichs. According to reports, while his gambling ring was still working in Trump Tower, Tochtachunov traveled to Moscow to attend Donald Trump's Miss Universe 2013 beauty pageant as a special VIP.
We also find the name "Anatoly Golubchik" in the Panama Papers database. Interestingly, his offshore company, Lytton Ventures Inc. shares a director, Stanley Williams, with a company that may be linked to our old friend Semyon Mogilevich, the alleged "boss of the bosses" of the Russian mafia that has appeared so often in our history. Lytton Ventures Inc. shares this director with another company that goes under the name "Galina Telesh". According to the Organized Crime and Corruption Reporting Project, numerous offshore companies owned by Semyon Mogilevich have been registered under the same name - that of Mogilevich's first wife.
A 2003 indictment against Mogilevich also mentions two offshore companies he allegedly owned with names containing the words “Arbat” and “Arigon”. The same director shared by Golobuchik and Telesh happens to be the director of a company called Westix Ltd., which resides in Moscow at the same address as "Arigon Overseas" and "Arbat Capital".
And another company with the same director appears to be owned by Dariga Nazarbayev, the eldest daughter of Nursultan Nazarbayev, the long-lived president of Kazakhstan. It is expected that Dariga will succeed him should he ever decide to step down or prove to be mortal.
Finally, Dimitri Firtasch - the Mogilevich buddy and Manafort customer whom we met earlier - also appears in the Panama Papers database in the orbit of the Galina Telesh network. A director of Telesh's "Barlow Investing", Wasiliki Andreou, was also the straw man director of a Cypriot company called "Toromont Ltd.", while another straw man director - of Toromont Ltd., Annex Holdings Ltd., a company on St. Kitts - also as a shareholder in Firtaschs Group DF Ltd. is managed, together with Firtasch himself. And the CEO of Group DF, who allegedly worked with Manafort to channel Firtasch's funds into the Drake Hotel project, is also listed in the Panama Papers database as a shareholder in Group DF. In addition, research by the Financial Times identified three other offshore companies associated with both Firtash and Telesh.
Of course, all of these strange relationships can be meaningless coincidences. Finally, the director shared by Telesh and Golubchik is named in the same role for more than 200 other firms, and over a thousand firms besides Arbat Capital and Arigon Overseas share Westix's corporate address. In the booming world of offshore ports and the shell game with letterbox companies, there is no overpopulation. The appropriate way to deal with all these clues is therefore to look at them “Socratically”: They raise important, unanswered questions, but do not give clear answers.
The "boss of the bosses": Semjon Mogilewitsch - Moscow's "bright Don"
Anyway, another of Trump's relationships through Trump Tower involves a 1990s fraudulent company, YBM Magnex International. YBM, allegedly a world-class manufacturer of industrial magnets, was founded in 1995 in Newton, Bucks County, Pennsylvania, indirectly through the "boss of the bosses", Semyon Mogilevich, Moscow's "bright Don". This one is a contemporary with an incredible story, even if only half of what has been written about him is true. Unfortunately, we have to concentrate here on those parts that are relevant for our purposes.
Semyon, now 70 years old, was born in Kiev and is now a citizen of Israel, Ukraine and Russia - but above all a lifelong criminal. He has a bachelor's degree in economics from the University of Lviv and is reportedly particularly proud of constructing complex, practically undetectable financial frauds that have been raised over the years. In order to achieve them, he often speculates on the human weaknesses of top bankers, stock traders, auditors, business tycoons and top politicians.
In the case of YBM, Semjon and his cronies spent several years in the 1990s establishing a fictitious, non-producing company on the then severely underregulated Toronto Stock Exchange - using bribes of just 2.4 Million dollars. In doing so, they managed to win the support of several Toronto business leaders and a former Premier of the Province of Ontario to serve on the company's board of directors. They paid one of the four major accounting firms, Deloitte Touche, very generously in exchange for brilliant audit reports. By mid-1998, YBM's share price had soared from less than $ 10 to $ 20, and Semjon had cut at least $ 18 million - a relatively large fraud for the time - before the FBI raided YBM's headquarters. The police found stacks of bogus invoices for magnets, but no magnets.
In 2003 Semyon Mogilevich was charged in Philadelphia on 45 points for stock fraud amounting to $ 150 million. But there is no US-Russia extradition treaty and no prospect that Russia will ever voluntarily extradite Semyon; he is arguably a national treasure, especially now. In recognition of these realities, or perhaps for other reasons, the FBI tacitly removed him from its Top Ten Most Wanted List in 2015, on which he resided for six years.
For our purposes, one of the most interesting details about the YBM-Magnex case is that the company's chief executive officer was a Russo-American named Jacob Bogatin, who was also indicted in Philadelphia. His brother David had served in the Soviet Army in a North Vietnamese air defense unit and helped shoot down American pilots such as the future Senator John McCain. Since the early 1990s, David Bogatin has been recognized by the FBI as a key member of Semyon Mogilevich's Russian mafia organization in the United States, with a long line of convictions for serious Mogilevich crimes such as financial fraud and tax evasion.
At times, David Bogatin owned five different condos in Trump Tower that Donald Trump had reportedly personally sold to him. Vyacheslav Ivankov, another key agent for Mogilevich in the United States, also resided in Trump Tower, and his personal phone book was reported to have private phone and fax numbers for the Trump Organization office in the same building.
What follows from all of this?
So what did we learn from this deep dive into the network of Trump's Russian and CIS connections?
First, the new president is indeed very "well connected" - namely, equipped with an extensive network of shady connections to the global underground that could be unprecedented in the history of the White House. In selecting his partners, Trump apparently pays only cursory attention to questions of background, character and integrity.
Second, Donald Trump spent literally decades cultivating high-level contacts in Russia and the CIS. And high-ranking official and private Russian figures of all kinds have also spent decades cultivating him, not only as business partners but also as “useful idiots”. After all, on September 1, 1987 (!) Trump was ready to spend $ 94,801 on full-page advertisements in the "Boston Globe", the "Washington Post" and the "New York Times". In them he called for the United States to stop paying to defend Japan, Europe and the Persian Gulf. The latter is an "area of only marginal importance for the US and for its oil supply, but on which Japan and others are almost completely dependent".
This is a major reason why Robert Gates - a Republican party member who served as Secretary of Defense under Presidents George W. Bush and Obama, and was also CIA chief and deputy CIA chief - the response of Congress and the White House to that allegedly supported by Putin criticized hacking as much too "relaxed".
Third, beyond questions of their illegality, the public clearly has a right to know much more about the nature of such global connections than it has to date. As the preceding quote from Cervantes suggests, these relationships are likely a pretty good leading indicator of how presidents will behave once they take office.
Unfortunately, in this election, for many reasons, American voters never really got the chance to decide whether such dubious connections and entanglements belong to the pinnacle of official power in the world. Now it may be too late to establish a non-partisan commission like the one on September 11, 2001, which would be needed to investigate all these connections in detail.
In any case, the long-term consequence of careless interventions in other countries is that they often return to haunt ourselves. In Russia's case, that is exactly what has just happened.
This is the exclusive German version of "The Curious World of Donald Trump’s Private Russian Connections". The original article was published on December 19, 2016 in the magazine "The American Interest" (www.the-american-interest.com, there also with numerous footnotes); the translation into German is by Daniel Bussenius.
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