Graphic from CNN

What follows is a summary of the lengthy investigative article, “The Curious World of Donald Trump’s Private Russian Connections” published by James S. Henry on December 19, 2016 in The American Interest.

James S. Henry, Esq. is an investigative economist and lawyer who has written widely about offshore and onshore tax havens, kleptocracy, and pirate banking. He is the author of The Blood Bankers, a classic investigation of where the money went that was loaned to key debtor countries in the 1970s-1990s. He is a senior fellow at the Columbia University’s Center on Sustainable Investment, a Global Justice Fellow at Yale, a senior advisor at the Tax Justice Network, and a member of the New York Bar. He has pursued frontline investigations of odious debt, flight capital, and corruption in more than fifty developing countries, including Russia, China, South Africa, Brazil, the Philippines, Argentina, Venezuela, and Panama.

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A Guided Tour of Trump’s Russian/FSU Connections

The Big Picture: Kleptocracy and Capital Flight

From 1992 to the Russian debt crisis of August 1998, the West in general – and the US Treasury, USAID, the State Department, the IMF/World Bank, the EBRD, and many leading economists in particular – actively promoted and, indeed, helped to finance one of the most massive transfers of public wealth into private hands that the world has ever seen.

One of the most central facts about modern Russia is its emergence since the 1990s as a world-class kleptocracy, second only to China as a source of illicit capital and criminal loot, with more than $1.3 trillion of net offshore “flight wealth” as of 2016.

Donald Trump had just suffered a string of six successive bankruptcies, so the massive illicit outflows from Russia and oil-rich FSU members like Kazahkstan and Azerbaijan from the mid-1990s provided precisely the kind of undiscriminating investors that he needed. These outflows arrived at just the right time to fund several of Trump’s post-2000 high-risk real estate and casino ventures – most of which failed. As Donald Trump, Jr., executive vice president of development and acquisitions for the Trump Organization, told the “Bridging US and Emerging Markets Real Estate” conference in Manhattan in September 2008 (on the basis, he said, of his own “half dozen trips to Russia in 18 months”):

“In terms of high-end product influx into the United States, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia.”

This helps to explain one of the most intriguing puzzles about Donald Trump’s long, turbulent business career: how he managed to keep financing it, despite a dismal 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 spirits – with $916 million of creative tax dodging as a kicker. But this official story is hokum. The truth is that, since the late 1990s, Trump was also greatly assisted by these abundant new sources of global finance, especially from “submerging markets” like Russia

Bayrock Group LLC – Kazakhstan and Tevfik Arif

Bayrock Group LLC, was a spectacularly unsuccessful New York real estate development company, headquartered in Trump Tower, that surfaced in the early 2000s and, by 2014, had all but disappeared except for a few lawsuits. As of 2007, Bayrock and its partners reportedly had more than $2 billion of Trump-branded deals in the works. But most of these either never materialized or were miserable failures.

Bayrock’s “white elephants” included the 46-story Trump SoHo condo-hotel on Spring Street in New York City, completed in 2010 and soon became the subject of prolonged civil litigation by disgruntled condo buyers. The building was foreclosed by creditors and resold in 2014 after more than $3 million of customer down payments had to be refunded. Similarly, Bayrock’s Trump International Hotel & Tower in Fort Lauderdale was foreclosed and resold in 2012, while at least three other Trump-branded properties in the United States, plus many other “project concepts” that Bayrock had contemplated, from Istanbul and Kiev to Moscow and Warsaw, also never happened.

Carelessness about due diligence with respect to potential partners and associates is one of Donald Trump’s more predictable qualities. Acting on the seat of the pants, he had hooked up with Bayrock rather quickly in 2005, becoming an 18% minority equity partner in the Trump SoHo, and agreeing to license his brand and manage the building.

Bayrock’s former Chairman is Tevfik Arif, an émigré from Kazakhstan who reportedly took up residence in Brooklyn in the 1990s. Trump also had extensive contacts with another key Bayrock Russian-American from Brooklyn, Felix Sater.

Arif worked for 17 years in the Soviet Ministry of Commerce and Trade, serving as Deputy Director of Hotel Management by the time of the Soviet Union’s collapse.

Alexander Mashevich was a strategic partner for Bayrock’s equity finance. Together with two other prominent Kazakh billionaires, Patokh Chodiev and Alijan Ibragimov, these three are sometimes referred to as “the Trio”. In addition to resource grabbing, the litany of the Trio’s alleged activities include money laundering, bribery, and racketeering.

The Trio also turn up in the April 2016 Panama Papers database as the apparent beneficial owners of a “Class B” banking license, permitting it to make international currency trades. In the words of a leading Belgian financial regulator, that would “make all money laundering undetectable”.

Arif and other members of Bayrock’s Eurasian Trio were arrested together in Turkey in 2010 during a police raid on a suspected prostitution ring. At the time, Turkish investigators reportedly asserted that Arif might be the head of a criminal organization that was trafficking in Russian and Ukrainian escorts, allegedly including some as young as 13 (though charges were dismissed in 2012).

The Case of Bayrock LLC – Felix Sater

Felix Sater, a senior Bayrock executive from 2002 to 2008, negotiated several important deals with the Trump Organization and other investors. Although Sater left Bayrock in 2008, by 2010 he was reportedly back in Trump Tower 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 had escorted Donald Trump, Jr. and Ivanka Trump around Moscow in 2006, had met frequently with Donald over several years, and had once flown with him to Colorado. He is also reported to have visited Trump Tower in July 2016 and made a personal $5,400 contribution to Trump’s campaign.

Tevfik Arif decided to hire him as Bayrock’s COO and managing director in 2002, despite the fact that Felix had already compiled an astonishing track record as a professional criminal, with multiple felony pleas and convictions, extensive connections to organized crime, and – the ultimate prize – a virtual “get out of jail free card,” based on an informant relationship with the FBI and the CIA that is vaguely reminiscent of Whitey Bulger.

Sater, a Brooklyn resident like Arif, was born in Russia in 1966, and emigrated with his family to the United States in the mid-1970s and settled in “Little Odessa”. His father, Mikhael Sheferovsky (aka Michael Sater), may have been engaged in Russian mob activity before he arrived in the United States, trafficking nuclear materials, weapons, and money laundering.

Michael Sater’s only US criminal conviction came in 2000, when he pled guilty to two felony counts for extorting Brooklyn restaurants, grocery stores, and clinics. He was released with three years’ probation – perhaps because Loretta Lynch, the US Attorney for the Eastern District of New York who handled that case was also overseeing a budding informant relationship and a plea bargain with Michael’s son Felix.

Felix Sater was already well on his way to a career as a prototypical Russian-American mobster. In 1991 he stabbed a commodity trader in the face with a margarita glass stem in a Manhattan bar, severing a nerve. He was convicted of a felony and sent to prison, but by 1993, the 27-year-old Felix was already a trader in a brand new Brooklyn-based commodity firm called “White Rock Partners”, an innovative joint venture among four New York crime families and the Russian mob aimed at bringing state-of-the art financial fraud to Wall Street.

Five years later, in 1998, Felix Sater pled guilty to stock racketeering, as one of 19 US-and Russian mob-connected traders who participated in a $40 million “pump and dump” securities fraud scheme. Facing twenty years in Federal prison, Sater turned “snitch” and helped the Department of Justice prosecute their co-conspirators.

Unfortunately for Sater, about the same time the NYPD also reportedly discovered that he had been running a money-laundering scheme and illicit gun sales out of a Manhattan storage locker. He fled to Russia, but the ever-creative Sater succeeded in brokering information about the black market for Stinger anti-aircraft missiles to the CIA and the FBI, allowing him to return to Brooklyn.

Meanwhile, Sater’s sentence for his financial crimes continued to be deferred even after his official cooperation in that case ceased in late 2001. His files remained sealed, and he managed to avoid any sentencing for those crimes at all until October 23, 2009, when he received a $25,000 fine, no jail time, and no probation.

In any case, between 2002 and 2008, when Felix Sater finally left Bayrock LLC, and well beyond, his ability to avoid jail and conceal his criminal roots enabled him to enjoy a lucrative new career as Bayrock’s chief operating officer. In that position, he was in charge of negotiating aggressive property deals all over the planet, even while – according to lawsuits by former Bayrock investors – engaging in still more financial fraud. The only apparent difference was that he changed his name from “Sater” to “Satter”.

One of the most serious frauds alleged in the recent Bayrock lawsuit involves FL Group, an Icelandic private investment fund. In the 1990s Iceland’s neoliberal political elite privatized the state-owned banks and deregulated capital markets. By the time all three of the resulting privatized banks, as well as FL Group, failed in 2008, the combined bank loan portfolio amounted to more than 12.5 times Iceland’s GDP – the highest country debt ratio in the entire world.

Long before this crisis hit and bankrupted FL Group, the two Russian/FSU/Brooklyn mobster-mavens, Arif and Sater, in early 2007 persuaded FL Group to invest $50 million in a project to build the Trump SoHo in mid-town Manhattan.

According to the lawsuit, at the same time, FL Group and Bayrock’s Felix Sater also agreed in principle to pursue up to an additional $2 billion in other Trump-related deals. The Kriss lawsuit further alleges that FL Group (FLG) also agreed to work with Bayrock to facilitate outright tax fraud on more than $250 million of potential earnings.

FL Group, Iceland’s largest private investment fund until it crashed in 2008, had several owners/investors with deep Russian business connections, including several key investors in all three top Iceland banks. FL Group made a variety of peculiar loans to Russian-connected oligarchs as well as to Bayrock, including to Alex Shnaider, the Russian-Canadian billionaire who later became Donald Trump’s Toronto business partner. There are also unconfirmed accounts of a secret US Federal Reserve report that unnamed Iceland banks were being used for Russian money laundering.

The Case of the Trump Toronto Tower and Hotel – Alex Shnaider

Alex Shnaider, a 48-year-old Russian-Canadian billionaire, co-financed the seventy-story Trump Tower and Hotel, Canada’s tallest building, that opened in Toronto in 2012. Like so many of Trump’s other Russia/FSU-financed projects, this massive Toronto condo-hotel project went belly-up November 2016 and entered foreclosure.

Alex Shnaider was born in Leningrad in 1968, the son of Evsei Shnaider, and emigrated with his family to Israel from Russia when he was four and then relocated to Toronto when he was 13-14. Shnaider prospered in the New World, with significant help from his (now reportedly ex-) father-in-law, another colorful Russian-Canadian, Boris J. Birshtein. One of his key companies was called Seabeco SA, a “trading” company that was registered in Zurich.

According to the Financial Times and the FBI, Birshtein was a close business associate of Sergei Mikhaylov, the reputed head of Solntsevskaya Bratva, the Russian mob’s largest branch, and the world’s highest-grossing organized crime group as of 2014, according to Fortune.

A 1996 FBI intelligence report cited by the Financial Times claims that Birshtein hosted a meeting in his Tel Aviv office for Mikhaylov, the Ukrainian-born Semion Mogilevich, and several other leaders of the Russo/FSU mafia, in order to discuss “sharing interests in Ukraine”. In 1993, the Yeltsin government reportedly accused Birshtein of illegally exporting seven million tons of Russian oil and laundering the proceeds.

The Toronto Globe and Mail reported that in 1991, while enrolled in law school, young Alex Shnaider started working for Birshtein at Seabeco’s Zurich headquarters. According to this account, he left Seabeco in January 1994 to start his own trading company in Antwerp, in partnership with a Belgian trader-partner. Curiously, Le Soir also says that Mikhaylov and Birshtein co-founded MAB International in Antwerp in January 1994. Shnaider also founded Midland Resource Holdings Ltd. in 1994.

Shnaider and Shifrin started buying up shares of the Zaporizhstal steel mill, Ukraine’s fourth largest, as if their pockets and connections were very deep. By 2001 they had purchased 93% of the plant for about $70 million, a stake that would be worth much more just five years later, when Shnaider reportedly turned down a $1.2 billion offer.

Today, Midland Resources Holdings Ltd. reportedly generates more than $4 billion a year of revenue and has numerous subsidiaries all across Eastern Europe. Shnaider also reportedly owns Talon International Development, the firm that oversaw construction of the Trump hotel-tower in Toronto. All this wealth apparently helped Iceland’s FL Group decide that it could afford to extend a €45.8 million loan to Alex Shnaider in 2008 to buy a yacht. As of December 2016, a search of the Panama Papers database found no fewer than 28 offshore companies that have been associated with “Midland Resources Holding Limited”.

The Case of Paul Manafort’s Ukrainian Oligarchs

Paul Manafort, the former Washington lobbyist who served as Donald Trump’s national campaign director from April 2016 to August 2016, has troubling Russo/Ukrainian connections of. Manafort’s partner, Rick Davis, also served as national campaign manager for Senator John McCain in 2008, so this may go beyond Trump.

One of Manafort’s biggest clients was the dubious pro-Russian Ukrainian billionaire Dmytro Firtash, who, by his own admission, maintains strong ties with the reputed Ukrainian/Russian mob boss Semion Mogilevich. His most important other link is almost certainly to Putin. Otherwise it is difficult to explain how this former used-car salesman could gain a lock on trading goods for gas in Turkmenistan and also become a lynchpin investor in the Swiss company RosUrEnergo, which controls Gazprom’s gas sales to Europe.

In 2008, Manafort teamed up with a former manager of the Trump Organization to purchase the Drake Hotel in New York for up to $850 million, with Firtash agreeing to invest $112 million. According to a lawsuit brought against Manafort and Firtash, the deal was made to launder part of the huge profits that Firtash had skimmed while brokering dodgy natural gas deals between Russia and Ukraine, with Mogilevich acting as a “silent partner”.

Ultimately Firtash pulled out of this Drake Hotel deal. Since 2014 there has been a spate of Firtash-related prosecutions, with the United States trying to extradict him from Austria.

After Firtash pulled out of the deal, Manafort reportedly turned to Trump, who declined to engage. Manafort stepped down as Trump’s campaign manager in August of 2016 in response to press investigations into his ties not only to Firtash, but to Ukraine’s previous pro-Russian Yanukovych government, which had been deposed by an uprising in 2014. However, following the November 8 election, Manafort reportedly returned to advise Trump on staffing his new administration.

The Case of “Well-Connected” Russia/FSU Mobsters

Because it has no prying co-op board, Trump Tower in New York has received press attention for including among its many honest residents tax-dodgers, bribers, arms dealers, convicted cocaine traffickers, and corrupt former FIFA officials. 

One typical example involves the alleged Russian mobster Anatoly Golubchik, who went to prison in 2014 for running an illegal gambling ring out of Trump Tower – not only the headquarters of the Trump Organization but also the former headquarters of Bayrock Group LLC. This operation reportedly took up the entire 51st floor. Also reportedly involved in it was the alleged mobster Alimzhan Tokhtakhounov, who has the distinction of making the Forbes 2008 list of the World’s Ten Most Wanted Criminals, and whose organization the FBI believes to be tied to Mogilevich’s. Even as this gambling ring was still operating in Trump Tower, Tokhtakhounov reportedly traveled to Moscow to attend Donald Trump’s 2013 Miss Universe contest as a special VIP.

One of Trump’s relationships through Trump Tower involves the 1990s-vintage fraudulent company YBM Magnex International. YBM, ostensibly a world-class manufacturer of industrial magnets, was founded indirectly in Newtown, Bucks County, Pennsylvania in 1995 by the “boss of bosses,” Semion Mogilevich.

By mid-1998, YBM’s stock price had gone from less than $0.10 to $20, and Semion cashed out at least $18 million – a relatively big fraud for its day – before the FBI raided its YBM’s corporate headquarters. In 2003, Mogilevich was indicted in Philadelphia on 45 felony counts for this $150 million stock fraud.

YBM Magnex’s CEO was a Russian-American named Jacob Bogatin, who was also indicted in the Philadelphia case. His brother David had served in the Soviet Army in a North Vietnamese anti-aircraft unit, helping to shoot down American pilots like Senator John McCain. Since the early 1990s, David Bogatin was considered by the FBI to be one of the key members of Semion Mogilevich’s Russian organized crime family in the United States, with a long string of convictions for big-ticket Mogilevich-type offenses like financial fraud and tax dodging.

At one point, David Bogatin owned five separate condos in Trump Tower that Donald Trump had reportedly sold to him personally. And Vyacheslav Ivankov, another key Mogilevich lieutenant in the United States during the 1990s, also resided for a time at Trump Tower, and reportedly had in his personal phone book the private telephone and fax numbers for the Trump Organization’s office in that building.

So what have we learned from this deep dive into the network of Donald Trump’s Russian/FSU connections?

“Tell me who you walk with and I’ll tell you who you are.” – Cervantes

First, the President-elect really is very “well-connected,” with an extensive network of unsavory global underground connections that may well be unprecedented in White House history. In choosing his associates, evidently Donald Trump only pays cursory attention to questions of background, character, and integrity.

Second, Donald Trump has also literally spent decades cultivating senior relationships of all kinds with Russia and the FSU. And public and private senior Russian figures of all kinds have likewise spent decades cultivating him, not only as a business partner, but as a “useful idiot”.

Third, even beyond questions of illegality, the public clearly has a right to know much more than it already does about the nature of such global connections. As the quote from Cervantes suggests, these relationships are probably a pretty good leading indicator of how Presidents will behave once in office.

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See also: The Plot to Hack America

and: Kremlin & Trump Conspire to Undermine US Democracy

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 by Robert Riversong: may be reproduced only with attribution for non-commercial purposes and a link to this page

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