Regardless of the accuracy of a still-unverified and still-infamous Steele Dossier, there are still decades of open questions regarding Donald Trump’s financial ties to Russian oligarchs and organized crime that are subsequently tied to Vladimir Putin. Regardless of the truth behind Trump’s alleged water sports fetish, the financial ties behind Trump and Russian interests are long-documented and deeply concerning, to the point where one could allege that the money alone is enough to force the Trump Regime to remain beholden to Russian masters. The money may be kompramat enough.
Donald Trump has declared bankruptcy six times, a fact that he touts as a point of pride, stating that he “used, brilliantly, the laws of the country” to his advantage. This fact is a cornerstone in this write-up, as it is the root from which the Russian (and other foreign power) tree grows. Most US banks will no longer lend to Trump due to his credit history, so he is forced to look overseas for his funding. This includes, among others, Russia. What’s more, Trump’s de facto campaign manager, Paul Manafort, was a longtime consultant to Viktor Yanukovich, the Russian-backed president of Ukraine who was overthrown in 2014. Manafort also has done multimillion-dollar business deals with Russian oligarchs. Trump’s foreign policy advisor Carter Page has his own business ties to the state-controlled Russian oil giant Gazprom. … Another Trump foreign policy advisor, retired Army Lt. Gen. Michael Flynn, flew to Moscow last year to attend a gala banquet celebrating Russia Today, the Kremlin’s propaganda channel, and was seated at the head table near Putin.
But we digress. Let’s start at the beginning.
One of the many vehicles for Trump’s funding following his fallout from the US Banking industry involves real estate development firm Bayrock Group. Bayrock received publicity in the early 2000s for its ties to the Russian mafia, particularly one Felix Sater, who plead guilty in 1998 to federal racketeering charges. Trump named him a “senior business advisor” to the Trump Organization in 2010, but claimed in a 2013 video deposition, “If he were sitting in the room right now, I really wouldn’t know what he looked like.” Before we continue, here is a 1995 article about how the Russian mafia was using US companies to launder their money.
There are multiple Bayrock (and other) threads to follow in detail, notably here, but for this abridged write-up we will focus on Bayrock’s dealings with Icelandic FL Group and the (currently being litigated) $250 million tax evasion scheme.
In early 2007, FL Group invested $50 million in a project to build the Trump SoHo in mid-town Manhattan. From The American Interest:
According to the Kriss 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. In particular, it alleges that FLG agreed to provide the $50 million in exchange for a 62 percent stake in the four Bayrock Trump projects, but Bayrock would structure the contract as a “loan.” This meant that Bayrock would not have to pay taxes on the initial proceeds, while FLG’s anticipated $250 million of dividends would be channeled through a Delaware company and characterized as “interest payments,” allowing Bayrock to avoid up to $100 million in taxes. For tax purposes, Bayrock would pretend that their actual partner was a Delaware partnership that it had formed with FLG, “FLG Property I LLC,” rather than FLG itself.
The Trump Organization has denied any involvement with FLG. However, as an equity partner in the Trump SoHo, with a significant 18 percent equity stake in this one deal alone, Donald Trump himself had to sign off on the Bayrock-FLG deal.
- 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 had constructed an incredible maze of cross-shareholding, lending, and cross-derivatives relationships with all these major banks, as illustrated by the following snapshot of cross-shareholding among Iceland’s financial institutions and companies as of 2008.
This thicket of cross-dealing made it almost impossible to regulate “control fraud,” where insiders at leading financial institutions went on a self-serving binge, borrowing and lending to finance risky investments of all kinds. It became difficult to determine which institutions were net borrowers or investors, as the concentration of ownership and self-dealing in the financial system just soared.
- FL Group make a variety of peculiar loans to Russian-connected oligarchs as well as to Bayrock. For example, Alex Shnaider, the Russian-Canadian billionaire who later became Donald Trump’s Toronto business partner, secured a €45.8 million loan to buy a yacht from Kaupthing Bank during the same period, while a company belonging to another Russian billionaire (Yuri Shefler) who reportedly owns an important vodka franchise got an even larger loan.
- Iceland’s largest banks also made a series of extraordinary loans to Russian interests during the run-up to the 2008 crisis. For example, one of Russia’s wealthiest oligarchs, a close friend of President Putin, nearly managed to secure at least €400 million (or, some say, up to four times that much) from Kaupthing, Iceland’s largest bank, in late September 2008, just as the financial crisis was breaking wide open. This bank also had important direct and indirect investments in FL Group. Indeed, until December 2006, it is reported to have employed the FL Group private equity manager who allegedly negotiated Felix Sater’s $50 million deal in early 2007.
- There are unconfirmed accounts of a secret U.S. Federal Reserve report that unnamed Iceland banks were being used for Russian money laundering. Furthermore, Kaupthing Bank’s repeated requests to open a New York branch in 2007-08 were rejected by the Fed. Similar unconfirmed rumors repeatedly appeared in Danish and German publications, as did allegations about the supposed Kazakh origins of FLG’s cash to be “laundered” in the Kriss lawsuit.
- When Iceland’s banks went belly-up in October 2008, their private banking subsidiaries in Luxembourg, which were managing at least €8 billion of private assets, were suddenly seized by Luxembourg banking authorities and transferred to a new bank, Banque Havilland. This happened so fast that Iceland’s Central Bank was prevented from learning anything about the identities or portfolio sizes of the Iceland banks’ private offshore clients. But again, there were rumors of some important Russian names.
- Finally, there is the rather odd phone call that Russia’s Ambassador to Iceland made to Iceland’s Prime Minister at 6:45 a.m. on October 7, 2008, the day after the financial crisis hit Iceland. According to the PM’s own account, the Russian Ambassador informed him that then-Prime Minister Putin was willing to consider offering Iceland a €4 billion Russian bailout.
The allegation here is that through Trump, at least $250 million funneled, untaxed and laundered, through Iceland to Russian interests. Trump is named a material witness in the case.
Trump repeats this pattern more than once. Just five days before the election, Trump Tower Toronto, financed by Russian billionaire Alex Shnaider, declared bankruptcy. The Trump Hotel in Washington DC, paid for by Russian financiers, was just levied its third lien on January 6, 2017, with unpaid bills totaling over $5 million. These failures mirror the Trump SoHo case. One could surmise that the scheme is to secure Russian funding, tank the project, funnel the money to Russia and declare bankruptcy. But that would just be conjecture. Still, the pattern aligns in SoHo, Baja, Tampa, Ft. Lauderdale, Toronto and soon Washington DC.
Trump could have been running a similar scheme with his casinos. We will follow up how that worked, and how it tied back to his real estate failures, and how it ties back to the Kremlin in Part 2.