President Donald Trump’s attorney Jay Sekulow recently told
me that the investigation being led by Robert Mueller, the special counsel
appointed by the Justice Department, should focus on one question: whether
there was “coördination between the Russian government and people on the Trump
campaign.” Sekulow went on, “I want to be really specific. A real-estate deal
would be outside the scope of legitimate inquiry.” If he senses “drift” in
Mueller’s investigation, he said, he will warn the special counsel’s office
that it is exceeding its mandate. The issue will first be raised “informally,”
he noted. But if Mueller and his team persist, Sekulow said, he might lodge a
formal objection with the Deputy Attorney General, Rod Rosenstein, who has the
power to dismiss Mueller and end the inquiry. President Trump has been more
blunt, hinting to the Times that he might fire Mueller if the
investigation looks too closely at his business dealings.
Several news accounts have confirmed that Mueller has indeed
begun to examine Trump’s real-estate deals and other business dealings,
including some that have no obvious link to Russia. But this is hardly wayward.
It would be impossible to gain a full understanding of the various points of
contact between the Kremlin and the Trump campaign without scrutinizing many of
the deals that Trump has made in the past decade. Trump-branded buildings in
Toronto and the SoHo neighborhood of Manhattan were developed in association
with people who have connections to the Kremlin. Other real-estate partners of
the Trump Organization—in Brazil, India, Indonesia, and elsewhere—are now
caught up in corruption probes, and, collectively, they suggest that the
company had a pattern of working with partners who exploited their proximity to
political power.
One foreign deal, a stalled 2011 plan to build a Trump Tower
in Batumi, a city on the Black Sea in the Republic of Georgia, has not received
much journalistic attention. But the deal, for which Trump was reportedly paid
a million dollars, involved unorthodox financial practices that several experts
described to me as “red flags” for bank fraud and money laundering; moreover,
it intertwined his company with a Kazakh oligarch who has direct links to
Russia’s President, Vladimir Putin. As a result, Putin and his security
services have access to information that could put them in a position to
blackmail Trump. (Sekulow said that “the Georgia real-estate deal is something
we would consider out of scope,” adding, “Georgia is not Russia.”)
The waterfront lot where the Trump Tower Batumi was supposed
to be built remains empty. A groundbreaking ceremony was held five years ago,
but no foundation has been dug. Trump removed his name from the project shortly
before assuming the Presidency; the Trump Organization called this “normal
housekeeping.” When the tower was announced, in March, 2011, it was the
centerpiece of a bold plan to transform Batumi from a seedy port into a
glamorous city. But the planned high-rise—forty-seven stories containing lavish
residences, a casino, and expensive shops—was oddly ambitious for a town that
had almost no luxury housing.
Trump did very little to develop the Batumi property. The
project was a licensing deal from which he made a quick profit. In exchange for
the million-dollar payment, he granted the right to use his name, and he agreed
to visit Georgia for an elaborate publicity campaign, which was designed to
promote Georgia’s President at the time, Mikheil Saakashvili, as a
business-oriented reformer who could attract Western financiers. The campaign
was misleading: the Trump Tower Batumi was going to be funded not by Trump but
by businesses with ties to Kazakh oligarchs, including Timur Kulibayev, the
son-in-law of Kazakhstan’s autocratic ruler, Nursultan Nazarbayev, and a close
ally of Putin. Kazakhstan has the largest economy in Central Asia, based on its
vast reserves of oil and metals, among other natural resources. Kazakhstan is
notoriously corrupt, and much of its wealth is in the hands of Nazarbayev’s
extended family and his favored associates.
Trump visited Georgia in April, 2012, at a politically
vulnerable time for Saakashvili. Nine years earlier, Saakashvili had led the
Rose Revolution, which overturned the country’s autocratic post-Soviet
leadership. After assuming power, he initially cracked down on widespread petty
corruption and cleaned up the civil service, which had functioned largely on
bribes. Then, in 2008, he led a disastrous war against Russia over control of
the breakaway region of South Ossetia. By then, his fight against corruption
had largely ceased, and Transparency International and other N.G.O.s were
reporting that élite corruption—in which wealthy, politically connected people
receive better treatment from courts, prosecutors, and government
administrators—was rampant in Georgia. Under these conditions, few Western
investors or brands were willing to put money into the country. Saakashvili
himself was increasingly unpopular, and the Trump deal was meant to help
salvage his reputation.
Saakashvili showed Trump around Tbilisi, the capital, and
Batumi. Georgian television covered the events fawningly, promising viewers
that Trump would soon build a second tower, in Tbilisi. One broadcaster
proclaimed that Trump was the world’s top developer. At the groundbreaking
ceremony in Batumi, Saakashvili said that the tower was “a big deal. . .
that changes everything around here.” At another event, beneath a banner that
proclaimed “trump invests in Georgia,” he thanked Trump for being
part of the project—which, he said, had a budget of two hundred and fifty
million dollars. He also awarded Trump the Georgian Order of Brilliance. Trump,
in turn, praised Saakashvili. “Everybody in the world, they speak of Georgia
and the great miracle that’s taking place,” he said.
Upon returning home, Trump appeared on “Fox and Friends.”
Gretchen Carlson, the host at the time, asked him, “What are you going to be
investing in?” He responded, “I’m doing a big development there—and it’s been
amazing.” He said of Saakashvili, “He’s one of the great leaders of the world.
Virtually none of the things that Saakashvili and Trump said
about the deal were true. The budget of the Trump Tower Batumi was not two
hundred and fifty million dollars but a hundred and ten. Trump, meanwhile,
could hardly have invested such a sum himself. He professed to be a
billionaire, but a few months earlier an appeals court in New Jersey had shut
down Trump’s legal campaign against Timothy O’Brien, the author of
“TrumpNation,” which argued that Trump had wildly inflated his fortune, and was
actually worth less than a quarter of a billion dollars. Julie George, a
political scientist at Queens College who studies Georgia, told me that, by
2012, Saakashvili’s tenure could in no way be considered a “great miracle.” The
country’s economy was floundering, and shortly after Trump’s visit it was
revealed that the government had been torturing political opponents. (Saakashvili
did not respond to requests for comment.)
The announcement of the Batumi tower was handled with
cynical opportunism by both Trump and Saakashvili, but that was not the deal’s
biggest problem. The developer that had paid Trump and invited him to Georgia—a
holding company known as the Silk Road Group—had been funded by a bank that was
enmeshed in a giant money-laundering scandal. And Trump, it seemed, had not
asked many questions before taking the money.
Before the collapse of the Soviet Union, in 1991, Batumi had
been a popular resort town, but by the early aughts it had fallen into
disrepair. Its beachfront hotels housed refugees from the nearby Abkhazia
region, which had broken away from Georgia in 1992. Batumi was the capital of
the semiautonomous Adjara region, which was itself on the verge of declaring
independence. Saakashvili saw the redevelopment of Batumi as critical for
maintaining Georgian sovereignty there. Batumi residents promised to turn the
city into the Monaco of the Black Sea.
But nobody seemed willing to put money into Batumi. Levan
Varshalomidze, the governor of Adjara at the time, told me that Saakashvili and
other Georgian officials sought financial backers, but they could not get
anyone to invest in a run-down Georgian port.
Then, in 2005, something remarkable happened. Saakashvili
and President Nazarbayev, of neighboring Kazakhstan, announced that B.T.A.
Bank—the largest bank in Kazakhstan—was giving several hundred million dollars
in loans to help develop Georgia. The loans would pay for the construction of
hotels in Batumi, the expansion of the Georgian telecommunications industry,
and the growth of a Georgian bank. Curiously, all the loans went to
subsidiaries of one company: the Silk Road Group, which specialized not in
real-estate development but in shipping crude- and refined-oil products, by
rail, from Kazakhstan to other countries. Its senior executives had very little
experience in telecommunications, banking, or hospitality. The Silk Road Group,
which had annual revenues of roughly two hundred million dollars, was planning,
in an instant, to venture into several new industries. Compounding the risk,
this expansion involved taking on a debt one and a half times its annual
revenue.
That wasn’t the only puzzling thing about the loans. At the
time that B.T.A. was lending all this money to the Silk Road Group, the bank’s
deputy chairman, Yerkin Tatishev, was apparently crossing an ethical
line—positioning himself to exert improper influence over some of the very Silk
Road Group subsidiaries that were benefitting from the loans. B.T.A. Bank had
representatives on the boards of those subsidiaries, but one representative
serving on two boards, Talgat Turumbayev, was simultaneously working for
Tatishev’s company, the Kusto Group, supervising mergers and acquisitions.
(Turumbayev told me that serving on the boards wasn’t a conflict of interest,
because it didn’t take “a lot of time.”)
I spoke with people who had knowledge about the
subsidiaries. They told me that the subsidiaries were co-owned by the Silk Road
Group and secret partners. The source at one subsidiary told me he suspected
that Tatishev—who repeatedly participated in company meetings—was a hidden
owner.
Tatishev, who is estimated by Forbes to be
worth half a billion dollars, left B.T.A. Bank in 2009. He insisted to me that,
while he was there, he had no personal financial involvement in the Silk Road
Group. But he acknowledged that he “developed a strong friendship” with George
Ramishvili, the company’s C.E.O., and “offered to advise him.” He added, “It
was the right thing to do, and this is my definition of friendship.” But is it
true that Tatishev merely advised the Silk Road Group? The Web site of
Tatishev’s company, the Kusto Group, declares that it has been “an outstanding partner
for the Silk Road Group” since 2006, noting, “Together we have
successfully invested in various sectors of the Georgian economy.” Whenever I
pointed out such contradictions to Tatishev, he came up with new answers. In an
e-mail, he said that the joint investments were simply “charity/heritage
projects.” After he told me that he never served on the committee of B.T.A.
Bank that oversees lending, I checked, and confirmed that this was false. He
then insisted that he “did not recall” participating.
If, as the Web site suggests, Tatishev financially involved
himself in businesses funded by the B.T.A. Bank loans, then he and the Silk
Road Group may well have committed bank fraud. When bank executives have a
personal financial stake in projects that their own bank is financing, it is
known as “self-dealing,” and it is a crime in nearly every country, including
Kazakhstan. I recently spoke with Sergei Gretsky, a professor at the Catholic
University of America, who wrote his Ph.D. dissertation on the Kazakh banking
sector. When I asked him if it would be illegal for the deputy chairman of a
Kazakh bank to have personal investments in a project that his bank was funding
and withhold that information from investors, he laughed and said, “Yes, of
course.”
Richard Gordon, the director of the financial-integrity unit
at Case Western Reserve University School of Law, explained that self-dealing
represented a central cause of the 1997 global financial crisis. Banks in
Indonesia, South Korea, Brazil, Russia, Pakistan, and Taiwan failed, in part,
because bank executives and board members kept lending money to themselves and
to their cronies. “This leads to defaults, bank bankruptcies, or government
bailouts,” he said. Since then, nearly every nation has made efforts to prevent
self-dealing. Gordon said that, at most banks today, the board members and
senior staff don’t even have a credit card associated with the bank, in order
to eliminate any appearance of a conflict of interest.
Lending to companies in which a senior bank executive has a
personal stake is a crime because it violates the central trust that makes
banking possible. The fundamental business of banking is to borrow money from
one group and lend it to another. B.T.A., which had been heralded
internationally as a fast-growing bank in a troubled part of the world, had
raised money by selling bonds through J. P. Morgan, Credit Suisse, and many
other top Western banks. If these Western banks had known that a senior B.T.A.
official was heavily involved in the operations of a company that was receiving
huge loans from B.T.A., they might have balked.
In the years before the Trump Tower Batumi deal, B.T.A. Bank
became entangled in a spectacular crime. Mukhtar Ablyazov, the bank’s chairman,
was a prominent figure in Kazakhstan, and not just because he was a
billionaire. He was one of the leading sponsors of a political party opposed to
President Nazarbayev. In 2009, when Nazarbayev signalled a desire to seize
control of B.T.A. Bank, Ablyazov fled the country for London—taking billions of
dollars in bank funds with him. He accomplished this with a diffuse scheme:
dozens of offshore companies under his control received loans from B.T.A., and
none of the loans were paid back.
In 2010, when a Trump Organization executive, Michael Cohen,
began negotiating with the Silk Road Group about licensing Trump’s name for the
Batumi tower, Ablyazov was facing eleven lawsuits in the U.K. The Kazakh
government, which had indeed seized control of B.T.A. Bank, had sued him to
reclaim ten billion dollars that he had allegedly siphoned out of the country.
The Financial Times covered the case extensively, as did
the Times, which described “a scheme by B.T.A.’s former chairman,
Mukhtar Ablyazov, to direct between $8 billion and $12 billion worth of B.T.A.
loans—about half of the bank’s loan book—to companies that he secretly
controlled.” The article noted that Ablyazov was renting “a 15,000-square-foot
mansion” in London.
It would have taken only a Google search for the Trump
Organization to discover that the Silk Road Group had received much of its
funding from B.T.A. Bank, which, at the time of the Batumi deal, was mired in
one of the largest fraud cases in recent history. The Silk Road Group had even
been business partners with the central figure in the scandal: Ablyazov and the
Silk Road Group were two of the owners of a bank in Georgia. I asked Cohen, who
visited Georgia with Trump, if he had been concerned about the Silk Road
Group’s connection to B.T.A. Bank. “I didn’t even know that B.T.A. was involved
in this entire scenario up until the moment you told me,” he said. He added
that he was not aware of any information about how the tower would be funded—or
even “if there was going to be any funding at all.” He went on, “We had not
gotten to that stage of the process. Remember, this was a licensing deal. The
financing of the project was the responsibility of the licensee”—the Silk Road
Group.
I recently spoke with John Madinger, a retired U.S.
Treasury official and I.R.S. special agent, who used to investigate
financial crimes. He is the author of “Money Laundering: A Guide for Criminal
Investigators.” When I told him what Cohen had said to me, he responded, “No,
no, no! You’ve got to do your due diligence. You shouldn’t do a financial
transaction with funds that appear to stem from unlawful activity. That’s like
saying, ‘I don’t care if Pablo Escobar is my secret business partner.’
You have to care—otherwise, you’re at risk of violating laws
against money laundering.”
A judge in the U.K. ruled repeatedly against Ablyazov,
starting in 2009, and ordered him to hand over more than four billion dollars
to B.T.A. (The Kazakh government insisted that six billion dollars more
remained missing.) The judge, Sir Nigel John Martin Teare, said that Ablyazov’s
use of offshore holding companies had facilitated “fraud on an epic scale.”
Teare ruled that “there can be only one explanation for the fact that the very
large sums of money which were advanced were immediately transferred to
companies owned or controlled by Mr. Ablyazov, namely, that the original loans
were part of a dishonest scheme whereby Mr. Ablyazov sought to misappropriate
monies which belonged to the bank.” Ablyazov was eventually sentenced to
twenty-two months in a U.K. prison, for contempt of court, because he had
refused to reveal disputed assets. In February, 2012, when Trump was planning
his trip to Georgia, Ablyazov fled to France. He is currently fighting
extradition.
The Silk Road Group, which was established in Georgia
shortly after the fall of the Soviet Union, does not have a conventional
corporate structure. It is a holding company that controls dozens of corporate
entities registered around the world. In total, B.T.A. loaned the Silk Road
Group three hundred million dollars, and these funds were dispersed among its
many subsidiaries, making the money trail hard to follow. For example, an
eight-million-dollar loan was granted to Batumi Riviera Holding, B.V., which
was registered in Holland. Batumi Riviera Holding has reported having a sole
asset: a company called Vento, L.L.C., which is registered in Georgia. That
registration indicates that its creditor is B.T.A., which made loans valued at
seventy-five per cent of the initial investment in the company. Batumi Riviera
Holding, in turn, is owned by Tbilisi Central Plaza, a company registered in
Malta. Tbilisi Central Plaza is owned by Susalike Holding GmbH, which is
registered, in Germany, to a Silk Road Group subsidiary.
Giorgi Rtskhiladze co-owns the Silk Road Transatlantic
Alliance, a subsidiary that focusses on business deals involving the U.S. He
brokered the Trump relationship. The Silk Road Group’s leadership in Georgia
asked him to represent the company in interviews for this article. I recently
met him at the St. Regis hotel in New York. When I asked why the Silk Road
Group had such a bewildering structure, Rtskhiladze said, “There are tax
reasons, and there are other reasons. To reduce liabilities, if we were sued or
have to sue, certain courts are more efficient.” He pointed out that many
companies legitimately use offshore jurisdictions to register their firms.
“That’s true,” Richard Gordon, the financial-integrity
expert at Case Western, said. However, he added, “it is difficult to conceive
of legitimate reasons for one shell company in an offshore jurisdiction to own
a chain of companies established in a series of other offshore jurisdictions.”
Such byzantine arrangements add expense, complexity, and uncertainty—the
opposite of what businesses normally want—without providing any clear benefit,
other than obfuscation. Moreover, by registering in so many different jurisdictions,
the Silk Road Group has actually increased its legal risk, because a potential
claimant can sue the company in all those jurisdictions. Gordon, who helped
write the Republic of Georgia’s tax law, told me that he could think of no
reason that this structure would help a Georgian company lawfully pay fewer
taxes.
When I described to John Madinger, the retired Treasury
official, the various entities and transactions involved in the funding of the
Trump Tower Batumi, he said, “That is what you would expect to see in a
money-laundering operation: multiple shell companies in multiple countries.
It’s designed to make life hard for people trying to follow the transaction.”
It was difficult to pierce the veil of ownership, but I made
some headway by collaborating on a reporting project with an investigations
team at the Columbia University School of Journalism. Manuela Andreoni and Inti
Pacheco, two recent graduates who are now investigative fellows, have spent
months researching the Silk Road Group, Mukhtar Ablyazov, Yerkin Tatishev, and
B.T.A. Bank. They have looked closely at relevant lawsuits, and they have
obtained and translated property records and corporate registries from around
the world.
Although Tatishev had repeatedly assured me that he was not
involved in making decisions about Silk Road Group projects that had been
funded by B.T.A. loans, I continued to accrue contradictory evidence. I
recently received a cache of internal Silk Road Group e-mails, dating back to
2014, and they make clear that Tatishev has exerted detailed operational
control over the company’s activities, including real-estate businesses that
were funded by the B.T.A. loans. The e-mail cache shows that David
Borger, a German financier who is a top executive at the company, regularly
informed Tatishev about delicate internal financial matters and asked him for
approval on a wide variety of decisions pertaining to Silk Road Group hotels,
casinos, telecommunications infrastructure, and hydroelectric plants. Many of
these projects had been initially funded by loans made while Tatishev was a
senior official at B.T.A. Bank.
In one e-mail exchange, from earlier this year, Tatishev
weighed in on a decision about which investment bank the Silk Road Group should
use for a transaction. “We are cool guys,” Tatishev wrote. “And should always
work with cool guys.” Borger responded, “Dear Yerkin, in this case can you
please help us to get a cool deal with them?” He then asked Tatishev to
describe how he wanted the deal to be structured.
In another recent e-mail discussion, which touched on
crucial questions about the ownership and the financing of a major Silk Road
Group project, Borger told Tatishev, “I need your ok.” In a subsequent e-mail,
George Ramishvili, the C.E.O. of the Silk Road Group, added that Tatishev
needed to give his approval. Tatishev did so. In a 2014 e-mail, a Silk Road
Group consultant sent Tatishev and Ramishvili a summary of a plan they had
devised to settle the outstanding debt owed to B.T.A. Bank.
Video from Trump’s visit to Georgia provides further
evidence that Tatishev was a key part of the Silk Road Group—and suggests that
Trump recognized his importance. During a speech that Trump gave in Tbilisi,
Tatishev can be seen sitting in the audience next to Ramishvili. Trump says,
“We have two great partners.” He points toward the seats where Tatishev and
Ramishvili are sitting. “And they’re going to do a fantastic job.” (Giorgi
Rtskhiladze, the Silk Road Transatlantic Alliance executive who met me in
Manhattan, told me that Trump must have thought it was him, not Tatishev,
sitting next to Ramishvili. But Rtskhiladze and Tatishev look nothing alike:
Rtskhiladze is clean-shaven, with light-colored hair; Tatishev is nearly bald,
with dark facial hair.) Tatishev accompanied Trump to meet Saakashvili at the
Presidential Palace, in Tbilisi. When Michael Cohen, the Trump Organization
executive, went to Georgia in 2010 to discuss building a tower with the Silk
Road Group, he also met with Tatishev. A representative of the Silk Road Group said
that Tatishev is a friend of Ramishvili and simply wanted to say hello to a big
American tycoon. Inviting friends to important business meetings, the
representative said, is common practice in the Caucasus region.
With minimal due diligence, Trump Organization executives
would have noticed that the Silk Road Group exhibited many warning signs of
financial fraud: its layered and often hidden ownership, its ornate use of
shell companies, its close relationship with a bank that was embroiled in a
financial scandal. Trump’s visit to Georgia occurred while his company was
making a series of similar foreign deals. Until then, the Trump Organization
had ventured abroad only occasionally: in 1999, a set of Korean buildings
licensed the Trump name; in 2006, Trump bought a golf course in Scotland; the
following year, construction began on a Trump-branded tower in Turkey. But by
2012 Trump was struggling in the U.S. market. His biggest investment, in
American casinos, had proved ruinous, and he was now a minority owner of a
near-bankrupt business. Trump had defaulted on loans multiple times, and nearly
every bank in the U.S. refused to finance deals bearing his name. And so Trump
turned to people in other countries who did not share this reluctance to give
him money. In 2012 alone, the Trump Organization negotiated or finalized deals
in Azerbaijan, Brazil, Canada, Georgia, India, the Philippines, the United Arab
Emirates, and Uruguay.
At the time, the Trump Organization had only a handful of
staff members involved in dealmaking. His children Ivanka Trump and Donald
Trump, Jr., assumed a management role in many of these foreign projects.
According to Rtskhiladze, Trump, Jr., helped oversee the Batumi deal. At one
point, Rtskhiladze and Cohen held two days of meetings in New York to discuss
the project. Trump, Jr., dropped by several times. According to former
executives at the Trump Organization, the company lacked rigorous procedures
for assessing foreign partners.
A month after Trump visited Georgia, he agreed to license
his name to, and provide oversight of, a luxury hotel in Baku, Azerbaijan, a
deal that I examined in an article in The New Yorker earlier
this year. Trump received several million dollars from the brother and the son
of an Azerbaijani billionaire who was then the Minister of Transportation—a man
who, U.S. officials believe, may have been simultaneously laundering money for
the Iranian Revolutionary Guard. In 2013, Trump met with the
Azerbaijani-Russian billionaire Aras Agalarov and his son, Emin; that November,
they partnered with Trump on the Miss Universe contest, in Moscow, and
discussed building a Trump Tower in the Russian capital. In June, 2016, at Emin
Agalarov’s request, Trump, Jr., met with Natalia Veselnitskaya, a lawyer who
has represented Russian intelligence. Trump, Jr., was promised damaging
information about Hillary Clinton. Veselnitskaya came to the meeting
accompanied by business associates who have extensive ties to Georgia and
Azerbaijan.
In December, 2012, not long after Trump signed the Batumi
licensing deal, a company called Riviera, L.L.C., bought the fifteen-acre
parcel of land on which the Trump Tower Batumi would supposedly be built. The
price was twelve million dollars, and the seller was Vento, L.L.C., which was
owned by a company that was owned by a company that was owned by a company that
was owned by the Silk Road Group. Riviera, L.L.C., was also partly owned by the
Silk Road Group. In other words, the Silk Road Group was selling property to
itself.
The Financial Action Task Force, headquartered in Paris, is
led by representatives from thirty-seven nations. In 2007, the task force
issued a report about the use of real-estate projects for money laundering. The
report makes note of several red flags. It warns of “complex loans” in which
businesses “lend themselves money, creating the appearance that the funds are
legitimate.” It also warns of the use of offshore shell companies and tangled
corporate legal structures, especially those in which third parties are hired
to administer a company and conceal its true ownership. These intertwined
companies can then trade property among themselves, in order to create inflated
valuations: “An often-used structure is, for example, the setting up of shell
companies to buy real estate. Shortly after acquiring the properties, the
companies are voluntarily wound up, and the criminals then repurchase the
property at a price considerably above the original purchase price. This
enables them to insert a sum of money into the financial system equal to the
original purchase price plus the capital gain, thereby allowing them to conceal
the origin of their funds.”
The report states that money launderers often find that
“buying a hotel, a restaurant or other similar investment offers further
advantages, as it brings with it a business activity in which there is
extensive use of cash.” Casinos—like the one planned for the Trump Tower
Batumi—are especially useful in this regard. The casino was to be owned by the
Silk Road Group and its partners.
Alan Garten, the chief legal officer for the Trump
Organization, declined to describe the due diligence behind the Batumi tower.
When the deal was signed, the general counsel for the Trump Organization was
Jason Greenblatt, who is now President Trump’s envoy to negotiate Middle East
peace. (The White House declined to comment for this story, referring me
instead to Sekulow, Trump’s lawyer, who also declined to discuss the specifics
of the Batumi deal.)
A representative of the Silk Road Group told me that the
company had been eager to assuage any ethical concerns the Trump Organization
or other potential partners may have had, and so it had conducted due
diligence—on itself. In May, 2012, the Silk Road Group commissioned K2
Intelligence, a firm founded by the investigator Jules Kroll, to produce a
report. (This was fourteen months after the Trump Organization
signed the Batumi deal.) I recently obtained a summary of the report, which
explained that K2 was “asked to probe the background and integrity of S.R.G.’s
principal shareholder, George Ramishvili, more deeply than a standard
investigative or compliance report might.” However, the report seems to have
addressed only one issue: a rumor, circulating in the Georgian media, that
Ramishvili had once been a member of the Mkhedrioni, a right-wing militia. K2
concluded that the rumor was false. The summary did not address the Silk Road
Group’s funding sources, its complex legal structure, or its relationship to
the B.T.A. Bank scandal, which was unfolding in London courts at the time.
Other due diligence may have been performed, but the Silk Road Group, K2, and
the Trump Organization declined to share specific information.
Ross Delston, a prominent anti-money-laundering attorney in
Washington, D.C., told me that, if one of his clients approached him with the
possibility of entering a licensing relationship with the people involved in
the Batumi deal, he “would tell him not to walk away but to run away—to run
like hell.” He explained, “There are too many aspects of the deal that don’t
make sense, and there’s no way, as an outsider, that you could conduct
sufficient due diligence to figure out if it is criminal.”
So many partners of the Trump Organization have been fined,
sued, or criminally investigated for financial crimes that it is hard to
ascribe the pattern to coincidence, or even to shoddy due diligence. In
criminal law, there is a crucial concept called “willful blindness”: a person
can be convicted of a crime even if he was unaware of certain aspects of the
crime in which he was engaged. In U.S. courts, judges routinely explain to
juries that “no one can avoid responsibility for a crime by deliberately
ignoring what is obvious.” (When the Trump Organization cancelled the Batumi
deal, it noted that it held the Silk Road Group “in the highest regard.”)
John Madinger, the former Treasury official, said that, in
any deal that might involve money laundering, there is one critical question:
“Does the financial transaction make economic or business sense?” In recent
years, a lot of residential housing has been built in Batumi, but most of it
has consisted of what Colliers, the market-analysis firm, calls
“low-segment”—down-market—apartments. The Trump Organization, with its
extensive experience in the luxury real-estate market, could surely sense
that it would not be easy to enlist hundreds of wealthy people to buy
multimillion-dollar condominiums in Batumi. I asked several New York
real-estate developers to assess the proposed tower. One laughed and said that
the Batumi deal reminded him of “The Producers,” the Mel Brooks movie about two
charlatans who create a horrible musical designed to fail. Another New York
developer, who spent years making deals in the former Soviet Union, told me, “A
forty-seven-story tower of luxury condominiums in Batumi is an insane idea.
I wouldn’t have gone near a project like this.”
Giorgi Rtskhiladze, the Silk Road Transatlantic Alliance
executive, confirmed that the luxury-housing market in Batumi was nonexistent
in 2012, when he invited Donald Trump to visit Georgia, but said that the
tower’s investors were nonetheless confident that a Trump-branded skyscraper
would attract buyers. He insisted that the Silk Road Group had not taken part
in anything illicit, and said that B.T.A. Bank’s 2005 decision to lend the Silk
Road Group several hundred million dollars was hardly suspicious. The company
had been working in Kazakhstan for years, transporting oil products, and had
become close with the Tatishev family. When the bank that Tatishev helped run,
B.T.A., decided to invest in redeveloping Batumi, the obvious partner was the
Silk Road Group. “We were the partner they knew,” Rtskhiladze said. “We’re
active in the region.”
Rtskhiladze acknowledged that it was quite a big loan for
such a poor country. “Unbelievable,” he called it. And it was true that the
Silk Road Group had little experience in hotels or construction or
telecommunications when it suddenly entered those industries. But, he pointed
out, Georgia was still emerging from the torpid days of the Soviet Union.
“You’re talking about a country that had no experience,” he
said. “Nobody else had experience.” In any case, he suggested, “real-estate
development wasn’t that complicated. You hire third parties, who do feasibility
studies. You look at the numbers. It wasn’t that difficult.” He added, “We like
to do clean, transparent business.”
I asked Rtskhiladze why he had invited Trump, who has
generally avoided travelling abroad, to Georgia. He told me a story from 1989,
when he was a young soldier in the Soviet Army. “They told me, for target
practice, to shoot Ronald Reagan’s face,” he recalled. “I refused.” The Army
jailed him for several days. Soon after he was released, he said, he saw a
magazine with Trump on the cover. He told himself, “One day, I will go to New
York and meet this man.”
He argued that the fact that “there was no luxury in Batumi”
was precisely why the idea of a Trump Tower was so smart. The skyscraper, with
its “pool and gyms and conference rooms,” would single-handedly create “an
entire universe of very New York-style luxury in a seaside town.” The luxury
condominiums, he added, were “for international buyers—Saudis, Turks,
Russians.” In his “strong opinion,” the Trump brand was “the only brand for
them.” (David Borger, the Silk Road Group executive, told me that a study by a
well-regarded Turkish firm had concluded that the tower was a good business
idea, but he declined to share the name of the firm or the study.)
Melanie A. Bonvicino, who handles communications for the
Silk Road Group, told me that the Trump Tower Batumi deal demonstrated an
openhearted vision. “With the Batumi project, Trump was once again able to
demonstrate his keen business sense,” she wrote in an e-mail. “Donald Trump in
his role as futurist and visionary ordained the region as the next big thing.
Mr. Trump had an immediate grasp over the geopolitical significance of the
Republic of Georgia and its Black Sea region, acknowledging its vast potential
by jointly transforming this hidden gem into the next Riviera. In the élite
realm of global residential and commercial real-estate developers, the Trump
moniker was and remains synonymous with Coca-Cola, Pepsi, and Michael Jackson.”
In 2009, when Ablyazov fled to London, the Kazakh government
seized control of B.T.A. Bank. (Tatishev moved to Singapore in 2013.) A lawyer
representing the bank, Roman Marchenko, informed the Silk Road Group that he
had reason to believe that it had participated in Ablyazov’s loan scheme. The
Silk Road Group denied any wrongdoing. A settlement was reached, for fifty
million dollars—a bargain price, considering that the loans had totalled three
hundred million. Marchenko believes that the Silk Road Group was deeply
entwined with Ablyazov, but Kazakh government officials decided to stop
investigating. They were pursuing Ablyazov’s stolen assets all over the world,
and there was more money in other countries.
The Kazakh government placed B.T.A. Bank’s assets under the
authority of its sovereign-wealth fund. Soon after, Timur Kulibayev—the
powerful son-in-law of the country’s dictator, Nursultan Nazarbayev—became the
director of the fund. Kulibayev and his staff had access to all the bank’s
internal documents. Recently, Kulibayev became the majority owner of the bank,
giving him total control over B.T.A.’s archives, as well as ownership of its
assets. Kulibayev was surely familiar with the players involved in the Trump
Tower Batumi project. In 2011, Giorgi Rtskhiladze and Michael Cohen, the
Trump Organization executive, began promoting the idea of a Trump Tower in
Astana, the capital of Kazakhstan. They visited Astana and met with Karim
Masimov, the Prime Minister. Masimov is now the head of Kazakhstan’s
national-security apparatus.
Keith Darden is a political scientist at American University
who has written extensively on the use of compromising information—kompromat—by
former Soviet regimes against people they want to control. He told me that
Kazakh intelligence is believed to collect dossiers on every significant
business transaction involving the country. This would be especially true if a
famous American developer was part of the deal, even if it would not have
occurred to them that he might one day become the U.S. President. “There is no
question—they know everything about this deal,” Darden said.
Darden explained that Kazakh intelligence agents work
closely with their Russian counterparts. Kulibayev himself has direct ties to
Russia’s leadership. In 2011, he was named to the board of Gazprom, the Russian
gas behemoth, which is widely considered to be a pillar of Putin’s fortune. In
“The Return: Russia’s Journey from Gorbachev to Medvedev,” Daniel Treisman, a
political scientist at U.C.L.A. who specializes in Russia, wrote, “For Putin,
Gazprom was a personal obsession. He memorized the details of the company’s
accounts, its pricing rules and pipeline routes. He personally approved all
appointments down to the deputy level, sometimes forgetting to tell the
company’s actual C.E.O., Aleksey Miller.” Kulibayev could not possibly be
serving on Gazprom’s board without Putin’s assent.
Robert Mueller has assembled a team of sixteen lawyers. One
of them is fluent in Russian, and five have extensive experience investigating
and prosecuting cases of money laundering, foreign corruption, and complex
financial conspiracies. The path from Trump to Putin, if one exists, might be
found in one of his foreign real-estate deals.
When Mueller was appointed special counsel, his official
writ was to investigate not just “any links and/or coordination between the
Russian government and individuals associated with the campaign of President
Donald Trump” but also “any matters that arose or may arise directly from the
investigation.” Much hinges on the word “directly.” Sekulow, Trump’s lawyer,
insists that Mueller’s mandate essentially stops at the Russian border. Pawneet
Abramowski, a former F.B.I. intelligence analyst, told me that Sekulow’s
assertion is nonsensical. “You must follow the clues,” she said. When
investigating a businessperson like Trump, “you have to follow the money and go
wherever it leads—you must follow the clues all the way to the end.” ♦
Manuela Andreoni, Inti Pacheco, and Giannina Segnini, of
Columbia University, contributed reporting for this piece.
__
De THE NEW YORKER, 21/08/2017
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