What secrets will Mueller find when he investigates the President’s foreign deals?
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.”
