Most important, the Obama administration had increased taxes on wealthy Americans. Trump and the Republican Party saw taxes, particularly on the wealthy, as theft by government edict to be eliminated whenever possible. Under Obama, efforts to increase funding for the resource-starved Internal Revenue Service, the frontline troops in the fight to stop Americans from evading taxes through the secrecy world, died in the face of Republican resistance. During the campaign, Trump praised himself for doing everything he could to escape paying taxes. When Clinton accused him of avoiding federal income tax for years, Trump responded, “That makes me smart.”
Within weeks of Trump’s inauguration, the new president and the Republican Congress signaled an end to Obama’s approach to the secrecy world. In one of its first significant votes, Congress repealed an anticorruption measure that had forced oil, gas, and mining companies to file an annual report to the Securities and Exchange Commission detailing their payments to foreign governments where they did business. The intent of the original legislation had been to reduce bribery, and its abolition was a gift to the extractive industries that had helped fund the Republican Party’s political campaigns through millions of dollars in contributions. The repeal could also benefit several of Trump’s foreign business partners, who were heavily invested in the oil and mining industries.
Trump was already on record against efforts to tamp down on foreign corruption. In a phone-in appearance on CNBC in 2012, he called the Foreign Corrupt Practices Act, which forces U.S. companies to investigate the people with whom they do business to ensure that they are not cooperating with illegal activities, “a horrible law,” which should be changed. “Every other country goes into these places and they do what they have to do,” Trump said.
If American companies avoided bribery, “you’ll do business nowhere,” said Trump.
* * *
TRUMP WAS ALL smiles walking the red carpet at the Miss Universe pageant in Moscow in November 2013. His trip to Russia had gone amazingly well, even if Vladimir Putin was a no-show. The previous June, Trump had sounded like a besotted teenage girl when he speculated-via-tweet whether the Russian leader would attend. “Do you think Putin will be going to The Miss Universe Pageant in November in Moscow,” Trump asked, “if so, will he become my new best friend?” Putin sent a decorative lacquered box and a personal note instead.
The real courtship, however, occurred on the sidelines. Trump’s Russian business partners for the pageant were Aras and Emin Agalarov, a father-and-son team of billionaire real estate developers. Aras Agalarov was close to the Russian leader, having received Russia’s Order of Honour the month before from Putin himself. During the trip, the Agalarovs and Trump discussed building matching apartment towers in Moscow.
In a meeting cohosted by Aras Agalarov, Trump met with a number of Russian oligarchs, including Putin’s former economy minister Herman Gref, who ran Sberbank, Russia’s largest state-controlled bank. After the trip, Trump boasted to Real Estate Weekly, “I have a great relationship with many Russians, and almost all of the oligarchs were in the room.”
Trump had been trying to break into the Russian real estate market since the 1980s. He and his first wife, Ivana, traveled to Moscow in 1987, looking for a site to build a luxury hotel in a joint venture with the Soviet hotel and tourism agency, but the deal never took off. In 1996 he tried again, this time a condominium project in partnership with U.S. tobacco executives, also a bust. Less than ten years later, he signed a deal with Bayrock Group, an investment fund with connections to Russia, Kazakhstan, and Turkey, to explore building a Trump Tower in Moscow.
While this Russia project, once again, failed to come to fruition, Bayrock and Trump did complete several other deals. In Bayrock, Trump had found a willing if unsavory partner, one with plenty of links to the secrecy world and Mossfon. If Trump couldn’t bring his business to Russia, Bayrock made it possible for Russian and Eastern European money to flow to him instead.
Bayrock was headed by Tevfik Arif, a former economist in the Soviet Ministry of Commerce and Trade. In a time when government officials and gangsters in the Eastern Bloc were carving up public goods, Tevfik and his brother Refik acquired the Aktyubinsk Chromium Chemicals Plant in Kazakhstan, a major producer of the chemical. (Chromium is an important component in steel products.) Tevfik Arif had business partnerships with Fettah Tamince, a relative of President Erdoğan, who owned the Turkish luxury hotel chain Rixos and maintained at least four Mossfon companies, some with interlocking shareholders. Arif had also branched out to America, redeveloping condominiums and a waterfront shopping center in Sheepshead Bay, Brooklyn.
In April 2000, Bayrock Holdings S.A. incorporated in the Bahamas, after which Arif established Bayrock companies in Delaware, Florida, and New York. He based Bayrock’s operations out of the twenty-fourth floor of Trump Tower on Fifth Avenue. In the years before the 2008 financial crisis, Bayrock was awash in cash. When it needed more, money would magically appear. It was sent by his brother, according to a lawsuit filed in federal court in New York. Tevfik’s brother Refik was based in Turkey, and his business interests ran through numerous Mossack Fonseca companies.
There were more than twenty-five companies connected to the Arif family in the Mossfon files, conducting a wide variety of business—everything from leasing private aircraft to selling chemicals to investing in real estate. The Arifs had operated in the secrecy world since at least 1996, creating layers of structures, with a Mossfon shell company even holding rights over Ravana, the Arif family foundation. Offshore companies tied to the family’s primary business organization, the Doyen Group, were also linked to corruption in international soccer.
One of Bayrock’s top employees was a former stockbroker and convicted felon named Felix Sater. Russian-born and Brooklyn-raised, Sater had served time for shoving a broken margarita glass into the face of a fellow patron in a barroom fight. After his release, he was involved in a Mafia-related $40 million pump-and-dump penny stock fraud in 1998. He managed to evade serious consequences for the crimes by turning confidential informant for the government. When questioned about Sater, Trump, who had traveled with him on at least one business trip, claimed to barely know him.
Trump joined forces with Bayrock in 2005, offering a brand name behind which Arif’s money could coalesce. Their best-known project was Trump SoHo, a forty-six-floor hotel-condominium in one of Manhattan’s trendiest neighborhoods. Trump announced the project on his television show, The Apprentice, in 2006. For the use of his name and input, Trump received a 15 percent cut of sales, with another 3 percent parceled out to two of his children, Ivanka and Donald Jr.
In 2007, Arif cut a deal with Iceland’s FL Group for $50 million in financing for Trump SoHo and three other Trump-related projects, in return for future profits. Trump signed a document agreeing to the arrangement. FL Group was an international investment company surfing the Icelandic financial mania. Its principal Icelandic shareholders spun off offshore companies like a pinwheel, a number of them through Mossfon. FL Group would go belly up when the financial crisis exposed the fraud and self-dealing behind Iceland’s economic miracle. A search of FL Group in the Mossfon files leads to substantial loans from Icelandic banks, a profligate Icelandic supermarket chain, investments in India, and Kaupthing’s largest debtor in Luxembourg. Iceland’s special prosecutor Ólafur Hauksson charged the company’s former CEO, Hannes Smárason, with embezzlement of about $22 million in corporate funds, but the businessman was acquitted at trial.
A civil suit against Bayrock filed by a former employee, Jody Kriss, speculated that some of the money behind FL Group was Russian in origin. Kriss alleged that Bayrock operated for years through “a pattern of continuous, related crimes, including mail, wire, and bank fraud; tax evasion; money laundering; conspiracy; bribery; extortion; and embezzlement.” He further alleged that the FL Group’s investment in the Trump SoHo project was in fact a sale disguised as a loan, to avoid paying approximately $20 million in taxes. Bayroc
k denied the allegations. Trump insisted he had nothing to do with the financing, lending only his name.
“I don’t know who owns Bayrock,” Trump said in a deposition in 2011, despite having signed a document that stated clearly that FL Group was helping to finance the project. “I never really understood who owned Bayrock.”
Another apparent investor in Trump SoHo through Bayrock, according to a company investment pamphlet, was Alexander Mashkevich, a Russian billionaire who was part of a trio of shareholders behind Eurasian Natural Resources Corporation (ENRC), a conglomerate with far-flung interests ranging from mining to construction. A spokesperson for Mashkevich says the billionaire never invested in Trump SoHo or Bayrock. The mining mogul was also close to Kazakhstan’s president-for-life Nursultan Nazarbayev, whose grandson and other relatives had their own Mossfon companies. In 2011, the three principals behind ENRC—Mashkevich, Patokh Chodiev, and Alijan Ibragimov—were accused in Belgium of money laundering. The charges were subsequently dropped when they agreed to pay a settlement for an undisclosed sum without admitting wrongdoing.
ENRC had deep ties with Mossfon, dating to at least 2003, having connected with the law firm through a trust company in Guernsey in the Channel Islands. Some of ENRC’s companies were involved in mining in Congo. In West Africa ENRC was implicated in a bribery investigation of the Israeli diamond magnate Dan Gertler, who also had Mossfon companies and HSBC Swiss bank accounts. Gertler denies any wrongdoing.
In 2014, the Guernsey intermediary, St. Peter’s Trust, attempted to move fifteen ENRC companies directly to Mossfon. The law firm’s compliance department reviewed the matter and discovered the companies were related to ENRC Limited, a joint venture between the trio of investors and the Kazakh government. All the people involved were PEPs. And ENRC had recently been delisted from the London stock exchange after a massive share price drop when investors bailed after a controversial mining deal with the Congolese president. The company faced multiple criminal investigations over corruption allegations in Kazakhstan and Africa. These were too many red flags, even for Mossfon. “Due to the adverse results found in the course of our investigations, the decision is, do not accept these companies under our administration,” wrote one of the firm’s compliance officers.
Trump SoHo was star-crossed from the start. The building site, it turned out, was on the grounds of a former African Methodist Episcopal church, and during construction, workers unearthed the bones of those buried in the churchyard, causing delays as those remains were disinterred and moved. A worker died on the job when he fell forty-two stories and was decapitated.
Before completion, Trump lied about how quickly the nearly four hundred units were selling, claiming the project had received thirty-two hundred applications when in fact only about sixty apartments had found buyers by the time the building opened in April 2010. Ivanka also fabricated sales figures, publicly stating that 60 percent of the units had sold. Angry buyers filed lawsuits alleging that the sales figures had been inflated. In a settlement in 2011, a number of the buyers received 90 percent of their deposits back. The developers had sold fewer than a third of the units by 2014, forcing the building into foreclosure where it was sold at auction.
Among the buyers for Trump SoHo condos were a family from Kazakhstan, the Khrapunovs, who in 2013 purchased three apartments for $3.1 million. The family is accused by the Kazakh city of Almaty of buying U.S. real estate through anonymous shell companies in order to launder hundreds of millions of dollars that Viktor Khrapunov allegedly stole while mayor of the city. The Khrapunovs deny the charges and claim they are dissidents, persecuted politically by the country’s authoritarian ruler, President Nursultan Nazarbayev. The Khrapunov family also had control over several Mossfon companies that held property in Kazakhstan.
The Khrapunovs’ son is married to the daughter of Mukhtar Ablyazov, a Kazakh oligarch accused, along with associates, of misappropriating $6 billion from the BTA Bank. While chairman of BTA, Ablyazov allegedly lent billions to shell companies that never paid the money back. On its website, BTA lists more than 786 offshore companies in which Ablyazov had an interest. Scores of these companies appear to be in the Mossfon files.
A few months after Trump SoHo opened, Tevfik Arif and the ENCR trio were aboard the Savarona, a 450-foot rented yacht, when Turkish police raided the boat because they suspected their involvement in prostitution. The men were accompanied by nine women between the ages of eighteen and twenty-three. Police had been surveilling Arif and his associates for months as they procured women, some as young as fifteen, for sex parties. All the men involved denied criminal intent. None of the girls agreed to testify. Prosecutors dropped the case.
Several years after the prostitution sting, Zamin Ferrous Limited, a Mossfon company whose director was one of Tevfik Arif’s sons, sued ENRC over the disposition of $220 million that was tied up in a Brazilian mining deal. The two sides settled two years later.
In addition to the Trump SoHo, Bayrock also built what was to be called the Trump International Hotel and Tower Fort Lauderdale. Trump has a number of branded properties in the Sunshine State. The Fort Lauderdale project met a similar fate to the Trump SoHo. After the 2008 financial crisis, the developer stopped paying Trump, and the real estate mogul stepped away from the 298-unit condo-hotel. Lawsuits followed. The property defaulted on a $139 million loan, the bank foreclosed, and it was sold at auction.
Trump-branded properties in Florida found many customers among Russians. According to an analysis by Reuters, at least sixty-three individuals with Russian passports or addresses purchased almost $100 million’s worth of properties in buildings that carried his name. A number of the buyers had Mossfon companies, including Andrey Truskov, the cofounder and principal of Absolute Group, LLC, one of the largest banks in Russia, with close ties to Putin.
Russians were such frequent buyers of condos in the Trump Ocean Club in Panama—a resort for which Donald Trump lent his name and had an operating agreement—that the sales force contracted with Mossfon for Russian translation services. The developer, Roger Khafif, used the firm for other matters as well. At one point in 2008, he asked Mossfon whether it had any experience getting visas for Iranians, since there were buyers with Iranian passports who were residents of the UK and wanted to purchase in Panama.
No single Florida real estate deal benefited Trump as directly as the sale of a Palm Beach mansion to the Russian billionaire Dmitry Rybolovlev. In 2004, Trump had purchased the spread in a bankruptcy auction for $41.4 million. He flipped the mansion to the oligarch four years later for $95 million. Rybolovlev probably never set foot inside the house. A few months after buying the property the billionaire became embroiled in a nasty divorce. Rybolovlev had several companies with Mossfon, which he insisted were for family planning purposes. His estranged wife claimed the structures were used to hide assets in the couple’s divorce.543 After the couple reached an undisclosed settlement, plans were approved to tear down the mansion.
* * *
AS EARLY AS 2013, Mossfon knew key details about Anar Mammadov, a thirty-three-year-old businessman from Azerbaijan. Mossfon’s compliance department ran Mammadov’s name through World-Check, a paid database the firm employed to ascertain if its customers were sought by Interpol or mired in negative media coverage. The law firm possessed a copy of his passport. Mammadov provided signed Source of Wealth Declarations that revealed he was a PEP, a relative of an Azerbaijani public official, and even described the business expectations of his offshore entities, which were to hold property and for investment purposes.
Mossfon’s due diligence showed that Anar’s father was Ziya Mammadov, Azerbaijan’s minister of transport. It also dredged up unflattering news articles. Anar Mammadov had become a billionaire off transportation concessions, public construction projects, and oil exploration. He claimed to have founded one of the country’s most successful commercial development companies while he was still a teenager. The company, which was likely a front for his fat
her, experienced explosive growth while Anar was studying full-time at the University of London. The Mammadov family specialized in no-bid state contracts and monopolies, and it owned Azerbaijan’s largest taxi and bus companies.
The clips revealed that Anar did not appreciate journalists poking into his affairs. Azerbaijan consistently ranks at the bottom of press freedom indexes, and journalists there are beaten, imprisoned, and killed with regularity. Anar had sued two Azerbaijani opposition newspapers over their coverage. When reporters tried to take photos of luxury villas owned by Ziya Mammadov and other family members, they were stopped, their cameras were confiscated, and they were interrogated for three hours.
Ziya Mammadov “is notoriously corrupt even for Azerbaijan,” a U.S. diplomat observed in a classified cable in 2009.
Given the brazen kleptocrats running Azerbaijan, the cable’s claim for Mammadov’s exceptional status was extraordinary. Situated north of Iran on the Caspian Sea, Azerbaijan once formed a strategic part of the Soviet Union. In 1969, Soviet premier Leonid Brezhnev appointed Heydar Aliyev, a top KGB official, to the post of First Secretary of the Central Committee of Azerbaijan’s Communist Party. Aliyev would stay in power for two decades until Mikhail Gorbachev removed him over corruption allegations. When the Soviet Union collapsed, Azerbaijan gained its independence and became an oil-rich republic. After its first president was deposed in a coup, Aliyev slipped back into power. In October 2003, two months after his death, his son Ilham Aliyev won the election to replace him. The younger Aliyev then proceeded to coast from one overwhelming electoral victory to another. Such was the extent of the fraud that in 2013, the Azerbaijani election commission mistakenly released election results, the day before actual voting began.
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