by Craig Unger
Having registered dozens of shell companies in Panama as owners of the gas stations, all Iorizzo had to do was to close down each of his gas stations before the tax man came, and then reopen under new management with a different shell company. By the time the tax men came looking for their money, much of it was in Iorizzo’s pocket. When the FBI later investigated the scam, which had spread to six states, they called the investigation Operation Red Daisy.20
Iorizzo’s scheme was going swimmingly except for one thing: A group of men—Michael Franzese described them as “small-fry associates of another family”—were trying to muscle in on Iorizzo’s operation.21 According to Franzese, the six-foot-four, four-hundred-fifty-pound Iorizzo “ate pizzas the way most people eat Ritz crackers” and didn’t exactly look like he needed protection. Nevertheless, he had gone to Franzese for help with these small-time hoods who were trying to shake him down and move in on his territory.
Without missing a beat, Franzese figured out a mutually acceptable solution, and a highly lucrative partnership was born. Soon, so much money was pouring in that Franzese was promoted to caporegime in the Cosa Nostra.22 Then in 1984, three alleged Russian gangsters, David Bogatin, Michael Markowitz, and Lev Persits, approached him with a proposition that was very similar to Iorizzo’s. Like Iorizzo, they had their own gas tax scam going on, and like Iorizzo, they needed protection.
Franzese instantly saw the opportunity for another huge score, but he sized up the Russians with a mixture of respect and scorn. Bogatin, with his receding hairline and steel-rimmed glasses, looked more like a white-collar professional than a Russian mobster. His father had spent eighteen years in prison in Siberia because he had been “caught” hanging the key to the office door so that it accidentally covered a portrait of Joseph Stalin—thereby defacing the image of the Soviet dictator.23 In 1966, Bogatin joined the Soviet Army and served in a North Vietnamese antiaircraft unit, where he helped shoot down American pilots.24 Then, in the mid-1970s, after leaving the army, he began working as a printer but was fired because he was printing outlawed material for Jewish dissidents.
After being blacklisted by the KGB, in 1977, Bogatin clawed his way out of Russia, came to New York, and worked in a factory. He bought a car, mastered English, and began to run a private cab service. That led to a gas station, then a fuel distributorship,25 all while he made acquaintances among the Russian diaspora.
Having grown up under communism, Bogatin took to capitalism like a duck to water—which won Franzese’s respect. The Russians had been among the pioneers of this spectacularly lucrative scam, and they had about two hundred members working under them.26 They wanted “to flex their muscles,” Franzese said, in testimony before a Senate subcommittee in 1996, “and would not hesitate to resort to violence when they felt it was necessary to do so.”
Franzese had a harder time taking Bogatin’s partner seriously—thanks largely to his attire. Michael Markowitz wore gaudy jewelry, heavy gold chains, and showy wide-collared shirts unbuttoned to the navel. As Franzese saw it, Markowitz aspired to be John Travolta in Saturday Night Fever, but instead called to mind the shimmying “wild and crazy guys” played by Steve Martin and Dan Aykroyd on Saturday Night Live in the seventies. The dapper Franzese couldn’t stop laughing at him. Markowitz “looked like a rug salesman who had just hit the lottery.”27 Was this really his competition?
In the end, however, money trumped fashion, and so, on a Saturday morning in the fall of 1980, Michael Franzese28 sat down with Bogatin, Persits, and Markowitz at a gas station in Brooklyn. “These Russians* were having trouble collecting money owed them,” Franzese recalled.29 “They were also having problems obtaining and holding on to the licenses they needed to keep the gas tax scam going.”
Franzese could help on both counts. One of his soldiers was a guy named Vinnie, and as Franzese put it, “Vinnie’s job was to say, ‘Pay the money, or I’ll break your legs.’”30
Vinnie was persuasive—so persuasive that the Colombo family had become famous for getting people to pay their debts. That wasn’t all. Franzese also had operatives inside the state government who could provide the Russians with the wholesale licenses they needed to defraud the government.
The Russians desperately needed Franzese, and he knew just how to play them. “We agreed to share the illegal proceeds, 75 percent my end, 25 percent their end,” he said.31 “The deal was put on record with all five crime families, and I took care of the Colombo family share of the illegal proceeds out of my end.”
Soon, the money came pouring in—$5 million to more than $8 million a week. As the operation expanded, profits soared to $100 million a month, more than a billion a year. The Italians were the big winners, but Markowitz and Bogatin were well on their way to lucrative criminal careers.
Thus, in 1984, at the peak of his success, David Bogatin went shopping for apartments in New York City. Even though he was a junior partner with Franzese, after seven years in New York, Bogatin had stashed away enough money to buy real estate anywhere he wanted. For roughly a decade, thousands of Russian Jews like him had been pouring into Brighton Beach, Brooklyn. But Bogatin had his eyes on something more prestigious.
So instead of shopping for a home in Brighton Beach, Bogatin became fixated on a garish fifty-eight-story edifice in midtown Manhattan with mirrors and brass and gold-plated fixtures everywhere. A monument to conspicuous consumption, it had an atrium covered with pink, white-veined marble near the entrance and a sixty-foot waterfall overlooking a suspended walkway, luxury shops, and cafés. The AIA Guide to New York City described it as “fantasyland for the affluent shopper,” but hastened to add that the design was more like a generic “malt liquor” than posh champagne.32
The New York Times architecture critic Ada Louise Huxtable called it “monumentally undistinguished,” while another Times writer dismissed it as “preposterously lavish” and “showy, even pretentious.”33 The developer’s love of excess was such that he purposely overstated the number of floors in the building. That way, he could say he lived on the sixty-eighth floor—even though it was a fifty-eight-story building. Its address was 721 Fifth Avenue, and it was known as Trump Tower.
CHAPTER TWO
TRUMP’S BEAUTIFUL LAUNDRETTE
According to the late Wayne Barrett, who investigated the Bogatin deal for the Village Voice, Donald Trump himself took the unusual step of personally meeting with David Bogatin when the transaction took place. Apparently, Trump found nothing untoward in the fact that Bogatin was buying not one but five luxury condos in Trump Tower for a total of $6 million (the equivalent of approximately $14.5 million in 2018),1 even though it was unlikely he had a legitimate way to get his hands on that much cash and had arrived in America with just $3 in his pockets.2
There was also one more element in the deal that was highly irregular. The extraordinary hype enveloping the building’s glamour overshadowed the fact that Trump Tower offered a special feature that was exceedingly rare. At the time, according to author David Cay Johnston, Trump Tower was one of only two buildings3 in New York City that sold condos to buyers who used shell companies, such as limited liability companies, which allowed purchasers to buy real estate while concealing their identities.
“If you are doing a transaction with no mortgage, there is no financial institution that needs to know where the money came from, particularly if it’s a wire transfer from overseas,” said Jonathan Winer, who served as deputy assistant secretary of state for international law enforcement in the Clinton administration.4 “The customer obligations that are imposed on all kinds of financial institutions are not imposed on people selling real estate. They should have been, but they weren’t.”
So, thanks to these lax regulations, Trump began to sell condos in Trump Tower as an ideal vehicle through which criminals could put their dirty money into luxury condominiums while keeping their ownership anonymous. Thus, according to the New York State attorney general’s office, when Trump closed the deal for five apartments w
ith David Bogatin, whether he knew it or not, he had just helped launder money for the Russian Mafia.5
All of this was happening at an extraordinary time. It was 1984. After nearly forty years, the balance of power in the Cold War had tilted decisively toward the West. The USSR was still embroiled in a costly, bloody, and unproductive war in Afghanistan, the “Soviet Vietnam,” as it had been since 1979, leaving the Soviet economy in tatters. President Ronald Reagan had aggressively ramped up the arms race with “Star Wars,” the Strategic Defense Initiative, which was intended to shield the US against incoming missiles and succeeded in making the cost of being a superpower prohibitively expensive.
Some people in the KGB were beginning to realize that the Soviet Union’s economy was doomed.6 Finally, with the deaths of Soviet leaders Leonid Brezhnev in 1982 and Yuri Andropov in 1984, and the ascent of aging and ailing Konstantin Chernenko to the top spot in the Soviet leadership, the old party structures were failing.
All of which created a gigantic power vacuum for the Russian Mafia to fill at a time when it had grown to roughly nine thousand criminal gangs with thirty-five thousand members,7 many of whom, likely including Bogatin, were looking to transfer illicit funds into safe havens in the West.
Two powerful forces in a newly created global underground economy had begun to come together. On the one hand, the disintegration of the Soviet Union had opened a fire-hose-like torrent of hundreds of billions of dollars in flight capital that began to pour forth from oligarchs, wealthy apparatchiks, and mobsters in Russia and its satellites. On the other hand, Donald Trump’s zeal to sell condos, no questions asked, to shell companies meant that Russians could launder vast amounts of money while hiding their personal identities. Over the next thirty years, dozens of lawyers, accountants, real estate agents, mortgage brokers, and other white-collar professionals came together to facilitate such transactions on a massive scale.
As the Financial Times notes, the fact that the US and the UK, unlike most Western democracies, permit anonymous ownership of real estate facilitates money laundering of roughly $300 billion per year in the United States alone, most of it from Russia.8 As a result, luxury real estate has provided a haven for Russian oligarchs and their kleptocratic president, Vladimir Putin, son of a factory worker and Russian seaman, to stash billions of dollars.
All-cash purchases through shell companies are not in and of themselves illegal or improper, and they have become more common in recent years in luxury home sales all over the world. Nor are sellers under any obligation to question where a buyer’s money comes from. However, Trump appears to have taken advantage of these weak regulations to sell en masse to the Russians.
Because it is so difficult to penetrate the shell companies that purchased these condos, it is almost impossible for reporters—or, for that matter, anyone without subpoena power—to ascertain the scale at which such laundering may have taken place in Trump-branded properties. Nevertheless, according to a BuzzFeed investigation by Thomas Frank, more than 1,300 condos, one-fifth of all Trump-branded condos sold in the US since the eighties, were sold “in secretive, all-cash transactions that enable buyers to avoid legal scrutiny by shielding their finances and identities.”9
The BuzzFeed article added that the total value of these condo sales—sales that match the US Treasury’s criteria for possible money laundering—was about $1.5 billion, a figure that actually may understate the amount of dirty money in play. The article did not include Trump’s many buildings outside the United States, such as Trump-branded high-rises in Canada, the Philippines, Panama, Uruguay, Turkey, India, South Korea, and other countries where President Trump often licenses his name and collects royalties.
As a teenager, Donald Trump had helped out in Trump Village, a Brighton Beach–adjacent development in Coney Island his father had built (in fact, the only Trump real estate development named after Fred Trump rather than Donald), by collecting money from the washing machines in the shared laundry used by Russian émigrés and the like—in the form of nickels, dimes, and quarters. Now he was participating in a very different kind of laundering operation—and this time the scale of the money was monumental.
* * *
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David Bogatin fled the United States in 1987 to avoid prosecution for his gas tax scam, and was extradited from Poland five years later.10 When he returned, he was imprisoned for the scam, but it remains unclear whether or not Trump knew about the illicit source of Bogatin’s money.
Still, over the next four decades similar transactions took place in Trump Tower and other Trump-branded buildings so frequently that it’s hard to imagine Donald Trump had no knowledge whatsoever about what was going on. Bogatin may have been the first Russian to use Trump condos to launder money, but other criminals with ties to the Italian mob had already done the same. Indeed, Lucchese crime family associate Robert Hopkins, who ran one of New York’s biggest illegal gambling operations, bought his Trump Tower apartments in 1981—two years before the building opened. When he met Trump at the closing, he opened his briefcase and approximately $200,000 in cash spilled out on Trump’s conference table. Similarly, soon after Trump Tower opened in 1983, Italian financier Roberto Polo, who was subsequently jailed for embezzlement, bought six Trump Tower apartments in the names of offshore shell companies.11 And Jean-Claude “Baby Doc” Duvalier, the brutal and corrupt former leader of Haiti, bought an apartment on the fifty-fourth floor in August of 1983.12
Still, Bogatin’s purchase of five apartments in Trump Tower was unique in that it did nothing less than link the future president of the United States to murderous Russian mafiosi and their subculture of drugs, money laundering, extortion rackets, prostitution, and more.
Even more important, the transaction may have represented an initial contact from Soviet intelligence to see if Trump was a potential Soviet “asset,” or agent of influence. Within the world of intelligence, assets are persons within countries being spied upon who provide intelligence to a foreign power. Different categories of assets include those who elect to work for a foreign government because they prefer its ideology, those who betray their country for monetary gain, those who are being blackmailed, and so-called useful idiots who don’t even know they are being used, but who still provide valuable information through security lapses or blind pursuit of their own agendas.
When he was asked about the Bogatin-Trump transaction, Oleg Kalugin, the former head of counterintelligence for the KGB, said he was “not surprised. That’s typical.”
“Normally, the procedures of major intelligence and secret police organizations are intended to collect sufficient information to see if the guy will collaborate,” he added.13 “If he is willing to collaborate, he may be useful.”
At the time, the KGB was deeply concerned about its failure to recruit more American assets and had issued instructions to agents abroad to find US targets to cultivate.14 In Trump, the Soviets had discovered a man who was so intoxicated by a huge new clientele with boatloads of cash that he engaged in dubious transactions without asking questions. Doing business with Trump allowed the Russian Mafia to secure a significant new foothold in the United States and begin an offensive that continues to assault America’s most essential democratic institutions to this day. Moreover, as early as 1984, the Russians had discovered that as long as they had money, Donald Trump was listening.
All of which made Trump, initially at least, a tiny part of an historic conflict that began as blowback from the end of the Cold War. For Vladimir Putin, the demise of the Soviet Union had been “the greatest geopolitical catastrophe of the century.”15 But even that was exacerbated by what came next: One by one, no fewer than thirteen Eastern Bloc nations joined NATO.*
Putin, however, drew a line in the sand with regard to Ukraine. After the Euromaidan protests against Russian aggression began in Ukraine in 2013, Russia launched a massive global offensive in which its strategic goals were to weaken not only the United States but Britain, NATO, the European Un
ion, and, indeed, the entire Western Alliance.
The battle was against not just the United States but the West itself, as Russia repeatedly interceded in domestic politics in the United Kingdom, where it fueled the successful Brexit campaign, in which UK citizens voted to leave the European Union; in the Netherlands, where it backed Geert Wilders; in France, where it supported Marine Le Pen; in Ukraine, where it backed Viktor Yanukovych and other pro-Putin forces; and in Hungary, Poland, and elsewhere in Eastern Europe as well.
The most striking fact of this massive new global conflict, however, may have been that barely anyone noticed that it was taking place. It was extraordinary. War is generally defined as armed conflict. However, Vladimir Putin had attacked the sovereignty of America and other Western nations—a Virtual World War III, if you like—but almost no one reported on it in the newspapers, on TV, on the radio, or on the Internet. That’s because this was a war by other means, a war that eschewed the bombs, bullets, and boots on the ground of conventional warfare, and instead relied on a new, sophisticated, asymmetric, hybrid form of “nonlinear” warfare.
Only on rare occasions did Russia resort to old-fashioned military intervention, as it did in 2014 when Russian troops were a prelude to the annexation of the Crimea during the Ukraine crisis. Instead, Putin waged a shadow war, or “virtual” war, consisting of covert operations, disinformation, and cyber warfare. It was a war in which Russia hacked its adversaries; used third parties, such as Julian Assange and WikiLeaks, to make it seem as if leaks had emanated from heroic, highly principled whistleblowers, rather than Russian intelligence; hijacked social media and exploited algorithms to make highly provocative “fake news” go viral; transformed Facebook into one of the biggest purveyors of Russian propaganda on the planet; deliberately used not only “alternative facts” and fake news but bogus websites that pretended to correct fake news, and, in the process, upended the very notion of truth, of reality itself, of what is real.
