House of Trump, House of Putin2

by Craig Unger

  To get a sense of the magnitude of his power, one has only to name two people with whom he has had long-term business relationships: Vladimir Putin and Donald Trump.

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  Born in Kiev, Ukraine, in 1946, Semion Mogilevich was the son of a podiatrist mother and a father who managed a large state-owned printing company.14 In the early seventies, after he graduated from the University of Lviv, Mogilevich* reportedly ran with the Lyuberetskaya crime group in the Moscow suburb of Lyubertsy, and was involved in petty theft and fraud.15 That led to two jail sentences totaling more than four years for infractions involving illegal currency.16

  These initial transgressions were small-time, relative to what was in store for Mogilevich, but one thing was clear: Money was his medium. Mogilevich started to make his fortune in the early eighties by approaching fellow Jews who were emigrating en masse to Israel and the United States and were trying to get market value for art, antiques, jewelry, and other collectibles at a time when there were strict limits on what assets could be taken out of the Soviet Union.17 Mogilevich came to their rescue—or so it seemed—by buying their possessions cheaply and promising to send more money once he had resold their property. In the end, however, he simply kept the money and used it18 to help finance a petroleum import-export company called Arbat International that was registered in the Channel Islands, an international center for money laundering and other financial crimes.

  Arbat was Mogilevich’s first foray into serious finance and his partners were men who would become some of the biggest names in Russian organized crime. At the time, in the early eighties, Mogilevich had been hanging out at the Legendary Hotel Sovietsky, a grandiose example of Soviet classicism that had become a celebrated watering hole in the Moscow suburb of Solntsevo.

  A rare nightspot that served alcohol after hours, the Sovietsky was notorious for its clientele of tracksuit-wearing mobsters, cardsharps, black marketeers, “shadow capitalists,” ex-wrestlers and ex-boxers, and other denizens of the dark side, including Alimzhan Tokhtakhounov, a businessman from Uzbekistan,19 and a gangster named Vyacheslav Ivankov.20 Both men were thieves-in-law.

  It was here that Mogilevich—his friends called him “Seva”—met a waiter named Sergei Mikhailov, aka Mikhas, who was just getting his first taste of the Bratva, on his way to becoming head of the Solntsevskaya organization, which, according to a report by Interpol’s Millennium Project, “is considered the most powerful criminal organization in the world,” with control of the Moscow region and significant influence in Europe, North America, and Israel.21 Mikhailov, in turn, was friendly with two brothers who were ex-boxers, Viktor and Alexandr Averin.

  No one knew it at the time, of course, but these were historic early meetings of a new generation of leaders in the Russian Mafia, of men who shared a vision beyond the Soviet Union. Nor could anyone have known that over the next thirty years they would be tied to both Donald Trump and Vladimir Putin.

  At a time when hundreds of Russian mobsters were engaged in open gang warfare, Mikhailov and his Solntsevskaya associates also transitioned to the white-collar, legitimate business world, through their ownership of casino Maxim in Moscow; Sistema Holding, a large conglomerate with insurance, telecom, oil, and banking interests;22 and SV Holding, a firm that manages real estate, casinos, restaurants, and hotels, and served as the first legal cover for the activities of Solntsevskaya group.23 Within that context, Mogilevich carved out a unique position as the financial genius behind Mikhailov’s huge Solntsevskaya organization, the biggest Russian gang of all, with a thousand men engaged in extortion, drug trafficking, arms trafficking, and prostitution.24

  For all that, it is possible that the FBI and the Western media have overstated Mogilevich’s power. “I understand that the American press makes Mogilevich out to be the big don, but he is not,” said one knowledgeable source who has considerable experience in the Russian underworld.25 “He never was. The real boss was Mikhas and then Avera [Viktor Averin]. It is very clear. Mikhas was and is the boss of the Solntsevskaya Bratva. But all of them were too stupid to make business. For that they needed Seva. They could not make the business without Seva. He was the only one who had the brains. Mikhas and Avera, they are the ones with the muscle.”

  According to Interpol,26 Mogilevich was a member of Solntsevo’s “board of governing members” with Mikhailov, and participated in crafting a “criminal community strategy,” resolving internal and external conflicts, laundering money, distributing profits among the leaders, distribution of “obshakom” (collective funds used to bribe authorities or finance new ventures), and other shared issues. Finally, the Interpol report said, Mogilevich was also “responsible for [Solntsevo’s] relations with Ukrainian criminal organizations.”

  While he partnered with Solntsevo, Mogilevich also ran his own smaller 250-person gang,27 the Semion Mogilevich Organization, which allegedly became a launching pad for criminal enterprises that included arms dealing, drug running, prostitution, contract murder, financial crimes, and more all over the world. Much of this was done through Arbat, which Mogilevich controlled, while Mikhailov and his pal Viktor Averin co-owned 25 percent and Vyacheslav Ivankov owned the remaining quarter.

  But in the end, it was Mogilevich’s expertise at laundering money that made him so invaluable to other mobsters. He had mastered a skill that was deeply coveted by the most formidable gangsters on the planet: He took dirty money and made it clean.

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  Mogilevich’s ascent happened to coincide with a period during which Soviet leaders had been dying in such rapid succession* that Vice President George H. W. Bush, who represented the US at state funerals, was said to have a new motto: “You die, I fly.”28

  The replacement of the sclerotic old hard-liners of the Soviet Union by Mikhail Gorbachev and his energetic new younger generation signaled a tectonic shift in global affairs. Gorbachev’s policies were successful in easing tensions with the West and providing a relief valve to its repressed citizenry. But they also weakened Soviet control of its satellites. Before long, Moscow lost control over Soviet republics in the Baltic and the Caucasus. In November 1989, the Berlin Wall fell.

  All of which was widely celebrated in the West. But Trump’s views were slightly different. “Russia is out of control and the leadership knows it,” he told Playboy in 1990.29 “I predict [Gorbachev] will be overthrown, because he has shown extraordinary weakness. . . . Yet Gorbachev is getting credit for being a wonderful leader—and we should continue giving him credit, because he’s destroying the Soviet Union.”

  Which wasn’t far from the truth. In 1991, Boris Yeltsin, the newly elected president of the Russian Soviet Federative Socialist Republic, turned against Gorbachev, whom he had initially supported. In August, there was an aborted coup, which temporarily removed Gorbachev from power. He returned a few days later, but, for all practical purposes, the Soviet Union was dead.

  On December 23, Gorbachev met with Yeltsin. Two days later, on Christmas Day, he resigned, and Yeltsin then became the first president of the Russian Federation. In an effective heartbeat, the world’s oldest and most powerful communist state had ceased to exist.

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  This was everything the Mafia had longed for. When it came to property, criminals, and illicit funds crossing borders, the floodgates had opened. “As soon as the Berlin Wall came down, there was no border,” said James Moody, former deputy assistant director of the FBI.30 “Criminals were just flowing. Once they got into Europe, they could do anything they wanted.”

  The hermetically sealed, closed world of the Soviet Union was dead and gone for good. Under communism, the Bratva had had to make do with relatively small-time crime such as extortion rackets and black marketeering. Now it emerged with an explosive force to fill the vacuum left by the failed Soviet state.

  Yeltsin had vowed that a market economy would replace communism, but the shift was so abrupt that cash-rich
gangsters rushed in to join forces with corrupt apparatchiks—including those in the KGB—and loot newly privatized state-held assets. Once that happened, the die had been cast. Instead of creating a truly democratic infrastructure and a market economy, Yeltsin essentially was allowing a handful of oligarchs to become enormously wealthy, in return for which he demanded their political support.31

  Russia was a poor country but it had an enormous amount of natural resources—oil and natural gas, iron ore, chromium, copper, tin, lead, aluminum, wheat, timber, and more. Massive industries that had been held by the state were now up for sale—all for mere kopeks on the ruble. Russia had become a gangster’s paradise. It was the birth of a new age of unimaginable greed, in which organized crime was about to become a powerful geopolitical force.

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  Mogilevich approached the post–Cold War era like a general surveying a battlefield with a grand strategic vision. As early as 1985, he had set up offices in Switzerland, Nigeria, and the Cayman Islands.32 In 1990, according to the FBI, Mogilevich acquired Arigon Ltd., which sold clothing in the former Soviet Union and oil to Ukrainian Railways, and registered it in the Channel Islands,33 then began using it as a corporate base for his growing empire and as the main legal entity for laundering funds from Solntsevskaya when he received money-laundering assignments from Mikhailov.34

  He reportedly cultivated a relationship with Czechoslovakia-born Robert Maxwell, the powerful British press lord who had bought control of the Bulgarian Cooperative Bank. That became another vehicle through which Mogilevich could launder money for Solntsevskaya.35

  Now was the time to go global. Thanks to Israel’s Law of Return,* the easiest route for Mogilevich, one favored by countless Russian mobsters, was to get Israeli citizenship.36 “There is not a major Russian organized crime figure who we are tracking who does not also carry an Israeli passport,” said Jonathan Winer, the former money-laundering czar in the Clinton State Department.37 Many of them, Winer added, such as Sergei Mikhailov, were not even Jewish. It was not unusual for Russian gangsters to suddenly discover a Jewish grandmother lurking in their family tree.

  Not long after his arrival, according to an Israeli intelligence report, Mogilevich “succeeded in building a bridgehead in Israel . . . [and] developing significant and influential [political and business] ties” by forging relationships with both Russian and Israeli criminals to run businesses in tourism, real estate, and catering through proxies. That included opening bank accounts in Israel, attending gatherings in Israel with other criminals, and, according to a classified FBI document, the “alleged purchase” by Mogilevich of an unnamed Israeli bank, with branches in Moscow, Cyprus, and Tel Aviv, for “laundering money for Colombian and Russian Organized Crime groups.”38

  Still, Mogilevich found something in Israel that he didn’t like. “There are too many Jews,” he told the National Post of Canada. “Too much arguing. Everybody is talking all the time and their voices are so loud.”39

  And so, in 1991, he married Katalin Papp, a Hungarian national, and moved to Budapest, where he established a new international base of operations.40 There, Mogilevich bought the Black and White41 nightclubs, a chain of strip joints in Budapest, Prague, Riga, and Kiev, and turned it into a global hub for prostitution and money laundering.* 42 He worked with the Italian Camorra, a leading Neopolitan crime syndicate, in drugs, arms sales, and money laundering.43

  Before long, according to Interpol’s Project Millennium, Mogilevich’s activities included “trade in oil, weapons and military strategic materials and human trafficking on an international scale.”44 As his organization grew, Mogilevich remained partners with Mikhailov in Solntsevskaya, which was also growing rapidly. According to the Russian crime blog Russian Mafiozi,45 Mogilevich partnered with Mikhailov in at least eight other companies in addition to Arbat.* Solntsevskaya had begun to acquire real financial power, both in Russia and abroad.

  But Mogilevich had not yet made his mark in the US. To do that, he turned to one of his partners in Arbat, Vyacheslav Ivankov, one of the most brutal and murderous gangsters in the history of Russian crime.

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  Starting off in the sixties in the back alleys of Moscow,46 Ivankov began his career as a gangster in a highly unusual way. In his youth, according to the Moscow Times, he had trained to be a circus performer, which led to a brief career working as a stuntman and training others for Mosfilm, the largest film studio in the Soviet Union.47 According to the memoirs of Nikolai Vashchilin, a well-known Soviet stuntman who appeared in the 1967 adventure film The Elusive Avengers (Neulovimye mstiteli), when Ivankov turned to crime, he put together his first criminal gang consisting largely of athletes and stuntmen.

  Vashchilin adds that Ivankov had ties to Leonid Usvyatsov, who allegedly ran a similar gang of mobsters who were stuntmen with Lenfilm, the Leningrad film studio. Usvyatsov, in turn, happened to have another job in Leningrad, teaching judo to young men, and among his prized students was someone named Vladimir Putin.48

  When Ivankov wasn’t gracing the silver screen, he made a name for himself as a ruthless practitioner of extortion who went after black marketeers, bureaucrats, and store managers with such cruelty that his victims were paralyzed with fear. Using fraudulent militia documents, he would search the homes of wealthy Russians, take whatever he wanted, and leave.49 A fairly typical outing had Ivankov and his gang breaking into the home of a wealthy black marketeer, handcuffing him to the radiator, and threatening to pour acid all over him unless he signed a promissory note for 100,000 rubles.50 “As a rule, his victims did not contact the police,” wrote Galina Odinokova, a crime specialist in the Ministry of Internal Affairs, in Russian Militia Gazette, a police publication, in 1992. “They preferred to part with their wealth than with their lives.”51

  Inevitably, however, Ivankov’s wild gun battles and daring getaways led him to jail, psychiatric hospitals, and finally a remote and frigid penal colony in Siberia where he was inducted into the brotherhood of the vory v zakone. Even imprisoned in a Siberian gulag, in the eighties, Ivankov managed to cultivate a mystique as an enforcer, as one of the top vory. He took on the name Yaponchik, which means “the little Japanese” in Russian and was made famous by a folk hero–like gangster named Mishka Vinnitsky, who had run the underworld in pre-revolutionary Odessa.52

  Those who crossed Ivankov in jail sometimes paid for it with their lives. According to Red Mafiya, he stabbed one inmate in the back and used a metal stool to club a prison guard over the head.53 As his reputation for brutality grew, Ivankov became one of the top vory, and, with the help of accomplices on the other side of the world, was able to control criminal activities in the Russian Far East, persuade banks to buy millions of dollars of stocks in a phony Siberian mining company, and send out a hit man in Toronto, Canada. In other words, he was exactly what Mogilevich was looking for.

  And so, in late 1990, Mogilevich bribed a Russian judge to secure Ivankov’s early release from a Siberian prison where he was being held for robbery and torture. When Ivankov was freed, Soviet authorities tasked him with the daunting assignment of taking on the ferocious Chechen Mafia, an undertaking Ivankov embraced with such fervor that rivers of blood soon were flowing from gangland shootouts, car bombings, and the like. Before long, Ivankov’s excesses had enraged the very politicians who had helped free him: Now that the Soviet Union had collapsed, Russia desperately wanted Western investors, and Ivankov was scaring them away.54

  As a result, in early 1992, the so-called Circle of Brothers, the ruling council of the vory, gave Ivankov his marching orders: “Go to the New Land and invade America!”55

  Meanwhile, Donald Trump was opening a new chapter in his life. His marriage to Ivana had produced three children—Donald Jr., Ivanka, and Eric—but Trump had begun a highly publicized tabloid relationship with Marla Maples. Trump and Ivana were headed toward divorce. At the same time, his massive losses in Atlantic City had made it very diffi
cult for him to get financing, which paralyzed any future development.

  In the past, the Italian Mafia had been crucial to his family’s success. They had helped his father’s projects. They had helped Donald develop Trump Tower, giving him secure access to ready-mix concrete. Mob-connected lawyers like Roy Cohn had always been there for him.

  It is not clear how much Trump knew about Mogilevich’s expansion into New York or the imminent arrival of Vyacheslav Ivankov and the Russian Mafia. But he was not wanting when it came to bravado. “I’ve always been blessed with a kind of intuition about people that allows me to sense who the sleazy guys are,” he wrote in Trump: Surviving at the Top, “and I stay far away.”

  CHAPTER SEVEN

  THE BILLIONAIRE BOYS’ CLUB

  As early as 1990, Trump’s casinos were in so much trouble that, far from being a multibillionaire, as he claimed, Trump actually had a negative net worth. Indeed, at a time when payments on more than $1 billion worth of bonds on his casinos came due every ninety days, he was down to his last $1.6 million.1

  Then, in 1991, the Trump Taj Mahal, the $1.2 billion casino Trump touted as the “eighth wonder of the world,” became the first of six Trump bankruptcies. As these fiascos took place, Trump structured his bankruptcies so he could sell off his stocks and reap millions while investors lost their shirts.2 But even that wasn’t enough to allow his empire to remain intact. Thanks to personal liabilities exceeding $900 million, one after another, Trump’s three Atlantic City casinos and the Plaza Hotel slipped out of his grasp. Other assets, such as the Trump Shuttle and his 282-foot yacht, the Trump Princess, were casualties as well.3

  Whether the Russians had been using Trump casinos to launder money was never established in court, but there was more than enough reason to be suspicious. The Taj Mahal had become a favorite destination for the Russian mob because Trump made a point of giving high rollers “comps” for up to $100,000 a visit, an amenity that casinos often offered big-time gamblers.4 Later, two other Trump casinos, the Trump Castle Hotel and Casino, and the Trump Plaza Hotel and Casino, agreed to pay fines for “willfully failing to report” currency transactions over $10,000 and failing to comply with laws designed to prevent money laundering.5