by Craig Unger
“I wasn’t interested in who this man was,” said Clodo. “It was only after the elections that I understood that this young man was Viktor Orbán from Fidesz [the right-wing populist party in Hungary].”26
Orbán went on to become prime minister of Hungary from 1998 to 2002, and again from 2010 to the present, but there is no way to verify Clodo’s account.
For a master of money laundering like Mogilevich, banks were essential, and in 1994, he infiltrated and later took over Inkombank, one of the largest private banks in Russia, allegedly via a secret deal with its chairman, Vladimir Vinogradov.27
In the UK, he had first staked out turf in the early nineties, laundering large sums of cash allegedly from activities ranging from arms dealing to prostitution, extortion, and drug trafficking, through Arbat and Arigon, the companies he had launched with Ivankov and Mikhailov in the Channel Islands. In 1995, however, after large amounts of money started going to the companies’ lawyers, London’s Metropolitan Police raided their homes and seized millions from the Royal Bank of Scotland.28 No charges were filed, but the companies were dissolved and Mogilevich was banned from Britain.
Increasingly, Mogilevich focused his energies on the corporate world—and not just in Russia and Ukraine, but also the United States. To make his dreams a reality, he put together a network of white-collar professionals who would propel the Semion Mogilevich Organization to another level entirely. He cultivated young Russian businessmen who had expertise in creating shell companies to launder money. He found bankers who made it possible to launder money on a multibillion-dollar level on an ongoing basis.
A decade earlier, the Russians had deconstructed the system of gasoline tax distribution in the United States, zeroed in on its vulnerabilities, and put together a virtually foolproof scheme to steal billions of dollars. Now they prepared to take on Wall Street, America’s campaign finance system, the world of K Street lobbyists, and any politicians who were ready for hire, all in a widespread effort to have as much power and money in their pockets as possible.
But Mogilevich’s ascent was not without setbacks. By 1994, Mogilevich’s Inkombank was able to have “virtually daily interaction”29 with the Bank of New York (BONY), one of the largest banks in the United States,30 meaning that he finally had direct access to mainstream international banks to launder billions of dollars.* But a British investigation code-named Operation Sword revealed that Arbat International, one of the Channel Island firms Mogilevich had started in the early nineties, was at the center of a web of companies in London and New York through which Mogilevich laundered as much as $10 billion.31
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Meanwhile, by 1995, Mogilevich was in the midst of a heated dispute with longtime ally Sergei Mikhailov. The reason, according to Interpol files, was that Mikhailov had “ordered Mogilevich to transfer about 5 million US dollars to the general security of the Solntsevo group.”32 The matter came to a head at a meeting in the Czech Republic on May 31 of that year, the purpose of which, according to Interpol files, was to split up “newly discovered routes for smuggling gold and jewelry, a new route of cocaine smuggling from South America to Moscow and heroin from the CIS countries to Western Europe and the United States.”33
It happened to be Averin’s birthday, and in true Bratva fashion, the “meeting” took place at the V Holubu, a Prague restaurant Mogilevich owned and used as a money-laundering center, with strippers, hookers, and a guest list that included Mikhailov, Averin, Mogilevich, and everyone who was anyone in the Russian Mafia.
“They were having an elaborate dinner and entertainment,” Special Agent Robert Levinson of the FBI told the BBC.34 “They had a Russian singer and a comic and they had some cabaret entertainers, and everyone was having a very good time for themselves.”
Then, while the performances were still under way, the Czech Republic’s organized crime SWAT team suddenly came into the restaurant, jumped on the stage, and, armed with machine guns, ordered the crowd not to move.35
At first, everyone was transfixed, thinking it was part of the show. According to FBI files, what they didn’t know, however, was that before the festivities got under way, “an unidentified Russian delivered an anonymous letter to the chief of police in Budapest, Hungary, in which it was alleged that Semion Mogilevich was to be assassinated that evening at the ‘summit meeting’ in Prague.”36
Slowly, the partygoers realized that the SWAT team had foiled an assassination attempt on Mogilevich. As for Mogilevich, he had been tipped off and was nowhere to be found.37 “Mogilevich knew he was dealing with some very, very treacherous people,” said Levinson. “They’d kill him in an instant.”
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In the wake of the Prague fiasco, Mogilevich, Mikhailov, and other alleged Russian mobsters were banned from the Czech Republic, effectively shutting down operations there. In June 1995, Ivankov had been nabbed for extortion and held without bail. He was later sentenced to nine years and seven months in jail.38 On occasion, there were shootouts between rival gangsters and internecine warfare. But all that was the price of doing business. By some accounts, Mogilevich was already said to be worth over $100 million—and money was rolling in.
At the same time, with Ivankov overseeing operations from his cell in upstate New York, Mogilevich had begun to consolidate operations in the US while maintaining major business interests in Europe. He had major holdings in the Hungarian arms industry. He had managed to steal millions of dollars of Soviet military equipment that had been left behind in East Germany when the Soviet Union dissolved.39 Between weapons trafficking, assassinations, prostitution, drug trafficking, dealing in precious gems and stolen art, extortion, and money laundering, cash was pouring in from all over the world.
In the history of the American Mafia, there have been a handful of summit meetings at which rival gangs sort out how to divide operations such as loan sharking, drug dealing, gambling, prostitution, and, of course, the resulting spoils. Among the most famous is the 1957 meeting in the sleepy hamlet of Apalachin, New York, that was raided by state and local cops, resulting in more than sixty underworld bosses being detained and indicted.
The Bratva meeting in Prague had played out differently for Mogilevich than the Apalachin meeting did for the American mob. He and his allies had been forced out of the Czech Republic, but they lived to fight another day. Moreover, vital issues were still unresolved. So in October 1995, Mogilevich attended a summit meeting of Russian crime figures in the Tel Aviv office of Boris Birshtein, a flamboyant, politically connected Russian-Canadian businessman who ran Seabeco SA and had close ties both to the KGB40 and Sergei Mikhailov,41 with whom he partnered in a Belgian company called MAB International.
Others who were present included Mikhailov partner Viktor Averin; Ukrainian media mogul Vadim Rabinovich, who had ties to the arms trade and had spent seven years42 in jail for black market ventures; several other Ukrainian businessmen; and, of course, Semion Mogilevich. Rabinovich had run the Kiev office of Nordex, an arms company allegedly tied to the Mafia that had brokered the sale of Scud missiles from North Korea to Iraq.43
While they were in Israel, the group traveled around the country, “including a visit to a shooting range.” Israeli officials had telephone coverage of their hotel rooms and detected calls to Russia, Hungary, and Paris. According to the FBI, they “did not appear to practice communications security, freely discussing business over the telephone.”44
Now that the Soviet Union was dead and gone, they had gone global. Hundreds of billions of dollars in natural resources were there for the taking, but they had to figure out how to split their booty. And so a settlement was reached whereby Mogilevich paid Mikhailov the disputed $5 million, but in return got something far more valuable.
The key subject of the meeting in Tel Aviv, and subsequent gatherings of the Russian mobsters, was how to divide spoils in Ukraine among the criminal gangs, especially Ukraine’s energy trade. With more than fifty million
Ukrainians overwhelmingly dependent on Russia for such an essential commodity as gas, especially given Ukraine’s frigid winters, an intermediary would be in a strong position to dictate whatever terms he liked. Of course, that meant asserting real political power at the highest levels of government in Ukraine and Russia. Even more important, in the long run, it also necessitated having access to power in the United States.
CHAPTER NINE
TURN OF THE SCREW
In the fall of 1996, after years of nonstop wrangling with creditors over billions of dollars in debt, Donald Trump’s comeback began. One of many reasons for the delay had been Trump Castle, one of the most troubled properties among his Atlantic City casinos. All of them were failing, but the Castle was the ugly stepmother. It had been that way for years.
In 1990, after Trump built the stupendously extravagant Trump Taj Mahal, with its minarets and carved elephants, the Taj began to cannibalize the nearby Trump Castle so much that it almost fell into the hands of bondholders. It was saved only when Fred Trump, Donald’s father, famously bought $3.3 million in poker chips and didn’t use them—thereby giving his son’s casino a questionable loan.1
The following year, however, the Castle’s decline in revenue was so dire that the New Jersey Casino Control Commission ruled that the resort was at risk of losing its license. Trump’s casino empire had so much debt, at such high interest rates, there was almost no chance he would succeed.
Then came the bankruptcies, with four trips to bankruptcy court. In the end, bondholders had to accept more than a $1.5 billion2 loss while Trump continued to collect a big salary, bonuses, and other payments. Through it all, Trump managed to stay in the game and persuade bankers and bondholders to refinance his casinos in a way that allowed him to keep majority ownership.
Then, finally, on September 30, stockholders of Trump Hotels and Casino Resorts, his publicly traded company, agreed to buy Trump Castle, the weakest of his Atlantic City properties, for $485.7 million. That meant stockholders paid Trump more than $130 million in stock and nearly $1 million in cash, and assumed $354.8 million in debt.3
“It took two years of hard work, but now everything is put together into one beautiful, simple, lovely, substantial company,” Trump said. “People are shocked when they look at the numbers because the numbers are terrific, the numbers are just huge.”4
Even his critics were impressed. “His turnabout is a classic,” casino analyst Marvin Roffman told Playboy. “It is the biggest comeback I’ve ever seen. Donald Trump, financially speaking, has come back from the dead.”5 Roffman had been fired from his Wall Street firm under pressure from Trump for refusing to apologize for a report critical of Trump.* 6
“He was worse than broke,” Stephen Bollenbach, a corporate salvage expert who helped rescue Trump’s empire, told Playboy’s Mark Bowden.7 “He was losing money every day, and he was already hundreds and hundreds of millions of dollars in debt.”
“This time,” Roffman said, “he has real net worth.”8
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But cash never lasted long in Donald Trump’s hands. As if to prove that he hadn’t lost his taste for profligacy, less than a month later, in October 1996, Trump bought three beauty pageants—Miss Universe, Miss USA, and Miss Teen USA—from ITT.9 As is often the case with Trump, the exact amount of the transaction is unclear. In The Art of the Comeback, he wrote that his winning bid was $10 million. But later, he couldn’t resist changing the narrative to make reporters think he had gotten a steal and paid only $2 million.10
Regardless of the price, less than a week later, with this new calling card in hand, and whatever cachet came with it, Trump returned to Moscow for the first time in nearly a decade, with visions of yet another Trump Tower still in his head.
Even though there’s no evidence that Trump had direct contact with Ivankov or Mogilevich, throughout his three-day stay in Russia in November 1996, Trump and his entourage were escorted around Moscow by people with alleged connections to them.
This time, Donald was accompanied by his friend, New York real estate developer Howard Lorber,* and Lorber’s business partner Bennett LeBow. Lorber was the president of the Brooke Group,* whose holdings included Liggett-Ducat Ltd. (formerly known as Liggett & Myers), America’s third-largest tobacco company, and major real estate assets in both New York and Moscow; LeBow was founder and chairman.
Having started out in the early Wild West days of post-Soviet privatization, the duo had already forged some interesting relationships. LeBow had begun partnering11 with Vadim Rabinovich, the pro-Russia Ukrainian oligarch who had spent seven years in jail for embezzlement.* 12 Only a month before Trump, Lorber, and LeBow’s Moscow visit, Rabinovich had participated in the Tel Aviv summit meeting at which Mogilevich was granted control of the Ukraine energy trade.13
Once Trump and his entourage arrived in Moscow, they were shown around town by its mayor, Yuri Luzhkov. As John Beyrle, the American ambassador to Russia, saw it, Luzhkov was the embodiment of the Russian “political dilemma” in that his political power was both marred by and fueled by “the shadowy world of corrupt business practices”14 and a system in which “almost everyone at every level is involved in some form of corruption or criminal behavior.”15
As reported by the liberal newspaper Novaya Gazeta, Mayor Luzhkov was alleged to be deeply in bed with Mogilevich, Ivankov, and company. In fact, according to a classified cable Ambassador Beyrle wrote, “Luzhkov used criminal money to support his rise to power and has been involved with bribes and deals regarding lucrative construction contracts throughout Moscow. [Source redacted] told us that Luzhkov’s friends and associates (including . . . crime boss Vyacheslav Ivankov and reputedly corrupt Duma Deputy Joseph Kobzon) are ‘bandits.’”16
Through his billionaire wife, Yelena Baturina, Luzhkov also had family ties to Sistema,* a company that privatized Moscow real estate and gas,17 and, according to Novye Izvestia, was tied to Mogilevich’s companies18 in the Channel Islands and the Solntsevo crime gang. According to the Guardian, the couple have vehemently denied the accusations as “total rubbish.”19
On the occasion of Donald Trump’s return to Russia, Mayor Luzhkov was effectively giving Trump the keys to Moscow as part of a serious overture from the Yeltsin government to build a Trump Tower–like complex in the Russian capital. According to TASS, the Russian press agency, Trump began negotiations with first deputy mayor of Moscow, Vladimir Rezin, to build a $300-million luxury residential complex.20 Over time, Mayor Luzhkov reportedly changed his approach and asked Trump about possibly renovating the run-down Rossiya and Moskva hotels in the style of the Commodore in New York.
In the end, talks stagnated, and once again, nothing came of the project. Nevertheless, this was a period during which post-communist powers were desperately courting business leaders and politicians of every stripe as a way of winning favor with American power brokers.
David Geovanis, Liggett-Ducat’s director of real estate, who was also on the trip, played a role in promoting Trump’s project21 and may have helped make sure Trump was entertained during his sojourn with the kind of activities that got him into trouble during his earlier trip. At least, that is one of the suggestions that is made in a controversial “dossier” that Devin Nunes, the Republican chairman of the House Intelligence Committee and congressman from California, produced in an attempt to discredit allegations of a conspiracy between Donald Trump and Russia. The document essentially consists of unfinished notes that have been neither corroborated nor confirmed and were part of an ongoing investigation by journalist and investigator Cody Shearer, a longtime ally of Bill and Hillary Clinton.
Before leaving Russia, Trump held a press conference in Moscow’s Hotel Baltschug Kempinsky, a magnificent, palatial nineteenth-century building overlooking Red Square, the Kremlin, and the Moskva River—which, FBI files allege, happened to be owned by Semion Mogilevich.
At the press conference, Trump announced he planned to invest $250 million t
o build two “super-luxury” residential towers, to be called Trump International and—surprise—Trump Tower, both of which he said “Moscow desperately wants and needs.”22
“Moscow is going to be huge, take it from the Trumpster!” he later told Playboy.
But, as in the eighties, the project remained eternally stalled, a public face that masked a constantly changing network of clandestine relationships.
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One reason those relationships changed so frequently was that the political situation in Russia was still quite volatile. In June 1996, Anatoly Sobchak lost his reelection bid as mayor of St. Petersburg, leaving his protégé Putin without a highly placed mentor. But two months later, in July, Putin was invited to Moscow by Nikolai Yegorov, Boris Yeltsin’s chief of staff, and offered a job as a deputy.23
These were days of chaos in the Kremlin. Yeltsin, then sixty-five, was tired beyond his years, erratic and incoherent, beset by alcoholism and serious health problems. He had had open-heart surgery and multiple heart attacks. The hawks among his advisers were perpetually at war with neoliberal reformers. Things weren’t stable in the short term for Putin, either. Just days after Putin moved in as deputy chief of staff, his job was eliminated. His patron, Chief of Staff Yegorov, had been fired in the internal warfare.24
For all the palace intrigue, Putin was playing a longer game, and by August he had finagled a position as a public liaison to the Presidential Property Management Directorate. That meant his new job was to oversee hundreds of palaces, dachas, hospitals, spas, yachts, aircraft, state factories, and more.25 It was not what he wanted, but he had finally found a foothold in the Kremlin.
At a time when the knives were certain to come out in internal turf battles, Putin was a marginal figure whose greatest asset was his unobtrusiveness.26 It was the key to his survival and upward trajectory. By March 1997, after just seven months on the property job, Putin was promoted to deputy chief of staff in the presidential administration. A week later, he was given broader authority to investigate abuses in government spending.27
