House of Trump, House of Putin2

by Craig Unger

  To anyone familiar with the long and bitter history of anti-Semitism in Russia, Putin’s outreach on behalf of Jews was extraordinarily unusual. Even though the 1917 revolution theoretically ended official tsarist policies that persecuted Jews, Stalin instituted anti-Semitic policies that sent tens of thousands of Jews into the gulags and, in the long run, gave birth to the Russian Mafia. But anti-Semitism endured even after the demise of the Soviet Union, and the rise of the Russian Mafia and the new oligarchs, many of whom were Jewish, provided fodder for anti-Semites.* 51 As a result, the Russian Mafia was sometimes referred to as the Jewish Mafia or the Kosher Nostra.

  On the surface, at least, Putin differed from previous Russian leaders in that he openly celebrated and rewarded his friendships with his Jewish high school teacher and Jewish sparring partners from judo practice.* 52 But Putin’s professed philo-Semitism, however genuine, was also vital to his political agenda. One of the imperatives of power in post-Soviet Russia was that the Russian chief of state had to keep the oligarchs under his control—and that included Jewish oligarchs.

  Until Putin’s ascent, the leading Jewish organization in Russia had been the Russian Jewish Congress, or Rossiiskii Evreiskii Kongress (REK), which had been cofounded by Vladimir Gusinsky. A former theater director turned media mogul, Gusinsky was unique among the oligarchs in that his wealth was created from the ground up rather than from taking over formerly state-run properties.53 With the REK, Gusinsky succeeded beyond all expectations in winning recognition from the state of Israel and bringing together a vast array of Jewish organizations and leaders. The Israeli daily Haaretz called him “the No. 1 Jew in Russia.”54

  None of which was good news for rival oligarchs Roman Abramovich and Lev Leviev, both of whom were strong Putin supporters, and, like Putin, felt “that Gusinsky was exploiting not only his businesses and ties, but also REK to further his standing at their expense,” according to Haaretz.55

  As a result, in 1999, Putin got Abramovich and Leviev to create the Federation of Jewish Communities in Russia, under the leadership of Rabbi Berel Lazar, a leader in the Hasidic movement called Chabad-Lubavitch.

  Founded in the late eighteenth century, the tiny, Brooklyn-based Chabad-Lubavitcher movement is a fundamentalist Hasidic sect centered on the teaching of the late Rabbi Menachem Schneerson, who is sometimes referred to as a messiah—moshiach—a savior and liberator of the Jewish people. It is antiabortion, views homosexuality as a perversion, and often aligns itself politically with other fundamentalist groups on the right.56

  Its biggest donors included Leviev, an Israeli billionaire who was an Uzbek native and was known as the “King of Diamonds” thanks to his success in the diamond trade, and Charles Kushner,57 an American real estate developer who was later jailed for illegal campaign contributions, tax evasion, and witness tampering. Kushner is also the father of Jared Kushner, who married Donald Trump’s daughter, Ivanka, and later became a senior adviser to President Trump.

  Leviev’s friendship with Lazar dates back to 1992 and, according to Haaretz, made Leviev “the most influential, most active and most connected person in the Jewish community of Russia and made Lazar the country’s chief rabbi.”58

  With Abramovich as another powerful ally, Leviev strengthened his alliance with President Putin and in May 2000 Lazar was awarded Russian citizenship59 and became known as Putin’s rabbi—pushing aside Gusinsky and his rabbi in the process.60 As for Putin, by putting loyalists in charge of a new national organization for Jews, he had come up with a unique way of consolidating power among the oligarchs.

  But there was one other unintended consequence that grew out of this alliance that proved to be most important of all: Oddly enough, at the end of the day, the tiny Hasidic sect called Chabad would provide some of the richest and most unexpectedly direct sets of connections between Putin and Donald Trump.

  CHAPTER ELEVEN

  EASY PREY

  America was different from Russia in so many ways that initially many Russians were baffled by the unusual business practices they encountered in the West. Which is precisely what an American businessman in Moscow discovered while talking to a rich Uzbek cotton trader about the pay-for-play K Street lobbyists in Washington.

  The Uzbek, an aspiring oligarch who was all too familiar with the dark practices of the Bratva, listened patiently to a long explanation about how corporate America uses lobbyists to get access to Congress. Then it was as if a light bulb went off. “You mean you have firms with highly paid professionals who are paid to bribe congressmen?” he asked.

  He couldn’t get over it. He had spent years navigating the perilous world of Bratva protection rackets, and here the Americans had sanitized corruption, institutionalized it, and made it into part of the white-collar, professional world! Not only was it legal, it was a highly paid profession.

  After decades carrying water for Big Oil, Big Pharma, and Wall Street, K Street lobbyists were ready, willing, and able to jump in bed with anyone who could write a big check—including Russians.

  Among the first wave of lobbyists willing to play ball with them was Jack Abramoff, aka “Casino Jack,” the notorious super-lobbyist who wined and dined DC’s most pliable politicians, made deals all over town, and reaped huge paydays from casino-rich Indian tribes, which he spent in fancy restaurants and stadium skyboxes and golf trips to Scotland and the Pacific island of Saipan.1 Jack Abramoff worked in the margins and loved it.2

  Abramoff eventually served more than four years for mail fraud, conspiracy to bribe public officials, and tax evasion and was at the center of a pay-for-play scam that led to the conviction of twenty-one other people, including Republican majority leader Tom DeLay of Texas. A high point in the scandal came when DeLay and Abramoff took a six-day trip to London and Moscow, played golf, and met Prime Minister Viktor Chernomyrdin, among other Russian leaders.

  Though Abramoff billed the trip to a client in the Pacific, the Commonwealth of the Northern Marianas, the money was really coming in from a shell company controlled by Russian oligarchs Marina Nevskaya and Alexander Koulakovsky of NaftaSib, a huge Russian oil company.3

  At one point, the two oligarchs said they “wanted to contribute to DeLay.” One of them even asked, “What would happen if the DeLays woke up one morning” and found a luxury car in front of their house?4

  That would have been illegal, of course. It would have been bribery. Everyone concerned would have ended up in jail, so the car never came.

  Instead, a $1 million check mysteriously made its way to the US Family Network, a DeLay slush fund. DeLay had initially opposed a foreign aid bill that would help the International Monetary Fund bail out Russia’s weak economy. But after the $1 million check arrived, he had a change of heart, although he later denied the payment had influenced his vote.

  Other Russians joined in. Alfa, the multibillion-dollar Russian conglomerate,* paid Barbour Griffith & Rogers, the influential GOP lobbying firm cofounded by former Mississippi governor Haley Barbour, nearly $2 million in lobbying fees. Barbour Griffith also received $820,000 from a United Kingdom shell company called Foruper Limited, which had no assets or employees, but which the US Justice Department was investigating for possible ties to Mogilevich.5

  In Congress, Representative Curt Weldon, a Republican from Pennsylvania, began touting a Russian arms control group called the International Exchange Group, which, according to ProPublica, happened to employ the head of the FSB as well as the Russian army’s chief of staff.6 According to the Los Angeles Times, Weldon also helped round up thirty fellow congressmen for a dinner to honor the chairman of the Itera International Energy Corporation, a Russian natural gas company. As it happened, Itera had agreed to pay $500,000 a year for public relations to a firm run by Weldon’s daughter, then an inexperienced twenty-nine-year-old lobbyist. Itera was the intermediary that Firtash and Mogilevich pushed aside to move into the Russian-Ukraine energy trade.7

  Whether it was lobbying or finding lawyers, the Russians
went straight to the top, as they had since the early days in Brighton Beach. When David Bogatin got busted in the Red Daisy gas tax scam, he took on as his attorney Mitchell Rogovin,8 the highly placed former special counsel to the CIA. When Bogatin’s brother, Jacob, needed representation for his role in Mogilevich’s YBM Magnex pump-and-dump scam, he hired Eric Sitarchuk,9 who later ended up representing Trump himself in a suit filed against him as owner of the Trump International Hotel in Washington.10

  Bob Dole, the former Senate majority leader and 1996 Republican presidential nominee, accepted a $560,000 fee to help Russian billionaire Oleg Deripaska obtain a visa to visit the US, after Deripaska had been accused by rivals of bribery.11

  Even William Sessions, director of the FBI from 1987 to 1993, was not above doing a complete about-face when it came to Russian organized crime. In 1997, after he returned to private practice, he traveled to Moscow and alerted the world to the horrifying dangers of the brutal Russian Mafia. A few years later, however, Sessions had no qualms about taking on as a client a Ukrainian-born mobster whom the FBI had put on its “Ten Most Wanted” list. His name was Semion Mogilevich.* 12

  Still, Russia’s relationship with Trump was unique. One measure of that was discovered by FBI agents who were on the trail of Vyacheslav Ivankov but couldn’t figure out where he lived. “[Ivankov] was like a ghost to the FBI,” said Gregory Stasiuk, an investigator with the New York State Organized Crime Task Force.13

  Ivankov, of course, had been spotted frequently at the Trump Taj Mahal in Atlantic City and was widely thought to be based with other Russian mobsters in Brighton Beach. But whenever the FBI was ready to pounce, he vanished. When they finally found him, he wasn’t in Brooklyn at all. Instead, they discovered that the head of the Russian Mafia lived in a luxury condo in Manhattan—at 721 Fifth Avenue, in fact—Trump Tower.14 (Ivankov was eventually convicted of extortion and sentenced to nine and a half years in jail.)

  * * *

  —

  Meanwhile, Russians continued to court Trump, even though his political prospects seemed middling at best. In 2000, with trickster Roger Stone as his strategist, Trump had made a stab at winning the presidential nomination on the Reform Party ticket, but dropped out when he found out that the Reform candidate, no matter who it was, would not make the cutoff for the presidential debates. For the most part, Trump was still relegated to the bin of novelty celebrity candidates like professional wrestler turned governor of Minnesota Jesse Ventura.

  Nevertheless, Trump had a unique résumé for someone on a presidential track. By this time his ties to Russian money stretched back more than two decades. When it came to laundering money, casinos and real estate were the vehicles of choice, and the Trump Taj Mahal* in Atlantic City seemed to be a favorite destination for Russian mobsters, who frequently arrived in Ferraris and Rolls-Royces with stacks of $100 bills.15

  If money laundering was going on, the Taj seems to have done everything within its power to keep it secret. In 1998, the Financial Crimes Enforcement Network (FinCEN) assessed a $477,700 civil penalty against the Trump Taj Mahal for currency transaction reporting violations—namely, failing to report each time a gambler cashed out with more than $10,000 in a single day.16 FinCEN added that the casino admitted to “willful and repeated” Bank Secrecy Act violations, including violations of AML (anti–money laundering) program requirements, reporting obligations, and record-keeping requirements.

  But that didn’t tell the whole story. At a time when it was very much the preferred spot of the Brighton Beach Mafia, the Taj Mahal was also short on cash, on the verge of bankruptcy, and not likely to cause trouble for such a free-spending clientele. Modest though it was, at the time, FinCEN’s fine was the biggest in history by the federal government for violating the Bank Secrecy Act. Moreover, it represented no fewer than 106 violations of the act.

  All of which left key questions unanswered. How much was laundered is unknown. In addition, as CNN reported, the names of parties suspected of money laundering had been scrubbed from the report, as were the identities of Trump employees involved in the transactions.17

  “Trump Taj Mahal received many warnings about its deficiencies,” said FinCEN director Jennifer Shasky Calvery.18 “Like all casinos in this country, Trump Taj Mahal has a duty to help protect our financial system from being exploited by criminals, terrorists, and other bad actors. Far from meeting these expectations, poor compliance practices, over many years, left the casino and our financial system unacceptably exposed.”

  * * *

  —

  As the Russians knew, real estate was a far more efficient way to launder billions in flight capital, and Trump’s newest projects were perfectly suited to their needs. In 1999, when the Russian economy was in a tailspin and scores of oligarchs were looking for a safe haven, construction was already under way on Trump’s biggest project yet.

  Rising to seventy-two stories in midtown Manhattan, Trump World Tower, overlooking the United Nations, was touted as the tallest residential building on the planet. Before long, one-third of the units on the tower’s highest and priciest floors, floors seventy-six to eighty-three,* had been snatched up, either by individual buyers from the former Soviet Union, or by limited liability companies connected to Russia or countries that had been part of the Soviet Union. “We had big buyers from Russia and Ukraine and Kazakhstan,” sales agent Debra Stotts told Bloomberg Businessweek.19 Ukrainian billionaire Semyon “Sam” Kislin assisted the sales effort by issuing mortgages to buyers of Trump’s latest luxury condos.20

  Among the new tenants was Eduard Nektalov, a diamond dealer from Uzbekistan who had bought a condo on the seventy-ninth floor of Trump World Tower, directly below Trump’s future campaign manager, Kellyanne Conway.* 21

  With his multimillion-dollar condo and a $300,000 Bentley, Nektalov, who was related to Lev Leviev, the billionaire pal of Putin’s known as the “King of Diamonds,” had been making a good living in the diamond world, but now he was being investigated by a Treasury Department task force for mob-connected money laundering. He and his father, Roman Nektalov, had been targeted in Operation Meltdown, a two-and-a-half-year sting operation that uncovered a scheme through which diamond merchants laundered $8 million in Colombian drug proceeds.22

  On a pleasant evening in May 2004, after reports circulated that he might soon start cooperating with federal investigators, Nektalov closed his store in New York’s Forty-Seventh Street Diamond District and began walking to the garage where he kept his Bentley. When he neared Forty-Eighth Street, a long-haired man pulled a .45 out of his pants and fired once in the back of Nektalov’s head. Nektalov collapsed. Then the shooter pumped two more bullets into his back and fled.23

  “Everybody on 47th Street knew if you had stolen stuff, you could bring it to the Nektalovs,” said David Ribacoff, a fellow Uzbek and a veteran of the Diamond District.24 “I knew someday something was going to happen with these people. If you play with fire, you’re going to get burned.”

  This was Trump’s market. “Early on, Trump came to the conclusion that it is better to do business with crooks than with honest people,” said Anders Åslund, a Swedish economist and senior fellow at the Atlantic Council.25 “Crooks have two big advantages. First, they’re prepared to pay more money than honest people. And second, they will always lose if you sue them because they are known to be crooks.”

  All Trump needed to do, it seemed, was slap his name on a big building, preferably in gigantic, bold, brass, upper-case lettering, and high-dollar customers from Russia and the former Soviet republics were guaranteed to come rushing in—gangland shootouts among his residents notwithstanding.

  After Trump World Tower opened, Sotheby’s International Realty teamed up with a Russian real estate company to make a big sales push for the property in Russia. Dolly Lenz, a New York real estate broker, spoke to USA Today. “I had contacts in Moscow looking to invest in the United States,” Lenz said.26 “They all wanted to meet Donald.” In the end, she
said that she sold some sixty-five units in Trump World Tower to Russians.

  * * *

  —

  There was one more factor that helped Trump evolve toward a new business model. Disastrous as his Atlantic City bankruptcies had been, one serendipity had come out of the experience: Banks that were on the hook for his gigantic losses decided that the Trump name had real market value.

  This was not merely the wishful fantasy of an egomaniacal once-and-future billionaire. “Ironically, the fact that he was so overextended worked to his benefit when the real estate market collapsed,” said Stephen Bollenbach, a corporate salvage specialist who helped structure Trump’s Atlantic City rescue operation.27 “He already had his financing. They were stuck with him.”

  Bollenbach’s epiphany came after a cash-strapped Trump failed to make an $800,000 quarterly insurance payment for his prized yacht, the Trump Princess, and assumed the bank would seize the boat.28 But Bollenbach had argued to the bank that the yacht was more valuable as the Trump Princess than as just another big boat—and to his astonishment, the bank agreed. They even paid the insurance premium. That meant the banks realized they were in better shape if Trump was back in business.

  It also meant that Trump could implement a completely new business model that allowed him to stay in real estate without having to deal with the onerous chores of financing and of actually being the developer. The model was simple: Because his name had brand value, he would license it to developers who would do all the work and give him a piece of the action. Then, he would sit back and collect royalties, which were often 18 percent or more.