House of Trump, House of Putin2

by Craig Unger

  It was also the perfect solution for both Trump and the Russians. On the one hand, Russians had billions of dollars from illicit sources that needed to be laundered. On the other hand, Trump, who was in dire need of financing, had the ideal vehicles for laundering their money—real estate and casinos—and a history of not asking too many questions of his buyers.

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  To capitalize on this new business model, Trump struck a deal with a Florida developer to attach his name to three high-rises in Sunny Isles Beach, just outside Miami. Without putting up a dime of his own money, Trump would receive a cut of the profits. “Russians love the Trump brand,” Sunny Isles developer Gil Dezer told Bloomberg.29 A local broker added that one-third of the five hundred apartments he’d sold went to “Russian-speakers.” So many bought the Trump-branded apartments, in fact, that the area became known as “Little Moscow.”

  Many of the units were sold by a native of Uzbekistan who had emigrated from the Soviet Union in the 1980s; her business was so brisk that she soon began bringing Russian tour groups to Sunny Isles to view the properties. According to a Reuters investigation, at least sixty-three buyers with Russian addresses or passports spent $98 million on Trump’s properties in South Florida.30 What’s more, one-third of the units—more than seven hundred in all—were bought by shell companies that concealed the true owners.

  And over the next few years, roughly 20 percent of Trump-branded condos—more than 1,300 luxury31 condos in all—repeatedly went to anonymous shell companies. Far from being a comprehensive tally, this number represents a conservative estimate of the amount of Russian flight capital that came through Trump property in the late nineties alone: $1.5 billion.*

  And, mind you, that figure refers only to the sale of Trump condos in the United States. It does not include his buildings in Turkey, Panama, the Philippines, India, Toronto, Baku, or elsewhere.

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  A key part of the model was that Trump appears to have defined his target market as Russian money. “Trump specifically marketed his Sunny Isles, Florida, apartment units in Moscow, St. Petersburg, and other venues designed to attract Russian organized crime money,”32 said Kenneth McCallion, a former federal prosecutor and New York attorney who specializes in human rights, money laundering, and civil racketeering cases. A Reuters investigation did not find any wrongdoing by Trump or his real estate organization.

  In response to media inquiries, Trump Organization lawyer Alan Garten commented that the firm did not track nationalities of buyers and that the company rarely plays a role in recruiting buyers.

  However, the dubious character of Trump’s clientele was so obvious that the Financial Times suggested that the Russian American Chamber of Commerce, headed by Sergei Millian, who claimed to be Trump’s exclusive broker for Trump properties in Russia and the former Soviet Union, was the kind of Russian operation that harkened back to Cold War–style espionage.33

  Konstantin Borovoi, who was president of Russia’s first commodities exchange, agrees that Millian’s chamber of commerce is reminiscent of the kind of practices one saw from the secret services at the height of the Cold War. “These institutions have been revived and developed,” he said. “The chamber of commerce institutions are the visible part of the agent network . . . Russia has spent huge amounts of money on this.”34

  In Moscow, of course, since the demise of the Soviet Union, the KGB had been replaced by the FSB, but that did not mean its vaunted tradecraft had been lost or in any way diminished. To the contrary, the Kremlin was now being run by a career KGB operative—in fact, one whose life’s goal was to revive Russia’s shattered dreams of empire. To that end, at almost every turn there is evidence of the Russians throwing the KGB textbook at Trump, trying to entangle him and compromise him in as many ways as possible. And in Trump, the Russians seemed to have found the perfect mark.

  As Comrade Kryuchkov’s notebooks had made clear, the KGB wanted to know about the “level of subject’s truthfulness and sincerity. Is he hypocritical in double dealing?”

  They wanted to know about compromising information regarding the subject, “including illegal acts in financial and commercial affairs, intrigue, speculation, bribes, graft, trading in narcotics, and exploitation of his position to enrich himself.”35

  They wanted to know if “pride, arrogance, egoism, ambition, or vanity [were] among [the] subject’s natural characteristics.”36

  Then there was the question of the subject’s relationships with women. “Is he secretly fascinated by them? Is he in the habit of having affairs with women on the side?”37

  By this time, of course, Russian intelligence already knew exactly where Trump fit in terms of such questions. According to Oleg Kalugin, Trump likely had his first taste of sexual kompromat in 1987. There were similar reports, unconfirmed, about possible comparable incidents in 1996.

  And then there was the fact that, after years of promoting himself as a billionaire, Trump was still anathema to Western banks, and was desperate to climb back to the top of the heap. Using his name as a brand was an inspired idea. But it was coupled with his apparent eagerness to turn a blind eye to practices that allowed the Russian mob to launder money through his real estate on a massive scale.

  Getting to that level, however, required a third party—not unlike Bayrock Group LLC, a real estate firm that was largely staffed, owned, and financed by émigrés from Russia and the former Soviet Union, and had moved into the twenty-fourth floor of Trump Tower.38 With its ties to the Kremlin, Russian intelligence, and possibly the Mob, Bayrock’s looming presence in Trump Tower should have had American counterintelligence agents on high alert. To Russian operatives, one can only imagine, Trump was such easy prey.

  CHAPTER TWELVE

  INTERNATIONAL MAN OF MYSTERY

  Whatever the Russians may have thought about Trump, when the ratings came in for the last week of the 2004 TV season, American television viewers clearly had a very different opinion. The final episode of The Apprentice, Donald Trump’s wildly successful new show on NBC, had been seen by an estimated twenty-eight million viewers and ranked as the number one show of the week. It was the most popular new show of 2004.

  To outside appearances, Trump was back on top after his failures in Atlantic City. Earlier that year, he had launched the new show in typical Trumpian fashion. “My name’s Donald Trump,” he had declared in his opening narration for The Apprentice, “the largest real estate developer in New York. I own buildings all over the place. Model agencies. The Miss Universe pageant. Jetliners, golf courses, casinos, and private resorts like Mar-a-Lago, one of the most spectacular estates anywhere in the world.”1

  But it wouldn’t be Trump without a better story than that. “It wasn’t always so easy,” he confessed, over images of his cruising around New York in a stretch limo. “About thirteen years ago, I was seriously in trouble. I was billions of dollars in debt. But I fought back, and I won. Big league. I used my brain. I used my negotiating skills. And I worked it all out. Now my company’s bigger than it ever was and stronger than it ever was. . . . I’ve mastered the art of the deal.”

  The show, which reportedly paid Trump up to $3 million per episode,2 instantly revived his brand. “The Apprentice turned Trump from a blowhard Richie Rich who had just gone through his most difficult decade into an unlikely symbol of straight talk, an evangelist for the American gospel of success, a decider who insisted on standards in a country that had somehow slipped into handing out trophies for just showing up,” journalists Michael Kranish and Marc Fisher observe in their book Trump Revealed.3 “Above all, Apprentice sold an image of the host-boss as supremely competent and confident, dispensing his authority and getting immediate results. The analogy to politics was palpable.”

  Unfortunately, much of what Trump said simply wasn’t true. He wasn’t the biggest developer in New York, the New York Times pointed out. Nor did he own the Trump International Hotel and Tower at New York’
s Columbus Circle, which was featured in his promo.4

  Nevertheless, there was no denying that he was back. Critics derided his show as a cheesy, Vegas-like caricature of what business was really like,5 but The Apprentice was a huge hit and provided a prime-time platform that Trump used to further enhance his brand, and to unveil another big project.

  Over time, ratings sagged, but the show was still a powerful marketing tool for Trump. On the 2006 season finale of The Apprentice, as more than eleven million viewers waited to learn which of the two finalists was going to be fired, Trump prolonged the suspense by cutting to a promotional video for his latest venture. “Located in the center of Manhattan’s chic artist enclave, the Trump International Hotel and Tower in SoHo is the site of my latest development,” he narrated over swooping helicopter footage of lower Manhattan.6 The new building, he added, would be nothing less than a “$370 million work of art . . . an awe-inspiring masterpiece.”

  What Trump didn’t say in the video was that Trump SoHo was the brainchild of two development companies—Bayrock Group LLC and the Sapir Organization—run by a pair of wealthy émigrés from the former Soviet Union who had done business with some of Russia’s richest and most notorious oligarchs.

  Together, their firms had made Trump an offer he couldn’t refuse: The developers would license Donald Trump’s name for branded luxury high-rises Bayrock would finance and develop. Without a financial investment, Trump was back in action, phoenix-like, with his name on yet another gleaming luxury hotel/condominium development. In return for lending his name to the project, Trump would get an 18 percent equity stake.7

  In the wake of his massive debts and multiple bankruptcies, Wall Street had said no to Trump. The banks had said no to Trump. New York had said no to Trump. But Bayrock had said yes, and thanks to them, Donald Trump was back in business.

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  No one at Bayrock was more important in working with Trump than Felix Sater, its managing director. One of the most enigmatic figures in the entire Trump-Russia saga, Sater was Bayrock’s international man of mystery, a stocky, olive-complexioned, Porsche-driving super salesman straight out of Glengarry Glen Ross who was always on, pushing a pump-and-dump stock scam, or going undercover for the CIA, the DIA, the FBI—whomever—to try to buy Stinger missiles from al-Qaeda or undertake other mind-boggling feats of derring-do.

  Born in Moscow, Felix had come to the United States with his family, then known as the Sheferovskys,* 8 in the early seventies, when he was a young boy, and settled with the first waves of Soviet émigrés in Brighton Beach’s “Little Odessa.” They left Russia with few regrets. According to Howard Rosenberg, a producer at CBS’s 60 Minutes who interviewed Sater, Felix’s father, Mikhail Sheferovsky, is said to have watched the communists execute his father—Felix’s grandfather—in the courtyard of their apartment building.9

  There long have been allegations that Mikhail Sheferovsky had ties to organized crime, including Mogilevich, but much of his past is shrouded in mystery. Sater’s attorney, Robert S. Wolf, told me, in an email, that Sheferovsky “never met nor had anything to do with Semion Mogilevich. Mikhail Sater [Sheferovsky] has never been a named accomplice of Semion Mogilevich, nor are there any court documents that so indicate. This is a complete fabrication.”10

  Nevertheless, according to a certified US Supreme Court petition, Felix Sater’s FBI handler described Felix’s father, Michael Sheferovsky (aka Mikhail Sater), as “a (Semion) Mogilevich crime syndicate boss.”11 Exactly what that meant was not defined. As Richard Lerner, the lawyer who wrote the Supreme Court petition, explained, “The Russian Mafia doesn’t exactly hand out business cards.”12

  Sheferovsky’s ties to the Italian mob were more clear-cut. After he got to Brighton Beach, Sheferovsky partnered in various extortion scams with Ernest “Butch” Montevecchi, a soldier in the Genovese crime family, which had joined with the Russian Mafia in the Red Daisy gasoline tax scam in the eighties and had been represented by Roy Cohn. Sheferovsky made the rounds of his victims accompanied by a six-foot-nine, three-hundred-pound giant nicknamed King Kong13 whose intimidating presence could be rather persuasive. In 2000, Sheferovsky pleaded guilty to charges that he ran an extortion ring that targeted grocery stores, restaurants, and other establishments.14

  His son Felix grew up near Brighton Beach and, as a teenager, counted among his friends Michael D. Cohen, who later became President Trump’s personal attorney. At the time, Cohen was dating Laura Shusterman, a Ukrainian girl Sater knew and whom Cohen later married,15 but the two men came from distinctly different worlds. Sater’s Brighton Beach/Coney Island neighborhood, of course, had its rough spots. “I was one of the white kids on the block, which led to lots of beatings,” he told Talking Points Memo.16 By contrast, Cohen lived in the tonier, more suburban precincts of Long Island’s Five Towns in Nassau County.

  Sater took classes at Pace University but dropped out, and before long was a Wall Street hotshot working at shops like Bear Stearns and Shearson Lehman Brothers.17 A charismatic but volatile man, and an unrelenting salesman, Felix, then in his midtwenties, loved the high life. He collected expensive watches and thought nothing of going into Ermenegildo Zegna and spending $30,000 on suits. Felix’s father had wanted his son to go straight, but, as his friend Salvatore Lauria put it in his autobiography, The Scorpion and the Frog,* Felix “would rather go through the back door than the front door of any deal.”18

  Sater also had a quick temper, and on October 1, 1991, when he was having drinks at a bar in midtown Manhattan, he got into a fight over a girl. “[I]ntoxicated and inebriated as a result of excessive drinking,”19 according to court records, Sater grabbed a margarita glass, broke it on the bar, and smashed the stem into his foe’s face. Then, according to the trial transcript, Sater picked up another piece of broken glass and lunged at the victim’s friend. “I’m going to kill you, motherfucker,” he said. “You faggot. Your mother’s a whore. Some black nigger fucked your mother.”20

  The man’s injuries required 110 stitches.21 Sater was convicted of felony assault, served a fifteen-month sentence, and was barred from legally selling securities. “I had great plans for myself which were all shattered with that stupid drunken night in a bar,” Felix later told ABC.22

  But that wasn’t the end of it. Even though Sater had lost his license to trade stocks, in 1993, he and two associates got control of White Rock Partners, a brokerage firm that later changed its name to State Street Capital Markets. Felix had rented a penthouse office suite23 at 40 Wall Street—a seventy-one-story neo-Gothic skyscraper in downtown Manhattan, owned by Donald Trump.

  According to the New York Times, the three men secretly used offshore accounts to gain control of large blocks of penny stocks in four companies so they could inflate the value of the shares. Once the price went up, Sater and his friends sold the stocks at a steep profit, in an illegal pump-and-dump scheme that left ordinary investors holding the bag when prices collapsed24 and was somewhat similar to Mogilevich’s YBM Magnex scam.

  With the help of Sater’s father, the firm got protection from the Genovese family, and Sater used an alias, “Paul Stewart,” to launder the proceeds through a network of Caribbean shell companies, Swiss and Israeli banks, and associates in New York’s Diamond District.25 In the end, it was a mob operation that ended up cheating unsuspecting investors out of $40 million.26

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  Then, in 1995, everything changed for Sater. He quit the business because, he told BuzzFeed, he “didn’t want to do dirty shit anymore.”27 Before long, Sater was given an opportunity to take part in a telecommunications deal for AT&T in Russia, and while he was there, he entered the world of espionage.28

  It happened one night in Moscow when an American defense contractor named Milton Blane* noticed Sater dining with “high-level Russian intelligence agents,” got his number, and set up a meeting for the next day.29

  They met at an Irish pub in Moscow,30 and Blan
e, clearly impressed by Felix’s mastery of Russian and his easy access to Russian military officials, proceeded to tell Sater that he worked for the US government—the Defense Intelligence Agency.31

  The people Sater had been sitting with the previous night were, Blane said, “extremely high-level Russian intelligence operatives . . . very strong people, people who can deliver the things that America needs. They seem to like you. You speak Russian. You blend in there. And your country needs you.”32

  Blane then asked Felix to work as a confidential source for the Defense Intelligence Agency, but gave him a stern warning. “I want you to understand,” he said, “if you’re caught, the USA is going to disavow you and, at best, you get a bullet in the head.”

  Felix thought about it for five seconds. “Having the opportunity to serve my country and do anything in its defense was a no brainer. It was, ‘where do I sign up?’”33

  And so began Felix’s second career.34 His most notable early operation took place in 1998, when he went on the hunt for Stinger antiaircraft missiles that the CIA had originally given to the mujahideen for use against the Soviets during their occupation of Afghanistan, but which were at risk of falling into the hands of radical jihadists.

  Felix went to work. His attorney Robert Wolf called David Kendall, then President Bill Clinton’s lawyer, and told him that Sater had serial numbers for the Stinger missiles the Clinton administration had sought. After President Clinton was informed, Wolf then spoke to CIA general counsel Robert M. McNamara Jr. and read out the serial numbers of the Stingers.35