Trump, Russia and a Shadowy Business Partnership
An insider describes the Bayrock Group, its links to the Trump family and its mysterious access to funds. It isn't pretty.
More stories by Timothy L. O'BrienJune 21, 2017, 4:00 AM EDT
Trump, Arif and Sater, at right, Trump Soho launch party, 2007
Photographer: Mark Von Holden/WireImage
The special counsel’s investigation of the White House has come more sharply into focus.
Robert Mueller is examining whether President Donald Trump obstructed justice when he fired James Comey as director of the Federal Bureau of Investigation, the Washington Post recently
reported. As we've heard for months now, there is also a probe of possible collusion between Trump's campaign team and the Kremlin to tilt the 2016 election in the president's favor.
But the Justice Department inquiry led by Mueller now has added flavors. The Post noted that the investigation also includes "suspicious financial activity" involving "Russian operatives." The New York Times was more specific in its
account, saying that Mueller is looking at whether Trump associates laundered financial payoffs from Russian officials by channeling them through offshore accounts.
Trump has repeatedly
labeled Comey's and Mueller's investigations "
witch hunts," and his lawyers have
said that the last decade of his tax returns (which the president has
declined to release) would show that he had no income or loans from Russian sources. In May, Trump
told NBC that he has no property or investments in Russia. "I am not involved in Russia," he said.
But that doesn't address national security and other problems that might arise for the president if Russia is involved in Trump, either through potentially compromising U.S. business relationships or through funds that flowed into his wallet years ago. In that context, a troubling history of Trump's
dealings with Russians exists outside of Russia: in a dormant real-estate development firm, the Bayrock Group, which once operated just two floors beneath the president's own office in Trump Tower.
Bayrock partnered with the future president and his two eldest children, Donald Jr. and Ivanka, on a series of real-estate deals between 2002 and about 2011
, the most prominent being the troubled Trump Soho hotel and condominium in Manhattan.
During the years that Bayrock and Trump did deals together, the company was also a bridge between murky European funding and a number of projects in the U.S. to which the president once leant his name in exchange for handsome fees. Icelandic banks that dealt with Bayrock, for example, were easy marks for money launderers and foreign influence, according to interviews with government investigators, legislators, and others in Reykjavik, Brussels, Paris and London. Trump testified under oath in a 2007 deposition that Bayrock brought Russian investors to his Trump Tower office to discuss deals in Moscow, and said he was pondering investing there.
"It's ridiculous that I wouldn't be investing in Russia," Trump said in that deposition. "Russia is one of the hottest places in the world for investment."
One of Bayrock's principals was a career criminal named Felix Sater who had ties to Russian and American organized crime groups. Before linking up with the company and with Trump, he had worked as a mob informant for the U.S. government, fled to Moscow to avoid criminal charges while boasting of his KGB and Kremlin contacts there, and had gone to prison for slashing apart another man’s face with a broken cocktail glass.
In a series of interviews and a lawsuit, a former Bayrock insider, Jody Kriss, claims that he eventually departed from the firm because he became convinced that Bayrock was actually a front for money laundering.
Kriss has sued Bayrock, alleging that in addition to laundering money, the Bayrock team also skimmed cash from the operation, dodged taxes and cheated him out of millions of dollars. Sater and others at Bayrock would not comment for this column; in court documents they have contested Kriss's charges and describe him, essentially, as a disgruntled employee trying to shake them down.
Jody Kriss in a luxury unit in a building he is developing in New York
Photographer: Jeff Brown for Bloomberg
But Kriss's assertion that Bayrock was a criminal operation during the years it partnered with Trump has been deemed plausible enough to earn him a court victory: In December, a federal judge in New York said Kriss's lawsuit against Bayrock, which he first filed nine years ago, could proceed as a racketeering case.
(I have my own history in court with the president. Trump sued me in 2006 when I worked at the New York Times, alleging that my biography, “
TrumpNation,” had misrepresented his business record and his wealth. Trump lost the suit in 2011; my lawyers deposed him and Sater during the litigation. Trump's representatives didn't respond to repeated interview requests for this column.)
Trump has said over the years that he barely knows Sater. In fact,
Sater -- who former Bayrock employees say met frequently with Trump in the Trump Organization's New York headquarters, once shepherded the president's children around Moscow and carried a Trump Organization business card -- apparently has remained firmly in
the orbit of the president and his closest advisers.
Sater made the
front page of the New York Times in February for his role in a failed effort — along with Trump’s personal attorney, Michael Cohen — to lobby former National Security Adviser Michael Flynn on a Ukrainian peace proposal.
Comey was still Trump's FBI director when he testified before the House Intelligence Committee in March about Russian interference in the 2016 election. During that hearing, Comey was asked if he was "aware of" Felix Sater, his criminal history and his business dealings with the Trump Organization. Comey declined to comment.
It's unclear whether Sater and Bayrock are part of Mueller's investigation. But Mueller has populated his
investigative team with veteran prosecutors
expert in white-collar fraud and Russian-organized-crime probes. One of them, Andrew Weissmann, once led an FBI team that examined financial fraud leading to the
demise of Enron. Before that, Weissmann was a prosecutor with the U.S. attorney's office in Brooklyn and part of a team that prosecuted Sater and mob associates for investment scams in the late 1990s.
However the Mueller probe unfolds, a tour of Trump's partnership with Bayrock exposes a number of uncomfortable truths about the president's business history, his judgment, and the possible vulnerabilities that his past as a freewheeling dealmaker — and his involvement with figures like Sater — have visited upon his present as the nation's chief executive.
Zegna Suits and Luxury Cars
Sater was born in the Soviet Union in 1966 and emigrated with his parents to the heavily Russian enclave of Brighton Beach, Brooklyn, when he was about eight years old. He attended Pace University before dropping out when he was 18, then found his way to Wall Street where he worked as a stockbroker.
His early years on Wall Street, according to the recollections of his one-time business partner, Salvatore Lauria, were flush. By his mid-20s, Sater was collecting expensive watches, spending thousands of dollars on Zegna suits and buying luxury cars. That all came to a brief halt in 1993 when he was sent to prison for using the stem of a broken margarita glass during a bar fight two years earlier to attack another stockbroker; Sater’s victim needed 110 stitches to hold his face together.
When Sater emerged from prison 15 months later, he found his way back into trouble. With a group that included Lauria (who admits to having had ties to organized crime figures and grew up in New York as a close friend of a prominent Mafia boss), Sater opened an investment firm on the penthouse floor of
40 Wall Street, a Trump-owned building in Manhattan. From there, according to federal prosecutors, Sater and his team set about laundering money for the mob and fleecing about $40 million from unwitting and largely elderly investors, a number of whom were Holocaust survivors.
By the time law enforcement authorities eventually caught on to the 40 Wall Street operation, Sater had fled to Russia. Lauria visited him there.
Sater "was always hustling and scheming, and his contacts in Russia were the same kind of contacts he had in the United States," Lauria wrote in a 2003 memoir, "The Scorpion and the Frog." "The difference was that in Russia his crooked contacts were links between Russian organized crime, the Russian military, the KGB, and operatives who played both ways, or sometimes three ways."
Sater, who had been charged with racketeering and money laundering by the U.S. attorney's office in Brooklyn in connection with the 40 Wall Street scam, eventually decided to return to America and face those charges. He had a card to play, however: his knowledge, gleaned from contacts in Russia, about a small stock of
Stingerantiaircraft missiles loose on the black market in Afghanistan that were of interest to U.S. intelligence officials.
"We were hoping for a free ride or a get-out-of-jail-free card for our crimes on Wall Street," Lauria wrote of Sater's maneuvering with U.S. officials.
Sater told authorities that he could use his Russian contacts to buy the Stingers and, according to court filings in Kriss's lawsuit and other accounts, a deal was struck in December, 1998. Sater pleaded guilty to federal fraud charges and then entered into a cooperation agreement with the government that sealed court records in the case and allowed his sentencing to be postponed for 11 years. (Sater would ultimately only pay a $25,000 fine and never go to prison.)
Many years later, as part of her confirmation hearings to become President Barack Obama's attorney general, Loretta Lynch would note that the cooperation deal she made with Sater when she was the U.S. attorney in Brooklyn lasted for a decade -- from 1998 to 2008 -- and that Sater gave the government "information crucial to national security and the conviction of over 20 individuals, including those responsible for committing massive financial fraud and members of La Cosa Nostra."
At some point after becoming an informant, Sater also recast himself as a real-estate savant. He made his way to a Manhattan real-estate investment firm, APC Realty, where he raised money for deals and where he met Kriss in 2000.
Kriss, a native of Miami and a business graduate of the Wharton School at the University of Pennsylvania, was an aspiring real-estate developer who was in his early 20s when they met. He says he was initially captivated by Sater.
“Felix knew how to be charming and he knew how to be brutally nasty,” says Kriss. “He has a talent for drawing people in. He has charm and charisma. But that’s what con men do.”
After APC began to fall apart in 2002, Kriss decided to strike out on his own back home in Miami, doing real-estate deals. Sater made his way to a small Hong Kong investment bank that used him as a New York-based rainmaker for real-estate deals.