I just finished reading The Scorpion and the Frog, the book by Felix Sater’s Wall Street pal, Salvatore Lauria.
It’s an interesting read about Sater’s time on Wall Street and his dealings with Mobsters.
Even more interesting are the details about his cooperation with the CIA in Russia against al Qaida that helped keep him out of prison for racketeering.
A lot of these details were new to me, so I thought I would post a little summary of what’s in the book.
Sater’s lawyer, Robert S. Wolf, has called some of the CIA-related portions of the book “fabricated.” However, The Scorpion and the Frog was the subject of a 2002 legal proceeding in federal court in Los Angeles. Lauria sought to stop publication of his own book. Not because it was fiction, but because it told the truth.
According to Lauria, he had agreed to write the book on the condition that his real name not be used. His publisher, however, went ahead and used his real name, and Lauria was worried that he could be physically harmed by the people named in the book. A bench trial was held and in the end a federal judge cleared the way for the book’s publication.
With that said, here’s my abridged version of what the book says:
Felix Sater walked away from his Mob-linked Wall Street business in 1996 and headed for Russia. He would spend the next two years there before returning to the United States to surrender to the FBI in 1998 and plead guilty to racketeering.
Sater had two jobs in Russia. The first was a deal to bring AT&T bulk long distance service and pre-paid phone charge cards to the country. The second was to find a deal that could get him out of jail.
Sater began to develop contacts at secret Russian military installations known as closed cities, which held “some of the great secrets of the Soviet Union,” Lauria wrote.
The closed cities were opening up. Their representatives were contacting “various countries and rogue organizations interested in buying everything from missiles to assault rifles to millions of rounds of ammunition,” Lauria wrote. They also would make munitions and missiles “to order.”
“We ran into guys selling shiploads of arms to Arabs and other Muslims — Libya, Iraq — countries that were hostile to the United States,” Lauria wrote.
At some point, according to the book, Sater made an initial contact with “someone connected to the CIA.”
Sater gave this version of events to New York magazine.
One night, Sater told me, he went to dinner with a contact that he assumes was affiliated with the GRU, the Russian military-intelligence agency, where he was introduced to another American doing business in Moscow, Milton Blane. “There’s like eight people there,” Sater said, “and he’s sizing me up all dinner long. As I went to take a piss, he followed me into the bathroom and said, ‘Can I have your phone number? I’d like to get together and talk to you.’ ” Blane, who died last year, was an arms dealer. According to a government disclosure made 13 years ago in response to a Freedom of Information Act query, Blane had a contract with the Defense Department to procure “foreign military material for U.S. intelligence purposes.” Sater says the U.S. wanted “a peek” at a high-tech Soviet radar system. “Blane sat down with me and said, ‘The country needs you,’ ” Sater said.
Back to the book. Sater’s unofficial contact in the CIA came to see him and told him the agency wanted a radar tracking system that the Russians had developed before the fall of the Soviet Union. The radar tracking system had never been deployed, and the CIA worried that the system could fall into the hands of our enemies.
“We looked around through Lex’s contacts and found we could definitely get the radar system. For once, this was a deal we were doing with no interest in the money. We were doing it to enhance our own position regarding the legal charges, and also as something that might benefit the country. Money or profit was not an issue. We just wanted the credit for doing it. With a direct line to the radar system, we contacted our lawyer in New York, who went to Washington DC to talk to the CIA”
The CIA was interested. The agency sent a man to Russia, and Sater located the radar tracking system. (In other parts of the book, Lauria calls it a “missile guidance system.”)
With that success, Sater was approached about acquiring a dozen Stinger missiles. The Stinger was the portable, shoulder-fired missile that used a heat-seeking sensor to home in on an aircraft’s engine. They could be fired from as far away as 5 miles away and could easily bring down a passenger airliner.
The CIA was desperate to get hold of them. Lauria states that at least 12 Stinger missiles were obtained by Osama bin Laden.
As he had with the radar tracking/missile guidance system, Sater found that he could get the Stingers, albeit in a round-about way.
Sater could not buy the Stingers directly from al Qaida. “Instead, he used his contact with a KGB general who claimed he had strong ties with Ahmad Shah Massed, leader of the Northern Alliance,” Lauria wrote. Sater alaso used “connections he thought he had with both sides in the Afghan War.” This is interesting. Was Sater dealing with the Taliban?
According to Lauria, Sater obtained photographs of the Stinger missiles as well as the the serial numbers of three of them to verify their authenticity. Sater also obtained what he thought was an active cell phone number for bin Laden. His attorney supplied it all to the CIA.
The CIA offered to pay Sater $300,000 per missile. Lauria insists there was no profit built into the deal. However, one of their partners, Gennady “Gene” Klotsman went behind their backs and demanded $3 million per Stinger. The CIA was furious and called off the deal.
A few days after the attacks of Sept. 11, 2001, Lauria got a phone call from Sater. The information they had provided about Osama bin Laden was now being actively pursued.
“Our situation had improved,” Lauria wrote.
Somehow I missed this. Buried deep in this excellent New York magazine piece on Felix Sater is this tidbit:
Cohen, one of Trump’s personal attorneys, had known Sater since they were teenagers.
I’m curious how these two met. Sater was born in Russia and grew up in the Russian enclave of Brighton Beach as a Mobster’s son. Cohen grew up on Long Island as a doctor’s son. About the only thing the two seem to have in common is that they are both Jewish and roughly the same age.
Update: Sater told Talking Points Memo he knew Cohen through Cohen’s wife, Laura Shusterman:
Sater said he most clearly remembers the beginning of his relationship with Cohen from the time the former Trump Organization attorney began dating his now-wife, whom Sater describes as a girl from his neighborhood of Jewish Soviet expatriates. Cohen told TPM the pair had known each other before then, in their teenage years, and that he hadn’t yet begun dating his wife, reportedly a Ukrainian émigré, when he was in his teens.
Their friendship puts a different light of the chummy emails between the two men in 2015, after Trump announced he was running for president. In the emails, obtained by The New York Times, Sater promised to use his contacts in Russia to help Trump win.
“Our boy can become president of the USA and we can engineer it,” Sater wrote in an email. “I will get all of Putins team to buy in on this, I will manage this process.”
Cohen had been in negotiations with Sater and foreign investors to build a Trump Tower in Moscow from September 2015 through the end of January 2016. Trump announced he was running for president in June 2015.
In January 2016, when negotiations stalled, Cohen wrote to Putin’s spokesman, Dmitri S. asking for help. But Mr. Cohen did not appear to have Peskov’s direct email.
That’s really strange. Why would he do this? As an attorney, he knows how important records are. It’s almost as if Cohen didn’t really expect a reply, but wanted to leave a trail.
And the White House has been referring questions about this whole matter to Cohen’s attorney, suggesting that this was Cohen’s deal, not the Trump Organization’s.
The port of Yalta on the Black Sea has long been a source of controversy.
Churchill, Roosevelt and Stalin met there in 1945 to discuss what to do with Germany when World War II ended. The Big Three agreed to demand Germany’s unconventional surrender. They also left with a promise form Stalin to allow free elections in Poland and to grant Eastern Europe the right of political self-determination. Stalin, however, wasn’t a man of the word and the result was a divided Europe and decades of Cold War.
On the 50th anniversary of the Yalta Conference, Donald Trump was considering whether to put his mark on the the Black Sea port.
In September of 2005, a Ukrainian cabinet minister announced that Trump was considering a major investment in his country.
Evhen Chervonenko, Ukraine’s minister of transport, announced on Sept. 12th that Trump planned to put $500 million into construction of an exclusive yacht and hotel complex in the Black Sea resort of Yalta. In order to boost tourism, the Yalta yacht club would replace the unsightly Yalta freight port.
The plan called for what Chervonenko called for a “huge condominium” with restaurants and a hotel.
The Yalta deal never happened, but it’s a chapter of the Trump-Russia story that has not gotten the attention it deserves for it weaves together two critical parts of the saga: Felix Sater and Deutsche Bank.
For Chervonenko had not met with Trump, but rather with one of his representatives, Felix Sater.
Sater was a violent twice-convicted felon who had gone to prison for stabbing a commodities trader in an ugly bar fight. Born in Russia and raised in the Russian enclave of Brighton Beach, Sater was the son of a Russian mobster convicted of extorting businesses in Brooklyn.
Despite his past, or perhaps because of it, Sater had gotten a job at Bayrock Group LLC, a New York development firm run by Tevfik Arif, a Kazah-born businessman. Bayrock joined forces with Trump to develop Trump SoHo, in lower Manhattan.
Construction on Trump SoHo had not yet begun when Trump granted Sater and Bayrock exclusive rights for one year to develop a Trump International Hotel and Tower in Kiev and Yalta and the rest of the Commonwealth of Independent States, which included Russia, and the former satellite republics in the Soviet Union. So this career criminal journeyed to Ukraine to negotiate a deal for Trump.
Yalta, although rich in history, is not the first place one thinks of for international tourism. Its location in the Russian-speaking Crimean Peninsula made it part of the ongoing tension between Russia and Ukraine that would culminate in Russia’s invasion of Crimea in 2014.
But Sater was obviously deeply connected in Crimea and the Ukraine. He arrived in the Ukraine in September 2005 bearing a letter from Trump that declared that Ukraine was developing rapidly, and was an ideal location for the signature development of Donald J. Trump. Somehow, Sater got Bayrock Group in a 2005 meeting of the executive council of investors of Crimea chaired by the Prime Minister of Crimea, Anatoliy Matviyenko, according to a Sept. 1 press government release.
Much later, Sater would use his Ukrainian connections to help a Ukrainian lawmaker Andrii V. Artemenko deliver a peace proposal for Russian and Ukraine to the White House in February 2017. Michael Cohen, Trump’s consigliere, had met with the two men in New York and delivered the proposal to the office of Michael Flynn, the National Security Adviser. (Interestingly, Cohen had his own business dealings in Ukraine around the time that Sater was pitching developments in Yalta.)
Several other multinational firms were considering massive investments in Ukraine along with the Trump Organization in 2005. These included the National Container Company of Russia, the Ofer Group of Israel, and the Toepfer Group of Germany. The Toepfer Group would later be caught paying millions of dollars in bribes to Ukrainian officials. Russia’s Sberbank and Vneshtorgbank (now VTB) were considering an additional $2 billion in Ukraine for “re-equipment of railways and ports.” Both of these banks were sanctioned by the United States in 2014 following Russia’s invasion of Crimea.
Trump, who called himself a billionaire and regularly inflated his estimates of his net worth (see TrumpNation by Timothy O’Brien), did not have $500 million to invest in Ukraine or anywhere else for that matter.
On Sept. 9th, three days before the announcement of Trump’s “investment” in Yalta, Ukrainian Transport Minister Chervonenko announced that Trump’s favorite lender, Deutsche Bank, had agreed to loan $2 billion to finance improvements to the country’s railways, postal service, and seaports.
Deutsche Bank’s London office is an attractive target for investigators looking into Trump ties to Russia because of the bank’s own sordid ties to Russia.
From 2011 to 2015, Deutsche Bank laundered rubles into dollars (without any reporting requirements) through a practice known as “mirror trades.” The bank allowed its Russian customers to buy Russian blue-chip stocks in Moscow and then quickly execute a sale of the same stocks in London. Deutsche Bank helped Russians transfer an estimated $10 billion out of the country via these mirror trades. US and UK regulators fined the bank a combined $629 million.
Trump’s business in the Ukraine was not yet finished. In February 2006, Donald Trump Jr. and Ivanka Trump paid a visit to the Ukraine. The Trump children met with Viktor Tkachuk, an adviser to the newly elected, West-leaning president of Ukraine, Viktor Yushchenko. They also met with Andrey Zaika head of a newly-formed Ukrainian construction consortium. The meeting with the Trump children, held in Kiev, was not reported in the Ukrainian press until after the Trumps had left the country.
The Yalta deal fizzled, but it’s a remarkable moment in the Trump-Russia story.
The Baltschug Hotel is one of Moscow’s most venerable hotels. Overlooking the Moskva River, across from the Kremlin, the Baltschug dates back to the reign of Czar Nicholas II. After the Russian Revolution, it became a dormitory, but the collapse of the Soviet Union saw the Baltschug restored to its former glory as a five-star hotel
And it was here on a Tuesday evening in September 2002, that Donald Trump arrived to sell apartments in New York to newly-wealthy Russians.
Trump wanted to make it easy for Russians to buy one of his New York apartments without even leaving the country. His real estate agent, Sotheby’s International Realty, had partnered with Kirsanova Realty to open an office in Moscow to sell his condos and apartments to Russians who were interested in buying abroad.
Trump is such a spectacle that we often forget to ask the interesting questions. What was interesting about the Baltschug event was not Trump himself. The interesting question to ask was who was buying. And the answer to that question is, well, we don’t know.
Guests at this event did not want to give their names, a reporter from the respected Russian business newspaper Vedemosti found:
However, potential customers present at yesterday’s presentation of New York real estate not only refused to reveal themselves, but also did not admit that they were interested in this real estate, insisting that they simply went in for “pies to eat”.
The Moscow Times, an English-language newspaper, also sent a reporter and noted the same thing:
When asked about the prospect of acquiring property through Sotheby’s and Kirsanova Realty, guests at Tuesday’s reception shied away from saying directly whether they were interested in the super expensive apartments. One guest said most were there to see “how the other side lives.”
Why would a Russian be embarrassed to admit they were interested in buying Trump property? That’s the interesting question.
The reason why the buyers at the event were embarrassed to give their names is because they didn’t want anybody doing exactly what these reporters from Vedemosti and The Moscow Times were doing: Asking questions.
Phllip Bogdanov of Kirsanova Realty said he didn’t consider his potential clients oligarchs, but rather owners of sustainable businesses. But that’s nonsense.
One of the few who wasn’t afraid to introduce himself to Vedemosti’s reporter was Pavel Syutkin, then the head of the investment department of the Presidential Administration of the Russian Federation. Today, Pavel Skyutkin is a food historian and author of an English-language cookbook about Russian cuisine.
The Russians who could afford a million-dollar apartment in New York were a special class of people who owed their wealth to their political connections, not their business skills. People get outrageously rich in Russia because the Kremlin allows it. The Kremlin lets them get rich; the Kremlin could take everything away. If you’re wealthy in Russia, your money is never secure. Your money was only safe if and when it moved out of the country, beyond the reach of the Kremlin.
Trump had spent a lot of time trying to put his name on something in Moscow in the 1990s. We’ve looked at his efforts to build a tower in Moscow and develop a pair of run-down Moscow hotels. At some point, Trump realized that building a tower in Moscow was the wrong way to go about it.
The Russians didn’t want to keep their money in Russia. The wealthiest of Russians weren’t interested in a Trump Tower in Moscow, but a tower in New York, now, that was something that interested them. Why not build luxury towers that served as deposit boxes for wealthy Russians and other foreigners who wanted to stash their money away? What if Trump could build right here in New York for Russian money?
This was Trump’s sales pitch. Come to New York. You can enjoy your money, no questions asked.
“Now, Russian connoisseurs of high-class housing will have the opportunity to become neighbors of well-known politicians, businessmen and Hollywood stars,” said SIR vice-president Mika Sakamoto.
Trump’s towers in New York were really safe deposit boxes for foreign money. Trump World Tower (pictured above), the 72-story skyscraper that opened in 2001, was a giant deposit box of Russian money.
Bloomberg found that Sam Kislin, a Ukrainian immigrant, issued mortgages to buyers of multimillion-dollar apartments in World Tower. An individual issuing mortgages for luxury homes is highly unusual.
One of the people Kislin provided mortgages to was Vasily Salygin, a future official of the Ukrainian Party of Regions. The Party of Regions is the Putin-linked party whose best known member is Viktor Yanykovych, the man who former Trump campaign manager Paul Manafort helped win the presidency of the Ukraine before he fled to Russia.
Kislin was business partners with Tamir Sapir, who would later partner with Trump to build the scandal-plagued Trump SoHo condo hotel.
Bloomberg also turned up another person who bought in Trump World Tower. It was Eduard Nektalov, an Uzbekistan-born diamond dealer, who purchased a $1.6 million apartment in July 2003. He was being investigated by federal agents for a money-laundering scheme. Nektalov sold his unit a month after he bought it for a $500,000 profit. He was gunned down on Manhattan’s Sixth Avenue in 2004.
Kellyanne Conway and Michael Cohen, Trump’s consigliere, bought units in Trump World Tower. Cohen also persuaded his Ukrainian in-laws and a business partner to buy in the tower as well. Cohen also helped Trump take back control of the tower’s board from a group of apartment owners upset over the way the building was being run.
What began in 2002 was the steady influx of Russian money into the Trump Organization. The same Russian money that kept him afloat during the financial crisis and the same money that is now the subject of an investigation by Special Counsel Robert Mueller.
Eric Trump told the Russian publication Home Overseas that the “bulk of buyers” in Trump SoHo were “foreigners, among whom there are a lot of Russians.”
He also added that the Trump Organization was expecting Russian buyers in its planned tower on Palm Jumeirah in Dubai. “We very much count on good demand from the Russians,” he said.
I haven’t seen these comments reported anywhere else before.
The comments from Eric Trump come in an article titled, “Luxury is Beyond Time,” on the website of the Russian publication. Although undated, it appears that he made the remarks around 2007-2008. Construction on the Dubai tower was halted at the end of 2008 as the financial crisis put the squeeze on the heavily-indebted Arab emirate.
Eric Trump’s comments in Home Overseas underscores what his brother Don Jr told eTurboNews in 2008: “Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York.”
Here is the full quote from Eric Trump:
In your projects, do you focus on domestic demand or are you looking for foreign investors?
It depends on the particular project. So, in the New York hotel-condominium Trump SoHo the bulk of buyers are foreigners, among whom there are a lot of Russians. The fact is that New York is one of the centers of international business and tourism, many foreigners often come here and want to have real estate. Quite a different situation in Chicago, where most buyers are from America.
Another example – a golf resort in Scotland is interesting both to local golf lovers, and to Americans who want to play in European fields. Also in the case of the Dubai project, our Palm Jumeirah tower will certainly attract not only investors from the Gulf countries, but also Europeans, Americans, and representatives of developed Asian states. We very much count on good demand from the Russians.
The Trump Organization’s connections with Russia in the scandal-plagued Trump SoHo project have been exhaustively covered.
I’ve written before about how Dubai was a favorite destination for Russian criminals and international money lauderers here.
I’ve pointed out the useful idiots of the American right before like David Keene of The Washington Times and others. But Putin uses people who are useful to him, regardless of political ideology, and there are useful idiots on the American left as well.
Two that come to mind are Katrina vanden Heuvel, editor of The Nation magazine, and her husband, Stephen F. Cohen, a professor emeritus of Russian studies at Princeton and NYU and a contributing editor to the magazine his wife edits.
On Aug. 9, The Nation published a lengthy “expose” that concluded that the Democratic National Committee wasn’t hacked by Russia or anyone else, as our intelligence communities tell us. The article, titled “A New Report Raises Big Questions About Last Year’s DNC Hack,” is dense, impenetrable, and ill-informed. It takes author Patrick Lawrence 4,000 words to say that the DNC emails were downloaded at speeds faster than the internet could handle. Before that we are doused with Lawrence’s rhetorical sewage:
Lost in a year that often appeared to veer into our peculiarly American kind of hysteria is the absence of any credible evidence of what happened last year and who was responsible for it. It is tiresome to note, but none has been made available.
“Absence of any credible evidence” — File that one away for later.
This article was quickly debunked. And it was ridiculed by Sam Biddle of the Intercept who found something interesting in Lawrence’s Twitter timeline:
Editor Katrina vanden Heuvel ordered a review of this article, which is the latest in a string of Russia-related embarrassments for The Nation, a still highly-regarded left-leaning publication that is in danger of disappearing into the loony fringe. Things have gotten so bad that journalists at the magazine complained about the magazine’s Russia coverage in a letter to vanden Heuvel in June. Here’s an excerpt from a longer version quoted in this column in The Washington Post:
As longtime associates of The Nation, we are deeply concerned that by making these editorial emphases and by likening calls for investigations into the Russia connection to “red baiting,” the magazine is not only playing into the hands of the Trump administration, but doing a dishonor to its best traditions. We have noted, too, with dismay, that Tucker Carlson, Ann Coulter and other far-right adversaries have taken comfort in the writings of other Nation writers on the current crisis.
Ouch. The Nation being cited by Ann Coulter. Other Nation articles suggest that leaks pose a greater danger to U.S. national security than Trump himself. Odd choice for a magazine that exhorts its readers to the barricades with slogans like “Resist. Organize. Defend Freedom.”
[Update: Here is the Nation’s DNC article being used as Russian propaganda]
I don’t know how it happened but somewhere along the way Vandel Heuvel and her husband Stephen F. Cohen became Putin’s useful idiots. And I mean that in the same sense as Lenin did when he used it to describe liberals and Social Democrats who helped advance the Communist cause outside the Soviet Union.
Recall that “absence of any credible evidence” phrase in the article I noted above? It’s is a frequent refrain of Stephen F. Cohen, who uses it to shoot down all criticism of Putin.
The U.S. community’s findings that Russian President Vladimir Putin ordered an influence campaign into the 2016 election aimed at undermining Hillary Clinton and helping Trump’s chances of winning? No evidence.
Cohen called the declassified summary released by the U.S intelligence community on Jan. 6 “embarrassing” and “worse than amateurish” on a podcast five days after the report’s release. The report contains “zero” evidence and Cohen says not incorrectly that U.S. intelligence has been dead wrong before. A summary of his podcast describes the report as “utterly bogus.”
You probably won’t be surprised to learn that this mirrors the Kremlin’s response to the intelligence summary as well. Russian Foreign Ministry spokesman Maria Zakharova, said Jan. 12, “Accusations are usually based on facts, dates and figures. This report is based on claims. There is nothing new in it for anyone, nothing but yet another compilation of absurd stereotypes.”
Echoing Donald Trump, Cohen also says there’s no evidence that Putin is “a killer.” This ignores the chairman of a UK panel who concluded that Putin “probably” gave the order to kill Alexander Litvinenko, the former FSB agent poisoned with radioactive Polonium-210 in 2006 in a London hotel.
Similarly, Cohen argues there is no evidence that Putin kills journalists such as Anna Politkovskaya of Novaya Gazeta — gunned down on Putin’s birthday — or the 33 others killed since he took office in 2000. Once again, Donald Trump makes the same claim.
“Trump [like Cohen] is technically right but wrong in spirit,” says Mark Galeotti, a New York University professor who studies the Russian security state. “There is indeed no proof Putin has journalists killed. But he presides over a regime in which journalists are beaten, harassed and murdered, often with impunity.”
Cohen is arguing a legal technicality. Sure, there’s no evidence Putin ordered anyone’s death. But someone did order the murders Litvinenko, Politkovskaya, or Boris Nemtsov. Those killers aren’t punished in Putin’s Russia, even though Putin probably knows who they are.
Follow his line of thinking and one could make the logically-sound but completely absurd argument that there is no evidence that smoking causes lung cancer.
It goes like this: Not all smokers develop lung cancer, and not all lung cancer patients are smokers. And the link between cancer and smoking is purely statistical. No double-blind study has ever been conducted to prove that smoking and lung cancer. So, how do we know that smoking — and not, say, air pollution — causes lung cancer?
Silly, yes, but it’s the same argument employed used by tobacco makers in court. It’s also the logic of climate-change skeptics (“scientific consensus is not evidence”), and people who think the Earth is 5,000 years old (“Evolution is a theory, not proof.”)
No evidence. No proof.
It is the desperate logic of those unable to reevaluate a long held, but increasingly ridiculous position so as to avoid looking like a fool.
Semion Mogilevich remains a subject of fascination in the Trump-Russia story.
I’ve written before about Mogilevich’s ties to Trump Tower and how the man called the most powerful Mobster in the world may be a subject of interest to Special Counsel Robert Mueller.
I thought it would be worthwhile to take a deeper dive into the world of Semion Mogilevich to understand who he is and what it means for Trump to be connected to him.
If you want cut to the chase, here you go: Having a relationship with Mogilevich was in some ways like having a relationship with Putin himself.
Semion Mogilevich and Donald Trump both were born in June of 1946, only two weeks apart, in vastly different circumstances. Trump, as we know, was the son of a wealthy New York developer. Mogilevich was born to a Jewish family in Kiev and before he began his life of crime he earned an economics degree.
Calling Mogilevich a Mobster is a bit misleading. He is a Mobster, but he’s much more than a Russian version of Tony Soprano.
Mogilevich is better described as a secret billionaire who made his fortune in the murky gas trade between Russia and Ukraine. US Attorney Michael Mukasey said in 2008 that Mogilevich “exerts influence over large portions of the natural gas industry in parts of what used to be the Soviet Union.”
The man called “the Brainy Don” also ran a publicly-traded company that defrauded investors in the United States and Canada out of $150 million. He sells weapons and drugs, arranges contract killings, runs prostitutes — all on an international scale. He has connections and influence at the very top of the Russian oligarchy. But the biggest sign of his power and influence is that he today lives free in Russia.
How is this possible? How can an international criminal live openly in Moscow?
To understand this, consider this secretly recorded conversation between then Ukrainian President Leonid Kuchma and Ihor Smeshko, who was then head of Ukraine’s military intelligence:
Smeshko: “So, this is why [the American FBI] thinks that Mogilevich’s organization, it is working completely under the cover of SBU [Ukraine’s secret service.] This is why there is this kind of cooperation there!”
Kuchma: “He [Mogilevich] has bought a dacha in Moscow, he keeps coming.
Smeshko: “He has received a passport already. By the way, the passport in Moscow is in a different name. And what is level in Moscow is … Korzhakov [the head of Boris Yeltsin’s personal security] sent two colonels to Mogilevich in Budapest in order to receive damaging information on a person … He himself did not meet them. His organization’s lieutenant, [Igor] Korol, met these colonels and gave them the documents relating to ‘Nordex’. Mogilevich has the most powerful analytical intelligence service. But Mogilevich himself is an extremely valuable agent of KGB, PGU … When they wanted to … Mogilevich … When the Soviet Union collapsed UKGB ‘K’ command did not exist yet. When one colonel wanted to he is retired, he lives there when he tried to arrest him, he got his pennyworth, they told him ‘Stop meddling! This is PGU [SVR, Russian foreign intelligence service] elite’. He has connections with [Russian businessman and former Deputy Prime Minister Anatoly] Chubais.”
This conversation, which was secretly recorded by a Kuchma bodyguard, is difficult to follow, but it gives you a sense of Mogilevich’s power and reach. First, he ran his own powerful intelligence service that was useful to a Russian president. He was an agent of the KGB in the days of the Soviet Union and remains a source to modern Russian intelligence. And he is protected by powerful interests in Russia.
These tapes were of great interest to Alexander Litvinenko, a former Russian FSB officer who was poisoned in a London hotel in 2006 with radioactive Polonium-210. Litvinenko, who hated Putin, had a role in transcribing them and publicizing them.
The British inquiry into his death went into considerable detail of the conversations on these tapes and his writings, which contain a few other fascinating bits of information on Mogilevich. In an email, Litvinenko revealed that Mogilevich had sold arms to al Qaida:
“I know beyond the doubt that Mogilevich is FSB’s long-standing agent and all his actions including the contact with al Qaida are controlled by FSB — the Russian special services. For this very reason, the FSB is hiding Mogilevich from the FBI.”
In Russia, criminals and intelligence services aren’t adversaries. They are birds of a feather. They share information. The Mob helps the state, and in return, Russian criminals like Mogilevich get to share in the riches and remain free.
As Mark Galeotti, an expert on Russian history and security issues, writes,
“The Russian state is highly criminalized, and the interpenetration of the criminal ‘underworld’ and the political ‘upperworld’ has led the regime to use criminals from time to time as instruments of its rule.”
Mogilevich’s ties to the Russian political “upperworld” go deep. Very deep.
In another secretly recorded conversation in 2000, Ukrainian PM Kuchma discusses Mogilevich with Leonid Derkach, the former head of the Ukrainian security services.
Kuchma: “Have you found Mogilevich?”
Derkach: “I found him.”
Kuchma: “So, are you two working now?”
Derkach: “We’re working. We have another meeting tomorrow. He arrives incognito.
Later in the discussion Derkach revealed a few details about Mogilevich.
Derkach: “He’s on good terms with Putin. He and Putin have been in contact since Putin was still in Leningrad.”
Kuchma: “I hope we won’t have any problems because of this.”
Derkach: “They have their own affairs”
According to Litvinenko, the poisoned ex-FSB agent, Putin was Mogilevich’s “krisha” or protector in Russian underworld slang.
And this was a relationship that dated back to the early 1990s when the future Russian president was a deputy mayor in St. Petersburg.
“Mogilevich have good relationship with Putin since 1994 or 1993,” Litvinenko says in broken English on a tape made before his death.
Back in 1993 and 1994, Putin was deputy mayor of St. Petersburg. He was known in St. Petersburg as the man who could get things done. His approach to the criminal world was a practical one, Karen Dawisha writes in Putin’s Kleptocracy.
The mafia and the KGB had always had points of intersection and conflict — the 1990s were no different, and the mafia had its uses. It was global, it could move money, it could hide money, and in any case, some of the money would come back to St. Petersburg for investment. So how did Putin operate? First and foremost, he made illegal activity legal.
Most countries, even corrupt ones, go after their biggest criminals. But in Russia, criminals have their uses.
One of these points where the interests of Mogilevich and Putin merge is in the natural gas trade. RosUkrEngero (RUE), a murky Swiss company that acts as an intermediary in gas sales between Russia and Ukraine is seen as a joint venture of sorts between the two men.
RUE is half owned by Gazprom, the Russian gas giant that is run by Putin’s cronies. The other half is nominally owned by two Ukrainian businessmen: Dmitry Firtash and a minority partner. But the U.S. government suspects that Mogilevich (see here) is the man behind the curtain at RUE.
The world was closely watching in 2008 when Russian police arrested Mogilevich on a tax evasion scheme. He posted bail and was released a year later. Charges were dropped in 2011.
Mogilevich is part of the story, the tragedy really, of modern Russia.
Russia is a country rich in natural resources. It has great wealth below the ground. Above ground the wealth is shared by a small number of individuals who were close to Russian President Vladimir Putin.
Putin allowed this select few to enrich themselves by siphoning billions out of the country’s natural gas and oil fields, its steel and nickel mills, its fertilizer plants, the state railroads, and many more industries. In return for unimaginable wealth, these oligarchs pledged absolute fealty to Putin.
This is an operation that Mogilevich knew very well. Enriching yourself and your friends in exchange for loyalty — that’s the job of a Mafia Don. Which is exactly what Putin is.
As Sen. John McCain told late night host Seth Meyers, Russia is a “a gas station run by a mafia that is masquerading as a country.”