Bloomberg reports that Special Counsel Robert Mueller has decided that Trump’s sale of his Palm Beach mansion to a Russian billionaire is worth a deeper look.
As readers of this site know, Dmitry Rybolovlev, the Russian fertilizer king, bought the future president’s Palm Beach mansion in 2008 for $50 million more than Trump paid for it just a few years earlier. The mansion, called Maison de l’Aimitie (House of Friendship), was in such bad shape that Rybolovlev got permission to tear it down and sell off the land beneath it.
I’ve written how this transaction has the marks of a bribery case I followed here in San Diego.
Not long after the mansion sold, Trump was approaching default on loan from Deutsche Bank. And the $50 million Trump pocketed on the mansion sale was enough to cover the $40 million he had personally guaranteed to the German lender.
Here’s a bit more detail: The Palm Beach mansion sold in July 2008. That fall, Trump was desperately trying to get Deutsche Bank to extend a senior construction loan for the 92-story Trump International Hotel and Tower in Chicago. The Chicago project was already facing weak sales before the 2008 financial meltdown hit.
Unlike many other Trump Organization projects, the Donald was personally on the hook in Chicago. He hadn’t licensed his name. He had no partners. He arranged all the financing himself: He put $77 million of his own equity into the tower and had given Deutsche Bank a $40 million personal guarantee. (See “In Chicago, Trump Hits Headwinds,” The Wall Street Journal, 29 Oct. 2008.)
Trump’s Deutsche Bank loan came due Nov. 7, 2008 with an outstanding principal balance of $334 million, plus $251 million in interest. Not only did Trump not pay, but with his usual bombast, he sued Deutsche Bank to force them to extend the loan. Deutsche Bank countersued, and demanded Trump cough up his $40 million guarantee. Deutsche Bank ultimately extended the loan for five years and eventually Trump paid it.
There are a lot of dogs sniffing around this tree. The personal guarantees Trump made for his Deutsche Bank loans are also of interest to New York State regulators looking at the president’s relationship with the German lender’s wealth management division: according to The New York Times:
Additionally, the New York regulators recently requested information related to the hundreds of millions in loans Deutsche Bank’s private wealth management division provided Mr. Trump, one of the people said, paying particular attention to personal guarantees he made to obtain the loans. Those guarantees have declined as the loans were paid down and the property values increased, but it remains a source of interest to the regulators.
For those who want even more detail, I’ve embedded Trump’s Deutsche Bank personal guarantee at the end of this post. If anyone with some expertise in these matters finds anything interesting in there, please let me know.
Mueller’s team are also said to be interested in dealings involving the Bank of Cyprus. Rybolovlev, the Russian oligarch who bought Trump’s Palm Beach mansion, became the bank’s largest shareholder in 2010 when he purchased a 9.7 percent stake through his British Virgin Islands holding firm, Odella Resources. (Wilbur Ross, Trump’s commerce secretary, invested in the bank in 2014.)
The shady mansion sale is just one of the things FBI investigators and others are examining:
- Russian purchases of apartments in Trump buildings
- Trump’s involvement in a controversial SoHo development in New York with Russian associates
- The 2013 Miss Universe pageant in Moscow
- Jared Kushner’s efforts to secure financing for some of his family’s real-estate properties.
It seems that Mueller’s team is looking for evidence of a payment disguised as a real estate transaction, fee or gift that would give Russians what the intelligence community likes to call “levers of pressure” that could be used against the US president.
Trump’s Personal Guarantee
It’s a bit suspect, to say the least, that Dmitry Rybolovlev, the Russian fertilizer king, bought the future president’s Palm Beach mansion for $50 million more than Trump paid for it just a few years earlier.
The mansion, called Maison de l’Aimitie was in such bad shape that Rybolovlev got permission to tear it down and sell off the land beneath it. I’ve written how this transaction has the marks of a bribery case I followed here in San Diego.
I decided to take a deeper look at Rybolovlev. Turns out, he’s got an interesting past: He spent nearly a year in jail on murder charges. Depending on whom you ask, Rybolovlev is a man who rubbed out a competitor or an innocent man framed for murder by corrupt Russian officials.
The evidence points to the latter. Rybolovlev, born in 1966, came from a family of doctors in Perm, an industrial city in the Ural Moutains. After graduating from the Perm Medical Institute in Russia in 1990 he joined the cardiology department of a local emergency room.
It was the dramatic upheaval after the fall of the Soviet Union that changed his life and the lives of his patients, who could not afford to pay him. Rybolovlev moved to Moscow and became one of the first licensed brokers in the country.
It was the right place at the right time. The Russian government, desperate to raise cash and stave off collapse, and being totally unacquainted with capitalism, began selling off its companies for mere fractions of their value. It was perhaps the single greatest investment opportunity in history.
In 1995, Rybolovlev started buying up shares of Uralkali, a fertilizer maker that was located back in his home region of Perm, the center of the country’s potash industry. He quickly amassed a controlling interest in the company and was named chairman of the board.
In 1996, Rybolovlev was arrested on a murder conpiracy charge. He would spend his 30th birthday and the next 11 months in jail.
[The definitive account of Rybolovlev’s time in jail comes from an interview he gave to the Russian edition of Forbes magazine about a decade ago.]
Rybolovlev was accused of ordering the 1995 murder of Evgeny Panteleymonov, the general director of Netfchimik, which produced industrial alcohol. Rybolovlev was chairman of Netfchimik and owned 40 percent of the company, according to Forbes.
Netfchimik generated high cash flows — and attracted attention from criminals. In the summer of 1995, Panteleymonov met with Rybolovlev and told him the criminals had to go. Rybolovlev had offered him bodyguards for his protection. Panteleymonov had refused.
Rybolovlev was not so cavalier. He had grown so worried for his family’s safety that he moved them to Florida and then to Switzerland. He hired bodyguards to protect his family, his parents and his business partners. “From time to time, I had to wear a bulletproof vest,” he told the Russian edition of Forbes.
Unprotected, Panteleymonov was gunned down by a mob-linked businessman named Oleg Lomakin (aka Prokop). Lomakin was arrested for Panteleymonov’s shooting, and, oin exchange for leniency, he accused Rybolovlev of ordering the murder.
It was enough to get Rybolovlev thrown in jail, where he languished. Authorities moved from from cell to cell in an effort, he suspects, to break him. Weeks dragged into months. Offered freedom if he sold his shares in Ukrakali, he refused. He told Forbes he was prepared to serve 10 years, if necessary.
Finally, the case against him began to fall apart. No other evidence linked Rybolovlev to the shooting, and eventually Prokop admitted that he had perjured himself. After nearly a year of incarceration, Rybolovlev was allowed to post bail of one billion rubles (about $200,000). In late 1997, he was acquitted of murder charges.
It turned out that Rybolovlev’s arrest was tied to the politics of the fertilizer industry. There was a familiar Soviet problem of overproduction, and to smooth things out the Rybolovlev’s company Uralkali and other fertilizer producers decided to collude. In 1993, they formed the International Potash Company to channel their exports.
Things were uneventful until 1996. On May 20th, Uralkali shareholders voted to end its relationship with the International Potash Company and export the company’s products through an American company, Transammonia. The next day, Rybolovlev was arrested.
“I definitely came out a different person,” Rybolovlev told Forbes. “I got an understanding of how the world actually works. ” In prison, the businessman realized that the state can ruin his business at any time. Political risks were too significant and could never be neglected.
Freed from jail, Rybolovlev resumed command of his business. In 2007, he listed Uralkali on the London stock exchange and overnight became one of Russia’s richest men. He sold most of his stake in the company in 2010 to three Russian tycoons. Forbes estimates his fortune today at $7.4 billion.
The Washington Post is out with a story about the American right’s ties to Russia and the article centers on the tale of accused Russian Mob boss and Russian Duma member Alexander Torshin and his red-headed friend, Maria Butina, which I’ve written about here.
In that post, I wrote that David Keene — opinion editor of The Washington Times editorial page and past NRA president — was a useful idiot who allowed a suspected Russian mobster to get close to the president.
Torshin is a member of the Russian Duma and, simultaneously, (while the Post story doesn’t mention it), he was accused by Spanish police of being a ranking member of the Moscow-based Taganskaya crime syndicate. He was slated to meet with President Trump at the National Prayer Breakfast until a White House national security aide noticed Torshin’s name and flagged him as a figure who had “baggage.”
The Post adds an important new detail: How Torshin met Keene.
At least one connection came about thanks to a conservative Nashville lawyer named G. Kline Preston IV, who had done business in Russia for years.
Preston said that in 2011 he introduced then-NRA President David Keene to a Russian senator, Alexander Torshin, a member of Putin’s party who later became a top official at the Russian central bank. Keene had been a stalwart on the right, a past chairman of the American Conservative Union who was NRA’s president from 2011 to 2013.
I never realized that Vladimir Putin had such open and effusive admirers in the United States like George Kline Preston.
Preston, born in 1966, is an expert on Russian law who displays a white porcelain bust of Putin in his office, according to the Post.
He believes that we have it backwards: Putin is the good guy in this story. He has told friends for years not to believe reports that Putin murdered journalists or political opponents. Here he is effusively praising Putin to his friend Torshin on Twitter.
Translation: “@torshin_ru Tomorrow is Presidents’ Day in the USA. I want to say that you are fortunate to have President Vladimir Putin.”
Preston’s relationship with Torshin goes back to at least 2009 when Preston briefed Russian legislators on the implementation of immunity agreements in Russia:
Mr. Torshin asked me to briefly describe the concept of a “deal with the investigation,” or, more precisely, the “plea bargaining”, as we used to call this term in the West. (source: archived web page of prestonkline.com)
Preston was an international observer during the 2011 Russian duma elections that led to mass street protests about election fraud. Preston said he concluded the Russian election system was “impressive” and “very well-organized,” but the Western view was overwhelmingly negative. The reason why, he said, lay in the fact the West does not like Vladimir Putin. Asked why, he speculated that “maybe because he’s a strong leader, maybe he’s done a pretty effective job:”
Interestingly, this video was posted to YouTube (and possibly made by) Johan Backman, a controversial Finnish academic. Backman is a Putin cheerleader and Kremlin propagandist (which is detailed in this lengthy expose). Preston was apparently didn’t know or didn’t mind that he was being used for propaganda purposes.
In 2012, Preston returned the favor and invited Torshin to be an election observer in Nashville. Both men appear in the picture below (Preston on the left, and Torshin in the middle). Torshin’s tweet below reads: “Standing in line at the polling place. As an ordinary American. 6:45 a.m.”
In contrast to his experience observing voting Russia, Preston said he saw violations of U.S. law during the presidential election: pro-Obama signs posted too close to a polling place.
Preston earned his bachelors degree in Russian language and literature at the University of Tennessee in 1989, the same year he studied in Leningrad via an Indiana University program at Leningrad State. He and earned his law degree at Nashville School of Law in 1994. For a time, Preston was involved in trading Russian/Ukrainian securities and importing Kievskaya Rus ultra premium vodka.
Preston’s law practice appears heavily focused on Russia. A version of his website archived in 2011 appears in both English and Cyrillic. On his office web page of is what appears to be a double-headed eagle, the symbol on the coat of arms of the Russian Federation.
A portion of the Preston’s practice involved assisting Americans in adopting children born in the Ukraine and the former Soviet Union. (Putin in 2012 signed into law a ban on adoptions of Russian children by Americans.) Preston also represented Bering Strait, a classically-trained Russian bluegrass and Russian scholar Mikhail Anikin, who claimed that author Dan Brown stole his idea for the “Da Vinci Code.”
On his Twitter feed, @gittinpaid, Preston often retweets Russian propaganda from RT, Pravda and other news outlets:
I’m not sure what happened to G. Kline Preston, but it’s hard to look at him and see a man who has turned himself, quite happily it seems, into another of Putin’s useful idiots.
In his excellent testimony March 30 before the Senate intelligence committee, Thomas Rid, a professor in the Department of War Studies at King’s College London, explains how Russia has perfected the art of exploiting unwitting agents.
Unwitting agents are fools who are doing the bidding of another person or country without realizing it. Another term for them is “useful idiot,” a phrase supposedly used by Lenin to describe liberals and Social Democrats who helped advance the Communist cause outside the Soviet Union.
Rid said three different types of unwitting agents stand out from the chaos of the 2016 election:
Unwitting agent #1: Wikileaks.
The US intelligence community concluded with a high degree of confidence that Russia’s foreign military intelligence service, the GRU, was the source for the reams of stolen Clinton campaign emails published by Wikileaks.
Wikileaks has repeatedly denied that Russia was the source for the leaked DNC emails, which shows why an unwitting agent is so useful.
Wikileaks clings to the moral high ground because it believes it acted in the name of justice or goodness, not in the name of a Russian intelligence agency.
So when Wikileaks insists that the emails were leaked to them by an insider, it does so with considerable conviction that has taken others such as the influential Fox commentator Sean Hannity.
Unwitting Agent #2: Twitter
Twitter was hugely influential among opinion leaders in the 2016 election, foremost among them the Twitterer-in-chief, Donald Trump. But it’s very hard to tell what on Twitter is real and what is fake.
A recent study by computer scientists at Indiana University and USC tried to tackle the question of how many Twitter accounts are bots. These are automated and semi-automated software applications that mimic human behavior and can be used to drive grassroots political support, spread rumors, or bully opponents.
The researchers conclude that as many as 15 percent of all Twitter accounts are bots, and given the increasing sophistication of bots, this may be a conservative estimate. Twitter claims it has 313 million “active” monthly users. If the study is correct, 47 million Twitter users are not human.
Twitter for its part could easily inform the public how many of its accounts are bots, whether influential accounts during the 2016 election were human or not, or how many Twitter trends began overseas.
But it is not in the company’s interest to do so. The inflated numbers make it appear that Twitter has active users than its published numbers claim it has. Pulling back the curtain on bots would depress Twitter’s value as a publicly-traded company.
Unwitting Agent #3: Journalists
The Soviet Union excelled at planting stories. Operation INFEKTION planted the devastatingly rumor that AIDS had been created by US scientists seeking new and potent biological weapons that still echoes around the globe.
But planting these stories was hard work, as this CIA history shows. It took time to craft believable forgeries and build relationships with newspapers. A CIA study estimated that the Soviets spent $3 billion annually influencing world perceptions through its “active measures” campaigns.
That was then. Now, Rid says, it’s much easier:
Cold War disinformation was artisanal; today it is outsourced at least in part — outsourced to the victim itself. American journalists would dig deep into large dumps, sifting gems, mining news, boosting ops.
The hours and reams of newsprint that reporters devoted to hacked emails — with little thought to the who, what or why of their appearance — made American journalism an unwitting agent of Russian intelligence.
Unwitting Agent #4: Donald Trump
Trump is not part of Rid’s testimony, but I felt the need to add him. Donald Trump is the biggest unwitting agent of them all.
In an op-ed in The New York Times, former acting CIA Director Michael Morrell summed it up this way:
President Vladimir V. Putin of Russia was a career intelligence officer, trained to identify vulnerabilities in an individual and to exploit them. That is exactly what he did early in the primaries. Mr. Putin played upon Mr. Trump’s vulnerabilities by complimenting him. He responded just as Mr. Putin had calculated.
Mr. Putin is a great leader, Mr. Trump says, ignoring that he has killed and jailed journalists and political opponents, has invaded two of his neighbors and is driving his economy to ruin. Mr. Trump has also taken policy positions consistent with Russian, not American, interests — endorsing Russian espionage against the United States, supporting Russia’s annexation of Crimea and giving a green light to a possible Russian invasion of the Baltic States.
In the intelligence business, we would say that Mr. Putin had recruited Mr. Trump as an unwitting agent of the Russian Federation.
Have you heard the rumor that Donald Trump is mentally ill? Did you hear that President Obama wiretapped Trump Tower? With the help of British intelligence? Or that a child-sex ring connected to Democrats was being run out of a Washington, D.C. pizza restaurant?
American society is being bombarded by rumors. Fake news websites push stories like the aforementioned “Pizzagate.” Russian has an army of Twitter trolls who blast out all sorts of wild rumors. Even Donald Trump’s own tweets deluge us with confusing and contradictory information.
It seems awful hard to know what’s true and what’s not these days. Where is the antidote for the epidemic of fake news? Many of us may feel like we can’t even trust our own judgment. And maybe, that’s the point.
The post-truth era, as it’s been called, might feel very familiar to American spies operating behind enemy lines in World War II. Back then, U.S. operatives were coming up with creative ways to damage morale and divide the leadership of Nazi Germany. One of their best weapons was the use of carefully crafted, well-timed rumors.
Rumors were a specialty of the Morale Operations Branch of the Office of Strategic Services (OSS), the predecessor of today’s CIA. One of the most famous of the OSS’ rumor campaigns was “Where Is Hitler?” The OSS would broadcast a fake report that Hitler was supposed to appear at an upcoming rally. When Hitler inevitably failed to show, the OSS would float rumors that Hitler was ill or suffering from a mental breakdown. These rumors spread so widely that they became the subject of articles in American newspapers, including The New York Times.
Creating a loss of confidence in leaders was just one was just one the tricks dreamed up by the OSS Morale Operations branch. Others are spelled out in a now declassified field manual, which is a guide on how to use rumors, forgeries, blackmail and bribery to destabilize a country. What the OSS called “subversive rumors” could be used to cause enemy populations to distrust their own news sources, create division among racial, political and religious lines, to create confusion and dismay with a welter of contradictory reports, and to tip the balance when public opinion was in a precarious state, among other things.
Viewed in this light, fake news seems less a nuisance and more like something that would trouble our intelligence community. And indeed, they do appear concerned. The U.S. intelligence community recently concluded that Russia mounted an “influence campaign” during the 2016 presidential election that blended covert intelligence operations with overt efforts by Russian Government agencies, state-funded media, third-party intermediaries, and paid social media users or “trolls.” Russia influence campaign sought to undermine faith in U.S. democracy and denigrate Hillary Clinton’s campaign.
In essence, Russia has created a modern version of the OSS Morale Operations branch. Social media gives the modern operative powers the likes of which his or her OSS forerunner could only have dreamed. Whereas the OSS had to send operatives into enemy territory to plant rumors, the modern influence campaign can without leaving home harness the power of social media sites. Facebook, Twitter and YouTube are machines for the rapid transmission of rumors.
While the technology behind rumor campaigns has evolved, the nature of rumor itself hasn’t changed much in the 74 years since the OSS wrote its field manual. The OSS defined a rumor as “an unauthenticated, unofficial story or report, represented and transmitted as fact.” This distinguishes it from propaganda, which stamps its authorship on its message. Anybody can start a rumor. Crafting a good one is an art form.
The old OSS characteristics of what makes a good rumor still hold true: A good rumor still must be simple, consisting of a single idea. It must be plausible. It is tied to some known facts, yet is impossible to completely verify. It frequently appears as an “inside” story. The best rumors to spread are existing ones. “In many cases, the most effective rumor policy will be to spread further rumors that have arisen spontaneously in enemy territory,” the field manual advises.
A good rumor must also be vivid. Rumors with “strong emotional content” are extremely effective. (Case in point: the unforgettable, unverifiable story of Trump cavorting in a Moscow hotel room with prostitutes.) A suggestive rumor was well adapted to spreading fear and doubt, by doling out limited but tantalizing bits of information that allow the audience to formulate conclusions (“FBI Director James Comey made an unexpected trip to the White House.”)
Robert Knapp, who developed the section of the OSS’ Field Manual on rumors and wrote academic papers on the subject, likened a rumor to a torpedo. “Once launched, it travels of its own power,” he wrote. Knapp had an insight into what gave rumors their power: They expressed and gratified the emotional needs of the community, just as daydreams and fantasies expressed the needs of the individual. Rumors gave sense and direction to fears, resentments or hopes. ”No rumor will travel far unless there is already a disposition among those who hear it to lend it credence,” he wrote in a 1944 paper.
Among the many coincidences involving Russia and Donald Trump, one that goes unnoticed is their mutual grasp of the power of rumor. Trump used rumors to stunning effect in his campaign, beginning with the suggestion that President Obama was born in Kenya. This rumor tapped into deeply-held beliefs about President Obama that many people were not comfortable expressing publicly. Outright racism is unacceptable to most Americans. However, many found the disguised racism of a rumor about the African-American president’s birthplace more palatable. There is frequently a racist undertone to many of Trump’s rumors: Muslims celebrating Sept. 11 in New Jersey, illegal immigrants voting, terrorist incidents that didn’t happen, and so on.
Rumors may also help explain Trump’s appeal. In a recent interview, Time magazine’s Michael Scherer pressed Trump on his use of rumors. “What am I going to tell you? I tend to be right,” the president told him. “I’m an instinctual person, I happen to be a person that knows how life works.” In other words, Trump’s rumors feel true to him, even if they can’t be verified. Trump’s words also feel true to his supporters, almost like an article of faith. He is making a connection on a deep emotional level that, once established, is difficult to break.
However, Trump’s predilection for rumors over facts is dangerous, for it leaves him wide open to manipulation. Unwittingly or not, Trump has spread rumors that originated in Russia. The story spread by the White House that President Obama used British intelligence to spy on Trump and his associates started as a story on RT, the Kremlin-backed propaganda outlet. On the campaign trail, Trump quoted a report that appeared to originate on Sputnik, another Kremlin-backed media outlet. At a March 30 Senate intelligence committee hearing, Clint Watts, a former FBI agent and an expert on Russian disinformation, explained in striking terms the problem with having a rumor-monger for a president:
Rumors do work on the campaign trail, but they are toxic to the presidency. Credibility is one of the president’s strongest assets, never more so than in moments of crisis. Trump seems not to understand that, as president, he is the authority, and the White House is the place where rumors end, not where they begin. If President Trump truly wants to make America great again, he must stop spreading rumors.
If Trump won’t quash rumors, others must do it for him. Many news organizations are now regularly refuting the president’s rumors. This effort harkens back to World War II, when rumors were an even bigger problem then they are now. Robert Knapp, the OSS’ rumor expert, founded a “rumor clinic” in Boston that collected rumors and sought to put and end to them. A column first published in the Boston Herald in 1943 quoted the rumor in italics followed by the word FACT. Rumor clinics opened in many cities, but quickly faded following a clash with the Roosevelt administration’s Office of War Information. Government bureaucrats wanted to smother rumors with facts, rather than call attention to them by singling them out for disproof. (For more on this click here.)
Knapp proposed that rumors could serve as an “index of morale.” They may be a better gauge of the true state of public opinion than any poll or survey. Rumors allow expression of the deeply held beliefs and fears that won’t be repeated to a stranger. A look at the rumors prevalent in American society show we are a deeply divided along racial, political, and religious lines. Many Americans have little or no confidence in our elected leaders. We distrust our own news sources.
In sum, American morale has been deeply wounded. We are much weaker than we think we are.