The Mystery Manafort Real Estate Transactions and a Potential Link to the GRU’s Hack-and-Leak Operation
This article describes mysterious financial and real estate transactions Manafort conducted during the 2016 election and a his possible connection to Russian Military Intelligence’s (the GRU) hack-and-leak operation targeting the DNC.
It is the sixth article in the series “Black Caviar: Paul Manafort, the Russo-Ukrainian Conflict, and the Trump Campaign.”
While it is not necessary to read earlier entries, it is recommended.
I published a series of articles covering Paul Manafort’s background as a lobbyist and political consultant, and his work in Ukraine prior to the 2016 election here.
The first article covered Manafort’s activities in post-Maidan Revolution Ukraine and his dual family/fiscal crisis.
The second article covers how Manafort was hired onto the Trump Campaign and his possible connections to the GRU’s hack-and-leak operation.
The third article covered Manafort’s communications with pro-Kremlin oligarchs and Konstantin Kilimnik’s provision of polling data to Russian intelligence.
The fourth article describes the meeting between Manafort and Kilimnik at the Grand Havana Room where they discussed a pro-Kremlin Ukrainian peace plan.
The fifth article described Manafort’s last days on the Trump Campaign.
This article is an excerpt from my book, While We Slept: Vladimir Putin, Donald Trump, and the Corruption of American Democracy, available here.
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At key moments during the 2016 election, Paul Manafort and members of his immediate family engaged in a series of mysterious and highly suspect financial and real estate transactions.
As many, if not most, of these transactions may have been legal in the narrow sense, the un-redacted sections of the report produced by Special Counsel Robert Mueller do not address these activities.
Where the law was violated, the most useful information can be gleaned from the indictments related to financial crimes produced by the Special Counsel’s office. Prosecutors established that Manafort used real estate transactions to launder money he received from his work in Ukraine.
The portions of the Senate Intelligence Committees report on counterintelligence that deal with these matters are heavily redacted and, most intriguing of all, allude to a potential connection with the hack and leak campaign conducted by Russian military intelligence.
Much of the information on these matters that is publicly available is due to the remarkable joint efforts of citizen journalists and investigators working for free, on their own time.
Attorneys Julian Russo and and Matthew Termine conducted critically important original research into these matters, which can be viewed at www.377union.com.
Manafort’s Potential Involvement in Russian Military Intelligence’s Hack-and-Leak Operation
At the heart of the Russian effort to benefit the candidacy of Donald Trump was a hack-and-leak operation targeting the Democratic National Committee (DNC).
According to Volume 5 of the Senate Intelligence Committee’s mammoth report into Russian Active Measures Campaigns and Interference in the 2016 U.S. Election, “Manafort’s involvement with the GRU hack-and-leak operation is largely unknown.”
The report continues: “Two pieces of information, however, raise the possibility of Manafort’s potential connection to the hack-and-leak operations.”
The following section describing these pieces of information is nearly entirely redacted but for a small section which mysteriously refers to Manafort’s interactions with his then son-in-law Jeffrey Yohai “during key periods in 2016.”
Why Manafort’s relationship and communications with Yohai was mentioned in this critically important section, which goes to heart of the question of what relationship the Trump campaign had with the Russian active measures operation, remains classified.
Manafort’s Manufactured Liquidity Crises
An analysis of publicly available financial information indicates that Paul Manafort experienced liquidity crises on two separate occasions, between 2003–04 and in 2016. Each time the liquidity crisis led to mortgage defaults, foreclosures and legal actions.
On both occasions, in order to make mortgage payments, Manafort took out loans on properties he owned that, in certain cases, appeared to exceed their market value.
Curiously, these two periods of apparent liquidity crisis for Manafort immediately preceded events transpiring internationally that he could have reasonably (and correctly) assumed would lead to investigations into his finances by prosecutors and other authorities.
Manafort’s first liquidity crisis was preceded by a May 2002 suicide bombing in Karachi, Pakistan that killed eleven French naval engineers who were in the country working on a billion dollar military contract involving submarines. The attack led to a 15-year investigation that came to be known in France as the “Karachi Affair.”
The scandal involved alleged kickbacks to French and Pakistani officials following a nearly $1 billion sale in 1994 of French submarines to the Pakistani Navy, some amount of which may have funded the 1995 Presidential campaign of then-Prime Minister Edouard Balladur in violation of French campaign finance law.
French investigators suspected the bombing may have been an act of retaliation following France’s decision to end the payment of kickbacks to military and intelligence figures in Pakistan.
Paul Manafort, whose involvement in the “Karachi Affair” is briefly explored in a previous article, was paid $272,000 by the Balladur campaign for consulting services.
French authorities also discovered that between 1994 and 1995 one of the two key intermediaries in the arms deal, the Lebanese arms dealer and close Manafort friend Abdul Rahman Al Assir, paid Manafort and accounts related to him $400,000 from Swiss bank accounts.
In October 2003, Manafort, who by then had built a lucrative overseas political consulting career for himself, failed to make a monthly mortgage payment on a horse farm he owned in Wellington, Florida, and the property went into default.
In February of 2004, he subsequently took out a $2.4 million loan from BB&T Bank, the same group that was contemporaneously foreclosing upon the farm, secured on a property he owned in Alexandria, Virginia. As the Virginia property sold eleven years later for only $1.5 million, it appears as though the $2.8 million loan greatly exceeded the market value property.
A month later, Manafort borrowed an additional $250,000 from Abdul Rahman Al Assir using the same Virginia property.
Manafort ultimately sold the Wellington horse farm in July of 2004 for $1.55 million, causing BB&T to drop its foreclosure action.
That same month, Emigrant Savings Bank assigned a $1,370,997 mortgage secured by a property Manafort held in Bridgehampton, New York to none-other-than Tom Barrack, the man who later assisted Manafort in getting a position on the Trump campaign.
Barrack then turned around and loaned Manafort $389,002.
The nature of these loans, which again clearly exceeded the market value of the properties used to secure them, raise interesting questions.
Publicly available documentation suggests that a large amount of cash was used as collateral. While this is obviously justifiable from the lenders perspective, the use of cash as collateral would seem to obviate Manafort’s need for liquidity.
There are several potential explanations for this apparent contradiction. The cash accounts used by Manafort may not have been easily accessible, or could have been offshore accounts that he could have utilized as collateral without triggering a taxable event.
Alternatively, the cash may not have remained under the control of the lender throughout the life of the loan, which would have defeated its purpose as collateral but would serve to legitimize the mortgage transaction at the time of borrowing.
Years later, Manafort was successfully prosecuted for, in part, laundering the illicit proceeds from his work in Ukraine through real estate transactions and the subsequent use of loans. It appears quite possible that he began engaging in these activities years earlier, to hide the cash he earned from his involvement in the “Karachi Affair.”
Paul Manafort, Jeffrey Yohai, and House Flipping During the 2016 Election
Over the course of the 2016 election and immediately afterward, Manafort engaged in similar activities. While this could have been a continuation of his efforts to launder the money he earned in Ukraine, it seems possible that he could have used these methods to conceal a bribe.
In the years leading up to the 2016 election, Manafort entered into a real estate investment partnership with his then son-in-law Jeffrey Yohai, which was surprising given that he had initially opposed the union between his daughter Jessica and Yohai.
While Yohai had enjoyed a privileged upbringing, he had long been troubled by a gambling addiction and substance abuse issues, first using cocaine by the age of 12 and experimenting with heroin by the time he was 16.
Despite Manafort’s initial misgivings about Yohai, they eventually entered into a real estate partnership together. According to hacked texts, Jessica Manafort believed her father and Yohai were in a 50/50 partnership.
Beginning in 2014, Yohai began purchasing and taking out loans on a series of Los Angeles properties, ostensibly with the intent of flipping them for a profit. LLC’s controlled by Yohai purchased four properties in Los Angeles.
According to Bloomberg News, Manafort, as well as his wife and daughter, provided Yohai with over $4 million in loans to make the purchases. The only other investor was the Oscar winning actor Dustin Hoffman, who invested $3 million into a home Yohai was planning to flip on Blue Jay Way in Los Angeles.
By the time 2016 rolled around, Yohai initially appeared as though he were flush with cash. In January of 2016 he offered to buy a mansion for $7 million cash from an as-yet unidentified Russian businessman who was in debt to several individuals in Russia who had liens on the house. Yohai put down a $160,000 deposit on the house, but by June he backed out of the deal and lost the deposit.
A month later, Yohai appeared on the Bravo reality TV show “Million Dollar Listing” and offered to purchase three New York apartments for $15 million cash. The broker on the show claimed to have “seen proof of funds.”
Hacked texts, however, reveal that when Andrea Manafort was asked whether her sister and Yohai had access to such funds she responded, “Of course they don’t.”
“Her hubby is running a ponzi scheme,” Andrea wrote. “I’m sure of it”
Strangely, at the same time Yohai, with heavy investment from his father-in-law, was willing to lose a $160,000 deposit and was at least publicly presenting himself as cash rich, LLC’s related to their real estate partnership took out a series of loans on their various Los Angeles properties through a private money lender called Genesis Capital.
One such loan for $5,950,000 was made on January 28th, the same month Manafort began seeking a position on the Trump campaign, for an $8.5 million dollar home located on Stradella Street in Los Angeles.
Less than a month later, on February 18th, a Manafort/Yohai linked LLC borrowed an additional $3,737,100 from Genesis secured by a Los Angeles property they purchased on Nottingham Avenue.
On March 4th, Genesis provided yet another multimillion dollar loan to a Yohai/Manafort linked LLC, this time with a property located at 377 Union Street in Brooklyn as collateral.
On June 1st, 2016, nineteen days before Manafort was elevated to the position of chairman of the Trump campaign, the Yohai/Manafort linked MC Brooklyn Holdings, LLC failed to make a scheduled monthly payment on a Genesis Capital loan.
Over the summer of 2016 it became known around Kyiv that Manafort was receiving messages threatening to reveal his potential malfeasance. Manafort would have learned about the existence of the Black Ledger sometime in June, assuming he was being honest with Steve Bannon when they spoke at Trump Tower.
Is it possible that, in anticipation of further financial scrutiny, Manafort engineered a liquidity crisis to falsely justify loans ultimately meant to hide illicit cash, as he may have done over a decade earlier following the launching of investigations into the “Karachi Affair?”
The Spruce Capital Loan and Alexander Rovt
On August 16th, two days after The New York Times ran the Black Ledger story, Genesis Capital filed a notice of default on a Yohai/Manafort property located on Stradella Street, and filed two more on separate properties on the 18th, 19th and 30th.
On August 19th, the day he resigned from the Trump campaign, Manafort established a holding company called Summerbreeze, LLC, and filed a notice of default on one of his and Yohai’s investment properties.
Less than two weeks later, on September 12th, Manafort through Summerbreeze LLC borrowed $3.5 million from SIII Capital Group, LLC, a subsidiary of Spruce Capital.
The co-founder and principal of Spruce Capital, Joshua Crane, had worked with the Trump Organization before developing the Trump International Hotel and Tower at Waikiki Beach Walk.
Spruce Capital is financially backed by a Brooklyn-based fertilizer billionaire named Alexander Rovt.
Born under the name Sándor Róth in Ukraine, Rovt identifies as Carpathian and moved to New York City in the mid-1980s. In 1988, Rovt joined IBE Trade (International Barter Exchange), which had been founded by a Korean war veteran, major Republican party donor and former intelligence operative named Sheldon Silverston.
A Facebook post from the United Veterans Council, Inc claims that a First Lieutenant Sheldon Silverston served as a guerrilla leader in North Korea during the Korean War.
On November 14th, 1952, The New York Times published a letter from Silverston arguing for the re-armament in Japan. The article claims that Silverston had just returned from East Asia after having worked for eighteen months for “an American Strategic Intelligence Service.”
IBE Trade sold goods to pariah states with little hard currency, examples including Uganda after its civil war in the 80s and Romania under Ceausescu, in exchange for commodities.
Silverston used Rovt’s contacts to gain access to the Soviet Union during the period it was opening up under Gorbachev, where they bartered for vast quantities of fertilizer.
Rovt and a partner Imre Pakh eventually bought out Silverston and by the late-90s IBE Trade controlled upwards of 85% of the fertilizer in Russia and Ukraine. According to the Senate Intelligence Committee, Imre Pakh has ties to Russian organized crime.
In 1999, IBE Trade purchased a fertilizer factory in Bulgaria. In order to provide the plant with a steady gas supply, Rovt partnered with Igor Makarov.
Makarov is a natural gas tycoon from Turkmenistan who established ITERA, the Gazprom-linked intermediary and predecessor to Eural Trans Gas (ETG) and RosUkreEnergo (RUE), all of which sold Turkmen gas to Ukraine and have been associated with corrupt Gazprom officials, Vladimir Putin, Semyon Mogilevich and Eurasian organized crime.
In return, Makarov received a 25% ownership stake in the plant. Rovt eventually got into a dispute with some of his other partners in the plant and one accused him and Pakh, without providing any evidence, of having old ties to the KGB.
Rovt ultimately sold his overseas assets to Dymtro Firtash, the Ukrainian billionaire and suspected front for Semyon Mogilevich, who was listed as part owner of ETG and RUE.
On the day of the election, Rovt donated $10,000 to the Trump campaign. However, all but $2,700 was returned as the rest was above the legal limit.
The Federal Savings Bank Loan and Stephen Calk
In addition to the loan from Spruce Capital, Manafort received two more loans following his resignation from the Trump campaign from the Chicago-based Federal Savings Bank, the first made on December 9th, 2016 and the second on January 17th, 2017, for $9.5 million and $6.5 million, for a total of $16 million.
The chairman and chief executive officer of Federal Savings Bank, Stephen Calk, was a former Army helicopter pilot who had met Trump years earlier at a charity event and enjoyed a relationship with Manafort that predated the campaign, though the extent to which the two knew each other remains unknown.
In another curious connection to Trump, Federal Savings Bank received a “seven-figure” cash investment from the Vector Group, whose CEO Howard Lorber traveled with Trump to Moscow in 1996 and has been described as one of Trump’s closest friends.
Trump and Lorber were joined in Moscow by the Vector Group’s founder and chairman Bennett LeBow, where they visited a former cigarette factory that LeBow had purchased to see if it might be developed into a Trump Tower Moscow.
Among Lorber’s business associates was Vadim Rabinovich, a Ukrainian oligarch with ties to organized crime. Rabinovich had worked as the Ukrainian representative of Nordex, a commodities trading firm and suspected Russian intelligence front run by Grigori Luchansky, who was described in a 1996 Swiss Federal Police Report as a KGB recruit.
In September of 1995, Rabinovich, who was then on a State Department Watch List, attended a Clinton-Gore fundraiser as Bennett LeBow’s guest at the Bel Harbor Hotel in Miami.
In 1996, the year Trump, Lorber and LeBow traveled to Moscow, then-CIA Director John Deutch described Nordex as “an example of an organization associated with Russian criminal activity moving out of Russia.”
“Is there any evidence that former KGB officials are involved in the Russian organized crime syndicates?” the chairman of the House Committee on International Relations asked then-FBI director Louis J. Freeh during a hearing in 1997.
“Yes, sir, there is,” Freeh Replied, “both in investigations in Russia, as well as in other parts of Europe, in companies such as Nordex, which is a Vienna-based company, a multinational company. There are strong indications of former KGB officers working directly with some of these organized crime groups, and that poses an additional level of threat and sophistication to these people.”
According to later testimony by bank employee Steven Raico, Manafort first reached out to Federal Savings Bank to inquire about loans relating to his real estate projects with Yohai in April of 2016.
At some point in May, Manafort, Calk and Raico dined together in New York and discussed politics and loans, among other topics.
On July 27th, Manafort and Yohai held a meeting with Raico which Calk attended via videoconference to discuss refinancing loans related to a Los Angeles property of theirs. During the meeting, Calk expressed an interest in participating in the Trump campaign and Manafort, who was then chairman of the campaign, replied that he would get back to him.
The next day, Calk met with several officials at the bank to discuss the Manafort loan. Several bank officials noticed red flags, for example Manafort claimed he earned $4 million in business income for 2015, yet other documents showed that he had earned no more than $400,000. As a result, some wanted to reject the loan application.
In a highly unusual move, they were overruled by Calk himself. Employees such as Riaco had never seen Calk approve a loan before, nor was a one day turn around usual practice. According to later testimony, Calk was hoping that by issuing the loan he would be rewarded with a cabinet position should Trump win.
The $16 million in loans that were extended to Manafort ultimately constituted the largest loan ever extended by the bank, representing nearly a quarter of its capital equity.
On August 3rd, the day after Manafort met with Konstantin Kilimnik, Manafort emailed Calk and requested that he send his resume. After Manafort sent a follow-up message the next day, Calk sent him his resume.
“Per our conversation,” Manafort replied, “I want to add you to the National Economic Advisory Committee for Donald Trump. Is that something you would be able to do?”
“I am happy and willing to serve,” Calk responded. Two days later, his name was released on the list of the Trump Campaign’s newly minted Economic Advisory Committee, alongside Howard Lorber, who was also named to the committee.
Despite being named to this committee, Calk’s ultimate goal of receiving a position in the Trump campaign ultimately never came to fruition. By the time of the transition, Paul Manafort was already beginning to feel the heat of multiple investigations into his own and the Trump campaign’s affairs.
So too would Stephen Calk.
Whether or not these loans served as elaborate means to conceal a hidden payment to Manafort remains in the realm of speculation and conjecture. Currently, the only known investigation into these matters remains heavily redacted in the Senate Intelligence Report.
Hopefully more information will be forthcoming in the near future.
The next, and final installment of this series will cover the strange tale of Nastya Rybka, a Belorussian escort who was in a relationship with Oleg Deripaska and claimed to have information related to Paul Manafort and the 2016 U.S. election.