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Why It’s So Difficult To Investigate Trump’s Russia Ties

The FBI and other agencies will have a hard time building a case due to the complexity of the politics and the opaqueness of international financial transactions.

Why It’s So Difficult To Investigate Trump’s Russia Ties
[Photo: Jabin Botsford/The Washington Post via Getty Images]

It’s going to be a long, hot summer–or as they say in Russian “жарко как в Аду” (translation: “it’s hot as hell”).

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For over a year now, we’ve been reading about Donald Trump’s ties to Russia: his praise of Vladimir Putin, his aides traveling there and getting chummy with Russian officials, and what may or may not have happened in his Moscow hotel suite during the Miss Universe pageant. And political and investigative reporters have been chasing down every lead, from rumors about payoffs through intermediaries and Russian banks supposedly guaranteeing Trump’s debt to offshore accounts and oligarchs allegedly funding his golf courses and hotels. In just the last two weeks, the heat index has ratcheted up even higher with the appointment of a special counsel, congressional committees demanding memos related to Trump’s communications with former FBI director James Comey, the seating of a grand jury in the case of fired national security adviser Michael Flynn, and reports that senior White House adviser Jared Kushner is a “person of interest” in the investigation.

But it seems increasingly likely that the president’s real problem could be more related to any cover-up of such entanglements with Russia, such as potential obstruction of justice for apparently trying to pressure Comey into dropping the Russia probe, rather than any sign of collusion or improper financing of Trump or his campaign.

That’s because when it comes to Trump’s Russia ties, it keeps getting smoky but there’s no real fire. Even Thursday’s revelation that the Trump campaign had at least 18 undisclosed emails and phone calls with Russian officials noted that there is no evidence yet of collusion with the Kremlin. It’s enough to leave even the best-informed observer simmering with annoyance–how long is this going to take? Even my 8-year-old turned to me the other day and blurted out, “Can’t the NSA tell the FBI what’s really going on with Trump?”

Well, be patient because this may take a while. Such an international mystery is complicated by the complexity of multi-layered financial transactions, the notorious inscrutability of Russian politicians and spies, and all of it muddied by layers of internet rumors and conspiracy mongering. In comparison, Watergate–a cover-up of a second-rate burglary–was simpler than your average game of Clue. As reporting legend Bob Woodward told the Washington Post“And what’s worrisome to a reporter interested in getting facts is, this is so polarized, this is so emotional. This is driven by tweets and assertions from people who don’t really know. It’s too bad we live in this internet culture of impatience and speed, and it does not set us on the road to gathering facts.”

Not to mention the legal challenges involved in building a case against a sitting president. As FBI historian Tim Weiner noted last month, the FBI is seeking to gather evidence that can be used in a court of law against the Trump team and it will be “extraordinarily difficult” due to the complexity of a case involving eavesdropping, international espionage, and other factors.

As part of its investigation, the FBI recently reached out to the Treasury Department’s Financial Crimes Enforcement Network, which collects financial transaction data from banks and other money service business likes PayPal and Western Union. It’s a relatively small unit, with about 250 to 300 employees who analyze such data for signs of money laundering and counterterrorism financing and to monitor banks for their compliance with the Bank Secrecy Act, among other rules. When the FBI has a criminal investigation, it turns to FinCEN for financial intelligence but “in order for it to be useful, you have a have a nexus to the U.S.,” notes John Cassara, who spent six years as a FINCen analyst. “But if it involves Russia and Cyprus and if that financial flow doesn’t cross the U.S., then they don’t get that info. There is nothing they can do.”

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In that case, their only option is to request that a foreign FinCEN equivalent–and there is one in Russia and one in Cyprus–check their databases and respond to them. There are over 150 financial intel groups around the world that are part of a body called the Egmont Group of Financial Intelligence Analysts and they often work together on inquiries. But each group is also affected by politics and in this case it’s doubtful that the Russian group would want to assist the FBI.

Two Sides To This Ruble

Let’s look at the dual tracks of the inquiry. One of them focuses on whether the Trump campaign colluded with Russian officials during the election, implying that the then-candidate’s aides worked with the Kremlin while Russian agents spread fake news and hacked the Democratic National Committee. So far, there are reports of plenty of conversations between Michael Flynn, Carter Page, Paul Manafort, and maybe Roger Stone and Russian officials. None of that is illegal. But we know every little about the content of those conversations beyond reports that Flynn may have discussed sanctions with Russian ambassador Sergey Kislyak. And though Flynn and Manafort have received payments from Russian entities, there is no proof yet that they were compensated in return for helping the Russians disrupt our election. It’s the same challenge faced by prosecutors cracking down on municipal corruption–proving a quid pro quo is not easy since it doesn’t usually take the form of someone handing a city official a bag of money while caught on tape making their demands.

The second track, which can easily intersect with the first one, is focused on any Russian financing of Trump, either via the Kremlin itself or state-controlled banks and companies. This type of investigation is even more difficult since you’re trying to track the activity of Russian banks, whose transactions are opaque and whose current and former employees are resistant to talking. In addition, such activity is often conducted through shell companies and offshore accounts that are often set up purposely to disguise the money trail.

Such shell corporations–whether established in offshore havens like the Cayman Islands or even Delaware–don’t actually have any assets. They just function as pass-through entities, allowing one individual or company to move financial assets from a foreign country to the U.S. The true owners of the assets don’t have to reveal their names; usually only a local lawyer’s name is attached to the company. Often, there are multiple chains, in which a shell company is linked to dozens of other shell companies, making it even more difficult to trace the assets. One major news outlet spent several weeks in the Cayman Islands last fall, looking for offshore accounts linked to Trump and Russia and came up empty, sources tell me. And again, it’s not illegal for an individual, even with criminal ties, to buy a Trump condo (unless it’s proven that those ill-gotten gains were used in the purchase)–and even then it’s difficult to prove that the Trump Organization knew about the source of those funds.

And don’t look for much help from FinCEN. “They can’t learn much about shell companies,” even if they’re on U.S. soil, says Cassara. “If there’s no beneficial ownership info, then they don’t get much.” As to the NSA’s role, to answer my son’s question, they’re already collaborating with the FBI, CIA, Treasury Department, and FinCEN on the investigation.

A Shell Game

The use of such entities was illustrated most prominently in the Panama Papers, the document dump from Mossack Fonseca, a Panamanian law firm that helped set up such shell companies.

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There are multiple examples of Russians, including organized crime associates, using such shell companies to purchase condominiums in Trump properties in Florida, Manhattan, and Panama City. Trump and his companies have been linked to at least 10 former Russian businessmen with connections to criminal groups or money laundering, reported USA Today. Among them, three owners of Trump condos “were accused in federal indictments of belonging to a Russian-American organized crime group and working for a major international crime boss based in Russia.” As Fast Company reported in early March, Mossack Fonseca helped Russians and other foreigners set up shell companies to buy condominiums in the Ocean Club, a Trump-owned property in Panama City that is the Trump Organization’s most lucrative overseas property.

In the past, Trump and his family have bragged about their Russian customers, with Trump telling reporters in 2013 after a presentation to potential investors in Moscow: “I have a great relationship with many Russians, and almost all of the oligarchs were in the room.” And Donald Trump Jr. told the Russian press back in 2008, that “Russians make up a pretty disproportionate cross section of a lot of our assets” around the world.

One of those assets, the Trump SoHo in Lower Manhattan, perfectly illustrates the complexity of Trump’s Russian connections. Felix Sater, a Russian immigrant who did time in jail in 1991 for stabbing a man in the face with a broken margarita glass, was one of his partners. By the time he first met Trump, Sater was also awaiting sentencing after being convicted in a mob-linked $40 million stock fraud scheme. He was an executive with the Bayrock Group, a real-estate group which developed the Trump SoHo. When Trump’s children traveled to Moscow in 2006, Trump asked Sater to squire them around the city. And Sater still has ties to Trump, reportedly facilitating a meeting in February 2017 between Trump lawyer Michael Cohen and a Ukrainian politician who was peddling a pro-Russian peace plan. The principal Bayrock partner, Tevfik Arif, a former official of Kazakhstan, was reportedly arrested in 2010 during a raid on a luxury yacht in Turkey in a case that involved prostitution and human trafficking charges. (He was later acquitted.) The Trump SoHo opened in 2010, then became embroiled in litigation, was forced to refund more than $3 million in down payments to disgruntled customers  and was foreclosed by creditors before being resold in 2014.

Trump’s lawyer has emphasized to reporters that his relationship was with Bayrock and not Sater and Trump said in a 2013 deposition that he barely knows Sater and wouldn’t recognize him “if he was sitting in the room right now.”

And the president continues to insist that he’s got nothing to do with Russia, telling NBC News earlier this month: “I have nothing to do with Russia. I have no investments in Russia, none whatsoever. I don’t have property in Russia.” His lawyers then released a certified letter showing that Trump has more than $100 million in income from Russian sources over the last decade, the vast majority of which is connected to the 2008 sale of a mansion in Palm Beach to a Russian billionaire. But, as The Atlantic‘s David A. Graham notes, the statements are unverifiable and it’s not clear whether the analysis includes the Trump Organization and any “Russian assets, debts, or other ties that might not appear in Trump’s personal tax returns.”

That’s just the tip of the iceberg. By 2007, Bayrock had more than $2 billion of Trump-branded developments in the works, reports The American Interest, including the Trump International Hotel & Tower in Fort Lauderdale and concept projects planned for Istanbul, Kiev, Moscow, and Warsaw. And Bayrock’s other partner was FL Group, an Icelandic investment company that was favored by Russian oligarchs, some of whom received huge loans from the firm. To get a sense of the mind-boggling complexity of FL Group’s connections, take a look at this relationship map of its cross-shareholding relationships with other major Icelandic banks in the tiny country.

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And that’s just one of Trump’s developments. Several months ago, BuzzFeed put together an interactive TrumpWorld graphic that includes over 1,500 individuals and companies linked to the president in countries around the world–from Brazil to Dubai, Indonesia to Turkey, which also paid former national security adviser Flynn to lobby for its government. And on Monday morning, Flynn reportedly notified the Senate Intelligence Committee that he will plead the Fifth Amendment and not comply with a subpoena seeking documents related to its probe.

So, don’t hold your breath waiting for clear answers to these complicated questions–or for a quick resolution of this investigation. It could take at least six months or more. But granted, anything is possible. There could be another “Deep Throat” whistleblower at a high level in government or another massive leak of top-secret documents or the Russians could be up to more mischief. Any any of those things could speed up or delay or even kill any investigation. The truth is out there somewhere.