Paul Manafort partnered on an $850 million New York real-estate deal with an ally of Vladimir Putin and a Ukrainian moneyman whom the Justice Department recently described as an “organized-crime member.”
That’s according a 2008 memo written by Rick Gates, Manafort’s business partner and fellow alumnus of Donald Trump’s presidential campaign. In it, Gates enthused about finalizing with the financing necessary to acquire New York’s louche Drake Hotel.
Two former federal prosecutors told The Daily Beast that the hotel deal was likely to be an item of focus for special counsel Robert Mueller’s inquiry into ties between Trump associates and the Kremlin.
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Some White House officials, who spoke to The Daily Beast on condition of anonymity, are also wary. They feel Manafort may have made President Trump more legally vulnerable through his decades of business deals with foreign governments and shady Eastern European power brokers. Those deals, these White House aides suspect, led federal investigators down a money trail that threatens to plunge the Trump White House further into legal jeopardy.
Asked whether any Manafort deals seemed particularly troubling in retrospect, a senior administration official replied, “You mean like this one?” and appended a link to a 2016 story on Manafort’s alleged attempts to launder a Ukrainian oil and gas billionaire’s ill-gotten fortune through New York real estate—including the Drake.
The Justice Department is now seeking the extradition of that billionaire, Dmitry Firtash, so he can stand trial for a 2013 racketeering indictment in a Chicago federal court. Two weeks ago, in response to a legal filing from Firtash seeking dismissal of the case, the acting U.S. attorney in Chicago termed Firtash and a deputy as “two organized-crime members” and people “identified by United States law enforcement as two upper-echelon associates of Russian organized crime.” Years before the indictment, Firtash was a major moneyman for the Party of Regions in Ukraine, the pro-Kremlin political faction for which Manafort consulted.
Partners With Putin’s Pal
Firtash’s alliance with Manafort to acquire the Drake has been reported before. But far less attention has gone to the involvement of another party: Oleg Deripaska, one of the wealthiest men in Russia—and a longtime Putin associate. In 2006, according to the Associated Press, Deripaska signed a $10 million annual contract with Manafort for what Manafort pitched as political and economic efforts inside the U.S. to “greatly benefit the Putin Government.”
But Manafort was more than Deripaska’s political operative. They were business partners, as well.
“When Paul met with Mr. D last month he told Paul to lock in the other financing elements and then come back to him for the final piece of investment,” Gates wrote to two longtime business associates of Deripaska, Anton Vishnevsky and Andrey Zagorskiy, on July 1, 2008.
According to ex-prosecutors, a business relationship between a Kremlin-tied oligarch, an accused gangster and the manager of Donald Trump’s campaign is the sort of arrangement currently occupying Mueller’s time.
“Any financial dealings with Russia and Ukraine would be considered within the scope of [Mueller’s] current mandate,” said Barbara McQuade, the U.S. attorney in Detroit until Trump fired her in March. “With the search warrant executed on Manafort’s home, looking for bank records, tax records, and the like, it seems like this is the kind of thing that Mueller would be interested in.”
In his 2008 memo, Gates wrote to Deripaska’s associates: “We need to finalize Pericles’ participation in this deal, as the final component in the financing structure, in the next two weeks to lock in the deal,” and signed off by saying he would be “available to come to Moscow immediately to discuss and finalize the details of the transaction.”
“Pericles” refers to Pericles Emerging Market Partners, a private-equity fund Manafort and Deripaska established in the Cayman Islands in March 2007. Gates assisted in Pericles’ management.
Court documents from the dissolution of the Pericles partnership, filed by Deripaska’s Surf Horizon Ltd., claimed to hold “the majority (if not all) of the economic interest in the Partnership.”
In other words, Deripaska’s company invested with Manafort in Pericles, and Pericles was set to be a prime investor in the Drake Hotel.
Manafort, Firtash, and Deripaska intended to convert the Drake into a luxury office and residential space called Bulgari Tower. Gates, in his July 2008 memo, estimated that the revamped, 70-story Bulgari Tower would generate “over $3 billion in value as a result of the unique combination of retail, smart office space, residential, and a luxury hotel.”
Money-Laundering Allegations in Court
The Drake Hotel deal did not materialize, and attorneys for a Manafort co-defendant told a New York federal court that project “never proceeded beyond due diligence.” But the former prime minister of Ukraine, Yulia Tymoshenko, alleged in a federal lawsuit that it was intended as a vehicle to launder illegal funds.
Gates’ memo was entered into the court record in Tymoshenko’s lawsuit after it was part of batches of documents recovered from a river following the 2014 flight from power of Viktor Yanukovich—the pro-Putin Ukrainian prime minister that Manafort and Firtash aided—and the sauna of Yanukovich’s prosecutor-general.
Tymoshenko, whom the Yanukovich government jailed, accused several Party of Regions figures of retaliating against her, in part for her move to eliminate Firtash’s firm “as the middleman in the natural-gas transactions between Ukraine and Russia.” But in September 2015, New York Federal Judge Kimba Wood dismissed Tymoshenko’s suit against Firtash, Manafort, and several other co-defendants. (Deripaska was not a defendant in the case.)
In her dismissal, Wood did not dispute the authenticity of the memos or other facts of the relationships between Manafort, Firtash, and other foreign partners, but considered them ultimately legally irrelevant to Tymoshenko’s misfortunes.
“Without specifying the particular contribution of each defendant to the money-laundering scheme,” Wood found, “plaintiffs fail to establish the requisite directness of relationship between each defendant’s conduct and the harm suffered by Tymoshenko.”
Tymoshenko’s attorneys initially did not know whether the “Mr. D” in Gates’ memo referred to Dmitry Firtash or Deripaska. But other documents they discovered from the Manafort team referred to Firtash and his economic interests with acronyms like “DF” and “DF Group.” Subsequently, they filed in April 2014 a memo to the court explaining Gates’ recipients were “associates of Oleg Deripaska,” referred to “in the memo only as Mr. D.”
Kenneth McCallion, Tymoshenko’s attorney and a former federal prosecutor, subsequently asserted in court that the memo “confirms that Paul Manafort had direct contacts with high-level Russian figures who were, upon information and belief, under investigation by the FBI and the U.S. Dept. of Justice for alleged money laundering and other criminal activities within (and without) the U.S.,” and that Manafort, Gates, and their U.S. partners “were directly conspiring to defraud” the parties Gates proposed to Deripaska’s people to enlist in the venture.
“Based on what we now know, it appears that both Deripaska and Firtash were involved in the Drake Hotel deal,” McCallion told The Daily Beast. “I am reasonably certain now that Mr. D is Deripaska, since it is referenced in relationship to Pericles, which was definitely Deripaska’s company, not Firtash’s.”
Alleged Ties to Organized Crime
On Nov. 6, 2008, the CEO of Group DF Real Estate (“a subsidiary company of Group DF Limited, the holding company of Dmitry Firtash”) wrote to Manafort to confirm “our commitment to the Bulgari Tower project following our recent meetings in Kiev.”
Group DF CEO David Brown wrote that Firtash was prepared “to provide $112 million in equity for the project.” To demonstrate Firtash’s seriousness, Brown continued, “Group DF has executed a deposit of $25 million into escrow for the project,” documented through an escrow agreement with the First American Title Insurance Co. that day. The insurance company noted that the delivery was “in the form of cash funds by wire transfer” and that Manafort had access to the account.
Moscow-based representatives for Deripaska would not comment for this story nor answer questions about whether the oligarch had foreknowledge that the accused criminal Firtash was part of the Drake deal.
Allegations of ties to organized crime have long dogged Deripaska, who has consistently denied them. Yet the State Department temporarily yanked his visa in 2006 over concerns about criminal connections, The Wall Street Journal reported the following year—concerns now exacerbated by his prospective involvement in a deal alongside an indicted figure like Firtash. Reportedly, Deripaska is seeking cooperation with Senate investigators scrutinizing Trump-Russia.
A spokesman for Manafort, Jason Maloni told The Daily Beast: “We’re not going to comment on a complaint by an adverse party in litigation that was dismissed.”
Gates made his financing request to Deripaska’s associates on July 1, 2008—right as, other court records indicate, Team Pericles was falling apart.
“After July 2008,” Deripaska’s attorneys write, Deripaska’s Surf Horizon Ltd. “did not receive any further invoices from [Manafort’s end of Pericles] in respect of Management Fees or for the purpose of funding further investments of the Partnership.” By September, Deripaska informed Team Manafort “it was suspending further investment into the Partnership.”
But, as has been widely reported, Deripaska took them to court in 2014 for ghosting on them. “It appears,” his Cayman filing says, “that Paul Manafort and Rick Gates have simply disappeared.” Deripaska separately claimed in 2015 that Manafort and associates owe him $19 million, which Manafort denies.
Renato Mariotti, a former federal prosecutor in Chicago, considered the Drake deal to be significant to Mueller’s inquiry.
“There’s no question that Mueller is gonna be interested in communications between Manafort and individuals who are close to Putin & the Russian government,” Mariotti said.
“The fact that Manafort has a close business relationship with at least two of these people means that Mueller will scour Manafort’s finances and the records of these transactions to determine what benefits Manafort received and whether he owed something to these individuals. He’ll also look to see anything about Manafort’s relationship with these individuals that could have been used as leverage by them.”
—with additional reporting by Anna Nemtsova and Justin Miller
