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Tuesday, August 16, 2016

If Trump stiffs the Russians, what will they do to him?

by John MacBeath Watkins

Donald Trump has a well-earned reputation for stiffing vendors, creditors, and investors. But what about the Russian money that's been flowing into his business? Could exploiting those investors have far worse consequences?

Most American banks won't lend to him, according to the Wall Street scuttlebutt.  And, as the Washington Post has reported, Trump has found a new source of financing.

Since the 1980s, Trump and his family members have made numerous trips to Moscow in search of business opportunities, and they have relied on Russian investors to buy their properties around the world. “Russians make up a pretty disproportionate cross-section of a lot of our assets,” Trump’s son, Donald Jr., told a real estate conference in 2008, according to an account posted on the website of eTurboNews, a trade publication. “We see a lot of money pouring in from Russia.”

Bayrock, a company that helped finance the Trump SoHo project, was accused of getting its money from some questionable sources. From the New York Times:
Shortly before the condo buyers’ lawsuit was filed, another suit appeared, this one by Jody Kriss, a former finance director of Bayrock. It claimed that by concealing Mr. Sater’s criminal record, Bayrock had committed fraud on banks and investors with which it did business. Mr. Trump is not a defendant in that case, which is continuing. 
Mr. Kriss’s lawsuit was filled with unflattering details of how Bayrock operated, including allegations that it had occasionally received unexplained infusions of cash from accounts in Kazakhstan and Russia.
Now, Donald Trump's finances are fairly opaque, because he has refused to release tax returns either for last year, for which he's being audited, or from any of the years for which he is not being audited.

But the fact is, there is virtually no clean Russian money. If you are rich, you support Putin, or you won't be rich for long, as some have discovered. For example, Mikhail Khodorkovsky, once the richest man in Russia, financed parties critical of Vladimir Putin. He was arrested, tried for a series of crimes that were either not illegal when he was alleged to have committed them or were still not illegal, convicted, and imprisoned. He has since been released and lives in exile on a much diminished fortune.

So, if you are getting much Russian money, it probably has ties to Putin and his ruling clique. This may explain Trump's constant praise of Putin, and his financial interests being tied to Russian sources of finance may have something to do with his heterodox views on foreign policy, like questioning our commitment to NATO.

But Trump is unlikely to win the presidency, and it is quite likely that his Russian investors will be as disappointed as some of his past investors.

How will they respond?

Well, consider what Masha Gessen, who wrote a book (The Man Without a Face)about Putin, described his background, starting with the period in East Germany prior to the fall of the Wall:
'Everything Putin had worked for was now in doubt,’ Gessen writes. 'Everything he had believed was being mocked.’ He would not return home until after the fall of the Berlin Wall in 1989. 
'I think a lot of his resentment goes back directly to that period,’ Gessen says. 'Having been in the KGB at a bad time, having been outside the country when everything was changing… He’s a very vengeful man – that’s one of his particular traits of character. And that vengefulness has carried through. He’s pursuing a vendetta against everybody who was ever opposed to the Soviet Union.’ 
Putin returned to St Petersburg, where he became assistant to the mayor, while continuing in the KGB. For all the reforms that were taking place in Russia, St Petersburg, Gessen writes, was 'a state within a state’: a place where the KGB remained all-powerful, where local politicians and journalists had their phones tapped, and the murder of major political and business players was a regular occurrence.' 
In other words, very much like Russia itself would become within a few years, once it came to be ruled by the people who ruled St Petersburg in the 1990s.’ In other words, Putin.

I think the nature and extent of his ties to Russia may have a bearing on Trump's business future and even on his own health and that of those close to him. Suppose he were to change his tune, and start to criticize Putin, and stiff his friends who invested with Trump.  Here's some guidance from Gesson:
'There is a theory that is popular among journalists that to Putin there are enemies and there are traitors. And enemies have a right to exist; he might not like them, but they have a right to exist. Traitors don’t have a right to exist. It’s a nice theory. I like it because I’m such a clear-cut enemy that I should be safe.’
Can Trump afford to have Putin see him as a traitor? He's not going to win the election, and he won't always have the protection of the Secret Service. So I think we can expect to see him continue to toady to the Russian leader.

Trump is heavily in debt to Deutsche Bank AG, but the Russians seem to have taken equity stakes in his ventures. We don't know how much money is involved, or which Russian oligarchs are involved, or how close all that money is to Putin. We don't know how his Russian investors will react if they suffer as badly as investors in his casinos did, or how dependent the continuation of Trump's empire is on their continued investment.

I think it's a pretty good bet that he is more financially beholden to foreign investors than any previous presidential candidate, and that it's likely his investors are heavily entangled with the Russian kleptocracy. That, if true, would mean that Trump is himself entangled with a government that has shown a willingness in the past to poison or otherwise kill its critics.

Now, there is a way for Trump to set our minds at rest, and assure us that he is not entangled with a foreign power. Let's see some transparency on his finances, starting with those pesky tax returns.

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