11
The Strange Case of the German Bank
2011–2017
Moscow–New York–Frankfurt
Woah, party now
Too much money in the bank account
Hands in the air make you scream and shout
—TIMATI (Russian rap star), “Welcome to St. Tropez”
The tone was weary exasperation. The sort of exasperation you might deploy when faced with a capricious and badly behaved child. One who agrees to do something but who then reneges on the promise, big-time, and blames everyone else, while screaming and throwing toys from his stroller.
The man-child in this case was Donald Trump. The fed-up reproving parent was Deutsche Bank, Trump’s New York creditor. At issue was a very large sum of money that Trump borrowed from the German bank in 2005 to fund the construction of the Trump International Hotel & Tower in Chicago. Trump had personally guaranteed to repay the $640 million debt.
Since then, a global financial crash had arrived. In late November 2008, the bank’s attorney, Steven F. Molo, wrote a motion for summary judgment. Against the backdrop of crisis Trump had defaulted on payment, with $330 million still outstanding. Deutsche was seeking an immediate $40 million from the tycoon. Plus interest, legal fees, and costs.
One had to be a little awed by Trump’s nose-thumbing response. Even by his sophistical and treacherous standards it was quite something. Instead of paying up, he countersued. In a complaint to the Supreme Court of New York, in the county of Queens, Trump wrote that he had no intention of paying back the outstanding loan. He described the world crisis as a “once-in-a-century credit tsunami” and an “unforeseen situation.”
According to Trump, the crash was a force majeure event. He argued that Deutsche Bank had co-created the financial downturn. Or as he put it: “Deutsche Bank is one of the banks primarily responsible for the economic dysfunction we are currently facing.”
Therefore, he was not obliged to pay back any money.
Therefore, Deutsche Bank owed him money.
He wanted $3 billion in damages from Deutsche Bank.
The German bank’s next move was an affidavit. Molo drew up a withering document, which was filed in New York. In a section ironically titled “Trump: The Guarantor,” the attorney contrasted Trump’s frivolous writ with his long career of boasting about how rich he was.
It began:
Trump proclaims himself “the archetypal businessman, a deal-maker without peer.” Trump has stated in court he is worth billions of dollars. In addition to substantial cash, personal investments and various other tangible assets, he maintains substantial interests in numerous extraordinary properties in New York and around the country.
These assets included hotel projects in seven U.S. cities, as well as in Mexico, the Dominican Republic, Dubai, Canada, and Panama, the lawyer noted. There were casinos and golf courses. These, too, were scattered all over the world, including Trump’s latest golf course development project in Scotland.
In fact, the same day he argued that the depression meant he was off the hook, Trump gave an interview to The Scotsman newspaper. After a two-year fight, he had succeeded in getting approval from the Scottish government for a new Trump golf resort near Balmedie in Aberdeenshire. The decision thrilled Trump. (It outraged environmentalists, who believed the course would wreck sand dunes and damage coastline ecology.) Trump was in a carefree mood.
“The world has changed financially and the banks are all in such trouble, but the good news is that we are doing very well as a company and we are in a very, very strong cash position,” Trump told the paper.
Trump said he didn’t have any exposure to the stock market, had bought the Scottish land for cash, and was now well placed to build “the world’s greatest golf course.” Two weeks later George Sorial, a Trump organization executive, assured The Scotsman that the tycoon had a billion dollars earmarked for the course. Sorial was vague as to where this fortune was, bankwise, but said: “The money is there, ready to be wired any time.”
If this weren’t damning enough, Molo’s affidavit cited Trump’s own literary works, which summarized Trump’s insouciant attitude toward paying back other people’s money—something he didn’t feel greatly obliged to do.
The attorney observed:
Trump provides extensive advice on how to do business through at least half a dozen books he has authored. In How to Get Rich Trump advised readers to use the courts to “be strategically dramatic.” In Think Big and Kick Ass in Business and in Life, he boasts of how he “love[s] to crush the other side and take the benefits.”
Trump strategy—honed during terrible struggles and shouting matches with lenders during the 1990s—“was to turn it back on the banks.” “I figured it was the bank’s problem, not mine,” Molo quoted Trump as saying, in connection with unpaid debt.
Molo concluded his petition by arguing that Trump must now settle his outstanding balance. “To date, he has failed to pay,” he wrote.
Trump’s outrageous behavior vis-à-vis Deutsche Bank might have been anticipated. He was, after all, someone who had been through a slew of corporate bankruptcies. His Taj Mahal casino, his other casinos in Atlantic City, his Plaza Hotel in New York City all filed for chapter 11 bankruptcy in the early 1990s.
After those failures, U.S. banks that had previously advanced the capital to Trump for building projects, believing them to be sound investments, stopped lending. Chase Manhattan, Citibank, and other burned Wall Street houses declined further credit, refused his calls.
The one institution willing to advance him loans in the new century was Deutsche Bank.
Now Trump had shafted Deutsche, too. Trump was a litigious client, slippery, untruthful, loud, wily, and knavish. He was prepared to use vexatious and underhanded tactics, toppling into absurdity. He had sued the bank for $3 billion. A judge had sensibly thrown out Trump’s suit. Evidently Deutsche would have nothing further to do with him. It would reclaim its investment and rip up its client’s file.
There was a certain fittingness that Trump would do business with a bank whose American headquarters were at 60 Wall Street. A century earlier, Donald’s German grandfather, Friedrich Trump, had worked at the same address. Friedrich was born in 1869 in Kallstadt, a small village in southwest Germany. He emigrated to New York at age sixteen. He opened hotels in Seattle and the Yukon, cashing in on the gold rush, before returning to lower Manhattan.
On Wall Street Friedrich didn’t work as the proprietor of another food and drink establishment. He went back to the profession he had learned as a teenager: barber. While his wife, Elizabeth, looked after their young son, Fred—Trump’s father—Friedrich snipped the hair of brokers and speculators. He later became a hotel manager. He died in the flu pandemic of 1918.
Friedrich’s Wall Street barbershop no longer exists. In its place is the U.S. headquarters of Deutsche Bank, a fifty-story skyscraper built in the late 1980s in giant postmodern style. Next door is a public atrium with fake palm trees and a Starbucks. There’s a shoe repair store, “while u wait.” The East River—a shimmer of silver-gray water—is visible as one exits the grand lobby of the building.
In 2010 Trump settled his feud with Deutsche Bank. This was done, extraordinarily, by borrowing more money from…Deutsche Bank.
Shut out from its real estate division, Trump turned to another part of the same institution, Deutsche Bank’s private wealth division, which typically deals with high-net-worth individuals. It doesn’t normally do property. Still, the unit lent him the money. And later gave him another $25 to $50 million in credit.
This was Trump’s route back to solvency.
The decision to keep lending to Trump was unusual, bizarre even. Deutsche Bank employees in New York were surprised. Asked whether it was normal to give more money to a customer who was a bad credit risk and a litigant, one former senior Deutsche Bank staff member said: “Are you fucking kidding me?”
The banker—who didn’t want to be named—told me that only private wealth accepted personal guarantees. “Real estate refused to lend to him [Trump],” the banker said. Still, senior risk managers and the compliance department straddled divisions and would likely have approved the move.
Remarkably, Trump was able to borrow even bigger sums. He took out two mortgages against his Trump National Doral resort in Miami. And a $170 million loan to finish his hotel in Washington in the old post office tower. These loans flowed from the private-wealth wing. There was also the outstanding Chicago loan.
According to an analysis by Bloomberg, by the time he became the forty-fifth president Donald Trump owed Deutsche Bank around $300 million. All four debts were due in 2023 and 2024.
This was an unprecedented sum for an incoming president and one that raised awkward questions about conflict of interest. If Deutsche Bank were to get into regulatory difficulty, one of the bodies that would investigate was the Department of Justice. Which reported to Trump. It was hard to see how the department could work dispassionately. Or how Deutsche Bank might take legal action against a sitting president if he defaulted again.
During the same period Deutsche Bank was doing something abnormal—something that would provoke the interest of regulators, and in turn lead to punishment. The bank was laundering money. Russian money. Not small amounts but many billions of dollars. This dubious tide flowed from Moscow to London, and from London to New York, enveloping the spot where Friedrich Trump had once worked, setting his descendants on a path to greater affluence.
In 2005 Deutsche Bank bought UFG, a boutique investment bank already well established in Moscow. UFG’s cofounder and chairman was Charlie Ryan, a charming American banker with libertarian views. Ryan’s partner was Boris Fyodorov, a former Yeltsin-era finance minister. The bank neatly straddled West and East. It was international and localized. It would be Deutsche Bank’s beachhead into Moscow.
The man behind Deutsche Bank’s aggressive expansion was Anshu Jain, its future co-CEO. He persuaded Ryan to stay on and head up Deutsche Bank’s new Moscow office. Jain came up with a controversial strategy: to tap into potentially huge Russian profits, he decided to forge relationships with state partners.
He desired, in effect, to become best friends with the Kremlin.
One way of doing this was to hire people with connections. Russia’s most powerful banker was Andrey Kostin. Kostin had served in Sydney and London as a Soviet diplomat. Intelligence sources think he was a KGB spy. In the 1990s, he became head of Vnesheconombank—VEB—a state development bank described by one former CIA analyst as the “Kremlin’s cookie jar.” Then Putin made Kostin head of Vneshtorgbank, or VTB, also state-run. After which Kostin expanded VTB to operate in nineteen countries. It worked in jurisdictions with minimal oversight. This flexibility meant the Kremlin could use VTB for sensitive international operations. In 2005 VTB absorbed two banks traditionally used in Soviet times for espionage and for shifting currency to Western communist parties. These were the Moscow Narodny Bank, based in London, and Eurobank, in Paris.
Jain and Deutsche Bank recruited Kostin’s twentysomething son, also named Andrei, with an i. In spring 2007 Kostin Jr. moved from a posting in London to Deutsche Bank in Moscow. Suddenly, Kostin got massive flows of business. It appeared Dad may have helped. Deutsche Bank did a series of lucrative trades with VTB.
According to one estimate, the German bank’s Moscow subsidiary began notching up profits of $500 million to $1 billion a year, with VTB generating somewhere between 50 and 80 percent of all revenue. This picture was pieced together from interviews with Deutsche Bank staff looking for jobs elsewhere. Other investment banks based in Moscow were chagrined. And a little suspicious.
“They were doing some very curious things. Nobody could make sense of their business,” said Chris Barter, the CEO of Goldman Sachs Moscow at the time. He added: “We found the nature and concentration of their business with VTB quite galling. Nobody else could touch VTB.”
Clearly Deutsche Bank owed its success to its newfound alliance with Russian state interests. As everyone in Moscow understood, VTB was more than a bank. It had ties to Russian intelligence. Putin’s FSB spy chief, Nikolai Patrushev—and Patrushev’s successor, Alexander Bortnikov—both sent their sons to work at VTB. The bank’s deputy chief executive, Vasily Titov, chaired the FSB’s public council. According to Trump’s business associate Felix Sater, writing in his email to Michael Cohen, VTB had agreed to bankroll Trump Tower Moscow.
So some well-connected people were helping Deutsche Bank, or at least aiding the office of their Moscow affiliate. And possibly Trump, too.
Maybe they were doing so out of kindness, as a favor. Or perhaps they wanted something in return.
Moscow was an alluring destination for Western expatriates. Especially for young single males.
There were the devushki—attractive long-legged Russian girls, some from Moscow, some newly arrived from the provinces—who were keen to meet foreigners and practice their English. There were the nightclubs, the parties, fueled by toasts and endless vodka shots. And the friendships, always more intense and philosophical than those at home.
In the new millennium the Russian capital was awash with petrodollars and opportunity. There was a dark side, too—as one of those attracted by its offer of riches discovered. Tim Wiswell grew up in Old Saybrook, Connecticut, one hundred miles northeast of New York. He was more of a “repatriate” than an expat: his father had worked in oil and gas in Russia. At age seventeen Wiswell spent a year at the Anglo-American School in Moscow and then returned to the United States for study.
In his midtwenties, Wiswell went back to Moscow and got a job with Alfa, the private bank owned by the oligarch Mikhail Fridman. From there he moved to Deutsche Bank. By twenty-nine he was head of Russian equities. He found a Russian girlfriend—Natalia Makosiy, an art historian whom he met at a Moscow dinner party.
In the wake of the 2008 crash, profits from the bank’s Russian business line were reduced by half. Traders were now under pressure to increase revenue. According to Barter, it was evident that “something nefarious” was going on at Deutsche Bank during the Wiswell period.
Barter recalled how he was approached by “broker types, not very senior,” seeking to do large, unexplained volumes of trade with Goldman Sachs. These were on behalf of major Russian clients. The brokers declined to identify their counterparties. Their names were concealed beneath “shell company after shell company,” Barter said, making a due diligence process impossible. He turned this business down “in five seconds.”
Seemingly, the same entities approached Wiswell. There they got better results. Over five years, between 2011 and February 2015, Wiswell presided over a money-laundering scheme run from the equities desk of Deutsche Bank’s Moscow office. According to the New York State Department of Financial Services (DFS), more than $10 billion was shifted from Russia to the West.
The method was simple—and effective. In Moscow, a Russian client bought blue chip Russian stocks from Deutsche Bank Moscow in companies like Gazprom or Sberbank. The payment was in rubles. The size of a typical order was $2 million to $3 million. Shortly afterward a non-Russian “customer” sold exactly the same number of securities to Deutsche Bank in London, paying in dollars.
These “mirror trades” were fake and had no economic logic. The selling parties were based in offshore territories like Cyprus or the British Virgin Islands. The buyers and sellers were linked, with related owners and agents. At least twelve different entities used the scheme to surreptitiously convert rubles into dollars. The money was interred in offshore accounts.
Thus, billions were moved out of one Deutsche Bank, from its modern glass office at Building 2, 82 Sadovnicheskaya Street, to another Deutsche Bank, at 60 Wall Street. There were nearly six thousand transactions. Nobody in New York or London or Frankfurt or any of the international financial centers really noticed.
When concerns were raised—by an unnamed European bank, for example—Wiswell swatted them aside. According to the New York regulator, he told the European bank that “there was no reason for concern.” Wiswell approved, or “on-boarded,” the Russian parties. He “threatened” and browbeat his colleagues on several occasions “when it appeared they had not moved quickly enough to facilitate transactions.”
In Moscow, Wiswell’s twenty-person equities desk was made up of Russians and Americans. One of its duties was to keep clients happy. That might mean extravagant skiing trips, visits to elite nightclubs, or weekends away. Sometimes clients repaid the favor. One of Wiswell’s business and skiing partners was Dmitry Perevalov, the owner of a Moscow fund called Lanturno.
For his fortieth birthday, Perevalov flew a group of people on a private jet to Mauritius. The jet belonged to Russian Orthodoxy’s most important bishop: Patriarch Kirill of Moscow. Perevalov chartered it for the occasion. One of his guests was Tim Wiswell. The weekend was designated “for wives” and Wiswell brought Natalia.
One fellow guest who met Wiswell at the party described him as charismatic and charming. He was a tall, handsome, all-American guy. At the same time, the person said, Wiswell came across as a “major lightweight” in terms of banking and finance.
“He had nothing special going for him. I remember him speaking pretty poor Russian. We wondered whether he was doing kosher business,” the guest said, adding that Wiswell’s wife was “quite aloof and spent the weekend with her friends.”
Guests stayed at the luxurious Four Seasons Hotel in Anahita, on the east coast of the Indian Ocean island.
Perevalov flew in a famous name to crown his birthday celebrations—the Russian rapper Timati. Timati gave a concert. Under a starry sky, and against a view of sea and mangroves, guests danced and twirled to Timati’s foot-stomping hit, “Welcome to St. Tropez.”
Woah, party now
Too much money in the bank account
Hands in the air make you scream and shout
Drinks, private villas, waterskiing out in the lagoon…everything was taken care of. “I was wondering: who the fuck is paying for all this? It was crazy,” the guest told me. Some invitees scarcely knew Perevalov, a former bartender. Those who were his actual friends—including Wiswell—called him Dima.
Lightweight or not, Wiswell was getting rich. In 2010 he had married Natalia at a ceremony in Newport, Rhode Island. While the mirror trades were occurring, Natalia became the beneficial owner of two offshore companies—one in the British Virgin Islands, one in Cyprus. In 2015 a counterparty paid $250,000 into her account. This was for “financial consulting.” Similar payments, totaling $3.8 million, were made through two companies in Belize.
These payments were “undisclosed compensation,” the Department of Financial Services found—“a bribe.” Which bank cleared these bribes? Deutsche Bank in New York.
According to Ed Caesar, author of a New Yorker exposé on the Deutsche Bank scandal, there were further payments made to the Wiswells. These arrived as cash, in a bag. The idea of the money was “to hook you, so you are not going to do unexpected things,” one Moscow broker told Caesar. “Guys always pay something,” the broker said.
The end came in August 2015 when Deutsche Bank suspended Wiswell and then fired him. After that, he disappeared. There were Facebook postings from Southeast Asia and Bali, where the Wiswells went with their two small children. He appeared to be on the run from U.S. authorities and is now allegedly back in Moscow. One friend described him to The New Yorker as “finance’s Edward Snowden.” His lawyer, Ekaterina Dukhina, refused my request for comment. In a wrongful-dismissal suit Wiswell said he’d been scapegoated. Around twenty colleagues, including two senior managers in London, knew all about the trades, he said.
The affair was a grievous blow to Deutsche Bank’s reputation. And an expensive one. The DFS—which has the power to suspend any bank with a branch in New York—fined Deutsche Bank $475 million. London’s Financial Conduct Authority imposed a £163 million penalty. The bank carried out an internal review, Project Square.
The review did not identify the Russians behind the scheme. We don’t know who they were or where the billions went. Or where the money came from in the first place. Effectively, Deutsche Bank facilitated the illegal flight of capital by a number of well-connected superusers and Kremlin insiders.
These fines took place ten days after Trump’s inauguration. The larger picture was disturbing. A Kremlin bank, VTB, run by proxies of the FSB, had seemingly captured Deutsche Bank’s Moscow outpost. Deutsche Bank’s London and New York divisions were economic beneficiaries of this arrangement. While this was going on, Deutsche Bank in New York lent hundreds of millions of dollars to the future president.
What Democratic senators and representatives wanted to know was this: Was there a connection?
It was a good question.
My attempts to get information from Deutsche Bank over its lending to Trump were unsuccessful. House and Senate Democrats fared no better.
There were legitimate questions to ask. Such as:
Had Deutsche Bank sold any part of Trump’s debt to foreign entities?
Plus, what meetings had the bank held with the Trump administration? Had Trump or his family received preferential treatment? Who decided to carry on lending to Trump after he defaulted in 2008? Had Russia or Russian entities underwritten any aspect of these loans? Was Deutsche Bank shielding the president of the United States because of the Justice Department’s ongoing investigation into mirror trades?
Every inquiry, question, and query came up against a wall. Deutsche Bank’s press offices in London and Frankfurt refused to comment. The policy was to say nothing about the president, whose tax filings remained a mystery. It was difficult to interpret the bank’s noncooperative approach. A cover-up? Or the actions of an institution terrified of what the Trump White House might do to it, given the motivation?
Meanwhile, I was piecing together another Russian money-laundering scheme, one also involving Deutsche Bank. A group of Moscow bankers were sending cash out of the country via a different route, nicknamed the Global Laundromat. Putin’s cousin Igor Putin sat on the board of one such bank. The Laundromat ran between 2010 and 2014. It processed at least $20 billion. The true figure may have been $80 billion.
It was this investigation that had led me and my Guardian colleague Nick Hopkins, in December 2016, to the Shakespeare Pub and our meeting with Christopher Steele.
The scheme involved shell companies set up in the United Kingdom. These companies “lent” money to one another, at least on paper. Russian businesses underwrote these “loans.” Company A would default on paying back Company B. Typically, a Moldovan citizen was involved. The companies would obtain a court judgment in Moldova asking the Russian firms to settle the debt.
And voilà! The Russian businesses would legally transfer hundreds of millions of dollars to a bank in Moldova’s capital, Chisinau. From Chisinau the money went to a bank in Latvia, Trasta Komercbanka. From Latvia, the cash went everywhere, to ninety-two countries, much of it vanishing offshore. The use of Moldovan judges was an imaginative ruse.
The Latvian bank required a corresponding Western bank to process its dollar-denominated transactions. Most U.S. banks, including JP Morgan Chase, refused to offer banking services to Trasta, given Riga’s notorious reputation as a European money-laundering hub. Only two Western banks agreed. Both were German. They were Deutsche Bank and Commerzbank.
Once again, Deutsche Bank was the entry point for criminal Russian money into the global financial system. (Deutsche Bank severed its relationship with Trasta shortly before Latvian officials shut down the bank in 2016 for money laundering.) According to the DFS, Deutsche Bank was reluctant to classify Russia as “high-risk,” doing so only after other “peer banks” improved checks.
Overall, Germany’s largest bank was in trouble. Its staff was demoralized. It was clocking up vast losses. And record fines. In 2005 the DFS reprimanded the bank for rigging the LIBOR, the main interbank lending rate. There was a further fine for sanctions busting—processing dollar transactions on behalf of entities in Iran, Libya, Syria, Myanmar, and Sudan. And another $7.2 billion for selling high-risk mortgage-backed securities before the 2008 slump.
Since our forward approach to Deutsche Bank’s corporate office was rebuffed, we tried other routes. We talked to current and former Deutsche Bank staff. According to one senior ex-employee, who worked in equities in Asia and New York, the bank’s problems went way beyond these scams.
The 2008 crash hit Deutsche Bank badly, the employee said. In order to paper over holes in the balance sheet, a few members of staff conducted deals with “hair”—complex, creative, and possibly illegitimate forms of finance. These dark-arts practices were extensive, the person alleged. They might involve innovative and opaque ways of getting outside parties to underwrite risky loans, the banker added, using structures “out of the cookbook.”
Did Trump accept Russian sources of funding during these times? Richard Dearlove, the former head of MI6, said this question hangs over the president. Dearlove told the magazine Prospect: “What lingers for Trump may be what deals—on what terms—he did after the financial crisis of 2008 to borrow Russian money when others in the West would not lend to him.” (Dearlove said allegations of illegal contact between Trump’s staff and Moscow were “unprecedented.”)
It wasn’t just Donald Trump who maintained a warm relationship with Deutsche Bank. The German bank looked after his entire family. Jared Kushner, Ivanka, and Kushner’s mother, Seryl Stadtmauer, were all Deutsche Bank clients. Kushner’s relationship with Deutsche Bank emerged in 2013 when he ordered a flattering profile of Trump’s wealth manager, Rosemary Vrablic. It appeared in The New York Observer, which Kushner owned.
Vrablic was a former Citibank employee who joined Deutsche Bank in 2006. In 2014 she attended a society dinner with Kushner at the Frick Museum in New York, held against a backdrop of Vermeers and Goyas. Trump described her (wrongly) to reporters as Deutsche Bank’s “boss.” And later invited her to his inauguration, The New York Times reported.
According to our sources inside Deutsche Bank, Trump’s bid to become president made him a politically exposed person, or PEP. Banks were obliged to scrutinize PEPs carefully. Deutsche Bank reviewed its lending to Trump and his relatives, and the review was sensitive. Its goal was to discover if there was a Russian connection to Trump’s loans. The DFS also requested information.
The sources insist that the answer was negative. No trail to Moscow was ever discovered, they told us. Deutsche Bank, however, refused to make a public comment. Nor would it provide details of its private review to Capitol Hill. Senators wrote letters; the bank stonewalled, citing privacy rules. Congress showed interest in mirror trades. It got the same evasive nein.
In a letter to Bill Woodley, Deutsche Bank’s U.S. CEO, Senator Chris Van Hollen expressed concerns about the bank’s lending to Kushner. Kushner had a $25 million line of credit with Deutsche Bank. Additionally, in October 2016, it loaned him $285 million. The cash was used to replace an existing loan on the old New York Times Building, the retail property Kushner bought the previous year from the Russian Lev Leviev.
The loan was made at a time when Kremlin representatives were eagerly seeking Kushner’s ear. This was when Kushner first met Sergey Kislyak, in April, when Trump gave his foreign policy speech at D.C.’s Mayflower Hotel—just a handshake and pleasantries, Kushner said. Next came the meeting with Natalia Veselnitskaya. Then, on November 16, Kislyak got in touch again. By this point it was clear that Kushner would become senior adviser to the president.
The Kushner-Kislyak meeting on December 1 took place at Trump Tower. Michael Flynn was present, too. Kushner made an unusual proposal. He asked Kislyak if it would be possible to set up a secret and secure communications channel between the Trump transition team and the Kremlin. The purpose, seemingly, was to keep any conversations hidden from the outgoing Obama government and U.S. intelligence. A back-channel, in effect.
Could this be done, Kushner wondered, by using Russian diplomatic facilities in the United States?
The inquiry was staggeringly naïve. If Kushner or Flynn were to drop by the Russian embassy, U.S. intelligence would certainly notice.
The FBI didn’t bug the conversation but learned of it afterward, when Kislyak reported to his superiors back in Moscow. According to FBI intercepts of Russian communications, Kislyak was taken aback by Kushner’s unusual request. It was unlikely Moscow would allow any American to use its encrypted networks. The Trump transition team said nothing about these secret negotiations. One person who knew the details was so alarmed he sent The Washington Post an anonymous note.
Russia, it seemed, didn’t need to expend much effort to get close to Trump’s aides. Kislyak came up with a suggestion of his own. Perhaps Kushner would like to meet with another person from Moscow, someone with “a direct relationship” to President Putin?
The details were agreed during a meeting on December 12 between Kislyak and Kushner’s assistant, Avi Berkowitz. Putin’s emissary turned out to be a banker, or more accurately, a banker-spy. His name was Sergei Gorkov. He was the head of VEB, the state development bank, which Kostin had run, and whose board Putin had chaired during his four years as prime minister.
It was VEB that had played a role in the story of Russian intelligence and Carter Page. VEB’s office in Manhattan was an espionage front. The two SVR officers who had discussed Carter Page—calling him a “bit of an idiot”—had been working with an undercover colleague based at the bank, Evgeny Buryakov. (It was the unfortunate Buryakov who was jailed in 2015 for acting as an unregistered foreign agent.)
Gorkov was a cut above Buryakov and his two U.S.-based SVR colleagues, all of whom were midlevel intelligence operatives.
Gorkov’s path was shinier. He had trained in the 1990s at the FSB’s academy before joining Yukos and state-run Sberbank. Like VTB, Sberbank performed certain Kremlin functions. It was the official sponsor of the 2013 Miss Universe contest in Moscow, attended by Trump and hosted by Emin Agalarov. Eight days after the contest, Sberbank announced it was lending Agalarov 
55 billion ($1.3 billion) to finance new projects. One of those under consideration was Trump’s Moscow Tower. In February 2016 Putin promoted Gorkov to VEB chief.
VEB’s mission was to support Moscow’s political programs. It provided capital to build facilities at the Sochi Olympics and cash to secessionist rebels in eastern Ukraine. These top-down ventures lost money. VEB had large debts. The United States had included VEB, VTB, and Sberbank in its 2014 sanctions package—the same package that led Putin to ban U.S. couples from adopting Russian children. Gorkov’s job was to restore the bank’s fortunes.
Gorkov was well prepared for his meeting with Kushner, as befits a graduate of what was known in KGB times as the Dzerzhinsky Higher School. He flew in from Moscow. On his plane were gifts. There were a piece of art and some earth carefully dug up and transported from the town of Novogrudok in northwest Belarus.
The town was where Kushner’s paternal grandmother, Rae Kushner, grew up. In 1941 the German army arrived. The town’s Jewish inhabitants were rounded up and forced to live and work in an agricultural college. Around half were executed. The survivors dug a tunnel, and in September 1943 they crawled out, fleeing into the forest.
This and much else would have been included in the FSB’s bulging Kushner file. Gorkov’s presents were chosen to remind Kushner of his origins in a part of the world that once belonged to the Soviet imperium, and of his spiritual roots. This subtlety was wasted. In evidence, Kushner said Putin’s messenger had given him a “bag of dirt.” It came from “Nvgorod,” he wrote, spelling his grandmother’s birthplace incorrectly.
This meeting took place on December 13. According to Kushner, Gorkov introduced himself and “made some statements about the Russian economy.” The banker said he was friendly with Putin, expressed disappointment about the state of U.S.-Russian relations under Obama and “his hopes for a better relationship” in the future, Kushner told congressional committees.
There was no discussion of lifting sanctions, Kushner said. Nor was he offered any commercial deals.
Kushner characterized the encounter as brief, meaningless. Without an official note this was hard to verify. After all, it was difficult to discuss the Russian economy without mentioning its depressed state. Next Gorkov flew directly from New York to Japan, where Putin was attending a summit. The banker would have certainly reported to his boss.
Kushner’s official account of his dealings with Kremlin representatives runs to eleven pages. It’s a flat, sterile document, clearly reviewed by other hands. In his version there was no wrongdoing. What happened was a series of inconsequential meetings during a hectic campaign. Kushner said he forgot Kislyak’s name. There was no secret channel. Nor did he rely on “Russian funds” to finance his business. In short, a nothing burger.
Despite these protestations, it’s clear that Russian intelligence found it remarkably easy to gain access to Trump’s inner circle. Ambassadors, lawyers, bankers bearing bags of dirt…all made their way to Trump Tower in 2016, all were welcomed and listened to. Gorkov was one part of a multiperson penetration exercise. The cast included Kislyak, Veselnitskaya, the Agalarovs, and other unknown actors working behind the scenes.
Targeting Kushner was logical. He was soon to become a federal employee. His portfolio included tax, banking policy, the military, and international affairs. In a protean White House—where anyone could be fired—Kushner’s status as the president’s son-in-law made him unfireable.
During his meetings with Russians, Kushner said nothing about Moscow’s attack on U.S. democracy.
Afterward, he kept quiet about the encounter. So did the Trump administration. In his security clearance form Kushner didn’t mention Gorkov or Kislyak. (Kushner said this was an administrative mistake, made by an underling, and that he left out details of all foreign contacts.) The American public only found out because of leaks.
By autumn 2017 the questions that led us to meet with Steele had acquired greater definition.
Was Moscow blackmailing Trump? And if yes, how exactly?
As a candidate, Trump’s praise of Putin had been a steady theme. In the White House, his fidelity to Russia’s president had continued, even as he lambasted other world leaders, turned on aides and allies, fired the head of the FBI, bawled out his attorney general, and defenestrated his chief ideologue, Steve Bannon.
It was Steele’s dossier that offered a compelling explanation for Trump’s unusual constancy vis-à-vis Russia. First, there was Moscow’s kompromat operation against Trump going back three decades, to the Kryuchkov era. If Trump had indulged in compromising behavior, Putin knew of it.
Second, there was the money: the cash from Russia that had gone into Trump’s real estate ventures. The prospect of a lucrative deal in Moscow to build a hotel and tower, a project that was still being negotiated as candidate Trump addressed adoring crowds.
And then there were the loans. These had helped rescue Trump after 2008. They had come from a bank that was simultaneously laundering billions of dollars of Russian money.
Finally, there was the possibility that the president had other financial connections to Moscow, as yet undisclosed, but perhaps hinted at by his missing tax returns.
Together, these factors appeared to place Trump under some sort of obligation. One possible manifestation of this was the president’s courting of Putin in Hamburg. Another was the composition of his campaign team and government, especially in its first iteration. Wherever you looked there was a Russian trace.
Trump’s pick for secretary of state? Rex Tillerson, a figure known and trusted in Moscow, and recipient of the Order of Friendship. National security adviser? Michael Flynn, Putin’s dinner companion and a beneficiary of undeclared Russian fees. Campaign manager? Paul Manafort, longtime confidant to ex-Soviet oligarchs. Foreign policy adviser? Carter Page, an alleged Moscow asset who gave documents to Putin’s spies. Commerce secretary? Wilbur Ross, an entrepreneur with Russia-connected investments. Personal lawyer? Michael Cohen, who sent emails to Putin’s press secretary. Business partner? Felix Sater, son of a Russian American mafia boss. And other personalities, too.
It was almost as if Putin had played a role in naming Trump’s cabinet. The U.S. president, of course, had done the choosing. But the constellation of individuals, and their immaculate alignment with Russian interests, formed a discernible pattern, like stars against a clear night sky. A pattern of collusion.
If Trump had been telling the truth—about his visits to Moscow, his dealings with Russian and Soviet emissaries, his financial entanglements—he had nothing to fear. It was a big if.
If he had been lying, the situation was grave. Sooner or later, the truth might engulf him and sweep away his presidency.