Donald Trump likely violated the Foreign and Corrupt Practices Act, according to a lengthy investigative story published in the New Yorker.
The Trump Organization participated in what appears to be a nakedly corrupt business deal involving the development of The Trump International Hotel & Tower Baku in Azerbaijan. Azerbaijan is situated between Southwest Asia and Southeastern Europe. Russia borders it to the north, Iran to the south and the Caspian Sea to the east. The country is notoriously corrupt.
The hotel never opened, and it’s well-off-the-beaten-path location and impossible to succeed business plan baffles financiers and real estate experts.
Trump Tower Baku was intended to be both hotel and residential space, but it’s location in an undeveloped neighborhood, many miles away from the main business district is unsuitable for an “ultra-luxury property.” It’s situated across the street from a discount shopping center.
A former top official in Azerbaijan’s Ministry of Tourism, scoffed, “Why would someone put a luxury hotel there? Nobody who can afford to stay there would want to be in that neighborhood.”
Adam Davidson, the reporter for the New Yorker, wrote, “During the nine days I was in town, I went to the site half a dozen times, and on each occasion, I had a comical exchange with a taxi-driver who had no idea which combination of turns would lead to the building’s entrance.”
A Cornell University expert told The New Yorker that five-star hotels should demonstrate the likelihood of an average occupancy rate of 60 percent over ten years to be financially viable. When the Trump Organization announced the project would be converted exclusively into a hotel in 2014, hotel occupancy in Baku was around 35 percent.
Trump’s financial filings show he was partnered in the deal with Ziya Mammadov. The Mammadov family is notoriously corrupt in a nation notorious for corruption. Ziya is a powerful oligarch who U.S. officials believe launders money for the Iranian Revolutionary Guard.
Iran’s Revolutionary Guard is an independent force of about one hundred fifty thousand soldiers whose duty is to protect the Islamic system and the power of the Supreme Leader, Ayatollah Ali Khamenei. The Guard operates a shadow economy of “dozens, perhaps even hundreds, of companies that appear to be private in nature but are run by [Revolutionary Guard] veterans,” according to the United States Institute of Peace. To prevent funding of terrorists and prevent geopolitical instability, many businesses with Revolutionary Guard ties are under U.S. and European sanctions, an attempt to prevent them access to international markets.
The Quds Force, for instance, an arm of the Iranian Revolutionary Guard, is blacklisted by the U.S. State Department for its support of terrorism, including financing Shiite proxy groups such as Hezbollah in Lebanon, the Houthis in Yemen and the Sunni militant group Hamas in the Gaza Strip.
The Foreign Corrupt Practices Act (FCPA) forbids American companies from participating in any schemes that reward corrupt foreign government officials, even unwittingly.
The New Yorker reports contractors who worked on The Trump Tower Baku described always being paid in cash. One contractor recounted, “they would give us a giant pile of cash. I got a hundred and eighty thousand dollars one time, which I fit into my laptop bag, and two hundred thousand dollars another time.” A colleague of his picked up a payment of two million dollars. “He needed to bring a big duffel bag.”
Alan Garten, the Trump Organization’s lawyer, didn’t deny there was corruption in the project but insisted the Trump organization was blameless because “We did not pay any money to anyone. Therefore it could not be a violation of the FCPA.”
But that’s all wrong, according to Jessica Tillipman, an assistant dean at the George Washington University school of law and expert on the FCPA. “You can’t go into business deals in Azerbaijan assuming that you are immune from the FCPA,” she said, “Nor can you escape liability by looking the other way. The entire Baku deal is a giant red flag—the direct involvement of foreign government officials and their relatives in Azerbaijan with ties to the Iranian Revolutionary Guard. Corruption warning signs are rarely more obvious.”
According to the New Yorker, more than a dozen lawyers with experience in the Foreign Corrupt Practices Act were surprised by the Trump Organization’s careless vetting of foreign partners.
In May 2012, Trump phoned-in to CNBC, with the recently finalized Baku deal, and the Foreign Corrupt Practices Act on his mind. “It’s a horrible law, and it should be changed,” he said, referring to the FCPA. Trump insisted if American companies refused to give bribes, “you’ll do business nowhere. There is one answer—go to your room, close the door, go to sleep, and don’t do any deals, because that’s the only way. The only way you’re going to do it is the other way.”
Trump’s business-minded world view translates to “financing terrorism is o.k. because sometimes it’s the only way to do business,” which is in stark contrast to United States interests and policy. While the Trump Organization likely aided foreign adversaries to launder money, directly supporting terrorism, without access to the Trump Organization’s bookkeeping, we can’t say whether or not there is a prosecutable offense.
Trump’s Atlantic City casinos paid $10 million in fines for violating anti-money-laundering requirements. The Trump SoHo project was a front for money laundering too, though Trump evaded legal liability because he didn’t own the project.
The Trump Tower Baku project is just one corrupt business deal that may have enriched Trump while providing support to terrorist networks. We wouldn’t know without investigative journalists digging, and perhaps this is why Trump will fight to keep his tax returns under lock and key. Sure, maybe he’s concealing shady Russian ties, but who knows what else he’d like to keep hidden.
Senator Sherrod Brown wrote that a federal investigation is warranted:
“The Trump Organization’s Baku project shows the lack of ‘extreme vetting’ Mr. Trump applied to his own business dealings in corruption-plagued regimes around the globe. . . . Congress—and the Trump Administration itself—has a duty to examine whether the President or his family is exposed to terrorist financing, sanctions, money laundering, and other imprudent associations through their business holdings and connections.”