Why real estate deals are important to investigators

Sam Smith - As the Review has been expecting for some time, the Trump real estate empire is attracting serious investigatory attention. While the reasons for this are not clear and no current charges have been leveled, it is helpful to understand why federal agents are interested in such matters. 

Basically, real estate can serve as a crook's bank either thanks to the ability to hide the source of funding or through the use of cash at a level not permitted at a bank. For more on this latter point: 

Business Insider - All you have to do to capture the IRS' attention is make multiple large deposits that are less than $10,000 in your account.

Banks that get deposits of more than $10,000 have to report those deposits to the federal government. A person who purposely tries to evade these reporting requirements is guilty of a crime known as "structuring" (or "smurfing.") It's a crime to purposely duck these reporting requirements even if the money comes from a legal source.

If the IRS even suspects you're guilty of restructuring, it can take your cash.


Roger Morris & Sally Denton, Penthouse Magzine - According to l.R.S. criminal investigator Duncan, secretaries at the Mena Airport told him that when [major drug dealer Barry] Seal flew into Mena, "there would be stacks of cash to be taken to the bank and laundered." One secretary told him that she was ordered to obtain numerous cashier's checks, each in an amount just under $10,000, at various banks in Mena and surrounding communities, to avoid filing the federal Currency Transaction Reports required for all bank transactions that exceed that limit. Bank tellers testified before a federal grand jury that in November 1982, a Mena airport employee carried a suitcase containing more than $70,000 into a bank. "The bank officer went down the teller lines handing out the stacks of $1,000 bills and got the cashier's checks." Law-enforcement sources confirmed that hundreds of thousands of dollars were laundered from 1981 to 1983 just in a few small banks near Mena, and that millions more from Seal's operation were laundered elsewhere in Arkansas and the nation.

Quora - About $1,000,000 a million dollars in Benjamin Franklin $100 bills would fit in an average briefcase, perhaps a little bit less or more depending on the size of your briefcase. $1 million dollars weighs 10kg exactly.

While nothing of this sort has been charged against the Trump Organization, it illustrates the role cash can play in criminal activity and why real estate becomes a useful haven. Now, about hiding ownership:

Nation 2014 - Since 2008, roughly 30 percent of condo sales in pricey Manhattan developments have been to buyers who listed an international address—most from China, Russia and Latin America—or bought in the name of a corporate entity, a maneuver often employed by foreign purchasers. Because many buyers go to great lengths to hide their interests in New York properties, it’s impossible to put a number on the proportion laundering ill-gotten gains. But according to money-laundering experts as well as court documents and secret offshore records reviewed by the International Consortium of Investigative Journalists, New York real estate has become a magnet for dirty money.

Public officials and real-estate operatives in New York have mostly applauded the city’s influx of mega-rich homesteaders from overseas, with former Mayor Michael Bloomberg leading the chorus during his time in office. “Wouldn’t it be great if we could get all the Russian billionaires to move here?” he told New York magazine in September.

Combine that give-us-your-rich ethos with state and local policies that lavish tax breaks on Manhattan’s wealthiest homeowners and federal policies that let real estate agents off the hook, and the results are predictable: New York is a magnet for the super-rich homebuyers from other lands bearing money of sometimes dubious provenance.

...US authorities don’t put up many roadblocks for foreigners who want to launder money through American real estate. Escrow and real estate agents aren’t required to find out the true identities of property buyers—the real people behind the front men or corporate shells. The Patriot Act, passed after the 9/11 attacks, requires that banks, securities houses and other financial firms follow stringent anti–money laundering rules and report suspicious transactions to law enforcement. Real estate and escrow agents were included on the list, but a loophole in the law gave an opening for the US Treasury to “temporarily” exempt the real estate industry from these requirements. A dozen years later, the exemption still stands.

... Among the assets that US authorities went after in the wake of the investigation was a condo at New York’s Trump Park Place tower. Clarita Garcia and a third son, Timothy, purchased Unit 6A in the luxury building for $765,000 in 2004. US prosecutors said the money, funneled through a joint account held by mother and son at Citibank, had been amassed through the general’s corrupt activities.

In late 2012, federal prosecutors in Manhattan won a court order turning over control of the Trump Park Place unit to the US Department of Homeland Security. 

Guardian, 2917 - The Trump Ocean Club International Hotel and Tower soars over Panama City bay, a 70-storey skyscraper shaped like a sail. Donald Trump’s first international hotel venture, it opened in 2011, a mix of condominiums, hotel rooms and a casino.

As one of the tallest structures in Latin America, it was a bold and lucrative expression of the Trump brand, earning him as much as $13.9m in management fees and royalties in the last three years.
By day it glints in the tropical sunshine, an apparently shining testament to the US president’s business savvy.
But a curious thing happens at night. Many of the lights stay off. The restaurants are near deserted; the corridors silent. The skyscraper appears to be largely empty – a dark tower.
Many of those who bought the condos, it turns out, did so not to live there but allegedly to launder illicit money – Russian gangster money, drug cartel money, people-smuggling money.
A joint Reuters-NBC News investigation alongside a report by the non-profit Global Witness said the skyscraper with Trump’s name had ties to international organized crime.

Alternet  -  The property, which the lead broker Alexandre Ventura Nogueira describes as “Ivanka Trump’s baby,” listed units for three times the going rate in Panama City, thanks to the Trump name. Nogueira worked closely with the Trump family; he claims he attended at least 10 meetings with Ivanka Trump, who challenged him to sell 100 units in the building. “The agreement was, I had a week to sell 100 units,” Nogueira told Reuters. “I said, ‘I’m going to do better, I’m going to sell without telling (the buyers) the price.'”

Nogueira later fled Panama after he was arrested for unrelated charges of real estate fraud. From his European asylum, he told NBC that at least half of his Trump Ocean Club customers were Russians, including some with “questionable backgrounds." Only later did he learn of their ties to Russian organized crime circles.

NBC reports that Mauricio Ceballos, a former prosecutor in Panama who investigated Trump’s business associates for financial crimes, called the Trump Ocean Club “a vehicle for money laundering.”

Among the shady buyers are:

David Murcia Guzmán, founder of a large Colombian marketing company, who purchased 10 units in the Trump Ocean Club. Guzmán is now in U.S. custody, convicted of laundering money on behalf of drug cartels, and will be extradited to Colombia. Guzmán also has financial ties to the terrorist organization FARC. Louis Pargiolas, who pleaded guilty in 2009 in Miami to conspiracy to import cocaine. Stanislav Kavalenka, a Russian national charged in Canada for compelling women into prostitution. Arkady Vodovozov, convicted in Israel of kidnapping, according to Reuters.

By 2010, Donald Trump had made approximately $74.2 million through his association with the hotel. From 2014-2017, he was paid as much as $13.9 million.

As Global Witness explains:

“The warning signs were there from the outset. The Trump Ocean Club, one of Trump’s most lucrative licensing deals to date, was announced in 2006 and launched in 2011, a period when Panama was known as one of the best places in the world to launder money. Whole neighborhoods in Panama City were taken over by organized crime groups, and luxury developments were built with the purpose of serving as money laundering vehicles.

“Moreover, investing in luxury properties is a tried and trusted way for criminals to move tainted cash into the legitimate financial system, where they can spend it freely. Once scrubbed clean in this way, vast profits from criminal activities like trafficking people and drugs, organized crime, and terrorism can find their way into the U.S. and elsewhere.”

The Trump Organization has shrugged off responsibility in a statement following the news, but legal experts say it should have done its due diligence into the backgrounds of buyers. Arthur Middlemiss, a former Manhattan assistant district attorney and a former head of the global anti-corruption program at JPMorgan, blames the Trumps directly:

“Those who do business there should perform due diligence on others involved in their ventures. If they fail to do so, they risk being liable under U.S. law of turning a blind eye to wrongdoing.”