When Donald Trump on Wednesday announces how he’ll separate himself from his vast family business empire, lawyer Mitchell Wine will greet it with a shrug. He’s leading a lawsuit against Trump in Canada that threatens to follow the president-elect into office.
The suit on behalf of investors underscores this: All conflicts of interest, litigation and business disputes likely won’t disappear when Trump moves to the White House.
“It’s a real problem,” said Lawrence Noble, a former chief counsel of the Federal Election Commission, who like other experts thinks nothing short of complete divestiture is likely to resolve potential Trump conflicts. “It’s why there are calls for him to divest himself from his business interests, especially foreign business interests.”
An examination of Trump’s 564 businesses that he declared in May 2016 shows that at least 151 appear to be tied to businesses outside the United States.
Trump originally said he’d announce in early December how he would step away from his businesses, especially those doing business abroad. Then he canceled the news conference. Now he is days away from becoming president.
A Canadian court has allowed the lawsuit to proceed against Trump and his business partners in the failed Trump International Hotel & Tower in Toronto. Trump leased his name to Russian émigrés in Canada, who built a luxury hotel and condo tower in Toronto. The Trump Organization operated a hotel management company in the building there too.
But the Russians’ company Talon International Development Inc., which built the luxury tower, defaulted on its loans in mid-2015 and went into bankruptcy receivership last year. That made it hard for buyers to win compensation from Talon, and that turned buyers’ attention on the owners and partners.
Wine, with the law firm of Levine Sherkin Boussidan, brought a lawsuit for clients who own 27 units, seeking from Trump, two of his companies and the Russian partners a total of $10 million in damages.
“I can’t look to them (Talon) for the balance, which means I will be looking at other defendants. One of them is Donald Trump,” Wine said in a phone interview from Toronto. “I will be looking very hard at next steps to try to get a judgment against one or more of those defendants, and of those defendants is Donald Trump.”
Wine and his customers are open to a settlement of the sort Trump decided on when, in November, shortly after winning the election, he agreed to pay $25 million to settle lawsuits over Trump University.
Alan Garten, executive vice president and general counsel for the Trump Organization, isn’t concerned about the Canadian lawsuit.
“There’s no evidence out there that any (damaging) evidence exists. They appear to be throwaway claims,” Garten said in a telephone interview, adding that there “is no factual or legal basis to involve my client in any of those claims.”
The Canadian case also highlights Trump’s ties to Russian businessmen in several of his projects, and his eagerness to improve relations with Russia has raised concerns among members of Congress. Trump tweeted last week that “Having a good relationship with Russia is a good thing, not a bad thing. Only ‘stupid’ people, or fools, would think that it is bad!”
“He has put Russia in the spotlight and Russia has put itself in the spotlight,” said Noble, now general counsel for the Campaign Legal Center, which promotes ethics and greater transparency in campaign finance. “What you have there is an oligarchy. You have some very wealthy individuals who are tied in with the government. It’s a country that is not seen as a truly functioning democracy at this point, and there are a lot of concerns about our relationship with Russia. ”
U.S. intelligence agencies have concluded that Russia sought to influence the U.S. elections. According to a report released last week, the Russian government developed a “clear preference for President-elect Donald Trump” and Russian President Vladimir Putin ordered an influence campaign aimed at the U.S. election.
Trump’s partners at Talon were billionaire Alex Shnaider and Eduard Shyfrin, émigrés from Russia who settled in Canada but enjoyed a fortune made from vast oil and real estate holdings back in Russia and Ukraine. Separate from their Toronto bankruptcy problems, the pair publicly fell out in 2007 with another business partner Michael Shtaif, who sued them for $750 million in damages.
Shtaif is also a Russian émigré who fled to Canada, and he alleged in a civil lawsuit that Shnaider in 2006 paid off a gun-toting Moscow police officer to help defraud him in a business deal in Russia. In a countersuit, Shnaider and his partners accused Shtaif of paying other Russian police for the same purpose. After seven years, a Canadian judge in 2014 exonerated Shnaider.
Trump was never tied to that affair, but it raises questions about his vetting of his partners. The issues surrounding these Russian partners were well documented by the time the hotel and condo complex went under construction in 2007, and when it opened in Toronto in April 2012 with Trump and his children Ivanka, Eric and Donald Jr. all present for the ribbon-cutting ceremony.
The lawsuit in Toronto was brought by a middle-class warehouse supervisor named Sarbjit Singh, whose father mortgaged his own home for the son to put a down payment on a unit. The financial crisis of 2008 led many buyers to back out and, despite promises of huge profits, about two-thirds of the units still weren’t sold when the developers defaulted in summer of 2015.
A lower court judge ruled in favor of the developers, but a three-judge appellate panel last Oct. 13 unanimously struck it down, awarded the investors trial costs and sent back to the lower court portions of the original lawsuit.
Trump licensed his name for the building, and two of his companies, Trump Toronto Hotel Management Corp. and Trump Marks Toronto LP, were managers in the project and are potentially affected by its pending sale.
The Russian developers had little experience with hotels or condo developments. The Toronto project ran into problems, the lawsuit claims, and buyers like Singh were hit with all sorts of unexpected fees and charges that were never in any contract.
How Trump came to partner with Shnaider and Shyfrin isn’t entirely clear.
“Certainly there was due diligence done. Mr. Trump personally wasn’t really involved,” said Garten, who noted that the origins of the deal predated his time with the Trump organization. He added that Trump had “limited interaction” with Shnaider.
“This whole fascination with this Russian business connection is maybe one of the most overblown stories I’ve seen for the entirety of 2016,” Garten said.
Garten said Trump does more business with Indians and Canadians than he does with Russians.
Talon International wasn’t the only company with Russian backers with whom Trump did business.
The Trump-branded Florida beachfront hotel and condo development in Fort Lauderdale failed in 2009. U.S. courts have cleared Trump of any misrepresentation, but the collapse of the project spotlighted his partner, Bayrock Group, which had ties to Russia.
Bayrock Group is a development firm headed by Tevfik Arif, a Turkish citizen born in Kazakhstan and raised in the Soviet Union. He was arrested in Turkey in 2011, aboard the world’s largest luxury yacht, and accused of running a prostitution ring involving young women from Russia and Ukraine. The charges were later dropped.
One of Bayrock’s co-founders is Felix Sater, a Russian-born businessman who spent a year in a U.S. jail for stabbing a man in a bar fight and was later convicted of stock fraud along with others in a Mafia-linked brokerage firm. His attorney confirmed to The Washington Post last year that Sater served as a U.S. government informant in an important national security investigation.
Trump had worked with Bayrock on a deal in Russia in 2005 that did not pan out. Sater told The Washington Post last May that he’d escorted Donald Trump Jr. and Ivanka Trump around Moscow. Even after he left Bayrock amid controversy, the Trump Organization gave Sater temporary office space and business cards that read “senior adviser to Donald Trump,” Garten confirmed.