How a Trump SoHo Partner Ended Up With Toxic Mining Riches From Kazakhstan

The long road from the old Soviet repub­lic to the off­shore finan­cial cen­ters of the Caribbean to London—and all the way to a part­ner in Midtown Manhattan’s Trump SoHo.

Green smoke paints the land­scape on the out­skirts of Aktobe, the hub of a Central Asian min­ing empire that pro­duces a third of the world’s chromi­um — the essen­tial ingre­di­ent in stain­less steel.

Locals say that the air gets so bad in sum­mer it’s hard to breathe. Industrial waste con­t­a­m­i­nates the groundwater.

All of this starts at the Aktyubinsk Chromium Chemicals Plant (AZXS), a Nikita Khrushchev-era com­plex. It shares an indus­tri­al zone with a vast smelt­ing plant; togeth­er, they have yield­ed lav­ish pri­vate wealth since the col­lapse of the Soviet Union.

In one sense, it’s a famil­iar snap­shot of post-Soviet cap­i­tal­ism: state assets bought for a song, work­ers say­ing they were cheat­ed out of shares and con­nect­ed busi­ness­men get­ting wild­ly rich.

Workers at the entrance of AZXS at the end of a shift, with a Soviet-era stat­ue loom­ing overhead.

This sto­ry, how­ev­er, carves a path from near Kazakhstan’s north­ern bor­der with Russia to the off­shore finan­cial cen­ters of the Caribbean, to London and all the way to Trump prop­er­ty in Midtown Manhattan.

How and why funds from for­mer Soviet states flowed into Trump-brand­ed real estate has been the focus of spec­u­la­tion since the start of the 2016 pres­i­den­tial cam­paign. One the­o­ry, pro­pound­ed by oppo­nents of President Donald Trump is that his admi­ra­tion for Russia’s Vladimir Putin comes down to mon­ey, a sug­ges­tion Trump has force­ful­ly denied.

Still, Special Counsel Robert Mueller is dig­ging into Trump’s busi­ness deal­ings, and the scram­ble for Kazakhstan’s chromi­um rich­es may fill in a piece of that puz­zle. Company records, court fil­ings and inter­views in Kazakhstan and London sug­gest mil­lions of dol­lars from the Aktobe plant wound their way to the U.S. and a devel­op­ment com­pa­ny with which Trump part­nered to build a con­tro­ver­sial Trump SoHo hotel-con­do­mini­um com­plex in Manhattan.

There’s no sug­ges­tion that the Kazakh mon­ey ties Trump to Putin. But the funds tell an impor­tant sto­ry of the future president’s insou­ciance toward due dili­gence and busi­ness part­ner choic­es at a time when unmon­i­tored cash was flood­ing out of Russia and oth­er for­mer Soviet states.

It was on the 24th floor of Trump Tower that Kazakh busi­ness­man Tevfik Arif, a key fig­ure in Aktobe chromi­um, estab­lished Bayrock Group LLC. The plant passed mil­lions of dol­lars to Bayrock, which orga­nized financ­ing for the Trump SoHo high-rise that Trump once hailed as a “work of art.” Earlier last month, Trump Soho’s new own­er bought the Trump Organization out of its man­age­ment con­tract for the project.

(From left) Eric Trump, Tevfik Arif, Donald Trump Jr., Ivanka Trump and Donald Trump attend the Trump SoHo press con­fer­ence at the con­struc­tion site on Sept. 19, 2007.

It’s unclear pre­cise­ly how much mon­ey from the refin­ery might have coursed through Bayrock and to Trump SoHo and oth­er Trump-brand­ed projects that Bayrock planned or under­took, in Miami and Phoenix. A 2016 com­plaint for breach of con­tract against Arif said that in two years alone, at least $10 mil­lion arrived at Bayrock from the Kazakh plant. Jody Kriss, the Bayrock finance direc­tor who brought the suit, said in the com­plaint that he became con­vinced the com­pa­ny was a front for Russian and Kazakh mon­ey laun­der­ing. The case, approved in December 2016 to pro­ceed to tri­al under a rack­e­teer­ing statute, is ongoing.

Arif, through a Bayrock spokes­woman, declined to com­ment on the case or a list of oth­er questions.

In Aktobe, work­ers leav­ing their shift on a recent morn­ing said they didn’t know who owned the chromi­um chem­i­cals plant which exports the ingre­di­ents for anti-cor­ro­sive paints to about 30 coun­tries and is known here by its Russian ini­tials, AZXS. Inspirational Soviet-era stat­ues of work­ers clutch­ing a book and hard­hat still stand over the entrance, 27 years after Kazakhstan declared its inde­pen­dence. Ruslan Kim, a smart­ly suit­ed young eth­nic Korean with a brief­case, who described him­self as an AZXS rep­re­sen­ta­tive, said he didn’t know, or ask, who owned the place.

Scrap met­al col­lec­tors in Aktobe. 

There’s lit­tle doubt that Arif’s broth­er Refik has owned a con­trol­ling share of the plant since the ear­ly 1990s, when the pair start­ed doing busi­ness with three men known col­lec­tive­ly in Kazakhstan as the Troika, or trio. Today, the Troika own much of Kazakhstan’s met­als indus­try, includ­ing the chromi­um smelter next to AZXS.

Audited 2016 accounts for AZXS show four shell com­pa­nies as the plant’s main share­hold­ers. According to the Panama Papers leak of off­shore hold­ings, three of these were estab­lished in the British Virgin Islands and in turn were owned by shell com­pa­nies, includ­ing one that shares a name with Tevfik Arif’s nephew, Polat Ali.

A 2011 leaked let­ter from Hamels Consultants, the London-based firm that orga­nized the Arifs’ off­shore hold­ings, said the annu­al prof­its from the chromi­um chem­i­cals plant flowed into a fur­ther BVI enti­ty, belong­ing to Refik Arif. In 2008, the most recent year cit­ed in the let­ter, that prof­it was $44 mil­lion. (A spokes­woman for Hamels said the com­pa­ny could not com­ment on the affairs of its clients.)

Part of the chromi­um plant’s prof­its were then direct­ed to Bayrock by issu­ing loans from a U.K. com­pa­ny reg­is­tered in London as dor­mant. In one June 2005 instance, Tevfik Arif autho­rized Bayrock to bor­row $2 mil­lion from the com­pa­ny at 6 per­cent a year. It isn’t clear whether the loan was repaid. The Bayrock spokes­woman declined to comment.

According to a 2007 Bayrock pre­sen­ta­tion, Arif was just one chan­nel through which Kazakhstan’s chromi­um indus­try fund­ed Bayrock. The oth­er was the Troika’s multi­bil­lion-dol­lar met­als empire and its chair­man, Alexander Mashkevich.

Mashkevich and his two part­ners —Patokh Chodiev and Alijan Ibragimov

Mashkevich and his two part­ners —Patokh Chodiev and Alijan Ibragimov— arrived in Kazakhstan in the ear­ly 1990s, secur­ing con­trol over exports from a swathe of met­als indus­tries. When those assets were then put up for pri­va­ti­za­tion auc­tion, the Troika were well-placed to win.

As ear­ly as 1996, Belgian pros­e­cu­tors accused the trio of laun­der­ing a $55 mil­lion bribe by pur­chas­ing prop­er­ty out­side Brussels. The case was since set­tled for an undis­closed fine and no admis­sion of fault.

By 2007, their hold­ing com­pa­ny, Eurasian Natural Resources Corporation Plc, went pub­lic in London. It soon became embroiled in one of the biggest scan­dals the City had seen in years. Allegations ranged from cor­rup­tion in Kazakhstan to hun­dreds of mil­lions of dol­lars in poten­tial bribes paid to acquire mines in Africa. A U.K. Serious Fraud Office inves­ti­ga­tion is still under way. A mem­ber of the ENRC board, Ken Olisa, char­ac­ter­ized the company’s prac­tices at the time as “more Soviet than City.”

Residential apart­ment blocks in Aktobe.

ENRC denied all wrong­do­ing and said it had “a zero-tol­er­ance pol­i­cy to bribery.” But the adverse pub­lic­i­ty crashed the company’s share price and in 2013 — just six years after list­ing — the Troika took their com­pa­ny pri­vate again. Now based in Luxembourg, Eurasian Resources Group Sarl., or ERG, accounts for 4 per­cent of Kazakhstan’s economy. 

How did so much of Kazakhstan’s nat­ur­al-resources wealth end up in the hands of a few businessmen?

That ques­tion trou­bles Yerzhan Dosmukhamedov, a for­mer Kazakhstani politi­cian who has railed against what he sees as endem­ic cor­rup­tion in his coun­try. A crit­ic of Kazakhstan’s President Nursultan Nazarbayev and his regime, Dosmukhamedov lives in self-imposed exile in London.

No civ­i­lized finan­cial insti­tu­tion should even shake hands with them,” Dosmukhamedov said of the Troika.

The Troika, in a let­ter from ERG’s lawyers, declined to com­ment on a list of queries the let­ter described as “a patch­work of stale mat­ters.” When list­ed on the London Stock Exchange, the let­ter said, ENRC’s “assets (includ­ing Kazchrome), and its founders, includ­ing Mr. Machkevitch, were sub­ject to the detailed lev­el of scruti­ny to be expect­ed of such a busi­ness, at the time of flota­tion and since.”

Bayrock spokes­woman Angela Pruitt said Mashkevich was nev­er a part­ner or investor in the firm. She did not explain why Bayrock had named him, backed by ENRC, as a strate­gic investor in 2007.

Mashkevitch’s 91-meter (299-foot) yacht, among the word’s largest, off the coast of Mugla, Turkey on July 16, 2017. 

In many ways, Mashkevich makes an unlike­ly tycoon. During the Soviet era, he was a pro­fes­sor of philol­o­gy and mixed with some of Central Asia’s best-known writ­ers. His broth­er became a globe-trot­ting orches­tral conductor.

He was a real­ly nice kid” from a fam­i­ly of intel­lec­tu­als, recalls Zamira Sydykova, who grew up with Mashkevich in Kyrgyzstan. Once he became rich, he was gen­er­ous to friends back home, she said, plac­ing them into jobs in his busi­ness in Kazakhstan and fund­ing a Jewish school in Bishkek, the Kyrgyz capital.

Sydykova, a promi­nent jour­nal­ist and for­mer Kyrgyz ambas­sador to the United States, declined to com­ment on Mashkevich’s busi­ness deal­ings because she knows lit­tle about them. Speaking broad­ly, how­ev­er, she said influ­ence ped­dling was endem­ic in Central Asia. “What is the prob­lem?” she asked of the focus on Mashkevich’s report­ed­ly close ties to Nazarbayev, a rela­tion­ship he has denied. “You can’t do busi­ness here with­out con­nec­tions in the government.”

Today Tevfik Arif and Mashkevich enjoy the trap­pings of extreme wealth. Arif lives in Port Washington on Long Island’s North Shore. Mashkevich, an Israeli nation­al since the 1990s, has  homes in sev­er­al coun­tries includ­ing London, as well as a $30 mil­lion prop­er­ty near Buckingham Palace. He keeps a 300-foot-long supery­acht, the Lady Lara. Mashkevich is worth at least $1 bil­lion, accord­ing to Bloomberg data.

An old, non-func­tion­ing open­cast mine in Xromtau, Kazakhstan.Photographer: Konstantin Salomatin for Bloomberg

Others haven’t been so lucky.

In Xromtau, a dusty min­ing set­tle­ment 60 miles east of Aktobe, Natalya Ivanova recalls how in July 1999 she was ordered to sell her small stake in Kazakhstan’s lucra­tive chromi­um industry.

Under a state vouch­er pri­va­ti­za­tion pro­gram, 10 per­cent of the shares in Kazchrome, a com­pa­ny that includ­ed the Troika’s chromi­um mine and two smelters, were ear­marked for employees.

My boss came and said, ‘Do you want to keep work­ing here? If you do, you have to give up your shares,” Ivanova says.

Several of her neigh­bors, stand­ing out­side their drab con­crete apart­ment blocks, tell sim­i­lar sto­ries. They say they were giv­en three days; bus­es took them to Kazchrome’s head­quar­ters in Aktobe; they were ordered to sign away their stock rights.

Ivanova kept her signed copy of the sale agree­ment. It shows she trans­ferred her stock to a com­pa­ny reg­is­tered in the British Virgin Islands. The price she was paid — the equiv­a­lent of $4 per share, or $316 in all — would have val­ued Kazchrome’s entire share issue at about $2.25 million.

On the out­skirts of Xromtau, chil­dren col­lect well water.Photographer: Konstantin Salomatin for Bloomberg

It isn’t clear who owned the now-defunct BVI com­pa­ny, Essex Commercial Corporation. Given that the mine’s man­age­ment worked for the Troika at the time, the work­ers assume it was one of them. When ENRC float­ed on the London Stock Exchange eight years lat­er, it was val­ued at 6.8 bil­lion pounds (then $13 bil­lion). At the time, more than half of ENRC’s total rev­enue came from Kazchrome, sug­gest­ing a val­u­a­tion in the billions.

Xromtau’s mine work­ers noticed. Hundreds com­bined to hire a lawyer, Bakhtygul Kanatov. He says gov­ern­ment offi­cials tried to bribe him to back off the class action suit he filed to seek redress. When he declined, police arrest­ed him over a faked hit-and-run acci­dent in a park­ing lot, and told him things would get worse if he didn’t drop the case, he says. 

Kanatov, at his office in Aktobe.

Kanatov dug a hole in the ground, buried his files and walked away. “One of the unhap­pi­est times of my life,” he says.

What Kazakh share­hold­ers and tax pay­ers lost, Bayrock and oth­er, much larg­er for­eign recip­i­ents of funds extract­ed from the nation’s rich nat­ur­al resource indus­try gained. According to one study, more than a quar­ter of Kazakh eco­nom­ic out­put slipped out of the coun­try each year from 1995 to 2005.

There is no indi­ca­tion that the Trump Organization broke laws by work­ing with Bayrock. Still, said for­mer Kazakh Deputy Prime Minister Baltash Tursunbayev, it was a mis­take. Sitting in the lob­by of Almaty’s Rixos hotel, a chain Arif also list­ed among Bayrock’s projects, Tursunbayev said that in the inter­est of trans­paren­cy, Trump should order an inquiry into his for­mer busi­ness associates.

Who were these peo­ple?” Tursunbayev asked. “Who were you deal­ing with?”

By Marc Champion

–With assis­tance by Mark Hollingsworth

How a Trump SoHo Partner Ended Up With Toxic Mining Riches From Kazakhstan

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