Secret criminal investigation targeted fraud at Trump Soho: report

Trump and co-developers settled fraud suit with buyers in 2011, but separate criminal investigation just now coming to light

New York /
Apr.April 06, 2016 02:09 PM

The Donald Trump document load from decades of civil lawsuits could already fill the floors of several Trump Towers, but a recent and previously unreported criminal investigation with the presidential candidate’s name on it has been hiding in the archives. 

In 2010, Donald Trump and partners Bayrock Group and the Sapir Organization were hit with a lawsuit for lying about how many units they sold at the condo-hotel tower known as Trump Soho at 246 Spring Street. According to the suit, apartment buyers were led to believe that they were buying into a highly-coveted new building, with over half the apartments already sold.

Ivanka Trump and Donald Trump, Jr. were each cited in media reports — including this The Real Deal article — saying that more than half of the building’s stock had been successfully marketed and sold. In reality, only about 15 percent had been. Donald Trump and his partners eventually settled with these unhappy customers, refunding 90 percent of their deposits.

But part of that settlement was kept secret, until now.

A number of the suing buyers at Trump Soho may have simultaneously been cooperating with the Manhattan District Attorney’s Office related to a criminal investigation of fraud at the new development. The probe was opened after the DA’s Major Economic Crimes Bureau caught wind of the allegations brought against the developers by attorney Adam Leitman Bailey. According to the New York Times, the settlement terms required more than 20 buyers to cease cooperating with government agencies charged with investigating any alleged fraud. The criminal investigation was later closed, likely because the key witnesses went silent.

Bayrock Group, one of the Trump Soho co-developers, has often been under fire for its suspected ties to criminal activity. Before the Trump Soho condo buyers filed their lawsuit, a former Bayrock finance director named Jody Kriss brought one of his own, claiming that Bayrock had concealed the criminal past of employee Felix Sater, who had done a stint in prison time for a 1993 bar fight and was involved in a stock manipulation scheme that later led to a gig informing for the FBI. (Another FBI informant, Salvatore Lauria, also worked with Bayrock and brokered an investment in Trump SoHo by FL Group, an Icelandic firm “in favor” with Russian President Vladimir Putin, according to Kriss’ suit. Trump was not a defendant on this case.)

Trump meanwhile has maintained a mum attitude about his relationship with Sater. After Sater left Bayrock in the fallout of his exposed criminal past, he went to work for Trump, reportedly taking an office at Trump Tower and getting his own Trump Organization business card. His title: senior advisor. In a 2013 deposition, Trump downplays his relationship to the man who co-developed Trump Soho and later advised him in-house for six months. “[I]f he were sitting in the room right now,” Mr. Trump says, “I really wouldn’t know what he looked like.”

Alan Garten, the general counsel for the Trump Organization, told the New York Times that the lawsuit filed by condo buyers at Trump Soho was “not focused” on Trump, describing the turn of events as a simple case of “buyer’s remorse.” Garten would not discuss the criminal probe, citing confidentiality agreements.

While Trump’s history of civil real estate litigation is prolific (as documented in The Real Deal‘s April cover story), there’s a much shorter history of criminal allegations. Trump was the target of a bribery investigation in the late 1970s and was questioned in 1981 as part of a racketeering probe, according to CNN, but neither federal investigation resulted in any criminal charges. However, recent articles as well as decades-old reporting have claimed deep ties between Trump and mob bosses via construction companies.

Just days ago, the American Democracy Legal Fund filed a criminal complaint against Trump, calling for an investigation into whether Trump illegally secured the presidential endorsement of Ben Carson in exchange for a future cabinet a appointment, a violation of federal law.


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