The Real Deal National

Tom Barrack’s Middle Eastern connections run deep. Here’s how they’ve boosted his real-estate business

Colony Capital boss and Trump buddy under scrutiny for Saudi ties
By Dennis Lynch | August 06, 2019 12:44PM

From left: Tom Barrack, former Qatari Prime Minister Hamad bin Jassim bin Jaber Al Thani, and Saudi Crown Prince Mohammad bin Salman.

From left: Tom Barrack, former Qatari Prime Minister Hamad bin Jassim bin Jaber Al Thani, and Saudi Crown Prince Mohammad bin Salman.

Play “six degrees of separation” with Middle Eastern investors active in the U.S. real estate market, and chances are Tom Barrack’s name would pop up.

The founder of Colony Capital is under scrutiny for his ties to the wealthy Middle Eastern nations of Saudi Arabia and the United Arab Emirates. Federal prosecutors are looking at whether Barrack, whose firm took in $1.5 billion from those two countries since his close friend Donald Trump won the Republican presidential nomination, sought to sway the Trump campaign and later the administration when it came to foreign-policy decisions.

Barrack, an Arabic speaker of Lebanese descent, has not been accused of any wrongdoing. But over his career, he’s developed deep ties to the Middle East and has been one of the most successful industry figures at bringing in money from wealthy investors there.

His dealings in the region date back to the 1970s, when he was a lawyer at the firm of Herbert Kalmbach, who had served as President Nixon’s personal attorney and was a prominent character in the Watergate scandal.

In 1972, a client at Kalmbach’s firm asked him to play squash with some local Saudi contacts, and he ended up partnering with the son of the king of Saudi Arabia, according to an account in The Hill.

“I had no idea who he was, but my boss said, ‘However much he wants to play, you play,” Barrack said in a 2014 speech at the Lebanese consulate in L.A. “We ended up playing three hours a day.”

Teaming up

Middle Eastern investors have poured billions of dollars into Colony Capital over the years.

After teaming with Saudi Prince Prince Alwaleed bin Talal on the Fairmont chain in 2006, Barrack partnered with the Qatar Investment Authority to buy Miramax Films for $660 million four years later. They sold the company to Doha-based beIN Media Group for an undisclosed sum.

And in 2011, amid the upheaval of the Arab Spring, Barrack swam against the current by saying he would be “looking hard” at expanding his then-$200 million worth of investments in the region.

“The time to buy is when everybody else is running for the hills,” he said at the time. “The Middle East is printing money and it’s used to operating in chaos.”

A year later, Colony sold several luxury properties in Sardinia to Qatar’s sovereign wealth fund, a move that prompted Italian prosecutors in 2017 to accuse him of avoiding taxes in the deal.

The New York Times reported that Colony has raised more than $7 billion in investments since Trump’s nomination, nearly a quarter of it coming from Saudi Arabia or the United Arab Emirates.

Barrack’s support for Trump has complicated his relationships in the region, particularly after the president’s 2015 comments on the presidential campaign trail that called for a temporary but “total and complete shutdown of Muslims entering the United States.” The Times uncovered emails in which Barrack tried to assuage United Arab Emirates Ambassador Yousef al-Otaiba’s concerns over the ban. The emails were regarding those 2015 comments, which Trump, as president in 2017, switched to a travel ban on people from majority Muslim countries. The UAE, Saudi Arabia and Qatar were never on the list of banned nations.

“We can turn him to prudence,” Barrack wrote in an email at the time, referring to Trump. “He needs a few really smart Arab minds to whom he can confer — u r at the top of that list!”
Pushing back
Barrack appears to have chosen his business over a closer role with Trump’s White House. The White House has offered Barrack at least one job before — in mid-2017 he was considered for U.S. Ambassador to Mexico, but that never happened.

Barrack says he has also pushed back on Trump over his more divisive comments about the Middle East. In June 2017, when the president called Qatar a “funder of terrorism at a very high level,” Barrack reportedly told him, “you don’t need to get involved.”

A month earlier, Qatar’s neighbors Saudi Arabia, the UAE, Bahrain, and Egypt severed diplomatic ties and blockaded the tiny nation. It was done over claims that Qatar financed terrorism and was becoming too close with regional rival Iran, which supports Houthi fighters in Yemen fighting a civil war against the Saudi-backed Yemeni government. The blockade remains in effect.

The split between Qatar and its neighbors put Barrack in a difficult spot, since he had deep connections with both sides. Two years ago, he filed plans for a 77,000-square-foot mega-mansion in Bel Air. But this palace was not for him. Barrack filed the design, sources said at the time, on behalf of former Qatari Prime Minister Hamad bin Jassim bin Jaber Al Thani.

At a February business summit in Abu Dhabi, Barrack jumped to the defense of Saudi Arabia’s Crown Prince Mohammed bin Salman after the kingdom admitted dissident journalist — and U.S. resident —Jamal Khashoggi was killed inside the embassy in Istanbul.

“… The atrocities in America are equal or worse to the atrocities in Saudi Arabia,” Barrack said, at the event hosted by CNN. “The atrocities in any autocratic country are dictated by the rule of law. So for us to dictate what we think is the moral code there when we have a young man and a regime that’s trying to push themselves into 2030 I think is a mistake.”
Barrack later apologized for the remarks, calling the October 2018 killing “atrocious” and “inexcusable.” The CIA has found credible evidence to conclude bin Salman ordered Khashoggi’s execution.

Barrack now appears to be reducing his role at Colony. The firm announced in July that he would step down as CEO as part of a merger with Digital Bridge Holdings that will see Digital Bridge CEO Marc Ganzi take the reins. Barrack will return to his role as executive chairman when the merger is completed sometime in the next two years.

Saudi Arabia’s sovereign wealth fund invested in a $4 billion Colony-Digital Bridge fund, a deal that preceded the recent merger.