Mueller’s big reveal is coming, and it could be bigger than anyone thinks

Originally published on the ACSblog.

Washington Post story describing how special counsel Robert Mueller intends to release reports of his findings “to answer the public’s questions” confirms what some Justice Department veterans have long maintained: That criminal indictments are not Mueller’s only goal — or even his primary goal. What he’s really after, these observers say, is the whole story. And then he intends to tell it.

In a typical criminal investigation, prosecutors are limited to only disclosing investigative details directly relevant to prosecutable crimes. That’s why special counsel Patrick Fitzgerald never disclosed the vast majority of the incriminating evidence he discovered about the leak of Valerie Plame’s identity by the Bush/Cheney White House; the only case he felt he could make was against Cheney aide Scooter Libby, for obstruction.

But some veterans of the Justice Department realized early on that Mueller’s remit went well beyond simply investigating prosecutable crimes. The most obvious thing Deputy Attorney General Rod Rosenstein did in Mueller’s May 2017 appointment letter, was give the special counsel the authority to prosecute crimes arising from his investigation. But Rosenstein also wrote that Mueller is “authorized to conduct the investigation confirmed by then-FBI Director James B. Comey” to the House Intelligence Committee in March 2017.

Here’s how Comey described that investigation to the committee:

I have been authorized by the Department of Justice to confirm that the FBI, as part of our counterintelligence mission, is investigating the Russian government’s efforts to interfere in the 2016 presidential election and that includes investigating the nature of any links between individuals associated with the Trump campaign and the Russian government and whether there was any coordination between the campaign and Russia’s efforts. As with any counterintelligence investigation, this will also include an assessment of whether any crimes were committed.

“This was and is, first and foremost, a counterintelligence investigation, designed to examine the exact scope of what Russia did with respect to the 2016 election and, most importantly, what the Russian threat is with respect to future operations” said Martin Lederman, a Georgetown Law professor and former deputy assistant attorney general in the Department of Justice’s Office of Legal Counsel

Prosecution was literally an afterthought.

“Many people are obsessed with the question of who is going to be indicted and for what — which is only a part, and not the most important part, of what Mueller was tasked to do,” Lederman said.

Mueller’s central task, Lederman said, “is to get to the bottom of all this — thereby to help Congress and the intelligence community prevent Russian involvement in future elections.”

Indeed, criminal investigations and counterintelligence investigations are two entirely different – almost antithetical – exercises.

“Counterintelligence investigators are rarely thinking about building a criminal case,” said Mary McCord, who, as acting head of the National Security Division, oversaw the Justice Department’s Russia probe until just before Mueller’s appointment.  After more than 20 years at the Justice Department, McCord resigned last May and now oversees litigation at Georgetown University’s Institute for Constitutional Advocacy and Protection.

Counterintelligence investigators focus almost single-mindedly on two questions, she said: “What are the intelligence threats to the U.S.? And how do we counter those threats?”

Even clear criminal action may never be prosecuted because “you’d have to reveal such sensitive and classified information in court, it’s just not worth it,” she said.

The central work product of a counterintelligence investigation, by contrast, is reports, distributed through intelligence channels. “There is a very robust amount of writing and reporting that takes place on a daily basis by members of the intelligence community,” McCord said.

Fully understanding an intelligence threat also requires a much more rapacious attitude toward gathering information than just trying to build a criminal case against a defendant.

“Information becomes an end to itself in a counterintelligence investigation,” said Frank Figliuzzi, a 25-year FBI veteran who, as assistant director for counterintelligence, led FBI counterintelligence investigations worldwide.

Counterintelligence investigators, Figliuzzi said, aren’t just interested in a possible foreign target’s illegal activities. “You want to know everything about the waking hours of this intelligence officer. You want to know how he lives and breathes. You want to know how he thinks. And why is that important? Because every bit of data you learn about him may help you to counter him, to recruit him, and to understand strategies,” he said.

Figliuzzi wouldn’t say how this approach might translate to American suspects. But just last week, when FBI agents stopped American lawyer Ted Malloch at Boston’s Logan airport and questioned him about his involvement in the Trump campaign, Malloch complained to the Guardian that the federal agents “seemed to know everything about me” and warned him that lying to the FBI was a felony.

Balancing secrecy with the public’s need to know

The results of counterintelligence investigations are typically among the least likely things to ever be discussed in public. The theory is that the less said, the less the enemy knows. But every party that could possibly do something to avoid it happening again is fully briefed.

In this case, those parties are the U.S. Congress and the American people.

Figliuzzi said he is convinced that Mueller will issue a report. But, he said, Mueller has “quite the dilemma on his hands”.

Typically, when counterintelligence investigations reach a conclusion, “there’s a lengthy report, generally called an LHM, or letterhead memo,” Figliuzzi said. But they are highly classified.

So Figliuzzi wondered how Mueller will tell his story without disclosing extremely sensitive sources, methods and techniques.

“Let’s say you’ve got an NSA intercept where Trump’s on the phone with Putin, clearly indicating conspiracy to commit a crime. If you need to write that up for Congress for impeachment proceedings, how the hell do you do that?”

In that case, declassifying and going public would mean “giving up the microphone in Putin’s office.”

The Washington Post report said that Mueller “told Trump’s lawyers that he is preparing a report about the president’s actions while in office and potential obstruction of justice, according to two people with knowledge of the conversations.”

The Post said that “Mueller’s investigators have indicated to the president’s legal team that they are considering writing reports on their findings in stages — with the first report focused on the obstruction issue, according to two people briefed on the discussions.”

And the Post quoted a person “familiar with the discussions” saying that Mueller’s team “said they want to write a report on this — to answer the public’s questions — and they need the president’s interview as the last step.”

One of the Post reporters, Robert Costa, told MSNBC Mueller’s team wants that report to come out in June or July.

McCord said there is precedent for the government declassifying and disclosing what would otherwise be considered secret or sensitive counterintelligence information when the benefit of that disclosure outweighs the harm.

For instance, she noted that President Obama insisted on the release of some information about Russian hacking, just before Trump took office. And after the November 2014 hacking of data from Sony Pictures, the FBI disclosed a great deal of information, both to encourage people to improve their cybersecurity practices — and to point the finger of blame very clearly at North Korea. “[W]hen we can’t lay hands on people, as often as possible, we’re going to call out the conduct,” then-FBI Director Comey said at the time. “And as often as we possibly can we’re going to say here’s what happened and who did it.”

“Those are things the government rightly thought the American people should know,” McCord said. “There are times, when even though it’s of interest for counterintelligence purposes, the need for the public to know about it becomes obvious to people in government.”

And in this case, McCord said, “It’s not just a national security issue, it’s an issue that is tied to a fundamental tenet of our democracy: Elections.”

Some concerns have been raised that Mueller would be handcuffed by Federal Rule of Criminal Procedure 6(e), which imposes strict limits on the disclosure of grand jury materials. Special counsel Kenneth Starr, for instance, had to get a court order allowing him to disclose grand jury materials in his eponymous report.

McCord said that Mueller would obviously “have to be aware of that in making any kind of report.” But, she said, “it’s possible that some of what he might include comes from things that aren’t 6(e) privileged as well.”

Mueller’s first report – on obstruction of justice – could avoid many of the thorny disclosure issues. Emptywheel blogger Marcy Wheeler, who has been rigorously analyzing the Mueller investigation, has pointed out that the obstruction investigation involved a lot of volunteered information, rather than grand jury testimony and subpoenas.

And it most likely doesn’t involve the “crown jewels” of the intelligence community: signals intelligence, or SIGINT, gathered through surveillance and intercepts.

The real action is behind the curtain

So far, the clues that have emerged directly from Mueller or his office have all been in the form of documents related to criminal indictments, so that is where much of the public speculation has centered.

But as Asha Rangappa, a former special agent in the Counterintelligence Division of the FBI field office in New York City, wrote in The Hill in January, “trying to make sense of a counterintelligence storyline by looking only at the criminal charges that stem from it is like trying to make sense of a full-length movie by watching only a few scenes: The full story will not be apparent, because key characters and events and plot lines are missing.”

Trump’s world of luxury real estate is fueled by money-laundering

Originally published on the ACSblog.

The ultra-high-end real estate business, where Donald Trump made a lot of his money, is the easiest place for oligarchs and others to launder large amounts of illicit cash.

And because several of the lawyers on special counsel Robert Mueller’s team investigating Russian connections with the Trump presidential campaign are specialists in money-laundering and other financial crimes, some observers are speculating that he may be looking into Trump’s past business dealings to see if any of those connections are relevant to the matter at hand.

The fact that money-launderers flock to luxury real estate is nothing new, and isn’t much of a mystery either. It’s the direct result of a major loophole in U.S. government rules that require banks to report cash deposits over $10,000 — but allow property owners to accept $10 million in cash for a condo without divulging who gave it to them.

When it comes to the real estate business, the anti-money-laundering rules only apply to banks and other financial institutions. So when buyers take out a mortgage from a lender, they are extensively scrutinized and unusual amounts of cash are reported to the government.

But by paying all cash – behavior that would reasonably raise the most suspicion – real estate buyers actually avoid setting off any alarm bells. The real estate agents and owners pocketing huge sums are under no legal obligation to report that to anyone.

For fraudsters, drug cartels, oligarchs and corrupt foreign government officials looking for a way to launder huge sums of illicit cash — and park it somewhere safe — high-end real estate is the investment of choice. “You can put a lot of money in one place at one time, without raising any eyebrows,” says Heather Lowe, legal counsel for the dirty-money watchdog group Global Financial Integrity.

The Treasury Department explains it this way: “The real estate market can be an attractive vehicle for laundering illicit gains because of the manner in which it appreciates in value, ‘cleans’ large sums of money in a single transaction, and shields ill-gotten gains from market instability and exchange-rate fluctuations.”

New York Times series in 2015 found that more than half of the $8 billion spent each year on New York residences that cost more than $5 million comes from shell corporations that mask the real owners’ identities, one possible sign of money-laundering.

Under pressure after the New York Times series, Treasury Department officials in early 2016decided to try an experiment in Miami-Dade County and Manhattan, ordering title insurance companies there to identify the individuals who owned the shell companies making all-cash purchases — and requiring them to send copies of the buyers’ IDs to the Treasury’s Financial Crimes Enforcement Network (FINCEN).

There were still some laughably large loopholes, chief among them the exemption of sales made with wire transfers, which are arguably the most common method of moving cash these days, especially from foreign sources.

But it helped: FINCEN reported on August 22 that a whopping 30 percent of the all-cash high-end real estate deals reported under the new program involved people who were already under government scrutiny due to potential money laundering — including a little rogue’s gallery of bribe-takers and drug smugglers.

And in a shock to Trump cynics, FINCEN officials simultaneously announced that they are not just re-upping the experiment, but expanding it to Honolulu – and including those ever-important wire transfers.

Yet even so, the new rules remain almost laughably easy to avoid: Just don’t get title insurance. That’s not an option for those of us who get a mortgage, because lenders require title insurance for their own protection. But otherwise, it’s totally optional and arguably a waste of money for the all-cash buyer.

The Russians Are Buying

Stories about money laundering in real estate – particularly by Russians and others in the former Soviet bloc – are legion.

One article in the Times series focused on apartments in the super-luxury Time Warner Center as an archetype, and “found a growing proportion of wealthy foreigners, at least 16 of whom have been the subject of government inquiries around the world, either personally or as heads of companies.” That “included government officials and close associates of officials from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico.

Another Times article concluded that “the flight of wealth accrued in the chaotic capitalism of post-Soviet Russia has been a powerful force behind the luxury condominium boom reordering New York City’s skyline.”

Jennifer Shasky Calvery, then the direct of FINCEN, said last year that in her previous job — prosecuting Russian organized crime — she often found members “based outside of the United States were laundering their funds through the U.S. financial system. Often, this involved the suspected purchase of personal residences with criminal proceeds.”

The Miami Herald reported last year that “Trump helped local developers sell condos to buyers from Latin America and Russia, including people allegedly involved in corruption and wrongdoing, as well as to dozens of anonymous offshore companies.” Buyers included “members of a Russian-American organized crime group, a Venezuelan oilman convicted in a bribery scheme and a Mexican banker accused of robbing investors of their life savings.”

McClatchy reported in May about “fugitive oligarchs and their kin accused of laundering Kazakh money in posh U.S. real estate — including Trump Organization properties.”

The U.S. Attorney’s office in Manhattan abruptly and controversially settled a major money-laundering prosecution in May that had targeted Russian businessman Denis Katsyv, the owner of Prevezon Holdings. He was accused of laundering some of the $230 million he obtained through Russian tax fraud in luxury New York apartments.

None of those apartments were in Trump buildings – but there was a connection to the Trump campaign: One of Kastyv’s lawyers was Natalia Veselnitskaya, the Russian attorney who held a secret meeting in June 2016 with Trump’s son, son-in-law and then-campaign manager, offering them Russian government information on Hillary Clinton.

Home Free

And once the laundered money is invested in real estate, the people who control the shell company are truly home free. It’s just that simple.

They can use the property as collateral for a loan. They can charge rent and put the money in a domestic bank account. Ownership of shell companies can be shifted at any time, with no indication in property records. And the owner of the shell company can simply turn around and sell the property — walking away with clean money. Depositing rental income or the proceeds of a real estate sale into U.S. financial institution sets off no automatic alarm bells.

“There’s really no impediment” to accessing the money after it’s been put into U.S. real estate, said Peter D. Hardy, a partner at the Ballard Spahr law firm and contributor to the Money Laundering Watch blog.

There may be some tax issues related to income or capital gains. But, Hardy said, “lots of money-laundering schemes don’t really involve tax fraud per se, in terms of hiding the income. It’s really more about being able to use it.”

Lowe said if Treasury wanted to seriously crack down on money laundering through real estate, it would require real estate agents to adopt the same kind of due-diligence, know-your-customer standards as financial institutions.

No Regrets From Trump

Neither his campaign nor his presidency have led Trump to shy away from selling real estate to shell companies – one of the possible indicators of money-laundering. In fact, a USA Today investigation published in June found that since Trump won the Republican nomination, “the majority of his companies’ real estate sales are to secretive shell companies that obscure the buyers’ identities.”

That’s a much larger proportion than the two prior years, USA Today found, but to be fair, the main concern is not so much money-laundering anymore as “that the secretive sales create an extraordinary and unprecedented potential for people, corporations or foreign interests to try to influence a President.”

Meanwhile, Trump is welcoming a major figure in luxury U.S. real estate money-laundering to the White House on September 12: Malaysian Prime Minister Najib Razak.

The Justice Department last year began the process of seizing more than $1 billion in assets of the 1Malaysia Development Berhad, the government-owned investment fund founded by Najib. Then-Attorney General Loretta E. Lynch called it “the largest single action ever brought under the Kleptocracy Asset Recovery Initiative.”

Those assets include a $30.6 million penthouse at the Time Warner Center in Manhattan and a $39 million mansion in the Los Angeles hills, both bought by shell corporations.

Najeeb might even bring this up in conversation with Trump: The assets are currently frozen, but they haven’t actually been seized yet.