Money | A crackdown on oligarchs stashing money in luxury real estate?
by Marvin Olasky
Posted 1/13/16, 03:40 pm
Here’s a rare time when WORLD and The New York Times agree: The secret flow of illicit money into high-end real estate is a problem. So, both publications can cheer the Treasury Department’s announcement this morning that it will require real estate companies to disclose names behind all-cash transactions in Manhattan and Miami, two destinations for oligarchs from abroad who turn what would be homes into rarely lived in safety deposit boxes.
The New York Times quoted Jennifer Calvery, director of the Treasury Department’s Financial Crimes Enforcement Network, as expressing concern “that dirty money is being put into luxury real estate. … Some of the bigger risk is around the least transparent transactions.” These transactions make legal use of “shell companies” whose owners are unknown and sometimes crooked.
WORLD reported in November 2014 that oligarchs around the world were stealing from their own people and putting ill-gotten gains into secret bank accounts—but the United States and other countries were trying to make anonymous hiding harder, so real estate was the new frontier. Some corrupt leaders would wire tens of millions of dollars to Manhattan accounts or have agents drop off suitcases crammed with cash.
It’s perfectly fine for those who have earned money honestly to buy and enjoy beautiful homes, but last spring I visited a $27 million condo on the 70th floor of the Time Warner Center overlooking to New York’s Central Park and learned its owner used it only three days per year. A realtor told me the owner from abroad was “happy to keep it as a good place to have his money.”
The New York Times found these gentlemen among the owners of condos on Time Warner’s 68th through 78th floors: Dimitrios Contominas, arrested a year ago in a Greek corruption sweep; Vitaly Malkin, a Vladimir Putin crony who allegedly plundered Angola; Andrey Vavilov, a Russian reformer turned oligarch; Anil Agarwal, a mining magnate under fire in Zambia and his native India; and Kabul Chawla, who allegedly misused the life savings of New Delhi residents.
Business Insider last February noted that 16 foreign owners of Time Warner condos were the subjects of government investigations: “They could not have chosen a better place to stash their wealth—from the unadorned hallways to the multiple entrances, this was a high-rise built for anonymity.” Financial alchemy could turn billions in rubles, yuan, and other currencies into master-of-the-universe steel and glass abodes.
I viewed two $20 million condos in The Plaza, that famous hotel/condo building across from Central Park, and a realtor told me only 30 percent of the condos are occupied at any given time. One resident said, “First time in a week someone’s been on the elevator with me.” One Plaza selling point speaks of being next to “Russian billionaires when you sashay into the large, glamorous marble lobby on Central Park South,” but one realtor was more realistic about apartments owned but not used: “Big safety deposit box.”
One money route could be like this: An agent for a Hamas terrorist puts money in a bank account in Liechtenstein. It goes to a trust on the Isle of Man, then to a Nevada limited liability corporation, then to a Delaware shell company. Such “layering” might have more steps, but eventually the cash ends up in the office of a New York realtor and goes to a condo purchase.
In 2010, the Senate Permanent Subcommittee on Investigations, with now-retired Sen. Tom Coburn, R-Okla., keeping it honest, produced a bipartisan recommendation that Congress enact legislation “requiring persons forming U.S. corporations to disclose the names of the beneficial owners of those U.S. corporations.” The Senate subcommittee also wanted the National Association of Realtors to “issue guidance to their members prohibiting use of any financial account to accept suspect funds.”
Nothing happened then. Now, something may. Finally, one cheer for an Obama administration announcement, and maybe more to come.