January 16, 2019, marked a watershed in the history of our republic. Senate Republicans defeated a motion to prevent Trump from lifting sanctions on Paul Manafort’s boss, the Russian mafia figure, Oleg Deripaska.
Obscured by the toxic cloud of racism, looting and general trashiness spewed out by Trump and his enablers, we are failing to notice much of this regime’s most lasting damage. What happened in the Senate this year has never happened before. An open enemy of the United States, an enemy our military has trained to fight and our international agreements are shaped to contain, has simply bought their way around our entire national defense infrastructure, purchasing in Congress what they could never win on a battlefield. They did it in broad daylight, in front of TV cameras, using our own longstanding weaknesses to defeat our democracy and profit from its decline. And it barely made the newspaper.
Our other global rivals have noticed, and they are catching up to the Russians. A new political system is emerging out of the cracks in liberal democracy, a system we don’t yet understand and haven’t prepared to fight. Like the Poles or the French in World War II, this monster is close to enveloping us before we’ve even turned our guns in their direction.
Imagine if Pablo Escobar or El Chapo had simply bought enough of our elected officials to operate with impunity. Picture Iran’s Ayatollah Khomeini buying off a President and enough Congressmen to sweep that whole embassy misunderstanding under the rug. That’s what happened in the US Senate this January, when Russian mobster, Oleg Deripaska, escaped the vise of US sanctions.
A country that has always struggled with institutional bribery is now for sale on a global market, a market in which our adorable local crooks and cronies are hopelessly overmatched by our sworn enemies, armed with the financial and intelligence infrastructure of a nation-state. We may have defeated the Communists only to be absorbed by their successors, the Kleptocrats.
How did Deripaska do it? For that matter, how have the Saudis bought their way to immunity from murder? How did Gulf Sheikhs buy the right to review and edit the US President’s energy policy? How did a Taiwanese company pry billions of dollars of land, infrastructure and tax concessions out of the State of Wisconsin on the promise of a patently fake project? What is the Chinese government getting from the State of West Virginia for their phony investments in the state?
Thing is, we don’t have the details. Our laws barely grant you the right to see a subset of your leaders’ campaign contributions. When the KGB merged with the Russian mob in the 90’s to restore some semblance of order to that disintegrating state, they built a terrible tool of oppression, armed with remarkable political insight and global reach. Lessons learned and refined by the Russians over the past three decades in the art of money laundering, extortion and democratic subversion are being put to use in the US.
Our insights into campaign finance may be limited, but we are absolutely blind to the ways shell companies, phony transactions and insider deals contribute to our leaders’ wealth. That blind spot has become the gap in our Maginot Line.
Deeply-cherished delusions about the nature of the American experiment compromise our ability to fight this assault. We carry a persistent, but ill-informed cynicism about the influence of money on our system, without understanding how it works. And because we don’t understand it, we naively imagine that money only influences our political opponents. We operate in a system steeped in institutionalized bribery, from city hall to the White House, and we somehow imagine our favorite figures are immune.
We still have a narrow chance to preserve a system in which ordinary people can enjoy some degree of protection under the law. To do so, we need to face hard facts, stop imagining that courts and police will help us, and be ready to confront those who pretend to be our political allies.
It’s impossible to understand how the Russians and others are exploiting our system without a better understanding of how bribery works in the US. As upset as we’ve been in recent years about the Koch Brothers and the NRA, we’ve never really confronted this system honestly. And we haven’t needed to. Your financial backers were always balanced, at least to a degree, by mine. All of them shared certain interests in common, including a basic need for national protection from external enemies.
As we scratch our heads in wonder at the apparent apathy of Democratic Congressmen pursuing Trump, we need to back up and explore their motives. We can get a clearer sense of the worldview blocking our response to this threat if we examine the careers of our allies, rather than rehashing the obvious greed of Republicans. Perhaps the best picture of the vulnerabilities that gave us Donald Trump and thwart our response to the Kleptocratic threat comes from looking at Nancy Pelosi’s finances.
How Nancy Pelosi Got Rich
Nancy Pelosi is not just wealthy, but fantastically wealthy. She’s never had a private sector job, but as recently as 2015 her disclosed net worth was well over $100m. Where did that money come from? When asked, the family makes mumbled statements about her husband Paul’s success in real estate, which is just another way of saying that Pelosi’s money comes from the same source as Donald Trump’s. In other words, we don’t know, and like the rest of your representatives she’s under no obligation to explain how she acquired it.
Pelosi’s fortune didn’t come from an inheritance on either side of the family. She and her husband both come from modest origins. Pelosi’s father was a local politico in Baltimore who failed to assemble much wealth, though not from lack of trying. His political career was derailed in 1954 by a fraud scheme. He stuck around for a while but couldn’t get back in the game.
Her husband Paul earned a political science degree at Georgetown. The two of them started out in San Francisco with little-to-nothing, where Nancy went to work for the Democratic Party, mostly as a volunteer. There’s never been any clear explanation of what Paul does beyond generalized talk of “real estate” or “investing.”
Pelosi inherited the safest Democratic seat in the country from her mentor in the 80’s after moving to the district to qualify. It’s only after she landed in Congress that the family started to accumulate real wealth. To understand how, first let’s look at the holes in the reporting scheme.
Here’s Pelosi’s financial disclosure form from 2016. This seems pretty helpful. All major transactions are recorded along with assets and liabilities, so what’s the problem?
Look closely at those disclosures, particularly the real estate transactions. Were these arms-length deals in a competitive marketplace? The names of these entities on both sides of the transaction – what are they? Who’s behind them? Did any of these transactions represent a real exchange of value? Maybe. But there’s a simpler explanation that makes a lot more sense.
Money may flow in secret, but it always casts a shadow. For some insight into Pelosi’s apparent financial prowess, it might be helpful to take a brief diversion into the career of a much clumsier politician operating in a place where politicians have no fear of the law. Let’s take a look at how Texas Governor and current Energy Secretary, Rick Perry, went from being a starving young politician from a poor family to owning millions in wealth, all on a Texas government salary (which is pennies).
Just like Paul & Nancy Pelosi, Rick Perry, a steady C-student in the Ag program at Texas A&M, got rich thanks to his remarkable skill in real estate. A 2011 piece in The Atlantic outlines just a couple of these brilliant financial moves:
Perry bought another 10 acres of undeveloped land in 1993. That property drew interest from Michael Dell, a computer magnate who needed Perry’s tract to connect his new home to municipal sewer lines. Dell took the property off Perry’s hands for $465,000, more than triple what Perry had paid for it two years earlier. Perry reported a $342,994 profit on the sale in his 1995 tax return.
Perry purchased the land from state Sen. Troy Fraser, R-Horseshoe Bay, in 2001 for $314,770. Six years later, Perry sold it for $1.1 million, pulling a profit of $823,776. Perry has attributed the gain to a favorable market for Hill Country land. “We bought a piece of property, the property appreciated and we sold it,” Perry said last year.
In short, people smarter than Perry taught him how to accept a bribe laundered through real estate. He did it in a particularly blatant, unsophisticated manner because he’s an idiot and because there are no enforceable bribery laws in Texas. This quote from Perry is just priceless (excuse the pun) and must be repeated:
“We bought a piece of property, the property appreciated and we sold it.”
I mean, who could find fault with this except some dirty Communist?
Back to the Pelosis, how did Paul go from having nothing, to accumulating a multi-million dollar fortune in “real estate” while his wife worked her way through the San Francisco Democratic Party machine toward a carefully teed-up Congressional seat? If he did it without the help of influential friends in the industry who needed favors from the party, then not only does he happen to be a one-in-a-million business genius, but he achieved his success while pissing off all the people expecting him to play the game by the insider rules. He turned down sweetheart deal after sweetheart deal without his intransigence causing any political difficulties for Nancy, and still managed to make more money than any honest realtor in history.
Or, maybe the simpler explanation makes more sense. For a little more clarity, let’s examine how this actually works on the ground.
How Political Corruption Works Now
Forget for a moment about campaign contributions. Those are public records, and your elected officials cannot easily hide them or pocket them for themselves. The real money in politics comes from facially legitimate business deals, often laundered through family members. This is the avenue the Russians have pursued in buying American politicians, especially a certain fat orange racist one. And we have no enforceable laws or disclosure to fight it. That system works like this:
You’re a promising young political figure struggling to get by and raise a family in an expensive city while pursuing your dream of making the world a better place. Allies offer to help you in minor ways.
There’s a new retail development coming in the Embarcadero. Your friends are confident it’s gonna be worth a ton. You don’t have any money to invest. No problem. They can finance a $200,000 investment for you at a low rate. Maybe you won’t even owe payments for a year or so.
You agree. Then magically, someone comes along a year later looking to buy your stake in the property for $800,000. They want to meet you, and express support for your politics, but it’s a simple arms-length transaction, right? What does that deal look like on a financial disclosure form? It just looks the same as all the others.
Now you have a capital stake you can use for further investments, and because you’re such a god-damned genius, every single deal you make somehow delivers amazing returns, while helping you accumulate smiling wealthy friends all over the district.
Once you acquire enough money this way you don’t even have to bother with disclosures anymore. You can dump your millions into a blind trust and only report the disbursements.
Are these cozy transactions bribes? Depends on what you mean by “bribe.” Did the people who helped the Pelosi’s become wealthy ask for any specific favor or a specific vote? Quite possibly, no. However, if you could spend .5% of your total net worth to get the personal cell phone number of the House Speaker, and have her consistently answer your call, would you do it? Under a strict legal definition this isn’t bribery, but this is how money buys power that you can’t readily match.
Figures like Pelosi and Perry are members of the same club. It is virtually impossible to rise to any position of influence in our political system without carving out a place in this club. Like any other club, it is filled with internal rivalries and conflicts, but its members share some sense of fraternal protection. They also share a vulnerability to deep, meaningful financial disclosure.
Money spent to make Nancy Pelosi and Rick Perry wealthy doesn’t (usually) buy specific political outcomes. It buys a seat at the table. You might think of it as a vote. As a savvy politician, you’re supposed to know which wealthy people you can and cannot piss off. It’s the skill that makes the difference between success and irrelevance in our system.
When Pelosi lectures junior figures like Alexandria Ocasio-Cortez on what is and isn’t possible in our system, what she’s interpreting as “pragmatism” is in fact merely the ethic of that club. When she takes an apathetic approach to pursuing Trump’s financial disclosures, she’s merely “being a realist.” There is a powerful, cynical, “this is how the sausage is made” understanding that lets people wink at this system. Pelosi has internalized the rules of what’s possible because that’s what the club will, on balance, tolerate.
Why have Democrats in Congress moved so lethargically against Donald Trump’s financial conflicts? They simply don’t consider the matter important. If Trump had run and won as a Democrat, they wouldn’t be challenging him at all.
So does this mean that Pelosi is a dirty politician? It is entirely unhelpful to think of systemic problems in terms of bad people and good people. It’s a false paradigm. Anyone who resists this system will face terrible headwinds that would probably doom their career, unless the public was forcefully and enthusiastically behind their efforts. And up to now, the public hasn’t really cared about money in politics beyond a few trite slogans. Nancy Pelosi is responding rationally to the incentives of this game. People who are winning in this game, and she wins regardless of whether Democrats achieve any of their legislative priorities, are not going to change this game.
It’s more helpful to recognize that our own compromises make Pelosi’s bought and sold “pragmatism” inevitable. As long as the voting public is willing to tolerate this system, her seat will always be occupied by someone who plays by the rules. The problem isn’t Pelosi, the problem is the incentives, tolerated by voters, that made Pelosi the leader she is.
As disturbing as this system might seem, it wasn’t such a big deal until recently. Many Democratic leaders remain disinterested in a sincere exploration of Trump’s finances because they view such investigations as childish and prurient, like sex scandals. Those who pine to expose political finance are, in their minds, just pearl-clutching prudes, too unsophisticated and naïve to understand how politics works. Frankly, until recently they might have had a point.
Until a mature challenge to liberal democracy emerged from the reeking decay of the old Soviet Union, our endemic political corruption was a like manageable infection. It’s not manageable anymore.
How Deripaska Neutralized the US Military and Intelligence Services
Obama’s 2014 sanctions on Russian oligarchs stirred a powerful response. A broad Kremlin subversion campaign ensued, ranging from massive money laundering of campaign donations through groups like the NRA, to calculated computer hacking and a sophisticated psyops effort on social media. Oleg Deripaska’s friend Paul Manafort, somehow became the head of Donald Trump’s campaign, helping the Kremlin water down the Republican Party’s anti-Putin platform plank at the Convention. Russian efforts to install Donald Trump as President are a poorly kept secret, well-documented in the Mueller Report and hundreds of newspaper articles.
What’s missing from the Mueller Report is the only piece of the puzzle that really matters, the money. Mueller never investigated the financial side of the Kremlin campaign and for some reason, no one in Congress felt any need to ask him why.
Money casts a shadow, and the shadow of Russian financial meddling in US politics hangs heavy over Kentucky. The pattern of sweetheart deals, shell companies, and opaque financial reporting that accompanies most of your representatives’ political careers explains how Deripaska pulled off the crowning achievement of Russia’s long campaign to wreck our democracy. At the center of the shadow is a project to build a mythical aluminum factory in Mitch McConnell’s home state.
Braidy Industries promised years ago to revitalize the Ohio Valley with a new aluminum mill in Kentucky. Needless to say, that economically unfeasible project couldn’t get off the ground in that unpromising location without millions of dollars in public support. Thanks to the accommodating nature of Kentucky’s Republican Governor, Matt Bevin, Braidy was able to secure millions in public funding for their boondoggle. And they did without having to disclose the identities of the investors who would benefit from the taxpayers generosity.
Of course, the roughly $25m from the state wasn’t enough. Why stop when you’re on a roll? Braidy continued to look for hundreds of millions in additional investments. Who wants to invest millions of dollars in a project that makes no economic sense, with a purely political purpose, which will likely never even become a functioning business? Answer: People who have motives other than financial profit. The kind of people attracted to a project like Braidy Industries are people who are more interested in political favors than economic returns.
In a gesture of remarkable magnanimity, sanctioned Russian mobster Oleg Deripaska found his way to McConnell’s state. After Trump’s Treasury officials agreed to exclude Deripaska from sanctions, he announced a $200m investment in Braidy Corporation’s Kentucky project.
Where will the money go? That’s not disclosed. Who is on the receiving end of money from the project? That’s not disclosed. What connection do McConnell or Bevin have to this project? We don’t know, and our current laws grant us no way to find out.
With sanctions lifted and Congress neutralized, the next-to-last act in this particular drama opened in June. Turns out, Braidy still doesn’t have the money it needs to build this project. They are still on the hunt for more investors. This is a prelude to the final act which will probably play out within in a year or two, unless the project continues to be useful to foreign money-launderers. It will go silent. The investors will disappear. Reporters will move on and we’ll hear nothing about it anymore. It will just fade away.
A decade on there will be a spot in the ground where some bulldozers may have briefly disturbed the soil. There will be no plant and no jobs. Money invested by the state will be lost and forgotten. Whatever money changed hands from Deripaska and others will have been safely laundered into clean US dollars and even more vital political currency. In other words, the project will have succeed in its authentic goal.
Like the Foxconn shams in Pennsylvania and Wisconsin and the phony Chinese investments in an imaginary West Virginia gas trading hub, these “projects” will have served their intended purpose without producing value for ordinary workers or voters. What picture does this paint of our political future?
Life Among the Kleptocrats
In an established democratic Kleptocracy like Ukraine or Mexico, your government announces a big investment in a new hospital. Headlines trumpet the investment for weeks, then attention fades. Years later, you’re still showing up to the same deteriorating hospital, still short on beds and medicine, with doctors asking for bribes to keep food on their table, and no one knows why.
You can live in a country that guarantees universal health care and taxes your wages to provide it, and the money never shows up to pay doctors or hospitals. Whatever you might do to track the spending ends with threats and dead ends. Anyone who pushed too hard for answers meets with an unfortunate accident.
Dark money exerts a gravitational force in a Kleptocracy, pulling all democratic political energy off-plumb in unpredictable, seemingly unexplainable ways. In time, citizens give up on the democratic process because it simply fails to function. Elections still happen, but no one cares. Voters pick ever-more extreme or bizarre candidates – comedians, pop stars, or outright mobsters in a desperate effort to “shake things up,” but no one seems capable of identifying the hole in the bucket, the malfunction that breaks every government effort. Democracy simply fades away while the wealthy secede into a libertarian and increasingly cut-throat netherworld of post-nationalism.
Alongside I-94, just across the Wisconsin state line in Mount Pleasant, bulldozers are moving dirt around on a site where Taiwanese company, Foxconn, has promised to build a factory. In July 2017, Foxconn announced the project in a coordinated political effort with Republican Governor Scott Walker and President Trump. They had secured a deal with the state worth roughly $3bn in incentives and subsidies for a project that would create 13,000 jobs.
The golden shovels had barely gotten dirty before the promises were broken. For months, the company did little or nothing at the site while state crews scrambled to upgrade electricity, water and road access to the site. They backpedaled on the number of jobs the factory would create. Foxconn changed their manufacturing plans. At one point the CEO claimed that the project “cannot simply be described as a factory” before Trump forced him to backtrack. In January of this year Foxconn’s cursory work on the site halted entirely.
Moody’s has already downgraded Mount Pleasant’s debt over the bonds they issued for the project. The state has already spend $300m on the project. Mount Pleasant’s debts for the factory are approaching $1bn.
In April, Foxconn CEO Terry Guo announced his plans to run for President in Taiwan. He claims that Mazu, the Sea Goddess, came to him in a dream and asked him to run.
There isn’t going to be a Foxconn factory in Wisconsin and we’ll never know where the money went. We don’t know what Foxconn, its investors, or the Taiwanese government actually received in exchange for the provincial politicians they bought with this effort. We don’t know how much money Foxconn moved through shell companies owned by legislators, or the value of “contracts” they directed to those legislators or their families or friends. No laws require the kind of disclosure that would expose the workings of this project.
What we know is that massive global organizations, sometimes with the backing of hostile nation-states, are pouring enough money into our political system to make the Koch Brothers look stingy. Fine details of these transactions may be secret, but enough of this iceberg is visible above the waterline to show us that not even our military and national security officials have the power to stop this invasion.
Like the sad citizens of some dingy East European hellhole, we’re left watching as our democracy fails and our wealthy secede into their own sheltered world. Politicians we elected specifically to reform this system tell us to be patient. They chastise our naïve failure to understand that reform takes time. Meanwhile, politicians elected with the explicit support of foreign Kleptocrats stir up so much nauseating hatred and abuse that we think we have no choice but to stick with our ineffective, mealy-mouthed compromisers. Between the hammer of Russian active measures and the anvil of hand-wringing, cowardly Democrats, our future threatens to be crushed.
Donald Trump’s finances are our most vital national security issue. Every Trump hotel, every piece of property that family secretly owns through shell companies or fraudulent trusts, functions like a military base occupied by our enemies. Trump’s businesses are a beachhead, and our vulnerability to bribery across our political system is territory ripe for the expansion of this invasion. As a President who has committed numerous crimes, Trump is susceptible to a degree of financial disclosure not required of a private citizen. Unravelling this finances could provide us with a blueprint, a map of the weaknesses we must address through legislation, legal action, and activism.
There is no political issue more vital to our future than attacking the financial hydra behind the Trump family. There’s no action, legal, peaceful or otherwise that isn’t warranted in attacking those businesses. Nothing would undermine Trump’s business empire, and the corrupt influence spreading through it into our national bloodstream, like forced disclosure. Nothing would do more to restrain the hydra than massive financial losses resulting from investigations and asset seizures.
If Donald Trump leaves office with his businesses still intact and secret, we will have lost the greatest opportunity of our generation to fight back against the tide of Kleptocracy and rebuild our representative government. We may only have months left before this opportunity recedes. Whatever it takes, Trump must not be allowed to preserve the secrecy of his businesses.