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American kleptocracy and why Trump embodies it, explained by an expert
Casey Michel on America's rise as a global dirty money haven, Trump, and why he's actually optimistic about the future.
Amid all the scandal and dysfunction of the Trump years, one story that arguably didn’t get the attention it deserved was how much the 45th president personally benefitted from the US’s role as an international laundromat for dirty money.
“There are few figures who have profited more both financially, and certainly politically, from America's transformation into an incredible offshore haven,” journalist and author Casey Michel told me.
Michel is author of the forthcoming book American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History. It details how states like Delaware and Wyoming became globally renowned for anonymous shell companies that, for a nominal cost, allowed oligarchs and dictators from all over the world to legally clean plundered loot with investments in luxury real estate or high-end art.
Trump is a central figure in this tale. Michel goes as far as to write that Trump’s real estate deals are “American kleptocracy in miniature — American kleptocracy in a single person, who eventually used the proceeds of these suspect sales to help build a war chest that would launch him to the presidency.”
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Michel told me that Trump’s election marked the first time in his view that a world leader “emerged from what I describe in the book as one of these major pro-kleptocracy industries,” i.e. real estate. But there have been some positive anti-kleptocracy developments in the past year beyond Trump’s loss to Joe Biden.
Shortly before Trump left office, Congress passed a law effectively banning shell companies as part of the National Defense Authorization Act (NDAA). That bill was vetoed by Trump (surprise!), but became law anyway after Congress overrode one of Trump’s vetoes for the first and only time.
Now, in an ironic twist, the first president from Delaware is overseeing the dismantling of an industry that was big business for his state — but came at the cost of turning it into one of the world’s havens for dirty money.
“I'm very excited and optimistic about where things are going in the US,” Michel told me, noting that anti-corruption efforts have bipartisan support in Congress.
I recently talked to Michel — my former colleague at ThinkProgress — about the big themes from his book, why he thinks Trump is the embodiment of American kleptocracy, the demise of anonymous shell companies, and why he’s actually optimistic about the future.
A transcript of our conversation, lightly edited for length and clarity, follows.
There's a passage in the book where you write about how Trump’s real estate dealings are “American kleptocracy in miniature.” Can you unpack what you meant by that?
What that line gets at and what other elements of the book get at is that Trump is the first world leader — the first major leader in the West, but also I would argue elsewhere — that emerged from what I describe in the book as one of these major pro-kleptocracy industries.
When we talk about kleptocracy, what I'm talking about and what others are increasingly talking about is not just a kleptocratic regime in a place like Moscow, or a place like Venezuela or Azerbaijan. What we're talking about is the flow of that dirty money tied to these dictatorships and oligarchs and their families and friends, the money that they take from national treasuries and get from using and abusing their positions of power.
What we've seen in recent years is they don't keep the money any longer in x country, or y capital city, or z area. They don't keep it in Moscow, they don't keep it in Azerbaijan, they don't keep it in Venezuela. They move it elsewhere. They get it out of the country, and what we've seen in recent years is that they're able to do that incredibly easily, not just because of this technology involved — you can move money with the click of a button — but because all of these industries in the West and especially in the US have sprung up that can perfectly legally take the proceeds of all this dirty money — we're talking billion and billions of dollars in dirty money sloshing around the world — and it can freely and easily come into the US through things like shell companies, through things like trusts. And as we've seen over the last two or three decades, things like, especially, luxury real estate.
American luxury real estate, in addition to a number of other industries like private equity, hedge funds, and luxury art work, has exploded in the past few decades into this great font and destination for dirty money across the world. And that's for a couple reasons.
One, you can do it perfectly legally. There are effectively no due diligence or anti-dirty money requirements for American real estate, including luxury real estate. On the other hand, it's an actual hard asset that they can use however they want — they can throw parties there, they can move their families there — but beyond that, they can also sell it themselves.
Say you spend $100 million in dirty money on some piece of real estate. And when you sell that asset — and say you get $150 million from another kleptocrat or oligarch — all of a sudden that's $150 million in perfectly clean, perfectly legitimate money in the eyes of the law. You can do whatever you want with it. You can donate it to political parties, you can donate it to nonprofits and transform yourself into this mogul and philanthropist. You can donate to a certain presidential candidate, etc., etc.
That's the broader background of how American real estate has transformed into this incredible sink for dirty money from around the world. And who, over the past two or three decades, was the singular figure who emerged from this industry? Who was the, as he likes to view himself, titan of American luxury real estate in the 90s and 2000s and into the 2010s? That was Donald Trump.
Now obviously Trump had other ventures — Trump Steaks and planes and so forth — but the core of his business enterprise was luxury real estate, and as my book details, the core of his business base was one of the key industries that had transformed into this incredible money-laundering vehicle for billions and billions and billions of dollars around the world.
The statistic that's in the book is that before 2016, Trump had at least $1.5 billion in sales to clients who matched basic money-laundering profiles — they're buying in cash, or they're buying through shell companies, or they’re tied to despotic regimes around the world. And those are only the sales that we know about, and only the sales that happened before 2016.
This all continued through his presidency, and we only have just the tiniest glimpse into who was taking advantage of it, how much Trump himself was taking advantage of it and profiting from it, and then, obviously, how that upended and affected American policy.
Congress passed a law banning anonymous shell companies as part of the NDAA this past winter. Why is that important, and how will it affect the type of real estate dealings that have enriched Trump in recent decades?
Let me start with the quick elevator pitch about what shell companies are and why they're important. A shell company is a company you could create in the US — before this year — in about 15 minutes for about $100, and you could use it to effectively anonymize the source of your wealth.
So, say you're a narcotrafficker or the son of a dictator in Equatorial Guinea, or you're an oligarch in Iran, and you're looking to mask the source of your funds, but want to still be able to use those funds and move them into luxury real estate, or artwork, and to be able to hide your tracks, to be able to kind of cover the process with which you're moving your money to anonymize it. And lo and behold, it just so happened that the US was, for years, the best place to set one of these up.
You have entire states that, over the last 20 or 30 years, began building so much of their own domestic financial architecture around making it easier and easier for people to set up these shell companies and add more and more and more protections. You had what political scientists call "a race to the bottom" in places like Delaware, in places like Nevada, in places like Wyoming, that are trying to outdo one another in providing these very pro-kleptocratic services, these tools to set up anonymous shell companies as easily as possible, for whoever wants one.
And we know who's been taking advantage. It's some of the greatest arms traffickers of the last few decades, it's any number of oligarchs and autocrats, and dictators, and their families. It's any number of just brutal regimes, brutal figures. Basically, anybody who had a little bit of dirty money burning holes in their pockets could set up a Delaware shell company perfectly anonymously, and then they could do whatever they wanted with it, and no investigator could find out who's behind it. No journalist could find out who's behind it, no human rights activists or tax authority could find out who's behind it.
This new law was actually enacted before Biden took office. What was Trump’s position on it?
It's important to note that this law was passed under Trump's veto. This was the first bill that Trump vetoed that Congress then overrode. Trump said it was about the Confederate base remaining provisions in the bill, but there's also the fact that he could've been the president to finally outlaw the formation of anonymous shell companies, and he chose not to.
So does this new law basically put Delaware out of business in terms of the shell company industry? What's the scope of this thing?
This was a momentous act, a once-in-a-generation bill tackling money laundering. It's the greatest anti money-laundering bill the US has passed in 20 years, since we cleaned up the banking sector, and it could yet be the biggest single piece of anti money-laundering legislation the US has ever passed.
We still have to see about enforcement, we still have to see about the actual architecture — they're still figuring out the details of that — but it's difficult to overstate just how important passing that bill was. Because the ability for anybody to set up an American shell company was really kind of the bedrock of American kleptocracy.
You mentioned Delaware. Delaware has a number of other pro-corporate regulations, and significantly more pro-corporate architecture and a broader pro-corporate economy surrounding it. It doesn't rely solely on anonymous shell companies. That was, for many, many years, a huge part of the Delaware economy. Delaware still has more companies than it does constituents, so in a very real sense Delaware politicians' constituents are the companies themselves. But Delaware's also built out a significantly bigger kind of infrastructure around corporate governance, so, in terms of Delaware, they'll be okay. They have other services they can provide.
What I've been watching are the smaller states that built up their architecture around shell companies. Places like Wyoming. Wyoming for years and years was absolutely against any kind of regulations for shell companies. This [the new federal law] was passed over significant opposition from folks like Wyoming legislators who wanted to keep the status quo.
One interesting thing that we've seen out of Wyoming in the last year is that shell company legislation is now a fait accompli, but that doesn't mean that this fight against dirty money, this fight against the kind of regulatory apparatus for transparency to make sure we know who's money this is, where they got it from, and how they're using it, is over. What we've seen in Wyoming is recent legislation not about shell companies, but about anonymous foundations. It seems like Wyoming realizes anonymous shell companies might now be a thing of the past, and they're trying to get in on the ground floor of a different tool, a new tool, anonymous foundations, which have different uses, but the way that they're structured in Wyoming effectively seems to be replacing anonymous shell companies.
So even though we have this legislation that has passed, dirty money doesn't just sit there. It looks for new outlets and tools, and as we've seen in places like Wyoming, there are more than enough legislators who are happy to have that home continue to be here in the US, and to use these kinds of legislative creations and tools to hide that money and launder it and use it however they want.
All this talk about Delaware has me thinking about where Biden fits into all this. I know you wrote a piece for Vox during the campaign about how he came out in support of the type of legislation Congress enacted last winter.
Was that an evolution on his part? Was there a time in the past when he was pro-anonymous shell companies, given the importance of them to his home state?
It's not as if he was out front combating legislation to regulate them. We didn't see any legislation about anonymous shell companies getting serious legs until 2008, in a bill that was co-sponsored by Norm Coleman, Carl Levin out of Michigan, and a certain senator from Illinois, Barack Obama. That legislation unfortunately didn't go anywhere, and obviously it wasn't until this year we saw it passed.
Now the first president we've ever had from Delaware is suddenly not only the president overseeing the elimination of anonymous American shell companies, but in many ways could well become the most anti-corruption president we've ever seen. A president who has placed combating corruption at the core of his administration, his domestic policy, and his foreign policy, in a way that no other president before him ever has.
A couple months ago, the White House issued a memo detailing how the Biden administration was elevating corruption and anti-corruption efforts into a core national security threat, putting it on par with things like terrorism or nuclear war. No president had ever done that before.
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If nothing else, rhetorically, that was a significant step forward. The US is now identifying corruption as as much of a threat as anything we've dealt with over the last 30 or 40 years. We're still waiting for the policy developments to flow from that. We know that the administration is talking about clamping down on, especially, real estate, which is certainly something I would be 100 percent on board with, along with other researchers and writers.
So, we're still waiting to see the actual policy apparatus of that take shape, but already, this administration has gone leaps and bounds beyond the previous one. I'm very excited and optimistic about where things are going in the US.
Trump is obviously a central figure in your book. I want to pick your brain, from the standpoint of kleptocracy, on what you think a second Trump term would like.
A second Trump term would absolutely decimate America's opportunity to lead on this broader global anti-kleptocracy fight. It would absolutely decimate America's reputation as a trusted partner in this fight, and it would absolutely decimate ongoing efforts, whether it's in Congress or elsewhere, to pursue the kind of policies recommended.
Again, there's absolutely zero reason to think that a second Trump administration would be on board with imposing anti money-laundering regulations in real estate, or in the art and auction sector, or in private equity and hedge funds, or in the luxury goods industry — these major prongs in pro-kleptocratic services. There is zero reason whatsoever to think that the US would make any progress in this fight.
Beyond that, what the book details, and as we saw the last four years [of the Trump administration], Trump himself is more than willing to take a sledgehammer to America's existing anti-corruption slate of policies. In the first month of his presidency he described the Foreign Corrupt Practices Act, which has been the keystone to all of the anti-corruption architecture the US has built, a “horrible law,” and we know that he tasked Jared Kushner with drafting an executive order to get rid of this law.
This is the core of America's anti-corruption policy! It's like, even for Trump it doesn't get more blatant than that. That's the kind of element that would be returning to the White House. They would look for any and all avenues to erode America's anti-corruption policy as it currently exists, and then to block any further development of, evolution of, extension of, America's anti-corruption and counter-kleptocracy policies moving forward.
Just as it's difficult to overstate how important the legislation that we saw earlier this year about shell companies is, it is difficult to overstate what a threat a second Trump term would be to the prospects of America leading this fight, making sure to clean up its own house, disrupting these kinds of kleptocratic figures, and, frankly, closing the door to the White House to these kleptocratic figures.
As the book details, Trump tossed the doors wide open, to all of these post-Soviet oligarchs, to all of these Malaysian financiers, to all of these Middle Eastern or Sub-Saharan African kleptocratic figures. All of a sudden they realized they had somebody they could recognize and work with freely in the White House without any of the rest of us knowing.
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We're looking through a keyhole at this kingdom of illicit finance, with Trump at the middle of so much of it as it pertains to American politics. There are few figures who have profited more both financially, and certainly politically, from America's transformation into an incredible offshore haven. To have him return to the presidency would be horrific on any number of levels, and it would be absolutely devastating to those of us working in this anti-corruption and anti-kleptocracy fight.
What's the level of bipartisan interest in the anti-corruption fight in Congress?
It is to a remarkable degree a bipartisan space. Certainly, I wish more legislators were onboard with things like clamping down on money laundering in real estate. The problem is, every legislator represents real estate interests, and so that results in a kind of a bipartisan unwillingness so far to really tackle something like that. But for as much partisan rancor as we've seen over the last few years, working in the money-laundering space, it is absolutely a breath of fresh air to see not only that the interest exists on both sides of the aisle, but that things can actually be done on this front.
In the Senate, two of the foremost voices pushing for legislation were Bob Menendez out of New Jersey — very much a traditional centrist Democrat — and Tom Cotton out of Arkansas. I don't know when those other two are ever gonna agree on anything. It is far more common to see anti-kleptocracy legislation pushed on a bipartisan basis than it is to see from the Democrats themselves, or from the Republicans themselves. It is, if nothing else, a reminder that the partisanship in the US has not blanketed everything yet.
And as we saw with the override of Trump's veto earlier this year to ban anonymous shell companies, that was on a bipartisan basis as well. The Democrats themselves couldn't have overridden the veto. They needed Republican partners to do that, and that's what we saw. That extends to some of the bills that we've seen proposed even in just the last few months, whether it pertains to highlighting some of the assets seized from kleptocratic figures in the US — that has bipartisan support — or as it pertains to clamping down on abuses of so-called investor visas that allow these oligarchs and kleptocrats to inject their money into the US — that does too.
So if you want to find bipartisanship, come work with us in combating money laundering and kleptocracy, because you'll absolutely be welcome.
This surprises me given how reticent Republicans are to cross Trump or contradict him in any way.
Certainly, many of the Republicans involved are coming at it from the national security angle, but at the end of the day, they passed the legislation that needs to be passed, and you bring these very strange bedfellows together behind it.
It's an indication that these momentous bills, certainly much-needed and overdue bills, can still be passed over the opposition of a president like Trump, and can still take a hammer to these industries in the US, and certainly to the Americans that are helping these dirty money networks continue to thrive and continue to profit along the way.