Monday, January 29, 2018

Reporting About Multiple Troublesome Real Estate Deal Connections Between Presidential Son-In-Law/Advisor Jared Kushner and Presidential Advisor Stephen A. Schwarzman, New York Times & Press Overlook Connections, Including Library Sale

Stephen Schwarzman and Jared Kushner captured in black tie together in 2007 around the time the Donnell Library sale was being concocted.  Schwarzman with Trump running his economic forum where the public infrastructure he wants to privatize was discussed.  Graph information about the benefit Schwarzman's Blackstone is getting from a Kushner-negotiated deal with Saudi Arabia for selling American infrastructure and where public employee pension fund money is being taken from to benefit the Trump family.  New York Magazine dubs Kushner the nepotistic "President-In-Law."  
Last August when the New York Times reported on the economic benefits of being politically connected to Donald Trump as president (The Benefits of Standing by the President, by Jessica Silver-Greenberg, Ben Protess and Michael Corkery, August 19, 2017) it came up with an impressive seemingly one-stop-shopping list of real estate deal connections between presidential son-in-law/advisor Jared Kushner and presidential advisor Stephen A. Schwarzman, the head of the Blackstone Group.  Of course, the bigger topic lurking was conflicts of interest.

As impressive as the list was when compiled, the question is what did it still leave out?  One thing it left out was the a library shrink-and-sink deal, the sale of the Donnell Library once owned by the NYPL, for a minuscule fraction of its value in what was essentially a no-bid transaction arranged in secret.

Here are the Kushner/Schwarzman transactions the New York Times listed in their article that day: 
•    In 2013, (before Mr. Trump was a candidate), Blackstone financed the purchase of warehouses and industrial buildings by Mr. Kushner’s family company.

•    Blackstone also made a loan, which has since been paid off, to Kushner Companies on a Rector Street property (2 Rector Street) in Manhattan.

•    In the summer of 2016, an entity controlled by Blackstone lent $376 million to Mr. Kushner’s company to purchase a large property in Brooklyn that the Jehovah’s Witnesses had operated for many years.

•    Separately, Mr. Kushner and his wife, Ivanka Trump, invested up to $500,000 in a fund that Blackstone manages.

•    Mr. Kushner urged the staff at his Commercial Observer newspaper, to place Jon Gray, the senior Blackstone executive at Blackstone who runs Blackstone’s real estate business, higher on its list of “Power 100” real estate executives and in 2016, Mr. Gray was No. 1 on that list.  (Blackstone is the largest commercial real estate investor in the world.)
And adding context, consider which is most important:
•    Mr. Kushner and his wife, Ivanka, attended what many described as the obscenely lavish 70th birthday party Mr. Schwarzman held for himself in February 2017 at his home in Palm Beach, Fla., near Donald Trump’s Mar-a-Lago estate.

•    Mr. Schwarzman speaks with Mr. Trump as much as once a week, typically (the Times tells us) “about the economy though also about social policy.”
•    When the national economic policy forum that Trump had created and put Schwarzman in charge of imploded following Trump's embarrassing racist Charlottesville comments, Schwarzman called Jared Kushner to give Trump a heads-up. Then, with the panel not yet announcing it was disbanding, Trump tried to claim it was his initiative.  (Infrastructure had been a key topic for the forum's moguls.)
A few months before the Times article, Bloomberg News zeroed in on the Kushner Schwarzman connections.  See: Kushners' Blackstone Connection Put on Display in Saudi Arabia, by Caleb Melby and Hui-yong Yu, May 25, 2017.

The Bloomberg article was far more direct in how it linked a $20 billion Saudi investment in Schwarzman’s Blackstone not just to Trump, but specifically to Jared Kushner and to a $110-billion arms sale to the country Kushner concurrently negotiated to the country noting that Schwarzman was with Kushner and Trump in Arabia when these deals were negotiated:
When Saudi Arabia announced last week a $20-billion investment in a U.S. infrastructure fund managed by Blackstone Group LP, many noticed that it came shortly after presidential son-in-law Jared Kushner personally negotiated a $110-billion arms sale to the country. What went unnoticed -- and is largely unknown -- is how important Blackstone is to the Kushner family company.

Since 2013, Blackstone has loaned more than $400 million to finance four Kushner Cos. deals -- two of which have not been reported -- making it one of the business’s largest lenders. And their ties go beyond the loans. Stephen Schwarzman, Blackstone’s co-founder and chief executive officer, heads Trump’s business-advisory council and was in Riyadh with the president and Kushner. The Saudi promise to invest in Blackstone’s fund drove the firm’s stock up more than 8 percent.
The Bloomberg article thoughtfully included a chart to make explicit how much Blackstone stock had gone up when Blackstone nailed, as the Times described it, “one of the biggest deals on Wall Street this year.”
By contrast to the earlier Bloomberg article, the triple-bylined Times article somehow neglected to mention the stunningly huge Kushner-negotiated arms deal at all, a deal which has all sort of implications given that Saudi Arabia is currently busily using its U.S. supplied arms to bomb and cut off food and water to the people of Yemen.  It’s not exactly fair to think that this arms deal is even hinted at by Times statements that, “Other deals involving chief executives with ties to Mr. Trump were announced during his visit to Saudi Arabia” or “In all, there were more than 40 signed agreements between Saudi Arabia and largely American corporations, including General Electric and the defense contractor Lockheed Martin.”  Nor should we be expected to cleverly discern the information when being told that the “guest list” for the business meeting that the “Saudis scrambled to put together . .  on the same weekend as Mr. Trump’s visit” included “an oil executive, defense contractors and a college president.” 

Given that the Bloomberg article had let the cat out of the bag covering the major points of the Kushner/Schwarzman real estate relations in May, the toned-down write up by the Times of essentially the same facts in August almost comes across as damage control together with a dutiful  checking of the box for the paper of record obligated to cover what is obviously major news.  Much of the Times article equivocally explained that there may or may not be indications of quid pro quo in Schwarzman’s and Kushner’s dealings and it almost sounds like an apology for Mr. Schwarzman being in Riyadh to say that:
Dozens of chief executives from across the United States faced pressure over the meeting. Some of them, speaking on the condition of anonymity, said they had felt they had no choice but to go if they wanted to do business in Saudi Arabia.
The Times article takes a sort of have your cake and eat it too approach, one that’s almost schizoid, about whether it is truly suggesting to its readers that there is anything bad about economic benefits that flow from being politically close to Trump and Kushner.  (With multiple bylines pastiched did some reporters have cake while others ate it?)  The article quotes  Schwarzman furnishing this profundity: “Public service is a core value for people of my generation . . . It’s a great privilege to be asked to help the country — even if it occasionally comes with some degree of criticism.”

The article also includes comments about Mr. Schwarzman from Kathryn S. Wylde, the president of the Partnership for New York City, a regular go-to person for quotes who can be depended upon to say nice things about powerful people.  Sinking any last possibility that the article’s ambiguity doesn’t do its job the article contains this direct statement: “There is no suggestion that Blackstone did anything wrong.”
Nevertheless, the Times probably figured that they were leaving a sufficient trail of crumbs for any readers priding themselves on being astute about such things to read between the lines and between the ambiguity and the denials.  That includes those readers who would intuit the sort quid pro quo they consider abominable, as well as those eager to know what Mr. Kushner and Mr. Schwarzman are up to so that they can keep up with the competition and abreast of the latest tactics and status of what people can get away with.

The Bloomberg article writing about how “the sequence of the deals and the intertwined personal relationships of the principals raise concerns about conflicts of interest” is also different from the Times in that the Bloomberg article reported on the lack of transparency.  It said that of the “$400 million to finance four Kushner Cos. deals” that Blackstone has loaned since 2013, two “have not been reported.”  More specifically, that Blackstone “was quietly financing two Kushner endeavors,” that although documents didn’t show it, Blackstone was among the project lenders giving Kushner an “$88 million loan for the property at 2 Rector St.,” and that a “similar arrangement enabled Kushner Cos.’ purchase of five Jehovah’s Witnesses warehouse and printing buildings” and “again, Blackstone was among the undisclosed partners.”

This lack of transparency is an essential ingredient of the story.  It should not be glossed over.  It was wrong for the Times to neglect to mention it.

In May the Wall Street Journal reported how Kushner improperly didn’t disclose (just forgot to?) business ties and $1 billion in loans he owed with “personal guarantees to pay more than $300 million of that.”  (See: Trump Adviser Kushner’s Undisclosed Partners Include Goldman and Soros- Investments show ties to major finance and technology names, by Jean Eaglesham, Juliet Chung and Lisa Schwartz, May 3, 2017)

More specifically (and the list below includes Blackstone declining to comment):
Lenders to Mr. Kushner, either directly or via properties he co-owns, include Bank of America Corp. , Blackstone Group LP, Citigroup Inc., UBS Group AG, Deutsche Bank AG and Royal Bank of Scotland Group PLC. Royal Bank of Scotland didn’t respond to requests for comment; representatives of the other firms declined to comment.
The Times did eventually report separately about Kushner’s lack of disclosure (separately is not such a good thing), but in another example of the Times lagging months behind, it was finally reporting only in November about non-disclosures previously reported by others. 
The potential conflicts extend from the cabinet to the West Wing. Mr. Trump’s son-in-law, Jared Kushner, an adviser whose portfolio ranges from Middle Eastern peace to government technology, revealed over the summer that he had failed to disclose dozens of assets on his initial government ethics forms.

    “It is precisely because we have extraordinarily wealthy individuals running the government that we have no way of knowing what the conflicts of interest really are,” said Gary Kalman, executive director of the FACT Coalition, a network of anti-corruption groups. “They use complex structures to hide their money, both domestically and abroad.”
See:  Too Rich for Conflicts? Trump Appointees May Have Many, Seen and Unseen, by Nicholas Confessore, November 10, 2017.

Another layer texturing the information about the $20 billion Saudi investment in Blackstone is that the money is seed money for deals to privatize American public assets.  So you can bet that $20 Billion will be generating scads of spin-off deals.  Those deals may not benefit the American public, in fact you can expect them to diminish the public domain and the wealth of what is publicly owned, but beneficiaries like Jared Kushner are not likely to be far away.  The sale of the Donnell Library in which Kushner and Schwarzman each participated on opposite ends of the transaction, was essentially a prototype for the kind of selling off of public property that we ought to anticipate Saudi/Blackstone funds will be used for.  The Blackstone fund is looking to mobilizemore than $100 billion of purchasing power for infrastructure projects.”

There is more texturing to the Blackstone/Kushner/Saudi/Military arms deals to consider if you think about that how tight the behind-the-scenes alliance has been between the Saudis and the Israelis.  The same trip Trump and Kushner took in May going to Saudi Arabia also involved flying directly to stop in Israel next.  The Times noted more recently about that stop in Israel:
Last May, Jared Kushner accompanied President Trump, his father-in-law, on the pair’s first diplomatic trip to Israel, part of Mr. Kushner’s White House assignment to achieve peace in the Middle East.

Shortly before, his family real estate company received a roughly $30 million investment from Menora Mivtachim, an insurer that is one of Israel’s largest financial institutions, according to a Menora executive.

The deal, which was not made public, pumped significant new equity into 10 Maryland apartment complexes controlled by Mr. Kushner’s firm.
(See: Kushner’s Financial Ties to Israel Deepen Even With Mideast Diplomatic Role, by Jesse Drucker, January 7, 2018.)

When the New York Times finally got around to reporting about the nondisclosure of potential conflicts of interest by Kushner on his ethics forms and other Trump advisor/associate ’s business engagements that are generating potential conflicts of interest, it reported that among the investments Mr. Kushner initially failed to publicly disclose was a real estate technology start-up called Cadre.

According to PR published on the web, Ryan Williams, the “co-founder” and face of Cadre, a young (29-year-old) black fellow from Baton Rouge, Louisiana, who came from Goldman Sachs, had just recently started working at Blackstone’s real estate private equity group when he started “thinking about a new endeavor — disrupting the real estate industry at large,” i.e. starting Cadre.  He says that Blackstone had “approached him about working in their real estate group given his technology experience.”  (See: How this 50-person startup is planning to completely transform the real estate industry, by Taylor Majewski, April 5, 2017.)

As “Thrive Capital” Jared Kushner and his brother Joshua Kushner are backers and strategic advisers to Cadre.  Cadre’s offices are in the Kushner owned Puck Building.  In other words they are very much involved.

In a March 1, 2017 Real Deal article (Trump assumed the presidency January 2017) Ryan Williams explained his closeness with the Kushner brothers, styling himself as a metaphorical third brother:
Every day, I speak with Josh Kushner. Josh, an investor through Thrive Capital, brings his tech domain expertise. He played an incredible role early on helping to seed us and give us the capital to build the business. Josh and Jared are both like brothers to me. Jared was an adviser and not involved operationally day to day. He was always a great sounding board for us.
Assessing this undisclosed close business relationship that Jared has with his brother Josh, it is worth bearing in mind that when Jared Kushner wanted to contend that he was taking appropriate steps to deal with his conflicts of interest he transferred some of his questionable assets to  brother Joshua and to a trust overseen by his mother. Such laughably useless gestures are the family M.O. when it comes to ‘resolving’ conflicts of interest with Donald Trump putting his own business interests in the hands of his sons, Eric and Donald Trump Jr.  Ivanka, Trump’s daughter and Jared’s wife, similarly retains the benefits of her business “empire” through such trust and close family relationships.

The Times has editorially worried that the Saudi Arabian government might try to exercise influence over Donald Trump through companies that Trump Organization recently established in that country wanting to do real estate deals there.  Meanwhile, one of the Trump Saudi trip deals, unveiled concurrently with the Schwarzman infrastructure privatization investment and the arming of the Saudis, was for the Saudis to put $100 million into the hands of Ivanka for a “new foundation” she was proposing.

When quid pro quo arrangements (possibly illegal) are bilateral, i.e. people connected by being each on one side of a single transaction, it is easier to conceptualize, comprehend and identify them. When organizations are huge, diffuse and ubiquitous, identifying problematic conflicts of interest can be much more challenging. Some people think it’s sufficient to conclude that the system is defective if you know powerful players view themselves as all being in the same club looking out for each other.  Maybe so, but with multiple players and possible combination there are a lot of variations in between the simple bilateral and the `we are all in the same club' mentality.  They can be very hard to spot. 

When Connecticut Governor John Rowland resigned in 2004 in a bribery scandal one of the bribery schemes that was uncovered was an exceedingly difficult to detect three-way: Bribing the governor by having an antiques dealer pay him nearly twice the legitimate value when purchasing a condominium from him, while one step removed, that overpayment was funded and reimbursed by a business man who had the real interest in bribing the governor buying antiques from the dealer at an inflated price.

How do you spot these things, or know with any certainty when they have or have not happened?

Back in May WNYC’s Andrea Bernstein and Ilya Marritz produced a story alerting the public to another business deal partner quietly helping to fund Jared Kushner projects, an outfit called CIM Group, a private equity company based in Los Angeles.  (See: Trump and Kushner’s Little-Known Business Partner, May 25, 2017)

The story told how “CIM has done at least seven real estate deals that have benefited Trump and the people around him, including Kushner.”  These include:
    •    Kushner’s $340 million purchase of the Jehovah’s Witnesses Watchtower (“one of the biggest real estate transactions in Brooklyn history”).

    •    The trouble plagued Trump SoHo that could have gotten Trump family members criminally indicted that CIM rescued with “a reported $85 million lifeline.”  (Family investors include Donald Trump and his children Ivanka, Eric, and Donald Jr.)

    •    200 Lafayette Street, an office building.

    •    2 Rector Street, an office building.

    •    85 Jay Street, a parking lot in Brooklyn, (“for an eye-popping $345 million.”) 
The story raises a slew of concerns about CIM’s trustworthiness and its interest in influencing politicians including with donation of “tens of thousands of dollars to a series of statewide political action committees.”  It quotes Konrad Putzier, a reporter for the Real Deal magazine saying that “CIM stands out as being very secretive.”  It quotes Laurent Morali, the present president of the Kushner Companies saying of CIM that they “can work through complicated situations, are thorough and strategic.”

The story sniffs around for the traditional bilateral sort of quid-pro-quo concerns saying that the “full extent of CIM’s government ties is not known,” while telling us that public disclosure documents show that CIM “received annualized rent of $37.7 million from the General Services Administration and other federal agencies” and that it has “pursued an array of lucrative government contracts, pension investments, lobbying interests, and a global infrastructure fund, all of whose fortunes could benefit from a Trump presidency.”

And the article reports that CIM has gotten a great deal of its money from public pension funds.  This, with concerns of pay-to-play overtones when political donations are made, is something that Schwarzman’s Blackstone has also been involved in.  WYNC links to the information that public employee pension funds in at least seven states (California, New York, Texas, Arizona, Montana, Michigan and Missouri) have invested in a CIM fund benefitting Trump and his family.
From Reuters, the seven states where the money from public employee pension funds is going to help the Trump family.
As noted, WNYC was sniffing for problematic overly-cozy bilateral arrangements.

Here is something more to think about-  Schwarzman’s Blackstone also does business with CIM.  Blackstone did the following two deals (reported in 2017) with the CIM Group that could be viewed as infusing cash into the business:
    •    Blackstone Real Estate Partners bought 211 Main Street, an office building in San Francisco from CIM for $312.9 million or $750 per square foot, according to sources that were aware of the sale.  CIM reportedly acquired the property in 2009 for $113 million. (“Blackstone declined to comment when contacted for this story.”  March 29, 2017)

    •    The Blackstone Group provided a $360 million loan to CIM Group to finance 1440 Broadway according to a December 21, 2017 article in the Real Deal.
Conflicts of interest in government are a diminishment of the public realm because they mean, by definition, that decisions being made are slanted to be more beneficial to private interests than to the public whom government officials are supposedly in office to serve.  The idea that the public realm is susceptible to being sold off is what then makes infrastructure deals, selling off publicly owned American infrastructure, just as Schwarzman’s fund is setting up to do, such juicy attractions for the greedy.  The private plundering of the Donnell Library with Kushner on one side and, on the other, Schwarzman in a position of public trust as an NYPL trustee, is a prime example of just how heinously detrimental to the public the looting of its assets can be. . .  But we are increasingly at the mercy of those in power who would seek to enrich themselves by diminishing the public realm, claiming its various dismantled parts as their own territory.

One final symbolic irony, perhaps even an irony that’s forcefully intended: In 2011 a new slogan was raised, a cry adopted and resonating across the country, recognizing the public as the “the 99%” while power and  wealth were being wielded with increasing destructiveness by the “1%.”  It was raised by Occupy Wall Street a protest movement that took to the street and seized Zucotti Park in New York City in order to be publicly heard and seen.  Zucotti Park was once named Liberty Plaza Park, before it was renamed in honor of a real estate lawyer. . .

I’ve written previously in Noticing New York about how Zucotti Park and its occupation directly raised the question of the public realm and how we are shrinking the public domains both physical and cultural that the public is still permitted to occupy.

Although Zucotti Park is dedicated and supposed to be for the public, it is technically privately owned by an adjacent property that got zoning bonuses for providing the public with the park.  Ever since Occupy Wall Street was forcible evicted from the park, tight private ownership control has been exercised over the park to ensure that such meaningfully expressive protests don’t erupt there again.  The latest news about Zucotti: Schwarzman’s Blackstone acquired 49% ownership* of it and the adjacent building.  A trophy intended to be symbolic of someone’s victory?
(* NOTE: If you know real estate, you know the various structures whereby 49% can be actual control.)