Russian Government Bank Deposited $500 Million into Deutsche Bank Subsidiary as it Lent to Trump
January 21, 2020 9:52 am
A Russian government-controlled bank deposited at least half a billion dollars into the American subsidiary of Deutsche Bank around the time that the bank lent Trump his most scrutinized loans, according to exclusively obtained confidential bank records. As Trump received loans from the subsidiary, DBTCA, totaling over $360 million, Gazprombank sent $511 million in cash to DBTCA to be dispersed however the Russian bank directed.
Additionally, DBTCA had deep liabilities to the Russian government in 2013, according to the documents acquired by Forensic News. The documents show that financial entities in Russia were owed nearly $3 billion by the subsidiary in October 2013.
A confidential report from Deutsche Bank Trust Company (DBTC), DBTCA’s holding company, shows that in October 2013, DBTCA owed Russian government-controlled Gazprombank over €373 million, or approximately $511 million. It was DBTCA’s biggest single liability to a foreign government-controlled entity. An additional liability of €2.8 million to a Gazprombank subsidiary in Switzerland brought DBTCA’s total liability to Gazprombank to more than $515 million.
In a statement, Deutsche Bank said that DBTCA’s relationship with Gazprombank was one in which the Russian state bank moved significant amounts of money into DBTCA as part of a “cash management” arrangement: “At no point has DBTCA ever received loans or a capital injection from Gazprombank or any other Russian bank,” a spokesman for Deutsche Bank said.
The cash management relationship allowed Russian government rubles to be converted to U.S. dollars and deposited in their DBTCA account. Gazprombank then directed DBTCA to distribute the cash to certain entities, individuals or vendors in jurisdictions that use the U.S. dollar as currency.
“A standard part of commercial banking needed by clients that operate internationally is the management of their cash in different currencies. Such cash balances show as liabilities on balance sheet, as that attributes the ownership of that cash to the client. Such liabilities are cash deposits, not loans,” a spokesman for the bank stressed. Deutsche Bank declined to name the entities to which Gazprombank distributed the dollars or for what purposes the Russian government wanted to convert approximately 16 billion rubles to dollars.
The revelation that the Russian government was converting billions of rubles to dollars via the same Deutsche Bank subsidiary that lent to Donald Trump adds further intrigue to President Trump’s finances and possible counterintelligence concerns.
The new documents show that while DBTCA incurred liabilities of more than $13 billion to other entities, a lion’s share–approximately 26% of that total–was owed to entities based in Russia specifically. The sizable amount of money owed to Russia raises questions about why the American bank was so deeply intertwined with Russian cash.
Deutsche Bank faced prior scrutiny for a $1 billion loan (later restructured to $790 million) to VTB Bank, a bank also majority-owned by the Russian government. That loan was first issued in 2007, and the Wall Street Journal later reported Deutsche Bank executives raced to shed the remaining balance on it shortly after Trump’s election. At the time there was still about $600 million left for VTB to pay off, but the Journal reported Deutsche Bank took a loss in order to reduce its Russian exposure.
Last month, a whistleblower named Val Broeksmit revealed to Forensic News he told the FBI that VTB underwrote the Trump loans, essentially guaranteeing a valve of money to Trump which DBTCA provided. Documents suggesting that Russian banks may have pumped $3 billion into DBTCA, which in turn handed $1 billion back to Russian bank VTB, support Broeksmit’s assertion that DBTCA was using Russian cash to finance some of its American operations.
Broeksmit shared an extensively detailed and confidential Deutsche Bank spreadsheet, characterized as a “breach report,” with Forensic News. These kinds of reports are triggered by a bank when its liabilities are greater than its assets. Broeksmit found the breach report in a cache of documents belonging to his father, who was an executive at DBTCA and Deutsche Bank, after he committed suicide in early 2014. Examining his father’s emails and files soon after his passing, Broeksmit reviewed the breach report which covered all liabilities of DBTC, the holding company for DBTCA, according to bank documents.
DBTCA loaned Donald Trump a significant portion of the $2.5 billion total lent to him by Deutsche Bank. The breach report provided by Broeksmit is a inside look into DBTCA’s complete financials around the time DBTCA issued several of its largest loans to Trump. In 2012, DBTCA approved a $125 million loan to purchase the Trump Doral Resort in Florida. Also in 2012, Trump took out an additional loan on his Chicago property, and in 2015, yet another DBTCA loan, this one worth $170 million, allowed Trump to purchase a 60-year lease to the Old Post Office Building in Washington, D.C.
The subsidiary also had a relationship with Jeffrey Epstein, the pedophile and sex trafficker who died under suspicious circumstances after his arrest in July, 2019. That relationship began in 2013, the same year Broeksmit was presented with the DBTCA breach report which documented massive liabilities to Russia.
Gazprombank publicly admits that DBTCA is their correspondent bank in America, though the full nature of the relationship between the two banks remains murky. Based on the breach report and the correspondent banking network, it appears that DBTCA was the bank of choice for the Russian government bank for both cash management and correspondent banking.
Banking experts suggested that Russia’s disproportionately large share of capital in DBTCA raised questions about why other banks were unwilling to manage their cash. Generally, financial experts indicated the relationship was an unusual one for the American subsidiary of a bank which demands more explanation from Deutsche Bank officials.
As of publication, Gazprombank did not respond to requests for comment.
The breach report was sent to Bill Broeksmit on October 18, 2013 from his colleague Joseph Rice, who was serving as Deutsche Bank’s Treasurer for the Americas Region. Rice warned Broeksmit that DBTCA had reached its MCO limit, an acronym representing the bank’s Maximum Cumulative Outflow, “again on Friday.” Rice added that this was a “continuation of the same cause that I reported to you over the weekend.”
DBTCA’s relationship with Gazprombank, wherein Gazprombank moved billions of rubles to DBTCA in order for them to exchange that to dollars, was by far its largest foreign liability to a state-owned bank; its next largest was to the National Bank of Egypt (€242 million/$331 million).
Two Troubled Banks: Russia’s Cash Cow & Germany’s Biggest Lender
The DBTCA breach report shows a disproportionate amount of liabilities owed to Russian financial entities. Breaking DBTCA’s liabilities down by country of origin, the documents indicate that DBTCA owed Russian entities more money than the next three countries combined.
Most of the liabilities to Russia by the Deutsche Bank subsidiary were owed to private institutions, though at least $1 billion (at least 7.6% of DBTCA’s total liabilities) appeared to be to Russian-state controlled entities, with the majority of that to Gazprombank, VEB, and VTB. It’s unclear if other Russian banks were using DBTCA for cash management, or why they ended up on the liabilities sheet.
Ilya Zaslavskiy, the Head of Research at the Free Russia Foundation, explained how Gazprombank has been used as a tool of the Kremlin, saying, “Gazprom and the government have control stake and have used this bank on multiple occasions for vested interests and special operations, like fake auctions of… assets or paying to Putin’s cronies for exaggerated contracts/deals.”
Private banks, especially in authoritarian countries such as Russia, are often also tools of the state even if they aren’t directly owned by the government. In Russia, the Central Bank has frequently injected billions of dollars into private banks such as Promsvyazbank, to which DBTCA had a liability of approximately $230 million according to the breach report. The founders of Promsvyazbank have fled Russia and are currently being sought by Russian authorities for embezzlement.
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Both Deutsche Bank and Gazprombank have faced a series of fines and regulatory actions after failing to stop Russian money laundering.
In early 2017, Deutsche Bank was fined $630 million by the New York Fed for a Russian money laundering scheme that involved its Moscow, New York and London branches. An overview of the scheme, written by the Fed, including the following:
“The ‘mirror trading’ scheme at issue here was simple and effective. Deutsche Bank Trust Company of the Americas (“DBTCA“)…was the entity through which the U.S. dollar payments flowed to the suspicious entities involved here. Operating through the securities desk at Deutsche Bank’s Moscow affiliate, certain companies that were clients of that desk routinely issued orders to purchase Russian blue chip stocks, always paying in rubles. The size of the typical order ranged in value from $2 to $3 million…Every single one of the U.S. dollar payments involved in the mirror trading and one-legged trading activity discussed above flowed through DBTCA….by virtue of this
scheme, the counterparties were able to surreptitiously convert rubles into U.S. dollars using Deutsche Bank.”
The mirror trading scheme occured from 2011-2015, though neither Gazprombank nor the Russian government are directly mentioned in the regulatory report. The Fed determined that, “the size of the typical order ranged in value from $2 to $3 million.”
Two years later, an internal bank report surfaced alleging that Deutsche Bank had direct involvement in another Russian money laundering scheme where “Russian criminals with links to the Kremlin, the old KGB and its main successor, the FSB, used the scheme between 2010 and 2014 to move money into the western financial system.” A slew of other regulatory actions have been brought against Deutsche Bank for separate financial wrongdoing.
Gazprombank has encountered its own share of money laundering problems. After the Panama Papers revealed that Gazprombank’s Switzerland division attempted to open a bank account in the name of Sergei Roldugin, a longtime friend of Vladimir Putin’s who allegedly holds wealth on behalf of the Russian President, a Swiss probe was launched. The 2018 conclusion of that probe, led by the Swiss Financial Market Supervisory Authority (FINMA), led to a court order which banned the Gazprombank subsidiary in Switzerland from accepting any new clients. The report concluded that, “Gazprombank Switzerland was in serious breach of its anti-money laundering due diligence requirements in the period from 2006 to 2016.”
The American Side: DBTCA Connections to Trump & Kushner
At the time of his inauguration, Donald Trump, his daughter Ivanka and her husband Jared Kushner and companies under their control owed Deutsche Bank a combined $659 million-$699 million according to a Forensic News analysis. The vast majority, if not all of this money was owed to DBTCA specifically:
- $364 million in loans to Donald Trump companies for properties in Chicago, Florida, and Washington, DC.
- $285 million loan to Kushner Companies.
- $5-25 million line of credit to Jared Kushner
- $5-25 million line of credit to Ivanka Trump.
Trump and Kushner alone appear to comprise about 1.6%-1.7% of DBTCA’s entire portfolio, which has total assets of $40 billion. Kushner’s mother also has a line of credit with Deutsche Bank, worth up to $25 million.
Two of the loans to Trump entities for the Doral resort in Florida mature in 2023, before a potential second-term would end. Trump still owes at least $55 million of those loans, with their due date approaching in 3 years. Those loans have come under previous media scrutiny, in large part due to their alleged management by Rosemary Vrablic, a private banker at DBTCA, and not Deutsche Bank’s commercial real estate division. Vrablic’s former boss at DBTCA, Tom Bowers, recently committed suicide in California.
Deutsche Bank pushed back on connections between scrutinized DBTCA loans and separate cash management services like it provided for Gazprombank. Both areas of banking, however, occured under DBTCA.
Testimony of bank officials like Vrablic might be essential to understanding how DBTCA justified lending to Trump, who had previously defaulted on multiple loans and declared corporate bankruptcy several times.
The Supreme Court is expected to issue a ruling in June on whether Trump can block Congress from receiving his Deutsche Bank records. Congress issued wide-ranging subpoenas for financial records relating to Trump entities and family members, as well as broader Deutsche Bank records regarding money laundering compliance. Those records may reveal where payments toward Trump’s loan balance originated, or whether any senior Deutsche Bank officials knew the loans were underwritten by Russian banks like VTB or Gazprombank.
The FBI continues to investigate Deutsche Bank in a criminal money laundering probe.