‘FIXER’ DABBLED IN TAXIS, REAL ESTATE
$25 million to a Ukrainian businessman who has a checkered financial record and a history of defaulting on loans. And Cohen long held a small stake in his uncle’s catering hall, which was frequented by Russian and Italian mobsters.
In addition to his legal and taxi businesses, Cohen has had a seemingly charmed touch as a real estate investor. On one day in 2014, he sold four buildings in Manhattan for $32 million, entirely in cash. That was nearly three times what he paid for them no more than three years earlier.
“This is the type of person you’d see most bankers steer clear of,” said Ben Berzin, a retired executive vice president and senior credit officer at PNC Bank who clashed with Trump in the early 1990s over loans to the future president’s troubled Atlantic City casinos. The speed with which Cohen successfully flipped real estate stands out, Berzin said. “You have to ask what’s going on.”
Robert Mueller, the special counsel investigating Russian interference in the 2016 election, had already been examining Cohen’s conduct as part of his ongoing inquiry. Last month, federal agents executed search warrants at Cohen’s home, his office and a hotel room where he was staying. The warrants sought documents related to Cohen’s business associates, among other things. That investigation, being conducted by the U.S. Attorney’s Office for the Southern District of New York, is apparently based on information provided by Mueller’s team.
Trump’s lawyers are resigned to the strong possibility that the investigation of Cohen’s businesses could lead him to cooperate with federal prosecutors.
Cohen, after being sent a detailed list of questions about his business interests, responded in a text message, “You need to do real fact checking as your questions are totally inaccurate.” Neither he nor his lawyers have offered further comment.
Trump, for his part, has said that Cohen was “a good guy” and that federal investigators were “looking at something having to do with his business. I have nothing to do with his business.”
But the president has long entrusted Cohen to represent him in matters both public and deeply private: real estate negotiations from Fresno, California, to the Republic of Georgia, and the hush-money payment to an adult-film actress who said she had had an affair with the future president. Or, as Trump put it, “this crazy Stormy Daniels deal.”
The $130,000 payment to the actress is in a way emblematic of Cohen’s many business dealings. Its provenance is murky, obfuscated by a private agreement, pseudonyms and evolving explanations. Trump said this past week that he had paid Cohen a retainer that was used to reimburse the $130,000, directly contradicting his earlier statements that he knew of no payment to Daniels.
Within the Trump Organization, it was Cohen’s job to deal with Trump’s thorniest problems. But now, whatever problems investigators find in Cohen’s own array of businesses could double back on Trump.
Family ties
The son of a Holocaust survivor, Cohen began his professional legal career at a personal injury firm in 1992, the year after he graduated from Cooley Law School in Michigan. His boss at that first job would later plead guilty to bribery.
Cohen’s marriage in 1994 gave him entree to communities of immigrants from the former Soviet Union.
His new father-in-law, Fima Shusterman, had emigrated from Ukraine in 1975. By the time of the wedding, Shusterman had landed in serious legal trouble. In 1993, he pleaded guilty to evading federal reporting requirements for large cash transactions. Shusterman cooperated with prosecutors in a related case and was sentenced to probation.
It was through his wife’s family that Cohen would be introduced to the taxi business. Shusterman initially found work as a taxi driver after arriving in the United States. By 1993, he accumulated nine taxi medallions, then worth roughly $1.5 million.
Not long afterward, Cohen began building his own taxi business, even as he was taking on personal injury work as a lawyer. He partnered with Symon Garber, another Ukrainian-born businessman, who was borrowing large amounts of money to finance taxi businesses in both Russia and the United States.
Cohen borrowed from a half-dozen banks and credit unions to buy taxi medallions. Then he used the medallions as collateral to borrow more money to buy more medallions, former colleagues said. He quickly amassed 30 medallions, each then worth about $250,000, but racked up millions in debt.
Together, the two men managed 260 cabs in the late 1990s and early 2000s, some for other owners. Drivers paid them $100 a shift. Millions of dollars in cash flowed in.
Moving money
From 2009 to 2014, Cohen — by then a trusted member of the Trump Organization — plowed $5.7 million into 22 Chicago taxi medallions, records show.
The investments were ill timed. The ascent of ride-hailing services like Uber and Lyft decimated the value of medallions. Since 2014, Cohen’s companies have been falling behind on taxes. Overall, his taxi businesses in New York and Chicago owe more than $375,000 for a variety of tax, insurance and inspection problems, according to records. Fourteen of his 54 cabs were suspended.
But even as the industry has buckled, Cohen has continued to use his medallions as collateral to borrow money. In December 2014, with his medallions worth $35 million, he took out loans totaling at least $20 million from Sterling National Bank and Melrose Credit Union, according to a banker who reviewed the transactions. (Documents related to both lenders were among the materials sought by federal prosecutors in their search warrants.)
In 2016, Cohen went so far as to dabble in financial engineering. He spoke to investors about pooling distressed loans that financed taxi medallion purchases, repackaging them and selling them to investors, according to a person with direct knowledge of the discussions. He also explored buying up such loans at a bargain price in anticipation that their value would recover, the person said. The outcome of those discussions was not clear.
The financial maneuvering has continued even after the federal search warrants were executed. On April 24, Cohen refinanced all 16 of his taxi company medallion loans. The transactions, with Sterling National Bank, appeared to extend the due dates on the loans by four years, according to public filings on the refinanced loans. And they added a new, unusual source of collateral: If Cohen were to default, Sterling would have the right to any money Freidman owes Cohen.
Many of Freidman’s taxi companies have declared bankruptcy. Asked about the loans, Freidman’s lawyer said his client had “no assets” that could be used as collateral.
Spokesmen for Sterling and Melrose declined to comment.
It was unclear what Cohen has done with all the money he has borrowed in recent years. But he received some of the funds around the time he and his father-in-law, Shusterman, lent a combined $26 million to a Ukrainian immigrant and taxi-fleet operator named Semyon Shtayner, real estate records show.
The transactions were unusual: Shtayner has had nearly $1.7 million in judgments and liens against him over the years, yet Cohen made large loans backed by collateral that appears to be worth less than the value of the loans.
Since 2012, Cohen has lent $6 million to Shtayner, whose family owns Chicago Medallion Management Corp., which manages more than 300 cabs in that city — including those owned by Cohen. The only collateral on the loans appears to be the Shtayners’ condominium in Sunny Isles, purchased in 2009 for $2.35 million.
Nevertheless, Cohen and his father-in-law were willing lenders to Shtayner, who recently entered the marijuana cultivation business in Nevada.
Since last summer, Shusterman has lent $20 million to Shtayner’s wife, Yasya, and two limited liability companies she controls.
“This is a business exchange, that’s it,” Yasya Shtayner said in a brief phone interview, when questioned about the loans from Cohen. Asked whether she had a lawyer who could speak on her behalf, she said yes. Then she hung up
Clinics and questions
After he had built a taxi operation and a personal injury legal practice, there was another element to Cohen’s business dealings, this one involving doctors and companies that operated on the fringes of the medical field.
Starting in 2000, Cohen set up a series of companies in New York City. There were two medical practices, an acupuncture office, two medical billing companies, two management companies and a transportation company.
The ventures were noteworthy, in part, because they were created at a time when countless phony companies were cropping up to exploit no-fault auto insurance laws in New York and other states. Hundreds of doctors, businesses owners and others would eventually be criminally charged or accused of fraud by insurance companies.
There is no evidence that Cohen or the companies he created were part of such schemes. Nor is there evidence that Cohen did anything other than register the companies with state authorities.
The no-fault insurance schemes, which were often masterminded by organized crime figures from the former Soviet Union, all followed a basic template. Staged or exaggerated car accidents were used to generate a tidal wave of “patients.” Transportation companies then took the patients — often low-level criminals — to what in many instances were sham medical clinics, diagnostic testing offices, and acupuncture and physical therapy offices. Billing companies were created to collect money from insurers, and management companies then siphoned the funds out to the scheme’s operators. Some operators were so bold that they sued insurers that had stopped paying after they realized they were being defrauded.
Cohen’s role, if any, in the operation of the companies he helped set up was unclear. The only people listed in the incorporation papers as having roles in the businesses are the two doctors, Aleksandr Martirosov and Zhanna Kanevsky, who were each affiliated with a medical practice.
But both of those doctors were accused of insurance fraud in connection with different medical practices they operated.
Martirosov was arrested and charged with insurance fraud and grand larceny in 2003. A little more than a year earlier, Cohen had registered Avex Medical Care in Martirosov’s name.
In 2005, Kanevsky was indicted on state racketeering charges, the result of a lengthy wiretap investigation into phony accidents and medical claims. Cohen had registered Life Quality Medical Care on Kanevsky’s behalf in April 2002.
Kanevsky pleaded guilty to scheming to defraud in the second degree. A man who answered two phone numbers listed in her name said “no comment” and hung up.
The charges against Martirosov were dropped. He did not respond to calls for comment or a message left at his home. The same year he was arrested, Martirosov was named in a civil racketeering lawsuit brought by the insurance company Allstate, in connection with his work for another medical business. The suit accused dozens of doctors and business owners of trying to defraud insurers. Martirosov denied wrongdoing.
Avex Medical Care continued to operate after Martirosov’s arrest. The company later sued insurers at a frenetic pace that averaged almost one lawsuit a week from 2003 to 2008. The suits targeted insurers that had balked at paying for treatments for accident victims.
In the late 1990s and early 2000s, Cohen’s personal injury practice filed hundreds of lawsuits largely stemming from auto accidents. For part of that time, a bustling bullpen of clerks and paralegals worked the phones at his Long Island City office. They sought settlements with insurers and churned out suits on behalf of clients, many of whom were referred to clinics that were later caught up in no-fault insurance fraud investigations.
One of the personal injury lawsuits Cohen filed was in connection to a 1999 auto accident in the Sheepshead Bay neighborhood of Brooklyn. Both his client and the defendant were later indicted on insurance fraud charges related to the accident, Rolling Stone recently reported. The lawsuit filed by Cohen was dropped.
A minor baron
During his time working at the Trump Organization, Cohen became a minor real estate baron in his own right.
While his business is dwarfed by Trump’s assemblage of properties, it is not insignificant. From 2011 to 2015, limited liability companies connected to Cohen purchased at least five buildings in Manhattan, public records show.
Like many of Cohen’s business dealings, the transactions were unconventional. His companies would buy a building, often in cash. Soon after, they would flip the building in another all-cash deal for four or five times the previous purchase price. The buyer was generally another limited liability company.
In October 2011, for example, a limited liability company listing as its address Cohen’s apartment at Trump Park Avenue purchased a building on Rivington Street on Manhattan’s Lower East Side for $2.1 million. In 2014, Cohen sold the building for $10 million in cash — nearly five times what he paid three years earlier.
That same day, Cohen sold three other Manhattan buildings, also entirely for cash. In total, the four buildings sold for $32 million — nearly triple what Cohen had paid for them in the span of no more than three years.
It is not known who owns the limited liability companies that purchased the properties from Cohen or why they agreed to pay such rich prices. Cohen told Mcclatchy, which first reported the transactions, that the sales were in cash to help the buyers defer taxes in other transactions.
Richard K. Gordon, director of the Financial Integrity Institute at Case Western Reserve University’s law school, said such real estate transactions — large profits, achieved quickly, involving cash purchases by LLCS — should raise red flags.
“If I were the bank, I’d either refuse his business up front or rate him extra high risk,” said Gordon, who once led anti-money-laundering efforts for the International Monetary Fund.
Trump is closely monitoring the investigations into his longtime counselor. In recent weeks, he has moved to simultaneously embrace Cohen and keep him at arm’s length.
“Most people will flip if the Government lets them out of trouble,” Trump wrote on Twitter last month. “Sorry, I don’t see Michael doing that.”
A few days later, Trump asserted that the investigation was unrelated to Cohen’s work for him.
“From what I understand, they’re looking at his businesses,” Trump said. “I’ve been told I’m not involved.”
The president added: “I hope he’s in great shape.”