Editor’s note: This is the third of a three-part series based on a WND interview with investigative reporter Peter Schweizer about his new book “Secret Empires: How Our Politicians Hide Corruption and Enrich Their Families and Friends,” which shows how lawmakers, on a massive scale, are avoiding scrutiny through “corruption by proxy,” using family and friends as “middlemen.” In part one, he explains why he now believes term limits for federal lawmakers are justified. In part two, he explains how the corruption of American politicians has helped prop up North Korea’s rogue regime. In part three, he talks about President Obama’s astonishing “smash and grab” scheme and warns of pitfalls President Trump faces through his family members in the White House and through his global real estate empire, which now is managed by his sons.
When President Trump vowed during the 2016 presidential campaign to “drain the swamp” in Washington if he were elected, he had in mind a vast but insular bureaucracy that stank of graft and personal ambition, with little apparent regard for the well-being of the American people.
But investigative reporter Peter Schweizer warns the president’s global real estate empire poses not only potential conflicts of interest but also the temptation to engage in what Schweizer calls “corruption by proxy.” It’s a more difficult form of corruption to detect in which family and friends of powerful political figures position themselves to create “previously unimaginable pathways to wealth.”
While President Obama had no adult children while he was in office, Schweizer shows in his new book, “Secret Empires: How Our Politicians Hide Corruption and Enrich Their Families and Friends,” how certain close friends profited from “seemingly well-timed financial bets” in the wake of landmark administration decisions adversely affecting industries such as for-profit schools and finance.
One of the biggest benefactors of the scheme, which Schweizer dubs “smash and grab,” was Obama’s best friend, Marty Nesbitt, who had direct access to the White House and became the go-to guy when companies faced regulatory threats from the Obama administration.
When Trump entered the White House, he sought to steer clear of conflicts of interest during his presidency by placing his hundreds of businesses in a trust managed by his sons, Donald Jr. and Eric.
Schweizer told WND in an interview he would have preferred a blind trust, which he believes is the best solution for senior government officials.
Although he recognizes that blind trusts are not as useful in the case of a real estate empire – because it’s clear which buildings are owned and what the obligations are – they at least provide some sort of wall between politics and the business, he argued.
“It’s not a perfect solution but it would be helpful,” he said.
The key ethical crossing line for the Trump sons, as well as for Ivanka Trump and Jared Kushner, who are in the White House, is any big new foreign deals.
“I get why people raise the issue of foreign diplomats being at the Trump hotel and running up the bar tab,” Schweizer said. “But that to me is small pickins. If you think you’re going to persuade the administration by buying a round of drinks at the Trump hotel, I don’t see it.”
The real vulnerability, he said, are “these lucrative foreign deals.”
“There’s no reason a foreign government could not say to any one of them, ‘Hey, we’ve got a prime plot of land here, we’d love to have you build a hotel.'”
Or in the case of Kushner, who has his own major financial obligations, “we want to give you a sweetheart financing deal.”
“They’ve got to resist those at all cost, because there’s always going to be strings attached,” Schweizer said.
Kushner, a top White House adviser who has been regarded by Chinese diplomats as a strategic “channel,” is vulnerable because of his need for a major cash infusion to keep a Fifth Avenue building on which his company remains highly leveraged. An interest-only mortgage is due in February 2019. Kushner, in fact, negotiated a tentative deal with China’s Anbang Insurance Group, regarded as one of China’s most politically connected companies, but the agreement was aborted when it was exposed by the New York Times.
Even the appearance of the intertwining of political power with the financial can spell trouble, Schweizer warned.
“In cases where you might have a coincidental event, suspicions are immediately raised,” he said.
But he said Jared’s and Ivanka’s positions in the White House might, ironically, be a better situation ethically.
“It actually makes it a little easier to monitor,” he said. “We’re aware of their meetings, their transactions. There’s at least a reporting requirement.”
As Schweizer points out in his new book, the Chinese very clearly have viewed the Trump children as a pathway to softening Trump’s position on the communist nation.
In March 2017, Schweizer notes, China suddenly granted the Trump family 38 long-sought trademarks.
“It’s legitimate for them to want those trademarks, but the timing of that is very, very suspicious,” Schweizer told WND.
He said voters knew they were getting a businessman with vast global holdings, but they must be focused, keeping an eye on any sort of politically related favors that might be done for the family’s benefit.
“The good news is we do have a lot of monitoring of these sort of things going on,” Schweizer said, referring to establishment media coverage. “I think that kind of reporting is a good and legitimate check on the possibility for sweetheart deals.
“My frustration is they don’t seem to do it to anybody else.”
He’s calling on the media “not to soften on Trump but to elevate their coverage on everybody else.”
In the case of Kushner, Scheizer observed that the family’s companies overpaid for the 666 Fifth Avenue building in New York City and are “in over their head.”
“So the bottom line is that any financier who is going to come in and, in a sense, rescue them in this, the probability is very high that they’re going to be doing so for political reasons and not just financial ones.”
On the world stage, the potential sources are largely limited to China, Russia and sovereign wealth funds in the Middle East.
“There’s not a large universe that is going to drop, say $500 million, to try to put a deal like this together,” he said.
Smash and grab
Schweizer observed that the corporate and commercial ties of Marty Nesbitt “exploded when his best friend became president.”
In early 2013, Nesbitt launched a private equity firm, Vistria, that oddly focused on investing in companies in highly regulated industries.
But Schweizer points out in his book that investing in highly regulated industries “made sense, given that Nesbitt was best friends with the Regulator in Chief.”
Vistria also brought on board several regulators and insiders from Obama’s administration.
“A curious pattern began to emerge. Obama and his administration would attack industries with government power, which led to substantially lower valuations for these companies. Nesbitt and Vistria, or others close to Obama, could then acquire those assets for pennies on the dollar.
Among the industries in which Nesbitt profited from an Obama regulatory crackdown is for-profit colleges. In one deal, Nesbitt and senior officials in Obama’s administration gained control of the University of Phoenix for $1.1 billion. Prior to Obama’s regulatory crackdown, the school was worth nine times that amount.
At the time of the deal, competitors were being run out of business, stranding thousands of students who provided a market for the University of Phoenix to scoop up.
Schweizer said such corruption is often hard to detect at the time “because it’s going on contemporaneously and we’re not always paying attention to every detail that a friend of a president happens to be engaged in.”
Is there anything that can be done now?
“The challenge with smash and grab is proving something illegal was done,” he said. “When you’re dealing with insider trading issues or issues related to financial transactions, it’s very, very difficult to prove the connection between the two.”
The pattern of the behavior is clear, nevertheless, in the case of Nesbitt and Obama.
“There were meetings, regulatory actions were made, business deals were made,” he said. “But it’s very hard to prove that in a court of law.”
Nesbitt is now chairman of the Obama Foundation, and as Politico put it, “the man building Barack Obama’s future.”