KELLY MCEVERS, HOST:
Special counsel Robert Mueller's team is reportedly looking beyond whether President Trump's campaign colluded with Russia in last year's election. It's also looking at Trump's finances on projects like his Manhattan building Trump SoHo. One of the developers of Trump SoHo is a company called Bayrock, and one of the people at Bayrock was a man named Felix Sater. To know about him is to understand how Trump does business and who he does business with. For my podcast Embedded, NPR's Alina Selyukh, Jim Zarroli and I start with Felix Sater's background.
JIM ZARROLI, BYLINE: Sater was from the former Soviet Union, came here as a child living in the Brighton Beach section of Brooklyn, which is home to a lot of Russian immigrants.
MCEVERS: Felix Sater's father had a criminal history. He once pled guilty to extortion charges.
DAVID BARRY: He wanted Felix to be an above-board businessman.
ZARROLI: That's David Barry. He's a former AP reporter, and he's spent a lot of time covering organized crime. He actually ended up writing a memoir with a guy named Sal Lauria, who is very good friends with Sater.
ALINA SELYUKH, BYLINE: And I should add here that we did try to talk to Felix Sater. He, through his lawyer, declined to talk to us. And so Felix Sater and this guy Sal Lauria grew up to be these high-flying brokers on Wall Street. And Felix Sater's trouble with the law starts at this party one night in 1991. Sal had just passed a broker's exam. It's very hard to pass. They're out celebrating.
BARRY: And it was a nice night of celebration at a nice restaurant that specialized in margaritas.
MCEVERS: David Barry says there's this other broker who's there at the time. Somehow a fight breaks out over a woman.
BARRY: And Felix exploded and smashed this heavy margarita glass. You know, it was a goblet, not like a martini glass. And he just in half a second or more cut this guy's face open.
MCEVERS: The New York Times reported the man suffered nerve damage and later needed 110 stitches in his face.
SELYUKH: Felix Sater ends up going to prison.
ZARROLI: And yet that really wasn't the end of Felix Sater's criminal career.
MCEVERS: Court documents show Felix Sater and Sal Lauria then started what's known as a pump-and-dump scheme. They would buy up shares of stock through offshore accounts, which inflates the price, then sell these shares or dump them onto unknowing investors. The FBI said they were part of an operation that made $40 million this way. And court documents show they had help from the Italian Mafia.
BARRY: To run something like that on a large scale, you need muscle.
ZARROLI: David Barry says you can't just politely ask other brokers not to sell stock you're trying to pump or inflate.
BARRY: But if you have two guys who are soldiers for the Gambino family and they show up at the brokerage, the brokers listen. They're not listening to Hutton at that point. They're listening to Dominic and Sonny.
MCEVERS: In 1998, Felix Sater pleads guilty to one count of racketeering. And here's where things get even more interesting. Instead of being sentenced for his crime...
ZARROLI: The charges against him were sealed and the case against him was basically frozen for years. And the reason was that he turned state's evidence. He started to become a cooperating witness for the government. And he became a really valuable witness over the next 10 years or so.
MCEVERS: One thing Sater helped the U.S. government do was to try to get Stinger missiles - these are these shoulder-fired surface-to-air missiles that had been used in Afghanistan - off the black market in Russia and out of the hands of terrorists. This is in that book by David Barry and Sal Lauria. And in return, the government promised to keep Sater from going to prison.
ZARROLI: And then, as I said, Felix Sater's pump-and-dump case is sealed for years. And Felix Sater reinvents himself.
SELYUKH: And the next thing that he moves on to is a new real estate investment company called the Bayrock Group.
MCEVERS: One of the developers that would go on to build Trump SoHo.
SELYUKH: So Bayrock was founded in 2001. They later get an office at Trump Tower.
TIM O'BRIEN: Two floors beneath where the Trump family conducted their own business at the Trump Organization.
ZARROLI: That's Tim O'Brien. He's with Bloomberg, and he's been reporting on Donald Trump for decades. So Bayrock and other developers come to Trump with this idea of Trump SoHo.
SELYUKH: Here's the pitch - let's build this 46-story condo hotel and you put your name on it, but you don't have to invest any of your own money. We will raise the money and you'll get equity in the building. Plus you'll be paid some management fees.
MCEVERS: It's called a licensing deal, and Trump has done a lot of these over the years around the world.
ZARROLI: By this point Trump's businesses have been through several bankruptcies, and O'Brien says Trump can't get loans from major banks.
O'BRIEN: From Trump's perspective, anybody who walked into Trump Tower and put a bag of money on his desk could do business with him.
MCEVERS: That's according to O'Brien's sources. So Trump announces this new project on "The Apprentice."
(SOUNDBITE OF TV SHOW, "THE APPRENTICE")
PRESIDENT DONALD TRUMP: Located in the center of Manhattan's chic artist enclave, the Trump International Hotel...
MCEVERS: But there are now questions. Did Trump know about Felix Sater's felony conviction? Because if he did, it shows he's willing to do business with someone who's committed financial crimes. If he didn't, it means he doesn't fully vet who he does business with. Felix Sater's lawyer says he'd reformed by the time of Trump SoHo. Bayrock and Sater have since been sued in a case that alleges financial improprieties, allegations their lawyers deny.
ZARROLI: Lawyers we talked to say that before 2007, Trump probably could have found out about Felix Sater's conviction. But after 2007, a lot of people knew about it. That's when The New York Times published an article about the margarita glass, the pump-and-dump scheme, and about Felix Sater's work for the government.
MCEVERS: A lawyer named Richard Lerner picks up the story from there. He has internal Bayrock emails from that time. They were filed as part of a lawsuit.
RICHARD LERNER: The New York Times article was published on December 17, 2007. Two days later, he was deposed.
ZARROLI: Trump was deposed as part of a separate lawsuit.
MCEVERS: In it, Trump says nobody knew anything about Felix Sater. And then he says he'll look into it. Again, here's Lerner.
LERNER: Then on January 21, 2008, there are internal emails at Bayrock saying there's going to be a meeting. And Donald Jr., Ivanka, Eric and Donald Trump Sr. are coming. Sater will be there.
SELYUKH: We don't exactly know what that meeting was about, but remember; some weeks earlier, The New York Times had published that article about Felix Sater.
LERNER: And in that email chain of January 21, 2008, I believe the very final email of the day is...
MCEVERS: Donald is happy with me, Felix Sater writes. I'll explain when I see you.
SELYUKH: As recently as 2010, Felix Sater had a business card, and it said senior adviser to Donald Trump. Then in 2013, Trump does this interview with the BBC's John Sweeney.
(SOUNDBITE OF ARCHIVED RECORDING)
JOHN SWEENEY: Why didn't you go to Felix Sater and say, you're connected with the Mafia, you're fired?
TRUMP: Well, first of all, we were not the developer there. That was a licensing deal.
SWEENEY: But your name was on it.
TRUMP: A very simple licensing deal.
SWEENEY: But your name's on it, Mr. Trump.
TRUMP: Excuse me. But I don't know - you're telling me things that I don't even know about. I mean, you're telling me about Felix Sater. I know who he is.
ZARROLI: After a few more exchanges, Trump ends the interview.
(SOUNDBITE OF ARCHIVED RECORDING)
TRUMP: And by the way, John, I hate to do this, but I do have that big group of people waiting. So I have to...
SWEENEY: OK, now, hold on...
MCEVERS: Later, Trump said he wouldn't know Felix Sater if they were sitting in the same room. And even later in 2015, as first reported by The New York Times, Felix Sater emails Trump's personal lawyer and says, quote, "our boy can become president of the USA and we can engineer it. I will get all of Putin's team to buy in on this." The White House says that email is a non-story. No one from the Trump Organization would talk to us for this story.
SELYUKH: As recently as last year, Felix Sater said he and Trump worked closely together over the Trump SoHo years.
ZARROLI: Trump told the AP in 2015 that he wasn't that familiar with Sater.
MCEVERS: And Bayrock does not currently do real estate deals.
ZARROLI: I'm Jim Zarroli.
SELYUKH: I'm Alina Selyukh.
MCEVERS: I'm Kelly McEvers.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.