| | | Jared Kushner still hasn't passed the FBI's background check required in order to work in the White House.
TheValuesVoter ? @TheValuesVoter
10 months. He's never going to get a real security clearance. Just an interim one from his FIL. But he's a key player, making decisions for the US around the world.
Oh yeah, he's quite likely to be indicted at a future date.
Chris Riotta?Verified account @chrisriotta Dec 1
Experts say Jared Kushner’s systemic failures to be honest and transparent in his government disclosures could bar him from receiving a permanent security clearance. His SF-86 omissions are part of a larger pattern of mistakes he's clearly benefited from.
JARED KUSHNER HID ONE OF HIS COMPANIES ON A DISCLOSURE FORM — THEN PROFITED
BY CHRIS RIOTTA ON 10/12/17 AT 6:00 AM
U.S. JARED KUSHNER CADRE FINANCIAL DISCLOSURE ETHICS
Jared Kushner "enriched himself" by not revealing his ownership of a real estate tech business that raised millions of dollars while he served in the government, said a member of the House Judiciary Committee, calling it part of a pattern of unethical behavior that he believes should cause the White House Senior Adviser to be stripped of his security clearance.
Congressman Ted Lieu told Newsweek that Kushner's failure to list a company called Cadre on his initial financial disclosure forms—an oversight that could mean millions for the president’s son-in-law—is an ethical lapse that should have severe ramifications.
"It appears [Kushner] ended up being the beneficiary of that omission," said Lieu, a California Democrat. "He enriched himself by failing to disclose the asset."
Kushner’s lawyer has said that her client’s failure to list Cadre on the initial filing in March was merely an "administrative error." But that "error" allowed Kushner to maintain a stake in the start-up at a time when the three-year-old business doubled its venture funding from rich private investors.
Kushner's failure to cite Cadre on his financial disclosure form came as the Office of Government Ethics was deciding whether to grant him a Certificate of Divestiture, which requires incoming government employees to divest "100% of all financial interests" from listed companies so they don't violate conflict-of-interest laws. It also allows those government employees to sell their assets without paying heavy capital gains taxes.
The timeline suggests more than just an inadvertent oversight, but an effort by Kushner to hold onto Cadre rather than be forced to divest his interests in the emerging company, according to ethics experts.
On March 9, Kushner submitted his original financial disclosure form to the Office of Government Ethics. It did not specifically list Cadre as one of Kushner's assets, though he co-founded the company with his brother, Joshua Kushner and his Harvard classmate Ryan Williams, who remains Cadre CEO.
The company was already attracting attention in New York's real estate and tech circles because of its promise to disrupt both industries by allowing investors to buy shares in real estate developments much like they would buy shares of companies on the stock market.
Kushner’s lawyer says Cadre was not specifically cited on the March 9 form because his holding company, BFPS Ventures, acquired his interest in Cadre on February 17. That transaction appears to be noted on his financial records as a $100,000 to $250,000 sale.
But that amount does not match subsequent disclosures. When Kushner finally amended his financial disclosure form on July 21, he valued his interest in Cadre from $5 million to $25 million.
That disclosure came after Cadre had raised $65 million more in venture funding from major donors including Andreessen Horowitz, adding to a list of prominent venture capitalists such as Democratic donor George Soros and tech entrepreneur Peter Thiel.
The disclosure form suggests that Kushner has not fully divested from Cadre. Indeed, a representative for the start-up told Newsweek that Kushner maintains "a small, passive investment," but has "no operational or advisory role," describing the cofounder as "an early investor in the company."
Government watchdogs have a problem with Kushner’s continued ownership of Cadre.
"Mr. Kushner co-founded Cadre and continues to own a significant part of it," the nonprofit Citizens for Responsibility and Ethics in Washington wrote to then-Ethics Office Director Walter Shaub on July 6. "As a result [the Ethics Office] appears to have granted the certificate of divestiture based on incomplete information."
Shaub, who resigned on July 19 from the ethics office complaining of the Trump administration's disregard for conflict-of-interest guidelines, never signed off on Kushner’s Certificate of Divestiture. Instead, it was approved by the office's general counsel, David Apol on July 20, the day after Shaub quit. Apol replaced Shaub the next day. The New York Times described Apol as having "a much more cordial relationship with the White House" than Shaub.
Kushner's failure to include the full value of Cadre in his initial filing likely allowed him to hold onto most of his interest rather than be forced to divest, Citizens for Responsibility and Ethics in Washington says. And had Kushner revealed his ownership in Cadre, the company might not have been as attractive to investors, who would obviously be keen on putting money into a company so closely linked to a person inside the White House. A Kushner representative admitted that investors would certainly have known about Kushner’s holdings in Cadre from publicly available information, which concerns ethics experts.
"(Kushner) could potentially have been wanting to not disclose this asset as the latest round of funding was happening," Elana Fine, executive director of the Dingman Center for Entrepreneurship at the University of Maryland, College Park, said. "When a venture capitalist like Jared Kushner invests in a company, they’re always expecting a return on that investment."
The type of business Cadre does is also noteworthy because it sits at the nexus of Kushner’s two power bases: real estate and, now, politics.
Cadre operates as an online platform, connecting wealthy investors like Soros, for example, to emerging real estate properties in which they can buy partial ownership. The billionaire was one of Cadre's initial key investors, opening up a $250 million line of credit between his family offices and Kushner’s start-up.
But ethics experts think the real estate investing platform may allow foreign investors to hide their identities to the public, though not to Cadre insiders.
"It's a novel kind of business," said Virginia Canter, who is executive branch ethics counsel for Citizens for Responsibility and Ethics in Washington. "Because of the real estate interests that can be traded on the platform, and who can be buying and selling that real estate, [Kushner’s] financial interest in Cadre concerns me … You can have foreign governments or other individuals who have significant interests before Jared Kushner. This is the man responsible for Middle East peace talks and the American Innovation office.
"The point is, Cadre could result in a benefit to him and there’s no way for us to have any insight or to hold him accountable," she added. "In any other administration, he’d be required to divest of this asset. You line this up with [Kushner's] failures on his security forms … and it’s a lot to just say it was an inadvertent failure. It looks like it’s a systemic problem and, in some cases, more than that."
newsweek.com
Kushners’ China Deal Flop Was Part of Much Bigger Hunt for Cash
By David Kocieniewski and Caleb Melby
August 31, 2017
Jared Kushner, Donald Trump’s son-in-law and top adviser, wakes up each morning to a growing problem that will not go away. His family’s real estate business, Kushner Cos., owes hundreds of millions of dollars on a 41-story office building on Fifth Avenue. It has failed to secure foreign investors, despite an extensive search, and its resources are more limited than generally understood. As a result, the company faces significant challenges.
Over the past two years, executives and family members have sought substantial overseas investment from previously undisclosed places: South Korea’s sovereign-wealth fund, France’s richest man, Israeli banks and insurance companies, and exploratory talks with a Saudi developer, according to former and current executives. These were in addition to previously reported attempts to raise money in China and Qatar.
The family, once one of the largest landlords on the East Coast, sold thousands of apartments to finance its purchase of the tower in 2007 and has borrowed extensively for other purchases. They are walking away from a Brooklyn hotel once considered central to their plans for an office hub. From other properties, they are extracting cash, including tens of millions in borrowed funds from the recently acquired former New York Times building. What’s more, their partner in the Fifth Avenue building, Vornado Realty Trust, headed by Steve Roth, has stood aside, allowing the Kushners to pursue financing on their own.
Kushner Cos. says it will prevail. Laurent Morali, the president, said the company has a variety of contingency plans for the building and its broader portfolio will allow it to sustain any setback. He said he is encouraged by the interest of several potential investors, but declined to name them.
“Reports that portray it as a distressed situation are just not accurate for the building or for the company,” Morali said in an interview on the 15th floor of the building, 666 Fifth Avenue.
But there are challenges all around. The mortgage on their tower is due in 18 months. This has led to concerns that Kushner could use—or has perhaps already used—his official position to prop up the family business despite having divested to close relatives his ownership in many projects to conform with government ethics requirements. Federal investigators are examining Kushner’s finances and business dealings, along with those of other Trump associates, as they probe possible collusion between the Kremlin and the Trump campaign. Kushner has already testified twice before closed congressional committees and denies mixing family business with his official role.
This article, which describes new details of the company’s troubled finances and its overseas fundraising efforts, is based on a review of thousands of pages of financial documents and interviews with more than two dozen executives, business partners, real estate agents, deal participants and analysts. They spoke on condition of anonymity to discuss private deals. Some feared legal reprisals or other retaliation from one of the country’s most powerful families.
The portrait that emerges is that of a real estate company established by a pair of penniless Holocaust survivors, its extraordinary expansion by their children, the rise of a grandson to a top White House role and a big bet that has complicated its financial future.
It was 2006—the height of the real-estate market boom—when Kushner Cos. agreed to buy 666 Fifth Avenue for $1.8 billion, then a record for a Manhattan building. All of it was borrowed except for $50 million. The company still holds half of a $1.2 billion mortgage, on which it hasn’t paid a cent. The full amount is due in February 2019.
The strain has become increasingly evident across their holdings. One person familiar with the company’s finances describes the tower, with its low ceilings and outdated floor plan, as the Jenga puzzle piece that could set the empire teetering.
The family’s idea of how to salvage its investment requires razing the building to the ground and constructing an 80-story tower with greatly expanded retail areas and high-end condominiums. No short- or medium-term return can be expected from such an aggressive approach. Even a return over the long run would be speculative, though Morali describes the plan as “ambitious and creative.” That narrows the pool of investors to those interested in something other than profit. Real estate experts say this almost certainly precludes U.S. companies. More likely: a foreign firm looking to get capital out of its country or seeking a trophy Manhattan property.
Before Trump began his rise to the presidency and the 36-year-old Kushner became his senior adviser, 666 Fifth Avenue struggled to attract serious offers. Meetings the Kushners requested were often rejected. After Trump’s nomination, billions of dollars in Asian and Middle Eastern money came under discussion. Two potential deals that made it to advanced stages, with China’sAnbang Insurance Group and a top Qatari sheikh, fell apart.
The new status meant the Kushners’ calls were more readily answered—but they came with additional scrutiny, not only of the Kushners but also of the investors. Since January, the company has ceased entering into business relationships with sovereign entities, Morali said. Federal investigators want to know if the Fifth Avenue building’s finances came up in a post-election meeting Kushner had with the head of Russia’s state-controlled development bank.
The Kushners have reason to look far afield. Even after selling big sections of 666 Fifth in 2011, they have increased their own vulnerability by borrowing more money for other deals, people close to the company say. After a refinancing, the deed to 666 Fifth sits in an escrow account, ready to be seized by lenders in a default, an action indicating their trust has grown thin. The mortgage will become even more of a burden after a scheduled jump in interest rates in December. Under some dire circumstances, guarantees in the refinancing agreement could even give lenders the ability to go after the family’s other assets—many of which are also underpinned by debt.
Towering Debt
Debt payments have almost always eclipsed net income at 666 Fifth Avenue. A two-year respite followed a hard-fought loan refinancing deal.
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While 666 Fifth Avenue has been a drain, Kushner Cos. has continued to make big moves across New York City, and company officials say those assets insulate the business. It has expanded its footprint by $1 billion, including the Times building and properties formerly owned by the Jehovah’s Witnesses, according to data firm Real Capital Analytics. Morali, sitting in a conference room below a painting of the company’s founders—Jared Kushner’s grandparents—says even a worst-case scenario at 666 Fifth would do minor damage to the company, because “it’s just one small piece of the portfolio.”
But after selling 18,000 mid-Atlantic apartments in 2007, the Kushners only partially own a substantial number of the company’s assets. In many cases, Kushner Cos. has partnered with well-capitalized firms that want to invest in real estate and seek out experienced locals for deals. These include the Israeli firm Gaia Investment Corp. as well as Oaktree Capital Management, the Los Angeles-based asset manager, and Stonehage Fleming, a London firm that invests money on behalf of 250 wealthy families primarily from Europe, the Middle East, and Africa.
As a privately held business, Kushners Cos. doesn’t generally have to disclose how ownership breaks down between it and its partners, and Morali declined to provide details. But there are clues. One Brooklyn development site purchased in 2014 for about $75 million and heralded by the real estate press as “Jared Kushner’s big Gowanus project”—so-named for the canal it abuts—is in fact barely owned by the Kushners at all. SL Green Realty Corp., their partner in the endeavor, owns 95 percent of it, according to a regulatory filing. The remaining 5 percent is split between the Kushners, and LIVWRK, another developer. Elsewhere in Brooklyn, where the Kushners partnered with RFR Realty to purchase buildings owned by the Jehovah’s Witnesses, they own about half of the project’s equity.
It’s here where the Kushners have scaled back. Among the six buildings the partnership purchased for $375 million in 2013 is a 30-story hotel at 90 Sands Street scheduled to be turned over to the Kushner group later this year. Kushner Cos. is now exiting the partnership and selling its stake to RFR, Morali said. Leaving the property means narrowing its role in a planned tech-centric Brooklyn office hub—its most ambitious project since purchasing 666 Fifth.
Kushner Cos. New York Area Properties
666 FIFTH AVE.
229 W 43RD ST.
1 JOURNAL SQUARE
TRUMP BAY STREET
55 PROSPECT ST.
117 ADAMS ST.
81 PROSPECT ST.
77 SANDS ST.
90 SANDS ST.
175 PEARL ST.
DATA: REAL CAPITAL ANALYTICS
The Kushners are also extracting cash from properties in which they do own significant stakes. Six floors of the former New York Times building, which they purchased for $295 million in 2015, now have $370 million of debt against them, loan documents show. Of that amount, at least $59 million was used to return cash to the Kushners.
Across the Hudson River at Trump Bay Street, a luxury residential building in Jersey City, the family plans to take out $50 million, Bloomberg previously reported. Efforts over the summer to obtain a $250 million mortgage for the property struggled in the face of controversy around their use of an investment-for-visa program. Now the company has found a lender, Morali says, declining to name the firm.
Central to the fate of 666 Fifth yet noticeably absent from the gyrations around it, is Steve Roth, Vornado’s chairman and chief executive officer, whose firm owns almost half the building’s offices and most of its stores following a 2011 refinancing. When an analyst asked Roth about 666 Fifth in an August earnings call, he demurred, saying the issue was being debated. Two spokesmen for Roth declined to comment for this article.
In 2014, at a meeting in his 57th Street headquarters with Jared Kushner and his father, Charles Kushner, as well as others wrestling with how to save the investment, Roth argued against the Kushners’ extravagant renovation plans, saying, “It would be worth a lot more if it was just dirt,” according to two people who were there.
Roth is famous for his unsentimental patience. In an April letter to investors concerning a recent dip in demand for retail property, he described an opportunity to “feed on the carnage” for those with ample capital at their disposal—a chance to profit from the overleveraged and underprepared.
That’s what Roth saw when his firm came to Kushner’s rescue in 2011, according to three people familiar with his thinking at the time. For $80 million and the assumption of half the debt, Vornado put itself in the best position to become 666 Fifth’s sole owner in the event of a restructuring or worse.
This may help to explain why Vornado has allowed Kushner Cos. to shoulder the burden of hunting for potential partners and lenders, according to four people. Another reason: Roth’s concern about his own legacy. Now in his mid-70s, having exited retirement only after his handpicked successor left Vornado, he has little desire to gamble his career on a family and a property with uncertain futures, the people said.
Morali said Vornado and Kushner Cos. are equal partners in the tower and will jointly decide its fate.
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Federal investigators know that Kushner met with then-Russian Ambassador Sergey Kislyak in Trump Tower last December and later met with Sergey Gorkov, head of the Kremlin-controlled VEB bank in two meetings that he didn’t, at first, disclose publicly or on his application for his national-security clearance. After those meetings became public, Kushner and the White House said the contacts were made in his role as a Trump adviser and didn’t involve discussion of his family business. But VEB and a spokesman for Russian President Vladimir Putin described the meetings quite differently, noted Adam Schiff of California, the top Democrat on the House Intelligence Committee. They said that Kushner was there in his capacity as head of his family’s real estate business. Investigators say they are studying those accounts with keen interest.
“I think it is part of a pattern of outreach to Russian financial interests, which are essentially Vladimir Putin and his oligarch circle, by Trump family members,” said Senator Richard Blumenthal of Connecticut, a Democrat on the Senate Judiciary Committee. “The financial dealings are important because we know that the Russian playbook is to engage and compromise foreign leaders.” He added, “Whether this meeting and contact are significant remains to be understood.” —With assistance from Billy House and Steven T. Dennis.
bloomberg.com |
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