Strange bedfellows: Swindler, Stinger-missile brokers, the CIA
A decade before he launched the celebrated Fort Lauderdale Trump Tower, Felix Sater hatched a bold plan to keep out of prison.
Charged in a New York securities scandal, the 46-year-old businessman traveled to his native Russia where he took on a unique role that went far beyond flipping on dangerous criminals.
He began spying for the CIA.
Tapping into the vast underground of the former Soviet Union, Sater was able to track down a dozen Stinger missiles equipped with powerful tracking devices on the black market.
With the backing of U.S. agents, Sater agreed to buy the weapons — keeping them out of the hands of terrorists. In return, the CIA pledged to keep Sater from going to jail in the stock scam he concocted with New York organized crime figures.
The deal was set.
Now, years after the failure of the Trump Tower, a legal battle has ensued between burned investors trying to reveal Sater’s background and federal agents who say national security is at stake.
“The problem is at scandal level, and the damage done to victims is incalculable,” argued attorney Richard Lerner in a brief before the U.S. Supreme Court.
Next month, a New York federal judge will decide whether to release dozens of documents in a dispute that alleges Sater stole millions from investors while he was given sweeping protections by prosecutors.
Saying the government has a duty to protect witnesses, prosecutors are fighting to keep Sater’s case hidden in a battle that’s expected to be heard by the justices.
Even the federal judge, Leo Glasser, has weighed into the case, arguing in a hearing that revealing some of the secrets could “significantly affect matters of national interest.”
Though the federal prosecutor’s office in Brooklyn has declined to talk about Sater’s role with the government, records just released show he was finally sentenced in 2009 — 11 years after he was charged in the New York stock fraud case.
The outcome: a $25,000 fine, no prison time.
In addition, he was not ordered to pay back his victims — mandatory under federal law — despite losses totaling $40 million.
What remains sealed is the work that Sater performed for the government in the past 14 years that’s now the topic of the court fight.
During one hearing, the judge said the case had reached top members “of a national law enforcement security agency. I should say agencies — plural.” But he didn’t elaborate.
The fight has been taken so seriously the judge is using the name John Doe instead of Sater to hide his identity and to “protect the life of the person.”
Despite the drama over hiding his past, some details have been divulged over the years, including records in the National Archives that show he cooperated with prosecutors in the securities scheme.
Then, another defendant in the scam, Salvatore Lauria, co-wrote a 274-page book in 2003 describing the deal they cut with the CIA to stay out of prison.
“We were hoping for a free ride or a get-out-of-jail-free card for our crimes on Wall Street,” he wrote in The Scorpion and the Frog: High Crimes and High Times.
When Sater was charged in the securities scandal in 1998, he was already in Russia with another defendant, Gennady Klotsman, according to the book, which used a pseudonym for Sater.
A risky realm
In the next two years, the three men would look for ways to stay out of prison with Sater delving into the dangerous world of arms traders and smugglers.
At the time, Russia was teeming with a network of people selling tanks, fighter planes, radar systems and missiles, wrote Lauria, 43.
“The CIA was worried the weapons would be sold to our enemies,” he said.
For Sater, it was the perfect solution.
They would get Russian operatives to buy the anti-aircraft missiles from terrorists — with the CIA kicking in $300,000 for each missile, the book states.
The deal would collapse — with the CIA and FBI at odds over the arrangement — but the crucial contacts in the black market would soon be fruitful for the defendants after the attacks of 9/11.
“Now the information was deemed important enough,” Lauria said in the final chapter of his book.
Though Lauria changed his mind and tried to stop publication, saying it was a work of fiction, co-author David S. Barry said his research for the book was drawn from interviews, court documents, police reports, and federal records, among others.
Barry said he spent months communicating with Lauria, getting intricate details about their foray to snare the missiles with the help of Russian brokers.
“It was a straight effort of reporting on my part,” said Barry, a former Associated Press reporter who has authored two other books.
Though most of the defendants in the stock swindle were sentenced by 2004, prosecutors pressed the court to delay sentencing for Sater so he could keep working with them — his racketeering crimes hidden.
In the ensuing years, he jumped into the real estate business, joining forces with Donald Trump who lent his name to projects in Fort Lauderdale, Phoenix and New York.
Sater was among the most visible members of the development team, interviewing with the media about the ventures, his conviction never revealed.
He would jet back and forth to South Florida, buying a condo on Fisher Island in 2007 while investing millions with his company in the Midtown Miami project the same year, records show.
Word leaks out
Not until a civil racketeering suit was filed two years ago accusing him and others of massive fraud in the Fort Lauderdale tower and other projects did his role in the $40 million stock scheme come to light.
A former finance director for the developers accused Sater and others of diverting millions from the IRS through shell companies.
The developers have vehemently denied the allegations, but the issue that galvanized the court was the fact that the lawyers inserted the sealed information about Sater in their case.
Prosecutors argued that the case could have been filed without tapping into the highly sensitive records that were somehow leaked to the lawyers.
“Something very bad and perhaps despicable was done by the use of those documents,” said Judge Glasser.
Sater’s former lawyer, Kelly Moore, also argued that sealing the records was not just crucial to “protecting human life” but “national security,” records show.
But lawyers pressing the suit have now taken the case to the Supreme Court, saying the judge went far beyond his bounds by hiding a racketeering case for 14 years — including the entire docket.
“A covert dual justice system of secret criminal trials is illegal and can have no place in American law,” wrote Lerner in a brief before the Supreme Court.
Paul Cassell, a former Utah federal judge who joined the appeal, said the victims were deprived of ever knowing whether a ringleader in a major stock scam was punished.
“[Sater] apparently continues to live the high life off of the money that he stole from victims,” he wrote in a brief for the National Organization for Victim Assistance.
Though top suspects in the securities scam were ordered to make restitution, including three of the ringleaders, no such order exists for Sater, according to records just released.
“Just as pirates think that ‘Dead Men tell No Tales,’ the government seems to believe that sealed cases will never be subject to public scrutiny,” Cassell wrote.