Seven years ago, the Trump Organization inaugurated its first real estate venture in Latin America. It was the organization’s most eye-catching yet, a 70-story luxury hotel and condo building dominating the oceanfront skyline of Panama City.
The glittering occasion was attended by Donald Trump, his sons Donald Jr. and Eric, as well as the president of Panama. But behind the scenes, the building was already in deep trouble. Within a few months, the developer, Newland International Properties Corp., defaulted on the bonds that financed the project, and two years later, it filed for bankruptcy.
Today, the $400 million Trump Ocean Club International Hotel and Tower is tangled up in a series of messy lawsuits with owners seeking to have the Trump Organization booted from management of the project, alleging "horrific mismanagement.”
On Monday, Panama’s government said it was investigating a complaint that Trump executives were illegally occupying the hotel following allegations of document shredding and battles for control over the hotel’s computers and bank accounts.
“The Trump name is toxic in Latino countries, with all the things he’s said about immigrants”, bemoaned one upset unit owner, retired pathologist Al Monstavicuis, 78.
The building’s troubled history dates back more than a decade and involves what critics say is a classic example of the Trump Organization’s business dealings, including weak due diligence that landed the Trumps in bed with foreign businessmen accused of a host of crimes, including drug money laundering.
The case continues to rumble in court in Panama and New York, where condo owners and the hotel’s current owners, Ithaca Capital Investments, launched a $15 million lawsuit last October against Trump International Hotels Management LLC, seeking to terminate the Trump Organization’s management contract for the hotel.
The Trump Organization is counter-suing for $150 million, saying the allegations of mismanagement are based on “fabrications.”
Univision and Columbia Journalism Investigations spoke by phone with Trump-lawyer, Alan Garten, in January seeking comment for this report. Upon his request, detailed questions were submitted by email. By the time of publication Garten had not responded, despite a number of follow up phone calls and emails.
The problems began with Trump’s partners, Newland International Properties Corp., a group that included several businessmen of dubious repute. Among them: a Colombian-American financier who ended up convicted on drug charges in Miami; a Brazilian broker investigated in Spain for money laundering; and a Colombian businessman who faces a criminal investigation for allegedly embezzling oil royalties from the government.
Background checks on the investors might have revealed that one of the brokers and investors in the project, Colombian-American Louis Pargiolas, had links with Colombian drug traffickers dating back to 2002. He was arrested in 2009 and convicted two years later in Miami for his role in a Colombian drug case.
Why would we do a background check? If we did a background check, we could have a background check of every real estate broker in, all of Panama and, beyond
Rodrigo Serna Londoño, a Colombian former partner of Pargiolas, told Univision Investiga that his firm cut off relations with the investor after learning about his legal problems in the United States.
At the time they were associated, Pargiolas "was considered as an entrepreneur without flaws of any kind," he added.
The largest investor in Trump Ocean Club, Panamanian businessman Roger Khafif, partnered with Alexandré Ventura Nogueira, a Brazilian businessman who later fled the country facing fraud charges and is also under investigation in Spain for money laundering.
Nogueira, 43, denies the charges and told Reuters: “I am no Angel but not Devil either.”
Khafif later filed for bankruptcy and disappeared from sight. He was last seen opening a GNC food supplements store in Montenegro in October 2016.
Franchising and laundering
These findings are part of a series by Univision and Columbia Journalism Investigations that looks at the Trump Organization’s licensing business. This investigation revealed that 15 of the 27 international licensing projects include an investor or a developer that has faced criminal allegations. Of those seven faced accusations prior to entering into dealings with Trump.
There is no evidence that any laundered money went into the Trump project, or how much due diligence was carried out by the Trump Organization.
After Trump’s election as president of the United States in 2016, the need for due diligence is arguably greater than when he was an ordinary citizen. During the last year there has been intense public debate over potential conflict of interest between the Trump brand and his public office.
The Trumps not to appear to have checked their business associates backgrounds. Eric Trump told Univision in an interview with Univision Investiga (the investigative team of Univision News) in 2011 that the company did not review each investor's and broker's past because involvement was limited to franchising the project under the Trump name. However, the Trumps also manage the hotel in Panama.
“Why would we do a background check? If we did a background check, we could have a background check of every real estate broker in, all of Panama, and beyond" he said.
As a franchise, The Trump Organization has an ethical duty to conduct due diligence on the people and entities inlolved a business partners, according to Alberto Avila, an expert in corporate transparency. "We are talking about countries or jurisdictions where corruption is endemic and it has already penetrated all levels of government and society. So, when you make investments in these types of countries the risk increases," Avila said.
Trump's self-declared rep
When the Trump Organization set its sights on Latin America in 2007, Colombian investment banker Camilo Benedetti began accompanying the Trump children on their trips and meetings with presidents, politicians and businessmen.
Benedetti was the link between the New York firm Yun Capital and the Trump Organization in the search for business opportunities outside the United States. He is currently under investigation in Colombia for the diversion of millions of dollars of oil royalties dating back to that period, Colombia's Attorney General's Office told Univision.
For several years, his role was to accompany Ivanka Trump and Donald Trump Jr. to visit a series of major tourism and infrastructure projects in Mexico, Colombia, Panama and the Dominican Republic. Some never came came to fruition, and others ended in legal wrangles.
At that time, Benedetti boasted to the media that he had persuaded the Trumps to take an interest in Latin America. During a press conference in December 2010, while on a trip in Sonora, Mexico, with Donald Trump Jr., Benedetti said, "I convinced Trump that he should come and get to know the quality of the people and all the opportunities that exist now in Mexico."
Eric Trump acknowledged that Benedetti accompanied him in a meeting with Colombian President Juan Manuel Santos, but has since rejected having "an association" with him. "I don't know what Benedetti does," he told Univision.
The building’s opening on July 6, 2011 was a festive occasion. An official video posted by the office of then Panamanian President Ricardo Martinelli shows a cheering crowd and dancers in traditional costumes.
At the ribbon-cutting, Trump congratulated Martinelli, noting how Panamanians “really love your president.” Turning to look at Martinelli, he added, “You’re my friend.”
Martinelli was equally effusive."We want to thank Mr. Trump for coming to Panama, investing in Panama," Martinelli said, describing the project as “the most important and beautiful building in Panama City."
Speaking about Trump, he added: “Everything he has done in his life turns to gold.”
In Newland’s bankruptcy petition filed in the Bankruptcy Court of the Southern District of New York on April 30, 2013, the firm's lawyers requested that the documents containing confidential information related to prices, payments and terms of the agreements between the company and the Trump Organization not be disclosed.
At that time his ‘gestalt’ was different. He had the TV show and all the success. I figured he did his homework and that he had his own money invested
The voluminous file was delivered to the government trustee at 9:15 a.m. on the same day of the hearing.
In a hearing two weeks later, bankruptcy judge Martin Glenn objected to the last-minute filing. "I take very seriously any request to seal documents. Okay? You are about to run this case off the track. ... You can't do what you did."
‘Behind the backs’ of an entire country
The condo owners also had little idea that the developer had filed a voluntary bankruptcy petition in the United States. Valeria Picchi, one of the condo owners, wrote to the judge on behalf of the Association of Owners Affected by Trump Tower accusing Newland International of a “lack of transparency and integrity," according to court documents.
"We feel that this was all done in many ways 'behind the backs’ of basically a whole country," she wrote.
The affected condo owners accused the Trumps of breach of contract on behalf of buyers who "believed they were buying into the Trump brand and its standards and who were later faced with a much different reality," Picchi said.
“I thought I would be safe with Trump,” said Al Monstavicius, the condo owner who lives in Nevada and now regrets investing $480,000 in a penthouse unit in Trump Ocean Club. He also bought a unit in Trump Tower Chicago.
“At that time his ‘gestalt’ was different. He had the TV show and all the success. I figured he did his homework and that he had his own money invested,” Monstavicius added.
The judge wanted to know how much Newland International paid to the Trump Organization, but the lawyer, J. Eric Wise, only provided a percentage figure for the reduction that the Trumps were willing to offer as part of restructuring the debt.
"How much is it in dollars ... the specific dollar amount?" the judge asked.
"That's a key component of the confidential information, Your Honor," Wise responded.
The judge erupted: "If you want to conduct your proceeding in secret, go do it in Panama. Don't do it in this court in front of me.”
The changes to the franchise contract were vital for the debt reorganization of the company, the judge said. "The importance of transparency in bankruptcy is essential," he added, noting that "the economics of the deal" were vital for the plan to be approved.
At the hearing, John Ashmead, a representative for the bondholders who accounted for 50% of the debt, also complained about the Trump Organization's lack of transparency over the licensing fees. “It's not broken out, as we understand, because Trump was very sensitive about breaking out the specifics,’’ Ashmead said.
"This isn't going to fly with me," the judge responded. "I don't approve plans when it’s a black box that nobody gets a peak in."
Things got worse in 2015 as unit owners complained about contract violations and alleged misspending by the Trump Organization’s management team. After a bitter legal battle the Trump Organization was stripped of the management contract for the non-hotel operations, accounting for about 620 of the building’s 1,000 units.
But the Trump name remained on the hotel, which has the remaining 369 rooms.
The latest management dispute stems from a management agreement that granted the Trump companies a hotel management fee.
After the developer went bankrupt, more than 200 of the 369 condo units were acquired early last year by Ithaca Capital Investments, a group of five investors in the United States and Panama.
In October 2017, Ithaca Capital got together with the condo owners from the owners association and voted to oust the Trump companies from the management contract.
They also filed for arbitration with the International Chamber of Commerce, accusing the Trump Organization of a “precipitous” decline in revenue in the last two years due to poor sales and marketing, according to the complaint.
“The Hotel has steadily been losing market share and stands in last place among its peer luxury hotels in all the relevant metrics for success in the hotel industry,” the owners allege in court documents.
Occupancy at the hotel sank to 36% compared to more than 60% for other five-star hotels in Panama, according to the owners. The hotel operates as a condominium, with rooms owned individually. The Trump Organization is contracted by the owners to run the hotel.
“The owners are suffering like crazy,” said Monstavius, adding that the maintenance fees on his unit far outweigh the revenue from hotel rentals. “The Trump name is toxic in Latin America now. Because of the low occupancy they slashed the rates. They are practically giving them away,” he said.
“It’s a great building, but Trump isn’t going to put his own money into it, he has no equity,” he added.
Last week, the owners sought to evict Trump’s hotel management team from the property and cut off power to parts of the building. A tense standoff ensued and police were called.
The head of Ithaca Capital, Orestes Fintiklis, wrote a letter to hotel employees warning them that the Trump Organization was no longer legally in charge of the hotel’s management. "The Trump Organization ... has been lying to you and putting your jobs and the hotel at grave risk,” he wrote. “The agreement on which the provision of services was based has been terminated by the owners.”
On Monday, the Panamanian government intervened, saying it would investigate any wrongdoing.
The Trump Organization asserts in court documents that the owners’ claims are based on "fabricated" breaches of the hotel management contract, and that the owners had conspired to usurp control of the hotel.
In the latest court filing earlier this month, the owners called Trump’s accusation “entirely fictitious and frivolous” and a bullying tactic designed to distract from the arbitration case.
“Trump is unable to defend against the claims of mismanagement and, thus, Trump’s only apparent defense is to deflect focus from the actual issues … and to create a circus by threatening Plaintiffs (and others) with baseless fraud and conspiracy claims that entirely lack merit,” the owners said.
They added: “In other words, Trump is being Trump.”
Spanish Editors: Ronny Rojas, Giannina Segnini, Alejandro Fernández S. and José F. López
English Editors: David Adams, Jessica Weiss and David Boddiger
Investigation and reporting: Inti Pacheco, Manuela Andreoni, Alex Mierjeski, Keenan Chen, Gerardo Reyes, Juan Cooper and Margarita Rabin
Web development and design: Juan Jesús Gómez
Animation: Mauricio Rodríguez-Pons
Social Media: Angélica Rodríguez
Contributors: Columbia Journalism School’s 2017 Using Data to Investigate Across Borders class, Jeremy Blackman, Ritu Sarin (The Indian Express) and The Toronto Star