In July 2008, Donald Trump undertook one of his most infamous transactions. He sold a mansion in Palm Beach for $95 million to Dmitry Rybolovlev, Russian oligarch and billionaire. Trump had purchased it four years earlier for $41.35 million. The sale price was nearly $54 million more than Trump had paid for the property, even though he had made only modest improvements in it. Trump boasts about his dealmaking skills in this transaction, but the details suggest something more sinister.

July 2008 was the middle of the recession. The real estate market had tanked, especially in Florida. Despite the recession, not only was the price 230 percent of what Trump paid, but it was also $13 million above the highest price previously paid for a Palm Beach mansion, according to the Palm Beach Post. Rybolovlev did not conduct an inspection. He did not obtain an appraisal. He did not order any professional review or undertake any other form of due diligence before purchasing the property.

Five years after the sale, when the economy had made a significant recovery, Palm Beach County appraised the house for just $59.8 million. In other words, despite an actual recorded sale of $95 million and despite the economic recovery, the county determined that it was worth $35 million less than what Rybolovlev had paid five years earlier.

As of March 2017, Rybolovlev had never even lived in the house.

Back to Gallery Strange real estate deal raises specter of Putin buying... 3 1 of 3 Photo: Jim Watson / AFP / Getty Images 2 of 3 Photo: Steve Mitchell / Associated Press 2006 3 of 3 Photo: Lionel Cironneau / Associated Press 2013





Why did Rybolovlev make this deal? There was publicity about a messy divorce and speculation that Rybolovlev was hiding assets from his wife (the divorce was not filed until five months after the purchase). Alternatively, he may have made the purchase as an investment.

Either way, the whole point would be to get his money back at some point. Overpaying for the property makes no sense. Nor does his complete failure to conduct even the most rudimentary due diligence.

There must have been another reason — a reason to give Trump tens of millions of dollars with no expectation of a financial return. One possibility is that Russian leader Vladimir Putin saw an opportunity to exploit Trump’s financial problems to obtain his loyalty and indebtedness.

There is no question that Trump was in financial trouble yet again and needed money.

The recession had seriously depressed sales at the not-yet-complete Trump International Hotel & Tower Chicago. He was unable to make payments on a Deutsche Bank loan for $640 million. He had personally guaranteed $40 million of that debt.

And that was not all. Trump Entertainment Resorts, which owned the Trump Taj Mahal Casino in Atlantic City, was also failing. The Taj was losing business to other Trump casinos in Atlantic City and to newer competitors. Trump Entertainment was facing a $53 million payment to bondholders. The company was plummeting toward its third bankruptcy.

Trump had no apparent source of funds to meet these crises. His father had died, and the estate had been distributed. Wall Street banks were shunning Trump.

Rybolovlev had gotten control of Uralkali, a state-owned potash-mining company, at the age of 29. Uralkali supplied about 30 percent of the global demand for potash, a fertilizer ingredient. Rybolovlev had once served time in jail for murder before being cleared. His wife alleged that he partied on his private yacht with other oligarchs and prostitutes.

In 2008, Forbes estimated his net worth at $13 billion.

Rybolovlev, however, was also in financial trouble. In 2006, a portion of the potash mine had collapsed. No one was killed, but there was enormous damage. Rybolovlev was facing tremendous losses.

Diana Pilipenko describes the relationship between Putin and the oligarchs in her Center for American Progress report “Cracking the Shell”:

“When President Vladimir Putin consolidated power after the fall of the Soviet Union, he established a social contract of sorts, sanctioning the unbridled self-enrichment of Russia’s new class of wealthy business tycoons — known as oligarchs — in return for their unwavering loyalty to his administration. Among other things, this loyalty to Putin meant the oligarchs would not attempt to challenge him politically or otherwise act counter to the Kremlin’s strategic interests. It also meant the oligarchy would act on behalf of the state, thus erasing the boundary between the two.”

As Trump’s financial empire was crumbling, Putin certainly had reason to believe that Trump might be susceptible.

In 1987, the Soviet ambassador to the United Nations, Yuri Dubinin, arranged for Trump and his then-wife, Ivana, to enjoy an all-expense-paid trip to Moscow to consider possible business prospects.

Only seven weeks after his trip, Trump ran full-page ads in the Boston Globe, the New York Times and the Washington Post calling for, in effect, the dismantling of the postwar Western foreign policy alliance.

He had another tour of Moscow in 1996.

Russian mobsters frequented and enjoyed the Trump casinos. Russians were heavy purchasers of units in the Trump Tower. So many Russians bought Trump apartments at his developments in Florida that the area became known as Little Moscow. The developers of two of his hotels were Russians with significant links to the Russian mob. The late leader of that mob in the United States, Vyacheslav Kirillovich Ivankov, was living at the Trump Towers. In various real estate deals, Trump, at the very least, had turned a blind eye to apparent Russian money laundering.

Though Trump had previously contemplated running for president, Putin had no idea whether that would come to pass. It was enough that Trump was a prominent figure and television star already sympathetic to Russia.

Rybolovlev’s purchase of the Florida mansion put about $74 million in Trump’s pocket. Trump suddenly had oxygen.

What had Trump done to earn such a favor? It may seem surprising, but the answer could be nothing. At least not then.

Trump was being enrolled in the Russian system of kompromat, of which Putin is a master. Grant a favor, ask for nothing. Both parties understand that someday something may be expected in return.

And Rybolovlev? Only four months after Rybolovlev bought Trump’s Florida mansion, the Russian government ruled that his mine had not caused the damage, blaming the collapse on long-dead Stalin-era planners. The stock price of Rybolovlev’s company soared. It was up long enough for Rybolovlev to recover his losses on the Palm Beach purchase, plus, presumably, an ample commission for his service.

This decision was made by officials who have been identified as key figures in Putin’s circle. Kompromat is the only explanation of these events that fits all the facts as we now know them.

Looking at Trump’s circumstances in 2008, Putin laid out bait in the form of an absurdly high purchase price for a piece of real estate. Trump took the bait. The snare snapped shut.

One deal was closed. Could there have been others?

Keith Darden, an international relations professor at American University who has studied kompromat, says about Trump: “He’s never said a bad word about Putin. He’s exercised a degree of self-control with respect to Russia that he doesn’t with anything else. ... He knows there are limits, there are bounds on what he can say and do with respect to Russia.”

Michael McFaul, a professor at Stanford University and a former U.S. ambassador to Russia, observed, “The disconnect between President Trump and the Trump administration on Russia policy is unlike anything in U.S. foreign policy history. While the Trump administration had continued, and at times increased, the Obama’s administration confrontation of Putin’s malicious international behavior, Trump himself has never criticized Putin. On the contrary, President Trump consistently praises Putin. Why is that? Why is President Trump so eager to appease Putin?”

Jackie Speier represents San Mateo County and a portion of San Francisco in the U.S. House of Representatives. She serves on the House Intelligence Committee. To comment, submit your letter to the editor at SFChronicle.com/letters.