A US company owned by President Donald Trump’s Russian business partner was under criminal investigation in the early 2000s, according to records reviewed by BuzzFeed News.
Aras Agalarov, the Russian developer who paid Trump $20 million to stage the 2013 Miss Universe pageant in Moscow, was the largest owner of a small Connecticut company that the IRS criminally investigated in 2000 and 2001, the records show.
The investigation began around the same time that IRS auditors found that the company, Comtek Expositions Inc., had paid $44,000 in income taxes over two years when it should have paid $9.3 million, according to records. No criminal charges were filed, but a US Tax Court judge ruled in 2003 that Comtek had vastly understated its income and owed the IRS taxes, interest, and penalties. An appeals court panel upheld the ruling in 2004. It’s unclear if the tax was paid. The IRS declined to comment, as did lawyers for Comtek and Agalarov.
The IRS scrutiny occurred at least a decade before any known contact between Agalarov and Trump, but the episode provides insight into Agalarov’s start as a businessman after the Soviet Union’s collapse, before he became a billionaire developer with ties to Russian President Vladimir Putin.
Agalarov is a key figure in the Trump-Russia investigations. He instigated the June 2016 Trump Tower meeting at which Donald Trump Jr. expected to receive incriminating information on Hillary Clinton from a Russian lawyer by telling his son Emin that a Russian official had offered incriminating records on Clinton. Emin’s representative Rob Goldstone set up the meeting with Trump Jr.
Two years after the Miss Universe pageant, Aras Agalarov explored building a Trump Tower in Moscow that would have paid Donald Trump millions of dollars. The project never materialized, but special counsel Robert Mueller is investigating it, according to news reports.
The intelligence dossier on Trump and Russia compiled by former British spy Christopher Steele says Agalarov “has been closely involved with Trump in Russia” and “would know the details” of Trump’s activities, including bribes Trump allegedly paid. The assertion is unproven, and Trump has dismissed the dossier, which Democrats paid for in 2016.
The IRS criminal investigation focused on the owners of Comtek, a company that Agalarov and three others created in 1990 to recruit exhibitors for trade shows in Russia focused on computers and electronics, court records show. Agalarov owned one-third of Comtek, company records show. His three business partners — all Russian immigrants living in the New York City area — owned the remainder.
The scope of the criminal investigation is unclear. But tax court records suggest IRS criminal investigators were probing the relationship between Comtek stockholders and an Irish company with Russian connections that helped Comtek stage trade shows in Moscow’s Expo Center and elsewhere.
The Irish company, ECI Management Services, “had associations with prominent Russian businessmen with access to space at the Expo Center,” according to a document Comtek filed in tax court. These ties were vital to Comtek because the Expo Center was “controlled by Kremlin and Russian businessmen,” Comtek said.
In 1995, Comtek signed a deal with ECI in order to “secure continued preferential access to space at the Expo Center,” according to Comtek’s filing. Under the deal, ECI received 75% of trade-show revenues and Comtek, 25%.
Comtek told the tax court that “it believed the [criminal] investigation may have been related to its stockholders’ relationships with ECI or its owners,” tax court judge Renato Beghe wrote in his 2003 ruling.
Brian Galle, a former lawyer in the Justice Department’s tax division, said the criminal investigation “probably was related to tax evasion” but that it’s impossible to know what the IRS criminal division was investigating. “It could be something as simple as signing a return even though it’s false,” said Galle, now a professor at Georgetown Law School.
Another law school professor who specializes in taxation said, “If it’s a criminal investigation, it’s obviously serious business. But I think the most you can say is the criminal investigation suggests some sort of tax evasion was underway.” The professor asked not to be named because he was speculating.
Most IRS criminal investigations involve suspected tax fraud, though they also can focus on money laundering and narcotics, according to an IRS report from 2017.
Comtek got into trouble with IRS auditors by excluding from its income in 1995 and 1996 more than $26 million that ECI received from trade shows. The tax court said Comtek should have counted that amount as income because Comtek “conducted the trade show business” and ECI was “limited to assisting with the logistics.”
As a result, Comtek reported taxable income of $117,673 in 1995 and $78,493 in 1996. The taxable income should have been $11.4 million in 1995 and $15.7 million in 1996, according to an IRS deficiency notice from 2000.
The IRS said in its notice that Comtek owed $18.3 million in unpaid taxes, interest, and penalties. The penalties included $2 million for filing late tax returns and $1.8 million for filing inaccurate returns.
The penalty for filing an inaccurate return “suggests that the taxpayer [Comtek] should have known” the return was inaccurate, said Galle, the Georgetown professor. But criminal investigators may not have had definitive proof that Comtek officials knew their returns were inaccurate, Galle said.
IRS criminal investigators refer suspected crimes to the Justice Department, which decides whether to file charges. It’s not clear if the IRS recommended criminal charges or not.
It’s also unclear which of Comtek’s four owners were under criminal scrutiny. The four men sold the company in 2000, according to a news report.
At a tax court hearing in November 2000, Comtek attorney Frank Agostino told the judge that the IRS is “running a parallel criminal investigation of Mr. Tseytin.” That was a reference to Michael Tseytin, who owned 27% of Comtek and is listed on tax returns as the company president. Agostino, who also represented Tseytin, declined to answer questions about the case.
A court filing by Agostino in February 2001 says that the IRS “is currently pursuing a criminal investigation of some or all of Comtek’s shareholders.” Criminal investigations typically focus on company owners instead of companies because prosecutors must show a defendant knew he was breaking the law. Companies cannot have such knowledge.
Although the tax court ruled that Comtek must count the $26 million paid to ECI as income, the court also let Comtek deduct some expenses related to the ECI payments. Shortly after the court ruling, Agostino told the Fairfield County Business Journal in Connecticut that he was “neither pleased nor disappointed with the ruling” and that the judge “did a good job.”
The court ordered the IRS and Comtek to determine how much the company owes. It is not clear how much Comtek paid. Agalarov is not known to have any US businesses currently.