The Trouble With Ivanka’s Business Partner

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His vendors call him a “career grifter.” His father’s creditors claim he’s a fraud and a serial extortionist who shakes people down with trumped-up threats of criminal charges. With these and other allegations piling up in court records along with judgments—against him, his wife and his businesses—for millions of dollars, his lawyers are abandoning him, saying he’s a deadbeat. All the while, he’s been living in one of the most luxurious mansions in the Bronx.

Meet Ivanka Trump’s longtime friend, matchmaker and business partner, Moshe Lax.

For the past decade, Lax, a 43-year-old New York diamond heir and entrepreneur, has been Trump’s partner in Ivanka Trump Fine Jewelry, the first major venture of her business career.

Trump and her family have continued to associate with Lax even as his legal problems have mounted and Trump has been dragged into Lax’s business disputes. On election night, Lax and his wife stood at the front of the ballroom at the Trump campaign’s victory party in New York, and Lax went on to visit Trump Tower during the transition, while Tiffany Trump attended the launch party for a new Lax venture in February. Ivanka Trump has even continued to rely on Lax’s advice in recent years: In depositions they gave for an unrelated case last summer, both Trump and her brother, Don Jr., cited advice they received from Lax in assessing another business partner.

And according to court records, Trump renewed her licensing agreement with Lax in 2011, allowing him to continue using her name even after his company defaulted on payments and he violated numerous terms of their agreement.

“He cheated not just us, he also cheated Ivanka,” says Mahipal Singhvi of KGK, a company that was recently awarded a multimillion-dollar judgment against Lax, his wife and their businesses after they kept, but did not pay for, a large shipment of KGK diamonds.

Trump’s relationship with Lax and the mountain of legal and financial troubles—reported here for the first time based on dozens of interviews and public records—raise serious questions about the first daughter’s judgment, even as she continues to serve as a powerful White House adviser. In response to detailed questions sent to the White House and the Trump Organization, White House spokesman Josh Raffel requested more information about this article but did not provide comment.

Lax initially agreed to a telephone interview about his relationship with Trump, but then said he might be traveling to Washington imminently and would prefer to meet in person. In response to an email listing detailed questions about the judgments and allegations against him, Lax responded that he was the victim of a blackmail and extortion scheme by one of his creditors.

“I do have all the hard evidence that this is an extortion case for money,” he wrote. “I will pursue criminally.” Lax declined to elaborate, and POLITICO Magazine is withholding the name of the creditor, for lack of any evidence of wrongdoing.

***

Lax grew up in Brooklyn the son of a diamond magnate with a sideline in real estate. He began his partnership with Trump a decade ago when both were rich kids looking to make their mark in the world of business. In 2007, Lax approached Trump pitching her on a land deal in Fort Myers, Florida.

Trump found herself drawn to Lax, seeing him as a kindred spirit. “Moshe was looking to take his business to a whole new level,” she recounts in “The Trump Card,” a 2010 memoir in which the entire final chapter is devoted to her partnership with Lax. “In that way, I suppose, we were a lot alike, trying to make our own way along a path set out for us by our fathers and trying to extend that path in exciting new directions, which I guess explains why we hit it off.”

Lax was not the only person Trump would hit it off with through the proposed deal. Soon after meeting Trump, he called a meeting of real estate heirs to discuss business opportunities at Prime Grill, a steakhouse across the street from Trump Tower, according to an April profile of Lax in Mishpacha, a magazine serving the Orthodox Jewish diaspora. At Lax’s networking lunch, Trump met her future husband Kushner for the first time (in the profile, Lax joked that it was a “state secret” whether he received a match-making fee and said he had gained an appreciation for President Trump’s “decency” and “sense of humor” by working with him up close).

The real estate deal went nowhere, but Trump and Lax soon embarked on a more promising venture together. At the time, Lax had a steady supply of diamonds from his family’s business, but was having trouble differentiating his product. Trump had a famous name with which to brand jewelry and ideas about how to create a shopping experience geared toward working women buying for themselves – a break from other diamond retailers that catered to husbands and boyfriends.

The pair decided to embark on a joint business venture, Ivanka Trump Fine Jewelry, converting Lax’s retail space on Madison Avenue into their flagship boutique.

According to Trump’s memoir, the partnership was a homerun. “As of now, in this tough economy, we’re doing very well,” she wrote in 2010. “Actually we’re doing better than ‘very well’ … We’ve succeeded beyond my wildest expectations.”

But beneath the rosy picture Trump painted in public, there were a number of problems. In June 2011, Trump and Lax entered into a new licensing agreement. This agreement, which has since surfaced in litigation, states that Lax’s company defaulted on licensing payments to Trump and that Lax or his company committed numerous violations of the original deal, including entering into unauthorized sublicensing agreements and failing to keep accurate records. The agreement charges Lax’s company $300,000 per year and 36 percent of net proceeds for the right to use Trump’s name.

Despite those problems, Trump remained in business with Lax as troubles kept piling up.

In 2012, Lax’s company, Madison Avenue Diamonds, found itself in court after it accepted delivery of millions of dollars in diamonds but refused to pay for them, claiming that the vendor, KGK, had breached their agreement by delivering some computer files related to the diamonds late. Lax was represented by David Scharf of Morrison Cohen, who in the past had done extensive legal work for the Trump Organization (the firm later went to court with the Trump Organization over half a million dollars in disputed legal fees).

The diamond dispute entangled Trump in a web of litigation against her will. At one point, Judge Charles Ramos became agitated with Trump’s attempts to avoid testifying about her relationship with Lax.

Ramos expressed special annoyance at the fact that Trump submitted an affidavit from her lawyer in an attempt to quash a subpoena, rather than submitting one herself. “You know something, if she does not want to testify she can tell me she doesn’t want to testify,” Ramos said at a hearing on the matter. “She has not done that. She does it through counsel? Thanks a lot. The deposition will go forward.” Trump also made the unusual request that the deposition take place at her office in Trump Tower, which the judge denied.

At her deposition, Trump’s lawyer revealed that in addition to her licensing agreement with Lax, Trump had an ownership stake in Madison Avenue Diamonds through an entity called IHoldings Madison LLC. It’s not clear how large a share of the company Trump held, or for how long. In the personal financial disclosure she made this year upon entering the White House, Trump says she served as president of IHoldings Madison until this May.

In 2015, the court ordered Lax’s company and his wife, Shaindy—who had personally guaranteed payment of the diamonds and in whose name Lax conducts many of his financial dealings—to pay the stiffed vendor $2.4 million plus interest. Singvhi of KGK says that the company has still not received the payments due, which at this point amount to $3.5 million.

In the meantime, Lax has had other problems.

***

In 2008, Lax’s father died, leaving him as co-executor of a vast estate. But his father also left vast debts, including $27 million owed to the IRS and a multimillion-dollar loan guaranteed by the Brooklyn real estate developers Joseph Brunner and Abe Mandel.

The fallout from that loan has led to some of the most disturbing charges against Lax: that he has been extorting members of his tight-knit religious community, threatening to bring criminal charges against them if they do not pay him—and that he engaged in a massive financial fraud to hide tens of millions of dollars left by his father from the government and creditors.

In 2014, Brunner and Mandel sued Lax, his wife, his brother-in-law Martin Ehrenfeld, his father’s estate, his father’s family trust and various corporate entities, claiming the defendants had used a series of shell corporations to hide Lax’s father’s money and avoid paying his father’s debts. The developers say that before his death, Lax’s father showed them documentation that his net worth was $174 million. According to their complaint, Lax and his co-defendants managed to make the fortune disappear—so that when creditors came calling, the estate had no assets to repossess.

The developers also claimed that Lax attempted to extort them in a scheme to avoid paying on the debts. In a sworn affidavit, Mandel said he received a call from Scharf in March 2014 informing him that a legal complaint was being prepared that would “destroy” him and Brunner and inviting him to a follow-up meeting to discuss the issue at Scharf’s office.

At the meeting, Scharf allegedly told the developers that his client was working with a former prosecutor, was prepared to accuse them of racketeering and would demand $20 million in damages—that is, unless they negotiated with Lax and his brother-in-law “to make this go away.”

In the affidavit, Mandel also said that a private intelligence firm had been approaching his business and personal contacts, telling them Mandel and his partner were under investigation and telling a charity he had given to that his gift was made with “stolen funds.” The developers submitted business card from the firm Sage Intelligence bearing the name Herman Weisberg, a former NYPD detective, that had been left with one of their acquaintances. Weisberg declined to comment for this story.

The developers said they were not the only victims, and that the defendants had been engaging in a “pattern and practice” of extorting and trying to extort other members of the Orthodox Jewish community, to which all involved belong, through “sham” entities called Diligence I LLC and Prudence LLC.

“Brunner and I inquired in our community about Scharf, Lax and Ehrenfeld,” states Mandel in a sworn affidavit. “We learned that they have been shaking down other people in our community for large settlement payments by threatening criminal actions.”

The Laxes and Ehrenfeld have denied wrongdoing. Scharf and his firm, who were never named as defendants, also deny any wrongdoing. Morrison Cohen has since withdrawn as counsel for Lax’s father’s estate, citing a conflict of interest (in June, the firm also withdrew from the KGK case, saying Lax and Ivanka Trump Fine Jewelry had failed pay them).

Morrison Cohen’s withdrawal was just one of many bizarre turns the Brunner and Mandel case has taken. At one point, an attorney for Diligence claimed not to know who actually controlled the shell corporation he was representing. At another point. Lax claimed not to know the original identities of the lenders for the loan under dispute.

Judge Shirley Kornriech later concluded that Lax was lying, and over the course of the case she grew increasingly frustrated with such shenanigans. “A theme in this case is the pleading of ignorance by defendants and their counsel,” she wrote in one court order, listing off assertions that she did not find credible.

In June 2015, the lawyer for Diligence, Steven Schlesinger, withdrew from the case, saying his client had failed to communicate with him and had stiffed him on $85,000 worth of legal fees. Diligence then got a replacement lawyer, David Jaroslawicz, but he also withdrew from the case this January.

In his request to abandon the case, Jaroslawicz said he had been retained by someone named Eldridge Glasford running a corporate services firm on the Caribbean island of Nevis— population 11,000—that he was “not computer literate” because of a disability, and that he was never paid for his work. In November, a lawyer representing Lax’s sister, Zlaty Schwartz, and his father’s estate, withdrew from the case, citing “irreconcilable differences” with the estate.

Since then, the case has settled, according to the developers’ lawyer, William Fried, who declined to comment, citing a confidentiality agreement.

Those cases represent only a small sample of the suits filed against Lax in recent years. In September 2013, the law firm Cohen & Perfetto sued Lax, claiming he stiffed them for $48,000 in legal fees. The case settled, with Scharf representing Lax.

Last January, Lax’s cousin, Aron, sued Lax and his sister for allegedly pursuing “unjust enrichment” by trying to evict Aron and his wife from a Brooklyn condo that they have resided in since 2006 but whose mortgage is in the name of Lax’s late father. Last October, the firm Porzio, Bromberg & Newman sued Lax for $100,000 in unpaid legal fees. And in June, the law firm Meltzer, Lippe, Goldstein & Breitstone sued Lax for $20,000 in unpaid legal fees. The cases remain ongoing. Lax has also been named as a defendant in a number of cases claiming failures to make mortgage payments.

Lax’s problems have continued to entangle Ivanka Trump. In recent years, the state of New York has issued at least three warrants for unpaid taxes against Ivanka Trump Fine Jewelry, totaling over $300,000. The outstanding taxes were eventually paid.

The financial travails of Lax and his wife have also put Ivanka Trump Fine Jewelry in danger of at least partly falling into the hands of the highest bidder at a public auction in order to satisfy their unpaid debts. In January, a New York couple, Michael and Rachel Goldenberg, sued Lax and his wife for stiffing them on a six-figure loan. Lax’s wife owned at least part of Ivanka Trump Fine Jewelry, and in April, a New York court ordered her to turn over her stake in the company to the city so that it could be auctioned off to settle the debt. She apparently failed to do so, leading the Goldenbergs to request in May that she be held in contempt of court. In July, the court ordered the Laxs to pay the Goldenbergs $675,000, and the motion for contempt has been put on hold until September 19, the deadline for paying the debt.

The Laxes’ finances are further obscured by the fact that they are sometimes conducted under the name Chana Weisz, an alias used by his wife, Shaindy. Lax will sometimes write checks from a checkbook made in the name of Chana Weisz, according to a person who has seen him do this. The person recently received a five-figure check from Lax out of that checkbook but said they were unable to cash it because, as an alarmed bank teller pointed out, Lax’s signature did match the name on the check.

Amid so many setbacks, Lax did score at least one massive, if temporary, reprieve thanks to some highly irregular tax relief. In October 2015, the IRS released a $27 million tax lien against his father’s estate, saying the obligation had been satisfied. But last May, the IRS reinstated the lien, saying it had been released by mistake and that the $27 million in back taxes had never actually been paid.

Michael Macgillivray, a prominent Chicago attorney specializing in tax collections and a veteran of the IRS collections department, was gob-smacked by the botched lien release. “That is extremely extraordinary,” he said. “Of the things I’ve seen in my practice, nothing has even remotely approached a million dollars when there was an erroneously released lien.”

MacGillivray added that he had difficulty fathoming the explanation the IRS offered on the form reinstating the lien—that the lien had been released “mistakenly.” A spokesman for the IRS said the agency does not comment on individual cases.

“I could not believe that on a $27 million issue somebody would just make a mistake like that. You’d think there’d be a lot of due diligence,” MacGillivray said. “I can’t say its corruption because the IRS has 80,000 employees and there are incompetents.”

***

As Lax’s problems mounted, Trump did not sever ties or disavow him. The continued relationship briefly came up last summer, when she gave a deposition in a dispute between the Trump Organization and restaurateur Geoffrey Zakarian, who years before had ended a partnership with Lax amid acrimony and litigation.

In her testimony, Trump recalls receiving advice about Zakarian’s character from Lax, which she passed along to her older brother, Don Jr. “I recall telling my brother to make sure that he got a good guarantee, because I had heard from a partner of mine that Zakarian had treated him very badly in a deal,” Trump said. “Moshe certainly feels that Geoffrey is not a very good human being.” Don Jr. also cites Lax’s advice in his deposition for the suit.

In November, Lax and his wife attended the Trump campaign’s official election night party at the Midtown Hilton. A few days later, with the new president-elect and his team holed up at Trump Tower to chart the course of his administration, Lax was spotted in the lobby, taking an elevator upstairs.

In March, Trump’s company announced it was discontinuing the Ivanka Trump Fine Jewelry line to focus on a mass-market collection, leaving the current status of her business relationship with Lax unclear. Until his LinkedIn profile was taken down this week, it listed him as the current chairman of Ivanka Trump Fine Jewelry. Pieces from the line remain available for sale alongside glamorous black-and-white photos of Trump at IvankaTrumpFineJewelry.com, a website registered to the Trump Organization.

Despite all his problems, Lax has been residing of late in a luxurious mansion in Riverdale, an exclusive section of the Bronx, according to a subpoena response submitted by his wife earlier this year. The house is named “Ochre Point” after a Gilded Age mansion in Newport, Rhode Island, and at one point last year, it was the second-most expensive residence on the market in the entire borough, featuring “eight bedrooms, an elevator, a motor court, a three-car garage, and an outdoor pool,” with a $7.75 million asking price, according to the real estate publication Curbed. The house is part of the Villanova Heights development, where houses rent for between $17,500 and $25,000 per month, according to the New York Post.

Meanwhile, Lax has continued to pursue new ventures and keep his name in the news. Earlier this year, he launched Code, a 10,000-square-foot “conceptual fashion retail gallery harboring a Community of Designers” at 800 Fifth Avenue. Trump’s younger sister Tiffany attended the launch party, along with Fox News host Kimberly Guilfoyle and former New York Gov. Eliot Spitzer, who happens to be the landlord.

In July, Lax announced a new diamond gallery, Facet of Love, slated to open on August 15, also at 800 Fifth Ave. But Lax has fallen afoul of Spitzer, according to a person close to the building, who said Lax is now being booted from it “as a consequence of his failure to pay rent.”

Facet of Love has not yet opened, and is not clear when it will, if ever. “I really can’t give a date,” said Lax’s publicist Ronni Kairney, whose website lists Trump as a former client and who also said she did not know when Lax might be available for an interview. “He’s just very busy.”
Indeed, despite it all, Lax continues to exhibit the same hustle that first drew Trump to him all those years ago. “My new associate was an entrepreneur through and through,” the future first daughter recalled in her memoir. “I admired that about him.”

Source:politico.com