Tom Barrack Snagged Saudi Money After Trump Transition Meetings

(Bloomberg) -- Tom Barrack, the investor and longtime friend of President Donald Trump, was an early advocate of strengthening ties between the White House and Saudi Arabia.

Now his firm, Colony Capital Inc., is doing business with the kingdom's sovereign wealth fund.

When Colony decided to invest in digital infrastructure such as cellphone towers and data centers after Trump's election, it brought in the kingdom's Public Investment Fund, according to people familiar with the matter. Colony worked with another firm, Digital Bridge, to form a $4 billion investment vehicle that closed in June. Since then, Colony has decided to acquire Digital Bridge of Boca Raton, Florida.

The size of the Saudi investment, not reported previously, hasn't been disclosed.

Los Angeles-based Colony and PIF are discussing another tie-up. If it happens, the Saudis would become co-investors in a Hollywood studio, Bloomberg News reported this week. The discussions for a stake in Legendary Entertainment would fulfill a longtime goal of the Saudis for a foothold in the entertainment business.

Barrack had pursued business across the Middle East for decades, but he hadn't done a deal with the massive Saudi fund. That changed after Trump's 2016 presidential run, a time when Barrack straddled multiple roles -- a leader of Colony, a campaign adviser and a key member of the presidential transition team.

During that time, he also laid groundwork with the Saudis. Those interactions were more extensive than has been previously reported. Barrack jetted to a feast with a prince and also was invited to meet with key diplomats at Treasury, according to people familiar with the matter, whose accounts were supported by flight records and official calendars.

Those people added new details about how the relationship developed with the Saudis as well as their allies in the United Arab Emirates. In one example, Barrack flew overseas in December 2016 to feast with the head of the Saudi wealth fund and Mohammed bin Salman, who is known as MBS and was then the deputy crown prince. At the time, Barrack was overseeing Trump's inaugural planning and weighing in on cabinet appointments.

Barrack's Middle East forays are being scrutinized by Democratic lawmakers, who say he and other Trump aides “obliterated the lines” that normally separate policy-making from corporate interests. A new congressional report shows that Barrack attempted to include language in a Trump campaign speech on energy policy that the lawmakers concluded had been vetted by a friend from the U.A.E.

After Trump won, Barrack began working to sell U.S. nuclear technology to the Saudis without restrictions on weapons development -- wielding “outsized influence,” according to the Democratic-led report.

A spokesman for Barrack said it's well known that he has engaged in “investment and business development throughout the Middle East for the purpose of better aligned Middle East and U.S. objectives.” The spokesman added: “Mr. Barrack's consistent attempts to bridge the divide of tolerance and understanding between these two great cultures is etched in the annals of time. This is not political, it is essential.”

A representative of the Saudi sovereign wealth fund declined to comment.

Sagging Business

The latest proposed tie-up comes at a fraught time for both Barrack and PIF. Hollywood cooled on the sovereign wealth fund after the Central Intelligence Agency determined that MBS, who's now the crown prince, ordered the killing of a U.S. resident journalist, Jamal Khashoggi, an allegation the kingdom denies.

Meanwhile, Barrack's business has been sagging, and investigators have been looking into Trump's inaugural committee, which raised $107 million under Barrack's leadership. Federal prosecutors in Brooklyn are probing his relationships in the Middle East, the New York Times reported on Sunday.

Barrack had built his career catering to his powerful clients, helping Middle East royals find a home in the U.S. or good halal food near an investment site. As Trump's star rose, he presented himself as a connector between Saudi and Emirati leaders and decision-makers in Trump's orbit.

His efforts didn't come to much, at least initially. The Mideast nuclear plan he pushed hasn't come to fruition. Barrack angled for a role as a special envoy to the Middle East, without success. He appeared to lose influence as Jared Kushner, Trump's son-in-law and senior adviser, developed a close relationship with MBS. Deepening the sting, Barrack's relationship with Qatar, historically one of his most lucrative in the region, took a hit when the Saudis and Emiratis blockaded the tiny kingdom with Trump's blessing.

Read More: Tom Barrack Got Trump Right, Then Things Went Wrong

But now Colony is beginning to see some upside. In 2017, as Colony began working with Digital Bridge to raise the infrastructure fund, the Saudis indicated interest -- not just in investing in the Digital Colony vehicle but taking an ownership stake, according to a person familiar with the matter.

Although selling a stake to the Saudis would have given Colony a quick profit, it would have crimped its ability to collect management and performance fees over the longer run, and also risked deterring other investors, including several pension funds that separately committed to Digital Colony. The Saudi investment is in the nine figures, according to one person familiar with the matter.

“We never comment on deals,” Tommy Davis, an adviser to Barrack, wrote in an email, saying that Colony had more than 500 limited partners globally. “Nor do we talk about potential LPs or any discussions we have with them.”

With the combination of Colony and Digital Bridge, Barrack will step down as Colony CEO in 2021. The head of Digital Bridge, a deal-maker named Marc Ganzi, will be the combined company's new chief executive officer, Colony said last week. Barrack will remain executive chairman. Colony shares, which have collapsed since a disastrous January 2017 merger, popped on the news.

Colony's latest deal with PIF would be a strategic reversal. The firm, best known for its real estate bets, exited the entertainment business with its 2016 sale of Miramax to a Qatari company. Now it's dipping back in, seeking a minority stake in Legendary Entertainment, the studio responsible for the “Godzilla” franchise.

Colony's change of heart came after PIF showed interest in Legendary last year. Legendary management told the Saudis that it had “no interest in conducting a transaction” with the wealth fund, according to the Hollywood Reporter. Barrack's deep ties in Hollywood could help smooth sensitivity there around the Khashoggi murder. PIF is discussing investing in Legendary through a new vehicle called Colony Media Partners.

Representatives of Legendary, owned by Beijing-based Dalian Wanda Group, declined to comment.

Multiple Hats

Barrack's relationship with the Saudis blossomed as he worked with key members of the Trump transition. On a morning in early December 2016, he met with Kushner in Colony's New York offices, according to people familiar with the situation. At the time, Barrack was the chairman of Trump's inaugural committee, and was in the midst of shaping the incoming cabinet.

Hours after meeting Kushner, Barrack flew to the gulf region, returning through London. In an intimate banquet with platters of Middle Eastern food, he and MBS were joined by Yasir Al-Rumayyan, an ally of the prince and a managing director of the Saudi sovereign wealth fund, according to people familiar with the gathering.

Barrack was accompanied by Sylvio Sharif Tabet, a former Hollywood producer who, like his boss, is of Lebanese descent. Tabet helps manage Barrack's business affairs in the Middle East as Colony's global head of investor relations.

The next month, several figures from the region were on Barrack's personal guest list for his chairman's dinner, one of the inaugural week's most lavish events. Among them was Rashid al-Malik, an ally of Crown Prince Mohammed bin Zayed of the United Arab Emirates, an advocate of MBS's ascent in Saudi Arabia. Barrack's relationship with Malik is of interest to prosecutors, according to the Times.

Later, as Barrack pushed the Saudi nuclear deal, his path crossed often with others in the Trump administration, including Treasury Secretary Steven Mnuchin.

In April 2017, at the Fiola Mare restaurant in Washington, Barrack and Mnuchin met with seven Gulf ambassadors, according to Treasury calendars obtained by American Oversight, a nonprofit organization. At the time, Barrack was proposing that PIF, the Saudi sovereign fund, play a role in the acquisition of Westinghouse, a bankrupt U.S. nuclear company.

Earlier that day, Barrack received an email from a partner in the Saudi nuclear effort stating that Gary Cohn, then Trump's chief economic adviser, had “agreed to signal support to the PIF” on the Westinghouse venture.

Though Barrack had no formal role in the administration, he remained in demand. That June, he was invited along with representatives from Middle Eastern countries to the U.S. Treasury for dinner, according to calendar entries obtained by American Oversight and not previously reported.

The guest list included 24 dignitaries and finance officials. Yousef Al Otaiba, the United Arab Emirates ambassador to Washington and an old friend of Barrack's, was invited. So was an executive of Thrive Capital, the venture firm managed by Josh Kushner, Jared's brother. It's not clear what was discussed.

Everyone was identified on the calendar by name and title, except for Mnuchin's wife and the man whose multiple roles may have made it hard to pick just one -- Tom Barrack.

--With assistance from Matthew Martin.

To contact the reporters on this story: Caleb Melby in New York at cmelby@bloomberg.net;Gillian Tan in New York at gtan129@bloomberg.net

To contact the editors responsible for this story: Jeffrey D Grocott at jgrocott2@bloomberg.net, David S. Joachim

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