Close friend of Trump investigated over alleged €170m tax evasion

A close friend and major fundraiser for Donald Trump is under investigation in Italy for allegedly evading €170m (£147m, $190m) in taxes after the sale of a luxury resort on Sardinia’s Emerald Coast, the beach playground frequented by Gulf Arabs and Russian oligarchs.

Thomas Barrack played a critical role in Trump’s 2016 election campaign and inauguration and has been described as one of the president’s key advisers outside the West Wing.

At the heart of allegations against Barrack in Italy are claims that he and associates in his private equity firm, Colony Capital, orchestrated a complicated scheme involving Luxembourg-based companies to shield tens of millions of euros from Italian tax authorities after Colony’s 2012 sale of the Costa Smeralda resort to Qatar for €600m ($670m).

Barrack and other executives have not formally been charged with wrongdoing. A spokesman for Colony Capital declined to comment on the allegations against the company and its executives. According to a legal document that was prepared by a prosecutor in Sardinia and obtained by the Guardian, investigators used wiretaps in their inquiry, which is a fairly common practice in Italy.

Last year, Barrack helped to recruit his longtime close friend, the former lobbyist Paul Manafort, who had a history of lobbying on behalf of Russian and Ukrainian interests close to Vladimir Putin, to join Trump’s campaign. Manafort served as the campaign’s chairman before he resigned. Manafort, who went yachting on the Mediterranean with Barrack after his departure from the campaign, is now a key figure in the FBI’s investigation into alleged collusion between the Trump campaign and the Kremlin.

Barrack, who saved Michael Jackson’s Neverland ranch from foreclosure while the singer was still alive, was the first major business figure to lend Trump his stamp of approval, calling the Republican candidate “intrinsically and academically first class” and “kind, compassionate, empathetic”.

A recent profile described the real estate mogul as “impeccably fit at 69”. His close friend and business partner, the actor Rob Lowe – with whom Barrack and others bought Hollywood studio Miramax before selling it in 2016 to a Qatari media group – told the LA Times that Barrack used his private plane the way his own children used Uber.

“When I get him on the phone, he’s as likely to be in Riyadh or Paris as he is to be in LA,” Lowe told the newspaper. The fact that Barrack is sitting at the table with Trump “should make everybody happy”, he said.

In the run-up to the election, few endorsements of Trump seemed as personal as those delivered by Barrack.

“Donald’s natural alliance is with the little guy,” Barrack told Charlie Rose during the Republican National Convention last year. “He is a disruptor … a man who can step into the middle of the fray and take the heat.”

The Italian investigation into Barrack’s financial activities in Sardinia is unrelated to Trump and Manafort. But it relates to Barrack’s dealings with Qatar, and Barrack – who speaks Arabic and began his career working for the Saudi royal family – is seen as having influence over Trump’s Middle East policy.

Shortly before the US election, Barrack called for a “radical historic shift in [the US] outreach towards the Arab world”, singling out “brilliant young leaders” in the UAE, Qatar and Saudi Arabia who he claimed represented the region’s best hope. Writing in Fortune, he also said that “the only solution [to the Syrian war] is one that works with Russia and not against them”.

Barrack’s business ties to the Qatar Investment Authority (QIA), the sovereign wealth fund, and its 2012 purchase of four luxury hotels and acres of undeveloped land in Sardinia, which were acquired through a subsidiary of QIA, are now under intense scrutiny.

Details of the allegations are complex and involve several entities that are based in Luxembourg, a tax haven, and the US state of Delaware, where many shell companies are incorporated. Deutsche Bank, which also serves as a private bank for Trump and his close family and has been mired in legal troubles in the US, advised Colony on the deal.

The Costa Smeralda, as it is known, was established by the Aga Khan, the spiritual leader of Ismaili Muslims, in the early 1960s. He wanted to develop the 35-mile patch of northern coast for his close friends. Decades later it became a hotspot known for attracting the world’s richest playboys and their yachts.

A prosecutor in Sardinia, who declined to comment on the case, is examining whether the Los Angeles businessman and his associates purposely sought to load an entity linked to the Sardinian resort with artificial debts in the years before it was sold in order to structure the sale as a tax-free transaction. As part of the alleged scheme, a Colony-linked entity sold bonds to a major hedge fund called TPG Axon.

Details of the alleged tax dodge are contained in a legal document prepared by a prosecutor that outlines the charges that are expected to be filed against Barrack and other Colony Capital executives, among others.

According to the document, a Luxembourg-based unit of TPG Axon, along with various Colony Capital entities, are under investigation for being part of a criminal conspiracy to create a tax scheme that defrauded the Italian treasury.

Under Italian rules, a prosecutor must first formally notify individuals that they are under investigation before charges can be filed, a process that a person familiar with the inquiry said has begun.

A spokesman for TPG Axon said it loaned money to a Colony Capital entity but its role was passive. “The allegation as made is completely without merit,” the TPG Axon spokesman said.

Barrack is not the only individual named in the legal document. The alleged conspiracy, which also involved alleged public corruption, names 23 individuals, including an Italian senator for Forza Italia, Franco Carraro, and Aleksandra Dubrova, Barrack’s Russian-born associate who was once listed on Colony’s website as a vice-president in charge of managing the company’s European investments.

A lawyer for Carraro declined to comment.

A lawyer for Dubrova, who resides in Rome, criticised the investigation, which he said had involved “wiretaps, seizures and searches” and was “very complicated”.

“The investigation is full of problems, full of issues, full of defects. For what it concerns my client, the Russian lady Aleksandra Dubrova, she is absolutely innocent and not involved in any of the allegations moved against her,” the lawyer Emilio Riccio, said. He said her position at Colony had changed.

Six of the executives named in the legal document who are connected to Colony Capital – though not Barrack himself – are being represented by Paola Severino, a Rome-based lawyer and former justice minister. Severino declined to comment.

The Qatar Investment Authority did not respond to several requests for comment.

Last year, Italian media outlets reported that Barrack’s company paid €22m ($25m) to settle legal questions over the tax treatment of the property sale to Qatar. But that did not end the investigation into the transaction. A spokesman for Colony said the firm could not verify whether it made the payment.

Colony Capital is merging with two other companies to create a new company, Colony NorthStar, which will have more than $58bn (€52bn) in assets under management.