Lawsuit against Trump Foundation, Explained

Lawsuit against Trump Foundation, Explained

Today, the New York Attorney General Barbara Underwood announced a lawsuit charging the Trump foundation and its board members with a persistent pattern of illegal conduct. The Attorney General also referred the foundation and its board to the IRS and FEC, asking those agencies to investigate and take legal action. 

The Allegations

The highlights of the allegations include:

  1. Self-dealing, in which foundation assets (which are supposed to be used for charity) were used to pay off legal obligations of Trump or his companies, to promote the Trump hotel brand, or to buy personal items for the Trump family. Using charitable assets to pay off personal obligations or to pay personal expenses would be a violation of both New York and federal law.
  2. Political activity, including using the foundation to support Trump's presidential election campaign. This also would be a violation of both New York and federal law.

What is at stake?

The New York attorney general is asking that:

  • The foundation be dissolved under court supervision;
  • Donald Trump be banned from serving on the board of a New York nonprofit for 10 years, and that each of his children be banned for one year; and
  • $2.8 million, which is roughly equal to the foundation's reported 2016 gross revenue, be paid as restitution, plus additional penalties.

The allegations have also been referred to the IRS and FEC, which means that potential criminal penalties could be involved.

Could anyone go to jail?

Possibly. The breadth of potential criminal tax penalties go much further than is typically prosecuted by the IRS or the DOJ. Those agencies typically focus on the most egregious cases, which is probably why the tax crimes conviction rate (once a case is pursued) is over 90%.

The most straightforward criminal charge seems to apply to the tax return filed by the private foundation. Each year, the foundation must submit Form 990-PF, and filing a false Form 990-PF is a crime. Here, the allegations would mean that a false Form 990-PF was filed with the government for multiple years.

What about civil penalties?

Monetary penalties are in play for all board members. The IRS may impose excise taxes for self-dealing and interventions in political campaigns, which are at the center of the allegations here. So Donald Trump, Jr., Ivanka Trump, Eric Trump, and Allen Weisselberg (who serves as CFO of the Trump Organization and Treasurer of the Trump foundation) may all potentially be fined.

Is this a political witch hunt?

By all appearances, no. The allegations in the Attorney General's lawsuit would be damning for any foundation, no matter who was involved, and are straightforward violations with little grey area. Click here for a copy of the Attorney General's lawsuit. Among the allegations, the Attorney General shows:

  1. A foundation check being given to a charity at a campaign event. The check itself shows Trump's campaign slogan (Make America Great Again) and includes a campaign website (DonaldTrumpforVets.com). See page 16 of the filing, linked above. Trump's attorneys may come up with any clever arguments, but it is hard to see this act as anything other than the foundation supporting Trump's campaign for president (which is illegal).
  2. A handwritten note initialed by Trump himself sending a $100,000 donation from the foundation to settle a dispute between Mar-A-Lago (Trump's private club) and the Town of Palm Beach. Again, it is very hard to see this as anything other than the foundation paying a personal legal obligation of Donald Trump. It is illegal to use the assets of a charity to pay a personal obligation, even if the charity is named after you. People get a tax deduction for donating to charity because those assets are supposed to go to good causes, not to enrich private persons.

The Attorney General's lawsuit presents many other problematic fact patterns of foundation grants and payments to enrich personal interests.

Could this end the Trump presidency?

Unlikely. Congress would have to decide that Trump's involvement in any illegal activities of the foundation would be "high crimes or misdemeanors" worthy of impeachment. Congress is currently controlled by the president's political party, and they seem unlikely to check the president for his illegal activities.

Can I see the Trump Foundation's tax returns?

Yes! Unlike personal tax returns, the tax returns of all 501(c)(3) charitable organizations are public documents. Click this link for a copy.

 

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