NEW YORK (AP) — The criminal tax fraud charges unsealed against Donald Trump’s company Thursday are a blow to a business already reeling from canceled deals following the insurrection at the U.S. Capitol and the impact of the coronavirus pandemic on hotels and clubs.
The indictment may make it harder for Trump to strike new deals, get bank loans and bring in new money to his sprawling and indebted business.
The former president himself was not charged by prosecutors, but investigations are ongoing.
Here’s a look at the company and the challenge it now faces:
WHAT IS THE TRUMP ORGANIZATION?
The company is a business entity encompassing hundreds of firms and partnerships that own or manage office buildings, hotels, residential towers, golf clubs, branding rights, licensing deals and other assets around the world.
Those various businesses share staff with the Trump Organization, including Trump’s two adult sons, Donald Jr. and Eric, both executive vice presidents, and Allen Weisselberg, the indicted chief financial officer.
WHAT ARE THE ALLEGATIONS?
A grand jury indictment charged the Trump Organization with conspiring to help top executives cheat on their taxes by not reporting compensation like free use of apartments and cars, payments of school tuition or reimbursement for personal expenses.
The company pleaded not guilty, as has Weisselberg, one of Trump’s most loyal and longest-serving employees.
The company says neither it nor Weisselberg did anything wrong and claimed the charges are politically motivated.
Weisselberg is also accused of cheating on his taxes by disguising that his full-time residence was in New York City, where he was subject to the city’s income tax.
WHAT IS TRUMP’S CURRENT ROLE IN THE COMPANY?
Trump resigned from positions he held with hundreds of Trump Organization entities in over 20 countries before he took the presidential oath of office four years ago.
It was his attempt to allay fears he would use the presidency to help his business. At the time he set up trust to hold its assets and handed over day-to-day control of it his two adult sons and Weisselberg.
But Trump remained the sole owner or principal owner of those hundreds of businesses and could pull profits from them at any time. Recently, he’s returned to his old offices at Trump Tower on Fifth Avenue, but it’s not clear how much he has assumed his former role overseeing operations.
WILL THE CHARGES HURT THE COMPANY’S ABILITY TO DO BUSINESS?
If the Trump Organization is convicted, it would have to pay a fine of double the amount of unpaid taxes, or $250,000, whichever is larger. The company may also have to change the way it operates.
But even absent a conviction, the indictment could pose problems.
“Companies that are being indicted, whether they are private or public, big or small, face serious collateral consequences,” said Daniel Horwitz, a white collar defense lawyer at McLaughlin and Stern and former prosecutor at the Manhattan district attorney’s office.
“Companies in the financial services industry are reluctant to do business with them,” Horwitz said. “Their access to capital is limited or cut off as is their ability to place their liquid assets with banks and brokerages.”
WHAT HAPPENED TO OTHER COMPANIES THAT HAVE BEEN CRIMINALLY INDICTED?
The giant accounting firm Arthur Andersen started losing auditing business after criminal charges were filed in relation to its Enron work,and it eventually had to lay off tens of thousands of workers. In 2005, the Supreme Court overturned its obstruction of justice conviction but it was too late and the firm collapsed.
Other companies hit hard by criminal charges include the now-defunct 1980s junk bond giant Drexel Burnham Lambert, the once-massive hedge fund SAC Capital and oil company BP, which had to pay billions stemming from criminal charges for its role in a drilling rig explosionin the Gulf of Mexico.
WHAT IS THE LIKELY HIT TO TRUMP’S COMPANY?
The Trump Organization could find it more difficult to strike deals to put the Trump name on buildings or products, attract tournaments to its golf courses and borrow money.
It may be able to withstand the blows. It is a sprawling company, but its operations are simple and behind the scenes: It runs golf clubs and hotels, collects checks from companies occupying offices it owns, and charges licensing fees to buildings and others using its name.
Although some companies have collapsed after criminal indictments, others have survived or even thrived, including Bank of America, which was convicted for reckless mortgage lending practices. Others that received what’s called deferred criminal charges have done well afterward, including drug giant Bristol-Myers Squibb, which was accused of accounting fraud, and JPMorgan Chase & Co., which was caught up in connection with Bernard Madoff’s massive fraud.
Stocks in all three companies are at or near all-time highs.
WHAT ARE THE FORMER PRESIDENT’S FUTURE BUSINESS PLANS?
He hasn’t said, but there some obvious moves.
Experts on branding say that the company could still use Trump’s fame to strike licensing deals around the world. In the years surrounding his runaway TV success, “The Apprentice,” Trump struck deals to put his names on suits, ties, steaks and residential towers in Las Vegas, Chicago and New York.
The Trump brand has been damaged by his divisive rhetoric and stances. It’s unclear how successful a new licensing effort would prove.
While he was in office, hotels and residential towers in several citiesstripped his name off their buildings. His company had to scrap plans for new hotel chains because of a lack of interest by potential partners.
Most damaging of all were accusations Trump incited the bloody siege of the Capitol in January. Real estate brokers, lenders and other businesses cut ties shortly afterward.
The Associated Press reported earlier this year that condo prices in many buildings that have licensed the use of his name have fallen sharply, with brokers saying some potential buyers refuse to even look at apartments in buildings with Trump’s name over the door.
Trump Organization, CFO indicted on tax fraud charges
NEW YORK (AP) — Donald Trump’s company and its longtime finance chief were charged Thursday in what prosecutors called a “sweeping and audacious” tax fraud scheme in which the executive collected more than $1.7 million in off-the-books compensation, including apartment rent, car payments and school tuition.
Trump himself was not charged with any wrongdoing, but prosecutors noted he signed some of the checks at the center of the case. And one top prosecutor said the 15-year scheme was “orchestrated by the most senior executives” at the Trump Organization.
It is the first criminal case to come out New York authorities’ two-year investigation into the former president’s business dealings.
According to the indictment, from 2005 through this year, the Trump Organization and Chief Financial Officer Allen Weisselberg cheated tax authorities by conspiring to pay senior executives off the books by way of lucrative fringe benefits and other means.
Weisselberg alone was accused of defrauding the federal government, state and city out of more than $900,000 in unpaid taxes and undeserved tax refunds.
The most serious charge against Weisselberg, grand larceny, carries five to 15 years in prison. The tax fraud charges against the company are punishable by a fine of double the amount of unpaid taxes, or $250,000, whichever is larger.
The 73-year-old Weisselberg has intimate knowledge of the Trump Organization’s financial dealings from nearly five decades at the company. The charges against him could enable prosecutors to pressure him to cooperate with the investigation and tell them what he knows.
Both Weisselberg and lawyers for the Trump Organization pleaded not guilty. Weisselberg was ordered to surrender his passport and was released without bail, leaving the courthouse without comment.
In a statement, Trump condemned the case as a “political Witch Hunt by the Radical Left Democrats.” Weisselberg’s lawyers said he will “fight these charges.”
The case is being led by Manhattan District Attorney Cyrus Vance Jr. and New York Attorney General Letitia James, both Democrats.
Vance has been investigating a wide range of matters involving Trump and the Trump Organization, such as hush-money payments made to women on Trump’s behalf and whether the company falsified the value of its properties to obtain loans or reduce its tax bills.
The news comes as Trump has been more seriously discussing a possible comeback run for president in 2024. He has ramped up his public appearances, including holding his first rallies since leaving the White House.
In announcing the grand jury indictment, Carey Dunne, the top prosecutor in the district attorney’s office, said: “Politics has no role in the jury chamber, and I can assure you it had no role here.”
The Trump Organization is the entity through which the former president manages his many ventures, including his investments in office towers, hotels and golf courses, his many marketing deals and his TV pursuits. Trump’s sons Donald Jr. and Eric have been in charge of day-to-day operations since he became president.
In addition to exposing the Trump Organizations to fines, the criminal case could make it more difficult for the business to secure bank loans or strike deals — a hit that comes at a particularly bad time, with the company already reeling from lost business because of the coronavirus and the backlash over the Jan. 6 attack on the Capitol.
“Companies that are being indicted, whether they are private or public, big or small, face serious collateral consequences,” said Daniel Horwitz, a white-collar defense attorney. “Companies in the financial services industry are reluctant to do business with them. Their access to capital is limited or cut off.”
Weisselberg came under scrutiny in part because of questions about his son’s use of a Trump apartment at little or no cost.
Weisselberg’s son Barry — who managed a Trump-operated ice rink in Central Park — paid no reported rent while living in a Trump-owned apartment in 2018, and he was charged just $1,000 per month — far below typical Manhattan prices — while living in a Trump apartment from 2005 to 2012, the indictment said.
Allen Weisselberg himself, an intensely private man who lived for years in a modest home on Long Island, continued to claim residency there despite living in a company-paid Manhattan apartment, prosecutors said.
By doing so, Weisselberg concealed that he was a New York City resident, and he avoided paying hundreds of thousands in federal, state and city income taxes while collecting about $133,000 in refunds to which he was not entitled, prosecutors said.
According to the indictment, Weisselberg paid rent on his Manhattan apartment with company checks and directed the company to pay for his utility bills and parking, too.
The company also paid for private school tuition for Weisselberg’s grandchildren with checks bearing Trump’s signature, as well as for Mercedes cars driven by Weisselberg and his wife, and gave him cash to hand out tips around Christmas.
Such perks were listed on internal Trump company documents as being part of Weisselberg’s compensation but were not included on his W-2 forms or otherwise reported, and the company did not withhold taxes on their value, prosecutors said.
Trump’s company also issued checks, at Weisselberg’s request, to pay for personal expenses and upgrades to his homes and an apartment used by one of his sons, such as new beds, flat-screen TVs, carpeting and furniture, prosecutors said.
Barry Weisselberg’s ex-wife has been cooperating with investigators and given them reams of tax records and other documents.
Two other Trump executives who were not identified by name also received substantial under-the-table compensation, including lodging and the payment of automobile leases, the indictment said.
Weisselberg has a reputation as a workaholic utterly devoted to Trump’s interests. So far, there is no sign that he is about to turn on the former president.
“I think it’s possible that Weisselberg would reconsider. Seeing the charges spelled out in this much detail, and seeing that the alleged federal tax loss is included, could in theory change his mind,” said Daniel R. Alonso, former chief assistant district attorney. “On the other hand, he is a loyal Trump soldier, which obviously argues against his cooperation.”
Trump has said his company’s actions were standard practice in the business and in no way a crime. The Trump Organization accused the district attorney’s office of using Weisselberg as “a pawn in a scorched-earth attempt to harm the former president.” It said the DA’s office and the IRS have never before brought criminal charges against a company over employee benefits.
Vance fought a long battle to get Trump’s tax records and has been subpoenaing documents and interviewing company executives and other Trump insiders.
James Repetti, a tax lawyer and professor at Boston College Law School, said a company like the Trump Organization would generally have a responsibility to withhold taxes not just on salary but on other forms of compensation.
Another prominent New York City real estate figure, the late Leona Helmsley, was convicted of tax fraud in a federal case that arose from her company paying to remodel her home without her reporting that as income.
“The IRS routinely looks for abuse of fringe benefits when auditing closely held businesses,” Repetti said.
Michael Cohen, the former Trump lawyer who has been cooperatingwith Vance’s investigation, wrote in his book “Disloyal” that Trump and Weisselberg were “masters at allocating expenses that related to non-business matters and finding a way to categorize them so they weren’t taxed.”
Weisselberg first started working for Trump’s real estate-developer father, Fred, after answering a newspaper ad for a staff accountant in 1973, and rose in the organization.
Keeping a low profile — aside from a 2004 appearance as a judge on Trump’s reality TV show “The Apprentice” — Weisselberg was barely mentioned in news articles before Trump started running for president and questions arose about the boss’ finances and charity.
Cohen said Weisselberg was the one who decided how to secretly reimburse him for a $130,000 payment to Stormy Daniels, the porn star who said she had sex with Trump.
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Sisak reported from New Jersey. Associated Press writers Bernard Condon in New York and Jill Colvin in Weslaco, Texas, contributed to this report.
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On Twitter, follow Mike Sisak at twitter.com/mikesisak and Tom Hays at twitter.com/APtomhays