The Trump Foundation Gets Served

So much has been going on during the past months that you may have missed some good news – New York Attorney General Barbara Underwood filed suit against the Trump Foundation and its board of directors (which includes the president plus his three oldest kids). The suit outlines a long-standing pattern of illegal behavior that includes self-dealing and coordination with Trump’s presidential campaign. I especially love the fact that it was filed on Trump’s 72nd birthday.

According to Underwood, “Mr. Trump’s wrongful use of the foundation to benefit his campaign was willful and knowing.” And: “As our investigation reveals, the Trump Foundation was little more than a checkbook for payments from Mr. Trump or his businesses to nonprofits, regardless of their purpose or legality.” 

Here are a few examples: soliciting donations for veterans' organizations at campaign rallies that were then deposited into the Foundation bank account; claiming credit for donations that actually came from other groups; using hundreds of thousands of dollars to settle personal lawsuits and contribute to political causes; failing to disperse funds to charities as promised; bragging that his “charitable” donations aided his political standing; repeatedly signing tax forms that said the Foundation did not carry out political activity. Note that it’s a felony to knowingly file a false tax return, and Trump and his kids are personally liable.

The lawsuit hearing is scheduled for October 10. When the Trump Foundation’s lawyer asked for a postponement until after the midterm elections, the presiding judge laughed, refused to change the date, and hinted she will likely require the President to testify.

Trump, in a tweet of course, blasted the suit as politically motivated and vowed not to settle.

This is a civil action, asking that the Foundation be dissolved and that Trump and his cohorts be prohibited from serving on the boards of any other nonprofits. It also asks that the foundation’s assets (valued at $1 million) be distributed to actual charitable organizations, and that Trump cough up almost $3 million in restitution. 

Although the attorney general’s office does not have criminal jurisdiction, the IRS, Justice Department, and the Federal Election Commission do. Underwood has sent referral letters urging action to all three outlining serious breaches of federal criminal law.

And a more recent New York State Department of Taxation and Finance investigation focusing on the Foundation’s violations of state tax laws could indeed lead to a criminal referral for possible prosecution. 

The Trump Foundation is also in breach of the most basic nonprofit standards. Its Board existed in name only, without regular meetings or knowledge of fiduciary and governance responsibilities. One of the organization’s board members said that he had no idea he was on the board and that the board had never met, to his knowledge. The Board failed to exercise any oversight at all, allowing Trump to run the Foundation as he pleased and to his own advantage. And it breached the most basic guiding principle: that nonprofits are exempt from paying taxes, and in return all their money must be spent in pursuit of the public good.

This has broader implications as well. Why should any nonprofit corporation – or for-profit business or taxpayer for that matter - feel obliged to meticulously follow the law if Trump and his foundation get a pass?

And recently the plot has thickened. It turns out New York State investigators issued a subpoena to Michael Cohen as part of the probe into the Foundation, after Cohen’s attorney said his client had information of interest to both state and federal prosecutors about whether the Foundation lied about its tax liability and/or broke state law. Trump Organization Financial Officer Allen Weisselberg, who has been granted immunity in the Cohen investigation, may also have something to say about the Foundation's practices.

Keep your fingers crossed that justice will be served, and stay tuned…