Exactly How Much Trouble Is The Trump Foundation In? Can You Say Possible Jail Time? Forfeiture Of Assets?

Expert from the IRS discusses the criminal and civil charges the Trump Foundation faces in the wake of the completion of a 2-year investigation by the New York Attorney General’s office.

The New York Times broke the story last week, reporting that the New York Attorney General had filed a lawsuit against the Trump foundation and turned over evidence to the Internal Revenue Service and the Federal Election Commission for possible action at the federal level.

As The New York Times reported:

The New York State attorney general’s office filed a scathingly worded lawsuit… taking aim at the Donald J. Trump Foundation, accusing the charity and the Trump family of sweeping violations of campaign finance laws, self-dealing and illegal coordination with the presidential campaign.

The lawsuit, which seeks to dissolve the foundation and bar President Trump and three of his children from serving on nonprofit organizations, was an extraordinary rebuke of a sitting president.,,,

The lawsuit, filed in State Supreme Court in Manhattan, culminated a nearly two-year investigation of Mr. Trump’s charity, which became a subject of scrutiny during and after the 2016 presidential campaign. While such foundations are supposed to be devoted to charitable activities, the petition asserts that Mr. Trump’s was often improperly used to settle legal claims against his various businesses, even spending $10,000 on a portrait of Mr. Trump that was hung at one of his golf clubs.

The foundation was also used to curry political favor, the lawsuit asserts. During the 2016 race, the foundation became a virtual arm of Mr. Trump’s campaign, email traffic showed, with his campaign manager, Corey Lewandowski, directing its expenditures, even though such foundations are explicitly prohibited from political activities.

“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,” said New York AG Barbara D. Underwood. “This is not how private foundations should function and my office intends to hold the foundation accountable for its misuse of charitable assets.”

Business Insider elaborated on the possible federal implications of the lawsuit, reporting that:

The lawsuit said Trump’s “wrongful use of the Foundation to benefit his Campaign was willful and knowing,” which is the standard by which a campaign-finance violation could be investigated as a criminal matter….

The Washington Post reporter David Fahrenthold said he discussed the lawsuit with a former IRS official and described the official as being “amazed at the range of the violations here.”

In a tweet, Fahrenthold quoted the former official as saying: “They hit an extraordinary catalog of how *not* to run a private foundation. There’s little else he could have done that would have made it worse.”

The New York Times reported last week that, if the IRS does decide to investigate the foundation, it could bring forth civil penalties or criminal charges. And similar behavior, The Times said, has led to federal prosecutions.

The Times cited an instance in 2007 in which Vincent Fumo, then a Democratic Pennsylvania state senator, was indicted by the Justice Department on charges that he misused a charity run by a former staffer. Fumo was convicted and sentenced to four years in prison.

CNN‘s Chris Cillizza reached out to Marc Owens, the former director of the exempt organizations division of the Internal Revenue Service, to discuss exactly how much trouble the Trump Foundation is in – along with Trump, his children, and others involved in the foundation’s alleged behavior.

Below are some highlights from a CNN article detailing their conversation conducted via email. We have edited sections for brevity and reformatted some of the answers as bullet points for clarity.

Cillizza: Let’s start simple: How odd is the way the Trump Foundation operates when compared to other similar-sized foundations?

Owens: Whether the Trump Foundation is compared to similar-sized, i.e. small, family foundations or it is compared to foundations of any size and type, my answer is the same: the Trump Foundation may be unique in the variety and scope of its transgressions of state and federal law, as well as the visibility of the transgressions.

Cillizza: What is being alleged here? And what is the most serious charge?

Owens: The petition, because it was filed by the New York attorney general, focuses on state charity law violations, including violations of the duty of care, that is, a foundation’s board has a duty to see that a foundation uses its funds for charitable purposes and not for private, personal benefit of board members.

The most serious state charge is essentially the basket of violations of the duty of care as reflected in

The purchase of paintings to decorate Trump resorts
The use of foundation funds to settle lawsuit disputes between the Trump Organization and various third parties
The use of foundation assets to support Donald Trump’s political campaign and, finally, the misreporting of the preceding on the foundation’s federal Form 990-PF return, which New York law also requires to be filed with the New York attorney general.

Noting that these charges can also be picked up at the federal level, Owens added that: “the filing of knowingly false or inaccurate Form 990 federal tax returns has triggered criminal sanctions in at least five or six cases in the last 10 years. The charges in those cases included conspiracy to defraud the United States, the making of false statements on tax returns and the aiding and abetting of the filing of a false tax return. The penalties can include substantial fines and jail time.”

Asked what possible defense Trump might have to the charges, Owens responded:

In my opinion, there are no effective defenses that Donald Trump and/or his foundation can deploy to either the attorney general’s petition or to federal tax charges. About the best he can do is plead ignorance of the law (generally ineffective with the sort of allegations being made) and to try to shift the blame to his accountants and attorneys (which will be factually difficult given Trump’s personal involvement in many of the actions.

The article concluded with the following exchange:

Cillizza: Finish this sentence: “The most likely outcome of this case against the Trump Foundation is _____________.” Now, explain.

Owens: In my view, the most likely outcome of the Trump Foundation matter is that a New York court will apply penalties and remove the current directors, but suspend dissolution of the foundation pending resolution of any federal charges (something that is required by New York law). With regard to federal issues, the IRS will have to decide whether to move for civil penalty excise tax sanctions against the foundation and its board or whether the criminal aspects will become a factor in Robert Mueller’s investigation, thus leading to suspension of any federal civil tax investigation pending resolution of the criminal case. Of course, President Donald Trump could pardon himself and his family members for federal tax law violations, leaving the matter up to the New York courts to handle.

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