Trump Foundation Legal Problems Pile Up

AP Photo/John Locher

Republican presidential candidate Donald Trump attends a campaign rally, Wednesday, September 28, 2016, in Council Bluffs, Iowa. 

Donald Trump has ditched any semblance of self-restraint with his renewed attacks on his Democratic rival as “Crooked Hillary,” but it’s Trump’s own apparent legal violations that are increasingly making the news.

After months of breathless reports about the conflicts posed by the Clinton Foundation when Hillary Clinton was secretary of state, a string of disclosures involving the Donald J. Trump Foundation point to multiple clear-cut tax and campaign-finance violations. Watchdogs and congressional Democrats have asked the Justice Department and the Internal Revenue Service to investigate, and New York Attorney General Eric Schneiderman has already launched a probe.

Trump has dismissed the New York inquiry as politically motivated, and his campaign aides say he has followed all applicable laws. But there are signs that Trump and his campaign are increasingly nervous about the mounting pile of evidence that Trump used the foundation as a conduit for political contributions, a personal piggy bank, and a haven from tax liability. While the Clinton Foundation’s controversies revolve largely around the appearance of a conflict of interest, the Trump Foundation looks genuinely vulnerable to criminal prosecution.

To be sure, Clinton faces continued questions about the tens of millions that foreign donors directed to her family’s foundation while she was secretary of state. While Bill and Hillary Clinton have said they would sever ties with the organization should she win the presidency, their daughter Chelsea plans to remain on the board—a problematic arrangement that will guarantee continued scrutiny. But so far at least, the Clinton Foundation stories have generated considerably more smoke than fire. And the story of the global charity, which has spent millions on international good works, is hardly entirely negative.

By contrast, the Trump Foundation has already paid the IRS a $2,500 penalty for violating the tax code with a $25,000 contribution to a political committee run by Florida Attorney General Pam Bondi, a Republican. Trump also has reimbursed $25,000 to the foundation, which has denied any wrongdoing and said the donation was made in error.

But according to a complaint brought by Citizens for Responsibility and Ethics in Washington (CREW), Trump’s foundation claimed falsely to the IRS that it had engaged in no political activity, violated the tax code by donating to a political group, and violated a ban on self-dealing by charitable organizers. The complaint states that the contribution was for Trump’s personal benefit, since Bondi went on to announce that she would not join a lawsuit alleging that Trump University engaged in fraudulent and deceptive conduct.

Self-dealing is also at the heart of a second CREW complaint, filed after The Washington Post’s David A. Farenthold disclosed this month that Trump dipped into more than a quarter-million in foundation funds to settle legal disputes, pay another group “sponsorship” ads that promoted his hotels, and purchase two portraits of himself, along with a football helmet signed by an NFL quarterback. Tax lawyer Jeffery Tenenbaum told the Post that he’d “never encountered anything so brazen.” Trump and his foundation have repeatedly violated prohibitions on self-dealing, “using the Trump Foundation to satisfy all sorts of private obligations of Mr. Trump and his business,” the CREW complaint alleges.

Trump himself has only given about $2.8 million to the foundation over the last 15 years, according to Farenthold’s reporting. Instead, the Trump Foundation is largely funded by other people’s money—a fact that in itself may prove legally problematic. This week, Farenthold dropped yet another bombshell, disclosing that the Trump Foundation collected $2.3 million from companies that actually owed money to Trump himself for goods or services. If Trump specifically directed the companies to pay the money to the foundation, instead of into his business accounts, he would owe income taxes on it. That’s because tax laws bar the diversion of money that should be taxed into a nonprofit entity.

Trump’s campaign told the Post that Trump did pay taxes on at least one foundation gift—a $400,000 payment from Comedy Central for a Trump TV appearance—but offered no further details. And since Trump has failed to voluntarily disclose his tax returns—a departure from political convention that drew scathing attacks from Clinton during the first presidential debate—there’s no way to verify whether Trump paid taxes on the foundation money or not.

If Trump or other foundation officials are found guilty of filing false returns, engaging in self-dealing, or using the foundation to evade taxes, they could face penalties ranging from a fine to the loss of tax-exempt status or even criminal liability. In addition to its IRS complaints, CREW has also asked the Justice Department to investigate whether Trump violated bribery statutes with his payment to Bondi.

Tax law experts say such cases rarely draw aggressive enforcement from the IRS, which is under constant fire from GOP lawmakers on Capitol Hill, and has been hobbled by budget cuts. But New York Attorney General Schneiderman told CNN this month that his office is investigating the Trump Foundation “to make sure it’s complying with the laws governing charities in New York.” Trump’s rallies are routinely marked by chants of “lock her up.” But it’s Trump who may be starting to need a good lawyer.

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