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NY Attorney General Sues Trump Foundation Over Self-Dealing


N.Y. Attorney General Sues Trump Foundation Over Self-Dealing

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Donald J. Trump at a 2016 campaign event in Iowa where he raised roughly $2.8 million for his foundation.CreditDamon Winter/The New York Times
  • June 14, 2018

The New York State attorney general’s office filed a scathingly worded lawsuit on Thursday 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 attorney general also sent referral letters to the Internal Revenue Service and the Federal Election Commission for possible further action, adding to Mr. Trump’s extensive legal challenges.

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 complaint asserts that Mr. Trump’s was often 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.

Mr. Trump immediately attacked the lawsuit, characterizing it in a Twitter post as an attempt by the “sleazy New York Democrats” to damage him by suing the foundation, vowing not to settle the case.

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Donald Trump Jr., left, Eric Trump and Ivanka Trump at an Eric Trump Foundation event in 2015.CreditGrant Lamos IV/Getty Images

The $10,000 portrait was one of several examples of the foundation being used in “at least five self-dealing transactions,” according to the attorney general’s office, violating tax regulations that prohibit using nonprofit charities for private interests.

In 2007, to settle a dispute between the City of Palm Beach and Mr. Trump’s Mar-a-Lago resort, the foundation paid $100,000 to the Fisher House Foundation, another charity.

In 2012, a man named Martin B. Greenberg sued the Trump National Golf Club after he made a hole-in-one at a fund-raising golf tournament that had promised to pay $1 million to golfers who aced the 13th hole, as he did. As part of a settlement, the charitable foundation paid $158,000 to a foundation run by Mr. Greenberg.

The foundation also paid $5,000 to one organization for “promotional space featuring Trump International Hotels,” and another $32,000 to satisfy a pledge made by a privately held entity controlled by Mr. Trump to a charitable land trust.

The foundation lawsuit, and the referrals to the federal agencies, are the latest of Mr. Trump’s voluminous legal challenges, starting with the ongoing investigation by the special counsel, Robert S. Mueller III, into ties between Mr. Trump, his associates and Russia. Earlier this week, Mr. Trump’s longtime fixer, Michael Cohen, scrapped his own legal team, as he faces an investigation by the United States attorney’s office in Manhattan.

The attorney general’s action is also likely to embolden critics who have accused Mr. Trump of flouting legal norms. Mr. Trump has suggested he might pardon himself in the Mueller investigation and has repeatedly assailed the Federal Bureau of Investigation.

“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 Barbara D. Underwood, New York’s attorney general, who has been on her job little over a month. “This is not how private foundations should function and my office intends to hold the foundation accountable for its misuse of charitable assets.”

The attorney general’s office is seeking $2.8 million in restitution, and the foundation and its directors could face several million dollars in additional penalties, depending on how the court rules. The office is also seeking to bar the president from serving as a director, officer or trustee of another nonprofit for 10 years. Likewise, the petition seeks to bar Mr. Trump’s three eldest children, Donald Jr., Ivanka and Eric, from the boards of nonprofits based in New York or that operate in New York for one year, which would have the effect of barring them from a wide range of groups based in other states.

The action could force Mr. Trump’s children to curtail relationships with a variety of organizations. Last year, for example, Ivanka Trump set up a charitable fund supporting “economic empowerment for women and girls.” After the election, Eric Trump distanced himself from his charitable foundation, which has also been under investigation by the attorney general’s office related to shifting its resources to the Trump Organization.

The foundation was explicitly “prohibited from participating or intervening in any political campaign on behalf of a candidate,” the complaint notes, adding that Mr. Trump himself signed annual I.R.S. filings, under penalty of perjury in which he attested that the foundation did not engage in political activity. “This statutory prohibition is absolute.”

Read the Lawsuit Against the Trump Foundation

The full text of the petition the New York Attorney General filed against the Donald J. Trump Foundation.

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But roughly $2.8 million was raised for the foundation at a 2016 Iowa political fund-raiser for the Trump campaign. At the time, Mr. Trump skipped a Republican debate and set up his own event to raise money for veterans, though he used the event to skewer his opponents and celebrate his own accomplishments.

After the event, his foundation “ceded control over the charitable funds it raised to senior Trump campaign staff, who dictated the manner in which the foundation would disburse those proceeds, directing the timing, amounts and recipients of the grants,” according to the complaint.

That same month, an official at the foundation emailed Mr. Lewandowski, who was Mr. Trump’s campaign manager at the time, telling him “we should start thinking about how you want to distribute the funds collected.”

Mr. Lewandowski, in a reply, wrote that “I think we should get the total collected and then put out a press release that we distributed the $$ to each of the groups.” He later sent a list of veterans’ groups “purportedly approved by Mr. Trump to receive grants from the Foundation.”

The list was created by another campaign staffer, Lisa Maciejowski Gambuzza, and edited by a third, Stuart Jolly, a political director. And Mr. Lewandowski asked that some of the disbursements be made in Iowa in the days before that state’s presidential nominating caucuses, which mark the kickoff of the primary calendar.

Read the Referral Letters

The letters the New York Attorney General sent to the Internal Revenue Service and the Federal Election Commission detailing accusations against the Donald J. Trump Foundation.

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Allowing the campaign to control the spending of the foundation’s charitable funds represented coordination between the two entities, as well “as an improper in-kind contribution of no less than $2.823 million (the amount donated to the foundation) to the campaign,” according to the lawsuit.

Federal election laws bar campaigns from coordinating with nonprofit groups, and from accepting donations from most corporations, including most nonprofit corporations, while donations from individuals are capped at $5,400 per election.

Mr. Trump long feuded with Ms. Underwood’s predecessor, Eric Schneiderman, who resigned last month amid a scandal involving allegations that he had physically abused a number of his girlfriends. Weeks after the 2016 election, Mr. Schneiderman’s office issued a “notice of violation” to the foundation, which had already attracted scrutiny over its practices, and ordered it to immediately stop soliciting charitable donations in the state.

At the time, Hope Hicks, then a spokeswoman for Mr. Trump, said “While we remain very concerned about the political motives behind A.G. Schneiderman’s investigation, the Trump Foundation nevertheless intends to cooperate fully.”

Mr. Schneiderman’s resignation raised questions whether his office, which had been at the heart of the Democratic legal resistance against the Trump administration, would persist in such efforts. By filing the lawsuit, Ms. Underwood, who is a career prosecutor rather than a politician, seems inclined to do so.

She also recently accused Mr. Trump of “undermining the rule of law” with his pardon practices. She made the comment when she announced she was continuing an effort begun under Mr. Schneiderman to change New York’s double jeopardy law so that state and local prosecutors would have the power to bring criminal charges against aides to President Trump who have been pardoned.

The Trump Foundation has been in legal limbo since after the election, when the president wanted to dissolve it amid growing controversy about its practices. But in late 2016, a spokeswoman for the attorney general’s office, Amy Spitalnick, said the foundation “cannot legally dissolve” while it is under investigation.

The attorney general’s referrals to the I.R.S. and the F.E.C. could add another wrinkle that might slow the foundation’s dissolution. The agencies are not known for their expeditious handling of enforcement actions, and the lawsuit notes that the foundation cannot legally complete its wind down “until the complaints to the Internal Revenue Service and Federal Election Commission have been resolved and it is determined if any penalties or fines will be imposed on the foundation.”

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