Donald Trump’s family business is set to face a criminal trial in New York on tax fraud charges beginning next week, which could result in fines and complicate the real estate firm’s ability to do business as the former U.S. president’s legal woes mount.
In July 2021, the Manhattan district attorney’s office charged the Trump Organization and its then-chief financial officer Allen Weisselberg with defrauding tax authorities by awarding “off the books” benefits to company executives since 2005, allowing certain employees to understate their taxable compensation and the company to evade payroll taxes.
Weisselberg, who has worked for Trump for over 50 years, pleaded guilty in August to concealing $1.76 million in income. His plea agreement requires him to testify at the Trump Organization’s trial, which operates hotels, golf courses, and other real estate all over the world.
In the case, Trump has not been charged. However, the trial of his namesake company, which is now run by two of his adult children, Donald Trump Jr. and Eric Trump, comes as the Republican former president considers running for re-election in 2024. Other federal and state prosecutors are looking into Trump, including attempts to overturn his 2020 election loss and the removal of government documents from the White House when he left office.
The Trump Organization could face fines of up to $1.6 million for the three-tax fraud counts and six other counts brought against it. The entities charged in the case are two of its subsidiaries, Trump Corporation and Trump Payroll Corp.
Lawyers for the Trump Organization have claimed that the case is a “selective prosecution” based on the prosecution’s animosity toward Trump because of his political views, but the judge overseeing it has rejected that claim. Both Manhattan District Attorney Alvin Bragg and his predecessor, Cyrus Vance, who initiated the investigation, are Democrats.
According to the company’s lawyers, prosecutors did not present any evidence to the grand jury that returned the indictment that the Trump Organization evaded payroll taxes. Prosecutors are also attempting to penalize the company because “a handful of its officers allegedly failed to report fringe benefits on their personal tax returns.”
According to Bridget Crawford, a law professor at Pace University in New York who specializes in income tax and corporations, the fact that the Trump Organization continued to make off-the-books payments for so many years could help prosecutors show it intended to violate tax laws, a key element in proving its guilt to the jury.
The criminal case is distinct from the civil fraud lawsuit filed on September 21 by New York state Attorney General Letitia James against the Trump Organization, Trump, and three of his adult children, accusing them of overstating asset values and Trump’s net worth in order to obtain favorable bank loans and insurance coverage.
According to Marc Scholl, a former prosecutor in the office, the Manhattan District Attorney’s office is limited to seeking financial penalties. Scholl added that a corporation can be fined up to $250,000 for each tax-related count and up to $10,000 for non-tax counts.
According to Miriam Baer, a professor at Brooklyn Law School who specializes in corporate compliance and white-collar crime, the trial could make other companies wary of doing business with the Trump Organization, regardless of the punishment the judge ultimately imposes.
Although the Manhattan district attorney’s office has brought criminal charges against high-profile corporations, trials are uncommon.
Prosecutors allege that Weisselberg received perks from the company in lieu of pay, including rent for a Manhattan apartment, lease payments for two Mercedes-Benz vehicles, and tuition for relatives, with Trump signing the tuition checks. They also claimed that Weisselberg used company funds to purchase personal items such as televisions and carpets, and that he lied to tax authorities about his residency in New York City.
Prosecutors said Weisselberg avoided $900,000 in taxes by failing to declare those benefits as income, and he received $133,000 in refunds he did not deserve.
Receiving non-monetary compensation from an employer is not illegal, but those benefits must be reported as income, with the exception of minor perks such as free coffee at the office, according to Jay Soled, a lawyer and accounting professor at Rutgers Business School in Newark, New Jersey.