New York prosecutors on Thursday unveiled the first charges in their grand jury investigation into the Trump Organization, charging the former president’s company and its chief financial officer (CFO), Allen WeisselbergAllen Howard WeisselbergWeisselberg indictment poses possible perils for Trump Justice or just desserts? Trump, Cosby and Georgia cases show rising cost of political litigation For Biden and Trump, a tale of very different weeks MORE, with tax-related crimes.
Prosecutors allege a 15-year scheme in which the Trump Organization compensated Weisselberg in a manner that allowed the company and the executive to evade taxes. The defendants deny any wrongdoing and argue that the charges are politically motivated.
The allegations stem from a years-long investigation by the Manhattan district attorney’s office that has involved prosecutors obtaining former President TrumpDonald TrumpThere is no ‘third way’ for Iran diplomacy Republicans eyeing White House take hard line on immigration Watch live: Trump holds rally in Florida MORE’s tax returns. Thursday’s indictment doesn’t charge the former president with any crimes, but prosecutors say their investigation is ongoing.
Here are five things to know about the indictment.
Prosecutors say Weisselberg avoided taxes on about $1.7 million of income
According to the indictment, Weisselberg received indirect compensation from the Trump Organization over a number of years of about $1.76 million. The company avoided reporting the income to tax authorities and withholding taxes from it, and Weisselberg hid the income from his tax preparer and didn’t report it on his tax returns, prosecutors claim.
“During the period of the scheme, Weisselberg thereby evaded approximately $556,385 in federal taxes, approximately $106,568 in state taxes, and approximately $238,159 in New York City taxes, and he falsely claimed and received approximately $94,902 in federal tax refunds and approximately $38,222 in state tax refunds, to which he was not entitled,” the indictment said.
Much of the untaxed compensation, more than $1.1 million from 2005 through 2017, came from the Trump Organization paying rent and related expenses for a Manhattan apartment where Weisselberg resided. While the apartment was Weisselberg’s main residence starting in 2005, the CFO falsely claimed to tax authorities that he wasn’t a New York City resident for a number of years and started paying city income taxes only after he sold a home on Long Island in 2013, according to court papers.
The untaxed compensation also took other forms, including payments for leases on Mercedes-Benz automobiles for Weisselberg and his wife and private school tuition for his family members, according to the indictment.
Indictment alleges the Trump Organization falsified records
Prosecutors also allege that the Trump Organization monitored the amount of indirect compensation it was providing to Weisselberg but nonetheless did not report the income to tax authorities.
Weisselberg was authorized to receive annual compensation of a set amount. The Trump Organization tracked how much it spent on indirect compensation in the forms of rent, automobile and tuition payments, and “treated many of them as part of his authorized annual compensation, ensuring that he was not paid more than his pre-authorized, fixed amount of gross compensation,” the indictment stated.
Still, the indirect compensation wasn’t included in forms that reported Weisselberg’s gross income, so the executive’s income was underreported to federal, state and local tax authorities, the document added.
Tax experts say the alleged crimes are significant
Experts in tax law told The Hill that the indictment alleges tax crimes that are substantial.
Daniel Hemel, a University of Chicago law professor, said that it’s rare for prosecutors to bring charges against businesses that commit more minor violations of tax rules governing fringe benefits for employees. However, he said it wouldn’t be unusual for prosecutors to bring charges against a business or its top officers over a substantial amount of off-the-books pay.
“Paying your CFO $1 million under the table, that is going to be a prosecution,” Hemel said.
Tax experts also said that the alleged crimes detailed by prosecutors were particularly blatant and that those accused of carrying out the offenses were likely knowledgeable about tax rules.
What’s alleged is a “well-thought-out structure to pick out a variety of ways to generate income for Weisselberg in a way that would skirt the tax rules,” said Scott Michel, an attorney at Caplin and Drysdale who has done defense-side criminal tax work for 40 years.
The Trump Organization cries foul
The Trump Organization and Weisselberg have pleaded not guilty to the charges against them.
The company is arguing that the charges are being brought only because of a desire by Democratic prosecutors to go after Trump. Representatives for the company also argue that it’s unusual to bring cases focused on employee benefits and that the indictment’s focus indicates that prosecutors haven’t found evidence of more significant crimes.
“After years of investigation and the collection of millions of documents and devoting the resources of dozens of prosecutors and outside consultants, this is all they have?” Ron Fischetti, an attorney representing the Trump Organization, said in a statement after the charges were announced.
A Trump Organization spokesperson said in a statement hours before the indictment was unsealed that Weisselberg is “being used by the Manhattan District Attorney as a pawn in a scorched earth attempt to harm the former President.”
“The District Attorney is bringing a criminal prosecution involving employee benefits that neither the IRS nor any other District Attorney would ever think of bringing,” a spokesperson for the company said.
The former president chimed in as well, calling the charges against his company and its CFO the continuation of a “political witch hunt.”
More charges could be coming
The Manhattan district attorney’s office and the New York attorney general’s office have been probing the Trump Organization for several years, and the prosecutors’ work isn’t ending with the charges announced last week.
“This investigation will continue, and we will follow the facts and the law wherever they may lead,” New York Attorney General Letitia James (D) said in a statement Thursday.
p dir=”ltr”>Many observers suspect that the charges were brought against Weisselberg, who has worked for the Trump family for decades, in an effort to get him to cooperate with prosecutors’ investigation against Trump.
A big question going forward is whether Thursday’s charges are strong enough “to convince Weiselberg to negotiate,” said Philip Hackney, a law professor at the University of Pittsburgh.