Judge: Trump mis­used char­ity funds, must pay $2 mil­lion

The Washington Post - - FRONT PAGE - BY DAVID A. FAHREN­THOLD AND JOSHUA PART­LOW

A New York judge on Thurs­day or­dered Pres­i­dent Trump to pay $2 mil­lion in dam­ages for mis­us­ing funds from a tax-ex­empt char­ity — tak­ing the char­ity’s money to pay debts for his for-profit busi­nesses, to boost his 2016 cam­paign and to buy a paint­ing of him­self, ac­cord­ing to court doc­u­ments.

That or­der, from state Judge Saliann Scarpulla, set­tled a law­suit filed against Trump last year by the New York at­tor­ney gen­eral.

It marked an ex­tra­or­di­nary mo­ment: The pres­i­dent of the United States ac­knowl­edged in a court fil­ing that he had failed to fol­low ba­sic laws about how char­i­ties should be gov­erned. Pre­vi­ously,

Trump had in­sisted the char­ity was run prop­erly and the suit was a par­ti­san sham.

“Mr. Trump owed fidu­ciary du­ties to the Foun­da­tion,” Scarpulla wrote in the or­der, mean­ing du­ties to safe­guard the foun­da­tion’s money. “Mr. Trump breached his fidu­ciary duty to the Foun­da­tion.”

But in a state­ment tweeted out late Thurs­day, Trump seemed to play down the set­tle­ment he had just agreed to — say­ing, in spite of the fail­ures he had just ac­knowl­edged, that the foun­da­tion’s money was spent prop­erly and the law­suit was po­lit­i­cally mo­ti­vated.

“All they found was in­cred­i­bly ef­fec­tive phi­lan­thropy and some small tech­ni­cal vi­o­la­tions, such as not keep­ing board min­utes,” he wrote.

The June 2018 law­suit from New York At­tor­ney Gen­eral Leti­tia James (D) was based largely on in­for­ma­tion first un­cov­ered by The Wash­ing­ton Post. It al­leged “per­sis­tently il­le­gal con­duct” at the Don­ald J. Trump Foun­da­tion, where Trump served as pres­i­dent since 1987.

As part of the set­tle­ment, Trump also agreed to dis­burse the $1.8 mil­lion re­main­ing in the foun­da­tion to a set of char­i­ties, and to shut­ter it for good. In a state­ment signed by Trump’s at­tor­ney, the pres­i­dent ad­mit­ted to poor over­sight of the char­ity.

James had asked Scarpulla to make Trump pay $2.8 mil­lion plus more in puni­tive dam­ages, but Scarpulla said she was re­duc­ing that pay­ment to $2 mil­lion.

The rea­son: The pres­i­dent had agreed to sub­mit to ex­tra mon­i­tor­ing of any fu­ture char­i­ta­ble ac­tiv­i­ties in New York, so that “the con­duct which en­gen­dered this pe­ti­tion should not oc­cur in the fu­ture,” the judge said.

If Trump does ever join a char­ity board — or starts a new char­ity of his own — the char­ity must fill a ma­jor­ity of board seats with peo­ple who have no re­la­tion­ship to Trump. It also must hire a qual­i­fied at­tor­ney, sub­mit to au­dits and agree never to pay Trump or his com­pany for any ser­vices.

Philip Hack­ney, a for­mer IRS lawyer who now teaches char­ity law at the Univer­sity of Pitts­burgh, said that was a strik­ing lim­i­ta­tion for a state to place on a sit­ting pres­i­dent of the United States.

“That’s a pretty sig­nif­i­cant state­ment about a lack of trust of the pres­i­dent’s ca­pa­bil­i­ties,” Hack­ney said, given that Trump is — in most other re­spects — one of the most pow­er­ful peo­ple on Earth. “It’s truly as­tound­ing.”

In his own state­ment, Trump’s at­tor­ney, Alan Futer­fas, at­tacked James’s law­suit as “po­lit­i­cally mo­ti­vated,” even as Trump ad­mit­ted to many of James’ al­le­ga­tions.

“Now that this mat­ter is con­cluded, the Trump Foun­da­tion is proud to make this ad­di­tional con­tri­bu­tion,” Futer­fas said, mean­ing the $2 mil­lion in dam­ages. In all, $3.8 mil­lion will go to eight char­i­ties: Army Emer­gency Re­lief, the Chil­dren’s Aid So­ci­ety, Ci­tymeals-on-wheels, Give an Hour, Martha’s Ta­ble, the United Ne­gro Col­lege Fund, United Way of the Na­tional Cap­i­tal Area and the U.S. Holo­caust Me­mo­rial Mu­seum.

Trump and his busi­ness have al­ready re­paid the foun­da­tion about $338,000 since The Post be­gan its re­port­ing on the Trump Foun­da­tion, to re­im­burse the char­ity for var­i­ous im­proper ex­pen­di­tures.

Trump’s three el­dest chil­dren — Ivanka, Don­ald Jr. and Eric — were also named in the orig­i­nal law­suit, be­cause they were listed as board mem­bers at the foun­da­tion. In re­al­ity, the board did not meet at all for 19 straight years, from 1999 to 2018.

The three Trump chil­dren were re­quired to take an “in-per­son in­ter­ac­tive” train­ing class in how to be bet­ter board mem­bers, and the suit against them was dis­missed, court doc­u­ments say.

“The pres­i­dent and his fam­ily en­gaged in per­sis­tent vi­o­la­tions of the law,” James said in an in­ter­view with The Post on Thurs­day. She said this was one of the larger char­ity cases her of­fice had worked on in re­cent years.

“Hope­fully this will serve as a les­son to any­one that no one is above the law . . . not even the pres­i­dent of the United States,” James said.

In the 2018 law­suit, the at­tor­ney gen­eral’s of­fice had orig­i­nally sought to ban Trump from serv­ing on any char­ity board in New York. The pres­i­dent avoided that ban by agree­ing to the close mon­i­tor­ing if he ever re­turned to char­ity lead­er­ship in New York.

The Trump Foun­da­tion had been a rel­a­tively small char­ity that in re­cent years had re­ceived very lit­tle in do­na­tions from Trump him­self. He do­nated noth­ing from 2009 to 2015. In­stead, the foun­da­tion sub­sisted largely on a gift from pro-wrestling moguls Vince and Linda Mcmahon: $5 mil­lion in to­tal. Linda Mcmahon was later ap­pointed by Trump as head of the Small Busi­ness Ad­min­is­tra­tion.

The foun­da­tion’s trou­bles were first un­cov­ered in 2016 — start­ing when a Post re­porter at­tended a Trump cam­paign rally in Water­loo, Iowa. On­stage, Trump gave away a $100,000 check from the Trump Foun­da­tion to a lo­cal char­ity.

Fed­eral law pro­hibits char­i­ties’ money from “par­tic­i­pat­ing” in po­lit­i­cal cam­paigns.

In ad­di­tion, The Post found that Trump had used the char­ity’s money to make a $25,000 do­na­tion to a po­lit­i­cal com­mit­tee as­so­ci­ated with then-florida At­tor­ney Gen­eral Pam Bondi (R). Char­i­ties are pro­hib­ited from mak­ing po­lit­i­cal gifts.

The Post also found that Trump had taken more than $250,000 from the char­ity to set­tle law­suits in­volv­ing his for-profit busi­nesses. And Trump had used the char­ity to buy things for him­self, in­clud­ing a hel­met signed by for­mer pro foot­ball player Tim Te­bow, and a large paint­ing of him­self that was later hung on the wall of Trump’s Do­ral golf re­sort in Mi­ami.

At the time, a Trump cam­paign spokesman named Boris Ep­shteyn said the ar­range­ment re­gard­ing the paint­ing was proper. Do­ral, he said, was ac­tu­ally do­ing the Trump Foun­da­tion a fa­vor by stor­ing the char­ity’s art col­lec­tion on its wall.

“Right, of course, he’s do­ing a good thing for his foun­da­tion,” Ep­shteyn said then.

The court did not agree.

All of these in­ci­dents — the do­na­tion at the Iowa fundraiser, the do­na­tion to Bondi, the hel­met and the paint­ing — were cited in the set­tle­ment as ex­am­ples of im­proper spend­ing.

Af­ter its investigat­ion, the at­tor­ney gen­eral’s of­fice al­leged that Trump had ef­fec­tively treated the foun­da­tion as a per­sonal check­book — with­out tak­ing care to fol­low the laws gov­ern­ing char­ity spend­ing. In fact, the foun­da­tion had spent only $163 on le­gal fees from 2001 to 2016.

In an in­ter­view with Allen Weis­sel­berg — a Trump Or­ga­ni­za­tion ex­ec­u­tive who was listed as the foun­da­tion’s trea­surer — Weis­sel­berg said he had no idea he was even on the board, ac­cord­ing to the state’s law­suit.

When state in­ves­ti­ga­tors asked about the foun­da­tion’s poli­cies for hand­ing out grants, Weis­sel­berg said, “There’s no pol­icy, just so you un­der­stand.”

Lloyd Hi­toshi Mayer, a professor of char­ity law at Notre Dame, said in an in­ter­view Thurs­day that Trump had bro­ken one of the most ba­sic rules of char­i­ties. Money put into a char­ity must be used for char­i­ta­ble pur­poses, even if the char­ity has your name on it.

“It doesn’t mat­ter if you’re in charge of the char­ity. It’s the char­ity’s money, not yours,” Mayer said.

RICKY CARIOTI/THE WASH­ING­TON POST

In the set­tle­ment of a law­suit over busi­ness, per­sonal and cam­paign spend­ing from Pres­i­dent Trump’s tax-ex­empt char­ity, the judge found that Trump “breached his fidu­ciary duty to the Foun­da­tion.”

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