U.S. President Donald Trump sits for a meeting in the White House. (Photographer: Kevin Dietsch/Pool via Bloomberg)

Trump Used Charity as His Checkbook, N.Y. Says as It Flags IRS

(Bloomberg) -- President Donald Trump’s personal charity repeatedly and willfully broke state and federal laws by engaging in a decade-long pattern of self-dealing that culminated in illegal coordination with his political campaign, New York alleged in a scathing lawsuit.

The president is accused of rampant misconduct by using the charity as one of his personal checkbooks, directing funds meant for needy causes to settle business and personal debts, boost his political aspirations and benefit his namesake company, the Trump Organization. He also filed false statements to the Internal Revenue Service, according to the suit.

Barbara Underwood, the state’s attorney general, is seeking to dissolve the charity and personally penalize Trump and three of his children. She said she also sent referral letters to the IRS and the Federal Election Commission for further investigations of possible violations of federal law.

The lawsuit and referrals deepen the president’s extensive legal woes, adding to U.S. Special Counsel Robert Mueller’s investigation of his campaign; a federal investigation in New York of his longtime lawyer and fixer Michael Cohen; civil suits related to hush-money deals; and claims the president’s businesses illegally take money from U.S. and foreign governments.

Dissolution of a charity is "an extraordinarily rare remedy" sought only when "the lack of governance or the level of misconduct is so significant that the foundation is no longer capable of governing itself," Jason Lilien, a former chief of the state attorney general’s charities bureau, said in a phone interview. "It must be crystal clear there’s no doubt there’s been a violation of the law to take this action against the President of the United States and his family."

Underwood sued the Donald J. Trump Foundation, Trump, his daughter Ivanka and his sons Donald Jr. and Eric, seeking a court order forcing the immediate closure of the foundation and repayment of at least $2.8 million in charitable funds that Trump allegedly directed toward his 2016 campaign.

The Trump Foundation rejected the allegations, accusing Underwood and her predecessor, Eric Schneiderman, who started the investigation, of engaging in a political campaign to smear the president and his children.

For example, according to the foundation, Schneiderman often solicited campaign funds by citing his efforts to challenge Trump and his administration. Schneiderman also advised Trump’s opponent in the 2016 campaign, Hillary Clinton.

Trump’s charity donated more money than it received, according to the foundation, and should be celebrated for incurring virtually no expenses, “so that the maximum amount of money could be sent to incredibly worthwhile causes,” Eric Trump said in a phone interview. The foundation gave out more than $19 million over its roughly 30-year existence.

Eric Trump

"These actions are truly sad, and exemplify the famous saying, ‘No good deed goes unpunished,’" Eric Trump said.

President Trump, who turned 72 on Thursday, wrote on Twitter that Schneiderman "never had the guts to bring this ridiculous case" and that Underwood and "sleazy New York Democrats" only sued after he made it clear he wouldn’t settle. Trump had made a similar vow about a fraud suit Schneiderman brought over Trump University, but ended paying $25 million to settle that case.

Trump said in December 2016 that he intended to dissolve the foundation amidst concerns about possible ethical conflicts, but the attorney general said at the time that it couldn’t shut down until its investigation was over.

False Statements

In the foundation lawsuit, Trump and his family are accused of violating multiple laws, including making false statements in state and federal financial documents, wasting charitable assets, and violating the tax code by making expenditures to influence the outcome of an election.

“Mr. Trump’s wrongful use of the foundation to benefit his campaign was willful and knowing,” Underwood said in the lawsuit. “He repeatedly signed, under penalties of perjury, IRS Forms 990 in which he attested that the foundation did not engage in transactions with interested parties, and that the foundation did not carry out political activity.”

In early 2016, Trump’s presidential campaign allegedly directed where and when millions of dollars of charitable funds would go based on the Iowa caucuses, a crucial early primary that can make or break a nascent presidential campaign.

A spokeswoman for the Federal Election Commission said the agency doesn’t comment on potential enforcement matters.

Internal Emails

Trump staff, including former campaign manager Corey Lewandowski, dictated the timing, amounts and recipients of the money to non-profits, according to the lawsuit, which cited internal emails between the campaign and executives at the Trump Organization who also worked for the foundation.

"I think we should get the total collected and then put out a press release that we distributed the $$ to each of the groups," Lewandowski wrote in a January 2016 email to Allen Weisselberg, a longtime Trump Organization executive who was the foundation’s treasurer.

Underwood also wants to temporarily block the Trumps from serving as a director of any New York nonprofits, an unusual rebuke of a sitting president that one former New York state official said is only sought for people deemed unfit for charitable service.

Underwood said the foundation entered into at least five transactions that were illegal because they benefited Trump or his businesses. They include a $100,000 payment to settle claims against his Mar-A-Lago resort and a $158,000 payment to resolve a suit against Trump National Golf Club over non-payment of a prize for a hole-in-one contest.

She accused Trump of running the charity "according to his whim, rather than the law."

The case is People of the State of New York v. Donald J. Trump, 451130/2018, New York State Supreme Court, New York County (Manhattan.)

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