Trump’s Panama Hotel Venture Accused of Tax Evasion

(Bloomberg) -- A onetime business partner of Donald Trump’s hotel management company claimed that the president’s firm evaded income taxes on a project in Panama and under-reported employee salaries there.

The accusations were contained in a court filing Monday by the business partner, Orestes Fintiklis, and his fund, Ithaca Capital Investments, as part of a lawsuit against Trump International Hotels Management. Ithaca assumed control of the property after Trump withdrew from it in March 2018, and a bitter feud over the development has ensued.

Ithaca claims it’s now exposed to millions of dollars in liabilities because of the alleged tax underpayments on Trump’s management fees, which it says were discovered after Panamanian authorities launched an audit of the project a year ago. The underpayments also had the effect of making the development’s finances appear better than they actually were, according to the complaint in Manhattan federal court.

“The Trump Organization did not evade any taxes,” the president’s company said in a statement. “To the extent any taxes were to be withheld, it was the responsibility of the condominium that owns the hotel. The Trump Organization’s only role was to manage the property.”

Fintiklis and Ithaca Capital are seeking at least $19 million in a suit that also accuses the Trump Organization of mismanaging the property, breaching a contract and stealing funds that should have gone to Ithaca. The allegations are part of what’s become a familiar pattern at the Trump Organization, where once-promising projects are abandoned with regularity and sometimes generate accusations of wrongdoing.

After the failure of Trump-licensed condos in Fort Lauderdale and Tampa, Florida, for instance, aggrieved partners sued claiming dodgy tactics. In another case, a group of investors sued Trump, his namesake company and his three eldest children last year alleging they were duped out of hundreds of thousands of dollars by a Trump-promoted multi-level marketing scheme. Trump-branded projects in Mexico, Georgia and Azerbaijan have failed.

Trump Organization executives consistently deny wrongdoing, dismissing complaints about their practices as little more than sour grapes or, since Trump’s election, as politically motivated attacks.

In the Panama case, the under-reporting of employee salaries was discovered after a labor dispute led to the realization that the amounts reported to the Panamanian social security agency were lower than the amount paid to a worker, the complaint said.

Fintiklis and Ithaca bought a majority of the units in the project, which began as a Trump-managed hotel in Panama City. But the relationship frayed in 2017 over financial performance and other issues. It is now known as the JW Marriott Panama.

The allegation was made in a proposed new complaint filed by the plaintiffs. A copy of the document was included in court records.

The case is Ithaca Capital Investments v. Trump Panama Hotel Management, 18-cv-390, U.S. District Court, Southern District of New York (Manhattan).

©2019 Bloomberg L.P.

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