The Trump Organization And A Longtime Executive Are Charged In A Tax Fraud Scheme

Donald Trump was not personally charged, but this marks the beginning of a new era of legal exposure for the former president.

The Trump Organization — former president Donald Trump’s eponymous business empire — and a longtime senior executive have been charged in what New York state prosecutors alleged was a 16-year tax fraud scheme, marking the first criminal legal exposure that Trump has faced since leaving office.

Trump was not personally charged, but the prosecution of his company and its chief financial officer, Allen Weisselberg, signaled a massive escalation by the Manhattan district attorney’s office and New York state attorney general’s office of their investigations into Trump and his financial affairs.

Whether Trump will ultimately end up facing criminal charges remains unclear; the district attorney’s office said earlier in the day that the investigation remains “active” and “ongoing.” New York State Attorney General Letitia James, whose office is investigating the Trump Organization as well, said in a statement that the “investigation will continue, and we will follow the facts and the law wherever they may lead.”

Weisselberg and the company were jointly charged with carrying out a fraud scheme dating back to March 2005 and falsifying business records, according to the indictment unsealed on Thursday afternoon. Weisselberg allegedly received more than $1.76 million in “indirect” compensation from the company that wasn’t properly reported and wasn’t taxed. Weisselberg is also separately charged with grand larceny for receiving tax refunds from the federal government that he shouldn’t have been entitled to given the income that wasn’t taxed, and falsifying tax records.

Trump is identified in the indictment with a direct connection to one category of off-the-books compensation that Weisselberg is accused of receiving and failing to pay taxes on as income: payments for private school tuition for family members. According to the indictment, the payments were made using personal checks that came from Trump’s account and were signed by him. Weisselberg is charged with later directing another employee to delete entries in Trump’s ledger that referred to the payments.

Weisselberg and lawyers for the Trump Organization appeared in court on Thursday afternoon to be arraigned on the charges. Weisselberg was led into the courtroom in handcuffs, surrounded by officers, and entered a plea of not guilty, which is typical during initial appearances in criminal cases. The case is being prosecuted jointly by Manhattan District Attorney Cyrus Vance Jr. and James; the two sat next to each other in court.

Announcing the charges to the judge in court, Assistant District Attorney Carey Dunne described the alleged tax fraud scheme as a coordinated effort to distribute off-the-books payments, and not the efforts of a rogue employee. He called the alleged scheme “sweeping and audacious,” and accused Weisselberg and other Trump Organization executives of giving themselves secret pay raises “at the expense of state and federal taxpayers.”

Dunne added that in reaction to the investigation, the organization made no attempt to accept responsibility for its actions or impose discipline on those involved, but instead kept Weisselberg in a senior position and responded combatively, failing to comply with subpoenas and not allowing any employees to participate in the investigation until the case went before the grand jury.

“Instead, it forced us into litigation for a year and a half, including two trips to the Supreme Court,” Dunne said. “There is no clearer example of a company that should be held to criminal account.”

Dunne also preemptively pushed back on any claim that the prosecution was politically motivated, a common refrain from Trump throughout the investigation.

“Politics plays no role in the grand jury chamber and I can assure your honor that it played no role here,” Dunne said.

In response to the prosecution’s presentation, Weisselberg’s legal team told the judge that they “reject the characterization of the facts that were just given." Speaking to reporters outside the courthouse, Trump Organization lawyer Alan Futerfas said that, at most, this should have been a civil case and not a criminal one.

There wouldn’t be a prosecution “if the organization had a different name,” Futerfas said.

Weisselberg had been a central figure in the state investigations into the Trump Organization, given his decadeslong relationship with the Trump family and its businesses; he’d originally worked for Trump’s father, Fred Trump, in the 1970s. Profiles of Weisselberg in recent years often quoted a response he gave during a 2015 deposition in a fraud lawsuit against Donald Trump over the now-defunct Trump University. “Am I his eyes and ears? From an economic standpoint,” Weisselberg reportedly said at the time.

As the latest investigation by New York prosecutors unfolded, Weisselberg refused to cooperate, according to numerous news reports over the past year. His former daughter-in-law, Jennifer Weisselberg, however, spoke openly about handing over boxes of documents; her ex-husband, Barry Weisselberg, is an employee of the Trump Organization and managed an ice skating rink in Central Park that had been part of the company.

The larceny charge is the most serious one that Weisselberg faces. It carries a maximum sentence of up to 15 years in prison, although as a nonviolent offender with no known criminal record, he'd likely face far less time than that if he's convicted, and potentially even probation. But the possibility of any time behind bars places that much more pressure on him to consider cutting a deal with prosecutors.

Weisselberg will be allowed to go home while the case is pending, although he’ll have to give up his passport; prosecutors expressed concern about him being a flight risk, given his past access to private planes and connections and assets he had outside of New York. Prosecutors also mentioned that there was a large amount of evidence to sort through in the case, including digital drives containing a substantial amount of information, bookkeeping records, Weisselberg’s tax records, statements of many witnesses, and grand jury testimonies. The next hearing is set for Sept. 20.

On June 25, the New York Times reported that the Manhattan district attorney’s office had notified the company that it was considering bringing charges against Weisselberg related to “fringe benefits” he’d received from Trump over the years — including an apartment, luxury cars, and tens of thousands of dollars in private school tuition for at least one of his grandchildren — and whether the company had properly recorded those perks and whether the necessary taxes were paid.

The IRS generally considers fringe benefits paid to an employee to be taxable income, but there are some exceptions. Although the name suggests that these perks are relatively low-value, they can take the form of everything from free meals and gym memberships to the use of company cars and planes.

The Washington Post then reported that prosecutors had given the Trump Organization until early this week to present their final arguments for why the company shouldn’t face criminal charges. On Wednesday night, the Post first reported that a grand jury had returned indictments, which would remain sealed until Weisselberg and lawyers for the company appeared in court.

The charges

The gist of the scheme alleged by prosecutors is that Weisselberg and other senior managers at the Trump Organization conspired to find ways to compensate Weisselberg and other top executives “off the books.” The alleged scheme meant that executives wouldn’t have to report these benefits to state and federal authorities as taxable income, and the company wouldn’t have to withhold taxes on compensation paid out to employees and could avoid payroll taxes.

What did that compensation look like? According to prosecutors, the Trump Organization paid rent, utilities, and garage expenses for an apartment that Weisselberg lived in on the Upper West Side of Manhattan, at times reducing his official, on-the-books compensation to match the value of what the company was paying for the apartment.

From 2005 to 2017, the Trump Organization paid more than $1.1 million for those living expenses. The unofficial compensation also included covering private school tuition for Weisselberg’s family members — news reports had previously identified that family member as one of his grandchildren — via checks that the indictment notes were signed by Trump and later from a trust in Trump’s name; paying for leases for two Mercedes-Benzes that Weisselberg and his wife drove; covering miscellaneous personal expenses, including furniture, TVs, carpet installation; and, simply, arranging for him to get cash.

Weisselberg benefitted the most from the alleged scheme, according to the indictment, to the tune of approximately $1.76 million in untaxed compensation. He allegedly hid the compensation from his tax preparer, and over the years evaded approximately $556,385 in federal taxes, $106,568 in state taxes, and $238,159 in New York City taxes; he also lied about living in the city in the apartment that the company had been paying for to avoid those local taxes, prosecutors alleged.

On the flip side, Weisselberg is charged with larceny because he received federal and state tax refunds of $94,902 and $38,222, respectively, which prosecutors said he wasn’t entitled to given the taxes he should have paid on his income.

Weisselberg wasn’t the only Trump Organization executive to benefit from the scheme, according to the indictment. Other employees and a family member of Weisselberg's — none of whom are named — allegedly received free housing and cars that the company failed to log and report as taxable income. The company was also charged with inaccurately reporting end-of-year bonuses that were paid out to Weissleberg and other executives.

The final count in the indictment against Weisselberg and the company accuses them of falsifying business records by deleting entries in Trump’s general ledger — at Weisselberg’s direction in 2016 — that noted the payments for the private school tuition.

The indictment does leave open the possibility of at least one more defendant in the case, referring three times to an “Unindicted Co-conspirator #1” who allegedly was part of the scheme to help Weisselberg under-report his income to tax authorities. The charging papers don’t include other details about who that person is.

Parallel investigations

The New York attorney general’s office and the Manhattan district attorney’s office have carried out separate but overlapping investigations into the Trump Organization and Trump over the past three years. (There’s no indication Trump is the subject of a federal criminal investigation related to his businesses.) An inflection point for both state probes was the revelation — first reported in early 2018 by the Wall Street Journal — that former Trump attorney Michael Cohen had orchestrated hush money payments at Trump’s behest to two adult film stars who claimed to have had affairs with Trump, and Cohen’s eventual decision to turn on his former boss.

When Cohen testified before Congress in February 2019, he not only shared details about the hush money payments, but also accused Trump of lying about the value of his assets depending on whatever best served his financial interests at the moment. Cohen pleaded guilty to federal charges related to campaign finance violations, tax evasion and other financial crimes, and lying to Congress in connection with the Russia investigation; Weisselberg was reportedly granted immunity by federal prosecutors to testify in their investigation into Cohen.

Vance’s office opened an investigation into Trump and his business operations in 2018, and spent a year and a half fighting with Trump in court over a grand jury subpoena for his tax returns going back to 2011. In court filings, Vance’s office confirmed that their investigation covered not only the hush money payments, but also whether Trump and his company had committed bank or insurance fraud.

The US Supreme Court twice sided with the district attorney’s office; after the case reached the high court for a second time, the justices issued a one-sentence order in February denying Trump’s request to stop prosecutors from getting the documents while he continued to fight the subpoena, clearing the way for Vance’s office to finally get them.

New York Attorney General Letitia James’ office, meanwhile, opened a civil investigation in early 2019, after Cohen testified in Congress. In August 2020, state attorneys disclosed more information about the scope of its probe when they went to court to enforce subpoenas they served on the Trump Organization, Eric Trump, and lawyers who had done work for the company.

The court filings from James’ office confirmed they were exploring whether Trump and his companies improperly inflated the value of assets to get loans and tax benefits, including the 212-acre Seven Springs Estate in Westchester County, New York, and other properties in New York, Chicago, and Los Angeles. Trump had received a $21.1 million tax benefit after agreeing to a conservation easement on 158 acres of the Seven Springs property, based on what his company had reported to the IRS as the “appraised fair market value.”

In May of this year, the attorney general’s office announced that they’d notified the Trump Organization that the investigation was “no longer purely civil in nature” and that they were “now actively investigating the Trump Organization in a criminal capacity, along with the Manhattan DA.” They didn’t provide any other details at the time.

Less than a week later, the Washington Post reported that the district attorney’s office had empaneled a new, longer-term grand jury in the Trump investigation to oversee the investigation and potentially consider whether to return any indictments.

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