03 July 21
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The indictments of the business and its CFO allege not some minor technical mistakes, but blatant violations of the law.
f the facts alleged in yesterday’s indictment are true, the Trump Organization and its longtime chief financial officer, Allen Weisselberg, have engaged in blatant tax evasion for more than a decade.
Early reports characterized the crime in question as involving “fringe benefits.” This gives entirely the wrong impression. The Trump Organization and Weisselberg aren’t being charged with tripping over some hyper-technical provision on the margins of the tax system. They are being charged with blatantly violating basic tax-law requirements—and bilking New York State and New York City out of hundreds of thousands of dollars along the way.
Probably the strongest allegation relates to an apartment on Riverside Boulevard in Manhattan where Weisselberg lives with his wife. According to the indictment, the Trump Corporation—one of the Trump Organization’s many business entities—paid roughly $100,000 a year in rent, utility bills, and garage expenses for this apartment starting in 2005. The Trump Corporation allegedly didn’t report those payments as compensation on Weisselberg’s W-2 forms, and Weisselberg allegedly didn’t include those amounts in income on his own tax returns.
But the Trump Organization did, according to the indictment, maintain a separate set of books that accounted for the payments as part of Weisselberg’s compensation. Notably, when the Trump Corporation paid Weisselberg’s rent, according to the indictment, the Trump Organization reduced Weisselberg’s salary by a corresponding amount. (Both Weisselberg and the Trump Organization pleaded not guilty yesterday.)
One can describe this as a “fringe benefit”—a tax-law term for any payment for services that is not part of stated compensation—but it’s also plain old tax fraud. Under federal and New York State tax law, lodging provided by an employer to an employee is part of the employee’s gross income. There are limited exceptions to this rule—for example, if the employee is required to live on the employer’s business premises as part of the job, or if the employer is a religious institution and the employee is a clergy member. But Weisselberg wasn’t living on Trump Organization premises because of some business need (and Trumpism is only metaphorically a religion). And if the Trump Organization was keeping a separate set of books recording compensation that it didn’t report to tax authorities, then this was no unintentional oversight.
The allegations related to Weisselberg’s apartment are quantitatively the most significant—amounting to nearly $1.2 million in untaxed income from 2005 to 2017—but yesterday’s indictment includes several other examples of brazen tax evasion. For example, it’s black-letter law that when an employer pays educational expenses for an employee’s family, those amounts are income to the employee and subject to tax (absent a specific statutory exception, such as for employees of educational institutions). Nonetheless, Donald Trump allegedly paid private-school tuition for two of Weisselberg’s grandchildren—signing his own name on checks that amounted to nearly $360,000 from 2012 to 2017. The Trump Organization and Weisselberg should have reported those payments as part of Weisselberg’s wages but, according to the indictment, didn’t.
Likewise, it’s crystal clear that an employee’s personal use of a company-provided vehicle is taxable income. But according to the indictment, the Trump Corporation made nearly $200,000 in lease payments on two Mercedes-Benz automobiles driven by Weisselberg and his wife. Again, per the indictment, the Trump Organization and Weisselberg hid those payments from tax authorities. All the while, the Trump Organization tracked the tuition expenses and the Mercedes-Benz leases as compensation to Weisselberg in its separate set of books.
This is the type of conduct that puts other people behind bars. The investment banker Richard Josephberg was sentenced to four years in prison in 2007 for—among other tax-law violations—having a business pay for his homes in Westchester County, New York, and Greenwich, Connecticut, and then failing to report those payments as income. Leona Helmsley, the late real-estate billionaire and Trump friend-turned-enemy, was sentenced to four years in prison for essentially the same thing: having her company pay to renovate her Greenwich mansion and then failing to report those payments as income. (The U.S. attorney who brought the federal case against Helmsley was, incidentally, Trump’s future personal lawyer Rudolph Giuliani.)
Usually, these types of tax crimes are prosecuted at the federal level. But state tax-fraud prosecutions are not unheard of. Helmsley was indicted on state tax-fraud charges before she was prosecuted federally. According to yesterday’s indictment, New York City and New York State lost out on nearly $345,000 in taxes owed by Weisselberg. And when New York Attorney General Letitia James opened her probe of the Trump Organization more than a year ago, both the IRS and the Justice Department were answerable to Trump himself. New York prosecutors took up this case at a time when their federal counterparts very likely wouldn’t.
James, to be sure, has a powerful political incentive to pursue criminal charges against individuals and entities in the Trump orbit. During her 2018 campaign for state attorney general, she said that the then-president should be charged criminally. And if James can nail an ex-president who is deeply unpopular in his former home state, she will be the odds-on favorite for governor in 2022. (James hasn’t announced her candidacy for governor, but as recently as last week, she declined to rule out a run.)
Yesterday’s indictment may be part of a strategy to flip Weisselberg and use him as a witness against his former boss. But if the allegations in the indictment are true, Weisselberg is no innocent bystander in a battle between James and Trump. The indictment paints him as a financially sophisticated and well-compensated CFO of a sprawling commercial enterprise who went to great lengths to cheat on his taxes and now faces the consequences.
So yes, this is a politically tinged prosecution. But if the allegations in the indictment are true, it’s also out-and-out tax fraud—conduct that is criminal beyond question. Being connected to a controversial political figure shouldn’t send you to jail. It shouldn’t get you off the hook either.
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