Jun 15, 2018
Nonprofit 101 is that a conventional charity cannot give money to a political campaign. But it's possible the Donald J. Trump Foundation may have broken this cardinal rule not just once, but twice. And the fact that it happened twice could make a significant legal difference. The first time could be a simple clerical mistake. But when it happens again and the person running the charity is the political beneficiary, that's a horse of a different color.
Yesterday, the New York Attorney General sued to dissolve the Trump Foundation because in essence it hasn't been acting as a true charity. Rather, the suit alleges, Trump's family, and Donald Trump in particular, have personally benefited from Foundation funds. For example, the complaint alleges Foundation money was used to settle several suits involving Donald Trump's commercial properties, including the Mar-A-Lago resort in Palm Beach, Fla. The Foundation also purportedly spent $10,000 to buy a Donald Trump portrait which hung on a wall at the Trump National Doral Miami for two years.
The Foundation's Board consisted of Mr. Trump, his three adult children, Donald Trump Jr., Eric Trump and Ivanka Trump, and Allen Weisselberg, the Trump Organization's chief financial officer, who acted as the Foundation's treasurer. But the Foundation's Board is hardly a model of good governance or oversight; it has not met in 19 years, the attorney general contends.
In a 41-page petition accompanying the complaint, are allegations that would amount to campaign finance violations. For example, on page 11, the filing alleges that
In 2016, the Board knowingly permitted the Foundation to be coopted by Mr. Trump's presidential campaign, and thereby violated its certificate of incorporation and state and federal law by engaging in political activity and prohibited related party transactions. Donald J. Trump for President, Inc. (the "Campaign"), Mr. Trump's political committee, extensively directed and coordinated the Foundation's activities in connection with a nationally televised charity fundraiser for the Foundation in Des Moines, Iowa on January 28, 2016 (the "Iowa Fundraiser"), and the disbursements of proceeds from the event.
The petition alleges the Trump campaign directed which charities would receive funds, often for the political benefit of the Trump campaign.
As the petition further alleges on page 20, "The [Trump] Foundation's disbursement of funds from the Iowa Fundraiser were related-party transactions....the Foundation ceded control over the grants to the Campaign, making an improper in-kind contribution of no less than $2.823 million...to the Campaign that provided Mr. Trump and the Campaign a means to take credit at campaign rallies, press briefings, and on the Internet, for gifts to veterans charities...."
All of this is a legal problem for the Foundation, the 2016 Campaign and Trump, because the Foundation is not allowed to participate in any political campaign, even Trump's own. And as a matter of federal campaign finance law, Trump's campaign was not allowed to receive an in-kind donation that large. Nor is a federal campaign allowed to receive money from a corporate source, including a charitable non-profit, under a longstanding law called the Tillman Act.
One of the reasons the attorney general argues Trump's violations were "willful and knowing" is because he signed the Foundation's annual IRS 990 forms which pledge the Foundation's money was not used for political purposes. Trump "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," the complaint reads.
Moreover, the Trump Foundation paid a $2,500 federal excise tax in March 2016 because of an illegal $25,000 contribution to the 2013 re-election campaign of Florida Attorney General Pam Bondi. According to the New York attorney general, Trump signed the IRS form reporting the transaction, signed a personal check paying the federal excise tax, and signed another check reimbursing the Foundation $25,000. In other words, the attorney general contends, Trump well knew the laws prohibiting political activity by charitable foundations. The attorney general has sent referral letters to both the IRS and the FEC.
If Trump loses the case, it could be costly. The complaint asks that Donald Trump pay "up to double the amount of benefits improperly obtained through self-dealing transactions," which could total about $5.6 million. In addition, the attorney general wants Trump's children "to account for their conduct in the neglect and violations of their duties in the management and disposition of corporate assets, to pay damages resulting from loss and waste of corporate assets, and should be enjoined from serving as an officer, director or trustees, or in any similar capacity, of any not-for-profit charitable organization incorporated or authorized to conduct business or solicit charitable donations in the State of New York."
After the suit was announced, it took all of 28 minutes for Donald Trump to respond. On Twitter, his medium of choice, Trump called the filing "ridiculous" and vowed, "I won't settle this case!" If indeed Trump does not settle, it will be interesting to hear from Trump and his offspring about how a charitable foundation could somehow legally subsidize a presidential campaign.
© 2023 Brennan Center for Justice
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