New York prosecutors announced the first criminal indictment Thursday in a two-year investigation into Donald Trump’s business practices, accusing his namesake company and its longtime finance chief of extensive tax crimes related to fringe benefits for employees.
The 15-count indictment alleges a long-running scheme to allow Chief Financial Officer Allen Weisselberg to avoid income taxes by giving him fringe benefits as compensation, but not reporting them as income. It also specifically details the participation of an "Unindicted Co-conspirator #1" in the alleged behavior, without identifying that person.
Led into court in handcuffs, Weisselberg entered a plea of not guilty to the charges, which include grand larceny, conspiracy and criminal tax fraud. He was released without bail. The Trump Organization, via its lawyers, entered a not guilty plea as well.
Lawyers for the Trump Organization, at a news conference after court adjourned, accused the Manhattan DA's office of targeting them for political reasons even as they ignored similar or worse crimes from the financial crisis years ago.
"In my 50 years of practice, I have never seen this office bring a case like this and, quite frankly, I am astonished. The District Attorney is supposed to be apolitical, but everyone knows that the only reason they are proceeding with this case is because it is 'Trump'. As far as we are concerned, this case is over," attorney Ron Fischetti said in a subsequent statement.
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Prosecutors alleged in court that the 73-year-old Weisselberg orchestrated a "sweeping and audacious illegal payment scheme" dating back to at least 2005. Manhattan District Attorney Cy Vance and New York Attorney General Letitia James were in the courtroom looking on, but did not comment afterward.
"The scheme was intended to allow certain employees to substantially understate their compensation from the Trump Organization, so that they could and did pay federal, state, and local taxes in amounts that were significantly less than the amounts that should have been paid," the indictment reads.
It goes on to allege that the Trump Organization paid for Weisselberg's apartment, utilities, Mercedes cars driven by him and his wife, cash to hand out tips around Christmas, and even private school tuition for his grandchildren — all without declaring those payments as income on his W-2 forms or otherwise reported.
Trump’s company also allegedly issued checks, at Weisselberg’s request, to pay for personal expenses and upgrades to his homes and an apartment used by one of his sons, such as new beds, flat-screen TVs, carpeting and furniture, prosecutors said.
Weisselberg also allegedly received cash payments via an employee who received corporate checks, cashed them and handed over the money to the CFO. In all, prosecutors said the executive collected more than $1.7 million in off-the-books compensation.
Weisselberg alone was accused of defrauding the federal government, state and city out of more than $900,000 in unpaid taxes and undeserved tax refunds. The most serious charge against Weisselberg, grand larceny, carries five to 15 years in prison. The tax fraud charges against the company are punishable by a fine of double the amount of unpaid taxes, or $250,000, whichever is larger.
Weisselberg has intimate knowledge of the Trump Organization's financial dealings from nearly five decades at the company. The charges against him could enable prosecutors to pressure him to cooperate with the investigation and tell them what he knows. The longtime employee has a reputation as a workaholic utterly devoted to Trump's interests. So far, there is no sign that he is about to turn on the former president.
Weisselberg's attorney, Mary Mulligan, said her client "will fight these charges in court."
A Trump Organization spokesperson issued a statement earlier Thursday affirming Weisselberg's contributions to the company and accusing the Manhattan district attorney's office of using him as a pawn in a "scorched earth attempt" to hurt the former president.
"Allen Weisselberg is a loving and devoted husband, father and grandfather who has worked at the Trump Organization for 48 years. He is now being used by the Manhattan District Attorney as a pawn in a scorched earth attempt to harm the former President," the statement said. "The District Attorney is bringing a criminal prosecution involving employee benefits that neither the IRS nor any other District Attorney would ever think of bringing. This is not justice; this is politics."
In announcing the grand jury indictment, Carey Dunne, a top deputy in Vance's office, said: “Politics has no role in the jury chamber, and I can assure you it had no role here."
There was no indication Trump himself would be charged at this stage of the investigation, jointly pursued by Vance and James, both Democrats. However, prosecutors noted he signed some of the checks at the center of the case.
Trump Investigations
Trump did not respond to reporters’ shouted questions about the New York case as he visited Texas on Wednesday, but in a statement condemned the case as a “political Witch Hunt by the Radical Left Democrats.” Earlier in the week, the Republican had blasted the New York prosecutors as “rude, nasty, and totally biased” and said his company’s actions were “standard practice throughout the U.S. business community, and in no way a crime.”
The news comes as Trump has been more seriously discussing a possible comeback run for president in 2024. He has ramped up his public appearances, including holding his first rallies since leaving the White House.
Vance, who leaves office at the end of the year, has been conducting a wide-ranging investigation into a variety of matters involving Trump and the Trump Organization.
His office has looked into hush-money payments paid to women on Trump’s behalf and truthfulness in the company's property valuations and tax assessments, among other matters.
Vance fought a long battle to get Trump’s tax records and has been subpoenaing documents and interviewing company executives and other Trump insiders.
James assigned two lawyers from her office to work with Vance’s team after her office found evidence of possible criminal wrongdoing while conducting a separate civil investigation of Trump.
Weisselberg had come under scrutiny, in part, because of questions about his son’s use of a Trump apartment at little or no cost.
Barry Weisselberg, who managed a Trump-operated ice rink in Central Park, testified in a 2018 divorce deposition that Trump Parc East apartment was a “corporate apartment, so we didn’t have rent.” He was charged just $1,000 per month — far below typical Manhattan prices — while living in a Trump apartment from 2005 to 2012, the indictment said.
Barry’s ex-wife, Jen Weisselberg, has been cooperating with both inquiries and given investigators reams of tax records and other documents.
Allen Weisselberg himself, an intensely private man who lived for years in a modest home on Long Island, continued to claim residency there despite living in a company-paid Manhattan apartment, prosecutors said.
By doing so, Weisselberg concealed that he was a New York City resident, and he avoided paying hundreds of thousands in federal, state and city income taxes while collecting about $133,000 in refunds to which he was not entitled, prosecutors said.
According to the indictment, Weisselberg paid rent on his Manhattan apartment with company checks and directed the company to pay for his utility bills and parking, too.
The case against Weisselberg — a loyal lieutenant to Trump and his real estate-developer father, Fred — could give prosecutors the means to pressure the executive into cooperating and telling them what he knows about Trump’s business dealings.
The Trump Organization is the business entity through which the former president manages his many entrepreneurial affairs, including his investments in office towers, hotels and golf courses, his many marketing deals and his television pursuits. Trump sons, Donald Jr. and Eric, have been in charge of the company’s day-to-day operations since he became president.
In addition to exposing the Trump Organizations to fines, the criminal case could make it more difficult for the business to secure bank loans or strike deals — a hit that comes at a particularly bad time, with the company already reeling from lost business because of the coronavirus and the backlash over the Jan. 6 attack on the Capitol.
Although Trump wasn't charged Thursday, allegations against the company bearing his name raise questions about his knowledge of — or involvement in — business that practices prosecutors suspect were illegal.
James Repetti, a tax lawyer and professor at Boston College Law School, said a company like the Trump Organization would generally have a responsibility to withhold taxes not just on salary, but other forms of compensation — like the use of an apartment or automobile.
Such perks wouldn’t be considered taxable income if they were required as a condition of employment, Repetti said, such as providing an apartment for the convenience of an employee who is required to be at the office or worksite at odd or frequent hours, or allowing the use of a car for business purposes.
Another prominent New York City real estate figure, the late Leona Helmsley, was convicted of tax fraud in a federal case that arose from her company paying to remodel her home without her reporting that as income.
The Trump Organization case involves possible violations of New York state tax laws.
“The IRS routinely looks for abuse of fringe benefits when auditing closely held businesses,” Repetti said. “The temptation for the business is that it claims a tax deduction for the expense, while the recipient does not report it in income.”
