The two Trump companies found guilty of tax fraud last month were sentenced to pay more than $1.6 million, a penalty likely to be eclipsed by the impact on the Trump Organization of the felony conviction itself.
(Bloomberg) — The two Trump companies found guilty of tax fraud last month were sentenced to pay more than $1.6 million, a penalty likely to be eclipsed by the impact on the Trump Organization of the felony conviction itself.
The small sum, in contrast to federal penalties for corporate crimes, is due to limits under New York state law. The real punishment lies in the potential long-term blowback to the former president’s business, going beyond reputational damage to freezing it out of coveted deals, bank loans and government contracts, legal experts say.
The sentencing comes after a New York jury returned its verdict against the two business units on all 17 counts, including conspiracy, criminal tax fraud and falsifying business records. The case stems from a scam spanning more than a decade to hide taxable income by compensating executives with unreported perks like luxury cars and private school tuition.
And while $1.6 million is a rounding error for Trump’s business, that’s just where the trouble begins.
Read More: Trump Companies Are Convicted in NY Criminal Tax Fraud Trial
“Doing business with a company that has been found guilty of unscrupulous practices may exceed the risk tolerance of lenders, insurers and potential business partners,” said Barbara McQuade, a former federal prosecutor who now teaches at the University of Michigan’s law school.
Felony Stain
The stain of the felony will likely make it harder for Trump’s company to secure bank loans, at least in the US, experts say. It will also make it more difficult to win government contracts, like the one that let Trump develop Washington’s Old Post Office into a luxury hotel.
“Does any company want to disclose they’re entering into a deal with a company convicted of tax fraud?” said Frank Agostino, a former Internal Revenue Service lawyer now in private practice and specializing in tax cases. Some companies, lenders and municipalities are bound by “morals clauses” that prohibit doing business with felons, he said.
Read More: Trump Ex-CFO Weisselberg Gets 5 Months in Jail, $500,000 Bonus
Lawyers for the two business units — Trump Corp. and Trump Payroll Corp. — have said they would appeal the verdict and had no comment on its possible consequences. Trump spokesman Steven Cheung didn’t respond to an email seeking comment.
And Trump’s legal troubles in New York are far from over. A $250 million civil fraud case brought by Attorney General Letitia James is scheduled for trial in October. Not only are the financial stakes in that case far greater, but the suit also seeks to bar Trump and three of his children from ever running any business in the state.
Read More: Trump Sued by New York Over ‘Fraudulent’ Asset Valuations
James has already succeeded in getting a corporate monitor installed at the Trump Organization. Previous litigation by her office resulted in the dissolution of the Trump Foundation, which violated the state law governing charities.
The criminal case was brought by the offices of the Manhattan district attorney and James.
‘Real Threat’
“The attorney general’s lawsuit is a real threat with real teeth,” said Daniel Horwitz, a former prosecutor at the Manhattan DA’s office who is now at the law firm McLaughlin & Stern. “If the AG gets the relief she’s seeking, it will essentially put an end to the Trump Organization in New York state as we know it.”
Trump himself wasn’t charged in the criminal case, but the sentencing comes as he runs for president and amid a series of other legal threats.
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Besides James’s case, they include criminal probes of efforts by Trump and his allies to overturn the 2020 presidential election and the treatment of classified government documents at Mar-a-Lago, his Florida home. Following the criminal verdict last month, District Attorney Alvin Bragg said his investigation of Trump and the business would continue.
Trump has called all the cases and probes he faces baseless political vendettas.
Weisselberg’s Deal
The Manhattan case grew out of an investigation of the Trump Organization’s business practices begun under former DA Cyrus Vance Jr., who in 2021 secured an indictment of longtime chief financial officer Allen Weisselberg and the two Trump companies. Weisselberg struck a plea deal with Bragg’s office last August and was its star witness at the trial. Prosecutors have said their probe began after a Bloomberg News story about Weisselberg’s perks.
Read More: Trump Perks for Weisselbergs Included Free Rent
After the conviction, Trump said in a statement that it was unfair to prosecute his companies for the acts of the disgraced former CFO, with Weisselberg himself “and every witness repeatedly testifying that President Trump and the Trump Family knew nothing about his actions, which he admits were done solely for his own benefit.”
He said New York “is a hard place to be ‘Trump,’ as businesses and people flee our once Great City!”
The case is New York v. Trump Organization, 01473-2021, New York State Supreme Court (Manhattan).
Read More
- Trump Said Fight It When DA Charged His Firms With Tax Fraud
- ‘He Was the Boss’: Trump’s Sign-Offs Come Up in Tax Fraud Trial
- Trump Knew of Alleged Tax Scam, Controller Says CFO Told Him
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