The New York State attorney general’s office filed a scathingly worded lawsuit on Thursday taking aim at the Donald J. Trump Foundation, accusing the charity and the Trump family of sweeping violations of campaign finance laws, self-dealing and illegal coordination with the presidential campaign.
The lawsuit, which seeks to dissolve the foundation and bar President Trump and three of his children from serving on nonprofit organizations, was an extraordinary rebuke of a sitting president. The attorney general also sent referral letters to the Internal Revenue Service and the Federal Election Commission for possible further action, adding to Mr. Trump’s extensive legal challenges.
The lawsuit, filed in State Supreme Court in Manhattan, culminated a nearly two-year investigation of Mr. Trump’s charity, which became a subject of scrutiny during and after the 2016 presidential campaign. While such foundations are supposed to be devoted to charitable activities, the petition asserts that Mr. Trump’s was often improperly used to settle legal claims against his various businesses, even spending $10,000 on a portrait of Mr. Trump that was hung at one of his golf clubs.
The foundation was also used to curry political favor, the lawsuit asserts. During the 2016 race, the foundation became a virtual arm of Mr. Trump’s campaign, email traffic showed, with his campaign manager, Corey Lewandowski, directing its expenditures, even though such foundations are explicitly prohibited from political activities.
The foundation was a source of funneling money into the pockets of Trump and his three oldest children who used it like their person piggy bank. They all act as if the rules don’t apply to them, “like they were raised by wolves.”
The bigger problem for the Trumps is the IRS that could revoke the non-profit status, even retroactively, requiring the Trumps to pay back millions in back taxes. It could also bring federal criminal charges. That’s just for starters:
Ms. Underwood’s petition noted that Mr. Trump signed the foundation’s tax returns, in which he stated, under penalties of perjury, “that the foundation did not engage in transactions with interested parties, and that the foundation did not carry out political activity.”
That is the sort of information that investigators would weigh in determining whether he should be charged with filing a false tax return, according to attorneys who have worked on criminal cases that were investigated by the I.R.S. and brought by the Justice Department. They said that Mr. Trump could be especially vulnerable because of his repeated involvement with the foundation, directing it to spend money on specific activities. [..]
The suit also cites a campaign event in Iowa where $2.8 million was raised for the foundation. Senior campaign staff controlled how and when those funds were eventually spent, the suit said.
Marcus Owens, who ran the I.R.S. division that oversees nonprofits during the administrations of Presidents George Bush and Bill Clinton, said there have been several cases where people were criminally prosecuted for filing false tax returns of charities they controlled. The difference in Mr. Trump’s case, he said, is that those cases were “less egregious.” [..]
At a minimum, tax attorneys said, the I.R.S. could seek civil penalties totaling about 20 percent of the funds that were allegedly misused. In the case of the single Iowa event, such penalties would total about $560,000.
A more drastic option in the civil realm would be to impose what’s known as a “termination tax” on the foundation. Such a penalty is equal to the organization’s remaining assets — meaning it would entirely drain the foundation’s coffers.
Not only that, the State of New York has another “trick up its sleeve,” a little known power held by the state’s AG called the Quo Warranto solution. Jed Legum at Think Progress explains:
On page 7 of the petition, Underwood cites her authority under section 1101(a) of New York nonprofit law. That provision gives Underwood the authority to dissolve an entity that transacts its business in an illegal manner.
This is where things get interesting. The exact same authority is conferred to the attorney general in the law governing for-profit corporations. The attorney general, in New York and many other states, is authorized to dissolve a for-profit corporation that is operating illegally.
The root of this authority is a legal concept called Quo Warranto. As law professor Jed Shugerman explained to me last year, Quo Warranto is based on the concept that “[i]ncorporation is a privilege afforded by the state, but to maintain corporate status, one must conduct business legally.” Quo Warranto authority grants the state the ability to dissolve corporations that are acting “ultra vires,” or beyond their legal authority.
Right now, there are multiple lawsuits against Trump arguing that his decision to maintain ownership of the Trump Organization violates the Emoluments Clause of the Constitution. Article 1, Section 9 of the Constitution prohibits any federal office holder, including the president, from accepting “any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.”
By continuing to own his golf courses, condos, hotels, and other properties, Trump receives a steady stream of emoluments from foreign governments.
But a Quo Warranto action by the New York attorney general could avoid all of these issues. Underwood has authority over the Trump Organization and could use its illegal activity — serving as a conduit for emoluments — to enjoin it from doing business with foreign governments, require the divestment of certain assets, or dissolve it completely.
In her new lawsuit Thursday, Underwood revealed that she is well aware of her authority to do so under New York law. Now all she has to do is act.
Could this be the beginning of the end of this plague of grifters that has been foisted on this country’s democracy?
