New York state prosecutors who’ve charged the Trump Organization and its CFO, Allen Weisselberg, with tax fraud will likely try to win in court by leaning heavily on a double set of books the company kept.
The company and its CFO are charged with conspiracy to defraud the government by systematically accounting for a portion of the compensation to Weisselberg and other executives as other types of expenses to avoid paying payroll and income taxes.
Weisselberg’s annual compensation for much of the period beginning in 2005 was $940,000, but Manhattan District Attorney Cyrus Vance, Jr., who filed criminal charges against the company two weeks ago, says his actual compensation includes payments covering the rent and utilities on his New York City apartment, payments on cars, and tuition and rental assistance for family members, among other things.
Those payments were listed as rental and other expenses rather than as compensation on the company’s general ledger but on an internal spreadsheet the company kept, the expenses were listed as compensation.
“The Trump Organization maintained internal spreadsheets that tracked the amounts it paid for Weisselberg’s rent, utility, and garage expenses,” the indictment says. “Simultaneously, the Trump Organization reduced the amount of direct compensation that Weisselberg received in the form of checks or direct deposits to account for the indirect compensation that he received.”
“The toughest part of the case is the double set of books,” University of Alabama law school Professor Pamela Bucy Pierson told The Wall Street Journal.
In addition to potentially hurting the company, the internal spreadsheets could hurt Weisselberg. By showing the payments were compensation offsets, Weisselberg should have reported them as compensation on his personal tax returns, but he didn’t.
“Weisselberg did not report the payments as compensation on his personal tax returns, despite knowing that they represented taxable income and were treated as compensation by the Trump Corporation in internal records,” the indictment says. The Trump Corporation is a subsidiary of the Trump Organization.
In its defense, the Trump Organization could argue the internal spreadsheets were simply part of a boundary-pushing tax strategy, Pierson told the Journal. The internal tracking would represent what a more conservative, cautious approach would look like. In that case, it wouldn’t represent a separate, true tally.
Grand larceny charge
Weisselberg's most pressing risk is the second-degree grand larceny charge, which comes with a maximum 15-year sentence. The charge involves some $95,000 in tax refunds he pocketed over an eight-year period.
To prosecute the charge, prosecutors must show he wrongly took at least $50,000 of that within the last five years. If they can’t show that, Weisselberg could argue the statute of limitations has passed.
Against that argument, prosecutors could say the eight-year period, taken together, represents a single scheme, so even if the five-year statute of limitations has passed on some of the refund amounts, the scheme as a whole falls within the statute of limitations.
“If prosecutors can show that he had a grand plan to engage in a continuous fraud, the refunds he obtained more than five years ago could still be included in the aggregate sum of stolen property,” the Journal reported.
On the other hand, legal specialists told the Journal, Weisselberg could simply argue he kept the refunds without criminal intent. But that could be a challenge, since the company’s internal spreadsheets indicate it was using rental and other types of payments to offset his compensation.