In a high-profile move, New York state prosecutors announced plans earlier this week to file criminal charges against the Trump Organization, and possibly the company’s CFO, Allen Weisselberg, for tax crimes related to how it paid perks and benefits to some employees, according to news reports.
The charges are expected to target the improper treatment on the company’s tax returns of rent-free apartments and leased cars to Weisselberg and other company officials, the reports said.
The indictments, which don’t target former President Donald Trump, could be followed by other charges.
Weisselberg and his son Barry allegedly received corporate perks and gifts potentially worth hundreds of thousands of dollars over their years with the company. If they failed to account properly for that money on tax returns and other financial filings, a Reuters report said, it could put them at legal risk.
In one of the allegations, Barry neither paid rent nor accounted for the arrangement on his taxes for a Trump-owned apartment he lived in for five years. Because of the unit’s size and its Central Park location, the rent is estimated to be worth some $200,000.
At the time, Barry managed a carousel and a skating rink that the Trump Organization operated for the city on a contract basis.
Barry is also alleged to have lived in a second Trump-owned apartment rent-free.
Ronald Fischetti, a Trump Organization lawyer who spoke to reporters yesterday, blasted prosecutors’ use of the tax accounting treatment of perks and benefits as the potential basis for criminal indictments.
“In my more than 50 years of practice, never before have I seen the district attorney’s office target a company over employee compensation or fringe benefits,” news outlets quoted him saying. “The IRS would not, and has not, brought a case like this.”
The charges are expected to be brought by Manhattan District Attorney Cyrus Vance, Jr., and New York State Attorney General Letitia James.
Even if the case fails, legal experts say, it raises going-concern issues for the company.
“Any kind of indictment against a corporation could be the death knell,” Bradley Simon, a former prosecutor, said in the Reuters report. “If charged, it means that customers and vendors are going to stay away and contracts are going to be canceled. From a financial perspective, it’s terrible, because no customer, client or other business will want to go anywhere near a company for fear of being tainted, subpoenaed, questioned by authorities or hauled into a grand jury.”
Trump Organization lawyers plan to argue the indictments are disproportionate to the alleged tax violations, reports said.
“It’s a pretty shallow indictment,” Fischetti told reporters. That’s especially the case given the devastating impact it could have on the 3,500 employees if the company faces risks as a going concern, he said.
Analysts see the indictment, the first of others that are expected to follow, as part of a campaign to pressure Weisselberg, considered the organization’s top officer behind Trump, to testify against the former president.