How Big A Deal Is New York State's Lawsuit Against The Trump Foundation?
President Trump was presented with yet another legal hurdle today, but it's probably not the one you were expecting. This lawsuit has nothing to do with Robert Mueller's investigation into Russian interference in the election, federal prosecutors' separate investigation into Michael Cohen's finances, Stormy Daniels' ongoing fight to be freed from her hush agreement or Summer Zervos' defamation claim related to groping allegations against the president. Nope, this one is a lawsuit filed by the attorney general of New York, Barbara Underwood, claiming that Trump's charitable foundation functioned as a slush fund for Trump's business and political expenditures before and during the 2016 presidential campaign.
Though the lawsuit may seem to have come out of the blue, it's been a long time coming — former New York Attorney General Eric Schneiderman announced that he was opening an investigation into the Trump Foundation a few days before the 2016 election. (Schneiderman recently resigned in disgrace following allegations that he'd physically abused multiple girlfriends, and Underwood, formerly the state's solicitor general, was selected by the state legislator to serve out the remainder of his term.) And journalists — notably the Washington Post's David Fahrenthold — have been reporting on apparent self-dealing by the Trump Foundation for years.
So what does this new legal challenge mean for Trump? Is it a serious threat to his presidency, or just another lawsuit that's destined to drag on without resolution for months or years? Here's what we know.
The Evidence Against Trump Is Not Particularly Ambiguous
Underwood's lawsuit contains fairly strong evidence that the Trump Foundation did not operate like legitimate charitable organization. For instance, the treasurer of the Trump Foundation did not actually know that he was the treasurer of the Trump Foundation:
At one point, during a deposition, a New York state investigator asked Allen Weisselberg — a Trump Organization employee who was also listed as treasurer for the Trump Foundation — whether the foundation had a policy for determining which specific payments the foundation was allowed to make.
"There's no policy, just so you understand," Weisselberg said. The interviewer asked whether Weisselberg had understood that he was actually on the board of the Trump Foundation, and had been for more than a decade.
"I did not," Weisselberg replied.
It's also clear that the Trump Foundation made improper payments on behalf of Trump and his businesses. One of the most egregious pieces of evidence contained in Underwood's filing is a note in Trump's handwriting instructing the foundation to pay $100,000 to a charity as ordered in a settlement with the city of Palm Beach over the placement of a flag pole at Mar-a-Lago.
Charitable foundations are not allowed to make payments on behalf of private enterprises, as Trump surely knew, since he signed annual IRS forms attesting to the propriety of the Trump Foundation's payments.
For more of the most egregious instances of self-dealing in Underwood's report, read Fahrenthold's very good report on the lawsuit for the Post.
No One's Going To Go To Prison (As A Result Of This Lawsuit, Anyway)
Underwood wants the Trumps to pay $2.8 million in damages and restitution and to pay the foundation back double for the improper payments it made. (The foundation's assets would then be distributed to real charities under the attorney general's oversight.) Underwood also wants to bar Trump from leading any New York-based nonprofit for 10 years and to bar Ivanka Trump, Donald Trump Jr. and Eric Trump, who have long served on the board of the Trump Foundation, to be barred from serving on charitable boards in New York for one year. (Underwood alleges that the Trump Foundation board, which is supposed to exercise oversight over the foundation's spending, has not actually convened since 1999.)
These are civil penalties, not criminal penalties. Even if a state judge takes all the action Underwood recommends, no member of the Trump clan will face jail or prison time as a result of this lawsuit.
However, the Washington Post's Jennifer Rubin argues that the evidence in Underwood lawsuit could hypothetically be used by federal prosecutors to show criminal violation of campaign-finance laws.
[G]iven that there are already concerns about whether the settlement with Stormy Daniels was a campaign expenditure and therefore should have been revealed, the discovery of other monies improperly routed to the campaign shows, if nothing else, a pattern of deliberate nondisclosure. Finding specific intent to break campaign-finance laws could transform a civil case into a criminal action.
Underwood's Referrals To Federal Agencies Could Prove A Headache
In addition to suing Trump, Underwood wrote referral letters to Internal Revenue Service and the Federal Election Commission recommending possible further action related to the Trump Foundation's improper payments. That could prevent this matter from being settled swiftly, notes the New York Times.
The attorney general's referrals to the IRS and the FEC could add another wrinkle that might slow the foundation's dissolution. The agencies are not known for their expeditious handling of enforcement actions, and the lawsuit notes that the foundation cannot legally complete its wind down "until the complaints to the Internal Revenue Service and Federal Election Commission have been resolved and it is determined if any penalties or fines will be imposed on the foundation."
Mueller Is Still Looking Into At Least One Specific Donation To The Trump Foundation
In April, the New York Times reported that Mueller was looking into a $150,000 donation to the Trump Foundation by a Ukrainian steel magnate named Victor Pinchuk in 2015 in exchange for a 20-minute video-conference appearance by Trump.
The payment from Mr. Pinchuk "is curious because it comes during a campaign and is from a foreigner and looks like an effort to buy influence," said Marcus S. Owens, a former head of the Internal Revenue Service division that oversees tax-exempt organizations. He called the donation "an unusual amount of money for such a short speech."
That donation is not mentioned in Underwood's lawsuit, but it is presumably still of interest to Mueller's team.
