“We don’t pay taxes. Only the little people pay taxes.” So said the late real estate tycoon Leona Helmsley, according to her housekeeper. To be more precise: according to her housekeeper’s testimony at Helmsley’s trial on tax fraud charges. Charges brought by one Rudolph W. Giuliani, then the U.S. attorney for Manhattan. Charges on which she was convicted — and served 18 months.
So let’s hear nothing, not a word, about the supposed unfairness of the indictment a New York state grand jury handed up on Thursday of the Trump Organization and its former chief financial officer on tax fraud charges, the details of which sound positively Helmsley-esque.
The “Queen of Mean” evaded $1.2 million in taxes by charging personal expenses, including renovations of her Connecticut estate, to the Helmsley hotel chain.
“You were not driven to this crime by financial need,” the judge lectured Helmsley at her sentencing. “Rather, your conduct was the product of naked greed. Throughout its course, you persisted in the arrogant belief that you were above the law.”
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Sounds familiar. Previous reporting about the Trump family’s tax returns portrays a multigenerational family enterprise devoted to tax avoidance, if not outright evasion. Thursday’s 15-count indictment lays out a separate, sprawling, 15-year conspiracy to funnel millions in unreported compensation — in the form of rent-free Manhattan apartments, leased Mercedes, private-school tuition payments, and the like — to senior Trump Organization executives, including CFO Allen Weisselberg, who allegedly received $1.76 million on which he paid no taxes. Both Weisselberg and lawyers for the Trump Organization pleaded not guilty.
“To put it bluntly, this was a sweeping and audacious illegal payments scheme,” Carey Dunne, general counsel for the Manhattan District Attorney’s Office, said at the arraignment “Contrary to today’s assertion by the company’s former CEO, this is not a ‘standard practice in the business community,’ nor was it the act of a rogue or isolated employee.”
Granted, it’s unusual to bring a criminal tax case involving the failure to pay taxes on fringe benefits. To take one relevant example, the Internal Revenue Service dunned Ronald and Nancy Reagan for back taxes plus interest for failing to report the value of $3 million free clothes, jewelry, furs and designer dresses she received; that was a civil penalty, not a criminal prosecution.
But it’s also unusual for prosecutors to amass the kind of damning evidence of intent laid out in the indictment. Nancy Reagan probably didn’t give a second thought to the tax consequences of her designer freebies; the Trump Organization and Weisselberg appear to have thought about nothing but tax consequences. Normal businesses don’t keep two sets of books, one for the tax authorities and the other for internal use. No self-respecting prosecutor would look at this kind of evidence and take a pass.
Two things stand out in the indictment: the seemingly boundless intensity of Weisselberg’s greed and, more legally significant, the degree to which the Trump Organization was aware of, and benefited from, the tax scheme.
As the indictment portrayed, Weisselberg maneuvered to avoid paying taxes on things large and small. He lived in Manhattan, but falsely declared his residence elsewhere to avoid paying New York City resident taxes, which would have added up to $238,000 over 16 years. He got the company to pay for new beds, flat screen televisions and carpeting for his home in Florida, but didn’t report that as income. He got the money for his annual holiday tips by having a check made out to another company employee, who duly turned over the cash for Weisselberg to dole out — nearly $30,000 over six years — and again, did not report it as income.
The most astonishing — and damning — part is that the Trump Organization kept careful records of it all. It maintained two sets of books, one that showed Weisselberg’s compensation as reported to tax authorities, the second that recorded in detail how much he was actually receiving — as the indictment explains, “ensuring that he was not paid more than his pre-authorized, fixed amount of gross compensation.” Underreporting the compensation didn’t just help Weisselberg — it benefited the Trump Organization, which avoided having to ante up for payroll taxes on the unreported income.
What does all of this have to do with the former president — and would the case have been pursued if it didn’t involve him?
The answer to the first question isn’t yet clear, and, if prosecutors don’t secure Weisselberg’s cooperation, it may never be. We don’t know how much Donald Trump knew about this arrangement, although the indictment tantalizingly mentions an “Unindicted Individual #1” and states that Trump personally signed the checks to reimburse tuition payments for Weisselberg’s grandchildren, amounting to $359,000.
As to the second, Trump and his lawyers loudly proclaim that his company is being unfairly singled out. “In our view, this case was brought because the company’s name is Trump,” his lawyers said in a statement. Trump, typically, went higher-decibel, assailing the indictment as a continuation of “the political Witch Hunt by the Radical Left Democrats.”
Such concerns have to be taken seriously, especially in the more lawyerly and restrained form of the accusation that a different company would not have been so charged. But given the reporting on Trump’s tax machinations, it would have been prosecutorial malpractice not to examine the operations of the Trump Organization.
And having uncovered the benefits scheme, were prosecutors supposed to look the other way, or simply refer the matter to civil tax authorities? Hardly. If true, this amounts to brazen, knowing tax fraud. That’s a crime, no matter who does it, or what their political connections.
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