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The Curious Campaign Role of Donald Trump’s Foundation

In an extensive complaint and supporting documents, New York’s Attorney General says Trump’s foundation made nearly $3 million in illegal contributions to his campaign. Trump calls the suit “ridiculous” and says he won’t settle.

Nonprofit 101 is that a conven­tional char­ity cannot give money to a polit­ical campaign. But it’s possible the Donald J. Trump Found­a­tion may have broken this cardinal rule not just once, but twice. And the fact that it happened twice could make a signi­fic­ant legal differ­ence. The first time could be a simple cler­ical mistake. But when it happens again and the person running the char­ity is the polit­ical bene­fi­ciary, that’s a horse of a differ­ent color.

Yester­day, the New York Attor­ney General sued to dissolve the Trump Found­a­tion because in essence it hasn’t been acting as a true char­ity. Rather, the suit alleges, Trump’s family, and Donald Trump in partic­u­lar, have person­ally benefited from Found­a­tion funds. For example, the complaint alleges Found­a­tion money was used to settle several suits involving Donald Trump’s commer­cial prop­er­ties, includ­ing the Mar-A-Lago resort in Palm Beach, Fla. The Found­a­tion also purportedly spent $10,000 to buy a Donald Trump portrait which hung on a wall at the Trump National Doral Miami for two years.

The Found­a­tion’s Board consisted of Mr. Trump, his three adult chil­dren, Donald Trump Jr., Eric Trump and Ivanka Trump, and Allen Weis­sel­berg, the Trump Organ­iz­a­tion’s chief finan­cial officer, who acted as the Found­a­tion’s treas­urer.  But the Found­a­tion’s Board is hardly a model of good governance or over­sight; it has not met in 19 years, the attor­ney general contends.

In a 41-page peti­tion accom­pa­ny­ing the complaint, are alleg­a­tions that would amount to campaign finance viol­a­tions. For example, on page 11, the filing alleges that

In 2016, the Board know­ingly permit­ted the Found­a­tion to be coopted by Mr. Trump’s pres­id­en­tial campaign, and thereby viol­ated its certi­fic­ate of incor­por­a­tion and state and federal law by enga­ging in polit­ical activ­ity and prohib­ited related party trans­ac­tions. Donald J. Trump for Pres­id­ent, Inc. (the “Campaign”), Mr. Trump’s polit­ical commit­tee, extens­ively direc­ted and coordin­ated the Found­a­tion’s activ­it­ies in connec­tion with a nation­ally tele­vised char­ity fundraiser for the Found­a­tion in Des Moines, Iowa on Janu­ary 28, 2016 (the “Iowa Fundraiser”), and the disburse­ments of proceeds from the event.

The peti­tion alleges the Trump campaign direc­ted which char­it­ies would receive funds, often for the polit­ical bene­fit of the Trump campaign.

As the peti­tion further alleges on page 20, “The [Trump] Found­a­tion’s disburse­ment of funds from the Iowa Fundraiser were related-party trans­ac­tions….the Found­a­tion ceded control over the grants to the Campaign, making an improper in-kind contri­bu­tion of no less than $2.823 million…to the Campaign that provided Mr. Trump and the Campaign a means to take credit at campaign rallies, press brief­ings, and on the Inter­net, for gifts to veter­ans char­it­ies….”

All of this is a legal prob­lem for the Found­a­tion, the 2016 Campaign and Trump, because the Found­a­tion is not allowed to parti­cip­ate in any polit­ical campaign, even Trump’s own. And as a matter of federal campaign finance law, Trump’s campaign was not allowed to receive an in-kind dona­tion that large. Nor is a federal campaign allowed to receive money from a corpor­ate source, includ­ing a char­it­able non-profit, under a long­stand­ing law called the Till­man Act.

One of the reas­ons the attor­ney general argues Trump’s viol­a­tions were “will­ful and know­ing” is because he signed the Found­a­tion’s annual IRS 990 forms which pledge the Found­a­tion’s money was not used for polit­ical purposes. Trump “repeatedly signed, under penal­ties of perjury, IRS Forms 990 in which he attested that the Found­a­tion did not engage in trans­ac­tions with inter­ested parties, and that the Found­a­tion did not carry out polit­ical activ­ity,” the complaint reads.

Moreover, the Trump Found­a­tion paid a $2,500 federal excise tax in March 2016 because of an illegal $25,000 contri­bu­tion to the 2013 re-elec­tion campaign of Flor­ida Attor­ney General Pam Bondi. Accord­ing to the New York attor­ney general, Trump signed the IRS form report­ing the trans­ac­tion, signed a personal check paying the federal excise tax, and signed another check reim­burs­ing the Found­a­tion $25,000. In other words, the attor­ney general contends, Trump well knew the laws prohib­it­ing polit­ical activ­ity by char­it­able found­a­tions. The attor­ney general has sent refer­ral letters to both the IRS and the FEC.

If Trump loses the case, it could be costly. The complaint asks that Donald Trump pay “up to double the amount of bene­fits improp­erly obtained through self-deal­ing trans­ac­tions,” which could total about $5.6 million. In addi­tion, the attor­ney general wants Trump’s chil­dren “to account for their conduct in the neglect and viol­a­tions of their duties in the manage­ment and dispos­i­tion of corpor­ate assets, to pay damages result­ing from loss and waste of corpor­ate assets, and should be enjoined from serving as an officer, director or trust­ees, or in any similar capa­city, of any not-for-profit char­it­able organ­iz­a­tion incor­por­ated or author­ized to conduct busi­ness or soli­cit char­it­able dona­tions in the State of New York.”

After the suit was announced, it took all of 28 minutes for Donald Trump to respond. On Twit­ter, his medium of choice, Trump called the filing “ridicu­lous” and vowed, “I won’t settle this case!” If indeed Trump does not settle, it will be inter­est­ing to hear from Trump and his offspring about how a char­it­able found­a­tion could some­how legally subsid­ize a pres­id­en­tial campaign.

The views expressed are the author’s own and not neces­sar­ily those of the Bren­nan Center for Justice.


Purchas­ing Power: The Conver­sa­tion

This post is part of the special series designed to provide well-informed comment­ary, fresh ques­tions, and new answers about the facts of money in polit­ics. Dive in to 'Purchas­ing Power: The Conver­sa­tion’ here. 

The views expressed by blog contrib­ut­ors are the authors’ own and not neces­sar­ily the views of the Bren­nan Center.