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How Trump’s Tax Records Could Point to Campaign Finance Violations

As the 2020 election draws to a close, the president still has campaign finance issues from the 2016 campaign popping up.

October 16, 2020
Alex Wong/Getty

In 2016, President Trump made a big show of claiming his campaign was “self-financed,” but in the end, he only funded 20 percent of it. The other 80 percent was other people’s money. And now thanks to reporting by the New York Times, there are new questions being asked about the 20 percent that seemed to be from him.

According to Federal Election Commission records, a $10 million contribution to the Trump 2016 campaign was paid 11 days before the election, from Trump himself. This payment was out of the ordinary compared to Trump’s other contributions to his campaign, which were $2 million or less over the summer and fall of 2016. If the money is really from Trump, then there is no problem. But the documents reviewed by the Times, raises multiple legal issues.

On September 27, the paper revealed that it somehow got its hands on multiple years of Donald Trump’s tax returns, and it has been writing story after story based on them. One of them reports on the mystery $10 million, which appeared to have come from a $20 million payment related to Trump’s Las Vegas hotel. According to the Times, “Tax records expose more than $21 million in highly unusual payments from the Las Vegas hotel Donald Trump owns with Phil Ruffin, routed through other Trump companies and paid out in cash.”

Here’s what the Times reports: Ruffin, who owns the Treasure Island Hotel in Las Vegas, had a business relationship with Donald Trump related to the Trump’s Vegas Hotel through an entity called Trump Las Vegas Sales and Marketing. “Then, seven weeks before the election, something else unusual happened. The Trump-Ruffin partnership borrowed $30 million from City National Bank in Los Angeles. Mr. Trump signed the loan documents in New York City, but tax records show that Mr. Ruffin personally guaranteed nearly the entire amount, should the company ever be unable to pay.” One explanation of what happened next is that the loan funded the partnership, the partnership gave Trump $21 million and then Trump used $10 million of that to pay his campaign in the final week of the election.

As former FEC Chair Trevor Potter noted, there a number of reasons why the flow of money here could be illegal either as a matter of campaign finance law or tax law. Federal campaign finance law requires that federal candidates disclose bank loans used in connection with their campaigns. So if this loan was really for the Trump 2016 campaign, then there is a problem with the failure to report it properly by the campaign.

If the money attributable to Ruffin (because of the loan guarantee) was really for the benefit of the Trump 2016 campaign, then it runs into a separate campaign finance problem of being far above the $5,400 limit for an individual donor at the time. As Stanford Professor Nathaniel Persily told the Times, if the payments were not legitimate, and were then directed to Trump’s campaign, they would likely be considered illegal campaign contributions.

The partnership also reportedly took a tax deduction for the $21 million payout. As tax expert Daniel Shaviro told the Times, unless the payments were for actual business expenses, claiming a tax deduction for them would be illegal.

According to CNN, this is the same $10 million payment that piqued the interest of Special Counsel Robert Mueller’s investigators, who thought it might have ties to an Egyptian bank or even the president of Egypt. Apparently, this lead did not pan out, possibly because of the stonewalling of the bank involved and the resistance by the president, or possibly because there was nothing to find.

So there’s a lot that a functioning FEC might investigate about this mystery $10 million payment to the Trump 2016 campaign. Unfortunately, the FEC presently lacks a quorum and thus cannot enforce this part of campaign finance law at the moment.

And for years now, Trump has spent years litigating about which of his personal papers can be revealed to prosecutors who are investigating alleged campaign finance crimes and related matters from the 2016 campaign. In the early summer of 2020, the Supreme Court gave the green light to Manhattan District Attorney Cy Vance to go after Trump’s personal papers in a state criminal matter. As Chief Justice John Roberts wrote in the opinion for Trump v. Vance, “Two hundred years ago, a great jurist of our Court established that no citizen, not even the President, is categorically above the common duty to produce evidence when called upon in a criminal proceeding. We reaffirm that principle today[.]”

Months later, Trump is still trying to resist Vance’s subpoenas. On October 7, the Second Circuit Court of Appeals rebuffed Trump’s latest attempt. Part of what is being investigated could be the payments made by former Trump lawyer Michael Cohen to benefit the Trump 2016 campaign that violated federal campaign finance laws and landed Cohen in prison.

Because of how these payments to adult film star Stormy Daniels and model Karen McDougal were structured and repaid, they could have violated New York business laws too, hence Vance’s potential interest. What is for sure is the Vance’s original 2019 subpoenas asked for information regarding “Michael Cohen’s work for the President and for the Trump Organization.

In the latest round of litigation, Trump attacked the subpoenas as being overbroad because they would reach documents not related to Michael Cohen, like the president’s taxes. But the Second Circuit rejected this, intimating that Vance may be looking at other alleged crimes: “First, [Vance] never actually alleges that the Michael Cohen payments are the sole object of the investigation. [He] states only that the grand jury was ‘investigating whether certain business transactions from 2016 violated New York law,’ … and that the Michael Cohen payments were ‘the focus’ of the investigation.” On October 13, this case returned to the Supreme Court with a request to stop Vance again.

Trump is likely hoping that winning reelection will allow him to run out the five-year statute of limitations on alleged campaign finance violations related to Cohen from 2016, where the president was referred in court filings in the Cohen criminal case as “Individual-1.” He is likely counting on hiding behind a DOJ memo stating that a sitting president cannot be prosecuted. But even this memo does not apply to ex-presidents.

Since “self-financing” caused so many headaches for Trump in 2016 and beyond, perhaps that could explain why as of now, President Trump hadn’t spent any of his own money on his 2020 re-election campaign.

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