If the facts alleged in yesterday’s indictment are correct, the Trump Organization and its longtime CFO Allen Weisselberg have been involved in blatant tax evasion for more than a decade.
Early reports characterized the crime in question as “fringe benefits”. That gives a completely wrong impression. The Trump Organization and Weißelberg are not accused of stumbling across a hyper-technical regulation on the edge of the tax system. They are accused of blatantly violating basic tax law requirements – fighting New York State and New York City for hundreds of thousands of dollars.
Probably the strongest allegation relates to an apartment on Riverside Boulevard in Manhattan, in which Weißelberg lives with his wife. According to the indictment, Trump Corporation – one of the Trump Organization’s many business units – paid approximately $ 100,000 a year in rent, utility bills, and garage bills for this apartment as of 2005. Trump Corporation allegedly did not report these payments as compensation on Weißelberg’s W-2 forms, and Weißelberg allegedly did not include these amounts on its own tax returns.
But, according to the indictment, the Trump Organization kept separate records showing the payments as part of the Weißelberg compensation. When the Trump Corporation was charged with paying the rent for Weisselberg, the Trump Organization cut Weisselberg’s salary by a corresponding amount. (Both Weißelberg and the Trump Organization pleaded not guilty yesterday.)
This can be referred to as a “fringe benefit” – a tax term for any payment for services that is not part of a reported fee – but it’s also plain old tax fraud. Under federal and New York state tax laws, the housing that an employer provides to an employee is part of the employee’s gross income. There are limited exceptions to this rule – for example, if the employee is required to live on the employer’s premises while working, or if the employer is a religious institution and the employee is a clerical member. But Weißelberg didn’t live on the Trump Organization’s premises for business reasons (and Trumpism is only metaphorically a religion). And if the Trump Organization kept a separate book on the compensations it failed to report to tax authorities, it wasn’t an accidental oversight.
The allegations related to Weißelberg’s apartment are the most significant quantitatively – amounting to nearly $ 1.2 million in untaxed income from 2005 to 2017 – but yesterday’s indictment contains several other examples of brazen tax evasion. For example, if an employer pays education costs for a worker’s family, those amounts are the worker’s income and taxable under the Black Letter Act (unless there is a specific legal exception, such as for educational workers). Nonetheless, Donald Trump allegedly paid private schooling for two of Weißelberg’s grandchildren and signed his own name on checks that amounted to nearly $ 360,000 from 2012 to 2017. The Trump Organization and Weißelberg should have reported these payments as part of Weißelberg’s wages, but according to the indictment, they shouldn’t.
It is also crystal clear that the private use of a vehicle provided by the company by an employee is taxable income. But according to the indictment, Trump Corporation paid nearly $ 200,000 in lease payments for two Mercedes-Benz cars driven by Weisselberg and his wife. Here, too, the Trump Organization and Weißelberg hid these payments from the tax authorities, according to the indictment. Meanwhile, the Trump Organization has kept the tuition fees and the Mercedes-Benz leasing contracts as compensation to Weißelberg in its separate book.
This is the kind of behavior that puts other people behind bars. Investment banker Richard Josephberg was sentenced to four years in prison in 2007 for paying for a business for his homes in Westchester County, New York and Greenwich, Connecticut, among other tax violations, and then not making those payments as income. Leona Helmsley, the late real estate billionaire and Trump friend who became the enemy, was sentenced to four years in prison for essentially the same thing: her company had to pay to renovate her mansion in Greenwich and then not report those payments as income. (Incidentally, the US attorney pending the federal lawsuit against Helmsley was Trump’s future personal attorney Rudolph Giuliani.)
Usually such tax offenses are prosecuted at the federal level. But government tax evasion is also not uncommon. Helmsley was charged with tax fraud before she was federally prosecuted. According to yesterday’s indictment, New York City and New York State lost nearly $ 345,000 in taxes that Weisselberg owed. And when New York Attorney General Letitia James opened her investigation into the Trump Organization more than a year ago, both the IRS and the Justice Department were responsible to Trump. New York prosecutors took this case at a time when their federal counterparts most likely wouldn’t.
James certainly has a strong political incentive to bring criminal charges against individuals and companies in Trump orbit. During her 2018 campaign for the Attorney General, she said the then-President should face criminal charges. And if James can pin down a deeply unpopular ex-president in his former home state, she’ll be the odds favorite for governorship in 2022. (James hasn’t announced her candidacy for governorship just yet, but just last week, she declined to rule out a run.)
Yesterday’s indictment could be part of a strategy to turn Weisselberg around and use him as a witness against his former boss. But if the allegations in the indictment are true, Weißelberg is not an innocent bystander in a fight between James and Trump. The indictment portrays him as the financially demanding and well-paid chief financial officer of a sprawling trading company who went to great lengths to cheat his taxes and is now facing the consequences.
So yes, this is a political charge. But if the charges in the indictment are correct, it is also pure tax fraud – behavior that is unquestionably criminal. Linking up with a controversial political figure shouldn’t land you in jail. It shouldn’t get you off the hook, either.