Fraud trial conviction could be “death knell” for Trump Organization

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The conviction of two Trump Organization companies for tax fraud and other crimes could prove insurmountable for former President Donald Trump’s hotel and real estate businesses, which are likely to face challenges drafting lenders, insurers and government contracts, legal experts say after the statement.

“It spells doom for the Trump Organization — I really see it as a death knell,” Bennett Gershman, a law school professor at Pace University and former New York State Anti-Corruption Office prosecutor, told CBS MoneyWatch. “It would be unlikely that any responsible credit institution, bank, insurance company or institution that provides financial support to companies would have anything to do with the Trump Organization now.”

The verdict, handed down Tuesday, found the two companies — the Trump Corporation and Trump Payroll Corporation — guilty of all charges 17 criminal cases. While the Trump Organization could face up to $1.6 million in fines, legal experts said the fine is negligible compared to the potential impact of additional fallout, especially for a company that relies on banks and insurers for its hotels, operate golf courses and other properties.

“A criminal conviction will affect the ability to get licenses, to borrow money, to get insurance, to do business with anyone,” says Randy Zelin, a professor of law at Cornell University. “Who wants to lend money to or insure a convicted criminal organization? There will be legal disqualifications because of the convictions.”


New York jury finds Trump Organization guilty on all counts in tax fraud case

03:25

The Trump Organization did not immediately respond to a request for comment.

In contrast, the immediate financial consequences of the criminal conviction are relatively minor, Zelin said. For example, according to Forbes, the $1.6 million fine probably won’t make a big dent for a company that posted $2.4 billion in revenue between 2017 and 2020.

The lawsuit focused on allegations that the Trump Organization used a range of methods to reduce executive pay liability through tax-free bonuses and luxury perks worth millions. The company’s longtime CFO, Allen Weisselberg, and his wife received Mercedes-Benzes for him and her, while their grandchildren’s private school fees were paid through the scheme, Bloomberg News reported.

“No Longer Teflon Don”

While the Trump Organization was found guilty, former President Trump himself was not charged, and lawyers representing the company said he was not involved. But Zelin said the impact of the conviction on his businesses could have long-lasting consequences.

“The parallel consequences are probably the worst,” he said. “With the conviction, the New York Attorney General’s pending case will gain momentum — the AG now has evidence of fraud set in stone.”

New York Attorney General Letitia James has indicated that the verdict could affect a civil case chased through her office. Her office conducted a parallel civil investigation and assigned two state prosecutors to work on the Manhattan District Attorney’s investigation.

While the criminal case focused heavily on executive compensation, the civil case – filed in September – was accuses the company, Trump and three of his children of a widespread, long-standing effort to commit fraud and manipulate property valuations.

Zelin noted, “It’s NYAG that has the power to kill the company,” adding that the conviction may also indicate that Trump is “no longer Teflon Don.”

When the civil suit was first filed, a lawyer for Donald Trump said the lawsuit “does not focus on the facts or the law — but only on advancing the attorney general’s political agenda.”


Impact of the Trump Organization’s conviction

03:49

Certainly, the Trump Organization could turn to nontraditional lenders if it runs into roadblocks with domestic banks and other lenders, legal experts said. For example, the company could turn to lenders in other countries, such as Saudi Arabia, who may have more flexibility or willingness to lend to a company compromised by a criminal conviction.

In November, the Trump Organization signed an agreement with Saudi real estate developer Dar Al Arkan to use the Trump brand on a $4 billion project in Oman that will include a golf course, hotel and villas, according to Reuters.

Even before the sentencing, the Trump Organization brand had grappled with challenges related to Trump and his family’s polarizing reputation. For example, some apartments in Trump buildings were sold at discounts compared to previous years, The Guardian reported last year.

Compared to Arthur Andersen

Meanwhile, other companies convicted of felonies have continued to operate without significant impact on their business. Among them are Tyson Foods, the meat producer, which pleaded guilty in 2003 to felonies related to the Clean Water Act; and Volkswagen, which pleaded guilty in 2017 for crimes related to the emissions scandal.

But those companies faced different issues than the Trump Organization, Gershman said. “Here you are being convicted of a financial crime where your existence depends on funding,” he noted.

A better comparison might be that of accounting firm Arthur Andersen, Gershman said. The company was convicted by a jury in 2002 of obstructing a government investigation into accounting irregularities at the bankrupt energy trading company Enron. Though the Supreme Court later overturned the conviction, the damage was done to the accounting firm, which collapsed in 2002.

The Trump Organization “is very hurt — how badly, we’ll have to wait and see,” Gershman said.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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