For decades, despite his fame, doing business with Donald Trump was considered risky. He made a reputation for stiffening building contractors and biting off more than he could chew, leading to a notorious implosion in Atlantic City when his casinos ran out of money. Eventually, banks started asking Trump to personally guarantee their loans.
Now working with the Trump organization could become even more difficult. Already marginalized in the corporate world, the former president’s eponymous company could soon be indicted by the New York City Attorney’s Office. The Wall Street Journal reported that the Manhattan attorney is expected to bring charges against the company and its longtime accountant Allen Weisselberg on Thursday.
The investigation includes potential tax violations related to unreported compensation, according to a source knowledgeable of the case. Danny Frost, a spokesman for Manhattan Dist. Atty. Cy Vance Jr. declined to comment.
However, this could only be the beginning of the company’s problems – the full scope of the investigation against the company is unclear. The New York attorney general, who conducted a civil investigation into whether the company inappropriately inflated or deflated the value of its properties, is also working with the attorney general on the ongoing criminal case.
The cases may sound like little potatoes after years of Trump facing an investigation by a special investigator into Russian support for his candidacy and two subsequent impeachments, one for pressuring Ukraine into an investigation into Joe Biden , the Democratic presidential candidate who eventually defeated him in last year’s elections and the other for “inciting the insurrection” on January 6th in the Capitol. In both cases, Trump was acquitted in the Senate.
But a grand jury indictment, legal experts said, would cloud Trump’s financial future and potentially cripple his business.
Under New York State law, a company convicted on the financial charges under consideration in the Trump Organization would face a fine of no more than $ 10,000 per count and a refund order. New York state attorneys, unlike some other states, do not have the power to order a judge to dissolve a company.
Such an outcome might not seem too bad, but legal and economic experts said the Trump Organization is likely to have serious “collateral consequences” that could ruin the company. This is because other companies, banks and municipalities are suspicious – or are excluded by internal rules, laws or regulations – from working with companies that are accused of such crimes. Banks in particular are reluctant to lend money to those facing such allegations, legal and economics experts said, because there is a good chance they will never get their money back.
“The Trump organization, if charged, could find itself without a place for its assets and no source of capital,” said Daniel Horwitz, a defense attorney and former Manhattan attorney. “If you are a bank, will you lend money to a company that is accused of a financial crime? If you are a different company, would you do business with another that has been charged? The answer is often no. “
Horwitz and other legal experts said a conviction would create another set of challenges for the Trump organization as corporations, banks and governments are stricter in this scenario. For example, according to Will Thomas, assistant professor of economics and law at the university, a number of funding strategies popular with private companies are banned from “bad actors” by the Securities and Exchange Commission, including those convicted of financial crimes by Michigan .
Analogous cases are hard to come by, but Thomas and others cited the Arthur Andersen saga as an example of how such side effects can bring a company down. The Big Five accounting firm was convicted in federal court in 2002 for obstructing the judiciary in connection with its work for Enron, an energy giant accused of massive accounting fraud.
The firm vigorously appealed the ruling and won the 2005 Supreme Court case. But then it was too late. The conviction had forced the company to give up its accounting license because federal regulations do not allow any person or entity convicted of crimes to audit publicly traded companies. Arthur Andersen struggled to start a new business. By the time it won its calling, the once proud company was essentially dead, with only about 200 employees out of nearly 30,000 who were once on its payroll.
Unlike Arthur Andersen – the Trump organization is not public – an indictment would come at a time when their businesses are already in trouble. The pandemic has starved its hotels of traveling customers, its golf courses are losing money, and its extremist policies have eliminated potential partners. Lucrative licensing and entertainment offers such as “The Apprentice”, the reality show that made him a television star, have withered or ended entirely.
Trump Organization attorneys met with prosecutors Monday to argue why the company shouldn’t be prosecuted, and the former president made a sizzling statement afterward. He said the prosecutors were “rude, nasty and completely biased,” and he said the investigation involves “things that are common practice throughout the US business community and are in no way a crime”.
Ronald Fischetti, a Trump attorney, and Alan Futerfas, a Trump organization attorney, did not respond to requests for comment. Weißelberg’s attorney Mary Mulligan declined to comment.
Weißelberg is on the test bench to see whether he has avoided taxes on perks such as private school lessons and rent-free apartments, which could have been seen as compensation for his job.
Court records show that investigators are also investigating the finances of several properties, including the Trump Seven Springs property in Westchester County, NY, the 40 Wall Street office building in Manhattan, the Trump International Hotel and Tower in Chicago, and the Trump National Golf Club in Los Angeles .
Sam Buell, a law professor at Duke University and a former federal attorney, isn’t sure if an indictment will be the turning point some have predicted.
“I can’t imagine such a central thing that this guy becomes toxic in a way that he wasn’t before,” he said.
He said it could be a different story if Trump relied heavily on government programs like healthcare or financial trading. But Trump’s business includes real estate and licensing deals that require less regulatory oversight.
Buell was skeptical that New York prosecutors would only bring charges on tax issues, since such allegations are usually only part of larger cases and not the only offense.
“You don’t want to be charged with some petty law enforcement that you wouldn’t bring against someone else,” Buell said. “That would only feed into the narrative you would get from the defense.”
Legal experts said prosecutors will almost certainly indict a senior official along with the Trump organization itself for having to prove in the process that a company executive or other official has broken the law. They couldn’t remember another case where a company was charged with serious fraud, but prosecutors spared the top employees responsible for the misconduct.
“If there is enough evidence to prosecute a company, then there is evidence to prosecute the officers involved in the alleged criminal activity,” said Jeffrey Robbins, a former federal prosecutor.
There are times, they said, when prosecutors conclude deals in which companies plead guilty but officials are not charged with crimes. In such cases, however, these are usually companies whose executives fully cooperated in an investigation and agreed to reform business practices and pay compensation. That doesn’t seem to be the case with the Trump organization.
Trump remains influential within the Republican Party, especially for a one-term president. During his time at the White House, he left his eldest sons, Donald Jr. and Eric, and Weißelberg to run the company. But his caustic policies, history of racist comments, and persistent refusal to accept his defeat in the last election have made him radioactive among corporations who view controversy as bad for their bottom line.
Deutsche Bank, which lent Trump money when other banks stayed away, also allegedly no longer wants to do business with him.
Other companies cut ties after the January 6 riot at the Capitol by Trump supporters. For example, the PGA of America announced that it would no longer hold its championship tournament on Trump’s golf course in Bedminster, NJ, next year.