Donald Trump used charity's money to settle his legal disputes

Republican presidential nominee Donald Trump holds a rally with supporters in Kenansville, North Carolina, on Sept 20, 2016.
Republican presidential nominee Donald Trump holds a rally with supporters in Kenansville, North Carolina, on Sept 20, 2016. PHOTO: REUTERS

WASHINGTON (WASHINGTON POST, BLOOMBERG) - Mr Donald Trump spent more than a quarter-million US dollars from his charitable foundation to settle lawsuits that involved the billionaire's for-profit businesses, according to interviews and a review of legal documents.

Those cases, which together used US$258,000 (S$351,000) from Mr Trump's charity, were among four newly documented expenditures in which the tycoon may have violated laws against "self-dealing" - which prohibit non-profit leaders from using charity money to benefit themselves or their businesses.

In one case, from 2007, Mr Trump's Mar-a-Lago Club faced US$120,000 in unpaid fines from the town of Palm Beach, Florida, resulting from a dispute over the height of a flagpole.

In a settlement, Palm Beach agreed to waive those fines - if Mr Trump's club made a US$100,000 donation to a specific charity for veterans. Instead, Mr Trump sent a cheque from the Donald J. Trump Foundation, a charity funded almost entirely by other people's money, according to tax records.

In another case, court papers say one of Mr Trump's golf courses in New York agreed to settle a lawsuit by making a donation to the plaintiff's chosen charity. A US$158,000 donation was made by the Trump Foundation, according to tax records.

 
 

The other expenditures involved smaller amounts. In 2013, Mr Trump used US$5,000 from the foundation to buy advertisements touting his chain of hotels in programmes for three events organised by a District of Columbia preservation group. And in 2014, Mr Trump spent US$10,000 of the foundation's money for a portrait of himself bought at a charity fund-raiser.

Or, rather, another portrait of himself.

Several years earlier, Mr Trump had used US$20,000 from the Trump Foundation to buy a different, six foot-tall portrait.

If the Internal Revenue Service were to find that Mr Trump violated self-dealing rules, the agency could require him to pay penalty taxes or to reimburse the foundation for all the money it spent on his behalf.

Mr Trump is also facing scrutiny from the New York attorney-general's office, which is examining whether the foundation broke state charity laws.

More broadly, these cases also provide new evidence that Mr Trump ran his charity in a way that may have violated US tax law and gone against the moral conventions of philanthropy.

"I represent 700 non-profits a year, and I've never encountered anything so brazen," said Mr Jeffrey Tenenbaum, who advises charities at the Venable law firm in Washington.

After The Washington Post described the details of these Trump Foundation gifts, Mr Tenenbaum described them as "really shocking".

"If he's using other people's money - run through his foundation - to satisfy his personal obligations, then that's about as blatant an example of self-dealing (as) I've seen in a while," Mr Tenenbaum said.

Jason Miller, a spokesman for the Trump campaign, defended the foundation, saying there was no intent or motive for the Trump Foundation to make improper payments.  

“All contributions are reported to the IRS, and all Foundation donations are publicly disclosed,” Miller said in a statement. “Mr. Trump is generous both with his money and with his time. He has provided millions of dollars to fund his Foundation and a multitude of other charitable causes.”

'PERSONAL ATM'

Senate Minority Leader Harry Reid escalated the Democratic Party’s attack on the Republican presidential nominee following the Washington Post report.  Trump used a charitable foundation he controls as a “personal ATM machine,” he said on the Senate floor on Tuesday.

“Self-dealing is when a person spends charity money on themselves,” Reid said. “It’s against the law.”  

Democratic nominee Hillary Clinton's campaign also used the report to call on Trump to release more information about his personal finances.

“Once again, Trump has proven himself a fraud who believes the rules don’t apply to him,” Clinton campaign spokeswoman Christina Reynolds said in a statement.

“It’s past time for him to release his tax returns to show whether his tax issues extend to his own personal finances.” 

The New York attorney-general's office declined to comment when asked whether its inquiry would cover these new cases of possible self-dealing.

Mr Trump founded his charity in 1987 and for years was its only donor. But in 2006, Mr Trump gave away almost all the money he had donated to the foundation, leaving it with just US$4,238 at year's end, according to tax records.

Then, he transformed the Trump Foundation into something rarely seen in the world of philanthropy: a name-branded foundation whose namesake provides none of its money. Mr Trump gave relatively small donations in 2007 and 2008, and afterward: nothing. The foundation's tax records show no donations from Mr Trump since 2009.

Its money has come from other donors, most notably pro-wrestling executives Vince and Linda McMahon, who gave a total of US$5 million from 2007 to 2009, tax records show. Mr Trump remains the foundation's president, and he told the IRS in his latest public filings that he works half an hour per week on the charity.

The Post has previously detailed other cases in which Mr Trump used the charity's money in a way that appeared to violate the law.

In 2013, for instance, the foundation gave US$25,000 to a political group supporting Florida Attorney-General Pam Bondi (R). That gift was made about the same time that Ms Bondi's office was considering whether to investigate fraud allegations against Trump University. It didn't.

Tax laws say non-profit groups such as the Trump Foundation may not make political gifts. Trump staffers blamed the gift on a clerical error.

After The Post reported on the gift to Bondi's group this spring, Mr Trump paid a US$2,500 penalty tax and reimbursed the Trump Foundation for the US$25,000 donation.

In other instances, it appeared that Mr Trump may have violated rules against self-dealing.

In 2012, for instance, Mr Trump spent US$12,000 of the foundation's money to buy a football helmet signed by then-NFL quarterback Tim Tebow.

And in 2007, Mr Trump's wife, Melania, bid US$20,000 for the six-foot-tall portrait of him, done by a "speed painter" during a charity gala at Mar-a-Lago. Later, Mr Trump paid for the painting with US$20,000 from the foundation.

In those cases, tax experts said, Mr Trump was not allowed to simply keep these items and display them in a home or business. They had to be put to a charitable use.

Mr Trump's campaign has not responded to questions about what became of the helmet or the portrait.

The four new cases of possible self-dealing were discovered in the Trump Foundation's tax filings. While Mr Trump has refused to release his personal tax returns, the foundation's filings are required to be public.

The case involving the flagpole at Mr Trump's oceanfront Mar-a-Lago Club began in 2006, when the club put up a giant American flag on the 80-foot pole. Town rules said flagpoles should be 42 feet (12.8m) high at most.

Mr Trump's contention, according to news reports, was: "You don't need a permit to put up the American flag."

The town began to fine Mr Trump, US$1,250 a day.

Mr Trump's club sued in federal court, saying that a smaller flag "would fail to appropriately express the magnitude of Donald J. Trump's . . . patriotism". They settled.

The town waived the US$120,000 in fines. In September 2007, Mr Trump wrote the town a letter, saying he had done his part as well."I have sent a check for US$100,000 to Fisher House," he wrote. The town had chosen Fisher House, which runs a network of comfort homes for the families of veterans and military personnel receiving medical treatment, as the recipient of the money. Mr Trump added that, for good measure, "I have sent a cheque for US$25,000" to another charity, the American Veterans Disabled for Life Memorial.

Mr Trump provided the town with copies of the cheques, which show that they came from the Trump Foundation.

In Palm Beach, nobody seems to have objected that the fines assessed on Mr Trump's business were being erased by a donation from a charity.

"I don't know that there was any attention paid to that at the time. We just saw two cheques signed by Donald J. Trump," said Mr John Randolph, the Palm Beach town attorney. "I'm sure we were satisfied with it."

In the other case in which a Trump Foundation payment seemed to help settle a legal dispute, the trouble began with a hole-in-one.

In 2010, a man named Martin Greenberg hit a hole-in-one on the 13th hole while playing in a charity tournament at Mr Trump's course in Westchester County, New York.

Mr Greenberg won a US$1 million prize. Briefly.

Later, Mr Greenberg was told that he had won nothing. The prize's rules required that the shot had to go 150 yards (137m). But Mr Trump's course had allegedly made the hole too short.

Mr Greenberg sued.

Eventually, court papers show, Mr Trump's golf course signed off on a settlement that required it to make a donation of Mr Greenberg's choosing. Then, on the day that the parties informed the court they had settled their case, a US$158,000 donation was sent to the Martin Greenberg Foundation.

That money came from the Trump Foundation, according to the tax filings of both Mr Trump's and Mr Greenberg's foundations.

Mr Greenberg's foundation reported getting nothing that year from Trump personally or from his golf club.

Both Mr Greenberg and Mr Trump have declined to comment.

Several tax experts said that the two cases appeared to be clear examples of self-dealing, as defined by the tax code.

The Trump Foundation had made a donation, it seemed, so that a Trump business did not have to.

Ms Rosemary Fei, a lawyer in San Francisco who advises non-profit groups, said both cases clearly fit the definition of self-dealing.

"Yes, Trump pledged as part of the settlement to make a payment to a charity, and yes, the foundation is writing a check to a charity," Ms Fei said. "But the obligation was Trump's. And you can't have a charitable foundation paying off Trump's personal obligations. That would be classic self-dealing."

In another instance, from 2013, the Trump Foundation made a US$5,000 donation to the D.C. Preservation League, according to the group and tax filings.

That non-profit group's support has been helpful for Mr Trump as he has turned the historic Old Post Office Pavilion on Pennsylvania Avenue NW into a luxury hotel.

The Trump Foundation's donation to that group bought a "sponsorship", which included advertising space in the programmes for three big events that drew Washington's real estate elite.

The ads did not mention the foundation or anything related to charity. Instead, they promoted Mr Trump's hotels, with glamorous photos and a phone number to call to make a reservation.

"The foundation wrote a cheque that essentially bought advertising for Trump hotels?" asked Mr John Edie, the longtime general counsel for the Council on Foundations, when a Post reporter described this arrangement. "That's not charity."

The last of the four newly documented expenditures involves the second painting of Mr Trump, which he bought with charity money.

It happened in 2014, during a gala at Mar-a-Lago that raised money for Unicorn Children's Foundation - a Florida charity that helps children with developmental and learning disorders.

The gala's main event was a concert by Jon Secada. But there was also an auction of paintings by Havi Schanz, a Miami Beach-based artist.

One was of Marilyn Monroe. The other was a four-foot-tall portrait of Mr Trump: a younger-looking, mid-'90s Trump, painted in acrylic on top of an old architectural drawing.

Mr Trump bought it for US$10,000.

Afterward, Schanz recalled in an e-mail: "He asked me about the painting. I said, 'I paint souls, and when I had to paint you, I asked your soul to allow me.' He was touched and smiled."

A few days later, the charity said, a cheque came from the Trump Foundation. Mr Trump himself gave nothing, according to Ms Sharon Alexander, the executive director of the charity.

Mr Trump's staff did not respond to questions about where that second painting is now. Ms Alexander said she had last seen it at Mr Trump's club.

"I'm pretty sure we just left it at Mar-a-Lago," she said, "and his staff took care of it."

The website TripAdvisor provides another clue: On the page for Mr Trump's Doral golf resort, near Miami, users posted photos from inside the club.

One of them appears to shows Schanz's painting, hanging on a wall at the resort. The date on the photo was February 2016.