NEW YORK – The two Trump companies found guilty of criminal tax fraud last month face sentencing on Friday, but the real punishment lies in the blowback to the former president’s business that is likely to go on for years.

The potential fallout goes beyond the sentence – an expected penalty of about US$1.7 million (S$2.25 million) – and reputational damage, to freezing the Trump Organisation out of coveted deals, bank loans and government contracts, legal experts say. 

The sentencing comes a month after a New York jury returned its verdict against the two business units on all 17 counts, including conspiracy, criminal tax fraud and falsifying business records. The case stems from a scam over more than a decade to hide taxable income by compensating executives with unreported perks like luxury cars and private school tuition.

And while US$1.7 million, the maximum under New York state law, is a rounding error for Mr Trump’s business, that’s just where the trouble begins.

“Doing business with a company that has been found guilty of unscrupulous practices may exceed the risk tolerance of lenders, insurers and potential business partners,” said Barbara McQuade, a former federal prosecutor who now teaches at the University of Michigan’s law school. 

Felony stain 

The stain of the felony will likely make it harder for Mr Trump’s company to secure bank loans, at least in the United States, experts say. It will also make it more difficult to win government contracts, like the one that let Mr Trump develop Washington’s Old Post Office into a luxury hotel.

“Does any company want to disclose they’re entering into a deal with a company convicted of tax fraud?” said Frank Agostino, a former Internal Revenue Service lawyer now in private practice and specialising in tax cases. Some companies, lenders and municipalities are bound by “morals clauses” that prohibit doing business with felons, he said.

Lawyers for the two business units – Trump Corp and Trump Payroll Corp – have said they would appeal the verdict and had no comment on its possible consequences. Mr Trump’s spokesman Steven Cheung didn’t respond to an email seeking comment.  

And Mr Trump’s legal troubles in New York are far from over. A US$250 million civil fraud case brought by Attorney General Letitia James is scheduled for trial in October. Not only are the financial stakes in that case far greater, but the suit also seeks to bar Mr Trump and three of his children from ever running any business in the state.

The Manhattan case grew out of an investigation of the Trump Organisation’s business practices begun under former DA Cyrus Vance Jr., who in 2021 secured an indictment of longtime chief financial officer Allen Weisselberg and the two Trump companies. Weisselberg struck a plea deal last August and was its star witness at the trial.

After the conviction, Mr Trump said in a statement that it was unfair to prosecute his companies for the acts of the disgraced former CFO, with Weisselberg himself “and every witness repeatedly testifying that President Trump and the Trump Family knew nothing about his actions, which he admits were done solely for his own benefit.” 

He said New York “is a hard place to be ‘Trump,’ as businesses and people flee our once Great City!” BLOOMBERG