Trump Organization Trial Uncovers Secrets From Bonus Scams to His-and-Hers Benzes




 

(Bloomberg) -- Every December, the Trump Organization would cut a check to a mail room employee. In a good year, the check was for $5,975. In less prosperous times, it was closer to $4,000.

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It didn't matter to the mail room guy. The money wasn't for him.

His job was to cash the check at a local bank, lug the bills back to Trump Tower, take the elevator to the 26th floor and hand the money over to Allen Weisselberg, the company's longtime chief financial officer. Weisselberg would then use it to tip garage attendants, his apartment doormen and others over the holidays, the jury learned in the criminal tax fraud trial of two Trump Organization business units that ended Tuesday.

Read More: Trump Companies Are Convicted in NY Criminal Tax Fraud Trial

Weisselberg used the free cash to live large, saving the Trump Organization from paying taxes on it as well, the jurors heard. Among the other expedients: dispensing fat bonuses as nonemployee compensation, providing his-and-hers Mercedes-Benzes for the Weisselbergs and covering their grandchildren's private school tuition.

The annual Christmas kitty was just one of a jackpot of undeclared perks used to disguise taxable compensation, the jury was told in a monthlong trial that laid bare a remarkable array of squirrelly business practices at the closely held real estate empire. Now, even as Trump runs for a second term, the company that set him on his path to the White House in 2016, long an intensely private enterprise, has been branded a felon, its secrets on raw display for weeks in open court and in the news - the gamble Trump made in going to trial.

"The Trump Organization was a family business, privately held and not subject to outside scrutiny," said Barbara McQuade, a former federal prosecutor who now teaches at the University of Michigan's law school.

No longer.

After less than two days of deliberation, the jury in New York state court in Manhattan returned convictions on all 17 counts against the two companies, including conspiracy, criminal tax fraud and falsifying business records. While Donald Trump himself wasn't charged, prosecutors argued he was aware of the games being played by Weisselberg and other senior executives under his nose and had "explicitly sanctioned tax fraud."

Read More: Trump Has Rough Legal Road Ahead Without Presidential Shield

Trump said in a statement after the verdict that it was unfair to prosecute the two companies for the acts of the disgraced former CFO, with "every witness repeatedly testifying that President Trump and the Trump Family knew nothing about his actions." The companies are appealing.

Trump Organization lawyer Alan Garten and Trump spokesman Steven Cheung didn't immediately respond to emails seeking comment on the revelations.

Trump's Signature

Although the Trump Organization, which has some 500 corporate affiliates, may sound like a business colossus, it's run like the family-owned company it is. Evidence at the trial showed that until he became president, Trump himself signed every check over $2,500.

One element of the scam involved the payment of annual bonuses not as W-2 salary but in the form of consulting fees for work purportedly done for other Trump-owned businesses, with no withholding taxes. Jurors saw Controller Jeffrey McConney's spreadsheets showing that for more than a decade, he, Weisselberg and several other executives pocketed tens of thousands of dollars as independent contractors.

Read More: Ex-DOJ Lawyer With Trump Experience Joins Manhattan DA's Team

The money came from a grab bag of Trump companies. In 2011 McConney himself collected a $20,000 year-end bonus from the skating rink Trump operated in Central Park in Manhattan and $25,000 from the entity responsible for The Apprentice, the reality TV show that made Trump famous, as well as $25,000 from Trump Payroll Corp., one of the two business units that were on trial, the jury learned.

Weisselberg, who has worked for Trump's family for almost half a century and remains on the firm's payroll, testified during the trial that he was still drawing his full $640,000 salary - and hoped to collect his own $500,000 bonus in January.

'Hundreds of Them'

"President Trump signed off on approving these bonuses?" Assistant District Attorney Joshua Steinglass, a prosecutor in the Manhattan DA's office that brought the case, asked McConney during the trial.

"Yes," McConney said.

Steinglass asked him whether Trump also signed the annual bonus checks.

"Yes," McConney said. "He signed hundreds and hundreds of them."

Read More: Trump 'Explicitly Sanctioned Tax Fraud,' Prosecutor Tells Jury

Steinglass asked him about a payment of $6,000 made by Trump Corp., the other business unit on trial, to Weisselberg's wife, who didn't even work at the company. McConney explained that Weisselberg, his boss, had directed him to take the $6,000 out of his own salary and shunt it to the CFO's wife to boost her Social Security benefits.

Only the two Trump companies were on trial.

Scramble to Clean Up

Trump's election in 2016 spurred a sudden turnabout. The Trump Organization brought in an outside auditor to review its business practices, McConney testified.

"I was instructed at certain points to do things differently," he told the jury.

Weisselberg, who pleaded guilty in August and was Manhattan DA Alvin Bragg's star witness against the two companies, told the jurors that after the election, he and other company officials scurried to clean up their act.

"When Trump became president and everybody was looking at our company from every different angle, and going through all the practices we'd utilized over the years, we corrected everything we'd have to correct," the 75-year-old executive testified.

"What else stopped?" Executive Assistant DA Susan Hoffinger asked.

"From my personal perspective," Weisselberg said, "I started paying my rent directly."

Read More

  • Trump Had Losses of $900 Million in Two Years, Jury Told

  • Trump Said Fight It When DA Charged His Firms With Tax Fraud

--With assistance from Zijia Song.

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©2022 Bloomberg L.P.

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