Originally published on Forbes.com.
You probably did not expect a published poet to weigh in on the Trump Foundation’s troubles with the New York Attorney General. Well, surprise, surprise. surprise as Gomer Pyle would often remark. I requested a poem from Bruce Hopkins and he came across. Mr. Hopkins is the author of Beware the Commerciality Doctrine and Other Nonprofit Poetry which you can buy for $19.97. He has many other books to his credit the most notable being The Law of Tax-Exempt Organizations. Those 1,125 pages will set you back $315.00. Apparently it is worth it to the people who need it. Paul Streckfus of the EO Tax Journal considers The Law of Tax-Exempt Organization “the bible” of EO tax law. But is the Trump Foundation/New York Attorney General matter still a thing?
Still A Thing
The troubles of the Trump Foundation with the New York Attorney General and conceivably with the IRS are still a thing as we can see in a recent Washington Post story by David Fahrenthold – The four times Trump signed tax returns for his foundation that contained incorrect information. Mr. Fahrenthold won the Pulitzer Prize for “casting doubt on Donald Trump’s assertion of generosity toward charities”. I mean why didn’t he try something challenging like showing that there was gambling going on at Rick’s? He was reporting on the author of The Art of the Deal, which includes: “The final key to the way I promote is bravado. I play to people’s fantasies” and “I call it truthful hyperbole. It’s an innocent form of exaggeration—and a very effective form of promotion” and managed to raise questions about his assertions of generosity.
At any rate, the most recent story asserts:
In 2007, 2012, 2013 and 2014, the Donald J. Trump Foundation stated that none of its money had been used to benefit Trump or his businesses.
He goes on to note that filing a false tax return is a felony with potential penalties up to $100,000 in fines and up to three years in prison and even gives a link to the specific statute – Code Section 7206 – Fraud and false statements. Well more on that later, but let’s go with the poetical analysis of the controversy.
Trump Foundation Legal Woes
The Donald J. Trump Foundation has been operating for 30 years.
It is not a typical private foundation, in oh so many different ways.
For one thing, it’s a flow-through entity — gifts come in, grants out.
Prior to June 14, 2018, the Foundation had seen much better days.
For on that date, the Foundation was roundly sued, by New York’s AG.
The complaint runs on for 40 pages, reflecting all sorts of lurid facts.
It seems the Foundation engaged in multiple self-dealing transactions,
Breaches of NY nonprofit law, and prohibited political campaign acts.
As to the latter, Mr. Trump in 2016 skipped the Iowa candidate debate
And instead organized a major fundraising event for veterans’ groups.
$6 million were raised that night; $2.8 million went to the Foundation.
Control of money was apparently ceded to Trump’s campaign — oops.
The money went to vets organizations indeed but at Mr. Trump’s bidding.
Checks for vets were handed out at various Iowa campaign stops.
The NY AG is pained at this, finding massive political campaign activity.
This conclusion appears correct; this is where the biggest penny drops.
It seems that, technically, the Foundation made a grant to the campaign.
This is a violation of the federal tax law as to charities’ tax exemption.
It also transgressed private foundation law, being a taxable expenditure,
For two reasons, noncharitable ends and political campaign intervention.
The self-dealing acts are old news; most of the corrections were made.
In any event, these violations didn’t amount to much; they’re incidental.
The state law rules were not followed; no board meetings in 19 years.
Required governance policies were not adopted; that’s hardly criminal.
The lesson here is obvious – exempt orgs and foundation law can be tricky.
Yet, running a private foundation is really rather straightforward, quite easy.
The Trump Foundation overlooked the greatest solution in this situation:
Hire a bunch of foundation lawyers, pay them well; that’s the safest alchemy.
Should This Still Be A Thing?
The notion that there should be serious discussion of IRS criminal investigation of Trump Foundation peccadilloes really deserves to be laid to rest. As noted above, the statute that Fahrenthold suggests is relevant is Code Section 7206(1) which refers to a person who:
Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter;
If you want to follow along you need to go to Page 5 of Form 990-PF . In Part VII-B, there are about a dozen Yes/No questions. One or more of them should have been checked Yes rather than No. I think we might be talking about 1(a)(3) being checked wrong in a couple of those years. According to the Department of Justice Criminal Tax Manual
Section 7206(1) is a specific intent crime requiring a showing of willfulness. Proof of this element is essential, and neither a showing of careless disregard nor gross negligence in signing a tax return will suffice.
Now you are a real stickler. If you had a private foundation you would carefully read every one of those questions and ponder their meaning – particularly what is meant by “disqualified person”. You might think Donald Trump was grossly negligent if he just glanced at the page, reasoned that everybody who worked for him was qualified (at the very least) and signed. I would not go that far, but even if you are right and the negligence was gross, it is still not enough to make it a crime.
Who Does Get Prosecuted Under 7206(1)?
I wanted to get a feel for what it takes to get prosecuted under 7206(1). I only searched appellate cases, but I figure they are likely a fair sample. If you are a millionaire with a private foundation and you get criminally convicted from signing Form 990-PF with one of the boxes checked wrong, I figure you would appeal. I didn’t find any. I did find a couple of cases under plain old Form 990. Here is what I found.
The closest I found to Trump’s situation was Willieann D. Madison and John A. Madison in the Sixth Circuit in 2007 for lying on the 990 about whether they were leasing property to Cherokee Children and Family Services. There was a lot more going on though. John reported less than half of the $108,000 in annual accounting fees and more than a million dollars in funds were misappropriated.
I covered another one of the cases where there was a criminal conviction for lying on Form 990 – US v Mubayyid in the First Circuit in 2011. What did they omit from their 990? –
Although the form asked for “a detailed narrative description of all of the activities of the organization — past, present, and planned,” Muntasser did not disclose Care’s hosting of religious speakers, its sale of materials advocating jihad, or its publication of the “Al-Hussam” newsletters (by that point, Care had already published at least two “Al-Hussam” newsletters in its own name). Nor did he disclose that Care’s orphan sponsorship program would target the orphans of martyred mujahideen
US v Sedagaty in the Ninth Circuit in 2013 was also about a Form 990 that forgot to mention that it was funding terrorists. Zahedi v DOJ in the District Court in Oregon was also a terrorist case.
Now maybe there are cases of people being prosecuted under 7206(1) that I didn’t find, but you would think that Mr. Fahrenthold who managed to find one of the Trump paintings in a lounge would have tracked them down by now. So I guess my challenge would be to find somebody who was prosecuted for signing an inaccurate Form 990-PF. If there is somebody I would like to interview them.
Why This Really Should Not Be A Thing
“As Critics Assail Trump, His Supporters Dig In Deeper” by Jeremy Peters greeted me yesterday morning as I checked the New York Times. Included in the story is a quote from Tony Schrantz of Lino Lakes Minn
Now I’m not a Trump supporter by any means. I attended a rally in Worcester Mass in 2015, which I reported on here. He suggested in his speech that John Kerry screwed up in Iran so badly because he hadn’t read Art of the Deal. I followed up the rally by reading Art of The Deal myself. My conclusion, based on his own words, was that I did not want this man to be in charge of anything I was involved with including my country. Nonetheless, I am inclined to “give the guy a little”, as Tony Schrantz pleads. The most that can be reasonably extracted from the NY AG complaint is some lessons about how not to run a private foundation. The closing lines of the Bruce Hopkins poem sums it up pretty well.
The lesson here is obvious – exempt orgs and foundation law can be tricky.
Yet, running a private foundation is really rather straightforward, quite easy.
The Trump Foundation overlooked the greatest solution in this situation:
Hire a bunch of foundation lawyers, pay them well; that’s the safest alchemy.
About The Poetry
Before succeeding to some degree as an accountant, I failed as a historian in graduate school after having failed as an English major as an undergraduate. So it is hard for me to evaluate Mr. Hopkins as a poet. Paul Streckfus wrote me that many of the people in the exempt organization world think that Mr. Hopkins should stick with prose. So I thought I would get some expertise. There is a Masters of Fine Arts graduate student that I know pretty well that I asked to evaluate the poetry as poetry. MFA prefers anonymity. He marked the poem up and added some comments.
After the second line the critic wrote “Lost focus here had to force myself to continue”. On the second verse he wrote “The information would benefit more from a listcicle format. Crunching it into 20 syllable lines isn’t helping”. Further down we have “K. Your’re definitely lost by now unless you know your ——–. I never thought I would find a poem that would benefit this much from citations and asides”. The critic does not think that in the last verse “quite easy” rhymes with “alchemy.
The overall evaluation is that it “feels like something a side character from an abandoned David Foster Wallace novel would write” and “It’s interesting that the author compressed so much information. It’s cool as a writing exercise but doesn’t work quite so well as a poem .”