Why the Trump Organization Could Face Criminal Charges and What It Would Mean for the Former President
As now-Utah Senator Mitt Romney said at the 2011 Iowa State Fair, "Corporations are people, too."
American law has recognized some form of "corporate personality" since at least 1819, when the Supreme Court ruled that the 1796 statute granted to Dartmouth College by George III, then King of Great Britain and Ireland, was a contract between two private parties. : the monarch and the school itself. But it was not until 1886 that the Court declared that the clause of the 14th Amendment that prohibits states from denying "to anyone within their jurisdiction the equal protection of the laws" applies to corporations.
Since then, a succession of court rulings has consolidated the rights of corporations, including the right to free speech, due process and others, into American law. Even Congress got into the game by defining the meaning of "person" in US law as "corporations, companies, associations, firms, partnerships, partnerships, and corporations, as well as individuals."
But those same rights come with responsibilities, and a corporation that fails to meet its responsibility to follow the law can be held accountable for criminal charges, just like anyone else. And if the people who run a corporation violate the law in the course of the corporation's business, a legal doctrine known as superior responat - literally "let the master answer" - holds the corporation accountable for its crimes.
Under this doctrine, some of the largest companies in the United States have faced the possibility of prosecution and have generally chosen to reach some form of financial settlement rather than answer the charges at trial.
Enter the Trump Organization.
According to various reports, the Manhattan district attorney's office has informed lawyers for former President Donald Trump that his company could face charges for violating tax laws related to the benefits it granted to top executives. The allegations could reportedly come as early as this week, both from the company itself and from the company's chief financial officer, Allen Weisselberg. Prosecutors have also reportedly been investigating whether the company improperly underestimated the value of various assets or failed to report the earnings to avoid paying state taxes on them.
While the former president's company presents itself as a multinational behemoth, it is actually a collection of individual Limited Liability Corporations that since 2017 have been owned by a trust benefiting Trump and controlled by him, his adult children. and Weisselberg.
Prosecutors working for District Attorney Cyrus Vance Jr have been investigating the former president and his business dealings since at least 2019, when Vance issued a subpoena for the Trump Organization's tax records to Mazars USA, the accounting firm of the company, and Deutsche Bank, which for years was the only lender willing to do business with Trump or his company.
Trump, the first U.S. CEO in decades to refuse to release his own personal tax returns, was able to prevent the cited documents from being turned over to Vance's office for the entirety of his presidency, despite a decision. 7-2 of the Supreme Court that rejected his defense of "absolute immunity" from the criminal investigation. But his streak of success in delaying the execution of the subpoena ran out just over a month after he was evicted from the White House, and after the Supreme Court refused to hear another of his appeals, Mazars delivered communications, states financial statements and commitment agreements, and other documents related to the preparation of returns dating from 2011 to 2019.
Prosecutors are reportedly looking at charges related to how the company accounted for benefits paid to executives, including housing, transportation and even an expensive private school tuition. Weisselberg has been the focus of Vance's office for some time and is reportedly facing charges for alleged tax law violations related to the same benefits.
Why would prosecutors indict the Trump Organization instead of Trump?
According to Nick Akerman, a former federal prosecutor who is currently a partner in Dorsey & Whitney's New York office, the fact that Vance and James are choosing to bring an indictment against the Trump Organization itself is a good sign that the potential case against the former president is not strong enough. Prosecutors have reportedly been pressuring Weisselberg to cooperate with the Trump investigation, but the longtime company executive has so far refused.
"The fact that they go after him and the company means they really don't have enough to go after Trump, because if they did, they would," Ackerman said.
While Weisselberg could face the possibility of a lengthy prison sentence if he is charged and convicted, a corporation found guilty of violating criminal law may be required to pay fines, but there is no way to put a company in jail.
But as Ackerman explained, a provision in New York state law that spells out penalties for companies convicted of crimes could see Trump face something that could be almost as painful for him as a prison sentence: bankruptcy.
"It could be devastating for him," Ackerman said. "First of all, it gets pretty bad because they have creditors, they have a lot of banks that they have borrowed money from, and if the company is charged, all those banks will get nervous and start calling on their loans."
He added that due to the nature of the Trump Organization's business, a hotel and golf course operator that has suffered along with the rest of the hotel industry during the Covid-19 pandemic, it would not have the cash available to pay creditors. if all of the company's loans were due immediately.
"He could end up forcing the company out of business," he said.
Additionally, Ackerman said a public trial would end up placing what Trump has spent years trying to keep hidden, his tax returns, on the public record as evidence.
And while Trump could avoid prison, Ackerman predicted that having his exposed finances and his bankrupt company could complicate any plans he might have to make another run for the White House.
"It would be worse for him to be criminally charged, but this is not a resume builder."
