Shaviro: The Trump Organization Tax Indictment Is Not A 'Fringe Benefits' Case

Following up on Saturday's post, New York Times: Trump Organization Is Charged With Running 15-Year Employee Tax Scheme:  Daniel Shaviro (NYU), The Weisselberg Indictment Is Not A “Fringe Benefits” Case:

In the days before the July 1, 2021 issuance of the Manhattan District Attorney’s Weisselberg-Trump Organization indictment, public anticipation was positively underwhelming. It would just be a fringe benefits case, we were told – meaning, a dispute, of a picayune sort that almost never yields criminal charges, regarding whether or not an employee’s use of, say, a company car or apartment yielded taxable income, in the face of admitted personal benefit but also with plausible claims of business purpose other than the purely compensatory. Everyone does it, we heard, and it shouldn’t be the basis for a criminal fraud charge. What’s more, this ostensibly would just be a New York State or City income tax issue, not federal, thus limiting the scale and monetary significance of the claimed wrongdoing.

Then the indictment dropped, and it turns out that public expectations could scarcely have fallen further short than they were of the magnitude of what was actually being charged. Let me spell out the particulars under several headings:

1. This is no mere fringe benefits case. It is a straight-out fraud case, claiming that the defendants kept double books: phony ones to show the tax authorities, and accurate ones to be hidden from view. The question of whether a given company apartment or car might in theory (with appropriate supporting facts) have been an excludable fringe benefit turns out to be almost completely irrelevant. A better analogy to what is being charged here is the following: Suppose that your employer pays you monthly, through automatically deposited paychecks that end up being included on your annual W-2. But suppose that each month you could stop by the front office, request an envelope full of cash in unmarked bills, and have your W-2 reduced accordingly. So your true income would be the same as if you hadn’t stopped by, but you’d be reporting less salary. If your employer kept careful records of all the cash it gave you, and also still deducted it all, we would basically have this case. That is far different from simple failure to pay taxes on fringe benefits, which is how the indictment has been widely misunderstood, thanks in part to Trump’s defense lawyers’ laying the groundwork before the charges were made public on Thursday. ...

10. What was Donald Trump’s role in all this? The indictment notes that “tuition expenses for Weisselberg’s family members [were]… paid by personal checks drawn on the account of and signed by Donald J. Trump.” It also states that, in 2005, “the Trump Corporation, acting through its president,” entered into the New York City apartment lease on Weisselberg’s behalf” – listed as an overt act in furtherance of the claimed conspiracy to evade federal income tax (Second Count; Overt Act #1).

Otherwise, however, there is little direct discussion of what Donald Trump himself did or knew personally in relation to the facts asserted in the indictment. If Trump is subsequently indicted by the DA in connection with the crimes alleged here or anything else, his conviction would require proof in court, beyond a reasonable doubt, of his requisite criminal actions and intent. In the courtroom of public discussion and debate, however, any claim that the crimes asserted in the indictment could have occurred without his participation and knowledge may be viewed by many as begging credulity.

(Hat Tip: Linda Galler)