These six cases precede New York’s lawsuit against the Donald J. Trump Foundation

There have been cases of alleged self-dealing and improper management at nonprofits but no case had ever involved a sitting president.
There have been cases of alleged self-dealing and improper management at nonprofits but no case had ever involved a sitting president.
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These six cases precede New York’s lawsuit against the Donald J. Trump Foundation

But the Trump foundation is not your average $1 million charity.
June 15, 2018

In the grand scheme of a $400 billion New York nonprofit world, a foundation with $1 million in assets would not normally amount to much, but the Donald J. Trump Foundation has a way of distinguishing itself through the extent of its alleged misdeeds.

A new lawsuit from New York Attorney General Barbara Underwood – filed on June 14 in state Supreme Court – says that Trump had used the foundation for at least a decade to promote his business, improperly influence the 2016 Republican Iowa Caucus and pay off legal bills. Each of these kinds of alleged violations of state and federal law have precedents – but as a whole, it’s hard to compare any case to one involving the president of the United States.

"The allegations are egregious and suggest that an organization that was set up as a charity (ostensibly) for the public good was actually used for political and personal purposes that are contrary to everything that New York charitable organizations do,” said Sharon Stapel, president of the Nonprofit Coordinating Committee of New York, in a telephone interview.

The lawsuit aims, after a two-year investigation, to dissolve the foundation and recover $2.8 million in restitution plus damages. It also imposes a 10-year ban on Trump serving on a nonprofit board in the state and similar one-year board service bans on his children Ivanka Trump, Donald Trump Jr. and Eric Trump.

While Trump lambasted the new lawsuit via Twitter on June 14 as a partisan effort, he may want to reconsider his vow to fight the allegations, according to Columbia Law Professor John Coffee.

His advice for a client facing similar allegations would be to settle the case to “avoid embarrassment,” especially since it looks like Underwood will eventually prevail in state court, he said in a telephone interview with NYN Media.

“These are telling allegations,” he added.

And they are not so different from other cases the New York attorneys general have pursued. The 30-year-old Donald J. Trump Foundation had about $1 million in assets as of 2016, according to its tax filing. Its prominence largely depends on its affiliation with the president of the United States, but otherwise it is just a small part of a state nonprofit sector consisting of about 100,000 nonprofits with about $400 billion in total assets, according to the National Center for Charitable Statistics.

The following cases show what company the Trump foundation keeps in the recent historical annals of misdeeds within the sector.

 

Richenthal Foundation (about $11 million is assets)

Underwood announced a settlement on May 21 that resolved an investigation into how David Richenthal reportedly took about $500,000 from the foundation his father founded. The allegations were similar to those that now face Trump, who is also accused of using funds without the approval of his board – comprised primarily of his children. In the case of Richenthal this was done “without oversight or intervention.” In the case of Trump, the lack of oversight was in part because the board had not met in nearly two decades, according to Underwood’s lawsuit

Richenthal was also accused of having the foundation make a $250,000 grant to settle a legal matter involving a former romantic partner. Trump faces similar charges for using his foundation funds to pay for unrelated legal expenses on several occasions.

 

Yisroel Schulman, former president of the New York Legal Assistance Group (about $15 million in assets)

Schulman reached a settlement with then-Attorney General Eric Schneiderman late last year over allegations that he diverted funds from NYLAG to other charities he controlled in order to raise his community profile. This is similar to how Underwood says that Trump Campaign officials reportedly directed the disbursements of funds to Iowa veterans charities to appear more generous as the 2016 Republican Iowa Caucus approached.

 

National Children’s Leukemia Foundation (defunct)

This Brooklyn-based organization was closed after settling with the Attorney General’s office in 2015. Former officers including its founder and leader Zvi Shor, its president Yehuda Gutwein, the founder’s son, Shlomo Shor, and its auditor, Shlomo Donn were also banned from serving as fiduciaries of any New York nonprofit. The nonprofit presented itself as a legitimate charity to donors but did not in fact operate the programs and facilities that it claimed, including a cancer research center and bone marrow registry. Trump is accused of misrepresenting the aims of his foundation by, among other things, using foundation money to purchase a portrait of himself.

 

Victor E. Perley Fund (about $1.8 million in assets)

An alleged breakdown in governance resulted in the board of The Perley Fund looking the other way as the foundation’s leader, Richard A. Basini, purchased a $1 million Southampton home as a private residence. A $1.025 million settlement in 2015 mandated that all of the board members be replaced with trustees approved by the attorney general’s office. The accusation that they failed to exercise reasonable care in overseeing the organization and its finances are similar to those faced by Trump’s board.

 

The National Arts Club (about $4.6 million in assets)

Aldon James and his brother John James mixed family and nonprofit business similar to the way the Trumps allegedly have. The James case involved accusations of fiduciary neglect, wasted assets and false statements – all allegations currently facing the Trumps. In the case of Aldon James that meant using club funds to go shopping. In the case of the Trumps, it involved using foundation funds to pay personal legal expenses and among other things, holding what was ostensibly a foundation fundraiser that was in reality a campaign event. The James brothers settled their case in 2013 for $950,000 and are permanently barred from running nonprofits in New York.

 

Lower Esopus River Watch (defunct)

Some of the allegations against President Trump also resemble those Schneiderman brought against Frederick Fritschler in 2013. The former chairman of the Ulster County Environmental Management Council used his position to direct donations to the Lower Esopus River Watch, where Fritschler once served as director.

He then used some of those funds to pay for personal living expenses such as vacations, entertainment and meals at high-end restaurants. Fritschler chose to fight the allegations but found himself ultimately on the losing end of a $540,000 judgement, which resulted in the demise of the nonprofit, according to an April 10, 2013 press release.

“Abuse of your official position for private gain is unacceptable no matter who you are,” Schneiderman said in the press release.

The original version of this article gave the incorrect first name of the president of the Nonprofit Coordinating Committee of New York. Her name is Sharon Stapel, not Susan Stapel.

Zach Williams
Zach Williams
is a staff reporter at New York Nonprofit Media and sister publication City & State.
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