There is an adage among longtime prosecutors and criminal defense attorneys that says, “A prosecutor can indict a ham sandwich.” What the adage doesn’t mention is that often the easiest-to-indict, juiciest ham sandwiches are wealthy real estate developers—the ones with overinflated egos and enduring senses of entitlement—people exactly like Donald J. Trump. As a former 27-year defense attorney, I can tell you the opportunities for tax abuse in this crowd are as predictable as they are inviting.
Trump has been waffling recently on whether he’ll release his tax returns, which has prompted much speculation about what he might be hiding in them. People have mentioned potential crooked real estate deals, an embarrassingly low tax rate and foreign investments. But their searches will lead nowhere.
If you want to discover fraud, don’t bother plumbing the depths of his real estate deals. The thousands of pages of mumbo jumbo associated with one hotel deal or another probably don't reveal anything. These finances are handled by attorneys and accountants on both sides and are pretty routine.
And you cannot embarrass Trump by pointing to his likely next-to-zero tax rate. As a real estate developer, Trump undoubtedly uses every lawful financial tool available to bring his taxes as close as possible to zero. More power to him; that is the American way.
Foreign investments? Plainly, he will just blame those on the Democrats.
No, none of these areas is likely to bear any fruit. That’s because, to expose a wrong-hearted real estate developer as a tax cheat, it is often more important to focus not on what the developer reports on his returns, but on what he leaves off.
You see, the goal of tax cheats is usually not to save money for some corporation, but to avoid using their own shekels to pay for personal expenses. Why pay for their own homes, food, golf rounds, cars or flights—or the taxes thereon—when their companies can pick up the tab? But personal expenses charged to a company counts as compensation, and failing to report such perks as taxable income is illegal.
This kind of personal and professional line-blurring is a hallmark of the real estate tax cheat—those people who control whole construction firms, golf courses and hotel crews and who don’t get 1099s and W-2s for all the work they order and the perks they get. Perhaps the most famous example of this kind of fraud comes from New York real estate billionaire Leona Helmsley, who, in 1989 was convicted of having her real estate company pay for personal improvements, including a new dance floor, at her 21-room weekend home in Connecticut, without paying taxes on such benefits. (Helmsley, by the way, is famous for saying, “We don’t pay taxes. Only little guys pay taxes.”)
Focusing therefore simply on Trump’s response to three or four topics—the finances and taxes relating to his primary and any vacation residence, including repairs, insurance and the like; the source of payment for and taxes on any benefits for food, golf fees, staff and the like at such homes; and the payment for and taxes on private car usage and plane trips—should provide a ready shorthand by which to assess Trump’s financial ethics. Regardless of whether Trump discloses his tax rate or produces all of his tax returns, Americans most certainly have the right to receive answers to and the proof regarding such basic questions concerning Trump’s financial integrity. And Trump has no excuse to fob off this request: Production of this information would be relatively simple and inexpensive.
Any scrutiny should focus first on Mar-A-Largo, Trump’s weekend and vacation oasis in Palm Beach, Florida, and former estate of Marjorie Merriweather Post. As the East Coast financial elite will attest, having a second home for leisure in Palm Beach is a pretty expensive luxury.
Trump explains the financial status of Mar-A-Largo on the home page of the Mar-A-Largo website: “Since purchasing this landmark in 1985, I spend many weekends and holidays at this home away from home. When I made it a club in 1995, (126 rooms made it a very big house), I kept private quarters and designed the club to provide the best amenities possible for our members.”
The relevant questions are few and should be quite easy for Trump to answer and to prove: Did Trump pay personally when he bought Mar-A-Largo in 1985? During the time that it was his personal vacation residence from 1985-1995, did his company deduct any of the acquisition costs, real estate taxes, insurance or utilities as a corporate expense? In other words, did he and his family alone live in this vacation home for 10 years while having the government and the rest of us pay for all or some as a business expense? Or, if a corporation bought Mar-A-Largo and provided it as a corporate perk, did Trump pay taxes on the benefit?
For the past 20 years since Mar-A-Largo has functioned as a club, how much has Trump personally paid for his “private quarters,” his “home away from home,” any improvements thereto, and for his staff, food and golf in Palm Beach? Once again, were these amenities provided as a corporate perk? If so, did Trump pay the millions of dollars that would be owed in taxes on this income?
Second, his primary residence at Trump Tower: Did Trump personally pay for his condo, and does he pay for the condo fees, utilities, improvements and expenses? If not—if the company pays—does he report that on his tax return?
Third, everyone pays for his or her own car or must pay taxes on the personal use of a company car. Tom Daschle, a good and honest man, withdrew himself from consideration as secretary of the Department of Health and Human Services when a friend and client claimed that he allowed Daschle part-time use of an extra car, and Daschle hadn’t paid taxes on such “benefit.” Has Trump, like the rest of us, paid for his personal travel?
And then, of course, there’s personal air travel, which we know Trump does often. Is Trump’s plane a personal or corporate jet? If personal, did he pay for the plane and for all of the expenses out of his own pocket? If corporate, has he reimbursed the owner for personal travel or paid the taxes on the perk? The plane records could be gathered in an hour.
In pursuing the answers to and proof concerning such basic questions, the media, the Democratic National Committee and even the Republican National Committee—which in the long run would be equally hurt, were any negative information subsequently to emerge—should be focused and unrelenting. Of course, Trump will decry such focused questioning as an invasion of privacy. But the louder the outrage, the greater the confirmation that something is likely amiss within these limited records. (And we already know that Trump has a tendency to blur the business and the personal when it comes to finance: Trump once brashly announced that he had donated large sums to charity. But it turned out that he had made virtually no charitable contributions from his own pocket; he simply was taking credit for corporate contributions.)
Trump doesn’t deserve any special treatment here. Prior to being confirmed for any senior government position, every presidential appointee has to produce and authorize access to every W-2, 1099, tax filing, mortgage payment, loan or investment document, and brokerage statement ever signed or received. During my personal background investigation to become a U.S. ambassador, two IRS agents arrived at my office unannounced one day to grill me about $210 of income—a check for appearing for two days in a movie—that they thought I had failed to report. Only by proving that the $210 was earned that January—and thus would be reported on the following year’s return—was my confirmation assured. If appointees are forced to go through that, finalists for the most important job in the world should at least have to disclose and prove who pays their rent and bills.
Donald Trump may well be a very honest man. But he has to prove it. Based on my experience, proving so is a relatively easy undertaking.