N.Y. Attorney General Sues Trump Foundation Over Self-Dealing

CreditDamon Winter/The New York Times

The New York State attorney general’s office filed a scathingly worded lawsuit on Thursday taking aim at the Donald J. Trump Foundation, accusing the charity and the Trump family of sweeping violations of campaign finance laws, self-dealing and illegal coordination with the presidential campaign.

The lawsuit, which seeks to dissolve the foundation and bar President Trump and three of his children from serving on the boards of nonprofits, was an extraordinary rebuke of a sitting president. The attorney general also sent referral letters to the Internal Revenue Service and the Federal Election Commission for possible further action, adding to Mr. Trump’s extensive legal problems.

The lawsuit, filed in State Supreme Court in Manhattan, culminated a nearly two-year investigation of Mr. Trump’s charity, which became a subject of scrutiny during and after the 2016 presidential campaign. While such foundations are supposed to be devoted to charitable activities, the complaint asserts that Mr. Trump’s was often used to curry political favor or settle legal claims against his various businesses, and even spent $10,000 on a portrait of Mr. Trump that was hung at one of his golf clubs.

The $10,000 portrait was one of several examples of the foundation being used in “at least five self-dealing transactions,” according to the attorney general’s office, violating tax regulations that prohibit using nonprofit charities for private interests.

In 2007, to settle a dispute between the City of Palm Beach and Mr. Trump’s Mar-a-Lago resort, the foundation paid $100,000 to the Fisher House Foundation, another charity.

In 2012, a man named Martin B. Greenberg sued the Trump National Golf Club after he made a hole-in-one at a fund-raising golf tournament that had promised to pay $1 million to golfers who aced the 13th hole, as he did. As part of a settlement, the charitable foundation paid $158,000 to a foundation run by Mr. Greenberg.

The foundation also paid $5,000 to one organization for “promotional space featuring Trump International Hotels,” and another $32,000 to satisfy a pledge made by a privately held entity controlled by Mr. Trump to a charitable land trust.

The foundation lawsuit and the referrals to the federal agencies are the latest of Mr. Trump’s voluminous legal challenges, starting with the ongoing investigation by the special counsel, Robert S. Mueller III, into ties between Mr. Trump, his associates and Russia. This week, Mr. Trump’s longtime fixer and lawyer, Michael Cohen, scrapped his own legal team, as he faces an investigation by the United States attorney’s office in Manhattan.

The attorney general’s action is also likely to renew questions about Mr. Trump’s respect for legal norms. Mr. Trump has suggested that he might pardon himself in the Mueller investigation and has repeatedly assailed the Federal Bureau of Investigation.

“As our investigation reveals, the Trump Foundation was little more than a checkbook for payments from Mr. Trump or his businesses to nonprofits, regardless of their purpose or legality,” said Barbara D. Underwood, New York’s attorney general, who has been on her job little over a month. “This is not how private foundations should function and my office intends to hold the foundation accountable for its misuse of charitable assets.”

The attorney general’s office is seeking $2.8 million in restitution, and is seeking to bar the president from serving as a director, officer or trustee of another nonprofit for 10 years. Likewise, the petition seeks to bar Mr. Trump’s three eldest children, Donald Jr., Ivanka and Eric, from the boards of nonprofits based in New York or that operate in New York for one year, which would have the effect of barring them from a wide range of groups based in other states.

The action could force Mr. Trump’s children to curtail relationships with a variety of organizations. Last year, for example, Ivanka Trump set up a charitable fund supporting “economic empowerment for women and girls.” After the election, Eric Trump distanced himself from his charitable foundation, which has also been under investigation by the attorney general’s office related to the shifting of its resources to the Trump Organization.

The White House did not have an immediate comment.

The foundation was explicitly “prohibited from participating or intervening in any political campaign on behalf of a candidate,” the complaint notes. “This statutory prohibition is absolute.”

But roughly $2.8 million was raised for the foundation at a 2016 Iowa political fund-raiser for the Trump campaign. At the time, Mr. Trump skipped a Republican debate and set up his own event to raise money for veterans, though he used the event to skewer his opponents and celebrate his own accomplishments.

After the event, his foundation “ceded control over the charitable funds it raised to senior Trump campaign staff, who dictated the manner in which the foundation would disburse those proceeds, directing the timing, amounts and recipients of the grants,” according to the complaint.

That same month, an official at the foundation emailed Mr. Trump’s campaign manager at the time, Corey Lewandowski, telling him “we should start thinking about how you want to distribute the funds collected.”

Mr. Lewandowski, in a reply, wrote that “I think we should get the total collected and then put out a news release that we distributed the $$ to each of the groups.” He later sent a list of veterans’ groups “purportedly approved by Mr. Trump to receive grants from the Foundation.”

The list was created by another campaign staffer, Lisa Maciejowski Gambuzza, and edited by a third, Stuart Jolly, a political director.

Mr. Trump long feuded with Ms. Underwood’s predecessor, Eric Schneiderman, who resigned last month amid a scandal involving allegations that he had physically abused a number of his girlfriends. Weeks after the 2016 election, Mr. Schneiderman’s office issued a “notice of violation” to the foundation, which had already attracted scrutiny over its practices, and ordered it to immediately stop soliciting charitable donations in the state.

At the time, Hope Hicks, then a spokeswoman for Mr. Trump, said, “While we remain very concerned about the political motives behind A.G. Schneiderman’s investigation, the Trump Foundation nevertheless intends to cooperate fully.”

Ms. Underwood, who is a career prosecutor rather than a politician, recently accused Mr. Trump of “undermining the rule of law” with his pardon practices. She made the comment when she announced that she was continuing an effort begun under Mr. Schneiderman to change New York’s double jeopardy law so that state and local prosecutors would have the power to bring criminal charges against aides to Mr. Trump who have been pardoned.

The Trump Foundation has been in legal limbo since after the election, when the president wanted to dissolve it amid growing controversy about its practices. But in late 2016, a spokeswoman for the attorney general’s office, Amy Spitalnick, said the foundation “cannot legally dissolve” while it is under investigation. If nothing else, Ms. Underwood’s action on Thursday moved the Trump Foundation closer to an end.