- The conviction of two Trump Organization companies for tax fraud and other crimes could prove insurmountable for former President Donald Trump’s hotel and real estate businesses
- Which are likely to face challenges in lining up lenders, insurers and government contracts, according to legal experts following the ruling.
The conviction of Donald J. Trump’s family firm on Tuesday was a devastating blow to the former president, exposing what prosecutors termed a “culture of fraud and deception” at his corporation and supplying ammo to his political opponents as he launches his third presidential campaign.
The Trump Organization faces a significantly less severe threat.
The maximum fine the corporation might pay is $1.62 million, which is a drop in the bucket for the Trump Organization, which regularly generated hundreds of millions of dollars in annual sales throughout his presidency. The corporation has paid its attorneys additional money to fight the case.
The magnitude of the potential punishment demonstrates that, despite the fact that the tax fraud conviction has permanently tarnished the Trump Organization’s reputation and labeled it as a criminal operation, the corporation faces far less than a monetary death sentence.
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This helps to understand why the corporation refused to plead guilty.
Even after its long-serving chief financial officer, Allen H. Weisselberg, decided to plead guilty and testify at the business’s trial, which centered on off-the-books luxury perks that the company provided to some of its executives, The Trump Organization opposed a compromise.
The Manhattan district attorney’s office did not charge Mr. Trump or anybody in his family of participating in the plan; nonetheless, at trial, prosecutors frequently referenced the former president and his adult children. They used a single exhibit in their closing statements to try to convince the jury that Mr. Trump had approved of the scheme.
Although the Trump Organization has maintained its innocence — and Mr. Trump has characterized the lawsuit as a politically motivated witch hunt by the district attorney, Alvin L. Bragg — the company may have been more amenable to a settlement if it had been facing a more severe penalty.
It is unknown what modifications Mr. Trump may make to the corporation in response to the ruling. The Trump Organization consists of over 500 corporate entities, of which only two were on trial.
It is possible for him to dissolve the Trump Corporation and the Trump Payroll Corporation without exerting much effort.
Obviously, a corporation cannot be imprisoned, and neither of the two convicted Trump corporations is publicly listed. As a result, neither financial regulators nor public investors are able to punish them.
Additionally, the Trump Corporation and the Trump Payroll Corp. are not important to Mr. Trump’s enterprise.
They mostly conduct back-office duties, such as employing and compensating top executives, therefore they do not possess any loans, liquor licenses, or other rights that could be revoked as a result of the conviction.
That is not to argue that the conviction will not cause some reputational damage. It might frighten away potential financiers and business partners, or allow them to impose more stringent terms on Mr. Trump. And the cost of being a criminal could make it more difficult to retain personnel and eventually grow the business.
However, the Trump Organization was already in retreat prior to its conviction.
Midway through the divisive Trump presidency, the company abandoned plans for new hotel brands and lost some of its flagship properties. The Trump name was removed from hotels in Panama, Toronto, and Lower Manhattan over the course of one year. And instead of taking on new projects, the corporation decided to focus on properties it has held for years, such as office and apartment buildings in New York, a handful of hotels, and sixteen golf courses it owns or maintains.
The Trump family, which had already established a number of self-imposed ethical constraints, including a moratorium on new overseas deals, attributed a significant portion of the retreat to the political and legal scrutiny that followed the businessman president.
And that was prior to the Manhattan district attorney’s office studying Mr. Trump in 2018 and the New York attorney general’s office investigating his business activities the following year.
The attorney general, Letitia James, made the initial move. She and Mr. Trump filed a lawsuit against the corporation in September, accusing it of overvaluing its assets by billions of dollars. Her complaint seeks a judge to remove the Trumps from the helm of their family firm; an impartial monitor has already been appointed to guarantee that no assets are transferred out of state.
With the company’s conviction, any growth ambitions appear to be in limbo.
In the midst of the trial, the Trump Organization announced a new licensing agreement with a Saudi real estate business for a housing and golf complex to be constructed in Oman. However, the transaction did not appear to be an indication that Mr. Trump was suddenly back in deal-making mode.
In addition, the company’s executive echelons may undergo a change of guard. Mr. Weisselberg is currently on paid leave from the company, and it is unknown if he will return after the trial. His attorney, Nicholas A. Gravante Jr., stated in a statement that Mr. Weisselberg’s sole obligation during the trial was to testify truthfully, which he did.
The Trump Organization’s brand confronts more severe reputational issues, many of which emanate from the Trump administration. After his supporters attacked the Capitol on January 6, 2021, the troubles intensified, and banks and insurance deserted the corporation.
In the years preceding Mr. Trump’s presidency, the Trump Organization erected five-star hotels in Chicago and Las Vegas, purchased golf courses, and licensed the Trump name to properties across the world that were developed by other companies.
Mr. Trump opened a hotel in Washington, directly across Pennsylvania Avenue from the White House, during the last stretch of the 2016 presidential campaign. It quickly became the focal point of the MAGA world.
In a hint of the company’s overall decline, the Trumps sold it this year.