How could the indictment harm Trump’s company?

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How could the indictment harm Trump's company?

NEW YORK (AP) – The tax fraud charges unsealed against Donald Trump’s company on Thursday are a blow to a company already hit by canceled deals following the U.S. Capitol riot and the impact of the coronavirus pandemic on hotels and clubs.

The indictment could make it difficult for Trump to close new deals, get bank loans, and bring new money into his sprawling and indebted business.

The former president himself was not charged by prosecutors, but the investigation is ongoing.

Here’s a look at the company and the challenge it faces now:

WHAT IS THE TRUMP ORGANIZATION?

The company is a business unit that includes hundreds of firms and partnerships that own or manage office buildings, hotels, residential towers, golf clubs, trademarks, licensing agreements, and other assets around the world.

These various companies share employees with the Trump organization, including Trump’s two adult sons, Donald Jr. and Eric, both executive vice presidents, and Allen Weisselberg, the accused chief financial officer.

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WHAT ARE THE CLAIMS?

In a grand jury indictment, the Trump organization was accused of conspiracy to aid top executives with tax fraud by failing to report compensation such as free use of homes and cars, paying school fees, or reimbursing personal expenses.

The company pleaded not guilty, as did Weißelberg, one of Trump’s most loyal and longest serving employees.

The company says neither it nor Weißelberg got anything wrong, claiming the indictment is politically motivated.

Weisselberg is also charged with defrauding his taxes by covering up the fact that he had his full-time residence in New York City, where he was subject to city income tax.

WHAT IS TRUMP’S CURRENT ROLE IN THE COMPANY?

Trump stepped down from positions he held with hundreds of Trump Organization organizations in over 20 countries before taking the presidential oath of office four years ago.

It was an attempt to allay fears that he would use the presidency to help his business. At that time he founded a trust company that managed the assets and handed over control over them to his two adult sons and Weißelberg.

But Trump remained the sole owner or major owner of these hundreds of companies and was able to profit from them at any time. He recently returned to his old offices in Trump Tower on Fifth Avenue, but it’s not clear how much he has taken on his former role as operations manager.

WILL THE FEES DAMAGE THE BUSINESS SITUATION?

If convicted, the Trump organization would have to pay a fine equal to twice the amount of unpaid taxes or $ 250,000, whichever is greater. The company may also need to change the way it works.

But even without a conviction, the prosecution could cause problems.

“Companies that are charged, private or public, large or small, face serious side effects,” said Daniel Horwitz, a business defense attorney with McLaughlin and Stern and former prosecutor with the Manhattan district attorney.

“Companies in the financial services industry are reluctant to do business with them,” said Horwitz. “Their access to capital is limited or cut off, as is their ability to invest their cash with banks and brokers.”

WHAT HAPPENED TO OTHER COMPANIES THAT HAVE BEEN CRIMINED?

Giant accounting firm Arthur Andersen began losing its accounting business after criminal charges were filed regarding its Enron work and eventually laid off tens of thousands of employees. In 2005, the Supreme Court lifted his obstruction to convicting the judiciary, but it was too late and the company collapsed.

Other companies hit hard by criminal charges include the now-defunct junk bond giant Drexel Burnham Lambert from the 1980s, the once-huge hedge fund SAC Capital, and oil company BP, who won billions for its role in an oil rig explosion on criminal charges had to pay in the Gulf of Mexico.

WHAT IS THE LIKELY BEAT TO TRUMP’S COMPANY?

The Trump Organization may find it harder to do business, putting the Trump name on buildings or products, attracting tournaments to their golf courses, and borrowing money.

It can withstand the blows. It’s a sprawling company, but its operations are simple and behind the scenes: it operates golf clubs and hotels, collects checks from companies occupying their own offices, and levies royalties on buildings and others who use its name.

Although some companies collapsed on criminal charges, others survived or even thrived, including Bank of America, which was convicted of reckless mortgage lending. Others who received so-called deferred criminal complaints have done well afterwards, including drug giant Bristol-Myers Squibb, who was accused of accounting fraud, and JPMorgan Chase & Co., who was caught in connection with Bernard Madoff’s massive fraud.

The stocks of all three companies are at or near all-time highs.

WHAT ARE THE FORMER PRESIDENT’S FUTURE BUSINESS PLANS?

He didn’t say it, but there are some obvious steps.

Branding experts say the company could still use Trump’s fame to get licensing deals around the world. In the years surrounding his staggering TV hit “The Apprentice,” Trump closed deals to put his names on suits, ties, steaks, and apartment towers in Las Vegas, Chicago, and New York.

The Trump brand has been damaged by his divisive rhetoric and attitude. It is unclear how successful a new licensing attempt would prove.

During his tenure, hotels and apartment towers in several cities removed his name from their buildings. His company had to give up plans for new hotel chains due to a lack of interest from potential partners.

Worst of all were the allegations that Trump had instigated in January for the bloody siege of the Capitol. Real estate agents, lenders, and other companies severed ties shortly thereafter.

The Associated Press reported earlier this year that condominium prices fell sharply in many buildings that have licensed the use of his name.

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