Ruminations on RICO and Asset Forfeiture in the Trump Business Empire

Garrett Graff provided an excellent summary in Wired of the seventeen Trump-related investigations currently open. The settlement of fraud allegations against Trump University could also provide fodder for an eighteenth. A number of those investigative threads could ultimately combine into one federal racketeering investigation that could cast his business and charitable entities as elements of a criminal organization that Donald Trump oversaw as kingpin.

As Trump ascended to the presidency, more and more allegations have surfaced suggesting that the Trump family businesses have been permeated with fraud. The New York Times traces a history of tax fraud associated with Fred Trump, in transferring his wealth, tax free to his children with Donald J. Trump’s overt assistance. Exhibit 1 was the concoction of the sham corporation entitled All County Building Supply & Maintenance Corp., and the use of false padded invoices to conceal the transfer of wealth from Fred Trump to his children tax-free.

Central to the various alleged fraud schemes attributed to the Trump family businesses over the decades is the use of shell companies, fraudulent misrepresentations, and false invoice schemes. If true, instances of fraudulent conduct — if they constitute mail, wire, bank, and tax frauds — could make up a “pattern of racketeering activity” for purposes of the Racketeer Influenced Corrupt Organizations (RICO) statute. Allegations leveled against the Trump Organization, the Trump Foundation, Trump University, and their insiders suggest that such practices were designed to enrich, elect, and insulate Trump, who has already been described in Michael Cohen’s criminal docket “Individual-1.”

At present, Department of Justice policy and constitutional views would bar criminal prosecution of a sitting president. But, provided there is evidence of crime, there is no constitutional or policy impediment to prosecution of Trump-related entities or other insiders, including Trump family members. Further, a racketeering prosecution could trigger the powerful asset forfeiture provisions of RICO against the Trump Organization and any other Trump assets used in connection with crimes.

A successful RICO prosecution against the Trump Organization would represent an existential threat to the many assets, properties, licensing agreements and multiple income streams that have made Trump a very wealthy man to the extent those assets represent the fruit of any racketeering crimes engaged in by the family business. As Eric Trump once told Fox & Friends: “My father sees one color, green. That is all he cares about.”

My analysis does not address whether a presidential pardon authority can be extended to a corporation or whether such authority could be used to mitigate a forfeiture as it can “monetary fines.” But putting those questions to the side, the substantive law of RICO could be extremely powerful in the Trump context.

A RICO conviction under 18 U.S.C. § 1961 hinges on proof of the underlying offenses comprising the “pattern of racketeering activity.” The statute delineates several hundred or so predicate acts that can contribute to a pattern of racketeering activity. Conduct may be charged in the RICO count of conviction as part of a pattern of racketeering activity even when the defendant has previously been convicted and sentenced for that conduct. As such, prior criminal convictions and civil suits relative to individual predicate acts do not inure against a RICO prosecution. This is key.

Further, RICO allows for a pattern of activity to encompass up to ten years with regard to the underlying predicate counts with at least the last one falling within the statute of limitations. For example, should a federal prosecutor seek to charge mail or wire fraud counts with regard to alleged criminal activity engaged in by the Trump Organization in 2017, then the prosecutor could go back as far as 2007 to capture the full scope of the pattern of activity. This also is very key.

In order to prevent the transfer of criminal assets, the RICO statute allows for asset forfeiture actions to be initiated early. The government can take various legal actions to freeze assets upon indictment while the criminal prosecution unfolds.

A successful RICO prosecution requires the prosecutor prove at least two racketeering activities that amount to a pattern of illegal activity. It is conceivable that the Trump Organization has engaged in multiple rackets over the prior ten years. This article addresses publicly available information about two fairly well-known causes célèbre: Trump Foundation and Trump University. I confine my analysis to two predicate offenses under RICO: mail and wire fraud (18 U.S.C. §§ 1341 & 1343, respectively).

Simply stated, one commits mail and wire fraud by engaging in any fraudulent scheme to intentionally deprive another of property or honest services by mail or wire communication. Mail fraud has been a Federal crime in the United States since 1872. Mail fraud and wire fraud cover an incredibly broad range of conduct. In Durland v. United States, the Supreme Court held the mail and wire fraud statutes encompass “everything designed to defraud by representations as to the past or present, or suggestions and promises as to the future.” Lower courts have progressively expanded this ruling, finding that the act condemns conduct that falls short of fundamental honesty, fair play, and right dealing. Not a particularly high bar! As such, they are also two of the most common RICO predicate offenses used by prosecutors.

In the 1960s and 1970s, Chief Postal Inspector Martin McGee, also known as “The Top Sleuth” or “Mr. Mail Fraud,” led his department in “exposing and prosecuting numerous mail fraud swindlers e.g. land sales, phony advertising practices, insurance ripoffs, and fraudulent charitable organizations using the mail,” according to former postal inspector Shu Shin Luh (emphasis added).

Last year, then-New York State Attorney General Barbara Underwood exposed fraudulent practices at the Trump Foundation. This petition to the court carefully documented a pattern of illegal activity carried out by the Trump Foundation at the direction of its president, Donald J. Trump. It noted:

In sum, the Investigation revealed that the Foundation was little more than a checkbook for payments to not-for-profits from Mr. Trump or the Trump Organization.This resulted in multiple violations of state and federal law because payments were made using Foundation money regardless of the purpose of the payment. Mr. Trump used charitable assets to pay off the legal obligations of entities he controlled, to promote Trump hotels, to purchase personal items and to support his presidential campaign.

Such a pattern of multiple violations — especially one dating back to 2007 and extending to 2016 — could form the basis of the required racketeering predicate offenses in the form of mail and wire fraud. But it is important to note how Underwood’s petition drills down to the core of the racketeering mechanism in the factual background:

The AG’s Investigation found that the Foundation is little more than an empty shell that functions with no oversight by its board of directors. The Foundation which does not have any employees delegated its operations to the accounting office of the Trump Corporation, Inc., a management company owned by Mr. Trump and located at 725 Fifth Avenue. The Trump Corporation supplies back office services to the several hundred Trump business entities that make up the Trump Organization.

Further, Underwood notes in paragraph 28 that the “accounting staff for the Trump Organization had responsibility for issuing checks for the Foundation, and issued the checks based solely on Mr. Trump’s approval before presenting the checks to Mr. Trump for signature.”

She presented evidence of solicitation of veterans’ charitable contributions during a televised Iowa Fundraiser that, once provided online, were used for political campaign purposes. The disbursements allegedly made in the name of the Trump Foundation were in actuality self-dealing. Such fact patterns of Trump-related misrepresentations could form the basis of wire fraud claims, each one representing a potential RICO predicate act.

Underwood referred the evidence referenced in her petition to the Internal Revenue Service and Federal Election Commission, while providing a carbon copy to DOJ Public Integrity Section. Public Integrity could theoretically collaborate with the SDNY hush money investigation — related to allegations false invoices and accounting fraud — to investigate racketeering with the added information in the New York AG’s findings. Of course, one would have to presume the Attorney General’s office would allow line prosecutors to follow the facts without politically motivated interference — hardly a sure bet in this environment.

Trump University (a/k/a Trump Wealth Institute & Trump Entrepreneur Initiative LLC) could also be a prime candidate for a RICO investigation. It was an American for-profit education company that ran a Real Estate training program from 2005-2010. It was owned and operated by the Trump Organization. Eric Schneiderman, whom Underwood succeeded as AG, described Trump University as a bait-and-switch scheme and pointed to the fact that the organization was not a university. He accused Donald Trump of misleading more than 5,000 people via false advertisement,to pay up to $35k apiece, to learn his real estate investment techniques. Each mailing or electronic solicitation carrying a material false statement could be a separate count of fraud for purposes of RICO’s pattern of racketeering activity.

On November 18, 2016, Donald Trump agreed to pay approximately $25M to settle 2 class actions and Schneiderman’s suit while not admitting to any wrongdoing. But a pattern of illegal activity evidenced by 5,000 people defrauded by the same scheme could be prosecuted as racketeering notwithstanding the civil settlement.

Trump-related investigations appear to be suitable for consolidation into one RICO investigation that could ultimately seize Trump assets and cast the president as the kingpin at the head of a criminal organization.

Photo of the Trump Tower lobby by Spencer Platt/Getty Images.

 

About the Author(s)

Martin J. Sheil

Former Supervisory Special Agent IRS Criminal Investigation. You can contact him at sheil51@protonmail.com.