Two separate fraud investigations in New York State against President Trump and his business, one criminal and one civilian, have expanded to include multimillion-dollar tax deductions as consulting fees, some of which appear to have gone to Ivanka Trump, according to people with knowledge on the subject.
The investigations – a criminal investigation by Manhattan District Attorney Cyrus R. Vance Jr. and a civil investigation by Attorney General Leticia James – are being conducted independently. But both offices have issued summonses to the Trump Organization in recent weeks for records related to fees, people said.
The development followed a recent audit of the New York Times for more than two decades by Mr. Trump’s tax records, which found that he had paid little or no federal income taxes for most years, largely because of his chronic business losses.
Among the revelations was that Mr. Trump reduced his taxable income by deducting about $ 26 million in fees from unidentified consultants as a business expense for multiple projects between 2010 and 2018.
Some of these fees appear to have been paid to Ms. Trump, The Times found. In a 2017 announcement she made when she joined the White House as presidential adviser, she announced that she had received payments from a consulting company that is a co-owner, totaling $ 747,622, which exactly matched the consulting fees, requested as a tax credit by Trump’s organization for hotel projects in Hawaii and Vancouver, British Columbia.
The lawsuits focused on the fees paid to the company for its disclosure, TTT Consulting LLC, and represent only a fraction of the $ 26 million, according to someone familiar with the matter. The company’s name appears to be a reference to Ms. Trump and other members of her family.
Ms. Trump was the CEO of the Trump companies that made the payments, which means she appears to have been treated as a consultant while also working for the company. While companies can deduct professional fees, the Internal Revenue Service requires consulting arrangements to be market-based and reasonable, as well as “ordinary and necessary” for running a business.
Alan Garten, a general adviser to Trump, said in a statement that “this is just the latest fishing expedition in a continuing attempt to harass the company.”
“Everything was done in strict compliance with applicable law and under the advice of lawyers and tax experts,” he added. “All applicable taxes have been paid and no party has received an improper benefit.”
Sometimes the IRS rejects attempts to write off consulting fees if they were intended to evade taxes and do not reflect business-related relationships. It is not known if the IRS has ever questioned Trump about the practice. Mr. Trump’s tax breaks from deducting taxes on his companies’ federal returns would also affect his statements in New York, which would make the state interested.
A tax adviser who has worked with Trump said such consulting fees are not uncommon.
The district attorney’s office and the attorney general’s office declined to comment. Ms Trump did not respond to requests for comment, but said on Twitter after the post that “there were no tax breaks.”
Few details have been made public about the district attorney’s investigation, the only known active criminal case involving Mr. Trump. Mr Vance’s office began the investigation more than two years ago, initially focusing on Trump’s role in the covert money paid out during the 2016 presidential campaign to Stormy Daniels, a pornographic actress who claims that she had an affair with Mr. Trump.
The investigation has been suspended since last fall after the president filed a lawsuit to block a subpoena for his tax returns and other financial records.
The legal battle is in the United States Supreme Court for the second time, with a decision expected soon. In court cases, prosecutors have suggested that their investigation has expanded far beyond frozen money and focused on a number of potential financial crimes, including insurance and bank fraud, tax evasion and grand theft.
Mr Trump said the investigation was part of “the biggest witch hunt in history”. Both Mr. Vance and Mrs. James are Democrats.
Ms. James’ civil investigation focuses on Trump’s business practices, although she may file a crime and seek power from Gov. Andrew M. Cuomo’s administration or the state comptroller to file charges herself.
Her investigation began last March after Michael D. Cohen, the president’s former lawyer, told Congress that Mr. Trump had inflated his assets in financial statements to secure bank loans and downgraded them elsewhere to reduce your tax bill. In August, prosecutors asked a judge to force President Eric Trump’s son to testify in the investigation, and he did so last month. Eric Trump is Trump’s executive vice president in charge of its day-to-day operations.
Investigators in Ms. James’s office have reviewed a growing set of transactions. One of them was the financial restructuring of the Trump Hotel & Tower in 2010 in Chicago, when the credit corporation “Fortress” forgave a debt worth more than 100 million dollars. The Attorney General’s Office said in court documents filed in August that the Trump organization had thwarted efforts to determine how that money was reflected in its tax returns and whether it was declared as income, as required by law in most cases. The Times’ analysis of Mr. Trump’s financial records found that he had evaded federal income tax on almost all debt forgiveness.
The Attorney General is also investigating whether the Trump Organization used overestimation when it received large tax breaks for promising to protect land where its development efforts had failed, including at its Seven Springs estate in Westchester County, New York.
“The outcome of the election will not affect our investigations,” Ms James said in a televised interview this month, adding: “No one is above the law. We will simply follow the facts and evidence wherever they lead us. “
Mr Trump has often attacked Ms James, the latest in a series of attorneys general in New York that he has encountered. Ms. James presided over the final stages of an investigation that led to the closure of his infamous charity foundation. It is also seeking to dissolve the National Riflemen’s Association, a key ally of the president.
“They are suing for everything, always in search of a crime,” he tweeted last year, although his own litigation is legendary. In recent days, his campaign and its allies have filed more than two dozen lawsuits seeking to overturn the election results he lost this month.
Checking the fees apparently paid to his eldest daughter is likely to bring even more vitality to the outgoing president. And that raises questions about whether the payments were a taxable way for him to compensate his children or avoid taxes on the gifts he could receive from transferring wealth to them, something Mr. Trump’s father did through legally questionable schemes. revealed by The Times in 2018
This is not the first prosecution investigation involving Mr. Trump’s children. As part of the agreement that led to the closure of the president’s charity foundation, Ms. Trump and her brothers, who were board members, were to receive “training on the duties of officers and directors of charities so that they cannot allow the illegal activity they led the Trump Foundation to take place again, “under the terms of the agreement.
In September, after a state judge dismissed arguments from Trump’s lawyers to further delay Eric Trump’s filing, the president’s son called the investigation a “continuing political vendetta.”