The Trump Organization has been charged with tax fraud. What could that mean for the former president’s company?

Former US president Donald Trump’s company was hit with charges of criminal tax fraud this week, with allegations it helped executives cheat their own taxes.

The accusations — which the company says are politically motivated — are a blow to a business already reeling from cancelled deals following the insurrection at the US Capitol and the impact of the coronavirus pandemic on hotels and clubs.

The charges could also make it harder for Mr Trump to strike new deals, get bank loans and bring in new money to his sprawling and indebted business.

The former president himself has not been charged by prosecutors, but they say investigations are ongoing.

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

What is the Trump Organization? Is Donald Trump involved?
The Trump Organization encompasses hundreds of firms and partnerships that own or manage office buildings, hotels, residential towers, golf clubs, branding rights, licensing deals and other assets around the world.

Those various businesses share staff with the Trump Organization, including Mr Trump’s two adult sons, Donald Jr and Eric, both executive vice-presidents, and Allen Weisselberg, the now-indicted chief financial officer.

Mr Trump resigned from positions he held with hundreds of Trump Organization entities in over 20 countries before he became US president.

At the time, he set up a trust to hold its assets and handed over day-to-day control of it to Donald Jr and Eric, along with Mr Weisselberg.

But Mr Trump remained the sole owner or principal owner of those hundreds of businesses and could pull profits from them at any time.

Recently, he’s returned to his old offices at Trump Tower on Fifth Avenue, but it’s not clear how much he has resumed his former role overseeing operations.

Mr Trump himself has not been charged in the ongoing investigation.

What did the Trump Organization allegedly do?

A grand jury indictment has charged the Trump Organization with conspiring to help top executives cheat on their taxes by not reporting compensation like free use of apartments and cars, payments of school tuition or reimbursement for personal expenses.

Mr Weisselberg, one of Mr Trump’s most loyal and long-serving employees, has also been charged.

The company says neither it nor Mr Weisselberg did anything wrong and claimed the charges are politically motivated. Both have pleaded not guilty.

Mr Weisselberg is also accused of cheating on his taxes by disguising that his full-time residence was in New York City, where he was subject to the city’s income tax.

How will the charges affect the Trump Organization?

If the company is convicted, it would have to pay a fine of double the amount of unpaid taxes or $USD250,000 ($332,180), whichever is larger.

The company may also have to change the way it operates.

But Daniel Horwitz, a white-collar defence lawyer and former prosecutor said even if the company is not convicted, the indictment could pose problems.

“Companies that are being indicted, whether they are private or public, big or small, face serious collateral consequences,” he said.

“Companies in the financial services industry are reluctant to do business with them.

“Their access to capital is limited or cut off as is their ability to place their liquid assets with banks and brokerages.”

The Trump Organization could find it more difficult to strike deals to put the Trump name on buildings or products, attract tournaments to its golf courses and borrow money.

Although some companies have collapsed after criminal indictments, others have survived or even thrived.

Others that received what’s called deferred criminal charges have done well afterwards, including drug giant Bristol-Myers Squibb, which was accused of accounting fraud, and JPMorgan Chase & Co, which was caught up in connection with Bernard Madoff’s massive fraud.

Stocks in both companies are at or near all-time highs.

What are Trump’s plans for the future?

He hasn’t said, but there some obvious moves.

Experts on branding say that the company could still use Mr Trump’s fame to strike licensing deals around the world.

In the years surrounding his runaway TV success, “The Apprentice,” Mr Trump put his name on suits, ties, steaks and residential towers in Las Vegas, Chicago and New York.

The Trump brand has been damaged by his divisive rhetoric and stances. It’s unclear how successful a new licensing effort would prove.

While he was in office, hotels and residential towers in several cities stripped his name off their buildings. His company had to scrap plans for new hotel chains because of a lack of interest by potential partners.

SOURCE: ABC NEWS