N.Y. Supreme Court clears the way for state lawsuit against Trump Foundation

NEW YORK – A state supreme court judge has cleared the way for the New York state attorney general to pursue a civil lawsuit against the Trump Foundation for allegedly abusing its tax-free status and violating campaign laws by operating on behalf of President Donald Trump's business and political interests.

In a ruling filed on Friday, New York Supreme Court Judge Saliann Scarpulla threw out an attempt by Trump and the Trump Family and Trump Foundation to dismiss the suit.

The suit was brought by New York Attorney General Barbara Underwood. She filed the lawsuit after completing an investigation opened by predecessor Eric Schneiderman. The frequent Trump critic resigned after a report that four women had accused him of assaulting them.

Scarpulla ordered the Trump side to respond to the lawsuit within 45 days.

The Trump Organization did not immediately respond to an email seeking comment.

Underwood said she welcomed Scarpulla’s decision. "There are rules that govern private foundations — and we intend to enforce them, no matter who runs the foundation," she said in a statement.

The Trump Foundation functioned as little more than a checkbook to serve Mr. Trump’s business and political interests. There are rules that govern private foundations, and we intend to enforce them—no matter who runs the foundation. — NY AG Underwood (@NewYorkStateAG) November 23, 2018

In a ruling dated Wednesday and filed Friday, Scarpulla said the allegations "sufficiently support a claim that Mr. Trump intentionally used Foundation assets for his private interests knowing that it may not be in the Foundation's best interest."

Underwood alleges in the civil lawsuit that the Donald J. Trump Foundation and its directors, including Trump, his sons Eric and Donald Jr. and his daughter Ivanka, violated federal and state charities law with a "persistent" pattern of conduct that included unlawful coordination with the 2016 Trump presidential campaign.

Scarpulla rejected arguments by Trump's lawyers that the case should be dismissed because he is a sitting president, and that federal, not state, courts, were better able to manage cases against a sitting president to avoid interfering with his official duties.

"This argument is meritless," Scarpulla wrote. She cited suits against President Bill Clinton as evidence that state courts are equally capable of accommodating the president's needs.

But Scarpulla says she’ll be forced to drop Trump from the lawsuit if a New York state appeals court rules in an unrelated case that a sitting president can’t be sued in state court. Trump's lawyers also lost a preliminary bid to get that case dismissed.

Underwood alleges that donations to the Trump Foundation were used to settle legal obligations for Trump and his for-profit companies. She also alleges that Trump instructed the foundation to convert tax-exempt contributions into campaign funds used to make grants aimed at helping him in his presidential race.

Underwood is asking the court to dissolve the foundation and order $2.8 million in restitution plus additional penalties. Underwood also wants Trump banned from serving as a director of any New York nonprofit for 10 years, and the other board members, the Trump children, banned from serving for one year.

One of the allegations involves a fundraiser for veterans that Trump mounted just before the 2016 Iowa GOP primary to compete with a televised debate from which he had withdrawn.

The attorney general alleges that Trump campaign officials were involved in the effort and even directed where some of the donations should be sent in order to help Trump politically.

The judge rejected a Trump argument that the suit was the result of "pervasive bias" on the part of Schneiderman, a Democrat who resigned from office before the case was filed.

The Attorney General's office investigation of the foundation, which led to the lawsuit, found that its board allegedly existed in name only, and did not meet at any point after 1999.