The final chapter: Judge's ruling that Donald Trump must pay $2 million to charities ends troubled foundation's saga

Show Caption Hide Caption Judge fines Trump $2 million for misusing charity A judge ordering President Trump to pay $2 million to charities as a fine for misusing his own charitable foundation to further his political and business interests is not as bad and could've gone much worse says a Columbia Law professor. (Nov. 8)

WASHINGTON – A New York judge’s ruling that President Donald Trump must pay $2 million to charity appears to be the final chapter in the saga of Trump’s troubled charitable foundation.

State Supreme Court Justice Saliann Scarpulla of Manhattan ruled on Thursday that Trump pay $2 million in damages to various nonprofit groups to settle allegations that he and his family used the Trump Foundation to further his political and business interests.

Though Trump admitted the misconduct in court documents, he issued a defiant statement in which he accused New York’s attorney general of mischaracterizing the settlement process for political purposes. Trump claimed he had been attacked by “political hacks in New York State.”

Here’s a closer look at the ruling and the foundation’s legal troubles:

What was the lawsuit about?

The lawsuit, filed last year by then-New York Attorney General Barbara Underwood, outlined a wide array of mismanagement by Trump and his three eldest children.

Chief among them: allowing Trump’s 2016 presidential campaign to orchestrate a televised fundraiser in Des Moines, Iowa, for the foundation, which then distributed $2.8 million to veterans’ charities that were also chosen by the campaign.

Charities are prohibited by New York law from supporting political candidates or campaigns.

Trump staged the fundraiser on Jan. 28, 2016, days before the Iowa caucuses, rather than participate in a Republican presidential debate.

According to the lawsuit, Trump's campaign staff, not the foundation, chose the veterans' groups that would get the money. That violated New York's charity laws.

The Attorney General's Office and the Trump Foundation reached an agreement last year to dissolve the foundation and distribute its remaining $1.8 million in assets to a variety of charities, including the Army Relief Fund and the U.S. Holocaust Memorial Museum.

In a settlement agreement reached last year, Trump and his foundation admitted the campaign had complete control of how the funds were distributed and that Trump took credit for the grants.

What happened this week?

The final part of the settlement involved how much in damages should be paid to the charities.

Scarpulla resolved that issue this week with her order that Trump must pay $2 million.

That's less than the $2.8 million sought by New York’s current attorney general, Letitia James. She based that figure on how much the foundation brought in at the fundraiser.

But Scarpulla reasoned that Trump had agreed to dissolve the foundation, and the money raised at the Des Moines event did eventually reach charitable organizations tied to veterans, even though that was done at the campaign's behest.

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In this week's ruling, Scarpulla wrote "that Mr. Trump breached his fiduciary duty" with statutory violations that included "allowing his campaign to orchestrate the fundraiser."

That conduct, she wrote, resulted in "distribution of the funds to further Mr. Trump's political campaign."

What was the foundation set up to do?

The Donald J. Trump Foundation was founded as a philanthropic enterprise with the initial goal of distributing proceeds from his book, "Trump: The Art of the Deal," to various charities.

The foundation expanded its fundraising and distribution over the years. It was registered as a tax-exempt nonprofit, so donations were tax-deductible.

Its federal tax form for 2015 showed annual expenditures of just over $900,000.

Until 2017, the foundation's board consisted of Trump, his three children, and the Trump Organization's treasurer.

A series of Washington Post stories in 2016 raised questions about the foundation's fundraising and expenditures. The New York Attorney General's Office followed up, alleging that substantial sums of foundation money were used to pay business debts, finance the presidential campaign and even purchase a giant painting of Trump.

A Ukraine connection

Trump’s charity even had a Ukraine angle.

In September 2015, a foundation tied to Victor Pinchuk, the billionaire son of a former Ukraine president, contributed $150,000 to Trump’s charity, according to the charity's tax return.

The contribution arrived in conjunction with a speech that Trump made via satellite hookup to a Pinchuk Foundation conference in Kyiv. Trump, who was running for president at the time, referred to Pinchuk as a friend during the speech, according to a 2018 report by a Forbes contributor.

Former special counsel Robert Mueller’s investigative team examined the Pinchuk payment as part of its probe into foreign funding that streamed to Trump and his associates in the year before Trump’s 2016 presidential campaign.

Did Donald Trump break the law?

The lawsuit was a civil action, rather than a criminal complaint. (Separately, the New York Attorney General has filed criminal charges against the president in connection with his taxes.)

However, the lawsuit alleged that Trump violated multiple statutes that prohibit the use of nonprofit revenue for business, personal and political purposes and require directors of nonprofit boards to perform their duties in good faith.

The judge ruled that Trump admitted to the violations in a settlement reached to end the lawsuit.

What's happening with the foundation now?

Early stipulations by Trump and his lawyers included an agreement to dissolve the foundation and distribute its remaining $1.8 million assets to various charities such as City Meals-on-Wheels, the Children's Aid Society and the U.S. Holocaust Memorial Museum.

As a result of the final order, the $2 million fine also will go to those philanthropies.

The Trump Foundation will no longer exist. In addition, Scarpulla issued stiff requirements for Trump and his family members to meet before they create or oversee any nonprofit in the future.