Congressional committees have subpoenaed Donald Trump’s tax returns from the IRS and from the State of New York, which recently passed a law to make them available. Though Congress has clear legal authority to obtain the returns, Trump has launched a frantic legal battle to keep them secret. Why?
The answer is obvious from a superficial examination of his businesses. Trump’s tax returns would expose his criminal transactions to scrutiny and eventual law enforcement action. Those documents are the only nearly-honest account of his life available anywhere.
If Donald Trump has been reporting earnings from crime on his tax returns, why he wouldn’t be in jail already? Unfortunately, that’s not how any of this works.
Since Al Capone landed in prison for false accounting, organized criminals have learned the #1 rule of operating in the US: Report your earnings. As long you’re not committing the kinds of street crimes that would gain the attention of local police, it’s smart to report your criminal earnings accurately to the IRS. Over the years we’ve crafted our tax laws to encourage income reporting by making it nearly impossible for the IRS to report any crime other than tax evasion. Tell the IRS the truth about your earnings and they will keep your secrets.
It is a crime for the IRS to initiate contact with law enforcement about criminal activity they find in your tax returns, unless they have evidence you’re supporting terrorists. If the cops aren’t already on your trail, with enough evidence to launch a prosecution, a blatant story of criminal activity laid out in your tax records cannot be used against you. Do all the criming you want. Go on a rampage of fraud, riot and murder. As long as you avoid attracting law enforcement attention and submit an accurate balance sheet, the IRS has no authority to act.
How would you engage in such a long career of crime without getting pinched by the cops? Ask Trump’s party buddy, Jeffrey Epstein. Or better yet, sit Manhattan DA Cyrus Vance in a room under some hot lights and ask him why he squashed a prosecution against the Trumps in 2012. Americans simply don’t care about crimes committed by the wealthy. Commit those crimes carefully, with a proper accounting, while making friends in key places, and you can do whatever you want in this country.
What this means is that the income and losses from shady deals that funded Trump’s rise, from the money laundering in his casinos to the money laundering through his Panama condos is laid out to the penny in his tax returns. It will be carefully obscured through layers of phony corporations and offshore entities, but in order to continue operating all these years, he had to account for them with reasonable accuracy, and in sufficient detail to tell the story, in his annual tax returns.
Landing in the White House placed Trump in a uniquely vulnerable position. His finances are now open to a kind of public scrutiny never otherwise available. His tax returns would do more than expose his criminal activities, they would shed light on a world of underground finance with powerful implications for the future of democracy. Many in Congress, on both sides of the aisle, have benefited handsomely from this “discreet” economy, growing fantastically and unaccountably wealthy on a lifetime of government salaries while obscuring the source of the money. They are in no hurry for the public to hear the story Trump’s tax returns would tell, but this is the most important story of our time.
What would you see in Donald Trump’s tax returns? It’s important to distinguish what’s reported in returns from what isn’t there. We wouldn’t get a formal statement of his net worth. Taxpayers only report income and losses, not assets. Most importantly, Trump’s tax returns would identity all of the profit/loss creating entities in which he has an interest, for a given year. That’s huge, though at first it would present a daunting tangle of shells and dodges.
To get a sense of how his tax returns might be laid out, it might be helpful to review how money laundering works. For a specific example, let’s walk through the structure of one of Trump’s most well-known money laundering enterprises, his condo project in Panama, known affectionately as “Narco-Lago.”
How do you launder money via real estate? You start with money that has an incriminating source, money you got from stealing or killing or running drugs or whatever. In the case of Trump and the Russians, that “whatever” is mostly either funds subject to US government sanctions, or money being looted from Russian companies.
You take that money to a place like Cyprus, where banks run by people like US Commerce Secretary Wilbur Ross will deposit it without asking too many questions. Next, you need to obscure the source and ownership of that money. For that, you might utilize the services of incorporation factories run by Cypriot lawyers who will manufacture a dozen or so corporate entities for you, even providing dummy board members. That process was described in detail in the indictments against Paul Manafort and Rick Gates. Those companies own each other in a complex web. The money you brought in your suitcase is split up among these entities, each with their own accounts in Wilbur Ross’ crooked, but legal bank.
Now you need to get those assets out of Cyprus (or Antigua or Jersey or the Virgin Islands) into a stable economy where there are assets worth owning. If you’re only trying to bring a million or so at a time into the US or Europe, then simply buying an expensive house, funded by checks from your businesses’ accounts in Ross’ bank, might do. But when you have $50m you need to move quickly before you’re caught you don’t have time to engage in dozens of real estate transactions, each carefully massaged to escape reporting requirements. You need to deal with a pro, someone who understands your particular needs and is sympathetic to your specialized payment arrangements. This is where you need Donald Trump.
Donald Trump has been laundering money for at least three decades, since he was prosecuted for it in New Jersey in 1993, right up to cases in 2015. In a career dominated by disasters wrought by his ego and stupidity, money laundering is the only business he’s ever run successfully. If you wanted to build a money laundering machine, it might look like the Trump Ocean Club built in Panama City in 2011, Trump’s first international venture.
From the beginning, ownership of the business was shady. Trump claimed ownership on loan applications while denying it elsewhere. The actual ownership remains obfuscated. Panama was an easy choice of location, as it had developed an entire industry laundering criminal money from its dodgy neighbors.
Ivanka Trump worked with Alexandre Ventura Nogueira to manage condo sales. He used his connections with mafiosi in Colombia and Russia to set up a sophisticated condo-flipping factory, laundering money from illegal activities through the President’s first semi-successful overseas venture. Several of the early tenants are now on the run or in prison.
The Ocean Club was a one-stop shop for all your money laundering needs. From Pro Publica:
Several aspects of the Panama sales raised red flags, according to experts. For example, some buyers bought blocks of units. Purchases were typically made anonymously through shell corporations registered in Panama. That allowed some buyers to change the ownership of the unit in secret, simply by changing the ownership of the company. They often used so-called bearer shares, allowing a stake in a company to be transferred simply by passing a piece of paper.
Lots of buyers were profiting handsomely from rapid flips of condos, but not the ordinary suckers who bought condos intended to actually live there. Most of the residents contacted by reporters described the property as a loss. In fact several have sued. The best way to make money on this sham project was to be in on its real purpose.
Keep in mind, money launders aren’t looking for a profit. They expect to pay a premium for the service of having their money legitimized. If they buy 20 Trump condos for $20m worth of compromised money and sell them for $19m in fully legitimate US currency, they’re pretty happy. Those wealthy rubes who bought a condo at the Ocean Club because they thought they were making a smart, exciting real estate investment were understandably perplexed, but the Trump Org doesn’t need them. They are useful to provide a minimal sheen of legitimacy for the project, but attracting too many of them would have caused trouble. The Ocean Club wasn’t a building, it was a giant financial washing machine.
Nogiera was indicted for activities with the Trumps in Panama. He has fled and his whereabouts are uncertain.
The Trumps would repeat this model several times over. They even copied the whole vagina-themed architecture of the Ocean Club for their phony tower development in Baku, Azerbaijan, where Trump helped launder money from the sanctioned terrorists in the Iranian Revolutionary Guard.
So, what will Trump’s money laundering business in Panama look like in his tax returns?
For starters, if the returns went back long enough they would reveal the truth behind Trump’s lies about their ownership interests in the project. Chances are, three or four shells deep, there’s a corporate entity paying revenues back to the Trumps with a significant ownership stake in the building. That’s why Ivanka seemed to be working non-stop promoting the project even though the family claimed to have only received branding royalties.
What would Trump’s interest in the Panama project look like on his tax returns? He has probably created hundreds of corporate entities which will report profits or losses back to him personally. None of them will have a name that clearly states their purpose. From 2008 on, there are probably half a dozen or more of them each year tied to that project. What will appear on his return is a Schedule C for a company name, probably no more descriptive than “DJT Ltd3,” attached to a reported profit or loss, or perhaps a Schedule E for real estate trusts, depending on what that entity is doing.
Addresses for most of these businesses are likely empty storefronts or a lawyer’s office, but those entities must have some form of a human board and owner somewhere. Those third-parties who are standing in as dummy board members are the family’s first vulnerability.
What purpose do these shell companies serve? One entity might be used to skim money from payments to contractors by acting as general contracting partner, similar to the scam by which Trump forces the Secret Service to pay him for protecting him. Another might be a real estate trust Trump shares with others, which holds the land. Others might hold the property management entity and still others might be profiting, or reporting paper losses, from lending money to the rest of the Trump entities. That money isn’t repaid and eventually gets written off as a loss.
Shell companies can make it time consuming and tedious to track down the original source of money in a transaction, but it rarely makes it impossible. For the purpose of IRS reporting, you just need a sheen of legitimacy, not deep cover. If the names, addresses, and apparent ownership of the entities that produce Trump’s income were available to journalists, we’d know the truth about his life story in a few weeks.
All we’ll see at first in the returns is the names of these shells. But once we have the names, we can start to assemble the relationships. And when that map of relationships is in the open, further inquiries into those layers of companies can fill out the rest of the picture.
We’d see fairly quickly how much money had flowed through his companies from Russian sources, with dates, and we’d learn the identity of those sources, at least by their official business names. We’d see where Trump got the money he needed in the period from 2008-2013 to go on a cash buying spree while all of his businesses were up in flames. Teasing a coherent story from the tangled trail of those returns would be like weaving a sweater from a soggy clump pulled from a prison shower drain, but those returns are the only place we’ll learn the truth.
But wait, tax returns submitted to Congress under its subpoena power are supposed to be confidential. How would we ever learn what was in them? There’s a provision in the law pertaining specifically to whistleblowers who gain access to returns through Congressional disclosure:
Any person who otherwise has or had access to any return or return information under this section may disclose such return or return information to a committee referred to in paragraph (1) or any individual authorized to receive or inspect information under paragraph (4)(A) if such person believes such return or return information may relate to possible misconduct, maladministration, or taxpayer abuse.
Why does this matter? Can’t we just vote him out of office next year and be done with this disaster? No. This problem is much bigger than Donald Trump, and it will only grow until we confront the cancer.
Unfortunately, few in the public recognize the vital importance of the story in Trump’s tax returns. By exposing the cash flows that led Donald Trump from reality TV to the White House, we’ll do more than wreck his empire. We’ll finally see how the networks that really influence our political system operate.
It’s not campaign contributions that make our system run. It’s the shadow money, flowing through shell companies and undisclosed transactions that deliver real power in our system. If we fail to seize this opening for daylight, the darkness may last a very long time.
I’ve been meaning to respond to your fantastic previous post about financial corruption in both parties (I wouldn’t mind subpoena’ing Pelosi and Diane Feinsten’s financial records too).
But one question I have: what happened to the Panama Papers? That was supposed to blow open this whole financial underworld, and even touched David Cameron (via his father). And then, suddenly, no one talks about the records anymore.
I fear the same thing might happen to Trump’s records even if they’re incriminating stuff.
I can’t speak for the US, but here in Europe, Brexit and Orban happened, and it distracted everyone.
I’m not a conspiracy theorist. I don’t believe that Brexit was done as an intentional distraction from the Panama Papers. However, if you asked me six months ago whether all the important people in Anglophone countries were members of a secret paedophile cabal, I would also have disbelieved it, so bear in mind that I’ve been wrong before.
Norway and Tax Returns being “Public Documents” looks better and better!
The IRS is NOT PERMITTED to tell law enforcement about criminal behaviour
How in the name of the wee hairy one did that come to be!!!!
Privacy is the value behind that policy. And of course, on a more pragmatic level, your goal in tax accounting is to collect taxes, not create a national super-narc looking over everyone’s shoulder. If you want people to voluntarily participate in an income reporting regimen, you want to make it as targeted and limited as possible.
It should probably be easier for law enforcement to gain access to tax returns, but I think keeping the IRS out of the law enforcement business also probably makes sense.
Consider, if you will, what will happen if the IRS is required to cooperate with law enforcement: they will also be used to locate undocumented Americans for deportation.
they will also be used to locate undocumented Americans for deportation.
Why would that be a problem??
Personally I would go the way every other country does – LARGE fines and jail time for the employers
“Privacy” – always means the right to diddle people out of THEIR property
There’s a thought that’s been rattling around my head for a while now, seeing your most recent articles. This is not fully formed yet but I’ll throw it out there nonetheless, and see if it works.
When talking to anarchists, people often say “sure your ideas work in theory, but where have they been implemented in practise?” The anarchists will reply with Catalonia and the Free Territory and Rojava, all of which flourished under anarchism. The first two, as we all know, were brutally stomped by totalitarian militarists, which we hope is not the fate of the third but may well be.
When talking to communists, people often say “sure your ideas work in theory, but where have they been implemented in practise?” The communists will reply with Lenin and Mao and Castro, all of whom succeeded in taking over a country and then, as we all know, became horrific dictators.
In other words, while being conquered is not part of anarchist theory, and becoming a brutal dictatorship is not part of communist theory, these properties are observed whenever they exist in real-world conditions; and it is both tiresome and disingenuous when anarchists and communists pretend that this is not the case, or might not be the case in future. It is not quite bad faith in their part to believe that it might be different next time, not quite; but it is certainly bad faith to act surprised when other people suggest this.
When talking to laissez-faire capitalists, it is often tempting to ask, “Sure, your ideas work in theory, but where have they been implemented in practise?” The capitalists will reply with gilded-age America, empire-era Britain, or 90s Russia. (Pinochet’s Chile will probably not, for some reason, be mentioned.) Something that all of these had in common is that the democratic and legal processes ended up for sale, and the states became plutocracies.
While becoming a plutocracy is not an inherent part of laissez-faire capitalism, I feel that the same principle can apply as with communism and anarchism.
Chris, I know you’ve moved dramatically across the political spectrum in recent years; do you think it’s fair to argue that people who believe in laissez-faire capitalism should not be surprised to discover that plutocracy occurs?
****do you think it’s fair to argue that people who believe in laissez-faire capitalism should not be surprised to discover that plutocracy occurs?***
Unfortunately, yes. Earlier in life I thought that the beautiful chaos of democracy could be counted on to operate in tandem with markets to check that tendency toward plutocracy. There may be some truth to that, as demonstrated by the US experience in the 1930s, but it looks like it only follows catastrophes and is usually accompanied by war, which is perhaps just another way of saying that it fails.
Thank you. You are, and remain, one of the most relentlessly honest people I know.
Chris, when will the tax returns become public?
Chances are we’ll never see them.
Trump will stall their release with lawsuits, and Congress won’t use their power to make that expensive or difficult, because they aren’t all that interested. He’ll lose in 2020, and with impeachment off the table the lower courts will claim that the question is moot. Congress will let it go in the spirit of “looking forward to the future.”
Why do you think he is going to lose?
Things like this cement my opinion that the tyrant will not lose. It is not officially a free-for-all when it comes to election spending, and this story will get very little play.
https://www.politico.com/story/2019/08/26/2020-campaign-finance-enforcement-resignations-1475596
When was the last time the FEC did anything that mattered? They’ve never been anything more than a nag, perched up there to create the appearance of some form of restraint.
Let’s look beyond the FEC. Let’s look at ourselves. Do any here believe things are not getting worse? Should any of us be confident that this cretin will not be re-elected? Are we individually and collectively doing all we can do to change the hideous track we are on?
Change is not going to happen because it is right or moral. I believe to my core that trump and those other dark forces aiding and inspiring him have every intention of fundamentally, radically changing our democratic form of government.
We need to open our minds and hearts to the horrors that are happening principally to our minorities and underprivileged and contemplate if we will tolerate this.
After all, history is replete with vile, hideous examples of man’s cruelty to others. Are we so privileged that we really think we won’t be next?
President George W. Bush’s chief speechwriter, Michael Gerson, has a message for people who are excusing President Trump’s racism:
“I had fully intended to ignore President Trump’s latest round of racially charged taunts against an African American elected official, and an African American activist, and an African American journalist and a whole city with a lot of African Americans in it. I had every intention of walking past Trump’s latest outrages and writing about the self-destructive squabbling of the Democratic presidential field, which has chosen to shame former vice president Joe Biden for the sin of being an electable, moderate liberal.
But I made the mistake of pulling James Cone’s ‘The Cross and the Lynching Tree’ off my shelf — a book designed to shatter convenient complacency. Cone recounts the case of a white mob in Valdosta, Ga., in 1918 that lynched an innocent man named Haynes Turner.
Turner’s enraged wife, Mary, promised justice for the killers. The sheriff responded by arresting her and then turning her over to the mob, which included women and children. According to one source, Mary was ‘stripped, hung upside down by the ankles, soaked with gasoline, and roasted to death. In the midst of this torment, a white man opened her swollen belly with a hunting knife and her infant fell to the ground and was stomped to death.’
God help us. It is hard to write the words. This evil — the evil of white supremacy, resulting in dehumanization, inhumanity and murder — is the worst stain, the greatest crime, of U.S. history. It is the thing that nearly broke the nation. It is the thing that proved generations of Christians to be vicious hypocrites. It is the thing that turned normal people into moral monsters, capable of burning a grieving widow to death and killing her child.
When the president of the United States plays with that fire or takes that beast out for a walk, it is not just another political event, not just a normal day in campaign 2020.
It is a cause for shame. It is the violation of martyrs’ graves. It is obscene graffiti on the Lincoln Memorial. It is, in the eyes of history, the betrayal — the re-betrayal — of Haynes and Mary Turner and their child. And all of this is being done by an ignorant and arrogant narcissist reviving racist tropes for political gain, indifferent to the wreckage he is leaving, the wounds he is ripping open.
Like, I suspect, many others, I am finding it hard to look at resurgent racism as just one in a series of presidential offenses or another in a series of Republican errors. Racism is not just another wrong. The Antietam battlefield is not just another plot of ground. The Edmund Pettus Bridge is not just another bridge. The balcony outside Room 306 at the Lorraine Motel is not just another balcony. As U.S. history hallows some causes, it magnifies some crimes.
What does all this mean politically? It means that Trump’s divisiveness is getting worse, not better. He makes racist comments, appeals to racist sentiments and inflames racist passions. The rationalization that he is not, deep down in his heart, really a racist is meaningless. Trump’s continued offenses mean that a large portion of his political base is energized by racist tropes and the language of white grievance. And it means — whatever their intent — that those who play down, or excuse, or try to walk past these offenses are enablers.
Some political choices are not just stupid or crude. They represent the return of our country’s cruelest, most dangerous passion. Such racism indicts Trump. Treating racism as a typical or minor matter indicts us.” — Michael Gerson
should this read “without asking”?
You take that money to a place like Cyprus, where banks run by people like US Commerce Secretary Wilbur Ross will deposit it “with asking” too many questions.
Many thanks. Updated.
Any predictions Chris on how these efforts to obtain t’s tax records will turn out? What about the NY State D.A.? She seems pretty determined and has been notching some wins on her efforts to gain access to his tax records.
Here is a link to Law.com New York Law Journal.
The NY State Attorney General is attempting to get Trump’s lawsuit to prevent Congress from receiving his NY Sate returns either dismissed or moved from the DC court to the Southern District of New York. The motions both to dismiss or change the venue are being heard Friday August 29th.
Chris excellent piece and the examples well documented. I never understood why there was so little press coverage of the Baku debacle…though there was mainstream press on the Panama condos. Maybe the problem is the story is a little complicated to tell and we as a nation don’t read and write at grade level like we used to or, we have the attention span of a 2 year old? In either case if I bring this stuff up with friends or family they just stare at me like I am some left wing conspiracy nut. The more polite response is, “I haven’t seen anything on that”.
I studied physics and mathematics. My friends thought I was some sort of occult practitioner, messing around in the secrets of the universe.
That’s the way I feel about forensic accountants. They have to combine the patience of a tortoise, the intellect of a Steven Hawking, and the puzzle-solving abilities of a Rubix-cube savant.
I tip my cap to them in advance if they can untangle this web.
I used to have more confidence in the NYSD attorneys office. Not now. Not with Barr presiding over our justice system.
Nogiera
Noriega?
Alexandre Ventura Nogueira
I have to wonder how many ‘suicides’ and ‘accidents” we’ll see result from this. I have a feeling Epstein was just a preview