There have been signs, including a posting on his Twitter-alternative website from the Crook-in-Chief that an arrest was supposed to be about to occur, that Donald Trump may soon be the prisoner in the dock.  Obviously, until charges are filed, any discussion of potential charges are just speculation.  But here is what seems to be in the wind.  And I did postpone writing this to see what might get filed this past week, but, since there is no guarantee about when these charges will come, I decided to go ahead with this post.

Right now, the case that appears on the eve of being filed is from Manhattan County in New York.  These charges arise out of something which is, unfortunately, somewhat common with closely-held corporations — an inability to keep the corporation separate from the person.  Legally, a corporation is a separate legal person from its owners, officers, and employees.  The corporation is legally responsible for paying its own expenses and liabilities.  The personal expenses and liabilities of the employees are supposed to be paid by the employees out of their personal funds.  If the employer covers those expenses, that is considered to be compensation to the employee (or dividends to the owner) which has to be reported to the IRS and state taxing authorities as income for the employee (or income to the owner).  This situation is what got the Trump Organization charged and convicted for benefits that it provided to some of the executives which were included as business expenses (and employee compensation is a business expense) on the corporate returns but not reported as income to the executives.

In Trump’s case, the issue is sexual misconduct by the CEO of the company.  Now, if the company is being sued for sexual harassment of its female employees under Title VII, that is a legitimate business expense.  If the CEO is sued for sexual misconduct in his personal ife, that is not a legitimate business expense, and he should be paying the settlement and the legal expenses out of his personal account.  Complicating the matter for Trump is that these issues arose while Trump was running for office.  That raises the issue of whether the settlements and non-disclosure agreements were for personal reasons — to avoid his spouse learning about his infidelity — or for political reasons — to avoid the public learning that the candidate is a liar and cheat who can’t even keep his wedding vows much less any other promise.   It is clear that there are some fraudulent business records here as Michael Cohen and the women should not have been paid from Trump Organization accounts but whether the offense is a felony or misdemeanor depends upon whether that improper use of corporate funds where for other criminal purposes — namely avoiding tax liability on the part of Donald Trump (if Trump had paid the bills and then taken a draw from the company that would have been income to Trump and the expense would not have been tax deductible) and the Trump Organization (distribution of income by a company is not tax deductible but legal expenses are) or to avoid reporting a campaign expense (if the settlement was designed to avoid the political consequences, it would be considered to be a campaign expense). Continue Reading...