Four Donald Trump-licensed real-estate developments are at the center of a huge income tax evasion scheme, according to allegations in a lawsuit unsealed Thursday afternoon by a judge in Manhattan.
The presumptive Republican nominee is not personally accused. He is described as a "material witness" in the evasion of taxes on as much as $250 million in income. According to the court papers, that includes $100 million in profits and $65 million in real-estate transfer taxes from a Manhattan high rise project bearing his familiar name.
However, his status may change, according to the lawyers who filed the lawsuit, Richard Lerner and Frederick M. Oberlander, citing Trump's testimony about Felix Sater, a convicted stock swindler at the center of the alleged scheme.
Trump received tens of millions of dollars in fees and partnership interests in one of the four projects, the Trump Soho New York, a luxury high rise in lower Manhattan. His son Donald Junior and his daughter Ivanka also were paid in fees and partnership interests, the lawyers said, and are also material witnesses in the case.
Trump and Sater traveled extensively together and were photographed and interviewed in Denver and Loveland, Colorado, Phoenix, Fort Lauderdale, and New York. The two Trump children were also with Sater in Moscow, Alan Garten, the Trump Organization general counsel, has said.
Trump has testified about Sater in a Florida lawsuit accusing the two of them of fraud in a failed high-rise project. Trump testified that he had a glancing knowledge of Sater and would not recognize him if he were sitting in the room.
Sater controlled an investment firm named Bayrock, with offices in Trump Tower, and sought to develop branded Trump Tower luxury buildings in Moscow and other cities. Court papers show his salary in 2006 was $7 million, but it alleges that was a pittance compared to his real income.
Sater then moved into the Trump Organization offices. He carried a business card, issued by the Trump Organization, identifying him as a "senior adviser" to Trump.
The tax fraud lawsuit included 212 pages of documents, among them a flow chart that the plantiff claims showed how the scheme worked. The lawsuit alleges the tax fraud scheme as simple, telling the judge "there need be no fear of complexity, for there is none."
The four developments were all handled as partnerships. Partnerships are not taxed and are rarely audited because the profits are supposed to be reported as going to the partners personally. The lawsuit says the profits simply were not reported when Sater and others took their partnership profits and other income from the deals.
The state tax fraud lawsuit is known as a qui tam case in which citizens file as private attorneys general on behalf of the government. In effect Lerner and Oberlander are acting as prosecutors in the alleged tax fraud.
Eric Schneiderman, the New York State attorney general, learned of the case soon after it was filed in state court last August and declined to intervene. His office confirmed that stance Thursday after the lawsuit was unsealed.
The suit says Sater and other defendants owe at least $7 million in New York state income taxes, a sum that would be tripled if they prevail.
If the federal government were to intervene the federal taxes would come to about $35 million.