How Donald Trump Shifted Kids-Cancer Charity Money Into His Business

[Leroy N. Soetoro]

How Donald Trump Shifted Kids-Cancer Charity Money Into His Business

LIKE AUTUMN LEAVES, sponsored Cadillacs, Ferraris and Maseratis descend on
the Trump National Golf Club in Westchester County, New York, in September
for the Eric Trump Foundation golf invitational. Year after year, the
formula is consistent: 18 holes of perfectly trimmed fairways with a dose
of Trumpian tackiness, including Hooters waitresses and cigar spreads,
followed by a clubhouse dinner, dates encouraged. The crowd leans toward
real estate insiders, family friends and C-list celebrities, such as
former baseball slugger Darryl Strawberry and reality housewife (and
bankruptcy-fraud felon) Teresa Giudice.

The real star of the day is Eric Trump, the president's second son and now
the co-head of the Trump Organization, who has hosted this event for ten
years on behalf of the St. Jude Children's Research Hospital in Memphis.
He's done a ton of good: To date, he's directed more than $11 million
there, the vast majority of it via this annual golf event. He has also
helped raise another $5 million through events with other organizations.

The best part about all this, according to Eric Trump, is the charity's
efficiency: Because he can get his family's golf course for free and have
most of the other costs donated, virtually all the money contributed will
go toward helping kids with cancer. "We get to use our assets 100% free of
charge," Trump tells Forbes.

That's not the case. In reviewing filings from the Eric Trump Foundation
and other charities, it's clear that the course wasn't free--that the
Trump Organization received payments for its use, part of more than $1.2
million that has no documented recipients past the Trump Organization.
Golf charity experts say the listed expenses defy any reasonable cost
justification for a one-day golf tournament.

Additionally, the Donald J. Trump Foundation, which has come under
previous scrutiny for self-dealing and advancing the interests of its
namesake rather than those of charity, apparently used the Eric Trump
Foundation to funnel $100,000 in donations into revenue for the Trump
Organization.

And while donors to the Eric Trump Foundation were told their money was
going to help sick kids, more than $500,000 was re-donated to other
charities, many of which were connected to Trump family members or
interests, including at least four groups that subsequently paid to hold
golf tournaments at Trump courses.

All of this seems to defy federal tax rules and state laws that ban self-
dealing and misleading donors. It also raises larger questions about the
Trump family dynamics and whether Eric and his brother, Don Jr., can be
truly independent of their father.

Especially since the person who specifically commanded that the for-profit
Trump Organization start billing hundreds of thousands of dollars to the
nonprofit Eric Trump Foundation, according to two people directly
involved, was none other than the current president of the United States,
Donald Trump.

IN ORDER TO understand the Eric Trump Foundation, you need to understand
the Donald J. Trump Foundation. The president was never known for giving
his foundation much money, and from 2009 to 2014, he didn't give it
anything at all. Outsiders still donated, though, allowing Trump to dole
out their money to a smattering of more than 200 charities as if it were
his own, with many of the donations helping his business interests.

Eric Trump set out to do things differently. Coming out of Georgetown, he
decided he would try to translate the good fortune he had inherited into
support for children's cancer research. Why this cause, especially for a
guy who still doesn't have kids? "It's a great question--it's one that
I've been asked before--and I'm not really sure," he says. "I think there
is something about that innocence that has always affected me." After
visiting various hospitals, he chose to give to strength, St. Jude, the
world's best-known pediatric cancer center.

Eric Trump set up his foundation as a public charity, a classification
that allows it to raise most of its money from outside donors. In 2007,
when he was 23, the first Eric Trump golf tournament took place, raising
$220,000. A compelling sales pitch evolved--the free golf course and the
donated goods and services assured donors that every penny possible went
to charity. The Eric Trump Foundation employed no staff until 2015, and
its annual expense ratio averaged 13%, about half of what most charities
pay in overhead. His original seven-person board was made up of personal
friends, an innocuous lot who helped sell tournament tickets, which last
year ranged from $3,000 for a single all-day ticket to $100,000 for a pair
of VIP foursomes.

For the first four years of the golf tournament, from 2007 to 2010, the
total expenses averaged about $50,000, according to the tax filings. Not
quite the zero-cost advantage that a donor might expect given who owned
the club but at least in line with what other charities pay to host
outings at Trump courses, according to a review of ten tax filings for
other charitable organizations.

But in 2011, things took a turn. Costs for Eric Trump's tournament jumped
from $46,000 to $142,000, according to the foundation's IRS filings. Why
would the price of the tournament suddenly triple in one year? "In the
early years, they weren't being billed [for the club]--the bills would
just disappear," says Ian Gillule, who served as membership and marketing
director at Trump National Westchester during two stints from 2006 to 2015
and witnessed how Donald Trump reacted to the tournament's economics. "Mr.
Trump had a cow. He flipped. He was like, 'We're donating all of this
stuff, and there's no paper trail? No credit?' And he went nuts. He said,
'I don't care if it's my son or not--everybody gets billed.' "

Katrina Kaupp, who served on the board of directors at the Eric Trump
Foundation in 2010 and 2011, also remembers Donald Trump insisting the
charity start paying its own way, despite Eric's public claims to the
contrary. "We did have to cover the expenses," she says. "The charity had
grown so much that the Trump Organization couldn't absorb all of those
costs anymore." The Trump Organization declined to answer detailed
questions about the payments. But it seems that for the future president,
who Forbes estimates is worth $3.5 billion, a freebie to help his son
directly fight kids' cancer took a backseat to revenue.

"I saw that Eric was getting billed," Gillule adds. "I would always say,
'I can't believe that his dad is billing him for a charitable outing.' But
that's what they wanted."

It's also very consistent. The Donald J. Trump Foundation famously acted
like an arm of the overall business, using the charity's money to settle a
Trump business lawsuit, make a political donation and even purchase
expensive portraits of its namesake. Meanwhile, Trump businesses billed
the Trump campaign, fueled by small outside donors, more than $11 million
to use his properties, chefs and private aircraft.

At first the extra bills did not cost the Eric Trump Foundation anything.
Shortly before the spike in costs, the Donald J. Trump Foundation donated
$100,000 to the Eric Trump Foundation--a gift explicitly made, according
to Gillule, to offset the increased budget. Thus, the Eric Trump donors
were still seeing their money go to work for kids along the same lines as
previous years.

The Eric Trump Foundation declined to comment on that donation. In effect,
though, this maneuver would appear to have more in common with a drug
cartel's money-laundering operation than a charity's best-practices
textbook. That $100,000 in outside donations to the Donald J. Trump
Foundation (remember: Trump himself didn't give to his own foundation at
this time) passed through the Eric Trump Foundation--and wound up in the
coffers of Donald Trump's private businesses.

"His father, Mr. Trump, always, until the presidency, had a very, very
tight rein on what was going on," says Gillule, referring to the company's
golf courses. "The buck always stopped with him."

THE COSTS FOR ERIC'S golf tournament quickly escalated. After returning,
in 2012, to a more modest $59,000--while the event brought in a record $2
million--the listed costs exploded to $230,000 in 2013, $242,000 in 2014
and finally $322,000 in 2015 (the most recent on record, held just as
Trump was ratcheting up his presidential campaign), according to IRS
filings. This even though the amount raised at these events, in fact,
never reached that 2012 high.

It's hard to find an explanation for this cost spike. Remember, all those
base costs were supposedly free, according to Eric Trump. The golf course?
"Always comped," he says. The merchandise for golfers: "The vast majority
of it we got comped." Drinks: "Things like wine we were normally able to
get donated." And the evening performances from musicians like Dee Snider
of Twisted Sister and comedians like Gilbert Gottfried: "They did it for
free." So many sponsors donated, in fact, that the event invitation has
carried enough logos to make a Nascar team proud.

Eric Trump, in speaking with Forbes, maintains that "our expenses on a
tournament that made us somewhere in the $2 million range every year was
somewhere around 100 grand," even though his foundation's tax records show
costs soaring to $322,000. When asked for an itemized list of expenses,
the Eric Trump Foundation declined to respond.

Thus it's hard to figure out what happened to the money. All the listed
costs are direct expenses: Items like overhead and salaries appear
elsewhere in its IRS filings. Even if the Eric Trump Foundation had to pay
the full rate for literally everything, Forbes couldn't come up with a
plausible path to $322,000 given the parameters of the annual event (a
golf outing for about 200 and dinner for perhaps 400 more). Neither could
golf tournament experts or the former head golf professional at Trump
National Westchester. "If you gave me that much money to run a tournament,
I couldn't imagine what we could do," says Patrick Langan, who worked at
the club from 2006 to 2015. "It certainly wasn't done that way."

Opaque accounting doesn't help, as the Eric Trump Foundation began hosting
a few other golf events and fundraisers; former board member Kaupp says
some were lumped into the cost figures of the Westchester event on the IRS
filings. Hundreds of thousands of dollars over this time went directly to
the Trump Organization, including one payment of $87,000 to Trump's golf
course in Washington, D.C., which hosted a separate event for St. Jude.

For his part, Eric Trump offers no indication that the charity is paying
for much beyond the day in Westchester. "I'm sure if I hunted, I could
find examples of expenses associated with the charity that aren't due to
day-of activities," he says. "But I would probably have to think pretty
long and hard about that."

IT DOESN'T SEEM A COINCIDENCE that at the same time the Eric Trump
Foundation went from what appeared to be a clean, efficient operation to a
seemingly Byzantine one that suddenly found itself saddled with costs,
there was a clear shift of control.

In 2010, the year the economics of the tournament suddenly pivoted, four
of the seven original board members, who were personal friends of Eric,
left. Those 4 were eventually replaced by 14 new board members, the
majority of whom owed all or much of their livelihoods to the Trump
Organization. Six of them were effectively full-time employees, including
Trump lawyer Michael Cohen and executive vice president Dan Scavino Jr.,
who both serve in political roles for President Trump. Another owns a
company that billed the Trump campaign $16 million. Add in Eric himself,
as well as his wife, Lara, and 9 of the 17 Eric Trump Foundation board
members had a vested interest in the moneymaking side of the Trump empire.
The foundation had become a de facto subsidiary of the Trump Organization.

"They were wearing two hats," says Langan, the former director of golf,
who says he sat in on meetings where he couldn't tell where the business
ended and the charity began. "You're dealing with people talking about the
event and the charity who also at the same time are thinking about it as a
corporation and as a business. It's a for-profit club. You know, they're
trying to make money."

Until this board turnover, the Eric Trump Foundation pretty much did what
it told its donors it would: send its money to St. Jude. But starting in
2011, more than $500,000 was redirected to a variety of other charities,
many of which were personal favorites of Trump family members and several
of which had nothing to do with children's cancer--but happened to become
clients of Trump's golf courses.

In 2012, the Eric Trump Foundation sent $5,000 to a charity called Abilis,
which provides services to people with disabilities. That same year,
Donald Trump's nephew Fred Trump, whose son has cerebral palsy, hosted the
inaugural Golf for Abilis fundraiser at the Trump National Westchester.
Over the next five years, Abilis spent an estimated $240,000 hosting
tournaments at the property.

In 2013 and 2014, the Eric Trump Foundation paid $15,000 for tables at a
gala for the Little Baby Face Foundation, according to a spokesman for the
latter foundation. Over the next three years, Little Baby Face spent an
estimated $100,000 to hold golf outings on the Trump course. The
foundation denies any direct connection between the two transactions.

Janet McHugh, the founder of a small charity named Julie's Jungle, was
delighted to receive $25,000 in total donations from the Donald and Eric
Trump foundations in 2013--money she figured came from Eric and Donald
Trump personally. Two years later, her charity hosted a golf tournament at
Trump National Hudson Valley. McHugh says the decision to hold her
tournament there was unrelated to the donation. "They didn't comp us the
golf course," she says. "We paid."

Altruism as a business-development strategy isn't necessarily illegal. But
a situation in which outside donor money is redeployed away from the core
mission in ways that seem to ultimately benefit the family that pays the
majority of the board is--at best--an appearance problem.

Other extra expenditures raise eyebrows. In 2013, for example, Eric Trump
used his foundation's money, rather than his own, to pay $1,600 to the
American Society for Enology & Viticulture for a copper wine still and an
antique bottle washer at a trade event and fundraiser that he was
keynoting. Eric runs the family vineyard in Charlottesville, Virginia,
about an hour down the road from where the event took place. "I have no
idea what that is," says Eric Trump, referring to the payment.

In 2012, the Eric Trump Foundation wrote a check for $25,000 to the George
Rodrigue Foundation of the Arts. That same year, George Rodrigue, who had
said that his famous "blue dog" paintings sometimes sold for about
$25,000, created a portrait of Donald Trump for the auction at Eric's
event. That portrait ended up hanging over the couch in Eric Trump's
house, where he was photographed sitting beneath it two years later.

Perhaps Eric bought the painting for himself at the auction or on the
aftermarket. Perhaps Rodrigue gave or sold him a copy. What does Eric say
about the donation? "Let's follow up later on," he replies, when asked
about it in a phone call, before getting off the line.

Later the next day, after being told Forbes had several other questions,
he sent a paragraphs-long text message, which read in part: "I was
reflecting on it last night and have to say I was really disappointed when
you said the story would be 'fair.'... It seems like there is a motive
against either myself or my family. And if that is the case, I would
simply rather disengage." A spokesperson for the Trump Organization
similarly declined to respond further to questions about Eric and Donald
Trump.

THE ULTIMATE TRAGEDY HERE is that the Eric Trump Foundation has done so
much good. Yes, Eric has indulged in the family trait of vainglory, from
Eric Trump bobblehead dolls at the tournament to statements that leave the
impression he's giving the money personally, even though tax records
suggest he's donated six figures total, at most. (Trump wouldn't tell
Forbes how much he's given to his own foundation. "I think it's totally
irrelevant," he says, citing the fact that "we never charge" for use of
the courses.) But in 2015, a new intensive-care unit at St. Jude opened
with Eric Trump's name on it, and the foundation's money has funded
research into a rare form of cancer.

It's hard to imagine how the early incarnation of the golf tournament--big
hauls, understandable costs--would have any problem continuing to spew out
millions for years to come. Last year, the Eric Trump Foundation donated
$2.9 million, according to St. Jude.

But in December, Eric Trump said he would stop fundraising. Running an
event with an increasing commingling of business and philanthropy created
the kind of conflict-of-interest (not to mention image) concerns that
similarly plagued Ivanka Trump's aborted attempt to auction off a coffee
date on behalf of Eric's foundation.

More recently, the foundation has rebranded itself as Curetivity. A
spokeswoman for the organization said it would continue hosting golf
tournaments to raise money for St. Jude. A Curetivity event was held this
past May outside Washington, D.C., with Eric Trump in attendance, at the
Trump National course.



https://www.forbes.com/sites/danalexander/2017/06/06/how-donald-trump-
shifted-kids-cancer-charity-money-into-his-business/#67e7b5d36b4a

[Leroy N. Soetoro]

[Leroy N. Soetoro]

[Leroy N. Soetoro]

[Leroy N. Soetoro]