The Trump Organization is facing a 10-count indictment. Here’s what it means to criminally charge a company
The Trump Organization, the real estate business owned by Donald Trump that propelled him into the public eye and eventually the White House, was charged Thursday afternoon in a sweeping tax evasion indictment by the Manhattan district attorney’s office for running a 15-year scheme to defraud tax authorities by compensating executives off the books.
New York prosecutors also charged Trump Payroll Corp., and Trump Organization chief financial officer Allen Weisselberg with 15 felony counts in connection with the fraud scheme. Weisselberg, a longtime associate of Trump’s, was accused of evading taxes on $1.7 million that should have been reported as income. The unreported perks included rent for a Manhattan apartment, lease payments for two Mercedes Benz vehicles, and tuition fees for Weisselberg’s grandchildren; many of the checks were signed by Trump himself.
Weisselberg pled not guilty and says he will fight the claims in court.
Lawyers for the Trump Organization, meanwhile, claimed that the president’s company was unfairly targeted because of political bias, and that the matter should have been dealt with by civil tax authorities.
“In our view, this case was brought because the companies’ name is Trump,” wrote lawyers Alan Futerfas, Bettina Schein, and Susan Necheles in a statement. “This case signals that it is now open season for local prosecutors to target federal political opponents and adversaries.”
And while the case could lay the groundwork for further claims against Trump, it does not explicitly implicate him and instead focuses on his corporate entity.
Bringing criminal charges against a corporation is not uncommon in the United States and federal and local prosecutors have a long history of bringing the same charges against companies that they would against individuals, here’s how it works.
A legal precedent
Companies or employers have been held responsible for the actions of their agents since as far back as ancient Rome. The concept, known as respondeat superior, was ingrained into common law and used as a guiding principle for the U.S. justice system, though in early cases, judges tended to side with the employer. But in 1909 a landmark Supreme Court case, New York Central & Hudson River Railroad v. United States changed that line of reasoning.
In that case, a railroad was charged with violating the Interstate Commerce Act by giving certain entities rebates on shipping fees. The company argued that by punishing them the United States was punishing innocent shareholders and the board of directors, none of whom had violated the law. The court rejected the arguments, and said that if a crime consists of purposely breaking laws, corporations must be held responsible for the conduct of their agents, especially if the agents are authorized by the company.
The case of Central Railroad left no question about whether companies could be held liable for a wide variety of crimes. Corporations have since been charged with violation of regulatory statutes, public welfare offenses, and even manslaughter.
A series of Supreme Court cases in the 1980s (United States v. Automated Medical Laboratories, United States v. Cincotta) reaffirmed that companies were to be held responsible for the actions of their employees, even if they were acting as mavericks.
You can’t throw a company in jail
Words matter, and words are law, but they aren’t magical. Calling a corporation a citizen doesn’t give it a physical form that can be jailed, and so when companies are tried, they don’t face the same legal repercussions as a person might. Instead, punishments focus on hefty fines, rulings can change the way a company operates or increase oversight and regulation. In severe cases, a judge can issue punishments that lead to the company being dissolved.
Citizen vs. corporation
Sometimes, it’s clear that a company is in the wrong but the case can’t be traced to one specific person, so prosecutors deem it’s best to keep things broad. This also happens when fraud or illegal activity is so widespread that they decide to charge the entity as a whole.
While prosecutors prefer to charge individuals, targeting a company can have a sweeping effect on an industry that often engages in unlawful behavior and make a larger impact. Charging a company can also lead to cooperation and more information, allowing prosecutors to make additional cases against individuals. It’s likely that the Manhattan district attorney’s office hopes to learn more about Donald Trump’s direct involvement in this tax scheme by trying the Trump Organization as a whole.
In 1999, the Department of Justice issued a detailed memo to all United States Attorneys with guidelines detailing when and how to bring cases against corporations. Factors like the seriousness of the offense, the risk of harm to the public, the corporation’s history, the pervasiveness of wrongdoing, willingness to comply and take remedial actions, and the efficacy of non-criminal remedies are all considered before bringing a case.
The future of the Trump Organization
The 10-count indictment against the Trump Organization and another entity called the Trump Payroll Corporation charged the companies with a scheme to defraud, conspiracy, criminal tax fraud, and of falsifying business records.
The Trump Organization is an umbrella organization for Trump’s various business endeavors. It includes hundreds of companies and partnerships in the real estate business, and in licensing and hospitality enterprises. These include everything from hotels to golf courses to perfumes to bottled water. The case could cause serious financial harm not just by levying hefty fines but also by sullying trust and deals with partners.
The indictment of a company bearing Trump’s name also deals a blow to a potential 2024 presidential run just as the president has resumed his rallies and public appearances.
Trump dismissed the indictment during a Fox News town hall but did not shy away from his personal association with the organization. “New York radical left prosecutors come after me,” he said.
“You got to always fight,” he said. “You got to keep fighting.”
Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.