NY Attorney General Green Lights $250 Million Tax Fraud Prosecution of Trump Projects

NEW YORK, July 14, 2016 /PRNewswire/ -- The following statement is being issued by attorneys Frederick M. Oberlander and Richard E. Lerner:

A Manhattan judge has unsealed a civil tax fraud case brought in behalf of New York State against associates of Donald Trump. The suit accuses convicted racketeer and Felix Sater, Bayrock Group, and prominent law firms of conspiring to launder as much as $250 million dollars of profit on Trump projects Bayrock was co-developing out of the country in a scheme to evade $100 million dollars of state and federal income tax. It alleges that Bayrock -- aided by law firms Kramer Levin, Roberts & Holland, and Duval & Stachenfeld – brought a foreign partner into the projects but then hid it behind a Delaware shell company and further disguised the transaction so wholesale transfers of profits corruptly headed overseas to that partner would falsely appear to be debt repayments to a U.S. lender. Defendant Nixon Peabody is charged with facilitating a separate multimillion withholding tax fraud by disguising Sater as a salaried employee to help hide the fact that he owned much of Bayrock.

At this time Mr. Trump is a material witness. Initial investigation of the case uncovered no evidence that he was culpable, as the papers themselves, written some time ago, state. However, in the time since it was filed, especially as a result of media interest, new, relevant Trump and Bayrock information has surfaced, from sources including Mr. Trump himself, which may significantly change that calculus.

For a PDF of the lawsuit and more information go to www.BayrockTaxFraudLawsuit.com

The People of the State of New York ex rel. the Bayrock Litigation Partnership v. Bayrock et al., NY Supreme Court, NY County, No. 101478/2015, is being civilly prosecuted under New York's qui tam law, which authorizes the Attorney General, after investigating a complaint, to assign the State's claims to the whistleblowers, or "relators," who filed it. These relators then litigate in the name of the state as "private attorneys general" and share in any recovery. The relator is represented by attorneys Frederick M. Oberlander and Richard E. Lerner. They are prosecuting the action in New York State Supreme Court, New York County, before Judge James d'Auguste.  By law, the case had been kept under seal since it was filed until Judge d'Auguste ordered it unsealed last week and it appeared on the court's docket on Monday.

Mr. Oberlander said of the suit: "This is an important case because it not only exposes how Bayrock, while developing Trump SoHo in New York, Trump International in Fort Lauderdale, and Trump Camelback in Phoenix in association with Mr. Trump, took advantage of Delaware secrecy to arrange to siphon most of the profits out of the country untaxed, it also exposes how major law firms were willing to facilitate it."

Mr. Lerner said: "Mr. Trump gave his consent to the transaction after receiving a full set of documentation which made clear that without it the deal would not go through. The extent of his involvement and any culpability will become clear in the course of the case. At this time, it seems that he benefited indirectly as a partner alongside Sater and Bayrock."

Mr. Lerner was referring to the fact that, in addition to promises of future fees, Bayrock had given Trump, his son Donald Jr., and his daughter Ivanka partnership interests in Trump SoHo then worth tens of millions of dollars to secure Trump's participation, and those interests indirectly benefited economically because the scheme allowed Bayrock to keep on hand $20 million it otherwise would have had to pay out for taxes. That extra cash was then available to use to help the Trump projects if necessary, including Trump SoHo.

It is believed that Mr. Trump did not report his receipt of those Trump SoHo partnership interests on his tax returns, despite their multimillion dollar value, by taking advantage of the same legal "carried interest" tax loophole that he has himself publicly denounced.

SOURCE Frederick M. Oberlander and Richard E. Lerner