Today, Explained - Take a penny, take a penny

Episode Date: August 29, 2018

New York investigators are turning up the heat on the Trump Foundation this summer. The Washington Post’s David Fahrenthold shares a series of increasingly unbelievable stories about the organization’s shenanigans. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Books are great, but when was the last time you listened to one? Right now, you can get $10 off your first purchase of an audiobook over $10 when you visit g.co slash play slash explained and log in with your Google account. Most reporting, politics and otherwise, you know, you get a lot of tips and most tips don't pan out. You know, you check something out and it turns out that, you know, the person who gave you the tip didn't really understand the full details of the situation or what you thought was really illegal is actually quite legal and very common. You know, there's all kinds of reasons why tips don't pan out. That's just part of reporting is, you know, you chase down a lot of leads that don't go anywhere. The Trump Foundation reporting was different because the success rate was like 100%.

Every time somebody called with, you know, a crazy story about something that happened or every time you found something weird that looked strange in the documents, every time you thought there was something there, there was. I mean, every rock you turned over, there was something underneath it that was sort of newsworthy and worth calling about. I've never had that kind of experience before. A person called me one time out of the blue and said that they knew this story from the mid-'90s

where Trump had once barged into somebody else's charity event and stolen a seat on the stage and sat on the stage as if he had given the charity money during a charity event, even though he'd given them nothing. And I thought at the time, well, that's ridiculous. You know, there's no way that actually happened. Or if it did happen, there's no way I can prove it. And the four phone calls later, I was talking to somebody who was on the stage and watched that very thing happen.

The controversy around the Trump Foundation isn't new. But as the Mueller investigation heats up on the country's front burner, the investigation into the Trump Foundation is heating up on the country's back burner. The state of New York opened up a fresh inquiry into the organization this summer, and just last week, investigators subpoenaed Michael Cohen for Trump Foundation documents. We asked David Farenthold from the Washington Post to come in and lay out the Trump Foundation shenanigans for a couple of reasons. One, they're cuckoo bananas.

Two, David won a Pulitzer for his reporting on them. Three, the president might actually be found guilty of breaking the law here. We started at the start. He started actually back in the 80s when he said he would give away the proceeds of The Art of the Deal. One of the interesting things about Trump is like he has this sort of two-sided personality before he became president. One side was, I am so rich. I'm the richest person you've ever met. The first line of the book, The Art of the Deal is like, chapter one, I don't do it for the money. I've got enough, much more than I'll ever need. Right. So that's one side of Trump's personality. He's so rich. He lives in this

gold-plated palace. He doesn't need any money. The other side of his personality is he wants your money right now for any manner of things, right? While he's telling you he's so rich, he's also trying to sell you a university and some cufflinks and a tie and a fragrance and a steak. When it comes to great steaks, I've just raised the steaks. He's hustling to get your money. And so to try to solve that kind of cognitive dissonance, why does this guy who doesn't need so much money, doesn't need any money, why is he so desperate to get my money? He always would say, well, this is money isn't for me, it's for charity. And so that was what he said about the art of the deal. The money was for charity. And so he started his foundation then. In the beginning, the money did come from him.

It wasn't very much money compared to other people who claim to be billionaires, but the money came from him. Over time though, he stopped giving money to his foundation. And most of the money actually came from Vince McMahon and Linda McMahon, who's now the small business administrator. Yeah. And Vince McMahon, famous for being a wrestling mogul. And not for being very charitable either. Vince McMahon, if you look at Vince McMahon's own foundation, he doesn't give as much money to it as he gave to Trump's foundation. We've never been able to figure out why out of the blue, Vince and Linda McMahon gave $5 million to the Trump Foundation in 07 and 09. Trump was giving away Vince McMahon's money for like the next seven years. Weird. Yeah. Okay. So in New York in June, the sitting attorney general

filed a lawsuit against the foundation, Donald Trump and his three oldest children. Could you tell us a bit about what that lawsuit's about? The lawsuit began, this investigation that began in 2016 as a result of some coverage in the Post. The end result was that they declared Donald Trump had run his foundation in a, quote, persistently illegal manner. It basically went through the all-you-can-eat buffet of things you can do wrong with a foundation. Can you take us to that buffet? Right. So one of the sort of most bedrock rules about foundations is that even if your name is on the foundation, even if you are the president of the board, the money in the foundation is not your money and it can't be spent to benefit you. The president of the foundation can't use the charity's money to buy

things for himself or for his business. That's kind of like, you know, Charity 101. But repeatedly, the Trump Foundation, the charity, used its money to buy things for Donald Trump. There are a couple of cases in which Trump's for-profit clubs had been sued by various people. And as part of the settlements of those lawsuits, the for-profit businesses agreed to make donations to charity. And Trump instead used his charity, which is, again, legally separate. Those are, you know, opposite ends of the earth legally.

They're not related at all. He used his charity to pay the settlement in lieu of his business. So basically his businesses saved $250,000, I believe, because his charity spent the money instead. I feel like an eight-year-old Girl Scout would know that it was wrong to, like, take money for cookies and pay off some personal debt to the bully on the block with it. How is it that the Trump Foundation thought they could get away with something like that? I think the answer was they just didn't ask anybody. Now that's not, ignorance of the law is obviously not a moral excuse. I

don't think it's really a legal excuse either. You know, everybody else who runs a little tiny nonprofit spends a lot of time with lawyers and follows the rules and they just didn't. Getting back to the buffet, what else was on the menu? Well, they also, charities are prohibited from making campaign contributions. And in that case, Trump used his foundation to make a $25,000 contribution to Pam Bondi, the Attorney General of Florida, around the time when she was considering whether to join a broader lawsuit against Trump University. And even more amazingly, sort of as we go down the buffet, the next steam tray in the buffet is,

you're not allowed to lie to the IRS. Again, something an eight-year-old would probably know. Right. So the year that he gave the $25,000 donation to Pam Bondi's political group, which was prohibited, the filing that he sent to the IRS the next year should have listed that. The IRS says, if you make a prohibited contribution, you're supposed to check this box on the form, tell us you did it, pay a fine. Instead, and mysteriously, and this is all attributed by the Trump people to a series of unrelated paperwork errors, what he sent to the IRS the next year did not list that he had made an illegal campaign contribution. It did not list any gift to Pam Bondi's group. Instead,

what was listed was a $25,000 donation to another group that had a similar name, a real nonprofit that had a name that was similar to Pam Bondi's group. Pam Bondi's group was called And Justice For All. They listed to the IRS a gift to a group called Justice For All in, I think, Kansas of the same amount, $25,000. They didn't give money to the group in Kansas. So this error, this sort of series of paperwork errors resulted in them giving the IRS a report that was wrong and had the effect of covering up a donation that was itself prohibited. Going down the buffet here, the next one is you're not allowed to involve your nonprofit in a political campaign. And so the New York AG lays out how in the same way that the Trump Foundation had been sort of seen by Trump as kind of an adjunct to his businesses,

when he gets into politics, he tends to treat it as an adjunct to his campaign. So in the beginning of 2016, Trump has this feud with Fox News going where he boycotts a Fox News Republican debate in Iowa right before the Iowa caucuses. And instead he has his own sort of televised fundraiser, kind of counter programs the debate. And he raises $6 million for veterans. And it turned out that he used the Trump Foundation as kind of the funnel for those donations. So he takes them in during this event that the AG charges was a political event. And then the next few days, and I saw some of this in Iowa, when the Trump for President campaign would have a rally in

Sioux City or in Waterloo, Iowa or whatever, he'd stand up on the stage during the rally and bring out like a giant golf tournament check from the Trump Foundation and give some of the money he raised away to local veterans groups or anything else. So he was using the Trump Foundation's money and its name and its checks to burnish his reputation in the middle of a presidential campaign rally. So pretty conspicuously political. Right. The oversized check said Donald J. Trump Foundation on the top and the payor line on the bottom. They actually said make America great again. So, yeah,

it's hard to imagine a more deeply intertwined charity and campaign. Might one of those giant checks be presented as evidence in a courtroom one day? You know,

I've been looking for one of those and if anybody has one, let me know because I would love to see it. Those are collector's items now. Have we reached the end of the buffet or does this thing keep going until the end of time? The only things that are left are smaller, but they're sort of interesting in showing how the lines were blurred.

So there were things like he used money from his charity to buy a portrait of himself. Actually, it happened twice. He twice bought giant portraits of himself with money from the charity. What do they look like? One of them we located. They're not that attractive. It's like a bad Andy Warhol. Right. Yeah. People didn't realize that if you were going to have an event at Mar-a-Lago, a charity event that included an auction, you should include a giant portrait of Donald Trump because either somebody else will buy it or if not, he's going to buy it. He's not going to let

a giant portrait of himself go unsold in his own home. It's genius. It's really genius. I bet a lot of people didn't think of it. So he did it twice. One time he paid $10,000. One time he paid $20,000. And he paid for those portraits with his charity's money.

The problem is that now those portraits are the property of the charity. And they have to be used for charitable purposes. So we asked them, well, hey, where are those portraits now? Are they in a children's hospital? Are they hanging like in a food bank? What charity is being benefited by these giant portraits of Donald Trump? One of them is six feet tall. One of them we never found, but the other one we found with the help of a Univision reporter down in Florida, we found it hanging on the wall of the sports bar and Donald Trump's golf club down at Doral outside Miami. So that is like the definition of using your charities assets for commercial gain. I mean, it's pretty shocking. It's audacious. It's flagrant. How, even if he didn't run for president, how did nobody notice or care?

He's one of the most well-known figures in the country just making a mockery of the law. One thing that surprised me in all this was how little enforcement there is by the IRS of these rules. You know, anybody who has a small charity, a small family foundation, my in-laws have one, they live in fear of the IRS. They want to make sure that the IRS comes knocking. They have every single thing locked down. And your in-laws not reality TV stars, just to be clear. No, no, not yet at least.

Not like names not on hotels, golf clubs. No, no, no. Small amount of money given to charities in Montana. They make sure that they do it all right Small amount of money given to charities in Montana. They make sure that they do it all right because they don't want to be audited. And they live in fear of the IRS. As does everybody. And what Trump had figured out was that it's a self-reported honor system. And so every year when you file your charity tax returns, there's a little box or a series of boxes that say, did you break the law this year?

And you're supposed to check yes if you did. He never did and i think they just if you don't say yes to the did you break the law question and you don't have that much money which trump's foundation never had that much money in it you're just likely to sort of escape beneath the radar and i think in much the same way that the paul manafort case last week showed like how little enforcement there is of white color crime in this country the the trump foundation was just an example of how possible it is to get away with pretty egregious violations of charity law without anybody ever noticing. Just to be clear here, there's all of these laundry list of violations and there's proof. And yet the person whose name is on the foundation is the president of the United States.

That's true. That is true. And so one thing that's really fascinating is the one of the penalties that's being pursued against Trump by the New York AG in the lawsuit against the Trump Foundation is that he would be banned from serving on the board of any New York charity for 10 years, which is something that they often use in cases where people have flagrantly used their charity as a scam. Charity swindlers, that's the kind of penalty they use against. And so I don't know if the judge is going to allow that, but if they do, we'll have a situation where Donald Trump is the most powerful man in the world, the head of the United States, the leader of the free world.

And at the same time, he would be prohibited, legally prohibited from joining the board of the Staten Island Little League. After the break, story time with David. This is Today Explained. Thank you. when you go to g.co slash play slash explained. One of the books you can grab is 10th of December by George Saunders. One of the most important and blazingly original writers of his generation, George Saunders is an undisputed master of the short story, and 10th of December is his most honest, accessible, and moving collection yet. Writing brilliantly and profoundly about class, sex, love, loss, work, despair, and war,

Saunders cuts to the core of the contemporary experience. These stories take on the big questions and explore the fault lines in our own morality, delving into the questions of what makes us good and what makes us human. Also, it's Wednesday, which means there's a new episode of Vox's TV show, Explained, to watch on Netflix. This week's episode is about political correctness. What exactly is it, and what exactly is it that we're always fighting over?

It investigates where the idea came from, and it sheds some light on how our understanding of political correctness has changed over time. You can check out Explained on Netflix or by going to netflix.com slash explained. I'll tell you, you didn't ask, but I'll tell you my favorite story about the portrait. It illustrates the sort of depth of ignorance. So after we discovered this portrait that the charity had bought hanging on the wall of Trump's sports bar, you know, it seems like a pretty obvious case where they call self-dealing. That he had used his charity to purchase for $10,000 a portrait of himself.

And then he hung that portrait of himself as decoration on the wall of his sports bar. So he was using his charity's asset to benefit his for-profit business. And after that story ran, this guy Boris Epstein, who is a spokesman for the Trump campaign now, is a commentator on Sinclair TV. He called and said, okay, well, this is the logic it may sound and now i know it looks like the trump charity did a favor for the trump business by buying art to hang on the wall of the sports bar but really it's the other way around the trump business is doing the charity a favor by storing its art collection on the wall of the sports bar so it's not a. It's a favor from the business to the charity, not the other way around.

So I, yep, they check these things out. So I called a couple of tax law experts to ask about, you know, is this storage argument, does it hold water? And one of them said, it's very difficult to make an IRS auditor laugh, but this would do it. Wow.

Okay. Oh, sorry. Irene wants to know if... Something about a $7 Boy Scout registration? Oh, yeah. It's another story if you want to hear it. We'll take all of them. We love stories.

It's just like a fireside chat with me, all my stories about the Trump Foundation. It's like an amazing reporting adventure as well as an amazing story about donald trump so okay we'll bring the fire up now exactly crackling in the background yeah uh we could tell we got trump's foundation's tax returns going back to the 80s and you could see all the individual gifts he'd given out in that period into which charities charities he'd given them. And one of the smallest one was a gift in 1989. Trump gave a $7 donation out of the Trump Foundation to the Boy Scouts, the Boy Scouts of America. And so I'm going down the list and that's the smallest donation the Trump Foundation

ever gave out. And I was going down the list and thought, well, there's got to be an amazing story there. But I don't know what it is. You know, it's so long ago. How could I? And it's such a small amount. No one will probably remember this. So I called the Boy Scouts and they wouldn't comment. I called Trump.

They wouldn't comment. And I'm sort of stuck. I know there's a story here, but I feel like this is like disappeared into the midst of history. And I'll never know why he gave a $7 gift to the Boy Scouts. And so I just put it out on Twitter one day. Look at this. Isn't this crazy? We'll never know the answer to this, but it looks like Trump gave a $7 donation to the Boy Scouts. And so I just put it out on Twitter one day, you know, look at this. Isn't this crazy? We'll never know the answer to this. But it looks like Trump gave the $7 donation to the Boy Scouts.

And then I like went home, actually went home for the day, like, you know, frustrated that I wasn't going to be able to answer this. And then at home could watch the, watching Twitter was like watching one of those spy movies where like the supercomputer is chasing the hacker around, you know, and like, you know, it started from like France to Djibouti. He's in Budapest, right? Like that. Like, and it was, what I was watching was readers trying to figure this question out. And one of the, one of the people thought, well, the boy Scouts sell this like shitty popcorn and make people make your parents buy it. And so maybe it was the popcorn, how much did the popcorn cost in 1989? And so, so they, they at trails and popcorn maybe it was the popcorn. How much did the popcorn cost in 1989?

And so they add Trails End Popcorn, which is the popcorn company. And so their social media intern, I've always never mentioned that Boy Scouts Popcorn on Twitter before. That person gets back to us and says, no, it costs $5 to buy a tin of popcorn in 1989. Couldn't be that.

So then somebody goes and finds a reader, looks at, Google has digitized not just old news stories, but old newspapers in general. So just ads are searchable too. And they found this ad from a newspaper in the fall of 1989 in like Schenectady, someplace in New York, there was a New York city. And it said, you know, Boy Scouts sign up now, you know, enrollment for the year is just $7. And that's the year donald trump jr was old enough to join the boy scouts and uh so it appears that that was you know donald trump had just written this book saying that he had more money than he knew what to do with and he used

the charity's money to buy his son's membership being the boy so i mean that tells you anything right that to me was a sign that from the very beginning, they hadn't understood the rules, or they'd been ignoring the rules. And they just considered that Boy Scouts are a nonprofit. We have to pay a nonprofit $7. Like, make sure the charity pays. Make sure it's not my own money. I ask you to reaffirm the Scout oath with your Scoutmaster. On my honor, I will do my best to do my duty to God and my country and to obey the scalp law, to help, like the way we, I was talking about Trump, sort of the, what this shows about the moral obligation he felt to help other people with

his money. The most amazing example of that is, so there's a thing called the Palm Beach Police Foundation. It has one of the biggest social events in Mar-a-Lago every year. Hundreds of people come for the Palm Beach Policeman's Ball. Now, Palm Beach is a small place with not that many police officers, and they are very well supported by this organization. So they have this huge thing, and they give away a lot of money for police scholarships and other things. It's an important customer. The point of this is it's an important customer for Trump. Every year they come to the Mar-a-Lago, and they can spend like $270,000 in a night at Mar-a-Lago to pay for catering and everything else. So this is a customer that Trump wants to make happy.

And one year he decides that he wants to give a big donation to the Palm Beach Police Foundation. Okay. He doesn't do it with his own money out of his own pocket. And he doesn't even do it with the Trump Foundation's money. What he does is he calls the widow of a friend of Trump's who has died, a Hollywood producer named Charles Evans. Trump calls his widow and says, look, I know you care about the Palm Beach police. I am taking up collections

for the Palm Beach police foundation. I'm gathering money for them. Will your late husband's foundation give some money to me? And then I'll give it to the Palm Beach police foundation. They say, great. They give him some money. He takes their money.

I forget now how much it was, but it was in the hundreds of thousands of dollars. The Charles Evans foundation, the foundation of this person who's now dead, gives money to Trump's foundation. Trump's takes just that amount of money. He doesn't add a dollar of his own, gives it to the Palm Beach police foundation as a gift from the Donald J. Trump foundation without mentioning the other guy. And as a result, not only does the Palm Beach police foundation have its event at Mar-a-Lago and pay Donald Trump all this money, they give Trump that year, they give him this giant crystal palm tree, like a four foot tall palm tree that is the award for the biggest philanthropist of the year. So Trump is honored for his philanthropy and paid for the room by this charity and he's given them nothing. Amazing. Again, that's the honor system.

Nobody would even suspect that somebody like Donald Trump, a billionaire, would do something like that. Partly because it would be easier for a billionaire just to write a check, right? This actually took a lot of work and planning and he actually went to an effort of time. He used his time to avoid having to spend any money of his own. That to me really sums up his approach to philanthropy. If in any way possible to give other people's money, he will. It's like you almost have to respect how conniving that is. It's incredible. Like I said, it's time consuming.

That's what struck me, right? Billionaires will write a check just to, you know, not have to spend any time thinking about something. But it's time consuming to do that. But he was willing to go to that length just to avoid giving any money. I'm sure you know about this, but you know, in the 80s, Spy Magazine. Oh, you have the checks. They printed a bunch of checks for these increasingly lower dollar amounts to see and sent them to famous people to see who would cash them.

And they kept going lower and lower and lower once you cashed a check. And it got to the point where Donald Trump was the only person left. And they got to like 13 cents and he cashed the check. It doesn't change, I don't think. One thing that I learned out of all this is sort of a broader lesson about the president. And I think it was novel to say this in 2016, maybe not so novel to say in 2018, is that he has always looked for honor systems that he can exploit. You know, there's places where people abide by the rules or abide by the law, not because, you know, the police arrest you the second you break the law, but because there's an honor system there and nobody would want to be seen as having broken the law. Everybody follows the rule because that's what everybody else does. And he gains a significant, although sometimes temporary, advantage by violating that and doing

a thing that other people would find unthinkable and then sort of waiting for the cops to catch up to him. In this case, the way he dealt with his foundation, particularly the way he dealt with it in Palm Beach Society where if you have a foundation with your name on it, right? The David A. Farenthold Foundation, if such a thing existed. People assume that if you are giving them a check from the David A. Farenthold Foundation, it's your money, right? Because who would ever set up a charity with their name on it and give away somebody else's money? But he did. And nobody suspected because they always thought, I guess I got a check from Donald Trump. The same thing with the IRS.

People follow the charity rules, not because they believe the IRS will come and arrest them the next year, but because everybody else does it and they're afraid to be the one that steps out of line. He was not afraid to be the one that stepped out of line and, you know, didn't follow any of the rules. And it worked for a long period of time. You make Donald Trump sound sort of like the guy who, like, walks up to the take a penny, leave a penny, and then just takes all the pennies and walks out. It's like, I just made 12 cents. We've all thought about doing that, but nobody does.

And I think maybe it's emboldening. Once you do it a few times, you realize that there's a lot to be gained there. David Farenthold covers the business of Donald Trump for The Washington Post. I'm Sean Ramos from This Is Today Explained. Irene Noguchi is our executive producer. Bridget McCarthy is our editor. Noam Hassenfeld and Luke Vanderhoof produce. Afim Shapiro is our engineer. And the charitable Breakmaster Cylinder makes music for us.

Summer's ending, and so we've only got one intern left. Her name is Bree Seely. Special thanks this week to Elisa Escarce. Today Explained is produced in association with Stitcher, and we're part of the Vox Media Podcast Network. Consider rating the show on Apple Podcasts or Stitcher or wherever you listen.

Some of you have, but most of you haven't. It helps other people discover us. Thank you. One last shout out to Google Play. Before we go, you can go to Google Play and find audiobooks and get $10 off your first purchase of an audiobook over $10 at g.co.play.explained. There's over 1,000 titles to choose from, and there's no subscription necessary.