This is such an unseemly arrangement that it was omitted from the settlement document.
This is such an unseemly arrangement that it was omitted from the settlement document.
I was wrong to assume the “This Week in Corruption” prize would have to go to President Trump’s $1.776 billion slush fund for political allies, about which we editorialized earlier this week (and I’ll have more to say on that over the weekend). The fund is topped, truly, by the president’s granting himself and his family immunity from further or future audits by the Internal Revenue Service, as well as any related prosecution for possible tax crimes.
This is such an unseemly arrangement that it was omitted from the settlement document that ended Trump’s farcical $10 billion lawsuit against the IRS over its negligence in allowing one of its contractors (Charles Littlejohn) to leak his non-public tax information to the New York Times and Pro Publica. (By “farcical,” I don’t mean no harm was done to Trump but, rather, that the $10 billion price tag on the harm was ludicrous.) The settlement agreement murkily describes the “Anti-Weaponization Fund,” but there is not a word about tax audit immunity — despite the fact that the settlement agreement purports that the only benefit Trump, his elder sons, and his family business are getting from their lawsuit is an apology, with no financial compensation:
As sole and complete relief for allegations in the Case and the Pending Agency Claims, Plaintiff President Donald J. Trump, and the other named Plaintiffs in the Case and in the Pending Agency Claims, will receive a formal apology from the United States, but will not receive any monetary payment or damages of any kind. [Emphasis added.]
To the contrary, the immunity from tax audits and prosecutions is conveyed in a separate half-page, three-paragraph document, signed only by Acting Attorney General Todd Blanche. Its inclusion in the bargain is hinted at, but not spelled out, in the settlement agreement’s fleeting reference to “the accompanying orders by the Attorney General,” couched as part of “the entire agreement of the Parties.”
In that short document, Blanche — purportedly on behalf of his current client, the U.S. government, and not his past client, Donald Trump (thanks to whom he has his current client) — commits that: “The United States RELEASES, WAIVES, ACQUITS, and FOREVER DISCHARGES each of the Plaintiffs [i.e., Trump, his elder sons, and the Trump organization] from, and is hereby FOREVER BARRED and PRECLUDED from prosecuting or pursuing” any claims, money damages, “examinations” (e.g., audits), or other relief — regardless of whether the underlying information is presently known or unknown — that could have been asserted against them by the Internal Revenue Service.
As the New York Times recounts, it reported two years ago that Trump was embroiled in an IRS audit battle over a claim that he had used a “dubious accounting maneuver” (as the paper described it) in connection with the Trump Tower in Chicago. According to the Times, the alleged “double-dip” — the deduction of the same losses twice, beginning in 2008 — could be worth $100 million. IRS proceedings are opaque to the public, and the Times adds that it is “unclear” whether that examination is ongoing or if the Trumps and their business entities are under other audits.
Recall that in December 2022, the Trump Organization was convicted on charges of falsifying records and tax evasion in New York State Court. It is unknown (at least to me) whether there were follow up federal investigations related to the false reporting of business transactions that led to the state prosecution.
(Note: The just-mentioned New York tax case, brought by Manhattan District Attorney Alvin Bragg, was a criminal action; it was different from the civil fraud case brought by New York’s Attorney General, Letitia James, in which Trump and his organizations were found liable for exaggerating asset values; an appeals court later vacated the astronomical disgorgement penalty but left the fraud liability finding undisturbed. The criminal tax case is also different from the criminal business records falsification case that was also brought by Bragg — the so-called hush money case, in which Trump is appealing his convictions. In Bragg’s criminal tax prosecution, the 17 charges were comparatively minor, but they were felonies and resulted in a $1.6 million fine.)
To repeat what I said at the start of the administration, Trump’s decision to appoint his personal lawyers to high-ranking Justice Department positions created a ticking ethics time bomb.
The settlement’s immunization of Trump from federal tax audits and prosecutions is not an instance of a U.S. Attorney General merely implementing policies of the incumbent president who happens to have been his client in the private sector. The past tax problems and examinations of Trump and his organizations are private matters, going back over a decade. They are unrelated to Trump’s official actions and duties as president. Hence, this is Blanche, as the top Justice Department official, using that position to benefit his former private client — and current boss — in connection with private conduct.
Like other lawyers, including government lawyers, the attorney general is supposed to recuse himself from any matter in which he has a conflict of interest — and in particular, if he represents a party (here, the government) whose interests are adverse to those of a former client (here, Trump). (See Model Rules of Professional Conduct, Rule 1.7, Rule 1.9 and Rule 1.11.) Government lawyers working for the Justice Department are explicitly prohibited from participating in criminal investigations or prosecutions if the lawyer has “a personal or political relationship” with the subject of the investigation or prosecution; a past attorney-client relationship is a classic example of a personal relationship. But note: The pertinent regulation, Section 45.2 (of Title 28, Code of Federal Regulation), has no enforcement mechanism; it operates on the assumption — which used to be a safe assumption — that the attorney general and other government lawyers will avoid such conflicts, which undermine the public integrity of federal law enforcement. Another federal regulation, Section 2635.502 (of Title 5, CFR), instructs executive branch officials to avoid participation in matters that would cause a reasonable person to question their impartiality.
Obviously, Blanche is not an idiot, he’s a competent lawyer — an experienced former Southern District of New York federal prosecutor. He surely grasps these ethical quandaries, he knows how bad this not only looks but is.
Here, however, is his problem. A federal tax statute, Section 7217 (of Title 26, U.S. Code) makes it unlawful for executive officials to request that the IRS terminate an audit (or conduct an audit) of any taxpayer regarding tax liability. The statute is explicit that “the President” is included among the executive officials who may not make such requests. Section 7217 creates only one exception to this prohibition: It does not apply to the attorney general of the United States.
Blanche is the acting attorney general. Had he recused himself, there is no Senate-confirmed acting deputy attorney general to whom he could potentially have delegated DOJ oversight of the Trump tax matter — in fact, the Justice Department’s website still lists Blanche as deputy attorney general, the position to which he was appointed and confirmed prior to becoming acting AG last month. Under Section 7217, only the attorney general could request the IRS to terminate an audit or refrain from conducting such an audit. If Trump wanted this relief, only Blanche could provide it.
This stinks. There is also nothing any court can do about it. It is executive branch ethical impropriety and self-dealing — abuse of power — that only Congress can address.
Yeah, right.