As Cuomo Confirms Criminal Probe, Where Is NY AG's Trump Foundation Lawsuit Headed?

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Donald Trump, left, stages a check presentation with an enlarged copy of a $100,000 contribution from the Donald J. Trump Foundation to Support Siouxland Soldiers during a campaign event at the Orpheum Theater in Sioux City, Iowa in January 2016, during Trump's run for president. New York Attorney General Barbara Underwood filed a lawsuit accusing Trump of illegally using his charitable foundation to pay legal settlements related to his golf clubs and to bolster his presidential campaign with foundation disbursements such as this one in Iowa. Photo: Luke Sharrett/Bloomberg[/caption] The stakes of Attorney General Barbara Underwood’s lawsuit against President Donald Trump’s charitable foundation could escalate, in the wake of Gov. Andrew Cuomo's confirmation that a criminal investigation is underway.Cuomo's announcement, which clarified a previous statement from his top lawyer that left many scratching their heads, may be bad news for Trump and his children, who ran the foundation, but it could be good news for Underwood if she decides to pursue criminal charges.She’s already filed an aggressive lawsuit against the Trump Foundation that seeks $2.8 million in restitution after the foundation allegedly colluded with the president’s 2016 campaign on a fundraiser in Iowa just days before the Iowa caucuses. She’s also seeking sanctions on the Trump family from serving at another New York nonprofit. Cuomo told reporters in Brooklyn Thursday that the state Department of Taxation and Finance is leading its own criminal inquiry into the Trump Foundation. A senior administration official confirmed that an investigation into whether the foundation broke any state tax laws is ongoing."Gov. Cuomo believes there is one set of rules for everyone, no matter who you are or how much power you have,” the administration official said. “This matter will be investigated to the fullest possible extent, and if appropriate, referred for criminal prosecution.”The investigation could be referred to either Underwood or District Attorney Cyrus Vance of Manhattan, where the foundation is headquartered. The investigation has been going on for more than a month now, according to the administration. That doesn’t mean Underwood would file charges immediately after a criminal referral is issued. State agencies are not law enforcement agencies. As such, Underwood’s office would have to use the information provided by the agency to complete its own criminal investigation into the matter. A referral gives the office additional tools, such as the ability to seek warrants, to build a case for criminal charges.The ongoing lawsuit could provide another tool for Underwood’s office to pursue charges. Information sought through discovery could help the case if it chooses to file a criminal action. Pursuing charges before discovery is obtained, though, could halt the lawsuit, according to Scott Wilson, a partner at Boies Schiller Flexner in Manhattan who used to sue and settle cases with charities in the state Attorney General’s Office. “The court will evaluate to what degree defending the civil case may undermine the criminal defendant’s right against self-incrimination and may in the course of discretion stay the civil action while the criminal case proceeds,” Wilson said.If the court rules against Underwood’s office in the Trump Foundation lawsuit, that doesn’t necessarily leave a criminal case off the table either, Wilson said. Prosecutors will have to determine if the evidence they garner through discovery and the state investigation satisfy the burden of proof.“Prosecutors consider the burdens of proof when they get a referral and consider how to proceed,” Wilson said. “The different burdens of proof, meaning that both don’t all rise and fall by the same water.”It’s also up to Underwood’s office if, and when, it pursues criminal charges. A referral does not mandate Underwood to file charges or convene a grand jury. Her office may decide after an investigation that the burden of proof just isn’t there to mount a criminal case. A representative for Underwood said earlier this week that the office would seek a referral if it found it necessary.“We continue to evaluate the evidence to determine what additional actions may be warranted, and will seek a criminal referral from the appropriate state agency as necessary,” said Underwood spokeswoman Amy Spitalnick.That was in response to a statement from Alphonso David, counsel to Cuomo, who seemingly out of the blue issued a statement telling Underwood that if she wanted to pursue criminal charges, all she had to do was ask the Cuomo administration.“At Governor Cuomo’s direction, the state stands ready to provide the Attorney General with the appropriate criminal referral on this matter if and when she asks for it,” David said.The Cuomo official did not say if the state Department of Taxation and Finance had enough information for a referral at this point. A spokesman for the agency declined to comment on the investigation.It’s unclear who would face criminal charges as a result of the investigation, whether it would be Trump himself, his children, or officials at the Trump Foundation that are named in Underwood’s lawsuit.Jeffrey McConney, controller and vice president of the Trump Organization, testified last year in an interview with the Attorney General’s Office that he was responsible for maintaining “the books” for the Trump Foundation and providing information to accountants with the company to prepare tax returns.McConney traveled to Iowa for the fundraiser last year with Allen Weisselberg, executive vice president and CFO of the Trump Foundation, at the request of the campaign. According to testimony from Weisselberg, Corey Lewandowski, Trump’s former campaign manager, directed Weisselberg to write checks to veterans groups after the fundraiser.Both McConney and Weisselberg testified that each check had to be personally approved by Trump before it was sent out. McConney also testified that the foundation may not have invoices for every check written by the foundation since it was created in 1987.Alan Futerfas, of the Law Offices of Alan Futerfas in Manhattan, is representing Trump, his children, and the foundation. He did not immediately respond to an inquiry about Cuomo’s comments.While Cuomo has been accused of moving further to the left because of a primary challenge from actor and progressive education advocate Cynthia Nixon, the administration’s announcement about a possible referral follow calls by another progressive female candidate for statewide office.Zephyr Teachout, a Democrat and Fordham Law professor running for state attorney general, has been calling for a criminal investigation and referral on the Trump Foundation for weeks. She suggested in a tweet that her position influenced David’s statement. “I had been calling for the referral for two weeks, and Barbara Underwood's leadership in her brilliant lawsuit against the Foundation must be recognized—that lawsuit is what opened the door to the criminal options,” Teachout said. “Don't underestimate Underwood.”Underwood and attorneys for the foundation are scheduled to check in with Manhattan Supreme Court Justice Saliann Scarpulla Aug. 15 on what the foundation will do with the roughly $1 million it still has in the bank. They will also discuss Underwood’s request to bar Trump’s children from serving at another nonprofit or charitable organization in New York state for one year.Scarpulla is expected to decide on Oct. 11 whether to rule on the lawsuit based on documents filed or schedule a hearing.