New York attorney general sues Trump, his foundation, over 'self-dealing'

NEW YORK, June 14 (Reuters) - The New York state attorney general sued U.S. President Donald Trump, three of his children and his foundation on Thursday, saying he illegally used the nonprofit as a personal "checkbook" for his own benefit, including his 2016 presidential campaign.

Barbara Underwood, the attorney general, asked a state judge to dissolve the Donald J. Trump Foundation and to ban Trump, his sons Donald Jr. and Eric, and his daughter Ivanka from holding leadership roles in New York charities. The three children joined the foundation's board in 2006, although Ivanka stepped down to work at the White House in 2017.

Underwood said her office's 21-month investigation, begun under her predecessor Eric Schneiderman, uncovered "extensive unlawful political coordination" by the foundation with Trump's campaign, as well as "repeated and willful self-dealing" to benefit Trump's personal, business and political interests.

RELATED: Donald Trump through the years

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Donald Trump through the years
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Donald Trump through the years

Donald Trump with Alfred Eisenpreis, New York City Economic Development Administrator. Sketch of new 1,400 room Renovation project of Commodore Hotel.

(Photo by NY Daily News Archive via Getty Images)

Donald Trump pauses in his apartment 5/20 after receiving the news that the Board of Estimate unanimously approved a 40-year tax abatement plan. Under the plan Trump will purchase and refurbish the Commodore Hotel, which closed into doors 5/18, from the Penn Central Transportation Corp. In return for his $10-million-dollar purchase and up to $100 million face-lifting investment, Trump will have no real estate taxes for 40 years.

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Real estate developer Donald Trump announces intentions to build a $100 million dollar Regency Hotel.

(Photo by John Pedin/NY Daily News via Getty Images)

Donald Trump stands behind architect's model of City Hall Plaza.

(Photo by Frank Russo/NY Daily News Archive via Getty Images)

Donald Trump and Ivana Trump attend Roy Cohn's birthday party in February 1980 in New York City.

(Photo by Sonia Moskowitz/Getty Images)

Donna Mills and Donald Trump during 1983 Annual American Image Awards at Sheraton Center in New York City, New York, United States.

(Photo by Ron Galella, Ltd./WireImage)

Donald Trump attends 38th Annual Horatio Alger Awards Dinner on May 10, 1985 at the Waldorf Hotel in New York City.

(Photo by Ron Galella/WireImage)

Portrait of real estate mogul Donald John Trump (b.1946), smiling slightly and facing to his right, 1983. New York.

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Boxing promoter Don King holds up the arms of Mike Tyson and former champion Larry Holmes during a press conference here 12/1. Looking on is Donald Trump. The fight will be held at the Trump Plaza Hotel.

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Donald Trump, real estate mogul, entrepreneur, and billionare poses in the foyer of his home in August 1987 in Greenwich, Connecticut.

(Photo by Joe McNally/Getty Images)

Donald Trump Jr. and Donald Trump during 1988 U.S. Open - September 3, 1988 at Flushing Meadows Corona Park in Queens, New York, United States.

(Photo by Ron Galella, Ltd./WireImage)

Ivana Trump and Donald Trump during Mike Tyson vs Michael Spinks Fight at Trump Plaza - June 27, 1988 at Trump Plaza in Atlantic City, New Jersey, United States.

(Photo by Ron Galella/WireImage)

Billionaire Donald Trump and his wife Ivana arrive 04 December 1989 at a social engagement in New York.

(Photo credit should read SWERZEY/AFP/Getty Images)

Donald Trump and Daughter Ivanka Trump during Maybelline Presents 1991 Look of the Year at Plaza Hotel in New York City, New York, United States.

(Photo by Ron Galella/WireImage)

Donald Trump attends 'Hoop-La' Special Olympics Basketball Game on June 25, 1992 at the Plaza Hotel in New York City.

(Photo by Ron Galella/WireImage)

Donald Trump and Joan Rivers during Opening of The Rose Room in the Plaza Hotel at Plaza Hotel Rose Room in New York City, New York, United States.

(Photo by Ron Galella, Ltd./WireImage)

Donald Trump touches 07 April 1993 Marla Maples stomach to confirm published reports that the actress is pregnant with his child. The two arrived for Maples appearance in the Broadway musical 'The Will Rogers Follies'.

(HAI DO/AFP/Getty Images)

US business tycoon Donald Trump enters the PLaza Hotel in New York past supporters 21 December 1994. Hundreds of supporters showed up at a news conference where Trump denied a New York newspaper report that the Sultan of Brunei had bid 300 million USD to buy the Manhattan hotel.

(Photo credit should read DON EMMERT/AFP/Getty Images)

Donald Trump and Christine Whitman during Opening of New Warner Bros. Store in Trump Plaza Casino at Trump Plaza Casino in Atlantic City, New Jersey, United States.

(Photo by Ron Galella/WireImage)

Donald Trump attends Marc Jacobs Fashion Show on April 4, 1995 at the Plaza Hotel in New York City.

(Photo by Ron Galella/WireImage)

Boxing: IBC Heavyweight Title: View of celebrity businessman Donald Trump and actor Steven Seagal seated ringside during Lennox Lewis vs Tommy Morrison fight at Boardwalk Convention Hall. Atlantic City, NJ. (Photo by John Iacono /Sports Illustrated/Getty Images) 

New York real estate giant Donald Trump poses in his Trump Tower office on a giant letter 'T' on May 8, 1996.

(TIMOTHY A. CLARY/AFP/Getty Images)

Portrait of Marla Maples and her husband, businessman Donald Trump, with their daughter Tiffany, as they pose together at the Mar-a-Lago estate, Palm Beach, Florida, 1996.

(Photo by Davidoff Studios/Getty Images)

Donald Trump and Ron Delsner backstage at a KISS concert at Madison Squre Garden in New York City on July 25, 1996.

(Photo by Ebet Roberts/Redferns)

Donald Trump attending Halloween party thrown by Naomi Campbell and Kate Moss at the Supper Club to kick off Fashion Week.  

(Photo by Richard Corkery/NY Daily News via Getty Images)

Donald Trump open his new building at 1 Center Park West- The new Trump International Hotel and Tower.

(Photo byJames Hughes/NY Daily News via Getty Images)

Donald Trump and his girlfriend Celina Midelfar watch Conchita Martinez and Amanda Coetzer 07 September at US Open in Flushing Meadows, NY.

(TIMOTHY CLARY/AFP/Getty Images)

Celine Dion, husband Rene, Donald Trump & Ivanka Trump

(Photo by KMazur/WireImage)

Entrepreneur Donald Trump and Rev. Al Sharpton speak at a ribbon cutting ceremony for Sharpton's National Action Network Convention April 5, 2002 in New York City. The group aims to further the development of civil rights.

(Photo by Mario Tama/Getty Images)

Donald Trump and his girlfriend Melania Knauss attend the Marc Bouwer/Peta Fall/Winter 2002 Collection show February 14, 2002 during Mercedes-Benz Fashion Week in New York City.

(Photo by George De Sota/Getty Images)

Donald Trump at Madison Square Garden

(Photo by Alexander Hassenstein/Bongarts/Getty Images)

Donald Trump stands on the sidelines before the start of the AFC divisional playoffs between the New England Patriots and Tennessee Titans on January 10, 2004 at Gillette Stadium in Foxboro, Massachusetts. Temperatures have reached as low as 7 degrees in the Foxboro area.

(Photo by Al Bello/Getty Images)

Donald Trump, Visionary Business Leader award honoree, poses with his children Donald Trump Jr. and Ivanka at Fashion Group International's 22nd Annual 'Night Of Stars' at Cipriani's 42nd Street October 27, 2005 in New York City.

(Photo by Evan Agostini/Getty Images)

Eric Trump and Donald Trump attend the Chicago Bulls vs New Jersey Nets game at the IZOD Center on October 31, 2007 in East Rutherford, New York.

(Photo by James Devaney/WireImage)

 Donald Trump delivers a speech with his son Barron after he was honored with the 2,327th star on the Hollywood Walk of Fame on Hollywood Boulevard in Hollywood, CA, 16 January 2007.

(GABRIEL BOUYS/AFP/Getty Images)

Portrait of former model Melania Trump and her husband, businessman Donald Trump, as they sit together at a table during the 16th annual 'Lady in Red' gala, hosted by LIFE (Leaders In Furthering Education), at the Mar-a-Lago club, Palm Beach, Florida, December 4, 2009.

(Photo by Michele Eve Sandberg/Corbis via Getty Images)

Donald Trump sands with Miss Universe 2009 Stefania Fernandez of Venezuela prior to the Miss Universe 2010 Pageant Final at the Mandalay Bay Hotel in Las Vegas on August 23, 2010. Miss Universe is an annual international beauty pageant and along with the Miss World is the most publicized beauty contest in the world. California clothing company Pacific Mills founded the contest 1952 and was acquired by Donald Trump in 1996.

(MARK RALSTON/AFP/Getty Images)

US tycoon Donald Trump arrives to speak at the annual Conservative Political Action Conference (CPAC) at National Harbor, Maryland, outside Washington, on February 27, 2015.

(NICHOLAS KAMM/AFP/Getty Images)

Donald Trump speaks during the NRA-ILA Leadership Forum at the 2015 NRA Annual Meeting & Exhibits on April 10, 2015 in Nashville, Tennessee. The annual NRA meeting and exhibit runs through Sunday.

(Photo by Justin Sullivan/Getty Images)

Real estate mogul and billionaire Donald Trump attends Golf legend Jack Nicklaus' Congressional Gold Medal ceremony in the U.S. Capitol Rotunda March 24, 2015 in Washington, DC. Trump announed on March 18 that he has launched a presidential exploratory committee.

(Photo by Chip Somodevilla/Getty Images)

Businessman Donald Trump speaks to guests gathered for the Republican Party of Iowa's Lincoln Dinner at the Iowa Events Center on May 16, 2015 in Des Moines, Iowa. The event sponsored by the Republican Party of Iowa gave several Republican presidential hopefuls an opportunity to strengthen their support among Iowa Republicans ahead of the 2016 Iowa caucus.

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Republican Presidential Candidate Donald Trump visits his Scottish golf course Turnberry with his children Ivanka Trump and Eric Trump on July 30, 2015 in Ayr, Scotland. Donald Trump answered questions from the media at a press conference.

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U.S. President-elect Donald Trump speaks at his election night rally in Manhattan, New York, U.S., November 9, 2016.

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Singer Kanye West and President-elect Donald Trump speak with the press after their meetings at Trump Tower December 13, 2016 in New York.

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Republican U.S. presidential candidate Donald Trump poses for a photo after an interview with Reuters in his office in Trump Tower, in the Manhattan borough of New York City, U.S., May 17, 2016.

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 Coverage of the 2016 Republican National Convention from the Quicken Loans Arena in Cleveland, Ohio, which airs on all ABC News programs and platforms. On this final night of the convention, Donald Trump accepts the party's nomination for President of the United States.

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U.S. Republican presidential candidate Donald Trump reacts to an answer his wife Melania gives during an interview on NBC's "Today" show in New York, April 21, 2016.

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President-elect Donald Trump speaks to reporters following his meeting with Jack Ma, Chairman of Alibaba Group, meeting at Trump Tower, January 9, 2017 in New York City. President-elect Donald Trump and his transition team are in the process of filling cabinet and other high level positions for the new administration.

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Among the transactions the lawsuit cited as illegal was a $10,000 payment to the Unicorn Children's Foundation for a portrait of Trump purchased at a fundraising auction in 2014. The portrait would end up decorating a wall at Trump's Doral golf resort near Miami, the Washington Post reported.

Another $100,000 went to another charity in 2007 to settle a legal dispute over a flagpole erected in violation of local ordinances at Mar-a-Lago, Trump's private club and sometime residence in Palm Beach, Florida.

"Mr. Trump ran the Foundation according to his whim, rather than the law," the lawsuit https://on.ny.gov/2lbdv0V said.

The lawsuit, filed on Trump's 72nd birthday in the state Supreme Court in Manhattan, seeks $2.8 million of restitution plus penalties, a 10-year ban on Trump serving as a director of a New York nonprofit, and one-year bans for his children.

"As our investigation reveals, the Trump Foundation was little more than a checkbook for payments from Mr. Trump or his businesses to nonprofits, regardless of their purpose or legality," Underwood said in a statement. "That is not how private foundations should function."

The foundation had no employees, had never written a required protocol for disbursing funds and its board of directors, which "existed in name only," had not met since 1999, the lawsuit said.

The Republican president attacked the lawsuit in a series of posts on Twitter that blamed Democratic politicians in his home state.

"I won't settle this case!" Trump wrote, calling the lawsuit ridiculous and engineered by "sleazy New York Democrats."

During the 2016 presidential race, Trump frequently derided a charity run by the family of his Democratic rival, Hillary Clinton, saying without proof that the former secretary of state gave favorable treatment to the Clinton Foundation's wealthy donors.

Both Clinton and the Clinton Foundation, best known for helping to lower the cost of HIV drugs in the developing world, dismissed those attacks as political mudslinging.

The Trump Foundation issued a statement criticizing the latest lawsuit as "politics at its very worst" and accusing the attorney general of holding its $1.7 million in remaining funds "hostage for political gain."

The New York City-based foundation said in a statement it had disbursed more than $19 million to "worthy charitable causes" since its founding in 1987. Trump himself had contributed more than $8 million, and the foundation had already announced its intention to dissolve in 2016, the statement said.

 

FUNDRAISER FOR VETERANS

The lawsuit adds to Trump's legal problems, including an investigation by Special Counsel Robert Mueller into whether his 2016 campaign colluded with Russia. Trump has denied there was any collusion, and Russia has denied meddling in the election.

The lawsuit challenges the Trump Foundation's role in an Iowa fundraiser for military veterans that Trump organized in 2016 instead of taking part in one of the Republican debates.

Some $2.8 million went to the foundation, the lawsuit said, and the foundation wrongly ceded control of those funds to Trump's campaign staff, who wrongly disbursed grants at campaign rallies for Trump's political benefit. Tax-exempt nonprofit groups are legally required to avoid partisan politics.

The lawsuit said Corey Lewandowski, then Trump's campaign manager, directed some of the funds to be disbursed in Iowa shortly before its caucuses, where voters from the state gather in the first electoral competition to choose parties' presidential nominees. Lewandowski, who is not a target of the lawsuit, did not respond to a request for comment.

Paul S. Ryan, head of litigation at Common Cause, a nonpartisan watchdog group in Washington, said the New York filing provides details of actions that could also violate a federal ban on campaigns funneling "soft money" through nonprofits.

"This involvement of the Trump campaign in the foundation's disbursements right before the Iowa caucuses may very well violate the campaign finance law soft money ban," Ryan said in an interview.

The attorney general said she also sent letters about possible breaches of federal law to the Federal Election Commission (FEC) and Internal Revenue Service. Both agencies declined to comment. (Reporting by Jonathan Stempel in New York; Additional reporting by Ginger Gibson, Makini Brice and Doina Chiacu in Washington and Brendan Pierson and Jonathan Allen in New York; Editing by David Gregorio and Chizu Nomiyama)

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