Thoughts On The Trump Organization Tax Case
Commentary: Reading about the Trump family’s disregard for law and their consistent bullying of adversaries by outspending them on lawyers took me back to an evening in Marshall, Texas.
We were there because a fellow I’ll call “Jack” had grown up there, and chose Marshall as the court for suing our clients, a small start-up north of San Francisco. He alleged that our friends’ invention belonged to his big Texas-based company, because after he bought their first start-up, they worked briefly for him.
The claim was horse manure; but, as Jack stated, “I have more money and more lawyers than [our client’s CEO].” He also had home-court advantage.
I actually liked our clients. They’d invented something that would allow rural areas and poorer countries to do telephonic stuff (then cutting-edge) that mostly only big cities did. They were ready to “go public” – selling shares of stock. Investors would likely flock to buy, and they’d all get rich. Jack wanted what they’d built, and knew a company can’t go public with a lawsuit hanging over its head, even a groundless one.
Two weeks into trial, we were kicking butt. We knew it, Jack’s high-priced lawyers knew it, and the jurors appeared to know. The decency of our people was coming through, and Jack’s lawyers’ efforts to embarrass our witnesses on cross-examination bounced off the witnesses like rubber-tipped arrows off Superman. Jack’s lawyers initiated settlement discussions.
If this were a movie, we’d have finished the trial and won a favorable jury verdict. But Jack’s lawyers demanded (lawfully extorting) significant dollars to go away. They knew trial results are always uncertain, and that if we won they could delay the Initial Public Offering for years just by continued appeals.
One memory I love is of us sitting on the front porch of a rooming house, talking, with everyone having his or her say. Not just the CEO (already a multi-millionaire) and the two inventors, but each lawyer, company employee, and paralegal articulated our thoughts and feelings. One inventor remarked that he wanted to fight on, and could afford to roll the dice, but that the secretaries in their little company would all become millionaires from the stock sale, and he couldn’t risk their life-changing payday by acting macho.
We negotiated a settlement, minimizing the payment (though what Jack’s company got would have set you or me up for life, handsomely), and our client’s IPO was indeed lucrative. (Having a little stock myself, I saved half and sold the rest to buy the nearly-new pickup truck we still drive.)
We battled Jack several more times, for that client and another. (His company filed a patent-infringement lawsuit over one product the company had publicly shown and marketed more than the allowable one year before they applied for the patent, making the patent invalid.)
Jack exhibited that Trumpian attitude that courts were for bullying. Litigation was a profit center: sue smaller companies, even on questionable grounds, hoping they’d pay an unwarranted settlement to avoid a lawsuit they couldn’t afford.
The duration and extent of the Trump Organization’s tax fraud demands prosecution. Misusing our judicial system and falsifying tax records hurts us all.
(The client’s CEO was a friend, and a respected philanthropist in northern California. After writing this column, I learned that he died just days ago, at 90, while visiting his caretaker’s family in Puerto Vallerta. He was one of the good guys.)