The owners of a luxury hotel in Panama City that ousted the Trump Organization as property managers last year accused it on Monday of evading taxes in Panama and creating a “false light” around the hotel’s finances.

The accusations, made in a legal filing in Manhattan federal court, are fraught with potential diplomatic and legal complexities for President Trump, as they essentially assert that his family business cheated a foreign country’s government.

The Trump Organization, the filing alleges, “also made fraudulent and false claims to the Panamanian tax authorities” to “cover up its unlawful activities.” This was originally detected during an audit last year by Panamanian tax authorities, according to the filing.

It was not possible to immediately verify the accusations in the filing, which include claims that the Trump Organization failed to pay required taxes on the fees it collected for managing the hotel’s day-to-day affairs. Panamanian law imposes a tax on commissions paid to foreign businesses, and it is not known whether the Trump Organization qualified for an exemption.

The filing does not make clear how much money may be owed — or for how long the Trump Organization may have failed to make the payments — but suggests that the company’s actions on this and other matters exposed the hotel’s owners to millions of dollars in liability.

The Trump Organization did not immediately respond to a request for comment.

The filing comes as the Trump Organization is waging battle with congressional Democrats investigating the president’s personal finances. While those investigations present more immediate political threats to Mr. Trump, the Panama dispute could open a new line of attack on the president’s business and provide fodder for his critics.

The filing also alleges, among other claims, that the Trump Organization understated employee salaries in reports to the Panamanian social security agency, which may have reduced the hotel’s social security tax payments. Collectively, the company’s actions made “the financial and operational performance of the hotel appear in a false light,” the filing says.

The new accusations escalate a bitter falling out between business partners over what was once known as The Trump International Hotel and Tower, and was the only Trump hotel property in Latin America. Orestes Fintiklis, whose companies control a majority of the hotel, removed the Trump Organization as managers last year and later rebranded the property as a JW Marriott.

The dispute with Mr. Fintiklis began in 2017, soon after he bought 202 of the hotel’s 369 units. Mr. Fintiklis, a Cypriot citizen, took legal action against the Trump Organization, arguing it had mismanaged the hotel, which was struggling financially.

In early 2018, the fight spilled over to the property itself, where shouting and shoving matches broke out and police officers arrived in Kevlar helmets. The Trump Organization accused Mr. Fintiklis of using “thug-like, mob-style tactics.” But in March of last year, a local court ruled in Mr. Fintiklis’s favor and a workman pried off the silver T-R-U-M-P name from the 70-story property, Panama’s tallest building.

It was a blow to the Trump Organization, which was already downsizing as it adjusted to business realities under a presidency that has driven away some customers and brought limitations on overseas deals. In 2017, owners of struggling Trump hotels in Toronto and the SoHo neighborhood of Manhattan bought out the Trump Organization and changed the names of the properties. Today, the Trump company still has its name on golf courses, hotels and other real estate ventures in 10 countries, from Ireland to South Korea, although several of the projects are still underway.

The fight with Mr. Fintiklis continues to wind through the courts.

The Trump Organization has pursued, among other things, its own fraud claim against Mr. Fintiklis and his companies. The president’s company, which was affiliated with the hotel since before it opened in 2011 and was supposed to manage it through 2031, has argued that it is owed at least $3 million.

Mr. Fintiklis and his companies are collectively seeking about $35 million in damages from the Trumps, through legal proceedings in Manhattan, where the Trump Organization is based, as well as in Panama and before an international arbitration panel.

The filing in Manhattan on Monday outlined for the first time the accusation of tax evasion. Mr. Fintiklis and his companies cited a Panamanian law that imposes a 12.5 percent tax on payments to a foreign entity like the Trump Organization.

The president’s company, the filing alleged, “used its control over the hotel bank accounts to make payments to itself and affiliates without withholding the 12.5 percent tax on its management fees, thus intentionally evading taxes.”

The president’s financial disclosure statements show that his business received at least several hundreds of thousands of dollars per year in fees related to its management of the Panama property. It is unclear how his company handled any taxes paid on those fees because he has refused to release his tax returns.

Source: Read Full Article