Accusations in a legal filing are escalating a dispute between Orestes Fintiklis, whose companies control a majority of a luxury hotel in Panama City, and the Trump Organisation. Photo / AP
The owners of a luxury hotel in Panama City that ousted the Trump Organisation as property managers last year accused it 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 Donald Trump. They essentially assert that his family business cheated a foreign government, a claim the Trump Organisation characterized in a statement as "completely false."
The president's company, 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 that country's tax agency, according to the filing.
It was not possible to immediately verify accusations in the filing that the Trump Organisation did not fulfill its obligation as managers to ensure all the hotel's taxes were paid, including those related to the Trumps' management fees. Panamanian law imposes a tax on commissions paid to foreign businesses, but the Trumps' management fees may have qualified for an exemption.
The filing does not make clear how much money may be owed — or for how long the Trump Organisation may have failed to pay the taxes — 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 Organisation said the accusations were misdirected. "To the extent any taxes were to be withheld," the company's statement said, it was the responsibility of the hotel owners, not the Trump Organisation, which "did not evade any taxes." The statement added that the tax decisions were made on the advice of an international accounting firm.
The filing comes as the Trump Organisation is waging a battle with congressional Democrats investigating the president's personal finances. While those investigations present more immediate political threats to 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 Organisation 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.
An official with the Panamanian tax agency, reached by telephone, said he was not authorized to comment.
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 Organisation as managers last year and later rebranded the property as a JW Marriott.
In its statement Monday, the Trump Organisation took aim at Fintiklis over the court filling, saying he was "trying to distract from his own fraud and material breaches."
The dispute with Fintiklis began in 2017, soon after he bought 202 of the hotel's 369 units. Fintiklis, a Cypriot citizen, took legal action against the Trump Organisation, 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 Organisation accused Fintiklis of using "thug like, mob-style tactics." But in March of last year, a local court ruled in Fintiklis' 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 Organisation, 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 neighbourhood of Manhattan bought out the Trump Organisation 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 Fintiklis continues to wind through the courts.
The Trump Organisation has pursued, among other things, its own fraud claim against 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 US$3 million.
Fintiklis and his companies are collectively seeking about US$35 million in damages from the Trumps, through legal proceedings in Manhattan, where the Trump Organisation 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. Fintiklis and his companies cited a Panamanian law that imposes a 12.5 per cent tax on payments to a foreign entity like the Trump Organisation.
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 per cent 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.
Written by: Ben Protess and Steve Eder
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