Trump companies accused of tax evasion in Panama

In the latest chapter in ongoing litigation, the private equity fund that bought what used to be called the Trump Ocean Club claims the Trump entities pocketed money that should have gone to the Panamanian government.

Image Credit: Andrew Harrer/Bloomberg

The owners of a 70-story Panama City hotel tower formerly managed by President Donald Trump’s companies are accusing them of stiffing the Panamanian government.

In a legal filing Monday in an ongoing lawsuit in Manhattan federal court, private equity manager Orestes Fintiklis and the company he leads, Ithaca Capital Partners, claimed that two Trump companies failed to pay Panamanian taxes equal to 12.5% of the management fees they drew from the hotel.

The Trump entities were allegedly supposed to withhold those fees in advance and pay them to the government regardless of whether the property was profitable or not. Instead, the Trump companies simply kept the money, the suit claims, “thus intentionally evading taxes.” That and other financial irregularities exposed Fintiklis and the companies he represents “to millions of dollars in liability,” according to the suit, which also claims Trump companies sought to cover up their actions. The filing does not say whether a tax penalty has been levied by Panamanian authorities.

Fintiklis declined to comment.

The Trump Organization did not immediately respond to a request for comment. In prior legal pleadings, the Trump entities have denied wrongdoing. The Trump Organization also countersued last year, accusing Fintiklis and Ithaca of a “fraudulent scheme” that breached Trump’s 20-year management contract.

The dust-up is the latest fallout from Trump’s foreign business entanglements. Trump projects in Canada, Mexico, India, Azerbaijan and elsewhere have also come under scrutiny. And he has spent nearly his entire presidential tenure seeking to dismiss or downplay his dealings with Russians related to a plan to build a Trump Tower in Moscow. His former lawyer Michael Cohen is serving a prison term in part for lying to investigators about that project.

In recent years, Trump has typically licensed his name to other players — selling the right to put his name on the building but not investing his own money. He often also seeks to manage the building once it’s built. Like many other projects, the Panama development is a hotel-condo arrangement, where buyers purchase hotel rooms that are then rented out by the management company.

Ithaca Capital’s suit, filed originally in January last year and amended Monday, is seeking at least $17 million in damages, alleging that Trump companies mismanaged the hotel and let it fall into disrepair. The suit claimed that the hotel sat “virtually empty,” with portions going uncleaned for years.

Led by Cypriot businessman Fintiklis, Ithaca Capital bought 202 of the 369 hotel-condo units at what was then called the Trump Ocean Club in 2017. The next year, Ithaca evicted Trump Organization employees from the sail-shaped waterfront structure, which also houses a casino and shops. Trump employees and security personnel tried to block the effort, resulting in shoving matches that attracted international headlines.

Trump’s company tried unsuccessfully to convince Panamanian President Juan Carlos Varela to intervene on Trump’s behalf. When Fintiklis’ group eventually took control, it found walls had been hastily built to obstruct access to certain areas — one was in the middle of a hallway, another in front of an elevator bank — including inner offices. Trump employees also shredded hotel documents, Fintiklis’ group alleged.

Trump’s name was scraped from a stone wall in front of the tower, which is now the JW Marriott Panama. It was one of several properties that have removed Trump’s name in recent years.

In its complaint, Ithaca Capital also claims Trump’s son Eric and employees misled Ithaca when it was performing due diligence before buying into the hotel. The claims echo similar complaints made in other projects involving Trump businesses. ProPublica in October detailed how Trump and his children engaged in deceptive practices — including in Panama — while promoting at least a dozen development projects in the U.S. and abroad.

At an August 2016 meeting, Eric Trump allegedly told Fintiklis and two other Ithaca board members that the hotel was outperforming the market in Panama, a claim the suit asserts was false. After the meeting, Trump companies sent Ithaca two brochures that reiterated his statements about the hotel “maintaining a leading market share” in Panama.

Trump representatives repeated the statements to Ithaca in early 2017, the new legal filings say. At a February 2017 Trump Tower meeting that included Donald Trump Jr., Trump employees again said the hotel was outperforming the market. Ithaca Capital leaders relied on these statements when deciding to make the purchase, the suit said, adding that “these representations were false and designed to mislead Ithaca into believing that the Hotel was performing better than its peers.”

Trump companies also “artificially deflated” the hotel’s expenses and underreported Trump’s management fees in financial statements presented to Ithaca, the suit alleged, leading the hotel to appear to be in a better financial position than it was.

The suit alleged other improper financial behavior, saying that instead of making the necessary distributions to hotel room owners, “Trump hoarded their cash.” It said Trump companies failed to make appropriate financial disclosures and drained reserve accounts to pay operational costs, “all the while Trump lined its pockets with ill-gotten management fees.”

The suit said Ithaca wouldn’t have bought the hotel if it had known about the tax and social security problems and other financial irregularities.

An earlier suit filed by Trump Ocean Club condo owners also objected to the Trumps’ management practices. The plaintiffs accused Trump employees of overspending and taking excessive bonuses, as well as mishandling the building’s finances. Owners said they saw a steep increase in fees. Trump responded by suing those owners, too, demanding $75 million for wrongful termination. That litigation was settled in 2016.

The suit said the false representations were made to other owners, too. In a December 2017 letter to hotel owners other than Ithaca, it said, Eric Trump wrote, “Over the last three years, the hotel has outperformed the market by a wide margin — as much as 20 percent — by virtually every measure.”


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