Trump Foundation Illegally Used $158,000 in Charity Funds to Settle Mar-a-Lago Legal Dispute

The Donald J. Trump Foundation used $158,000 in tax-exempt charitable funds to settle a legal dispute between the Town of Palm Beach and Trump’s for-profit Mar-a-Lago Club over an illegal 80-foot flagpole. The town had fined Trump’s private club for violating local ordinances by erecting an oversized flagpole, and after protracted litigation, Trump’s business owed the town money as part of the settlement. Instead of paying the fine from Mar-a-Lago’s business accounts or Trump’s personal funds, Trump directed his charitable foundation to pay the settlement, effectively using charitable donations from others to cover his business’s legal obligations.

Background

In 2006, the Town of Palm Beach cited Mar-a-Lago for erecting an 80-foot flagpole in violation of town ordinances limiting flagpole height. Trump refused to remove or shorten the flagpole, launching a publicity campaign claiming it was about patriotism while simultaneously filing a $25 million lawsuit against the town for supposedly damaging the club’s property value. After months of negotiation, Trump settled with the town in 2007, agreeing to reduce the flagpole height and make a donation to veteran charities - but critically, the obligation fell on Mar-a-Lago LLC, Trump’s business entity.

When it came time to make the $158,000 payment in 2012, Trump did not use Mar-a-Lago funds or his own money. Instead, he directed the Trump Foundation - a 501(c)(3) charitable organization funded almost entirely by other people’s donations - to make the payment. This constituted illegal self-dealing under federal tax law, as Trump used charitable assets to settle legal obligations of his own for-profit business. The transaction provided direct financial benefit to Trump by relieving his business of a legal liability while improperly using funds that were supposed to be dedicated exclusively to charitable purposes.

Significance

This payment represents one of the most clear-cut examples of Trump treating the Trump Foundation as a personal checkbook rather than a legitimate charity. The use of foundation funds to settle business legal disputes was cited prominently in the New York Attorney General’s 2018 lawsuit, which characterized it as part of a “persistent” pattern of illegal conduct. The AG’s complaint noted that “the Foundation’s grants made Mr. Trump ’look more charitable than he really was’ using other people’s money.”

In November 2019, New York Supreme Court Justice Saliann Scarpulla found that Trump had breached his fiduciary duties as foundation director and ordered him to pay $2 million to legitimate charities as damages. The court specifically cited the Mar-a-Lago settlement payment as an admitted violation. The Foundation was dissolved under court supervision, and Trump and his adult children were required to complete mandatory training on the proper operation of charitable organizations - a humiliating acknowledgment of their systematic abuse of charitable status to benefit Trump’s business empire.