Wednesday, June 07, 2017

Trumping Up a Health Care Charity - Trump Organization Received Increasing Revenue from a Children's Cancer Care Charity

While health and health care are clearly not central interests of the current US President, Donald J Trump, we have noted some disturbing stories about the effects of his leadership on health care.  Most importantly, prior to the election, a story appeared alleging that Mr Trump licensed his name, and actively supported the Trump Network, which sold dodgy vitamin supplements to gullible consumers based on the results of urine tests of unproven, at best, accuracy (look here). While Mr Trump is controversial, to say the least, on multiple levels, never in modern history can I recall a president who was alleged to have been a major player in what appears to be a health scam.

Moreover, since Mr Trump was elected we have noted his proposed and actual appointments to positions of power over health and health care people with severe conflicts of interest, sometimes with no or limited experience in and knowledge of health and health care, and sometimes who had acted against the values of health care professionals  (look here, here, here, here, here, here, here, here, and here ).  (Please note that since while our focus in health care dysfunction, we emphasize cases that are not extensively reported in the media and/or medical and health care literature.  So this list is hardly exhaustive.)

Now we have in the public arena a case in which Mr Trump apparently subverted the good intentions of a charity designed by his son to benefit children with severe illness, resulting in apparent private gain for Mr Trump.

The Beginnings of the Eric Trump Foundation and its Support of St Jude Childen's Research Hospital

An article in Forbes published this week recounted how Eric Trump set up a charity whose main goal was to support children's cancer care, and which would channel the maximum amount of money raised directly to reputable health care organizations.

Eric Trump set up his foundation as a public charity, a classification that allows it to raise most of its money from outside donors. In 2007, when he was 23, the first Eric Trump golf tournament took place, raising $220,000. A compelling sales pitch evolved--the free golf course and the donated goods and services assured donors that every penny possible went to charity. The Eric Trump Foundation employed no staff until 2015, and its annual expense ratio averaged 13%, about half of what most charities pay in overhead. His original seven-person board was made up of personal friends, an innocuous lot who helped sell tournament tickets, which last year ranged from $3,000 for a single all-day ticket to $100,000 for a pair of VIP foursomes.

For the first four years of the golf tournament, from 2007 to 2010, the total expenses averaged about $50,000, according to the tax filings. Not quite the zero-cost advantage that a donor might expect given who owned the club but at least in line with what other charities pay to host outings at Trump courses, according to a review of ten tax filings for other charitable organizations.

That is all admirable, to say the least. But apparently it was not to continue.

Donald Trump Demands His Pound of Flesh

Eric Trump's plans to minimize his charity's overhead soon collided with the wishes of his father, Donald J Trump, then CEO of the Trump Organization, now President of the United States.  Per Forbes, 

But in 2011, things took a turn. Costs for Eric Trump's tournament jumped from $46,000 to $142,000, according to the foundation's IRS filings. Why would the price of the tournament suddenly triple in one year? 'In the early years, they weren't being billed [for the club]--the bills would just disappear,' says Ian Gillule, who served as membership and marketing director at Trump National Westchester during two stints from 2006 to 2015 and witnessed how Donald Trump reacted to the tournament's economics. 'Mr. Trump had a cow. He flipped. He was like, 'We're donating all of this stuff, and there's no paper trail? No credit?' And he went nuts. He said, 'I don't care if it's my son or not--everybody gets billed.''

Katrina Kaupp, who served on the board of directors at the Eric Trump Foundation in 2010 and 2011, also remembers Donald Trump insisting the charity start paying its own way, despite Eric's public claims to the contrary. 'We did have to cover the expenses,' she says. 'The charity had grown so much that the Trump Organization couldn't absorb all of those costs anymore.' The Trump Organization declined to answer detailed questions about the payments.

Furthermore, the amount of money demanded by the Trump Organization rapidly increased.

The cost for Eric's golf tournament quickly escalated. After returning, in 2012, to a more modest $59,000--while the event brought in a record $2 million--the listed costs exploded to $230,000 in 2013, $242,000 in 2014 and finally $322,000 in 2015 (the most recent on record, held just as Trump was ratcheting up his presidential campaign), according to IRS filings. This even though the amount raised at these events, in fact, never reached that 2012 high.

The Forbes article alleges this occurred despite Eric's protestations to the contrary.

Remember, all those base costs were supposedly free, according to Eric Trump. The golf course? 'Always comped,' he says. The merchandise for golfers: 'The vast majority of it we got comped.' Drinks: 'Things like wine we were normally able to get donated.' And the evening performances from musicians like Dee Snider of Twisted Sister and comedians like Gilbert Gottfried: 'They did it for free.'

The Trump Organization Takes Over the Eric Trump Foundation

The move to claw back increasing amounts of charitable proceeds from the Eric Trump Foundation as payments to the Trump Organization seemed to coincide with a shift in the governance of the Eric Trump Foundation. Per Forbes,

In 2010, the year the economics of the tournament suddenly pivoted, four of the seven original board members, who were personal friends of Eric, left. Those 4 were eventually replaced by 14 new board members, the majority of whom owed all or much of their livelihoods to the Trump Organization. Six of them were effectively full-time employees, including Trump lawyer Michael Cohen and executive vice president Dan Scavino Jr., who both serve in political roles for President Trump. Another owns a company that billed the Trump campaign $16 million. Add in Eric himself, as well as his wife, Lara, and 9 of the 17 Eric Trump Foundation board members had a vested interest in the moneymaking side of the Trump empire. The foundation had become a de facto subsidiary of the Trump Organization.
'They were wearing two hats,' says Langan, the former director of golf, who says he sat in on meetings where he couldn't tell where the business ended and the charity began. 'You're dealing with people talking about the event and the charity who also at the same time are thinking about it as a corporation and as a business. It's a for-profit club. You know, they're trying to make money.'

Why this happened, and who orchestrated it were not clear. However, it does suggest that at best, the charitable nature of the Eric Trump Foundation was diluted, to the point that it conceivablye became a de facto part of the for-profit Trump Organization, a company whose majority owner was, and still is Donald J Trump.

Eric Trump Launches an Ad Hominem Attack Against Critics of His Charity

Within a day of the Forbes article, Eric Trump was interviewed by the British Tabloid, the Daily Mail. Its headline was:

Eric Trump says critics of his children's charity are 'sick' and 'disgusting' after news report clobbers him for paying his company $100K for expenses – and he insists there was 'zero profit' to his family

To make a long story short, Mr Trump perseverated about the total amount of money his charity brought to St Jude, and fixated on the amount of a single payment made by the Trump Organization to the charity of $100,000 supposedly to offset the bills sent to the charity from the Trump Organization.

But $100,000 in one year's revenues for his family's company pales in comparison to the millions the foundation raises each year for child cancer research.

He maintained that

none of the money resulted in actual profit to the Trump organization - only reimbursements for costs that couldn't be paid through specific donations.

However, the Daily Mail article included no discussion of the escalating payments after 2011, allegedly reaching as high as $322,000 in 2015, and no justification that these were required only to cover costs.  Calling critics "sick" or "disgusting" was an ad hominem attack.  However, Mr Trump never did contradict the rising unexplained payments made by his foundation to his father's company. 


Eric Trump ought to be commended for his original goal, to benefit pediatric cancer care through a charity which had minimal overhead expenses.  While he apparently was able to maintain this mission for several years, it appears that his father, Donald J Trump, CEO of the Trump Organization and now President of the United States, was able to siphon increasing amounts of money from the charity back into his family-owned corporation, and to position his cronies as trustees of his son's charity.

While the Eric Trump Foundation seems to be continuing to raise substantial money for pediatric oncology care, his claims that the organization has virtually no overhead, and his own control of the foundation now appear dubious.  His father's ability to convert donated money into corporate revenue appeared at the least to compromise the stated mission of the Foundation

to support St Jude Children's Research Hospital

In the last few years its mission also appeared to be to support the revenue of the Trump Organization. Thus the transformation of the Eric Trump Foundation seems to fit the ethical definition of corruption per Transparency International

the abuse of entrusted power for private gain

albeit that the Eric Trump Foundation was entrusted to support St Jude at minimal overhead cost, and that the gain accrued privately not to Eric Trump, but to the Trump Organization and presumably its principal owner at the time, Donald J Trump.

This case, of course, just adds to many others in which non-profit health care organizations threaten their own missions at the apparent behest of and/or for the apparent benefit of their leaders, and in this case, their leaders' relatives.  So I could simply again point out that we need leadership of health care organizations that puts mission, and patients' and the public's health ahead of all other considerations, including revenue enhancement, and particularly ahead of the leaders' enrichment.

This is a special case, though, because the person who seemed to gain the most benefit from the machinations was not just another corporate CEO, but the future president.  Now, as president, Donald J Trump is the de jure leader of the entire government health care apparatus, including the Department of Health and Human Services, and all its associated agencies, and is the de jure leader of the entire government law enforcement apparatus, including the Department of Justice.  The leader of the US Internal Revenue Service, which enforces the laws and regulations about non-profit organizations, incidentally also answers to the President.

Thus as an advocate for more functional health care, disquieting is far too polite a term to describe the presidency in the hands of someone who apparently so cavalierly re-engineered for his personal benefit a charitable foundation meant to help sick children, who so cavalierly supported conflicted and ill-informed leadership of government health care agencies, and who so cavalierly licensed his name to a sketchy vitamin sales scheme.    

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