According to various reports, including
this one, the controller of the Trump Organization, Jeffrey McConney, testified that “he followed instructions from former Chief Financial Officer Allen Weisselberg and other high-level Trump Org. executives” to provide fringe benefits and bonus checks to organization employees in ways that permitted those items of compensation to go untaxed, both for the organization and the employees, not only for federal and state income tax purposes but also for purposes of payroll taxes such as Social Security and Medicare. In the case of the bonus checks, not only were they wrongfully reported on Forms 1099 as though the employees were independent contractors, testimony and other evidence revealed that these employees “did not report those bonuses as income on their personal taxes.” The list of fringe benefits provided free of taxation is an indictment of how the wealthy can manufacture tax advantages that the ordinary employee is unable to arrange. McConney also testified that when he filed returns for high-level Trump Organization executives, he “improperly” reported that they did not keep residences in New York City, when in fact they did, and this made it possible for them to evade New York City taxes.
According to the reports of the trial, “McConney testified that Trump Org.’s tax consultant from Mazars, Donald Bender, never told him the practices of underreporting taxable income were illegal,” though he also “acknowledged that Bender told him that he ‘wasn’t a fan’ of the practice of issuing bonuses using 1099 tax forms when they could be booked as part of annual compensation from the Trump Corporation and taxed using a W2 tax form.” Interestingly, in about “2011, Bender advised McConney to stop cutting a bonus check to an in-house lawyer at the company because they could lose their law license for receiving it as an independent contractor, but McConney testified that he never questioned whether the illegality of how they handled bonuses would apply to anyone else.” McConney explained that he and other Trump Organization accounting personnel stopped these practices in 2017 at about “the time that a tax consultant conducted an internal review for Trump Org. and President Donald Trump took office.”
Is it sufficient for a corporate controller to rely on an external tax consultant’s alleged failure to point out the illegality of what the controller is doing, whether or not the controller is acting at the direction of higher-ups? I think not. According to RoberHalf, “Candidates for controller jobs should have a minimum of a bachelor’s degree in accounting or business, but preferably an MBA. They should usually have at least seven years of experience in the accounting field, and some public accounting experience is often required.” According to accounting.com, a controller should “Earn a Bachelor's Degree . . . in accounting or finance, . . . Obtain a Master's Degree, . . . like a master's in accounting or an accounting MBA, . . . Take the CPA Exam, . . . Earn CPA Licensure, . . . Obtain Professional Accounting Experience, . . . [and] Pursue Employment as an Assistant Controller.” Similar or identical advice can be found in educational, career planning, and employment web sites.
Based on this advice, a controller should have an education, licensure, certification, and work experience that includes exposure to basic tax principles. Business and accounting education includes exposure to basic tax principles. It’s one thing for someone whose education and career are not focused on tax to rely on tax professionals’ advice for the tax aspects of complex international transactions, but it doesn’t require an LL.M. (Taxation) degree to know that treating an employee as an independent contractor, providing false residence information, and underreporting employee income are illegal. Those principles are taught in business and accounting programs. The tactic of blaming others for one’s own misdeeds, whether in the form of alleging someone else did the wrong act or in the form of alleging that someone else failed to prevent the commission of the wrong act, has become a feature of present-day culture, perhaps fueled by a widespread parenting technique of making children feel good by telling them that their misdeeds are the fault of others.
There is a fine line between a justification and an excuse. Both terms often are used interchangeably in common conversation but in law there are technical differences. A justification is a claim that the act occurred but that the act should not be punished because it is consistent with societal principles. An excuse is a claim that the act occurred but that the person committing it should not be held responsible because of circumstances beyond the person’s control.
There is no way that underreporting income, misreporting income, and misstating facts on a tax return can be justified. Nor should an excuse based on blaming someone else for something that the actor knew or should have known be accepted as relieving the actor from responsibility. Blaming someone else isn’t justification. It’s an excuse, and in this instance it’s an unacceptable excuse.