DOJ Sues Ivanka’s Ex-Business Partner for Massive Fraud

The Justice Department is suing a friend and former business partner of Ivanka Trump for his alleged role in schemes to defraud the federal government out of millions of dollars in tax liabilities on his father’s estate.

Filed last month and reported here for the first time, the lawsuit follows an August 2017 POLITICO investigation of alleged financial wrongdoing by New York businessman Moshe Lax and glaring irregularities in the Internal Revenue Service’s handling of a $27 million lien on his father’s estate.

The suit, which seeks more than $60 million in unpaid tax liabilities, was brought in the Southern District of New York by lawyers in the Justice Department’s tax division. It alleges that Lax, his sister Zlaty Schwartz, and his late father, Chaim Lax, engaged in a series of complex “sham transactions” designed to fraudulently evade tax liability. The government alleges the family members undertook 10 separate schemes “designed to hide the Lax family assets from the IRS and other creditors and make it appear as though the Estate was insolvent.”

At a time when Democrats are working to make corruption a midterm campaign issue and a jury deliberates over whether to convict President Donald Trump’s former campaign manager for tax fraud, the suit threatens to further the perception that the Trump family and their closest associates operate in a corrupt milieu.

Though the complaint does not mention the president’s daughter or accuse her of wrongdoing, Madison Avenue Diamonds, the business that she helped run for years under the name Ivanka Trump Fine Jewelry, figures prominently in the government’s case.

One of the 10 schemes outlined in the complaint is Lax’s alleged transfer of a roughly $21 million interest in Madison Avenue Diamonds from his father’s estate to a holding company for nothing in return.

A lawyer for Schwartz, Megan Brackney of Kostelanetz & Fink, declined to comment. Lax did not respond to requests for comment and court records do not list an attorney for him. The White House referred requests for comment to a firm that handles PR for Trump’s brand. “The issues in this case have nothing to do with Ivanka or the Ivanka Trump brand,” said a spokesperson for the brand, who asked not to be identified by name. “These licensing arrangements were terminated by the Ivanka Trump brand in 2016, prior to Ivanka entering government service.”

But the government alleges that Lax fraudulently transferred a portion of equity in Madison Avenue Diamonds at some point between 2008 and 2012. During that period, Trump remained involved with the business. At one point, Trump also had an ownership stake in Madison Avenue Diamonds, according to a deposition she gave in an unrelated case that was obtained by POLITICO last year.

Madison Avenue Diamonds is not named as a party in the complaint, but the holding company to which Lax allegedly transferred part of the company is.

In the complaint, the government names private creditors of Madison Avenue Diamonds as parties because they may have competing claims on the assets the government wants to seize.

Although no Trump entities are named as parties, Trump Organization General Counsel Alan Garten told POLITICO last summer that the Trump family business was “still owed a significant amount of money” by Lax from the jewelry venture.

It is not clear whether Lax has paid out on the debt since then. Neither Garten nor Trump Organization spokeswoman Amanda Miller responded to questions about whether Lax still owes money to Trump or any Trump family entities. The spokesperson for Trump’s brand said the brand would not be going after Lax or Madison Avenue Diamonds for any outstanding debt but did not address a question about whether any debt had been repaid.