How Donald Trump Shifted Kids-Cancer Charity Money Into His Business

LIKE AUTUMN LEAVES, sponsored Cadillacs, Ferraris and Maseratis descend on the Trump National Golf Club in Westchester County, New York, in September for the Eric Trump Foundation golf invitational. Year after year, the formula is consistent: 18 holes of perfectly trimmed fairways with a dose of Trumpian tackiness, including Hooters waitresses and cigar spreads, followed by a clubhouse dinner, dates encouraged. The crowd leans toward real estate insiders, family friends and C-list celebrities, such as former baseball slugger Darryl Strawberry and reality housewife (and bankruptcy-fraud felon) Teresa Giudice.

The real star of the day is Eric Trump, the president’s second son and now the co-head of the Trump Organization, who has hosted this event for ten years on behalf of the St. Jude Children’s Research Hospital in Memphis. He’s done a ton of good: To date, he’s directed more than $11 million there, the vast majority of it via this annual golf event. He has also helped raise another $5 million through events with other organizations.

The best part about all this, according to Eric Trump, is the charity’s efficiency: Because he can get his family’s golf course for free and have most of the other costs donated, virtually all the money contributed will go toward helping kids with cancer. “We get to use our assets 100% free of charge,” Trump tells Forbes.

That’s not the case. In reviewing filings from the Eric Trump Foundation and other charities, it’s clear that the course wasn’t free–that the Trump Organization received payments for its use, part of more than $1.2 million that has no documented recipients past the Trump Organization. Golf charity experts say the listed expenses defy any reasonable cost justification for a one-day golf tournament.

Additionally, the Donald J. Trump Foundation, which has come under previous scrutiny for self-dealing and advancing the interests of its namesake rather than those of charity, apparently used the Eric Trump Foundation to funnel $100,000 in donations into revenue for the Trump Organization.

And while donors to the Eric Trump Foundation were told their money was going to help sick kids, more than $500,000 was re-donated to other charities, many of which were connected to Trump family members or interests, including at least four groups that subsequently paid to hold golf tournaments at Trump courses.

All of this seems to defy federal tax rules and state laws that ban self-dealing and misleading donors. It also raises larger questions about the Trump family dynamics and whether Eric and his brother, Don Jr., can be truly independent of their father.

Especially since the person who specifically commanded that the for-profit Trump Organization start billing hundreds of thousands of dollars to the nonprofit Eric Trump Foundation, according to two people directly involved, was none other than the current president of the United States, Donald Trump.

IN ORDER TO understand the Eric Trump Foundation, you need to understand the Donald J. Trump Foundation. The president was never known for giving his foundation much money, and from 2009 to 2014, he didn’t give it anything at all. Outsiders still donated, though, allowing Trump to dole out their money to a smattering of more than 200 charities as if it were his own, with many of the donations helping his business interests.

Eric Trump set out to do things differently. Coming out of Georgetown, he decided he would try to translate the good fortune he had inherited into support for children’s cancer research. Why this cause, especially for a guy who still doesn’t have kids? “It’s a great question–it’s one that I’ve been asked before–and I’m not really sure,” he says. “I think there is something about that innocence that has always affected me.” After visiting various hospitals, he chose to give to strength, St. Jude, the world’s best-known pediatric cancer center.

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.

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. But it seems that for the future president, who Forbes estimates is worth $3.5 billion, a freebie to help his son directly fight kids’ cancer took a backseat to revenue.

“I saw that Eric was getting billed,” Gillule adds. “I would always say, ‘I can’t believe that his dad is billing him for a charitable outing.’ But that’s what they wanted.”

It’s also very consistent. The Donald J. Trump Foundation famously acted like an arm of the overall business, using the charity’s money to settle a Trump business lawsuit, make a political donation and even purchase expensive portraits of its namesake. Meanwhile, Trump businesses billed the Trump campaign, fueled by small outside donors, more than $11 million to use his properties, chefs and private aircraft.

At first the extra bills did not cost the Eric Trump Foundation anything. Shortly before the spike in costs, the Donald J. Trump Foundation donated $100,000 to the Eric Trump Foundation–a gift explicitly made, according to Gillule, to offset the increased budget. Thus, the Eric Trump donors were still seeing their money go to work for kids along the same lines as previous years.

The Eric Trump Foundation declined to comment on that donation. In effect, though, this maneuver would appear to have more in common with a drug cartel’s money-laundering operation than a charity’s best-practices textbook. That $100,000 in outside donations to the Donald J. Trump Foundation (remember: Trump himself didn’t give to his own foundation at this time) passed through the Eric Trump Foundation–and wound up in the coffers of Donald Trump’s private businesses.

“His father, Mr. Trump, always, until the presidency, had a very, very tight rein on what was going on,” says Gillule, referring to the company’s golf courses. “The buck always stopped with him.”