The Panama luxury hotel owner who sued and evicted Donald Trump’s property management company from his waterfront hotel in the Central American country last year has alleged that it knowingly evaded Panamanian taxes.
In the filing in Manhattan federal court, Cypriot businessman Orestes Fintiklis alleged that the company had “failed to comply with Panamanian tax and legal requirements” including failing to pay all due taxes on the hotel management fees and failing to report staff salaries in full.
“Trump used its control over the hotel bank accounts to make payments to itself and affiliates without withholding the 12.5 per cent tax on its management fees, thus intentionally evading taxes,” the filing said.
The Trump Organization said that Mr Fintiklis was “trying to distract from his own fraud and material breaches. The Trump Organization did not evade any taxes. To the extent any taxes were to be withheld, it was the responsibility of the condominium that owns the hotel. The Trump Organization’s only role was to manage the property”.
The filing said the alleged tax fraud came to light after Mr Trump’s company was evicted as owner of the hotel in March 2018 and turned the property over to Mr Fintiklis’s Florida-based Ithaca Capital Partners fund.
It also alleged that Mr Trump’s company made “fraudulent and false claims” to the Panamanian tax authorities — saying it was an affiliate of a Panamanian hotel entity — “in an attempt to cover up its unlawful activities”.
The filing said an audit by Panamanian tax authorities that began in the spring of last year “identified the failure to withhold and pay income taxes relating to Trump’s management fees” and confirmed irregularities, including withdrawing funds from the reserve accounts and replacing them with funding from other sources, in breach of the rules. Ithaca said the irregularities exposed it to a potential multimillion-dollar tax penalty in Panama.
Furthermore, the company knowingly exaggerated the hotel’s performance, employed “fatally flawed sales and marketing strategies” and turned a blind eye to “plummeting occupancy levels, declining revenues and increased costs”, the filing claimed.
Mr Fintiklis became the controlling owner of the hotel in August 2017 after buying 202 of its 369 units, and sought soon after to take control of the building, prompting skirmishes.
But after a legal ruling last year, the Trump name was removed from the façade of the hotel.
The Trump Organization has in the past accused Mr Fintiklis of “thug-like, mob-style tactics”.