A Manhattan judge presiding over New York state's suit against President Donald Trump's charitable foundation pushed a lawyer for Trump on Thursday to explain how the Trump campaign's direction of allocation of the charity's finances doesn't run afoul of state nonprofit laws.

The New York Attorney General's Office is pushing for dissolution of the Trump Foundation, alleging that Trump uses it as a “checkbook” to other nonprofits and for personal and political benefit.

The AG also alleges that the Trump Foundation broke New York state charity laws when it took marching orders from Trump's presidential campaign in the months leading up to 2016 as to how it should distribute the $5.6 million collected from donors at an event in Iowa that has blurred the line between charitable fundraiser and campaign event.    

Alan Futerfas, who represents Trump and who presented oral arguments for a motion to dismiss the suit, argued that the AG's office, which argues that the Trump campaign's direction of the foundation's finances amounted to an improper “related party” transaction, is trying “manhandle” the facts of the case to fit within statutory limits.

But Manhattan Supreme Court Justice Saliann Scarpulla, who noted several times during the hearing that she must accept all the AG's allegations as true at the dismissal motion phase, said the state is alleging that the Iowa fundraiser provided Trump with a dose of “voter goodwill that he would otherwise have to pay for” in terms of receiving TV coverage and passing out get-out-the-vote cards.     

“To me that seems like a very easy case of a related transaction,” Scarpulla said. “It is not an incidental publicity, it is someone who is running for president of the United States.”    

In addition to dissolution of the charity, Attorney General Barbara Underwood's office seeks a pledge from Trump that he will not serve as director of a nonprofit for a decade as well $2.8 million in restitution, which was the amount gathered from the 2016 rally in Iowa to the foundation.

Assistant Attorney General Yael Fuchs, the co-chief of the enforcement section of the AG's Enforcement Bureau who presented oral arguments against Trump's dismissal motion, said that the state is not contesting Trump's argument that the foundation donated the $2.8 million to various veterans groups.

But Fuchs noted that Trump has argued in court papers that the Iowa rally was a political event, while stating in filings with the IRS that it was a fundraiser. Trump argues that the foundation was a “passive recipient” of funds, an argument that Fuchs said has no legal significance.   

“To use the modern parlance, that's not a thing,” Fuchs said.

Fuchs argued that the level of control that Trump's campaign exerted over the foundation's expenditures constitutes improper transfers, including where the money went and when it was sent, referring to an email exchange between a former Trump campaign manager, Corey Lewandowski, and Allen Weisselberg, who served as treasurer for the foundation, in which Lewandowski asked about disbursing money in Iowa while the campaign was making rounds through the states.   

The AG's office also alleges that Trump has used foundation funds for “self-dealing,” such as the $10,000 purchase of a six-foot portrait of Trump that was donated to an auction for a Florida-based charity for the developmentally disabled—Futerfas said Trump put down the money, but it received no bidders, and Trump was “stuck with the painting.”

Underwood filed the suit June, not long after she took office, though the investigative legwork that underlies the case began under former Attorney General Eric Schneiderman in the months before Trump was elected.

Schneiderman, a Democrat who emerged in the early days of the Trump administration as a foil for the White House and a champion of women's rights, resigned in disgrace in May just hours after The New Yorker released a report detailing accusations from women who say that Schneiderman physically abused them.

Attorneys for Trump have also argued that the case should be dismissed because the suit is motivated by political bias against a Republican president.  

Underwood's office contends that the investigation and suing charities for alleged misuse of funds is business as usual for the office: for example, theater producer David Richenthal agreed to cough up $550,000 in restitution for using funds from a charity founded by his father, prominent landlord attorney Arthur Richenthal, to pay for travel, entertainment and legal expenses.

Futerfas argued that the case falls outside the AG's typical charity enforcement case, as it didn't involve the use of foundation funds for trips to Paris or houses in the Hamptons.

Underwood also argues that Schneiderman's departure from the office makes Trump's bias argument irrelevant, though Scarpulla declined to explore the bias issue during the hearing, saying that the “allegations are what they are, and until you deny them, I accept them.”  

Scarpulla reserved judgment on the motion, and how the case progresses from here may hinge on how a Manhattan appeals court decides in a separate case on the unprecedented issue of whether or not Trump can be sued in state court while serving as commander-in-chief.

Last week, the Appellate Division, First Department heard oral arguments in the defamation lawsuit against the president filed by Summer Zervos, a former contestant on “The Apprentice” who alleges that Trump groped her in 2007 while he hosting the show.

Scarpulla noted that Trump is not the only party in the Trump Foundation case—if Trump himself is no longer a defendant, the foundation and its board of directors—which includes Trump's children, Donald Jr., Eric and Ivanka—may still have claims against them.

But Scarpulla said if the First Department finds in Trump's favor in the Zervos suit and reverses Manhattan Supreme Court Justice Jennifer Schecter's ruling that there's nothing in the supremacy clause of the U.S. Constitution that precludes a state-court suit against a sitting president, Underwood's office may have to re-plead its suit.

“I don't think that's going to completely remove their action,” Scarpulla said.  

On Friday, Schecter is scheduled to hear arguments in the Zervos case regarding her motion to compel Trump to hand over evidence of other women with allegations that they too were victims of sexual misconduct by Trump.  

Read more: