By James Oliphant and Emily Stephenson
WASHINGTON (Reuters) - New York's attorney general ordered Republican presidential nominee Donald Trump's charitable foundation to immediately stop fundraising in the state, warning that a failure to do so would be a "continuing fraud."
For Trump, the cease-and-desist order was the latest in a series of blows that has sent his campaign reeling. The New York businessman and his aides spent much of the weekend dealing with the fallout from a New York Times report that said Trump may have avoided paying federal income taxes for almost 20 years.
New York Attorney General Eric Schneiderman's office said the Donald J. Trump Foundation was violating a state law requiring charitable organizations that solicit outside donations to register with the office's Charities Bureau.
The order followed a series of reports in The Washington Post that suggested improprieties by the foundation, including using its funds to settle legal disputes involving Trump businesses.
"The failure immediately to discontinue solicitation and to file information and reports required under Article 7-A with the Charities Bureau shall be deemed to be a continuing fraud upon the people of the state of New York," according to a letter dated on Friday that the office posted online on Monday.
Trump's campaign has suggested that the probe launched by Schneiderman, a Democrat, was politically motivated.
While again putting Trump's campaign on the defensive, the order could also undercut his efforts to make the Clinton Foundation, the family charity of Democratic presidential rival Hillary Clinton, a primary target in his campaign against her for the Nov. 8 election.
Trump has sought to paint the Clinton Foundation as a "pay-to-play" operation under which the former U.S. secretary of state and her husband, former President Bill Clinton, rewarded big donors to the foundation with access.
The Clinton Foundation, which has $354 million in assets and almost 500 staffers, is a radically different charitable vehicle from the small-scale Trump nonprofit. It has worked to reduce the cost of drugs for people with HIV in developing countries, eradicate childhood obesity in the United States and reduce greenhouse gas emissions.
There has been no evidence that foreign donors to the foundation obtained favors from the State Department while Clinton headed the agency. While some donors were able to obtain meetings with her or senior State Department officials, Clinton has said the fact that they had donated to the foundation did not play a role in her decision to meet with them.
The scrutiny of the Trump Foundation came as the Republican candidate was dealing with a torrent of bad news, including his shaky performance in his first debate with Clinton on Sept. 26 and the release by the New York Times of tax records that showed Trump taking an almost $1 billion loss in 1995 that may have allowed him to avoid paying federal income taxes for up to 18 years.
In its series on the Trump Foundation, The Washington Post reported that Trump may have violated U.S. Internal Revenue Service rules against “self-dealing” by using foundation money to purchase two portraits of himself, which were then hung at his private golf clubs in New York and Florida.
The newspaper also said that Trump may have improperly used the foundation to settle legal disputes, including one at his Palm Beach, Florida, estate, diverted income from his business to the charity to avoid paying income tax, and donated foundation money to support Florida Attorney General Pam Bondi, a Republican, who was considering launching an investigation into Trump University, Trump’s for-profit education venture.
The foundation ended up paying a $2,500 fine to the IRS for that donation. A Trump Organization representative told the Post the donation was meant to be from Trump's personal account, and that it came from his foundation's account by clerical error.
In response to the Post's reporting, Schneiderman's office began a probe into the Trump Foundation.
The Trump campaign said in a statement on Monday that the charity would cooperate with the investigation.
"While we remain very concerned about the political motives behind AG Schneiderman’s investigation, the Trump Foundation nevertheless intends to cooperate fully with the investigation," said Trump campaign spokeswoman Hope Hicks.
"Because this is an ongoing legal matter, the Trump Foundation will not comment further at this time,” she added.
The New York Attorney General’s Office is the sole regulator of charities in the state. A spokesman for the office said it was not unusual for the regulator to send notices to charities whose filings were overdue or incomplete but that a cease-and-desist letter was more serious.
While letters such as the one the Trump Foundation, which is based in Woodbury, New York, on Long Island, received are not judgments of wrongdoing, they are sent only after the office gets “a clear indication of wrongdoing,” the spokesman said.
Trump established the charitable foundation in 1988, but it runs no programs of its own. Instead, it donates money to other nonprofit groups such as the Police Athletic League for youths. Once the foundation began soliciting money from other donors beyond the Trump family, it was required by New York law to register with the state and file regular reports.
(Additional reporting by Emily Flitter; Editing by Caren Bohan and Jonathan Oatis)