Background on this case, from Sept 2022:
An intricately detailed,
200-plus page civil lawsuit lays out New York Attorney General Letitia James’ case that former President Donald Trump, three of his children, his companies and his business executives defrauded lenders, insurers and other entities.
“This conduct cannot be brushed aside and dismissed as some sort of good-faith mistake,” James told reporters.
“No one, my friend, is above the law,” she added.
Trump and his company used “false and misleading” financial statements, her lawsuit alleged, “repeatedly and persistently to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available to the company, to satisfy continuing loan covenants, and to induce insurers to provide insurance coverage for higher limits and at lower premiums.”
“All told, Mr. Trump, the Trump Organization, and the other Defendants, as part of a repeated pattern and common scheme, derived more than 200 false and misleading valuations of assets included in the 11 Statements covering 2011 through 2021,” the lawsuit said.
James characterized one of the episodes as a “two sets of books” scenario: “one internal set of records reached one conclusion regarding market value, but the figure presented on Mr. Trump’s Statement was considerably higher.”
James claims that Trump reaped a “substantial” financial benefit by putting forward faulty information in his financial statements, including $150 million in the form of favorable interest rates he obtained from the banks that James said his team misled.
Trump valued his Mar-a-Lago club in Florida as high as $739 million when the property was likely worth about a tenth of that, James alleged, while accusing Trump of further boosting the resort’s value by tacking on a “brand premium.”
US accounting principles prohibit such premiums and the Trump financial statements “expressly claim to exclude brand value,” James said.
Included in the 2011 valuation of Trump’s Westchester golf course in New York was the notion that new members would pay $200,000 in initiation fees, even though Trump instructed the club to reduce or waive those fees in a bid to increase club membership numbers, according to the lawsuit.
The defendants are accused of skewing the worth of the Trump Park Avenue property, by putting a value on several units that was roughly six times more than what an outside firm calculated in an 2010 appraisal. James pointed to testimony from Donald Trump Jr., one of the defendants, that indicated the company was aware that the units were rent stabilized, which is the reason the appraiser had put them at the much lower value.
Other Trump ventures – including his Doral golf resort in Florida, the Old Post Office property he leased for a hotel in Washington, and Trump International Hotel and Tower in Chicago – are implicated in the lawsuit, with James saying that loans were extended for those properties because of inaccurate representations the Trump team made to banks.
James also claimed that the Trump financial statements describes profits from real estate properties as being part of Trump’s liquid assets when they were in fact cash held by a real estate trust, Vornado Partnerships, in which Trump had a minority stake. Doing so contradicted both US accounting principles (known as generally accepted accounting principles or GAAP), according to the complaint.
“In some years these restricted funds accounted for almost one-third of all the cash reported by Mr. Trump,” the lawsuit said.
The lawsuit said that “no outside professionals were retained to prepare any of the asset valuations” that were presented in his annual financial statements, despite representations on those statements that the evaluations were done with “outside professionals.”
“To the extent Mr. Trump and the Trump Organization received any advice from outside professionals that had any bearing on how to approach valuing the assets, they routinely ignored or contradicted such advice,” the complaint said.
Jeffrey McConney – a Trump Organization executive and a defendant in the lawsuit – was asked by the attorney general’s office in a 2020 interview about the references to outside professionals on the Trump financial statements, according to the lawsuit.
“After that interview, the Trump Organization changed the wording for the 2020 Statement, omitting any representation that any particular valuation was reached in consultation with ‘outside professionals’ and instead listing outside professionals as merely one factor that may have been ‘applicable’ in some unspecified manner,” James’ complaint said.
