Donald Trump and family members (circled) Donald Jr., Eric and Ivanka are under investigation in New York. (Photo: US Govt.)
Donald Trump’s long-running battle with New York Attorney General Letitia James over his alleged shady business dealings is nearing its end game, according to the latest developments in the case.
“We have uncovered significant evidence indicating that the Trump Organization used fraudulent and misleading asset valuations on multiple properties to obtain economic benefits, including loans, insurance coverage, and tax deductions for years,” James said in a Tweet.
In the latest round of legal action, James has filed a motion to compel the testimony of Donald Trump, Donald Trump, Jr. and Ivanka Trump all of whom have been involved in the myriad business dealings of the Trump Organization.
The Trumps have filed a motion to quash the subpoenas, largely on procedural grounds. The matter is pending.
More than a dozen current and former Trump Organization employees have provided sworn testimony in recent weeks, according to the AG’s office.
Click Here to Read the Court Filing
Like any good lawyer, she likely already knows the answers to questions she plans to ask about their financial dealings.
Typically, investigative targets are also questioned at the end of an investigation, when their legal jeopardy is highest and they are open to committing perjury or obstruction, according to legal references.
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“We are taking legal action to force Donald Trump, Donald Trump, Jr., and Ivanka Trump to comply with our investigation into the Trump Organization’s financial dealings,” James said in a Tweet this morning, explaining her action.
“No one in this country can pick and choose if and how the law applies to them… We won’t tolerate their attempts to evade testifying in this investigation.”
Michael Cohen, Trump’s one-time lawyer and self-described “fixer,” is the catalyst for the investigation.
Cohen testified before Congress in 2019 that Trump had engaged in fraud by manipulating valuations of his real estate holdings to minimize taxes or to obtain loans.
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A month later, James launched her investigation with subpoenas to Deutsche Bank and Investors Bank.
Her office was seeking records relating to the financing of four major Trump Organization projects and a failed effort to buy the Buffalo Bills of the National Football League in 2014, according to The New York Times.
Cohen had provided copies of financial statements he said had been submitted to Deutsche Bank.
The Manhattan District Attorney began a parallel criminal investigation at about the same time.
Last October, the attorney general’s office said it had begun working alongside the Manhattan district attorney in its criminal fraud investigation.
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“We have informed the Trump Organization that our investigation into the organization is no longer purely civil in nature,” Fabien Levy, an AG spokesman said in a statement.
“We are now actively investigating the Trump Organization in a criminal capacity, along with the Manhattan D.A. We have no additional comment at this time.”
Trump’s long-time Chief Financial Officer Allen Weisselberg was charged last July with 15 felony counts for evading $344,745 in taxes over 15 years. He’s pleaded not guilty.
The Trump Organization announced that Weisselberg would manage the company along with Eric Trump and Trump Jr. during Donald Trump’s presidential term.
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According to court records and media reports, James has zeroed in on a Trump-owned estate in New York called Seven Springs, and likely several other properties.
Following Cohen’s testimony in Feb. 2019, James, ten months later, subpoenaed the Trump Organization for records related to a $21 million tax deduction Trump claimed against the property in 2015.
Trump allegedly improperly inflated the property’s value to boost the size of the tax benefit, according to court papers.
Trump is also under scrutiny for allegedly failing to pay taxes on debt forgiven during the financial restructuring of the Trump Hotel & Tower in Chicago and inflating the appraisal of the Trump National Golf Club in Los Angeles.
The latter property was used for a conservation tax break, which was substantially higher than metrics typically used to value golf properties, according to court filings.
James’s office questioned Eric Trump about the deals in October 2020 and won a key court ruling in January a year ago that yielded thousands of documents about the tax deductions held by Trump’s tax attorneys.
Lawyers for the Trumps claim the “joint” criminal investigation precludes James from using a civil procedure to compel testimony.
Rather, they argue the Trumps should be questioned by a grand jury, which would provide them with legal protections, including seeking a deal for immunity.
Donald Trump is also suing James in federal court to block the investigation.
He claims James, a Democrat who is elected to office, is pursuing the investigation solely to grind a political axe.
He also asserts his First Amendment rights are being violated because of his political activities and claims the subpoenas were filed in bad faith.
James responded on social media.
“We will not be deterred in our efforts to continue this investigation, uncover the facts, and pursue justice, no matter how many roadblocks Mr. Trump and his family throw in our way.
“No one is above the law,” she wrote.
The attorney general has broad authority under state law to investigate fraud and can fine — or in extreme cases, go to court to try to dissolve — a business that is found to have engaged in repeated illegality, according to the Times.
Trump and his cronies are facing a slew of litigation arising out of his one-term presidency and the 2020 election, which he falsely claims was “rigged.”
Watch Michael Cohen’s full Congressional testimony below.
The Case Against Donald Trump and the Trump Organization
All of the examples described below appeared on official Statements of Financial Condition for Donald J. Trump for a number of years and were used to obtain loans or otherwise state the net worth of Mr. Trump and the Trump Organization.
1) Seven Springs
Seven Springs is a 212-acre property in Westchester County, purchased by the Trump Organization in 1995. In 2004, the Trump Organization valued the property at $80 million; in 2007 they valued it at $200 million; and by 2012, they valued it at $291 million. The principal basis of this last valuation was the contention that the property was zoned for nine luxurious homes worth a supposed $161 million of profit. Two separate, professional appraisers valued the lots that were supposedly going to be developed at mere fractions of the prices used in the Trump Statement of Financial Condition. After receiving the March 2016 appraisal, which valued the property at $56 million, Mr. Trump’s subsequent financial statement was changed in a manner that disguised what would otherwise have appeared as a more than 80 percent drop in the value of Seven Springs (from $291 million to $56 million) by moving the property to a catch-all category where no asset was itemized.
2) Trump Tower Triplex
In that same catch-all category was Mr. Trump’s triplex apartment, which on the same statement was given a value increase of $127 million. The valuations of Mr. Trump’s triplex apartment in Trump Tower since at least 2012 were based on the assertion that the triplex apartment was 30,000 square feet in size. However, the actual size of Mr. Trump’s triplex apartment was 10,996 square feet, and documents confirming that fact were signed by Mr. Trump himself in 2012. Nevertheless, Mr. Trump’s 2015 and 2016 financial statement reported the value of Mr. Trump’s triplex apartment as $327 million, based on the apartment having 30,000 square feet of space multiplied by a certain price per square foot. In testimony to OAG, Trump Organization CFO Allen Weisselberg admitted that the value of Mr. Trump’s apartment was overstated by “give or take” $200 million.
3) Trump International Golf Club Scotland
This property, which is located in Aberdeen, Scotland, was purchased by the Trump Organization in 2006 for $12.6 million. In 2011, the valuation of Aberdeen used for Mr. Trump’s financial statement was estimated at £75 million or $161 million, however, this valuation appears to have been based on an email prepared to provide information to Forbes magazine for a quote and was not professionally determined. For Mr. Trump’s 2014 financial statement, the Trump Organization valued the entire Aberdeen property at $435.56 million, in part by assuming the right to build 2,500 luxury homes on the property – despite approval to build fewer than 1,500 holiday apartments and golf villas.
4) The Trump Brand
Mr. Trump’s financial statements explicitly state that the statements do not incorporate any brand value. Mr. Trump was personally aware of the fact that his Statements of Financial Condition represented that no brand value was included in the valuations, however, based on evidence that OAG obtained, that representation was false or at least misleading. The financial statements included an undisclosed added brand premium for most of the properties classified as “Club Facilities and Related Real Estate.” From 2013-2014, seven golf club facilities were valued in a manner that included an undisclosed flat 30 percent premium on top of fixed assets for a “fully operational branded facility.” From 2015-2020, the value of those same seven facilities included an undisclosed flat 15 percent premium. The financial institutions that provided loans or insurance for these facilities required that brand value be excluded from the individual’s “net worth.”
5) Trump National Golf Club Westchester
Mr. Trump purchased Trump National Golf Club Westchester for $8.5 million. In his 2011 financial statement, the property was valued at $68.7 million. A portion of that total reflected the value of the initiation fee for 67 unsold memberships, totaling $12.77 million on the assumption that the club was currently “getting $150,000” per membership and that amount would only rise. But the investigation determined that the $150,000 number was false. Many new members paid no deposit at all in 2011, and Trump Organization records showed no members paid an initiation fee in 2012. The valuation also included an undiscounted amount from the sale of 31 mid-rise units that the Trump Organization recognized had been “put on hold.”
6) Trump Park Avenue
Trump Park Avenue is reflected on Mr. Trump’s financial statements from 2011-2020. In these years, the property was reported as representing between $135 million and $350 million of Mr. Trump’s total assets. Evidence obtained by OAG establishes that unsold residential condominium units represented the majority of the reported value (in excess of 95 percent in some years). In 2011, the reported value of the property was $311.6 million with unsold residential units comprising $293.1 million of that value. Evidence obtained by OAG indicates both that the reported values of the unsold residential units of the Trump Park Avenue building were significantly higher than the internal valuations used by the Trump Organization for business planning and failed to account for the fact that many units were rent stabilized. For one apartment, Ivanka Trump held an option to purchase an apartment she was renting for $8.5 million, but it was valued as high as $25 million on Mr. Trump’s financial statements.
7) 40 Wall Street
The Trump Organization owns a “ground lease” at 40 Wall Street, meaning it holds a leasehold interest in the land and buildings on the land, but pays rent to the owner. The OAG has obtained evidence raising questions regarding the true value of the Trump Organization’s leasehold interest in 40 Wall Street as reported on Mr. Trump’s financial statements. Outside appraisals conducted by Cushman & Wakefield in 2010-2012 for Capital One, which held a $160 million mortgage on the building, valued the Trump Organization’s interest in the property between $200 million and $220 million. During the same period, Mr. Trump’s financial statements represented that 40 Wall Street had a valuation of $601.8 million in 2010, $524.7 million in 2011, $527.2 million in 2012, and $530.7 million in 2013 – values between two and three times the value recorded in the three consecutive appraisals
In early 2015, the Trump Organization sought to renegotiate its loan to avoid a $5 million principal payment, citing its $550 million valuation as grounds for the renegotiation. Capital One, which had performed its own valuation in November 2014 determining that 40 Wall Street was worth $257 million, declined to renegotiate. Thereafter, the Trump Organization, under Mr. Weisselberg’s leadership, began working with his son, Jack Weisselberg, a director at Ladder Capital to refinance the $160 million mortgage. Now working for Ladder Capital, the same Cushman & Wakefield team that performed the 2010-2012 appraisals valued the building at $550 million. While OAG has obtained evidence that the 2015 appraisal did not reflect a good-faith assessment of value, using demonstrably incorrect facts and aggressive assumptions, even this inflated value was insufficient for Mr. Trump. Mr. Trump’s financial statements as of June 2015 added almost $200 million to that figure and valued the building at $735.4 million.
Misrepresentations to Financial Institutions
The OAG is investigating the Trump Organization’s representations to banks and insurers and whether those institutions relied on Mr. Trump’s financial statements. The evidence to date indicates that banks and other financial institutions relied on Mr. Trump’s financial statements in considering whether to grant Mr. Trump and the Trump Organization access to credit and coverage. Mr. Trump’s Statements of Financial Condition were submitted to multiple banks and insurers to obtain credit and coverage and to comply with covenants on existing loans that required periodic submission of financial statements.
Misrepresentations to Insurance Providers
Evidence indicates that over a period of years, Allen Weisselberg misrepresented the source of valuations on Mr. Trump’s financial statements in order to obtain favorable terms for insurance coverage on multiple occasions. Mr. Weisselberg repeatedly represented that the valuations listed in Mr. Trump’s personal financial statements were prepared annually by professional appraisal firms, which was false. With respect to nearly all valuations, the Trump Organization did not retain any professional appraisal firm to prepare the valuations of the Trump Organization’s real estate holdings that appeared in Mr. Trump’s financial statements shown to the underwriter. Rather, the valuations were prepared by Trump Organization staff, contrary to what an underwriter was expressly told and believed.
Misrepresentations to the IRS
Evidence indicates that the Trump Organization also submitted fraudulent or misleading valuations to the Internal Revenue Service (IRS), specifically related to the Trump National Golf Club Los Angeles and Seven Springs.
Evidence indicates that an appraisal commissioned by the Trump Organization and submitted to the IRS substantially overstated the value of a land donation at the Trump National Golf Club Los Angeles by overstating the speed with which the site could be developed and by failing to value a reduction in affordable housing requirements that the donation enabled. During the preparation of that appraisal, one appraiser wrote that “Trump is fighting for every $1.” The misrepresentations were incorporated into the final valuation arrived at by appraisers, and ultimately submitted to the IRS in connection with a tax deduction Mr. Trump sought on the property.
Evidence indicates that an appraisal commissioned by the Trump Organization also substantially overstated the value of a land donation at Seven Springs. After efforts to develop the Seven Springs property in Westchester were unsuccessful, the Trump Organization granted a conservation easement over 158 acres of the property in 2015.
The OAG has identified evidence that the number of lots relied upon to calculate the value of the conservation easement that the Trump Organization sought on this property was more than double what was permitted by development restrictions imposed by a locality — restrictions that the Trump Organization was long aware of and had agreed to on the record at a town meeting. As a result of these restrictions, the Trump Organization would have been required to reduce the number of potential subdivision lots that could be developed, which on information and belief, would have reduced the value reached by the appraisal by as much as approximately 50 percent. The OAG has also identified evidence suggesting that the development timeline used to calculate the value of the easement donation was inconsistent with applicable disturbance restrictions, and if the actual timeline were utilized, it would have further reduced the value of the appraisal. Mr. Trump’s accountants have told OAG that the easement deductions at Trump National Golf Club Los Angeles and Seven Springs resulted in several million dollars of benefit to Mr. Trump.