AG court filing reveals details about possible Trump fraud
In a court filing that answered efforts by attorneys for Donald Trump, Ivanka Trump and Donald Trump Jr. to block subpoenas, New York State Attorney General Letitia James provides previously unknown details of her office”™s investigation into Trump business dealings, including the Seven Springs Estate and Trump National Golf Course properties in Westchester.
The subpoenas were issued to compel Trump and his children to testify and produce relevant documents for James”™ investigation.
In a Memorandum of Law filed with the State Supreme Court in New York County on Jan. 18, the Office of the Attorney General (OAG) states, “The Trump Organization used fraudulent or misleading asset valuations to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions. And while OAG has not yet reached a final decision regarding whether this evidence merits legal action, the grounds for conducting the investigation are beyond reproach.”
In a Supplemental Verified Petition also filed with the court, OAG states it is “currently investigating whether the Trump Organization and Donald J. Trump (“Mr. Trump”) misstated the value of Mr. Trump”™s assets on annual financial statements, tax submissions, and other documents and made other material misrepresentations provided to third parties in order to secure loans and insurance coverage and obtain other economic and tax benefits.”
The petition reveals that during the investigation “witnesses closest to the top of the Trump Organization have asserted their Fifth Amendment rights against self-incrimination. Certain others have professed faulty memories or asserted that they were following instruction from more senior employees.”
The petition states that “Donald J. Trump is the beneficial owner of the Trump Organization. He had ultimate authority over a wide swath of conduct by the Trump Organization involving misstatements to counterparties, including financial institutions, and the Internal Revenue Service.”
It goes on to say that Trump”™s son, Donald Jr., manages the Trump Organization with son Eric. It says that daughter Ivanka, among her other responsibilities, negotiated and secured financing for Trump Organization properties and was the primary contact for Trump with the organization”™s largest lender, Deutsche Bank.
James”™ petition to the court charges that Trump financial statements or backup material:
- “Misstated objective facts, like the size of Mr. Trump”™s Trump Tower penthouse;
- “Miscategorized assets outside Mr. Trump”™s or the Trump Organization”™s control as ”˜cash,”™ thereby overstating his liquidity;
- “Misstated the process by which Mr. Trump or his associates reached valuations;
- “Failed to use fundamental techniques of valuation, like discounting future revenues and expenses to their present value;
- “Misstated the purported involvement of ”˜outside professionals”™ in reaching the valuations; and
- “Failed to advise that certain valuation amounts were inflated by an undisclosed flat percentage for brand value, despite express language on the Statements asserting that the value of Mr. Trump”™s brand was not reflected the Statements pursuant to generally accepted accounting principles (”˜GAAP”™).”
The petition includes information about Trump”™s Seven Springs Estate, which consists of approximately 212 acres of property in Bedford, New Castle and North Castle in Westchester. It says Trump bought the property in December 1995 for $7.5 million.
The OAG also says that an appraisal prepared in the year 2000 for the Royal Bank of Pennsylvania and sent to the Trump Organization estimated that Seven Springs had an “as-is” market value of $25 million for residential development. The same bank”™s records further indicate that a 2006 appraisal showed an “as-is” market value of $30 million. The OAG says that Trump”™s 2012, 2013 and 2014 Statements of Financial Condition reported a value for Seven Springs of $291 million and asserted that “[t]his property is zoned for 9 luxurious homes.”
James”™ petition also states that “in March 2016, two Cushman appraisers completed an appraisal of Seven Springs and concluded that the entire property (including undeveloped land and existing buildings) as of December 1, 2015 was worth $56.5 million.”
According to the Attorney General”™s petition, the investigation has raised “serious questions” about whether the value of a conservation easement that was donated to preserve a portion of the Seven Springs Estate property and provided a tax deduction “was improperly inflated because of actions by the Trump Organization, its agents, and attorneys.” The easement was donated after attempts to develop the property had been unsuccessful.
“Mr. Trump”™s accountants have told OAG that the Seven Springs deduction resulted in a multi-million-dollar benefit to Mr. Trump,” the OAG”™s petition says.
“Evidence indicates that Mr. Trump adopted a practice of preventing the creation of written records with regard to his development efforts at Seven Springs,” the OAG”™s petition says. “One witness, who described his role as the ”˜direct representative of Donald Trump”™ for the Lower Hudson Valley testified that Mr. Trump directed his activities, that he spoke to Mr. Trump personally about Seven Springs ”˜[a]bout once a week,”™ and that he ”˜seldom”™ communicated in writing with Mr. Trump because Mr. Trump stated to him ”˜that he did not want things put in writing in communications between us.”™”
The petition also discusses the Trump National Golf Club in Briarcliff Manor that had been purchased for $8,500,000. It stated that a representation in 2011 that the golf club was “getting $150,000 per membership” was false and that records indicated “that many members paid no deposit for their memberships in 2011” and that “no new members paid an initiation fee in 2012.” It also said that Trump valued the property at $101,748,600 in 2013, increasing to $177,679,723 in 2016.
The OAG”™s petition reveals that when appearing to testify before investigators on Oct. 5, 2020, in response to a subpoena, Eric Trump delivered extended prepared remarks objecting to the investigation and invoked his rights against self-incrimination, taking the Fifth Amendment in response to more than 500 questions over six hours.
The petition also revealed that James”™ investigators have obtained some evidence indicating Donald Trump was personally involved in reviewing and approving Statements of Financial Condition before their issuance. It also said OAG “likewise has obtained evidence indicating Mr. Trump”™s intimate involvement in the development of the Seven Springs property.”
It also was stated in the petition that “the accounting firm that participated in preparing his tax returns has advised that conservation easements at Seven Springs and (Trump National Golf Club LA) generated a federal tax benefit for Mr. Trump personally to the tune of more than $5 million over the course of tax years 2014 through 2018.”