A case of fraud against Trump? Not a slam dunk, experts say

People walk past The Trump Building office building at 40 Wall Street in New York on Friday, Jan. 7, 2022. The New York Attorney General's office said Tuesday, Jan. 18, that its civil investigation uncovered evidence that the Former President Donald Trump's company used loans and tax benefits. (AP Photo/Ted Shaffrey)” loading=”lazy”/>

People walk past The Trump Building office building at 40 Wall Street in New York on Friday, Jan. 7, 2022. The New York Attorney General’s office said Tuesday, Jan. 18, that its civil investigation uncovered evidence that the Former President Donald Trump’s company used “fraudulent or misleading” asset valuations to obtain loans and tax benefits. (AP Photo/Ted Shaffrey)


For years, Donald Trump has punctuated his reality TV spiels and presidential speeches with claims that his company and its many gold-plated properties were “huge”, “incredible”, the biggest and the best.

Now the New York attorney general’s office says it has uncovered evidence that his comments weren’t just public buffoonery. The bureau’s civil investigation of Trump found that he and his company routinely faked the value of assets on financial statements given to banks, insurers and tax authorities.

But that doesn’t mean the Trump Organization will be shut down, Trump Tower will be padlocked, and the former president will be sent to jail.

Lawyers who have reviewed the details of the allegations told The Associated Press that while Attorney General Letitia James could potentially bring a lawsuit alleging fraud, she will face two major hurdles: proving both an intent to deceive and that the banks that lent money to Trump were duped.

“Were you careless, lazy, or overly optimistic about your prospects? If you were, it might be bad business, but it doesn’t necessarily turn into fraud,” said Will Thomas, assistant professor of business law at the University of Michigan.

The attorney general, a Democrat, has yet to take legal action against Trump in her nearly three-year investigation, but in a court filing on Tuesday, her lawyers argued there was enough evidence. of wrongdoing to demand that Trump and his eldest children, Donald Jr. and Ivanka, answer questions under oath.

Among the allegations, his office says Trump’s company inflated its value by doing things like claiming its Trump Tower penthouse was almost triple its actual size and including revenue from club members’ golf fees which did not exist.

The Trump Organization said in a statement Wednesday that the investigation was “baseless” and politically motivated.

Trump’s business practices are also the subject of a grand jury investigation overseen by the Manhattan District Attorney.

Prosecutors revealed little about the evidence in the criminal case, but said in public court filings that it covers much of the same ground as the attorney general’s civil investigation. James has assigned investigators to assist in this investigation.

An important question is whether any misrepresentation in the company’s financial statements “was intentional, knowing and intended to deceive,” said David S. Weinstein, a former federal prosecutor who reviewed the evidence for AP.

Intent is difficult to prove with real estate because it is an illiquid asset whose value, unlike publicly traded stocks, is not set by different investors constantly buying and selling, but by estimates. , often erroneous.

“Even experts applying the same set of assessment tools could reasonably disagree on the final assessment,” Thomas said.

Another problem is proving that the banks, insurers and others doing business with the Trump Organization actually believed the fake numbers.

According to James’ filing, a bank said it received financial statements in 2014 from Trump’s accounting firm confirming he had a net worth of $5.8 billion and cash on hand of $302 million. A loan officer involved in that transaction testified in James’s investigation that had he known of any inaccuracies in Trump’s statement of financial position, he would have killed the deal.

Trump’s questionable financials also helped him secure $300 million in loans for three of his properties from Deutsche Bank, James’ office said. The bank accepted the financial statements without objection and, in internal memoranda, pointed to Trump’s stated financial strength as a factor in lending to him, James’ office said.

“Credit exposure is recommended based on the financial profile of the guarantor,” one of the memos said, referring to Trump.

“The way they presented the evidence tells me that she plans to conclude her investigation with some sort of trial,” former federal prosecutor Jennifer Rodgers said, referring to the attorney general. “She wouldn’t characterize their case as strongly as she did if she didn’t think they would eventually get there and file some kind of civil suit.”

A potential problem for the attorney general is that many of the company’s financial statements included a line warning that the numbers were unaudited, a caveat that Trump’s lawyers are sure to point out in any case.

Daniel Horwitz, a former Manhattan district attorney, says it’s not clear that professional lenders or insurers would have trusted the documents, or taken them with a grain of salt.

“Were they duped, were they duped? Did lenders care? If they don’t really care about errors or inaccuracies, it will be quite difficult to prove a case,” he said.

The purpose of the document filed by James’ office was to show the court his reasons for justifying the compelling testimony of Trump and his eldest children.

Another son helping run the company, Eric Trump, had previously testified in 2020 for six hours, although it’s unclear what the attorney general learned from that. She said the second oldest son invoked his Fifth Amendment right against self-incrimination in response to more than 500 questions.

Stephen Gillers, a New York University law professor, said getting the other Trumps to testify might not be the only reason for filing such a detailed document.

“What the AG means to telegraph is, ‘You can’t hide. We’ve got the goods. You’re dead.’ She may or may not be exaggerating, but the Trump world has to worry that she isn’t — and that’s what James wants,” Gillers said. “It’s like when a country displays its weapons and tanks in a military parade, intended to warn opponents, ‘Don’t mess with us.


Follow Michael Sisak on Twitter at twitter.com/mikesisak, Bernard Condon at twitter.com/BernardFCondon and Jim Mustian at twitter.com/jimmustian and send confidential tips by visiting https://www.ap.org/tips/

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