NY AG Reports “Significant Additional Evidence” in Case Against Trumps. Here’s What To Know.
On Tuesday evening, in a filing in state court, New York Attorney General Letitia James let drop a few bombshells in her ongoing investigation into fraudulent statements and filings by the Trump Organization and its head, Donald Trump. The headline grabber was her statement that her office already had “significant additional evidence” in the case, specifically that the “Trump Organization used fraudulent or misleading asset valuations to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions.” In her papers, James enumerated and fleshed out a great deal of that evidence—which is pretty damning—and it was not difficult to discern what it implies about the years of continuous fraud perpetrated by the Trump Organization and its officers.
So what does this mean for the former president, his family members, and other key officers at the company? Here are a few things to keep in mind as her case progresses.
This is a civil, not a criminal, investigation.
Before we get out over our skis on this, it’s important to remember that James’s efforts are part of a years-long civil investigation for which there has been no final decision on legal action. Even if, as it seems more likely by the day, the Office of the Attorney General ultimately brings a civil action against the Trump Organization and its officers, the penalties would range from monetary to injunctive ones, including disgorgement of fraudulently obtained gains and even up to revoking the company’s license to do business under state law. They would not, however, by themselves include any criminal charges that might lead to prison time for the defendants.
The possibility of criminal charges by the state is not foreclosed, however. As James’s investigation proceeds, a grand jury that was convened in November of 2021 by the Manhattan District Attorney Cy Vance (with the office now under his successor, Alvin Bragg) is presently investigating whether to bring criminal charges based on fraudulent statements and representations related to the same Trump properties that James’s office is investigating. The presence of that grand jury ups the stakes considerably for the Trump family and other top officials at the Trump Organization, and they have had to proceed as if indictments could issue at any time from that grand jury. Note that this is the second grand jury in Manhattan tasked with investigating and possibly issuing indictments against the Trumps; the first already indicted the Trump Organization and its CFO Allen Weisselberg on tax fraud in 2021.
James has numerous receipts showing a pattern of fraud.
The investigation by James began following testimony in 2019 by former Trump “fixer” and attorney Michael Cohen, who stated under oath before Congress that Trump and his company had a history of misrepresenting the value of assets. For some time, initial reports focused on one property upstate, Seven Springs, where some of the most egregious discrepancies occurred. As I wrote about in March of last year, it appeared from the available documents that the property’s value had been wildly inflated in financial statements in order to obtain a favorable government payout on an easement that the property had granted. As James noted in her papers filed Tuesday,
Despite the Trump Organization’s receipt of a valuation of twenty-four lots across three Westchester townships reflecting a value between $29.5 million and $50 million, the 2014 Statement of Financial Condition valued seven non-existent mansions in Bedford at $161 million—without factoring in the valuation the Trump Organization commissioned or the time it would take to build and sell such homes. Those failures are objectively misleading.
But Seven Springs was only the first of many other instances of asset inflation. Indeed, James and her office have been quite busy, and the list of questionable valuations and practices has ballooned. They reportedly now include, to name a few:
The value of Trump’s NYC apartment in Trump Tower was based on an assertion or 30,000 square feet when it really was 10,996 square feet, an overstatement of around $200 million;
On some properties the company added a “brand premium” of 15% to 30% to the value due to the Trump name, despite financial statements explicitly stating they didn’t incorporate brand value;
The Trump Organization inflated the value of a suburban NY golf club by millions of dollars by counting fees for memberships that weren’t sold or were never paid;
The company provided a valuation on a Park Avenue condo tower of $350 million even though many of the unsold apartments would sell for far less because they were covered by rent stabilization laws;
Ivanka Trump rented an apartment that the company valued as high as $25 million, even though she had an option to buy it for $8.5 million;
The company stated in documents that its stake in an office building on Wall Street was worth $525 to $602 million, two to three times the estimate of Capital One’s appraisers.
While it’s common in the real estate world to provide different valuations under different circumstances, these wildly divergent and unorthodox statements led to huge financial benefits and even payouts to the Trump Organization and thus the Trump family as lenders, insurers and the tax authorities relied upon the false statements.
James has tied Trump and his children to the fraud.
A persistent question has been whether Trump was able to stay clear of legal liability by arguing that he simply followed the advice of his financial advisors rather than intentionally misled authorities. It has also been unclear to what extent the Trump children—Don Jr., Ivanka and Eric—have been directly involved. In her motion to compel testimony and documents from Donald Trump, Don Trump Jr. and Ivanka Trump, James lays out many of the ways in which they might be personally responsible for the false and misleading statements to financial and government authorities.
For example, one witness who was already subpoenaed and testified stated that he was a “direct representative of Donald Trump” in Westchester County, New York where the Seven Springs estate was located and that Donald Trump directed his activities and that he spoke with Trump “about once a week.” Moreover, the massive easement donation appeared on Donald Trump’s personal tax returns for several years to the tune of nearly $5 million in federal tax benefits.
Don Jr. was intimately involved with the financial condition of properties such as the Wall Street property and its appraisal as well as the problem with vacancies there. He was made a trustee of a revocable trust after Trump became president and was responsible for the financial statements of condition for it along with CFO Weisselberg. And he was directly involved in the loan transactions with Deutsche Bank for which allegedly false statements of value were submitted.
Ivanka Trump directed all the company’s real estate and hotel management platforms and was the lead negotiator on several deals including the Old Post Office property leasehold with the GSA, for which she submitted financial statements containing allegedly false statements of value. Like her brother, she was also a primary point of contact for representatives of Deutsche Bank.
James has evidence of extensive efforts to hide the ball.
As a final note, it was fascinating to read how often the subject of not leaving a paper trail arose, not only with respect to Trump’s personal practices but in communications with appraisers. For example, James explained how appraisers and outside counsel were under intense pressure and jumped through several hoops not to leave any evidence that might later be discovered:
[Outside Counsel] Ms. Dillon instructed a Morgan Lewis associate to “call [Cushman appraiser] Tim [Barnes] and advise him to limit substantive emails with Scott Blakely (engineer) and instead use the phone to the extent possible (want to avoid creating discovery unnecessarily).” On September 28, 2015, Ms. Dillon sent an email to another Morgan Lewis associate, “Please use a fresh email when communicating with appraisers so that we avoid to the extent possible, email chains.” In testimony before OAG, the Morgan Lewis associate testified that both emails were attempts to prevent creating documents that might be uncovered by adversaries potentially challenging the easement donation—i.e., the United States Internal Revenue Service or Department of Justice.” (Internal citations omitted.)
The doubts of the appraisers and the notion that the company was “hiding something” were evident in this telling exchange:
The Cushman appraisers acceded to Ms. Dillon’s request. As Mr. Barnes, the senior appraiser, wrote to the junior appraiser, “Bedford conversations with engineer, broker, or attorney should be phone calls, not email whenever possible. You and I can email no problem.” The junior appraiser chafed under this instruction, writing to a Morgan Lewis associate who insisted on a phone call to discuss “factual changes” that, “If it is indeed just a few factual changes, wouldn’t it be easier to just write them down and I can take care of it over the weekend? I understand the reluctance to put anything in writing, but since it’s something factual, it would not be seen as anything controversial or influencing us one way or the other.” As she explained in an email that she drafted—but never sent—to the senior appraiser, “I am only resistant to this because it seems like they are hiding something and want to push me to ask about stuff that you were reluctant to change…”
Two things stand out here. One is that James has found a way to get to what actually happened even in the absence of what would normally be a trove of documents laying it all out clearly. The second is that she has done so through the sworn testimony of others who were involved in the projects—meaning the evidence is likely admissible even if no one within the Trump Organization is willing to testify and everyone pleads the Fifth.
This, apparently, has been their practice: According to James’s filing, after Eric Trump finally sat for his deposition, he mechanically took the Fifth in response to more than 500 hundred questions posed by James’s office over six hours.
Fun legal aside: while refusal to testify in a criminal matter cannot be used as an inference of criminal guilt, no such rule exists in civil cases in New York, so the Trumps’ likely assertion of the Fifth can lead to a jury weighing civil penalties finding they indeed have something to hide.