Trump’s Accountants Say, “You’re Fired.” Here’s Why That’s Really, Really Bad for the Trump Org

Photo by Charles Platiau / Reuters

New York Attorney General Letitia James dropped a bombshell in a court filing yesterday, revealing a letter dated February 9, 2022 from the Trump Organization’s longtime accounting firm, Mazars, in which it formally severed its ties to the company. Importantly, Mazars instructed that the “Statements of Financial Condition” for the 10 year period from June 2011 through June 2020 “should no longer be relied upon” by the company or by those to which it provided the statements, including presumably lenders, insurers and tax authorities. It based its decision on case filings by James’s office, its own investigations, and “information received from internal and external sources.” It went on to state that the firm now has a “non-waivable conflict of interest with the Trump Organization” and is “not able to provide any new work product” to the company.

This development is astonishing on a number of levels, so let’s unpack a few.

Mazars Has Thrown Trump Under the Bus

Despite the Trumps’ best efforts to put on a good face here, even claiming that this letter somehow vindicates them, there is no positive way to spin this development. As soon as judges, grand juries and trial juries hear that Trump’s own accountants won’t even stand by the financial statements they prepared for ten years, it’s not hard to conclude that there was plainly something very wrong going on. Mazars wants to get ahead of this development and has announced, in effect, that it is interested in protecting its own reputation and business, not that of the Trump Organization.

It is also very possible that people within Mazars have seen how this ends and are now cooperating with authorities. That certainly could explain the “non-waivable conflict of interest” in the disengagement letter. Legal commentator Richard Signorelli, a former prosecutor for the Southern District of New York, agrees this is a distinct possibility. “Mazars accounts may be turning state’s evidence” against the Trump Organization, he posited.

There are of course other plausible explanations for the announced non-waivable conflict, including for example an intent by Mazars to sue the Trump Organization for fraud, which would of course also be a big conflict. After all, when an accounting firm the size of Mazars becomes embroiled in a possible criminal tax scheme, longtime clients begin to abandon ship. Mazars may be preparing to go on the offensive to assert its innocence in this matter so that it does not go the way of Arthur Anderson, which represented the disgraced corporation Enron in its fraudulent accounting schemes.

(Mazars, it should be noted, is far from an innocent party here. As a lengthy investigation and report by ProPublica in 2020 laid out, for decades Mazars was well aware of the shady practices by Trump and was shockingly aggressive in its attempts to shield him and his company from any tax liability, deploying head-spinning schemes that left even its own accountants bewildered. This longer backstory is worth a read.)

This Is a Strong Indication That Trump Lied About His Finances

How is it possible for an accounting company like Mazars to produce 10 years of financial statements and then suddenly seek to withdraw them as unreliable? One obvious reason is that the information provided to the accountants was itself false or misleading. Indeed, it’s difficult to imagine that this was some kind of innocent clerical or math error for which Mazars would take simply responsibility as the negligent party.

In preparing financial statements, accounting firms don’t conduct independent investigations to determine if the information provided to them is truthful and accurate. The statements, in effect, are only as reliable as the client who provides them. In the case of Donald Trump, that reliance presents big issues, as Mazars was no doubt always aware.

It was well known that Trump often inflated his own wealth in the eyes of the public, and that in and of itself is no crime. But when it comes to material representations to banks, insurance companies and tax authorities, there are laws requiring truth in financial disclosures and possible civil or even criminal penalties for offenders. That is why there is currently a grand jury seated in Manhattan investigating the Trump Organization’s and its officers’ potential tax crimes—an effort that is being openly assisted by attorneys from the state AG’s office. 

Someone at Mazars presumably will have to testify about why, especially after their own investigation, they concluded that the financial statements are now unreliable. It is actually quite likely someone at Mazars already has provided information to investigators, and that the very simple answer likely is, “Trump and his people lied to us.”

The Trump Organization Is About To Tainspin Financially

The Trump Organization relies upon loans from lenders in order to keep its operations afloat. All of those lenders received and presumably relied upon the very financial statements that Mazars has now walked back. The Trump Organization is already under indictment on charges of tax evasion; with this revelation, further extensions of credit by its lenders are highly unlikely given that this could actually expose them legally. In an interview on MSNBC, Trump biographer Timothy L. O’Brien made this point in plain terms:

“Good luck refinancing your debt when the accountants just walked out the door. That is going to give anybody else who would consider lending money to Donald Trump enormous pause. In fact, they may not be able to do it because of this.” 

O’Brien has noted elsewhere that Trump has personally guaranteed over half of the $590 million that is coming due within the next four years.

NPR also took notice of Trump’s financial predicament in its reporting:

The company has hundreds of millions of dollars of debt coming due in the next several years. Over the past decade, the Trump Organization bought a golf course outside Miami, secured the lease for the Old Post Office in Washington, D.C., which it has operated as the Trump International Hotel, and sought business deals around the world, often with bank financing.

And as observed by Tristan Snell, who prosecuted Trump University at the New York AG’s office, loan agreements likely have “representations and warranties” clauses in which the signatories vouch for the accuracy of what is provided. If Trump is in breach of those lending agreements because of fraudulent statements or omissions to his own accountants, the banks could sue under those contracts and might even have an immediate right to call in their debts.

All in all, it’s a pretty bleak picture for the Trump Organization and its chief officers. The abrupt end of the Mazars relationship may prove a decisive tipping point in the ongoing civil and criminal investigations and even the future of the Trump empire.