A massive 222-page suit that was filed by the State of New York aims to end Donald Trump’s business empire as well as prevent his children from doing business in the state and with banks based in New York.
It is literally the “neutron bomb Trump has been fearing for decades”, and aims to take $250 million dollars from the once billionaire, and force him to a fire sale of his holdings.
More on the campaign to crush Donald Trump
Following a comprehensive three-year investigation by the Office of the Attorney
General (“OAG”), involving interviews with more than 65 witnesses and review of millions of
pages of documents produced by Defendants and others, OAG has determined that Defendants
Donald J. Trump (“Mr. Trump”), Trump Organization LLC and the Trump Organization, Inc.
(collectively with the other named entities, the “Trump Organization”), Allen Weisselberg, and
the other individuals and entities affiliated with Mr. Trump and his companies named as
Defendants, engaged in numerous acts of fraud and misrepresentation in the preparation ofMr.
Trump’s annual statements of financial condition (“Statements of Financial Condition” or
“Statements”) covering at least the years 2011 through 2021.
These acts of fraud and misrepresentation were similar in nature, were committed
by upper management at the Trump Organization as part of a common endeavor for each annual
Statement, and were approved at the highest levels of the Trump Organization—including by
Mr. Trump himself. Indeed, Mr. Trump made known through Mr. Weisselberg that he wanted
his net worth on the Statements to increase—a desire Mr. Weisselberg and others carried out
year after year in their fraudulent preparation of the Statements.
These acts of fraud and misrepresentation grossly inflated Mr. Trump’s personal
net worth as reported in the Statements by billions of dollars and conveyed false and misleading
impressions to financial counterparties about how the Statements were prepared. Mr. Trump and
the Trump Organization used these false and misleading Statements repeatedly and persistently
to induce banks to lend money to the Trump Organization on more favorable terms than would
otherwise have been available to the company, to satisfy continuing loan covenants, and to
induce insurers to provide insurance coverage for higher limits and at lower premiums.
All of this conduct was in violation of New York Executive Law § 63(12)’s
prohibition of persistent and repeated business fraud, which embraces any conduct that “has the
capacity or tendency to deceive, or creates an atmosphere conductive to fraud.” People v.
Northern Leasing Systems, Inc., 193 A.D.3d 67, 75 (1st Dep’t 2021).
Law § 176.05 (Insurance Fraud).!
Each Statement from 2011 to 2021 provides Mr. Trump’s personal net worth as of
June 30 of the year it covers, was compiled by Trump Organization executives, and was issued
as a compilation report by Mr. Trump’s accounting firm. Each Statement provides on its face
that its preparation was the responsibility of. Trump, or starting in 2016, the trustees of his
revocable trust, Donald Trump, Jr. and Allen Weisselberg.? Each Statement was personally
‘ While not a basis for recovery in this action, the conduct alleged in this action also plausibly
violates federal criminal law, including 18 U.S.C. § 1014 (False Statements to Financial
Institutions) and 18 U.S.C. § 1344 (Bank Fraud). Under those provisions, a defendant violates
federal law by knowingly submitting a false document or statement in order to influence the
of a federally-insured bank or to obtain money from a bank by means of false
representations or pretenses. There is no requirement of loss or reliance. OAG is making a
referral of its factual findings to the Office of the United States Attorney for the Southern District
Mr. Weisselberg was removed as a trustee as of July 2021, after having been indicted by the
New York District Attorney on charges of tax fraud. Mr. Weisselberg pleaded guilty to those
charges on August 18, 2022.
certified as accurate by Mr. Trump, by one of his trustees, or in 2021 by Eric Trump, when
submitting the Statement to financial institutions with the purpose and intent that the information
contained in the Statement would be relied upon by those institutions.
Each year from 2011 to 2016, Mr. Trump and Mr. Weisselberg would meet to
review and approve the final Statement. When asked questions about those meetings under oath,
both men invoked their Fifth Amendment privilege against self-incrimination and refused to
answer. When asked under oath if he continued to review and approve the Statements after
becoming President of the United States in 2017, Mr. Trump invoked his Fifth Amendment
privilege and refused to answer.
As further evidence of their scheme to inflate the value of Mr. Trump’s assets
when beneficial to his financial interests, Mr. Trump and the Trump Organization procured
inflated appraisals through fraud and misrepresentations in 2014 and 2015 for the purpose of
granting conservation easements over two of Mr. Trump’s properties. Through these
conservation easements, Mr. Trump and the Trump Organization agreed to forgo their purported
rights to develop areas of the two properties that are the subjects oftheeasements, which enabled
them to treat as a charitable donation the difference in the value of each property with and
without the relinquished development rights as determined in the appraisals. In the same way
that Mr. Trump and the Trump Organization inflated the valuations of Mr. Trump’s assets for the
Statements, they manipulated the appraisals to inflate the value of thedonated development
tights with respect to both conservation easements.
The Fraudulent Statements of Financial Condition
Each Statement ofFinancial Condition lists Mr. Trump’s assets and liabilities,
and then presents his “net worth” as the difference between the two. On the asset side, each
Statement includes five basic categories: (i) “cash and cash equivalents;” (ii) monies held in
“escrow” and “reserve deposits;” (iii) interests in “partnerships andjoint ventures;” (iv) real
estate licensing fees; and (v) by far the largest category —real estate holdings. On the liability
side, each Statement lists “accounts payable and accrued expenses,” loans on “real and operating
properties,” and other mortgages and loans.
Mr. Trump’s Statements of Financial Condition for the period 2011 through 2021
were fraudulent and misleading in both their composition and presentation. The number of
grossly inflated asset values is staggering, affecting most if
not all of the real estate holdings in any given year. All told, Mr. Trump, the Trump Organization, and the other Defendants, as part
of a repeated pattern and common scheme, derived more than 200false and misleading
valuations of assets included in the 11 Statements covering 2011 through 2021.
Nearly every one of the Statements represented that the values were prepared by
Mr. Trump and others at the Trump Organization in “evaluation[s]” done with “outside
professionals,” but that was false and misleading; no outside professionals were retained to
prepare any of the asset valuations presented in the Statements. To the extent Mr. Trump and the
Trump Organization received any advice from outside professionals that had any bearing on how
to approach valuing the assets, they routinely ignored or contradicted such advice. For example,
they received a series of bank-ordered appraisals for the commercial property at 40 Wall Street
that calculated a value for the property at $200 million as
of August 1, 2010 and $220 million as
of November 1, 2012. Yet in the 2011 Statement, they listed 40 Wall Street with a value $524
million and increased the valuation to $527 million in the 2012 Statement, and to $530 million in
2013—more than twice the value calculated by the “professionals.” Even more egregiously the
valuation ofmore than $500 million was attributed to information obtained from the same professional appraiser who prepared both valuations putting the building’s value at orjust over $200 million.
The inflated asset valuations in the Statements cannot be brushed aside orexcused
as merely the result of exaggeration or good faith estimation about which reasonable real estate
professionals may differ. Rather, they are the result of the Defendants utilizing objectively false
assumptions and blatantly improper methodologies with the intent and purpose of falsely and
fraudulently inflating Mr. Trump’s net worth to obtain beneficial financial terms from lenders
Nor can the false and fraudulent asset values in the Statements be defended based
on boilerplate disclaimers in the accountant’s compilation report accompanying each Statement.
While the accountants gave notice in the reports that they did not audit or review the Statements
toverify the accuracy or completeness of information provided by Mr. Trump or the Trump
Organization, they confirmed that their clients were responsible for preparing the Statements in
accordance with generally accepted accounting principles in the United States (“GAAP”). The
disclaimers may relieve the accountants of certain obligations that would otherwise adhere to
their work on a more rigorous audit engagement, but they do not give license to Mr. Trump or
the Trump Organization to submit to their accountants fraudulent and misleading asset valuations
for inclusion in the Statements.
Moreover, Mr. Trump and the Trump Organization have no excuse for issuing
Statements of Financial Condition that repeatedly violated GAAP rules in multiple ways despite
expressly representing in the Statements that they were prepared in accordance with GAAP.
Among the many GAAP rules they violated are: (i) including as “cash” funds that Mr. Trump
could not immediately liquidate because they did not belong to him and may never be distributed to him; (ii) failing to determine the present value of projected future income when including the
income as part of an asset valuation; (iii) failing to disclose a substantial change in methodology
from the prior year’s statement for how an asset value was derived; (iv) failing to value the
ofMr.Trump’s interest in a partnership, including all limitations and restrictions on his
interest; and (v) including intangibles such as internally-generated brand premiums when
calculating an asset’s value.
As discussed in greater detail in the sections that follow, Mr. Trump and others
affiliated with the Trump Organization who are named as Defendants employed a number of
deceptive strategies as part ofthe overall scheme to fraudulently and falsely inflate Mr. Trump’s
assets in order to comply with Mr. Trump’s instruction to increase his net worth. A chart
showing many of the deceptive strategies employed by Mr. Trump and other Defendants by asset
and year is attached as Exhibit 1, and includes the following, tolist just a few:
a. Relying on objectively false numbers to calculate property values. For example,
Mr. Trump’s own triplex apartment in Trump Tower was valued as being 30,000
square feet when it was 10,996 square feet. As a result, in 2015 the apartment
was valued at $327 million in total, or $29,738 per square foot. That price was
absurd given the fact that at that point only one apartment in New York City had
ever sold for even $100 million, at a price per square foot ofless than $10,000.
And that sale was in a newly built, ultra-tall tower. In 30 year-old Trump Tower,
the record sale as of 2015 was a mere $16.5 million at a price of less than $4,500
per square foot.
b. Ignoring legal restrictions on development rights and marketability that would
materially decrease property values. For example:
In the 2012 Statement, rent stabilized apartments at Trump Park Avenue
were valued as
if they were unrestricted, leading to a nearly $50 million
valuation for those units—but an appraisal accounting for those units’
stabilized status valued them collectively atjust $750,000;
The Mar-a-Lago club was valued as high as $739 million based on the false
premise that it was unrestricted property and could be developed and sold
for residential use, even though Mr. Trump himself signed deeds donating
his residential development rights and sharply restricting changes to the
property —in reality, the club generated annual revenues of less than $25
million and should have been valued at closer to $75 million; and
For his golfcourse in Aberdeen, Scotland, the valuation assumed 2,500
homes could be developed when the Trump Organization had obtained
zoning approval todevelop less than 1,500 cottages and apartments, many
of which were expressly identified as being only for short-term rental. The
$267 million value attributed to those 2,500 homes accounted for more than
80% of the total $327 million valuation for the Aberdeen property on the
Failing touse basic rules of valuation toensure reliable and accurate results—
such as discounting revenue or cash flow that might be obtained from a
speculative development far into the future to its present value. For example, a
series of high-value properties estimated the profits from developing and selling
homes without accounting for the years it would take to plan, build, and sell the
homes and instead operated under the impossible and thus false premise that the
homes could be planned, built, and sold instantaneously.
Using an inappropriate valuation method for a given category of assets. For
example, for the period 2013 to 2020, Mr. Trump’s golf course in Jupiter, Florida
was valued using a fixed-asset approach even though that was not an acceptable
method for valuing an operating golf course. And the bulk of the value in that
fixed-asset approach was based on the use of
an inflated purchase price from the
purported assumption of“refundable” membership liabilities. Mr. Trump
claimed to have paid $46 million forthe club, consisting of $5 million in cash he
actually paid and $41 million in assumed membership liabilities. Inthe
Statement Mr. Trump did not disclose the inclusion ofthose inflated liabilities in
the price ofthe club and in fact took the opposite position, stating that his
potential liability for those membership deposits was zero.
Increasing the value of golf clubs to incorporate a “brand premium” despite
expressly advising in the Statements that brand value was not included in the
figures and despite GAAP rules prohibiting inclusion of internally-generated
intangible brand premiums. For example, in the 2013 Statement, the value ofMr.
Trump’s golf course in Jupiter, Florida was further inflated by fraudulently
adding 30% for the Trump “brand.” Combining the inflation from using the
fixed-asset approach with the 30% brand premium, Mr. Trump claimed that a
club he purchased for $5 million in 2012 was worth more than $62 million in
2013. The 2013 Statement included the same fraudulent 30% brand premium for
six other golf clubs.
Using inflated net operating income (“NOI”) figures and arbitrarily low
capitalization rates to calculate valuations using the income capitalization
method, where value is derived by dividing NOI bya capitalization rate. For
example, in some instances the NOI for Trump Tower relied on favorable
numbers by mixing time periods, using future income that exceeded the Trump
Organization’s internal budget projections while also using expense figures that
were lower than past expenses in audited financials. Capitalization rates were
derived by cherry-picking an unsupported figure from, or averaging the lowest
two orthree capitalization rates listed in, generic marketing reports and ignoring
rates in those same reports for buildings that were closer and more comparable to
g. Claiming as Mr. Trump’s own “cash” monies belonging not to Mr. Trump but to
partnerships inwhich Mr. Trump had only a limited partnership interest with no
control over making disbursements. For example, one-third of the amount under
“cash and cash equivalents” listed in the 2018 Statement belonged toVornado
Partnerships, not Mr. Trump. Those are partnerships in which he owns a minority
30% stake with no right to control distributions. Mr. Trump did the same thing in
counting funds held in escrow. For example, one-half of the amount under
“escrow” in the 2014 Statement belonged to the Vornado Partnership.
h. Including in the value of golf clubs anticipated income from inflated membership
initiation fees. For example, at Mr. Trump’s golf course in Westchester, the
valuation for 2011 assumed new members would pay an initiation fee of nearly
$200,000 for each ofthe 67 unsold memberships, even though many new
members in that year paid no initiation fee at all. In some instances, Mr. Trump
specifically directed club employees to reduce or eliminate the initiation fees to
boost membership numbers.
16. | Mr. Trump and the other Defendants also engaged in conduct intended to mislead
Mazars in connection with its work compiling the Statements, including by concealing important
information. Because Mazars was not conducting any review or audit procedures, but rather
issuing a compilation in which Mr. Trump’s and the Trustees’ assertions were being compiled
into financial-statement format, many of their fraudulent statements and strategies remained
concealed from, or undetected by, Mazars.
As a result, shortly after some of the findings uncovered by OAG’s investigation
came to light in public filings to enforce OAG’s investigative subpoenas, Mazars concluded that
it had to end its long-term business relationship with Mr. Trump and the Trump Organization and
withdraw the Statements it had compiled from 2011 to 2020. In a letter to the Trump
Organization dated February 9, 2022, Mazars explained that it had “come tothis conclusion
based, in part, upon the filings made by the New York Attorney General on January 18, 2022,
our own investigation, and information received from internal and external sources,” and advised.
“that the Statements of Financial Condition for Donald J. Trump for the years ending June 30,
2011—June 30, 2020, should no longer be relied upon.” Mazars further instructed the Trump
Organization to “inform any recipients thereof who are currently relying upon one or more of
those documents that those documents should not be relied upon.”
Mr. Trump’s Statements of Financial Condition were repeatedly and persistently
submitted to banks insured by the Federal Deposit Insurance Corporation for the purpose of
influencing the actions of those institutions. The Statements were used to obtain and maintain
favorable loans over at least an eleven-year period, including: (a) Deutsche Bank’s extension of a
$125 million loan (or combination of loans) in connection with the Trump Organization’s
purchase of the property known as Trump National Doral; (b) Deutsche Bank’s financing ofup
to$107 million in debt in connection with the Trump International Hotel and Tower, Chicago, in
2012, as well as a $54 million expansion ofthat loan in 2014; and (c) Deutsche Bank’s financing
ofup to $170 million in funds in connection with the Trump Organization’s purchase and
renovation of the Old Post Office property in Washington, DC.
As to each of those loans, the truthfulness and accuracy of the pertinent
Statement, as certified by Mr. Trump, was a precondition to lending. Moreover, pursuant to the
covenants of those loans, each year Mr. Trump or the trustees would submit a new Statement and
certify its accuracy. Material misrepresentations on any loan document, including the Statements
or the certifications as to their accuracy, would constitute an event ofdefault under the terms of
the loan agreements.