Trump business empire imperilled by sweeping NY fraud lawsuit

New York attorney-general Letitia James on Wednesday sued Donald Trump and three of his adult children for what she called an “astounding” fraud to falsely inflate the value of assets held by their family business, the Trump Organization, for their own financial gain.

James is seeking penalties that, if imposed, could effectively end the former president’s real estate career and would imperil the Trump Organization itself, which was started by his father in Queens in the 1920s.

These include banning Trump and his children Donald Jr, Ivanka and Eric from ever again serving as officers of a New York-registered company.

The attorney-general is asking a court to force the Trumps to repay at least $250mn in what she claims were ill-gotten proceeds. James also said her office would refer evidence to the Justice Department for possible criminal charges, including bank fraud.

“Mr Trump thought he could get away with the art of the steal, but today, that conduct ends,” James said, alluding to the 1987 memoir that helped hone Trump’s image as a property mogul with a Midas touch, The Art of the Deal. “We must hold former presidents to the same standards as ordinary Americans,” she added.

The lawsuit represents an extraordinary legal action against a former US president who remains the most powerful figure in the Republican party and is contemplating another run for the White House.

It marked the culmination of a nearly three-year investigation that has featured bitter clashes between the attorney-general and the Trumps and their lawyers. Trump has repeatedly accused James, a Democrat, of undertaking a “witch hunt” to destroy his political career.

A Trump Organization spokesperson on Wednesday called the suit “political harassment” and rejected the contention that any entity had been victimized by the family.

“Not only was no bank harmed — actually, they profited handsomely, to the tune of hundreds of millions of dollars in interest and fees, and never once took issue with any of the loans in question,” the spokesperson said.

Many of the details in James’s suit were previewed in a January legal filing. Central to the case is the annual “statement of financial condition” that Trump and his advisers prepared to demonstrate his net worth for lenders and prospective business partners.

Trump, according to James, was insisting that the figure rise every year. To accomplish that, she said, the Trumps routinely inflated the value of assets such as office towers and golf clubs and even the former president’s Mar-a-Lago estate. This, in turn, allowed them to secure economic benefits, including access to financing on more favorable terms.

The Trumps would then minimize the value of the same assets to reduce their tax bills, she alleged. Between 2011 and 2021, the statement of financial condition contained more than 200 false valuations, according to the following.

“With the help of Donald Jr, Eric, Ivanka and other defendants, Trump variously unlawfully inflated and deflated his net worth by billions to obtain and satisfy loans, get insurance benefits, and pay lower taxes,” James stated.

Among the many examples in a complaint that ran to more than 200 pages was Trump’s own penthouse apartment. He valued it at $327mn in 2015 — at a time when no apartment in the city had ever sold for more than $100mn. The Trumps justified this by nearly tripling their estimate of the flat’s square footage.

Another instance involved 40 Wall Street, an office tower in lower Manhattan. According to James, the Trumps valued it at $524mn in 2011 even though Cushman & Wakefield, a real estate services firm, pegged the same building at around $200mn in an appraisal for a separate client.

The former president, James alleged, also added a 30 per cent brand premium to any property simply for carrying the Trump name.

In addition to the Trumps, the suit names Allen Weisselberg, the Trump Organization’s longtime chief financial officer, and Jeffrey McConney, its controller. In August Weisselberg pleaded guilty to 15 charges stemming from criminal tax fraud in a deal with prosecutors that is expected to result in a five-month prison sentence.

James’s pursuit of Trump has been a drawn-out affair, with repeated legal delays and questions about the strength of his evidence and the merits and consequences of charging a former president.

A parallel criminal probe by the Manhattan district attorney, Alvin Bragg, appeared to stall earlier this year when the two prosecutors overseeing it abruptly quit. In a statement on Wednesday, Bragg said his investigation was “active and ongoing”.

One challenge that has dogged prosecutors is that the parties Trump dealt with were major lenders, such as Deutsche Bank, and should be expected to perform their own due diligence — regardless of the family’s claims and especially so considering Trump’s reputation for hyperbole and braggadocio.

In addition, Trump’s annual financial statement was prepared with assistance from his former accountant, Mazars, but not formally audited by the firm. In February, Mazars cut ties with Trump, saying it could no longer vouch for 10 years of his financial statements.

Meanwhile, Trump is known not to have kept detailed written records. Prosecutors had hoped that Weisselberg might assist them but he has refused to testify against his boss.

In a criminal case, prosecutors must convince a jury beyond a reasonable doubt. The civil suit that James has filed faces a lower burden of proof.

In the meantime, the Trump Organization could face added complications, according to Daniel Horwitz, a lawyer at McLaughlin & Stern. “Anyone who’s accused of fraud, they’re going to inevitably encounter some level of resistance from financial institutions,” he said.

While the attorney-general was presenting her complaint in Manhattan, one of the former president’s longtime allies, Tom Barrack, was standing trial in Brooklyn on charges of illegal lobbying on behalf of the United Arab Emirates.

On the first day of the trial, prosecutors laid out their case that Barrack “acted as the eyes, ears and voice of the UAE” during a two-year period in which he allegedly sought to insert talking points into Trump’s speeches and agreed to pass on sensitive information to Abu Dhabi.

His lawyer, Michael Schachter, dismissed those allegations as “ridiculous”, claiming that the private equity investor had in fact implored Trump to side with Qatar and against neighboring countries — including the UAE — that were imposing a regional embargo on the gas-rich emirate .

“Tom helped the UAE’s enemy, Qatar,” Schachter said. He described Barrack as “his own man” and dismissed the idea that the founder and chair of a $40bn investment business could have been enlisted at the direction of any foreign country. “He did it because he believed it was the right thing to do.”

Additional reporting by Mark Vandevelde in New York

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