According to the NY State Attorney General James lawsuit, the Trump Organization “grossly inflated Mr. Trump’s personal net worth…by billions of dollars and conveyed false and misleading impressions to financial counterparties about how the Statements (of Financial Condition) 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”
In other words, Trump exaggerated his own wealth, and the wealth of his companies. For instance, “(r)elying on objectively false numbers to calculate property values…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 of less 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.”
Following the logic of these arguments, it would seem that the banks that loaned Donald Trump money, or the insurance companies that insured Trump’s properties would have standing to sue, it they believed they had been defrauded. But in a recent interview with Sean Hannity of Fox, the former President was asked “Do you put in a caveat that actually says these are our valuations? Because I don’t know a lending institution or bank or financial institution that would lend money to anybody and just go by the borrower’s estimation or evaluation of a particular property.”
According to Trump, “We have a disclaimer…(i)t basically says, you know, get your own people, you’re at your own risk, this was done by management, it wasn’t done by us…don’t rely on the statement that you’re getting…It’s a very powerful disclaimer. It basically says to an institution: ‘You are going to loan money. You have to go out and make sure that you get your own appraisers, your own lawyers, everything.’”
In other words, the banks which lent Donald Trump money, and the insurance companies that insured his properties, did not get their own, independent valuations. They agreed to rely on the Financial Statements provided by Trump and his Organization before they lent him money, or insured him.
Is this fair or equitable? Probably not – when you and I buy or sell a house, the bank performs its own assessment of the value of the property before that bank lends us a dollar. But we are not engaged in the buying, selling and insuring of properties worth millions of dollars. Is it a fraud? If it is, it would be a fraud on these banks and insurance companies – not necessarily against the People of the State of New York.
In her civil complaint, James alleges that Trump “repeatedly and persistently violated the following: New York Penal Law § 175.10 (Falsifying Business Records); Penal Law § 175.45 (Issuing a False Financial Statement); and Penal Law § 176.05 (Insurance Fraud).” But if this were the case, why isn’t Trump being charged with these crimes?
Former Manhattan DA Cyrus Vance, Jr. was engaged in an extensive investigation of Trump and the Trump Organization. However, the current DA, Alvin Bragg, has not moved forward with any criminal charges. As explained by Jane Mayer in The New Yorker, “(t)he case was always a high-wire act. Unlike the parallel civil case..by New York’s attorney general, Letitia James, which only needs to reach a threshold of ‘preponderance of the evidence’ to find Trump liable for violating the law, the D.A.’s criminal case would have had to convince a jury ‘beyond a reasonable doubt’ that Trump had criminal intent to defraud. Real-estate valuations of the kind that Trump was under investigation for manipulating are also often slippery, but Vance’s team had hoped to prove that Trump engaged in a decades-long pattern of criminal fraud.” Apparently, Bragg and his team are not as confident of success.
In a criminal matter, the prosecutor acts as an agent of the People of the State of New York, and can call the bankers and insurance agents allegedly defrauded by Trump to testify as the victims of the fraud. James can also subpoena those bankers and insurance agents to testify in civil court. In a criminal case, the state always has an interest in preventing criminal activity, giving the prosecutor standing to bring the charge. But by bringing a lawsuit on behalf of the People of the State of New York, James is claiming that the People of New York State have been injured by Trump’s overstatements of his wealth. This returns us to the same question – why aren’t the banks and insurance companies suing Trump?
It is also valuable to consider that many civil complaints include a section, usually no more than a paragraph, which expresses the basis for the Plaintiff’s standing to bring a case. There is no obvious Statement of Standing to be found in James complaint against Trump – in fact, standing is not one of the entitled sections described in the extensive Table of Contents included in the Attorney General’s complaint.
The closest James comes to expressing standing is in the Section of the Complaint titled “Parties,” in which she asserts that “(t)he Attorney General is responsible for overseeing the activities of New York businesses and the conduct of their officers and directors, in accordance with the New York Executive Law and other applicable laws. She is expressly tasked by the Legislature with policing any persistent or repeated fraud and illegal conduct in business.”
A very broad statement indeed – and one that assumes facts yet to be established.
It may be years before this matter is resolved – civil litigation is notoriously ponderous and slow. But Bill Barr’s initial impression appears to be supported by the facts. The Manhattan DA refused to act on these allegations; the US Attorney is pursuing other avenues in an effort to satisfy Trump-haters worldwide. James vowed to “shine a bring light” on Trump’s real-estate dealings – and through this lawsuit, she has done as she promised.
Judge John Wilson (ret.) served on the bench in NYC.
Illustration: Pixabay