In unveiling a fraud lawsuit on Wednesday against Donald Trump, his three eldest children, and his company, Letitia James, the New York attorney general and a longtime political antagonist of the former President, didn’t mince words. “Trump falsely inflated his net worth by billions of dollars to unjustly enrich himself and cheat the system,” James said, in a statement. “In fact, the very foundation of his purported net worth is rooted in incredible fraud and illegality.”
The lawsuit that her office filed in State Supreme Court alleges that, from 2011 to 2021, the Trump Organization’s financial statements systematically exaggerated the value of at least twenty-three of his properties and other assets—from his Fifth Avenue triplex apartment and his daughter’s penthouse on Park Avenue to his estate in Mar-a-Lago, Florida, and his far-flung network of golf courses. “The number of grossly inflated asset values is staggering, affecting most if not all of the real estate holdings in any given year,” the lawsuit states. It also says that Trump’s alleged deceptions reaped him and his co-defendants financial benefits worth up to an estimated $250 million, and asked the court to force him to repay these gains, plus interest.
In addition to Trump, the lawsuit names his children Donald, Jr., Eric, and Ivanka as defendants. In 2014, the complaint says, Ivanka was granted an option to buy a penthouse at Trump Park Avenue for $14.3 million, but the apartment was valued in the Trump Organization’s 2014 “Statement of Financial Condition” at $45 million. According to the lawsuit, Trump’s son Eric was “taking the lead” on Seven Springs estate, a large property in Westchester County, New York—which Trump bought for $7.5 million, in 1995, but between 2011 and 2021 valued at up to $291 million. The complaint also alleges that, in 2016, the Trump Organization misled an outside appraiser that prepared a valuation of the Seven Springs property, which it then submitted to the Internal Revenue Service in support of an application for a conservation easement “that ultimately, and fraudulently, reduced Mr. Trump’s tax liability by more than $3.5 million.”
The Trump Organization didn’t respond to a request for comment, but a spokesperson for the company told the Wall Street Journal that the complaint was “the culmination of nearly three years of persistent, targeted, unethical political harassment.” Trump, in a social-media post, dismissed the lawsuit as a “witch hunt” and described James as “a fraud who campaigned on a ‘get Trump platform.’ ” Eric, who is the Trump Organization’s executive vice-president, said on Twitter that James, who will be running for reëlection in November, was “working for the DNC,” or the Democratic National Committee. The Wall Street Journal quoted Alina Habba, a lawyer for Trump, as saying that the lawsuit’s claims were meritless. A lawyer for Ivanka and Donald, Jr., declined to comment to the Times, but Donald, Jr., tweeted that James was “Weaponizing her office to go after her political opponents!”
To be sure, it isn’t a crime to stand on Fifth Avenue and declare that you are a billionaire. And it has long been reported that Trump grossly inflated the value of his assets to exaggerate his net worth. In a 2018 Washington Post article, Jonathan Greenberg, a former reporter for the Forbes 400 list of the richest Americans, recalled how, as far back as 1984, an official from the Trump Organization representing himself as “John Barron” called him up and claimed that Trump owned far more valuable real estate than the magazine had given him credit for. (Trump, who Greenberg believes made the calls himself, wanted to be higher on the rich list.)
Where Trump and his businesses crossed the legal line, the complaint alleges, was in producing false financial statements that grossly inflated his net worth 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.” The complaint identifies numerous loans and insurance policies that it said were granted at least partly on the basis of claims Trump made about his wealth in a “Statement of Financial Condition”—a list of his assets and liabilities that the Trump Organization produced annually.
In her press conference, James credited Michael Cohen, Trump’s former lawyer and fixer, who turned against him after being charged with tax evasion and campaign-finance violations, for helping to get her investigation going. In February, 2019, Cohen told Congress that Trump “inflated his total assets when it served his purposes . . . and deflated his assets to reduce his real-estate taxes.”) The complaint makes practically the same argument at great length, and, reading through it, an obvious question arises: Why hasn’t a criminal indictment been brought in this case?
For some time, James’s investigation was run in parallel with a criminal probe carried out by the Manhattan District Attorney’s office. Earlier this year, a recently elected D.A., the Democrat Alvin Bragg, reportedly stopped presenting evidence to a grand jury in the Trump case, and two lead prosecutors who were working on the investigation abruptly quit. One of them, Mark Pomerantz, said, in a resignation letter to Bragg that was made public, “I and others have advised you that we have evidence sufficient to establish Mr. Trump’s guilt beyond a reasonable doubt, and we believe that the prosecution would prevail if charges were brought.”
The contents of the civil complaint demonstrate why a veteran prosecutor like Pomerantz may have taken this view. Under the New York penal code, it can be a felony to maintain false business records, and the complaint charges that, in some instances, the Trump Organization exaggerated the value of its properties compared with its internal valuations, even when it had received independent appraisals that conflicted with its own claims. In 2013, for example, it valued its leasehold at 40 Wall Street, an office and retail-space building, at $530 million, despite a bank-ordered appraisal the prior year that valued it at $220 million. More recently, in 2020, it valued Trump Park Avenue, a condominium, at $135.8 million, despite an appraisal, earlier the same year, of $84.5 million. In a criminal case, how would Trump and his associates explain these discrepancies?
On the other hand, the complaint also provided some clues as to why Bragg may have questioned “the likelihood that a prosecution would succeed”—to use Pomerantz’s words. Mainly, these were clues of omission. The complaint doesn’t contain much in the way of internal e-mails or communications, which often figure prominently in white-collar criminal prosecutions. It also doesn’t contain any suggestion that the government has any coöperating witness inside the Trump Organization who could testify about Trump’s personal culpability. Allen Weisselberg, Trump’s longtime financial honcho, who helped prepare the annual “Statement of Financial Condition,” is listed as a co-defendant. So is the company’s controller, Jeffrey McConney. In a separate criminal case involving the compensation practices of the Trump Organization, Weisselberg has pleaded guilty to felony charges of tax fraud, falsifying business records, and grand larceny, but he has reportedly refused to testify against Donald Trump himself.
There is also the question of whom the prosecutors would present as the victims of Trump’s fraudulent schemes at trial. In a statement provided to the Times, the Trump Organization claimed that its lenders, in their dealings with the company, “profited handsomely—to the tune of hundreds of millions of dollars in interest and fees.” The biggest lender to the Trump Organization over the past decade has been Deutsche Bank. By May, 2022, the complaint notes, Trump owed Deutsche “approximately $340 million.” But the complaint also points out that, by the end of the same month, the Trump Organization had repaid “approximately $295 million” of this debt, following the sale of its hotel in the Old Post Office building, in Washington, D.C., and the refinancing, with another institution, of a loan tied to Trump’s Doral golf resort, in Miami. In other words, Deutsche has already got back most of its principal from Trump. James said that Deutsche is coöperating with her office, but it’s not clear what that coöperation amounts to. Either way, convincing a jury that Deutsche Bank was victimized could prove challenging.
In theory, Bragg could still change his mind and bring a criminal case—he said in April that the Trump investigation is ongoing—although that seems unlikely. James said her office is also referring her case to federal prosecutors in Manhattan and the I.R.S. In the absence of actions by those agencies, the potential sanctions facing the Trumps, if James wins her case, are a big financial penalty, the appointment of an independent monitor to oversee the Trump Organization for at least five years, a prohibition on Trump or the Trump Organization buying any new commercial real estate in New York during the same period, and a ban on any of the Trumps named in the lawsuit serving as an officer or director in any businesses licensed or registered in the state.
Effectively, James is trying to banish Trump and his family from doing business in their longtime home state. Doubtless, Trump is unhappy about this. Right now, though, he is probably more worried about his other legal challenges, which include a ruling by a federal appeals court, later on Wednesday, that the Justice Department can resume using some of the materials it seized from Mar-a-Lago in its investigation into possible mishandling of classified documents. That probe is a criminal one, and so far it seems like a clear-cut case. ♦
