New York Attorney General Files Financial Fraud Case Against Trump

By: Mary Katherine Browne

Former President Trump, three of his children, and his organization have been accused of engaging in widespread fraud in order to enrich themselves economically by deceiving financial institutions and tax authorities.

New York Attorney General Letitia James announced September 21 that she had filed a lawsuit against Trump, the Trump Organization, and Donald Trump Jr., Eric Trump, and Ivanka Trump for “repeatedly and persistently” inflating the value of 23 Trump assets to receive more favorable loans, pay lower taxes, satisfy continuing loan agreements, and receive insurance coverage for higher limits and at lower premiums.

Former Trump Organization CFO Allen H. Weisselberg and Controller Jeffrey McConney were also named in the lawsuit.

In the 220-page complaint, James alleges that Trump, his organization, and the other defendants made more than 200 false and misleading valuations of assets on financial statements from 2011 through 2021.

The lawsuit details how asset valuations were prepared by Trump and his organization in consultation with outside professionals, but says those valuations were rejected and “no outside professionals were retained to prepare any of the asset valuations” presented in the financial 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,” James said in a release.

James accuses Trump and his organization of ignoring “the most basic rules” and generally accepted accounting principles by representing that Trump had cash on hand that he did not, ignoring critical property restrictions that would lower a property’s value, changing valuation methods annually without reason or notice, and including intangible items, such as brand premiums, when calculating asset values.

The lawsuit seeks to permanently bar Trump and his children from serving as an officer or director in any New York corporation or similar business registered or licensed in New York, to bar Trump and his organization from entering into any New York real estate transactions for five years, and to order the disgorgement of at least $250 million.

The complaint also seeks to cancel the Trump Organization’s corporate certificate.

James has been investigating Trump and his businesses for more than three years. The probe started after Michael Cohen, Trump’s former longtime personal attorney, testified before Congress that Trump had engaged in misconduct, including falsifying the value of his assets and submitting fraudulent tax returns.

The lawsuit comes a month after Weisselberg reached a deal with New York prosecutors and pleaded guilty to 15 criminal charges stemming from his involvement in a 15-year tax fraud scheme with other Trump Organization executives.

Referrals to the IRS

During a press conference, James said she has made referrals to the U.S. attorney's office for the Southern District of New York and to the IRS regarding possible violations of federal law that weren’t included in the civil fraud action.

“We also believe that he illegally saved millions of dollars in federal tax benefits, conservation easement donations related to Seven Springs in Westchester and the Trump National Golf Club in Los Angeles,” James said.

The complaint alleges that the Trump Organization fraudulently obtained inflated appraisals in 2014 and 2015 for granting conservation easements over the two properties. Trump secured a $21.1 million tax deduction for the Westchester, New York, property and a $25 million tax deduction for the Los Angeles property in exchange for not developing the land.

“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 the donated development rights with respect to both conservation easements,” the complaint says.

Senate Finance Committee Chair Ron Wyden, D-Ore., released a statement of support for an IRS investigation into potential violations of federal tax law, calling the evidence James has provided “significant.”

“I’m particularly concerned by Donald Trump’s alleged abuse of the conservation easement program, which was the focus of an extensive Finance Committee report. This underscores the need to get our bipartisan bill reforming the syndicated conservation easement program across the finish line,” Wyden said.

In May Wyden sent a letter to Trump’s former accounting firm, Mazars USA LLP, asking why it disavowed a decade’s worth of financial statements for the former president and his organization. He also asked whether tax returns it prepared for Trump contained discrepancies or errors.