NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate provides the Northwest Progressive Institute's uplifting perspective on world, national, and local politics.

Saturday, January 29th, 2022

New York investigators are closing in on the Trump Organization. Who will crack first?

The New York Attor­ney Gen­er­al’s inves­ti­ga­tion into the Trump Orga­ni­za­tion appears to be heat­ing up yet again. The lat­est peti­tion filed by the state, which was sub­mit­ted on Jan­u­ary 18th, 2022, is to com­pel the sworn tes­ti­mo­ny of Don­ald J. Trump, Don­ald J. Trump Jr., and Ivan­ka Trump, and to com­pel the pro­duc­tion of doc­u­ments in the pos­ses­sion, cus­tody or con­trol of Don­ald J. Trump.

The fil­ing was a bit unusu­al in that it cit­ed numer­ous and spe­cif­ic exam­ples of dis­crep­an­cies to sup­port its motion.

The Attor­ney Gen­er­al’s office has demon­strat­ed it has evi­dence of unusu­al busi­ness prac­tices regard­ing its val­u­a­tions for cer­tain prop­er­ties that it would like the offi­cers of the Trump Orga­ni­za­tion to explain. Eric Trump has already appeared before the grand jury and invoked his Fifth Amend­ment rights, refus­ing to tes­ti­fy. Eric Trump specif­i­cal­ly did not want to say any­thing about the meth­ods and details of how val­u­a­tions were made for Sev­en Springs, a Trump Orga­ni­za­tion prop­er­ty in Westch­ester Coun­ty, New York, cen­tered around a Geor­gian estate.

The Sev­en Springs prop­er­ty is a two hun­dred and twelve acre par­cel of prop­er­ty that had been pur­chased by the Trump Orga­ni­za­tion in 1995 for $7.5 million.

It was appraised in 2000 for $25 mil­lion and again in 2006 for $30 mil­lion, both times “as-is.” But in 2007, the stat­ed val­ue of Sev­en Springs by the Trump Orga­ni­za­tion rose to $200 mil­lion, and both the 2012 and 2013 State­ments of Finan­cial Con­di­tion report­ed a val­ue for Sev­en Springs of $291 mil­lion, assert­ing by then that “[t]his prop­er­ty is zoned for 9 lux­u­ri­ous homes.”

David McAr­dle, an apprais­er at Cush­man & Wake­field, assessed the twen­ty-four devel­opable lots at Sev­en Springs at between $29.5 mil­lion and $50 mil­lion and con­veyed the results to the Trump Orga­ni­za­tion in either August or Sep­tem­ber of 2014. Despite this, the 2014 State­ment of Finan­cial Con­di­tion val­ued sev­en non-exis­tent man­sions to be con­struct­ed on the prop­er­ty at $161 mil­lion and repeat­ed stat­ing the total val­ue of the prop­er­ty at $291 mil­lion, not account­ing for either the appraisal or the time and cost to build or sell these non-exis­tent mansions.

Eric Trump

Eric Trump speak­ing at the 2018 Con­ser­v­a­tive Polit­i­cal Action Con­fer­ence (CPAC) in Nation­al Har­bor, Mary­land. (Pho­to: Gage Skid­more, repro­duced under a Cre­ative Com­mons license)

All of these val­u­a­tions over time were entered by Mazars, an inter­na­tion­al audit, tax and advi­so­ry firm, based on the rep­re­sen­ta­tions of the Trump Orga­ni­za­tion, and Mazars pro­vid­ed doc­u­ments that estab­lished that the val­u­a­tion of $291 mil­lion had been specif­i­cal­ly stat­ed by Eric Trump dur­ing a tele­phone call on Sep­tem­ber 24th, 2012.

The assigned Mazars accoun­tant stat­ed in their work papers that Mr. Trump’s State­ments of Finan­cial Con­di­tion rep­re­sent that val­u­a­tions of Sev­en Springs were “based on an assess­ment made by Mr. Trump in con­junc­tion with his associates…”

To sum­ma­rize, Eric Trump, for at least three years, was per­son­al­ly respon­si­ble, or was fol­low­ing the instruc­tions of some oth­er fam­i­ly mem­ber, when stat­ing val­u­a­tions for Sev­en Springs that had no sup­port­ing evidence.

This total val­u­a­tion of $291 mil­lion was then used to val­ue prop­er­ty at Sev­en Springs to be set aside as a con­ser­va­tion ease­ment, which result­ed in a $21.1 mil­lion tax break for the Trump Organization.

This same val­u­a­tion of $291 mil­lion for Sev­en Springs was lat­er pro­vid­ed to the Gen­er­al Ser­vices Admin­is­tra­tion (GSA), part of the exec­u­tive branch of the Unit­ed States Gov­ern­ment, as well as to Deutsche Bank, as a basis for sev­er­al loans, and cer­ti­fied as reli­able by the Trump Organization.

When com­plet­ing loan appli­ca­tions, state prop­er­ty tax forms, fed­er­al tax forms, appli­ca­tions for insur­ance cov­er­age, and appli­ca­tions for “oth­er eco­nom­ic incen­tives” such as con­ser­va­tion ease­ments, an appli­cant is sup­posed to use con­sis­tent, truth­ful values.

There is also a gen­er­al pro­hi­bi­tion against mak­ing things up for one’s finan­cial posi­tion to look bet­ter than it is.

It’s one thing to attempt puffery for social sta­tus but doing so to acquire a loan from a com­mer­cial lender is fraud. Finan­cial state­ments based on such val­u­a­tions as these appear to be fraud­u­lent on their face because the finan­cial state­ments sub­mit­ted to the GSA explic­it­ly state that they were pre­pared under Gen­er­al­ly Accept­ed Account­ing Prin­ci­ples (GAAP) but were not.

All appli­ca­tion process­es con­tain a jurat state­ment at com­ple­tion, sim­i­lar to what is on Form 1040 (per­son­al income tax return). The Form 1040 states that “Under penal­ties of per­jury, I declare I have exam­ined this return, includ­ing accom­pa­ny­ing sched­ules and state­ments, and to the best of my knowl­edge and belief, it is true, cor­rect and com­plete. Dec­la­ra­tion of pre­par­er (oth­er than tax­pay­er) is based on all infor­ma­tion of which pre­par­er has any knowledge.”

You sign this when you file a return, and some­thing sim­i­lar when you fill out a loan, insur­ance appli­ca­tion, or a prop­er­ty lease application.

Don­ald J. Trump would have signed his own return, and the infor­ma­tion returns for the Trump Organization.

When you apply for a loan, nego­ti­ate your prop­er­ty tax val­u­a­tions, or apply for eco­nom­ic incen­tives (con­ser­va­tion ease­ments), you don’t get to pick the val­ue of the prop­er­ty. The prop­er­ty has an objec­tive val­ue that may be an esti­mate or a range, but not a val­ue with great variation.

In any event, it should be doc­u­ment­ed how the val­ue was arrived at if it isn’t with a pro­fes­sion­al appraisal or an actu­al sale or purchase.

Giv­en all this, it doesn’t seem like it will be too dif­fi­cult to pin a 26 USC 7206 vio­la­tion on Eric Trump for caus­ing false tax returns to be filed.

The per­ti­nent parts of the Inter­nal Rev­enue Code § 7206 provide:

Any per­son who–

I.R.C. § 7206(1) Dec­la­ra­tion Under Penal­ties Of Per­jury —

Will­ful­ly makes and sub­scribes any return, state­ment, or oth­er doc­u­ment, which con­tains or is ver­i­fied by a writ­ten dec­la­ra­tion that it is made under the penal­ties of per­jury, and which he does not believe to be true and cor­rect as to every mate­r­i­al mat­ter; or

I.R.C. § 7206(2) Aid Or Assis­tance —

Will­ful­ly aids or assists in, or pro­cures, coun­sels, or advis­es the prepa­ra­tion or pre­sen­ta­tion under, or in con­nec­tion with any mat­ter aris­ing under, the inter­nal rev­enue laws, of a return, affi­davit, claim, or oth­er doc­u­ment, which is fraud­u­lent or is false as to any mate­r­i­al mat­ter, whether or not such fal­si­ty or fraud is with the knowl­edge or con­sent of the per­son autho­rized or required to present such return, affi­davit, claim, or doc­u­ment; or….

…and…

I.R.C. § 7206(5)(B) With­hold­ing, Fal­si­fy­ing, And Destroy­ing Records —

Receives, with­holds, destroys, muti­lates, or fal­si­fies any book, doc­u­ment, or record, or makes any false state­ment, relat­ing to the estate or finan­cial con­di­tion of the tax­pay­er or oth­er per­son liable in respect of the tax;

shall be guilty of a felony and, upon con­vic­tion there­of, shall be fined not more than $100,000 ($500,000 in the case of a cor­po­ra­tion), or impris­oned not more than 3 years, or both, togeth­er with the costs of prosecution.

False tax returns also can be pros­e­cut­ed using wire and mail fraud statutes, one for each inci­dent, where a false doc­u­ment or return was mailed or transmitted.

Pros­e­cu­tors for the State of New York and the Unit­ed States also have con­spir­a­cy statutes avail­able to them. Fed­er­al law spec­i­fies that a Klein Con­spir­a­cy exists, accord­ing to the US Depart­ment of Jus­tice, “if two or more per­sons con­spire … to defraud the Unit­ed States, or any agency there­of in any man­ner or for any pur­pose.” 18 U.S.C. § 371 (2013).

This lan­guage is the sec­ond clause (or “defraud prong”) of the fed­er­al con­spir­a­cy statute that cre­ates crim­i­nal lia­bil­i­ty for any­one who con­spires “either to com­mit any offense against the Unit­ed States, or to defraud the Unit­ed States…”

Beyond Eric Trump, there are three oth­er fam­i­ly mem­bers who have respon­si­bil­i­ty for the val­ues entered on the finan­cial state­ments, loan appli­ca­tions and tax returns — Don­ald J. Trump, Don­ald J. Trump Jr., and Ivan­ka Trump.

The Attor­ney Gen­er­al is com­pelling the three Trumps to tes­ti­fy under oath as to who deter­mined the val­u­a­tions, how the dif­fer­ent val­u­a­tions were arrived at, and why any of the val­u­a­tions was used for a prop­er­ty for a par­tic­u­lar purpose.

The tes­ti­mo­ny is need­ed because none of the three fam­i­ly mem­bers wrote any­thing down regard­ing the val­u­a­tions — an atyp­i­cal prac­tice of any busi­ness that is not a crime fam­i­ly. The ven­dors ser­vic­ing the por­tion of the Sev­en Springs prop­er­ty in Bed­ford, New York were instruct­ed not to write any­thing down regard­ing the devel­op­ment project. From the subpoena:

Evi­dence indi­cates that Mr. Trump adopt­ed a prac­tice of pre­vent­ing the cre­ation of writ­ten records with regard to his devel­op­ment efforts at Sev­en Springs. One wit­ness, who described his role as the “direct rep­re­sen­ta­tive of Don­ald J. Trump” for the Low­er Hud­son Val­ley tes­ti­fied that Mr. Trump direct­ed his activ­i­ties, that he spoke to Mr. Trump per­son­al­ly about Sev­en Springs “[a]bout once a week,” and that he “sel­dom” com­mu­ni­cat­ed in writ­ing with Mr.Trump because Mr. Trump stat­ed to him “that he did not want things put in writ­ing in com­mu­ni­ca­tions between us.”

Fur­ther­more, a tax attor­ney for Don­ald J. Trump, Sheri Dil­lon, “made efforts to avoid the cre­ation of dis­cov­er­able material.”

On June 18, 2015, Ms. Dil­lon instruct­ed a Mor­gan Lewis asso­ciate to “call [Cush­man apprais­er] Tim [Barnes] and advise him to lim­it sub­stan­tive emails with Scott Blake­ly (engi­neer) and instead use the phone to the extent pos­si­ble (want to avoid cre­at­ing dis­cov­ery unnec­es­sar­i­ly).” […] On Sep­tem­ber 28, 2015, Ms. Dil­lon sent an email to anoth­er Mor­gan Lewis asso­ciate, “Please use a fresh email when com­mu­ni­cat­ing with apprais­ers so that we avoid to the extent pos­si­ble, email chains.”…In tes­ti­mo­ny before OAG, the Mor­gan Lewis asso­ciate tes­ti­fied that both emails were attempts to pre­vent cre­at­ing doc­u­ments that might be uncov­ered by adver­saries poten­tial­ly chal­leng­ing the ease­ment dona­tion — i.e., the Unit­ed States Inter­nal Rev­enue Ser­vice or Depart­ment of Justice.

Donald Trump

Don­ald Trump speak­ing at the 2013 Con­ser­v­a­tive Polit­i­cal Action Con­fer­ence (CPAC) in Nation­al Har­bor, Maryland.

Don­ald J. Trump’s legal coun­sel, Ali­na Hab­ba, respond­ed to the state’s fil­ings by claim­ing victimhood.

Of course, the vic­tims “have all been close­ly involved” in Trump Orga­ni­za­tion trans­ac­tions that, accord­ing to the Attor­ney Gen­er­al for the State of New York, “used fraud­u­lent and mis­lead­ing asset val­u­a­tions on mul­ti­ple prop­er­ties to obtain eco­nom­ic ben­e­fits, includ­ing loans, insur­ance cov­er­age, and tax deduc­tions for years.”

The New York Supreme Court will return a find­ing that the three remain­ing Trump’s, Don­ald J. Trump, Don­ald Jr. and Ivan­ka must sit for a depo­si­tion to answer the State of New York’s ques­tions. Don­ald J. Trump will have to answer truth­ful­ly or invoke his Fifth Amend­ment privilege.

Long­time observers of Don­ald J. Trump, such as Tim O’Brien of Bloomberg News and Trump’s for­mer lawyer, Michael Cohen, have stat­ed repeat­ed­ly that the Trump Orga­ni­za­tion is a small fam­i­ly-run busi­ness, and that Don­ald J. Trump makes all the deci­sions and approves every pay­ment made by the Trump Organization.

It is also wide­ly known that noth­ing is put in writ­ing that can tie Don­ald J. Trump to any one deci­sion. How­ev­er, there has been dis­cov­ered a spread­sheet that the Trump Orga­ni­za­tion alleged­ly main­tained over mul­ti­ple years of their unre­port­ed income. If con­sid­ered valid, this could lead to a charge of conspiracy.

But Don­ald J. Trump may not be the only one fac­ing spe­cif­ic charges.

Ivan­ka Trump began serv­ing as an Exec­u­tive Vice Pres­i­dent in the Trump Orga­ni­za­tion in 2005. She left the Trump Orga­ni­za­tion in or around 2017.

While at the Trump Orga­ni­za­tion she:

direct[ed] all areas of the company’s real estate and hotel man­age­ment plat­forms. This includ­ed active par­tic­i­pa­tion in all aspects of projects, “includ­ing deal eval­u­a­tion, pre-devel­op­ment plan­ning, financ­ing, design, con­struc­tion, sales and mar­ket­ing” as well as “involve[ment] in all deci­sions— large and small.

Ivan­ka Trump was the lead nego­tia­tor for the lease­hold with the Gen­er­al Ser­vices Admin­is­tra­tion (GSA) for the Old Post Office. As part of that process, she sub­mit­ted the Trump Organization’s pro­pos­al to the GSA in July 2011. That pro­pos­al incor­po­rat­ed the State­ment of Finan­cial Con­di­tion of Don­ald J. Trump.

“Trump’s real estate invest­ments are fund­ed from Don­ald J. Trump’s sig­nif­i­cant net worth, which is com­posed of a wide range of cap­i­tal­ized affil­i­ates. Please find Trump’s State­ment of Finan­cial Con­di­tion in an enve­lope sub­mit­ted with each copy of this pro­pos­al.” The Trump Orga­ni­za­tion rep­re­sent­ed to the GSA that the State­ment of Finan­cial Con­di­tion was com­piled under GAAP with any depar­tures not­ed in the accountant’s com­pi­la­tion report.

While at the Trump Orga­ni­za­tion, Ivan­ka Trump, along with Allen Weis­sel­berg, the Trump Organization’s Chief Finan­cial Offi­cer, were the pri­ma­ry points of con­tact for rep­re­sen­ta­tives of Deutsche Bank.

As part of an ongo­ing search for financ­ing on the Doral prop­er­ty, she was copied on a let­ter from Don­ald J. Trump to the CEO of Deutsche Bank Secu­ri­ties along with which he trans­mit­ted his State­ment of Finan­cial Con­di­tion and an addi­tion­al let­ter meant to “estab­lish [his] brand value.”

Ivan­ka Trump was also deeply involved in the pur­chase of what even­tu­al­ly became the Trump Nation­al Doral Mia­mi resort and golf course in Mia­mi, Florida…

Ms. Trump also dis­cussed oth­er, less favor­able terms with respect to Doral with anoth­er finan­cial insti­tu­tion for financ­ing options not per­son­al­ly guar­an­teed by Mr. Trump.

In the course of nego­ti­at­ing with Deutsche Bank financ­ing for the Doral prop­er­ty, Ms. Trump was respon­si­ble for secur­ing loan terms, which includ­ed a per­son­al guar­an­ty by Mr. Trump for which his rep­re­sen­ta­tions regard­ing his finan­cial con­di­tion would be (and were) made. Deutsche Bank then issued a loan on Doral to Trump Endeav­or LLC, an enti­ty in the Trump Orga­ni­za­tion, and per­son­al­ly guar­an­teed by Mr. Trump. This loan (ini­tial­ly com­prised of one secured tranche and one unse­cured tranche) was for a total of $125 mil­lion and closed in June 2012.

…After win­ning the bid to lease the Old Post Office, Ivan­ka Trump helped nego­ti­ate financ­ing for the property.

The per­son­al guar­an­ty for this loan required sub­mis­sion of Mr. Trump’s State­ment of Finan­cial Con­di­tion annu­al­ly, along with a com­pli­ance cer­tifi­cate attest­ing that the state­ment pre­sent­ed fair­ly in all mate­r­i­al respects Mr. Trump’s finan­cial condition.

…and in what became the Trump Inter­na­tion­al Hotel and Tow­er Chicago.

As part of that trans­ac­tion, she received term sheets from two dif­fer­ent divi­sions of Deutsche Bank. Some term sheets includ­ed recourse through a per­son­al guar­an­ty while oth­ers did not. The final Chica­go loans includ­ed a per­son­al guar­an­ty where­in it was rep­re­sent­ed that Mr. Trump’s June 30, 2012 State­ment of Finan­cial Con­di­tion was “true and cor­rect in all mate­r­i­al respects” and that the state­ment “presents fair­ly Guarantor’s finan­cial con­di­tion as of June 30, 2012.”

And then there’s this….

Ivan­ka Trump’s Park Avenue Pent­house was incor­po­rat­ed into the val­u­a­tion of the Trump Park Avenue asset on Don­ald J. Trump’s State­ment of Finan­cial Con­di­tion […] Ivan­ka Trump had an option to pur­chase a pent­house unit in Trump Park Avenue at $8,500,000…During the pen­den­cy of that option her unit was val­ued at between $12 mil­lion and $17 mil­lion high­er than the option price.

Most peo­ple know hav­ing an $8.5 mil­lion option to buy some­thing is not the same as own­ing it. But then adding it to the Trump Organization’s State­ment of Finan­cial Con­di­tion at $3.5 to $8.5 mil­lion more than assessed?

Ivanka Trump

Ivan­ka Trump speak­ing with sup­port­ers at a cam­paign event at Moun­tain Shad­ows Resort Scotts­dale in Par­adise Val­ley, Ari­zona. (Pho­to: Gage Skid­more, repro­duced under a Cre­ative Com­mons license)

And Ivanka’s actions pale in scope to that of the rest of the actions of the Trump Organization.

Such an exten­sive paper trail over an unusu­al­ly long peri­od of time, includ­ing secret doc­u­men­ta­tion by The Trump Orga­ni­za­tion itself, rein­forced by the per­son­al tes­ti­mo­ny of oth­ers involved in these process­es, paints a sub­stan­tial pic­ture of a long-run­ning tax eva­sion process through fraud.

This is a boun­ti­ful trail for inves­ti­ga­tors to fol­low and pro­vide the most choice morsels dis­cov­ered to a grand jury.

The New York State Supreme Court ought to reach a con­sen­sus rul­ing to enforce the sub­poe­nas very soon. None the three mem­bers of the Trump fam­i­ly have any sort of spe­cial sta­tus that will pre­vent the sub­poe­na from being enforced by the New York State Supreme Court. Only time will tell if any of the three will tell the truth, take the Fifth Amend­ment them­selves, or com­mit perjury.

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