New York State Attorney General Letitia James on Wednesday accused former President Donald Trump, his three eldest children and their company, the Trump Organization, of financial fraud, contending they misled investors and falsely inflated the value of their assets by billions of dollars over more than a decade.
And the Trump Organization, based in a Fifth Avenue office tower bearing the family name, is a tangible reminder of the fortune that Trump inherited from his father and used to vault himself into the public consciousness and ultimately the White House. Trump, despite his celebrity, long felt overshadowed by his father, Fred, who carved a lucrative real estate portfolio out of modest Brooklyn and Queens properties and cozy ties to New York’s political machinery. Trump brought the family business into Manhattan and the spotlight. Now — for the second time in his career — he has put the family’s business legacy on the precipice. Trash-canning the New York remnants of what his father started about a century ago will weigh on Trump, regardless of whatever he says about it.“Claiming money you do not have does not amount to the art of the deal — it is the art of the steal,” James said at a press conference. “No one — no one — is above the law.”
The Trumps have characterized James’s investigation as a political vendetta. An appellate court judge already disagreed with that assessment last spring and allowed the attorney general’s prosecution to proceed.A civil case holds advantages for James. She won’t have to prove to a jury that Trump intended to break the law — the high bar prosecutors must overcome in a criminal case. Trump and his son Eric also refused to answer questions posed by James’s prosecutors during depositions. The Trumps chose to invoke the Fifth Amendment’s protection against self-incrimination hundreds of times, which can be used against them in a civil jury trial (something James couldn’t do in a criminal case).
Still, James must prove crimes were committed. Her team has relied extensively on “Statements of Financial Condition” that Trump submitted to lenders (and journalists like me) as evidence of inflated asset valuations. The statements were unaudited, and Trump’s own accountants declined to certify them as complying with generally accepted accounting principles. Journalists may have been swayed by the statements, but whether banks were induced to make loans based on them alone is another matter.
Banks are meant to be savvy lenders and conduct due diligence that goes beyond merely relying on the claims of borrowers. Did the financial statements alone persuade banks to do business with Trump? Probably not. Trump unsuccessfully sued me for libel in 2006 after claiming a biography I wrote, “TrumpNation,” misrepresented his wealth and business career. Although Trump told me in 2004 and 2005 that his net worth was anywhere from $1.7 billion to $6 billion (and suggested it might even be $9.5 billion), my sources at the time told me his wealth was closer to $150 million to $250 million. When Trump litigated the point with me, my lawyers produced a Deutsche Bank AG assessment of his finances that pegged his wealth at $788 million in 2005. Whatever Trump might have been peddling to Deutsche Bank in a financial statement didn’t convince the bank at the time that he was a billionaire.
Being a sloppy and mendacious grifter is grotesque, of course. But convincing a jury that rolling that way also amounted to criminal behavior is a thornier affair. On the other hand, the fact that Trump and his children simply set out to mislead their lenders — even if they weren’t successful— might put them at odds with the law and a jury. We’ll have to see. James said she has also uncovered federal crimes and has referred those to the US Attorney’s Office in Manhattan and the Internal Revenue Service.
In the meantime, Trump may choose to simply settle James’s case, pay $250 million in allegedly ill-gotten gains she wants disgorged and give up the business ghost in New York rather than wage yet another legal battle.
He is facing intense scrutiny from the Justice Department about his handling of state secrets he took with him to Palm Beach, Florida, after leaving the White House. Federal investigators may choose to indict him on charges of committing a variety of possible crimes exposed during the Jan. 6 committee hearings. A state prosecutor in Georgia is probing whether he engaged in electoral fraud there in the wake of the 2020 presidential election. A criminal fraud inquiry in Manhattan has resulted in the indictment of the Trump Organization’s chief financial officer and has also put the company in the cross hairs there.
That’s a lot to contend with, even for a former president who relishes trench warfare.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O’Brien is senior executive editor of Bloomberg Opinion. A former editor and reporter for the New York Times, he is author of “TrumpNation: The Art of Being the Donald.”
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