Another shoe has dropped in the growing post-presidential legal woes of former president Donald Trump, with New York Attorney General Letitia James (D) filing a major lawsuit against Trump, his business and his family on Wednesday.
The lawsuit accuses Trump, the Trump organization and three of his children — Trump Jr., Eric and Ivanka — of business fraud and misrepresenting their finances for personal gain. It also names Trump’s longtime chief financial officer, Allen Weisselberg, who recently pleaded guilty to tax crimes, and Trump Organization controller Jeffrey McConney. It seeks to recover $250 million and severely restrict the defendants from conducting business in the state moving forward.
James also said at a news conference that she was referring the matter to the Internal Revenue Service and the Justice Department’s Southern District of New York for potential criminal prosecution.
With James telegraphing an intense focus on Trump in the lead-up, and reportedly rebuffing an offer to settle the case recently, this lawsuit has been expected. It also comes as the former president faces potential criminal scrutiny from the federal government, the Manhattan district attorney and prosecutors in Fulton County, Ga., for a variety of issues — including his finances, the Jan. 6, 2021, insurrection and his retention of sensitive government documents at his residence in Florida.
Trump lawyer Alina Habba responded Tuesday: “Today’s filing is neither focused on the facts nor the law — rather, it is solely focused on advancing the attorney general’s political agenda. It is abundantly clear that the Attorney General’s Office has exceeded its statutory authority by prying into transactions where absolutely no wrongdoing has taken place.” In a string of social media posts, Trump called the suit “Another Witch Hunt.”
Below are some takeaways from the lawsuit.
1. The alleged inflations of asset values
Thanks to a host of reports by newspapers including The Washington Post, as well as the previous indictment of Weisselberg, we already knew some of the details about Trump’s properties and how their values might have been inflated, laid out in James’s lawsuit.
Among the key examples: claiming his triplex apartment at Trump Tower was 30,000 square feet when other documents stated it was only about 11,000 square feet; claiming other buildings had more floors and square footage than they did; claiming more residential lots than he was zoned for on his golf course; and listing values far beyond what appraisers had.
But the lawsuit provides even more specifics.
In one instance, it says Trump claimed money held by Vornado Partnership Interests as his — even though he owned only a 30 percent partnership stake and had no ownership interest. The lawsuit says this increased Trump’s claimed liquid assets by between $14 million and $93 million, depending on the year, thereby “often constituting a considerable portion of Mr. Trump’s reported liquidity.”
At another point, it accuses Trump of seeking to “unduly influence” a lender appraisal in 2015 for 40 Wall Street in New York. The appraised value more than doubled from just three years before: In 2012, it had come in at $220 million, but the 2015 version came in at $540 million. Trump had sought to refinance the loan through Capital One but was rejected, ultimately turning to Ladder Capital Finance, which employed Weisselberg’s son Jack as a director.
James’s office can only sue Trump in civil court, but her office has coordinated with the Manhattan district attorney. A major question is what the civil probe might reveal that could be used in criminal probes brought there or elsewhere.
In addition to referring the matter to the IRS and the Justice Department, James’s lawsuit highlights a number of state criminal laws she says Trump violated.
- New York Executive Law § 63 (12), which makes it a crime to “engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business.”
- New York Penal Law § 175.10, which involves falsifying business records.
- New York Penal Law § 175.45, which involves issuing a false financial statement.
- New York Penal Law § 176.05, which deals with insurance fraud.
In a footnote, the lawsuit also suggests that the alleged conduct it describes “plausibly violates” federal criminal laws:
- 18 U.S.C. § 1014, which deals with false statements to financial institutions.
- 18 U.S.C. § 1344, which deals with bank fraud.
James declined to say at her news conference Wednesday whether she expected Trump to be charged criminally, saying merely that others would make that determination.
3. Explaining the disclaimer
A big question in all of this is whether Trump’s allegedly false “Statements of Financial Condition,” containing purportedly inflated figures, might have broken the law and were held up as actual financial statements. The documents came with disclaimers that assured they were not the full picture of his finances.
But James’s lawsuit says that while that disclaimer could insulate the accountants involved, it doesn’t absolve Trump.
“While the accountants gave notice in the reports that they did not audit or review the Statements to verify the accuracy or completeness of the information provided by Mr. Trump or the Trump Organization, they confirmed that their clients were responsible for preparing the Statements in accordance with generally accepted accounting principles in the United States,” the suit says.
It adds that such disclaimers “do not give license to Mr. Trump or the Trump Organization to submit to their accountants fraudulent and misleading asset valuations for inclusion in the Statements.”
Elsewhere in the lawsuit, the attorney general’s office says the disclaimers were adjusted after McConney was questioned in the investigation in 2020. It says that after McConney was asked about the claim in the disclaimer that the valuations were reached in consultation with “outside professionals,” the language was changed to downplay the role of those “outside professionals.”
“The Trump Organization’s abrupt removal of any specific references to consultation with outside professionals in connection with specific valuations is a tacit admission that such references in prior years were inaccurate and misleading,” the lawsuit says.
4. The roles of Trump Jr., Ivanka and Eric
The decision to include Trump’s three eldest children is a notable one. They have been high-ranking executives at Trump’s business, but relatively little has been known about their roles in alleged wrongdoing.
After accusing them of each taking part in the scheme — and even saying it “required” their “participation” — the lawsuit lays out the case against each, one by one.
- Of Donald Trump Jr., it says he “was a source of valuations in the Statement of Financial Condition for properties like Trump Park Avenue.” It also says he was “was responsible for the preparation of the Statement for every year from 2016 to the present” and that he certified its accuracy in 2017, 2018 and 2019. Though he once testified that the rent-stabilized apartments at Trump Park Avenue were “the bane of [his] existence,” it says a statement valuing unsold units there did not account for any such restrictions; as a result, the appraisal of the residential and storage spaces were nearly six times higher in later years than they were in 2010.
- Of Ivanka Trump, it says she “was familiar with the Statements of Financial Condition, making presentations on them to the [U.S. General Services Administration] in 2011, and using them to facilitate loans from Deutsche Bank in 2012 and 2013.”
- And of Eric Trump, it says he “was a source of valuations in the Statement of Financial Condition for properties like Seven Springs,” an estate in Westchester County, N.Y. It says, “Those projections for developing mansions [at Seven Springs] from Eric Trump were false in almost every particular.” It also says that he certified the statements’ accuracy in 2020 and 2021 and that he invoked his Fifth Amendment right against self-incrimination when asked whether he assisted in the preparation of the statements. (Invoking the Fifth Amendment can be used against you in civil cases in New York, unlike in criminal cases.)
5. Where the $250 million figure comes from
James’s lawsuit alleges that the over-valuations of Trump’s properties and other financial tricks allowed him to profit because they helped him secure favorable interest rates and other benefits.
She seeks to recover $250 million that she says the defendants illegally obtained. Of that, she says $100 million represents the net gain Trump made from selling the Old Post Office property in D.C. this year, after using inaccurate statements to get favorable interest rates from Deutsche Bank to fund the construction of his hotel.
The other $150 million comes from favorable interest rates received from banks for other properties.
“All of those benefits were derived from the improper, repeated, and persistent use of fraudulent and misleading financial statements,” the lawsuit says.
6. A Mar-a-Lago documents connection?
The lawsuit also repeatedly suggests a coverup by Trump and those around him, noting instances in which those involved sought to cut down on written correspondence and long email chains.
It also makes a reference to what had — until recently — been the biggest news involving Trump: the seizure of government documents from his residence at Mar-a-Lago in Florida.
The lawsuit floats the idea that the search might have turned up documents that Trump’s team should have shared with the New York Attorney General’s office. It notes that the district court has said “the seized materials include … correspondence related to taxes, and accounting information.”
“Documents concerning taxes and accounting information would appear to be responsive to OAG’s subpoenas, but no such documents for Mr. Trump were produced by counsel for Mr. Trump despite a representation by that counsel that: I ‘diligently searched each and every room of Respondent’s private residence located at Mar-a-Lago, including all desks, drawers, nightstands, dressers, closets, etc. I was unable to locate any documents responsive to the Subpoena that have not already been produced to the OAG by the Trump Organization.’ ”
That, notably, is a similar representation to one that a Trump representative made to the Justice Department in June, saying all documents marked classified had been turned over. It doesn’t appear that was true.
This story has been updated.