The Trump Organization, the former president’s family business, is facing a civil fraud trial in New York that could have serious consequences for its future. The New York attorney general’s office has accused the company of inflating and deflating the value of its assets to get better deals on loans, taxes and insurance. According to an expert witness hired by the state, this fraudulent behavior may have cost banks more than $168 million in interest.
How the Trump Org Manipulated Its Financial Statements
The state’s case is based on the Trump Organization’s statements of financial condition, which are documents that summarize its assets, liabilities, income and expenses. These statements were prepared by the company’s chief financial officer, Allen Weisselberg, who is also facing criminal charges for tax evasion and grand larceny. The state alleges that the company used these statements to misrepresent its financial situation to various lenders and insurers.
For example, the state claims that the company inflated the value of its properties by omitting debt, expenses and vacancies, and by adding hypothetical scenarios that were not realistic. The company also allegedly deflated the value of its properties by understating income, overstating expenses and using outdated appraisals. The state says that these manipulations allowed the company to get lower interest rates on loans, lower tax assessments and higher insurance coverage.
How the Banks Lost Out on Interest
One of the key questions in the trial is how much damage the company’s fraud caused to its victims. The state has hired Michiel McCarty, a financial expert and CEO of an investment bank, to calculate the lost interest for the banks that loaned money to the Trump Organization. McCarty testified on Wednesday that he used a methodology called “yield maintenance” to estimate how much interest the banks could have earned if they had known the true value of the company’s assets.
McCarty said that he analyzed four of the company’s properties: 40 Wall Street, Trump International Hotel and Tower Chicago, Trump International Hotel Washington DC (Old Post Office) and Trump National Doral Miami. He compared the interest rates that the company actually paid on its loans with the interest rates that it would have paid if it had disclosed its accurate financial statements. He then calculated the difference between these two rates over the duration of each loan.
According to McCarty’s calculations, the banks lost out on more than $168 million in interest across these four properties from 2014 to 2023. The largest amount was for 40 Wall Street, which cost the banks $69 million in interest. The second largest was for Trump International Hotel and Tower Chicago, which cost $53 million in interest. The third largest was for Trump International Hotel Washington DC, which cost $28 million in interest. The fourth largest was for Trump National Doral Miami, which cost $18 million in interest.
What Are the Potential Consequences for the Trump Org
The state is seeking $250 million in penalties and restitution from the Trump Organization and its executives, including former president Donald Trump and his sons Donald Jr. and Eric. The state is also asking for a ban on them serving as officers or directors of any New York companies. The judge has already found them liable for fraud before the trial began, ruling that the state had proved its case.
The trial could also have implications for other investigations into the Trump Organization’s finances, such as those by Manhattan District Attorney Cyrus Vance Jr. and Congress. The trial could reveal more evidence of wrongdoing or cooperation by witnesses who could testify against the company in other cases.
The trial is expected to last until mid-November. Donald Trump Jr. took the stand on Wednesday after McCarty’s testimony. He defended his father’s business practices and denied any knowledge of fraud. He also accused the state of pursuing a political vendetta against his family.
