Donald Trump’s colossal trial for faking property values starts next Monday, and one mind-boggling issue has emerged as his weakest defense yet: the idea that his past lies on financial statements were justified because prices eventually went up anyway.
The judge already expressed his utter contempt for that argument, tearing it apart on Tuesday in the same order that already determined Trump had committed bank fraud and should have his real estate empire pounded into dust.
“He claims that if the values of the property have gone up in the years since the [statements of financial condition] were submitted, then the numbers were not inflated at that time,” Arthur F. Engoron wrote. “The defenses Donald Trump attempts to articulate in his sworn deposition are wholly without basis in law or fact.”
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That doesn’t bode well for Trump, his heirs, or other top executives targeted by the New York Attorney General. This is a three-month bench trial, which means there won’t be a jury. The judge alone will decide the outcome, and he’s already concluded Trump is an unrepentant serial liar.
But for Trump, this particular defense is revealing in its stunning detachment from reality—one that hints at how far he’ll go to justify his lies.
As the judge described it in his recent order: “This is a fantasy world, not the real world.”
The matter came under heightened scrutiny at a court hearing last week, when the judge’s clerk, attorney Allison Greenfield, questioned Trump’s lawyers about the inexplicable reasoning. Defense attorney Christopher Kise’s answer? He’s a real estate genius who sees the world differently.
But that doesn’t explain why, during an April 13 deposition with the AG’s lawyers, Trump maintained he was right about real estate prices all along—even though they weren’t true at the time he listed the property values in the personal financial statements he submitted to banks in order to get millions of dollars in loans.
That morning, AG senior enforcement counsel Kevin Wallace questioned Trump on a public statement the politician gave to minimize the embarrassment that followed when his longtime outside accounting firm dropped him as a client and distanced itself from his web of lies.
To investigators’ surprise, Trump suddenly launched into a diatribe about how an eventual increase in prices validated his inflated past assessments.
“If you look at the values today of this property that you have down, obviously, the numbers are low. In 2014, the numbers are low because the properties are worth much more today,” Trump said.
Wallace tried to move on, but Trump wouldn’t relent—doubling down on this time-altering reasoning.
“Obviously, it turned out to be right, because the properties are worth more today, generally speaking, than they were in the statement—substantially,” the former president said. “Regardless it turned out to be true.”
“Because the properties are worth more… I think we have now the benefit of knowing that the statement when I did it was probably low because of the fact that a number of years later, not that long later, the properties are worth substantially more,” Trump added.
Now that months have passed—and Trump’s defense lawyers refuse to back away from that line of reasoning—the former president is setting himself up for rough seas ahead.
On one hand, the argument doesn’t hold up in the business world—at least not the one that operates legally.
“What he is saying is completely inconsistent with how real estate professionals talk about valuations,” said David Reiss, a Brooklyn Law School professor who specializes in real estate finance.
“When you talk about valuations at a given time, you’re talking about what its value is at that time. It becomes more valuable in the future, but that’s its value at the time,” Reiss said.
That means Trump’s 2014 financial statement should have, naturally, captured the value of any given building or land at that time.
To better understand why Trump’s excuse is bonkers requires a quick review of the three basic methods to assess value employed by professional property appraisers.
One is the income approach: What income a particular property is currently generating? That doesn’t account for the future, Reiss said.
Another is the cost approach: How much does it cost to replace the property? That doesn’t consider the future either, Reiss made clear.
The third is the sales comparison approach: What are similar parcels and comparable properties selling for? This could include future expectation of development, Reiss explained. After all, sale prices are determined by supply and demand—and a fundamental concept in economics dictates that demand can be affected by consumer expectations of future price changes.
As usual, Trump’s logic seems to careen off the rails and focus solely on his property’s future value. But Trump simply can’t do that because he wants to.
“That’s not how the legal system works or how the real estate industry works… if everybody could say that, nobody could be accused of a lie. We would all do whatever the heck we want,” Reiss said.
Reiss likened Trump redefining time-bound questions on financial forms to the way Humpty Dumpty makes up words in Lewis Carroll’s sequel to Alice’s Adventures in Wonderland. The law professor read a passage in which Alice took issue with the Eggman’s improper use of the word “glory.”
Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’”
“But ‘glory’ doesn’t mean ‘a nice knock-down argument,’” Alice objected.
“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
And yet, another way of exploring Trump’s assertion that his 2014 estimates were true then because they became true in 2022 is through the lens of physics. For that, The Daily Beast contacted one of the world’s leading thinkers about the concept of time: cosmologist Marina Cortês at the Institute for Astrophysics and Space Sciences in Portugal.
“He's defying the very laws of physics,” Cortês said. “The past is different from the future. That is the most basic knowledge we have in cosmology. The arrow of time is the most fundamental property of reality.”
She’s referring to the scientific notion that there’s a one-way direction to the occurrences in our universe. In the world in which a real estate tycoon is slapping inflated values on his properties, now is now and later is later.
“Unless he wrote specifically that this property will be valued this much in the future, the statement he wrote carries four-dimensional coordinates in space that are attached to the time he made them. He cannot make statements that are continuous into the future. If he had, there’s a large community of theoretical physicists who’d like to speak to him,” she said.
Essentially, Trump is wrong for the same reason that his lawyers can drop ice into their glasses at their courtroom table next week and watch it melt—but won’t ever see their New York City tap water coalesce into ice cubes. Heat always moves from hotter objects to colder ones unless some outside force is involved.
“According to the second law of thermodynamics, the future does not move into the past. It’s always different from the past,” Cortês said. “It’s like Sir Arthur Eddington’s famous statement: ‘If your theory is found to be against the second law of thermodynamics I can give you no hope. There is nothing for it but to collapse in deepest humiliation.’”
The simplest explanation suffices, Cortês said. “It’s just a tale.”
