“Reality TV Star Found Guilty of Fraudulently Inflating His Assets”
That headline would generally not surprise anyone who watches shows involving “Real Housewives” or other so-called reality TV stars. But today’s ruling by Justice Engoron in New York slams none other than Donald Trump, the former host of The Apprentice, for rampant fraud, the same person who is very soon to be dubbed the Republican Party’s presumptive nominee for the highest office in the land. And if the recent verdict against Trump in the second defamation case brought by E. Jean Carroll of roughly $83 million was shocking, Justice Engoron’s ruling is at least more than four times that, a truly staggering $350 million, with interest. One important element of the opinion that has gotten less coverage than the fact that Trump appears to have defrauded banks: He also defrauded taxpayers.
The practice that led to this ruling is really not that difficult to understand. The former president is found to have inflated his assets when it suited him to do so: that is, in order to get favorable treatment from lenders. That resulted in the Trump companies taking advantage of their lenders. Perhaps public sentiment in general and Trump supporters in particular are unlikely to cry any tears for those big banks. The law that Trump was found to have violated does not require that the victims come forward to seek damages, however; the fraud is on the market and the general public, and that’s why the attorney general of New York was able to bring this case. (In full disclosure, I served as a volunteer member of Attorney General Letitia James’ transition team in late 2018/early 2019, and have had no involvement in this or any other case brought by her office since.)
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The corresponding move that Trump took with the very same assets when reporting their worth to governments was often to devalue them, or simply to defraud the government of other funds to which they might be entitled. By doing so, in no uncertain terms, he cheated governments, and, by extension, taxpayers.
Although much of the focus of the penalties Trump must pay focus on the defrauding of the financial institutions because he was able to secure favorable loans based on fraud, like his statement that his Trump Tower apartment was far larger and far more valuable than it was in reality, Judge Engoron found that there was a substantial amount of other fraud going on as well. With just two of the Trump Organization’s properties, Mar-a-Lago and the recently sold Ferry Point golf course in the Bronx, Trump was found to have managed the financials around those properties fraudulently, with significant consequences for taxpayers.
In his words, Trump thought Mar-a-Lago was actually undervalued in some of the statements to banks. These were, as he said, “very big numbers, very, very big. Far bigger—the values are far bigger than what is on the financial statement. I thought Mar-a-Lago was underestimated.”
But the valuation of Mar-a-Lago was both nefarious and illegal. Trump said he considered it a single-family residence to inflate its value. At the same time, he took a tax break explicitly because it was not a single-family residence, according to the deed for the property.
As the court would ultimately rule, “Donald Trump insisted that he believed Mar-a-Lago was worth ‘between a billion and a billion five’ today, which would require not only valuing it as a private residence, which the deed prohibits, but as more than the most expensive private residence listed in the country by approximately 400%.” It’s ironic that Trump may have valued the property as he proclaimed in his testimony at over $1 billion; when the local government said it was only worth $26 million, however, Trump initially sought to challenge even that assessment in the hope of lowering his taxes, but then decided to let it stand.
Similarly, with Ferry Point, New York City paid well over $100 million dollars of taxpayer money to construct the course, at no cost to Trump. When bidding on the right to manage the course, Judge Engoron found that the Trump Organization submitted false statements in its application and then failed to abide by the terms of the contract with the city once it won the contract. Trump recently flipped it for a $60 million windfall to a new developer, who agreed to pay Trump an additional $115 million if the developer lands a casino license for the property. The judge’s decision seeks to allow the attorney general to claw back that money.
Perhaps Trump’s supporters agree that his fraudulent tax evasion “makes him smart,” as he famously said in a debate with Hillary Clinton in 2016. What is more likely is that he thinks that “only the little people pay taxes.” That line was famously made by one of his real-estate rivals in New York City when he was emerging on the scene: Leona Helmsley. Trump battled with the now-deceased Helmsley for notoriety and supremacy in the popularity contest that was New York City’s real estate market in the go-go ’80s, when Trump forged his persona, and tried to build a mystique around himself. One of the things that supposedly led to the tension between Helmsley and Trump was that Trump was able to secure a tax break for a property he had recently purchased from Helmsley. I guess even Helmsley hated the fact that Trump got away without paying taxes too.
Will this decision lead to greater scrutiny of other parts of Trump’s business practices, like the $7 million his companies received from foreign dignitaries that used his hotels and related properties while he was president, or the hush-money payments he allegedly made to a porn star with whom he supposedly had an extra-marital fling, which will be the subject of another trial in a Manhattan courtroom in roughly one month? Might it lead to a reckoning over the events on Jan. 6 as well?
In Judge Engoron’s opinion, he noted that Trump and his family members had “a complete lack of contrition and remorse [that] borders on pathological.”
In reality, it is unlikely that any of these judgments will lead Trump to change his stripes. Ultimately, it is going to be up to voters to render the final verdict.
