On Wednesday, New York Attorney General Letitia James sued former President Donald Trump, three of his children (Donald Trump, Jr., Ivanka Trump and Eric Trump), the Trump Organization and others for fraud, conspiracy to falsify financial documents and related charges. James, who seeks $250 million in damages, claims that Trump falsely inflated his net worth—including the value of his golf courses and when trying to buy the Buffalo Bills—to make it more likely that banks would loan him money and when pursuing insurance coverage for higher limits and lower premiums.
James’ 222-page complaint was filed in a New York state court. It contends that from 2011-2021, Trump “knowingly and intentionally created more than 200 false and misleading valuations of assets on his annual Statements of Financial Condition to defraud financial institutions.” So-called inflated asset valuations “cannot be brushed or excused as merely the results of exaggeration or good faith estimation about which reasonable real estate professionals may differ,” James insists. She argues that Trump and others willfully relied on “objectively false assumptions and blatantly improper methodologies” to mislead financial institutions and their employees.
On Truth Social, the former president dismissed the lawsuit, posting “Another Witch Hunt by a racist Attorney General . . . who failed in her run for Governor. . . . I never thought this case would be brought – until I saw her really bad poll numbers. She is a fraud who campaigned on a ‘get Trump’ platform.”
To illustrate the allegations, James contends that the valuation of Trump International Golf Links in Scotland assumed 2,500 homes could be developed and yet “the Trump had obtained zoning approval to develop less than 1,500 cottages and apartments, many of which were expressly identified as being only for short-term rental.” This alleged discrepancy, James asserts, spawned financial fraud in that “the $267 million value attributed to those 2,500 homes accounted for more than 80% of the total $327 million valuation for the Aberdeen property on the 2014 Statement.”
James also takes issue with the valuation of Trump National Golf Club in Florida. She says a method deemed unacceptable based on accepted accounting practices for golf courses was employed for the valuation. As told by James, Trump’s statements did not disclose “inflated liabilities in the price of the club,” which he purchased 10 years ago for $46 million, but only $5 million of which was in cash. She also says that Trump inflated the value by “adding 30% for the Trump ‘brand.’”
The lawsuit isn’t the first time Trump has been accused of exaggerating the value of assets in connection with sports.
In 2019, Trump’s former attorney, Michael Cohen, testified that Trump “inflated his total assets” when he was seeking a loan from Deutsche Bank to bid for the Buffalo Bills in 2014. Longtime owner Ralph Wilson passed away that year, which led to the estate gaining control of the team and retaining Morgan Stanley to sell it. Three finalists emerged: Trump, Buffalo Sabres owners Terry Pegula and Kim Pegula and a group of investors led by musician Jon Bon Jovi. The Pegulas won with a $1.4 billion bid, reportedly about $500 million more than Trump offered.
On pages 183 to 184 of her complaint, James references Trump’s bid for the Bills and its relationship to Deutsche Bank. She notes that as part of the bid, Trump “needed a conference letter from a financial institution to submit with his bid package.” A letter was prepared “indicating that based upon the bank’s review of Mr. Trump’s financial information he would have the ‘financial wherewithal’ to fund his bid to purchase the Bills football team.” James also says that a letter signed by Trump asserted, “I have a net worth in excess of $8 billion” yet his 2013 statement of financial condition reported a net worth of $5.1 billion. Financial documents provided by Cohen claimed that from 2012 to 2013, Trump’s net worth climbed from $4.56 billion to $8.66 billion, with much of the increase attributed to a purported surge in Trump’s “brand value.”
Attorneys for Trump will answer the complaint, contend the claims are false and seek the complaint’s dismissal. There are several potential defenses. One is that Trump did not prepare the financial documents at issue and instead relied on both the advice and document generation of his (and the Trump Organization’s) accountants; this is sometimes called a good faith defense. James’ complaint anticipates this defense and preemptively asserts “the false and fraudulent asset values in the Statements [cannot] be defended based on boilerplate disclaimers in the accountant’s compilation report accompanying each Statement.” She maintains clients are ultimately “responsible for preparing the statements in accordance with generally accepted accounting principles in the United States.”
Another defense would be to ask why sophisticated, multinational banks and insurance companies were, at least as James portrays, so badly and so repeatedly misled. These financial intuitions utilize established procedures and skilled professionals to verify or refute claims made in loan applications, especially when the amount sought is nine figures. The notion that Trump and his accountants duped banking professionals for a decade will likely invite skepticism and scrutiny.
