Trump’s New York State Legal Troubles are Accelerating
His second impeachment is just the tip of the spear of all the potential civil lawsuits and criminal investigations underway.
Former US President Donald Trump faces his first day of trial in his second impeachment in the US Senate for inciting the January 6, 2021, Capitol insurrection. He is also facing a barrage of criminal and civil investigations in several states and federal jurisdictions into his businesses and his conduct while in office.
In New York State and City, the investigations into Trump’s businesses, property transactions, and possible tax evasion are gaining speed. These investigations represent a serious threat to his financial stability and to his liberty.
The Manhattan DA Cyrus Vance Jr. and the prosecutors in his office are probing Trump’s real-estate business for possible insurance and tax fraud. This investigation is gaining speed since Trump’s departure from office.
The Manhattan DA’s office has been conducting witness interviews in recent months. Still, now that Trump doesn’t have the protection of a sitting President, the Manhattan DA’s office has stepped up the investigation’s pace and hired forensic accountants, according to four people familiar with the criminal probe, according to Reuters.
Meanwhile, a separate New York State Attorney General’s civil probe by Letitia James is underway into whether the Trump Organization falsely reported property values. Their investigation was energized on January 29, 2021, when a New York Supreme Court judge ordered the Trump Organization to turn over its tax and business documents related to the State AG’s case.
Meanwhile, on the horizon is an expected decision by the US Supreme Court decision on whether Manhattan DA Cyrus R. Vance Jr can obtain eight years of Trump’s tax records and other financial information from accounting firm Mazars. Two people familiar with the district attorney’s criminal probe expect the court to act this month and expect to get everything they have subpoenaed.
Both the Manhattan DA and attorney general are focused in part on whether Trump’s businesses improperly falsified values on real-estate assets to secure tax breaks, loans, or other benefits. There are strong indications that Trump and his businesses played fast and loose with New York laws and while filing his and his businesses state and federal income tax returns.
Daniel Horwitz, a white-collar defense lawyer, and former Manhattan prosecutor, told Reuters…
“Many believe that the former President’s tax returns could provide compelling evidence and justify not only the criminal probe underway but a slew of criminal charges if his tax returns differ significantly from other financial statements reported by the Trump businesses.”
But in addition to records, Horwitz says prosecutors will likely need witnesses who could “testify about false documents and why they were falsified.”
Lawyers for the Trump Organization have been refusing to respond to questions and requests for comment for over a year. Further, the Trump Organization has denied court filings that the company falsified property values and has denied all of the allegations being investigated by Manhattan District Attorney Vance and New York State Attorney General Letitia James.
While continuing to deny the allegations that have piled up, Donald J. Trump’s lawyers have done everything they could to block the release of his and his company’s tax records by appealing the Manhattan district attorney’s request US Supreme Court.
The Supreme Court’s appeal comes after several lower courts rejected Trump’s attorneys’ arguments that the request amounted to political “harassment.”
Trump’s legal team has requested a stay of the Supreme Court proceedings. The high court usually acts quickly on such “emergency applications.” Still, Trump’s request has been pending since October because the Supreme Court didn’t want to confront the issues raised in the appeal until after he left office.
Now that Trump is out of office, we should expect a ruling by the Supreme Court in favor of the Manhattan district attorney to clear the way for prosecutors to access the tax and financial records.
The Manhattan district attorney has been very clear about what they are looking for. In an August filing, they indicated they were investigating “possibly extensive and protracted criminal conduct” at the Trump Organization.
In a September filing, the Manhattan DA said in a court filing that it has “mountainous” misconduct allegations that justify the ongoing grand jury probe into possible tax fraud, insurance fraud, and falsifying business records.
Meanwhile, New York AG Letitia James’ office has filed a civil lawsuit to compel the Trump Organization to produce documents. Still, it has been keeping mum on any possible crimes, likely in hopes of getting all the evidence needed to pursue a criminal phase later.
A spokesperson for Vance declined to comment. James’ office spokesman said the Trump Organization has turned over all the documents that prosecutors sought but declined to comment further on the inquiry.
The investigations into Trump and his businesses aren’t as slam dunk as some are portraying. According to many tax law experts, the Manhattan DA could have problems proving inaccurate property estimates amount to fraud because the standards for valuing properties vary widely.
Appraisals are also typically performed by outside parties, potentially putting distance between controversial valuations, Trump’s businesses, and Trump. However, keep in mind if there are patterns of misconduct, the appraisers could turn on Trump and his businesses.
Joshua Levine, a former assistant US attorney in the Southern District of New York who now specializes in white-collar criminal and regulatory law in private practice, said…
“There’s a lot of expertise to hide behind.”
New York Mansion Subject of Probe
The current Court records in New York show the Manhattan and NY. State investigations, while separate, have some important issues that collide. For example, both law enforcement offices are looking into how the Trump Organization and its agents assessed the value of Seven Springs, a 212-acre estate north of Manhattan that Trump purchased in 1995. The Trump Organization’s lawyers have insisted the century-old, 50,000-square-foot mansion was used as a Trump family retreat.
Trump lawyers insist that the former President wanted to build a championship golf course there. Still, the project was derailed by local opposition, and he was forced to instead adopt a plan to build luxury homes. According to property records and court filings, the property did become a vehicle for a tax break. In 2015, he signed a conservation easement - an agreement not to develop the property - covering 158 acres, despite his plans to build luxury homes.
In a court filing, Letitia James’ office said an appraiser hired by Trump before the conservation agreement set the property’s value at a whopping $56.5 million and the easement’s value at $21.1 million Trump claimed as an income tax deduction. The numbers make no sense to the New York AG’s office and many property tax experts looking into the matter.
AG Letitia James’ office said in an August court filing, it was investigating whether the assessment was “improperly inflated” to increase the tax benefit. In filings, Letitia James’ prosecutors pointed to several emails authored by Trump Organization representatives to the appraisers arguing for a higher valuation.
At the same time, the Manhattan district attorney is investigating Trump’s handling of the same property. Vance’s office announced this past December it had subpoenaed the three towns that cover parts of the Seven Springs property, seeking tax assessments, financial statements, conservation easements, and Trump’s development proposals.
The Trump Organization claimed a vastly higher value on Seven Springs in other documents, which creates impropriety.
Trump’s former lawyer Michael Cohen also has done tremendous damage by disclosing while he testified in February 2019 during a Congressional hearing that a 2012 financial statement from the Trump Organization that valued Seven Springs at $291 million. During his testimony, Cohen said the financial statement intended to portray Trump as richer than he really was to insurance companies - to secure lower premiums. Proving this was intentional could establish an ongoing conspiracy to defraud the city and New York state out of millions in tax revenues.
Michael Cohen also testified that the Trump Organization provided the statement to Deutsche Bank AG (NYSE: DB), the company’s biggest creditor, during Trump’s failed attempt in 2014 to buy the Buffalo Bills, a professional football team. If true, a claim violates Federal law and makes it a crime to provide false statements to banks. A violation of federal law, as well.
According to three bank sources, the Manhattan district attorney and the New York State Attorney General both subpoenaed Deutsche Bank (DE: DBKGn) in 2019. One of the New York State Attorney General’s subpoenas sought information on financing four Trump Organization property projects and his Buffalo Bills bid. The other from the Manhattan DA requested financial statements in support of various loan applications. In recent months, Manhattan investigators have spoken to a number of staff at Deutsche Bank, the three sources said.
Deutsche Bank declined to comment. However, the Bank has made it be known that it will no longer lend to Donald Trump and the Trump Organization.
Both the city’s and state’s chief law enforcement officers are also looking at 40 Wall Street, a Trump Organization skyscraper in Lower Manhattan. According to the state attorney general’s court filings and people familiar with Vance’s investigation may prove to be an elaborate scheme to defraud the state and city of New York out of millions in taxes. To this end, the attorney general’s office is examining financial statements submitted by the Trump Organization to banks in connection with loans for the building, according to court filings.
Tax Breaks: LA Golf Course Look Fishy
Letitia James’ office is also looking into additional deals, court documents that show, including Trump, failed to pay taxes on debt that was forgiven in connection to a loan restructuring for the Trump International Hotel & Tower in Chicago. All of this is designed to build a case that shows a pattern of intentional fraud. New York prosecutors have said in court records that the Trump Organization had refused to produce documents to determine whether it declared that money as income in its tax filings, as usually required by law.
Attorney General James is also looking into another Trump conservation tax break, this one for his Trump National Golf Club near Los Angeles. Trump bought the golf course on a cliff in 2002, which literally saw its 18th hole collapsed into the ocean, and was forced to invest heavily to rebuild that golf course’s final hole.
In December 2014, Trump signed a conveniently constructed agreement written by his tax attorneys that granted a conservation easement over 11.5 acres of the course. The appraisal ordered by the Trump Organization valued the property at $107 million, setting the easement’s value at $25 million. Letitia James’ office has noted in its court filings the valuation is high compared to the metrics usually used to value golf properties, real-estate experts said.
What’s the Burden of Proof for New York Prosecutors?
The burden of proof for the Manhattan DA, to prove in court that Donald Trump or other company officials intended to commit the crime of tax evasion or the crime of conspiracy to commit tax evasion is going to be “particularly hard,” observes Rebecca Roiphe, a former assistant district attorney in Manhattan who teaches legal ethics and criminal law….
“The fact is prosecutors in corporate fraud cases, according to Roiphe, often rely on a combination of direct evidence - such as incriminating witnesses, video, emails or text messages - and circumstantial evidence, such as tax records or other financial documents. They use such records, often to point out where a company veered from common industry practice.”
This is why Cyrus Vance Jr’s office has retained forensic accounting specialists from Washington-based FTI Consulting (NYSE:FCN) Inc. A key challenge for the investigators, Roiphe says, are the industry standards for real estate valuations can be extremely flexible…
“It’s kind of common practice that you need to be a little bit loose with valuations, so to say this was done with a purpose - with the intent to defraud - will be challenging.”
NY AG Letitia James Says “Trump cannot avoid justice in the great state of New York.”