There’s little doubt that in the course of his real estate career, Donald Trump exaggerated the value of many properties in his portfolio, along with his own access to capital and his net worth. The question now is whether it matters.
In September, Judge Arthur Engoron found the former president and his company liable for fraud in the civil lawsuit brought last year by New York Attorney General Letitia James. Prosecutors have now rested their case in a separate proceeding to determine the damages Trump owes. James is asking for payments of more than $300 million, plus a ban that prevents Trump and the other defendants, including his three adult children, from doing business in New York. The defense will now make its case, with the trial likely to end sometime in mid-December. Then, appeals are likely.
Prosecutors documented numerous instances in which Trump listed property values on his annual financial statements that dramatically exceeded what professional appraisers or official records suggested those properties were worth.
The most well-known example may be Trump declaring that his personal residence in Manhattan’s Trump Tower was 30,000 square feet in size, when in reality it was 10,996 square feet. At the correct size, the property might have been worth $117 million in the most recent estimate prosecutors examined. Trump listed its value at $327 million, based on the inflated size. Allen Weisselberg, former chief financial officer of the Trump Organization, acknowledged in testimony that the apartment was overvalued, “give or take,” by around $200 million.
The lawsuit established that Trump routinely overvalued a variety of properties, including office buildings, golf courses, and his Mar-a-Lago social club by hundreds of millions of dollars per year, relative to professional appraisals or government assessments. In his Sept. 26 finding establishing liability, Judge Engoron highlighted seven properties Trump overvalued by as much as $1.3 billion altogether, in just a single year. Prosecutors found the same patterns year after year, in records that typically date to the early 2010s.
Trump, notoriously prickly about his net worth and every other aspect of his public image, reported those inflated valuations to Forbes and other outlets that document the net worth of America’s wealthiest people. He also provided those figures to banks when seeking loans on other properties, puffing up his collateral.
Trump and his underlings argue that nobody got hurt in any of the matters under scrutiny. Bankers got their money back, with interest. Prosecutors have never claimed that Trump ripped off customers or stiffed employees. New York law doesn’t require that. It permits the attorney general to seek damages against any business that commits fraud, as a form of consumer protection, without having to show that anybody suffered a loss.
So is the whole case about bragging rights? About Trump’s desire to seem richer than he is, and a prosecutor’s interest in popping his bubble?
There’s more to it than that. The amount of Trump’s wealth, it turns out, had financial implications. Trump was able to get loans at lower rates if he personally guaranteed them, using his net worth as a kind of collateral. Prosecutors highlighted one instance where Deutsche Bank offer him a loan 6 percentage points below the prevailing rate if he personally guaranteed it and maintained a net worth of at least $2.5 billion. So Trump could save considerable money on borrowing costs by convincing the world, and the banks, that he was worth as much as possible.
Deutsche Bank isn’t complaining, and it does seem weird for an attorney general charged with protecting the little guy to be suing Trump because he may have misled a Wall Street lender. Again, New York state law permits that, since in theory it creates a deterrent against cheating: The prosecutor can go after you even if it looks like a victimless crime.
The New York fraud trial, however, isn’t going to change anybody’s mind about Trump. The details are arcane, there’s no victim to sympathize with, and perhaps most importantly, there are no cameras capturing courtroom proceedings, including recent testimony by Trump and his adult kids. Americans who already think Trump is corrupt will find more evidence to back up that belief, while Trump’s supporters will say he’s doing nothing other businesses don’t do. If there’s anybody left in the middle, this isn’t the legal proceeding that will produce sudden clarity on whether Trump deserves their vote in the 2024 presidential election.
The New York fraud trial, however, is a mere appetizer compared with what’s coming in 2024 and beyond. Trump faces 91 criminal indictments in four separated cases. A federal trial focusing on Trump’s role in the Jan. 6, 2021, riots at the US Capitol is supposed to start next March. So is the New York City case on campaign finance payoffs, though that could get delayed to avoid scheduling conflicts.
Another federal trial, on Trump’s mishandling of federal documents after he left the White House, is scheduled for next May. A Trump trial in the Fulton County, Ga., election fraud case isn’t scheduled yet, but four of 19 defendants have pleaded guilty so far, and prosecutors could flip more of Trump’s former allies before Trump himself actually goes on trial. That case is the only one of the four criminal matters during which cameras will be allowed to film the proceedings, setting it up as an unprecedented spectacle amid spectacles. So if the New York fraud case isn’t generating enough excitement for you, just sit tight.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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