Accounting firm cuts ties with Trump and retracts financial statements
By Ben Protess and William K. Rashbaum
Donald Trump’s longtime accounting firm cut ties with him and his family business last week, saying it could no longer stand behind a decade of annual financial statements it prepared for the Trump Organization, court documents show.
The decision, which was disclosed to the company in a Feb. 9 letter from the accounting firm, comes amid criminal and civil investigations into whether Trump illegally inflated the value of his assets. The firm, Mazars USA, compiled the financial statements based on information the former president and his company provided.
The letter instructed the Trump Organization to essentially retract the documents, known as statements of financial condition, from 2011-20. In the letter, Mazars noted that the firm had not “as a whole” found material discrepancies between the information the Trump Organization provided and the actual value of Trump’s assets. But given what it called “the totality of circumstances” — including Mazars’ own investigation — the letter directed the Trump Organization to notify anyone who received the statements that they should no longer rely on them.
The statements, which Trump used to secure loans, are at the center of the two law enforcement investigations into whether Trump exaggerated the value of his properties to defraud his lenders into providing him the best possible loan terms.
Mazars’ acknowledgment that the statements were fundamentally flawed was a potential blow to the Trump Organization as it attempts to fend off the long-running scrutiny of its finances. And for Trump, whose personal finances are intertwined with those of his family business and who has long faced questions about his taxes, Mazars is the latest in a long line of companies to break with him over the past year, following in the path of several banks, insurers and lawyers.
The disclosures about Mazars’ work for Trump appeared in new court documents filed by New York Attorney General Letitia James, who is seeking to question Trump and two of his adult children under oath as part of her civil investigation.
Trump’s lawyers had asked a judge to prohibit the questioning, and in response, James’ office argued in court papers last month that the company had engaged in “fraudulent or misleading” practices.
Her Monday filing — which marked her latest attempt to press ahead with questioning Trump as well as Donald Trump Jr. and Ivanka Trump — included a copy of the Mazars letter, signed by the accounting firm’s general counsel.
The Manhattan District Attorney’s Office has been conducting a separate criminal investigation, with the assistance of lawyers from James’ office.
In a statement, the Trump Organization said that although it was disappointed with Mazars’ decision, it viewed the letter as confirmation that the firm’s “work was performed in accordance with all applicable accounting standards and principles and that such statements of financial condition do not contain any material discrepancies.”
The company argued that Mazars’ characterization of its work “effectively renders the investigations by the DA and AG moot.”
Mazars first moved to split with the Trump Organization last spring, and wound down its work during a transition to a new accounting firm, according to people with knowledge of the relationship. But the letter withdrawing the statements represented a sharper break, and its disclosure in the court filing was the first time the end of the business relationship has been made public.
In a statement, the accounting firm said that “under our standards of professional ethics, we cannot comment on any client services or relationships.”
The firm’s brief letter could bolster James’ investigation, which has focused partly on the statements and whether they overvalued Trump’s various hotels, golf clubs and other properties.
Mazars said it concluded that the statements were no longer reliable based in part on the attorney general’s earlier filings, its own investigations and information the accountants received from “internal and external sources.” The letter added that Mazars “performed its work in accordance with professional standards.”
Because James’ investigation is civil, she cannot file criminal charges. But she could sue Trump and his company to seek financial penalties and could try to shut down certain aspects of Trump’s business in New York.
“As the most recent filings demonstrate, the evidence continues to mount showing that Donald J. Trump and the Trump Organization used fraudulent and misleading financial statements to obtain economic benefit,” James said in a statement. “There should be no doubt that this is a lawful investigation and that we have legitimate reason to seek testimony from Donald J. Trump, Donald J. Trump Jr., and Ivanka Trump.”
It is unclear whether Mazars’ break with the Trumps will have any bearing on the DA’s criminal investigation into Trump. The firm has been cooperating with that investigation, and Trump’s main accountant at Mazars has already testified before a grand jury hearing evidence about Trump.
The office of the DA, Alvin Bragg, declined to comment.
Both investigations still face obstacles. Although the statements may contain exaggerated estimates of Trump’s property values, those same documents also include a number of disclaimers, including acknowledgments that Trump’s accountants had neither audited nor authenticated his claims.
Another disclaimer notes that Mazars did “not express an opinion or provide any assurance about” the statements, a common caveat in statements of financial condition. The firm also disclosed that, while compiling the information for Trump, it had “become aware of departures from accounting principles generally accepted in the United States of America.”
Trump’s lawyers would probably argue that his lenders, sophisticated financial institutions such as Deutsche Bank, would not have relied on the statements when providing him loans.
Still, in her court filing last month, James highlighted potential misleading statements about the value of at least six Trump properties, including golf clubs in Westchester County, New York, and Scotland, as well as Trump’s own penthouse home in Trump Tower.