Did Trump overvalue his properties? Here’s what we know about the inquiry
By Danny Hakim and William K. Rashbaum
Over the years, Donald Trump and his company have placed widely different values on the Seven Springs estate.
The sprawling property north of New York City was purchased for $7.5 million in 1995. But by 2014, the Trump Organization said it was worth $291 million, in financial documents its officers prepared when they were seeking a bank loan. Four years later, on Trump’s ethics disclosure form, it was listed as being worth no more than $50 million.
That property and three others have become a focus of an investigation by the New York state attorney general’s office into whether the president and the Trump Organization improperly inflated the value of his holdings, making false representations to banks or on tax forms.
This week, the investigation drew new attention after the attorney general, Letitia James, went to court to force Eric Trump, the president’s son and executive vice president of the Trump Organization, to answer questions under oath.
James is also seeking to compel the Trump Organization to turn over thousands of documents to her office, which is examining potential violations of civil, rather than criminal, law.
Here’s what we know so far about the attorney general’s investigation.
It began with Trump’s lawyer
The investigation started after Michael Cohen, Trump’s former personal lawyer and fixer, testified to Congress in February of last year that Trump and his employees manipulated his net worth to suit his interests.
Cohen, who had broken with his old boss and had pleaded guilty to tax evasion, campaign finance violations and bank fraud, also provided the House Oversight Committee with documents he said backed up his claims.
“It was my experience that Mr. Trump inflated his total assets when it served his purposes, such as trying to be listed among the wealthiest people in Forbes, and deflated his assets to reduce his real estate taxes,” Cohen said in his testimony.
The next month, the attorney general’s office issued subpoenas to Deutsche Bank and Investors Bank. Court documents made public this week said the office was investigating whether the president and the Trump Organization “improperly inflated the value of Trump’s assets on annual financial statements in order to secure loans and obtain economic and tax benefits.”
Four properties are being examined
At least four of the president’s properties are under scrutiny, according to new court papers.
They include the Trump International Hotel and Tower in Chicago, where one of the lenders, Fortress Credit Corp., forgave more than $100 million worth of debt in 2012. The Trump Organization has refused to turn over records establishing whether it reported the forgiven debt as income, as is typically required.
Investigators are also looking at the 212-acre Seven Springs estate in Westchester County, New York, on which Trump originally said he hoped to develop a golf course or luxury homes.
He valued the estate at $291 million on his 2012 balance sheet, and in financial records presented to Deutsche Bank, when he was seeking to buy the Buffalo Bills in 2014.
But locals blocked his development plans, and Trump eventually claimed a $21 million tax break after agreeing to conserve much of the land. In a 2018 federal ethics filing, he said it was worth no more than $50 million.
The Trump Organization used a similar tax strategy at another property being scrutinized, the Trump National Golf Club, Los Angeles, where it also claimed a large tax break after agreeing to conserve some land.
Some of the court documents released this week remain redacted or sealed, and many details of the investigation remain secret. But financial records related to a skyscraper at 40 Wall St. in Lower Manhattan are also being reviewed, the papers said.
In 2012, Trump valued the building at $527 million. That year, The Wall Street Journal reported the property was worth about $400 million, based on sales of comparable properties.
Pushing up valuations
After abandoning plans to turn Seven Springs into a golf club, The Trump Organization turned to its longtime lawyer, Sheri Dillon of Morgan, Lewis & Bockius, to “quarterback” a tax maneuver, the attorney general’s office said in court papers.
She oversaw an effort to get the highest possible valuation on the land, so the company could increase the size of the tax break it sought in exchange for agreeing to conserve a large part of the property.
Dillon retained Cushman & Wakefield, a real estate services firm, to do an assessment of the estate, but the Trump Organization was not happy with the result.
Dillon told Cushman that “the client blew up at her,” according to the filings. She began pressuring the appraisers to take steps that would push the value up, asking them, for instance, to restore earlier valuations made on a series of lots.
Cushman pushed back, writing: “We’ve been over these issues and there is no point in dredging them up again. It’s time to agree to disagree and move on.”
Dillon also told another lawyer at her firm to ask Cushman’s experts to backdate their appraisal, which one Cushman employee balked at, “citing her obligations under appraisers’ professional standards.”
The Trump Organization says it’s all politics
The Trump Organization has dismissed the attorney general’s investigation as baseless and politically motivated. James, a Democrat, has made no secret of her fierce opposition to Trump’s presidency and has sued his administration repeatedly.
Eric Trump released a statement on Twitter that said James “has pledged to take my father down from the moment she ran for office.”
“This is the highest level of prosecutorial misconduct,” he added.
But James has defended her actions, saying in a statement on Monday that the “Trump Organization has stalled, withheld documents, and instructed witnesses, including Eric Trump, to refuse to answer questions under oath.”
Is this a criminal investigation?
No, but it could become one.
The current inquiry is examining whether civil laws that prohibit deceptive business practices were violated, or if there were other fraudulent or illegal acts.
The attorney general’s office has broad power to conduct such investigations, including compelling people to answer questions under oath and to provide documents and other evidence.
In the filing made public on Monday, lawyers for the attorney general’s office said they have not yet determined if any laws have been violated.
If they do find evidence, they can file a lawsuit against The Trump Organization, Trump, his son Eric, or other entities they control, seeking fines or restitution. They can also ask a judge to bar Trump and his company from continuing to violate laws.
But if the attorney general’s office finds evidence of possible criminal conduct, it can turn that evidence over to another law enforcement agency for investigation. And in certain circumstances, the governor can authorize the office to open its own criminal investigation.
Is the Manhattan district attorney also investigating this?
No, but the Manhattan district attorney, Cyrus Vance, is conducting a separate criminal investigation and has suggested in court filings that he is examining possible financial crimes and insurance fraud by the president and his company.
Last month, the U.S. Supreme Court issued two rulings that cleared the way for Vance’s office to seek the president’s tax returns, though the president continues to fight the subpoena for his financial records in the lower courts on new grounds.