By Jason Szep, Joseph Tanfani and Peter Eisler
(Reuters) – As former US President Donald Trump is tried in the Senate this week for inciting the Capitol uprising on January 6, criminal and civil investigations against his companies are accelerating in New York.
Manhattan prosecutors investigating Trump’s real estate business for possible insurance and tax fraud have stepped up witness interviews and hired forensic accountants in recent months, four people familiar with the criminal investigation told Reuters. A separate attorney general’s civil investigation into whether the company falsely reported property values was kicked off on Jan. 29 when a New York Supreme Court judge ordered the Trump Organization to hand over documents.
A US Supreme Court ruling is expected shortly as to whether Manhattan District Attorney Cyrus R. Vance Jr. can get eight years of Trump’s tax records and other financial information from accounting firm Mazars. Two people familiar with the District Attorney’s criminal investigation expect the court to act this month.
Both the District Attorney and the Attorney General focus in part on whether Trump’s companies falsely falsified the values of real estate assets to secure tax breaks, loans, or other benefits.
Trump’s tax returns could provide compelling evidence for the criminal investigation if they are significantly different from other degrees reported by the Trump deal, said Daniel Horwitz, a business defender and former Manhattan attorney. But in addition to the records, he said, prosecutors will likely need witnesses “to testify about false documents and why they were forged”.
Trump Organization lawyers did not respond to requests for comment. The Trump organization has denied in court records that the company falsified real estate values and denied other allegations investigated by Manhattan District Attorney Vance and New York Attorney General Letitia James.
Trump’s attorneys have tried to block disclosure of his tax records by contesting the Manhattan District Attorney’s application to the US Supreme Court. The lower courts rejected an argument from Trump’s lawyer that the request constituted political “harassment”. Trump’s team has asked for the Supreme Court to stay. The Supreme Court is usually quick to respond to such “emergency requests,” but Trump’s motion has been pending since October. Another decision in favor of the district attorney would give prosecutors access to tax and financial records.
The Manhattan District Attorney said in an August file that the office is investigating “potentially extensive and lengthy criminal conduct” at the Trump Organization. In a file filed in September, he said “mountainous” allegations of wrongdoing could warrant a grand jury investigation into possible tax fraud, insurance fraud and falsification of business records. James’ office has filed a civil lawsuit to compel the Trump organization to produce documents but has alleged no crimes.
A spokesman for Vance declined to comment. A spokesman for James’ office said the Trump organization had turned over all the documents sought by the prosecution but refused to comment on the investigation.
The investigations face challenges. The Manhattan District Attorney may struggle to prove that inaccurate property appraisals constitute fraud as standards for real estate valuation vary, legal experts say. Such reviews are typically also conducted by outside parties, potentially creating a distance between controversial reviews and Trump’s deals.
“There’s a lot of expertise to hide behind,” said Joshua Levine, a former US assistant attorney in the southern borough of New York who now specializes in criminal and regulatory law in private practice.
PROBE OF THE NEW YORK MANSION
Court records show that the two investigations, although separate, overlap. For example, both the district attorney and attorney general are investigating how the Trump Organization and its agents assessed the value of Seven Springs, a 200-acre property north of Manhattan that Trump bought in 1995. Trump’s company said the century-old 50,000-square-foot mansion was used as a retreat for the Trump family.
Trump’s ambitions to build a championship golf course there were derailed by the local opposition, and he put another plan to build luxury real estate behind. However, according to property records and court records, the property became a vehicle for a tax break. In 2015, he signed a conservation department – an agreement not to develop the property – covering 158 hectares.
The attorney general’s office announced in a lawsuit that an appraiser hired by Trump prior to the Conservation Treaty set the property’s value at $ 56.5 million and the easement value at $ 21.1 million – an amount Trump claims as an income tax deduction made.
The attorney general’s office said in a court case in August that it was investigating whether the rating was “improperly inflated” in order to increase the tax benefit. In the files, prosecutors cited emails from representatives of the Trump Organization to the reviewers who called for a higher rating.
The Manhattan District Attorney is investigating Trump’s handling of the same property. In December, the Vance office summoned the three cities that cover portions of the Seven Springs property and obtained tax assessments, financial reports, conservation measures and Trump’s development proposals.
Trump has claimed a much higher value for Seven Springs in other documents. Trump’s former attorney Michael Cohen testified during a Congressional hearing in February 2019 and presented 2012 accounts for the Trump Organization that valued Seven Springs at $ 291 million. Cohen testified that the statement was intended to portray Trump as richer than he really was, both to insurance companies – to secure lower premiums – and to journalists.
Cohen also said the Trump organization made the statement to Deutsche Bank AG – the company’s largest creditor – during Trump’s 2014 failed attempt to buy the Buffalo Bills, a professional football team. Federal law makes it a crime to misrepresent banks.
Both the Manhattan District Attorney and Attorney General summoned Deutsche Bank in 2019, according to three bank sources. An attorney general’s subpoena sought information regarding the funding of four Trump Organization real estate projects and his bid for Buffalo Bills. Another, from the district attorney, requested financial statements in support of various loan applications, the sources said. In the past few months, Manhattan investigators have spoken to a number of Deutsche Bank employees, the three sources said.
Deutsche Bank declined to comment.
Both the district attorney and attorney general are looking at 40 Wall Street, a Trump Organization skyscraper in lower Manhattan, according to attorney general’s court records and people familiar with Vance’s investigation. The attorney general’s office is reviewing the financial statements submitted by the Trump Organization to banks in connection with loans for the building, following court records.
TAX BREAK ON THE LA GOLF COURSE
The attorney general is reviewing additional deals, court documents show, including whether Trump has not paid taxes on debts related to a loan restructuring for the Trump International Hotel & Tower in Chicago. Prosecutors found in court records that the Trump Organization refused to produce documents to determine whether they declared that money as income on their tax returns, as is normally required by law.
Attorney General James is also looking into another Trump tax break, which applies to his Trump National Golf Club near Los Angeles. Trump bought the cliff site in 2002 after his 18th hole in the sea collapsed and invested heavily in rebuilding it.
In December 2014, Trump signed an agreement granting a conservation measure over 11.5 acres of the course. An appraisal ordered by Trump valued the property at $ 107 million and set the easement value at $ 25 million, James’ office said in court records. This rating is high compared to the metrics typically used to evaluate golf properties, according to real estate experts.
LOAD OF EVIDENCE
It is “especially difficult” for the Manhattan district attorney to prove in court that Trump or other company officials want to commit a crime, said Rebecca Roiphe, a former Manhattan assistant district attorney who teaches legal ethics and criminal law at New York Law School informed .
Prosecutors in corporate fraud cases often rely on a combination of direct evidence such as incriminating witnesses, videos, emails or text messages and circumstantial evidence such as tax records or other financial documents. They often use such records, she said, to point out where a company is deviating from normal industry practice.
To look for anomalies in real estate deals, the Vance office hired forensic bookkeeping specialists from FTI Consulting Inc, Washington, a person familiar with the investigation. An FTI spokesman declined to comment.
According to Roiphe, a key challenge for investigators is that industry standards for property valuations can be flexible.
“It’s a common practice that you have to be a little loose with reviews,” she said. “To say this was done with a purpose – with the intent to cheat – will be a challenge.”
(Jason Szep, Joseph Tanfani and Peter Eisler reported from Washington; additional reporting by Matthew Scuffham, Tom Bergin and Lawrence Hurley; editing by Brian Thevenot)