New York v. Trump et al.
https://www.washingtonpost.com/documents/f203be39-020c-4f82-a423-96aa20c08e3a.pdf
The state of New York sued Trump and his team for business fraud in his dealings with banks and insurance companies. It was a simple straightforward case, other than the defendant was the President of the United States for part of the time that the business fraud was ongoing (2011-2021). The judge found and ordered disgorgement of the results of the fraud in the amount of roughly $350 million. This was not small potatoes nor a simple clerical error. After the results of the fraud were uncovered, his accountants, the banks, and the insurance companies dropped Trump like a hot potato.
Trump had had some bad business failures leading to six bankruptcies, leaving his creditors in the lurch. https://en.wikipedia.org/wiki/Business_career_of_Donald_Trump#:~:text=The%20six%20bankruptcies%20were%20the,Trump%20Entertainment%20Resorts%20(2009). And he had gained a reputation for an unfortunate practice of not paying his contractors, so they had repeatedly sued him https://www.wsj.com/articles/donald-trumps-business-plan-left-a-trail-of-unpaid-bills-1465504454
The events in question in NY v. Trump occurred shortly after the financial meltdown of 2008 where very large Wall Street banks, insurance companies, etc. failed, causing a large global recession, many mortgage foreclosures where people lost their homes, businesses and livelihoods. Congress bailed out the banks and insurers so that people would not lose all their savings and checking accounts, retirement accounts and small businesses. Congress also passed new laws (Dodd Frank) to assure that the big banks were solvent and would not issue so many bad loans that it would destroy our nation’s and the global economy.
In 2011 Trump found a new bank, Deutsche Bank that would make him loans. He approached them for large loans to finance several major transactions: a Chicago skyscraper, a golf course in Miami, and the renovation of an old federal post office in Washington DC that he would develop into a luxury hotel. The bank agreed to give him loans in either of two forms: one a straight business loan for which he would pay LIBOR plus 8%, and two a personally guaranteed loan for which he would pay LIBOR plus 4%. LIBOR was the London Interbank Offered Rate, and the standard for transactions between large banks. https://www.investopedia.com/terms/l/libor.asp LIBOR rates were exceptionally low in 2011 because governments had propped up the financial markets after the meltdown of the financial markets in 2008. https://www.macrotrends.net/1433/historical-libor-rates-chart Think of these options like your mortgage payment back in 2011, you could pay 5% interest, or you could pay 9% interest on your home mortgage depending on what you accurately told the bank about your net worth.
These were very large loans for very big projects, and Deutsch Bank required Trump to maintain a personal net worth of $2.5 billion and $138 million in liquidity (i.e. liquid assets like cash or short term treasuries) throughout the pendency of the loan to get the lower rate, so they could be assured that if the deals went bad, they would have recourse to collect from Donald Trump personally.
Trump duly reported and certified to the accountants, banks, and insurance companies that he had the required (by the bank loans) $2.5 billion net worth and $138 million liquidity. The problem was that he didn’t, so his CFO and his Controller, Trump, and his sons, who managed the business while he was President, had to report and certify highly inflated figures to the banks, accountants, and insurance companies.
The Triplex in Trump Towers was 11,000 square feet; Trump and team reported it as 30,000 square feet and inflated the value annually by $114-207 million dollars.
40 Wall Street was appraised by the real estate firm of Cushing and Wakefield for Trump. In the statements the Trump team chose to disregard the valuation, showing it was worth $227 million more than its appraised value. The building for example was operating at a loss and they had the records to prove it, but what they showed to the bank was that 40 Wall St. was earning $26 million annually.
Vornado was Trump’s limited interest partnership in office buildings in New York and San Francisco; Trump had a 30% share. His team listed it as part of his cash assets, even though it was not, and they knew it was not. When they had to adjust for the reduction in values of his assets due to the actual size of Trump’s Triplex in 2016-17, they simply increased (with no justification at all) the value of the Vornado asset to make up for the decreased value of the Triplex asset.
Trump Park Avenue had 12 apartments subject to rent control. In calculating their value in computing Trump’s net worth, they assumed they were not subject to rent control and submitted a valuation that was 700% higher than their actual market value as rent controlled units.
Seven Springs was an undeveloped plot of land in Bedford, NY. Trump team submitted their valuation at $161 million, and they assumed that it would be developed with seven mansions and assumed that the legal permissions to develop the land would be granted, and that the mansions had already been approved by the town and already built by Trump; none of the above was true. The Cushman and Wakefield estimated valuation, which the Trumps had already received, was $5.5 million. A later Cushman and Wakefield appraisal was increased to $14 million, but the Trumps continued to report its value as $161 million on his financial statements certified to the Bank.
Briarcliff was undeveloped land in Briarcliff, NY. The Trump team valued it at $101 million; they built into their valuation the assumptions, that they could build 71 condominiums. Cushing and Wakefield appraised it at $45 million, assuming that 71 condos could be built. In fact, the Trump team knew that only 31 condos could be built on the land. The Trump team continued to tell the banks it was worth $101 million despite the much lower Cushing and Wakefield valuation and the reduction in the actual numbers of condos that could be built on it.
Mar a Lago is Trump’s Golf Course and social club in Palm Beach. He signed deeds and easements that it would only be used a social club, not as a residence, in return for lowered property taxes. Its valuation was $26 million. He reported its valuation to the banks as if it could be sold for residential purposes (he claimed $405-739 million) despite the deeds and easements to the contrary. At trial, Trump claimed Mar a Lago could be sold as private residence for between $1 billion and $1.5 billion – making it the mot expensive residence in the nation by a factor of 400% -- even though the Trump signed deeds and easements restrict it to use as a social club.
Trump National Golf Club in Los Angeles was assessed by Cushing and Wakefield for the Trump Team at $16 million for the golf club and $82 million for the entire property. The Trump team presented certified financial statements to the banks that it was worth $56 million for the golf club and $140 million for the whole property.
Aberdeen is a golf course in Scotland and its adjacent property. The Scottish authorities only approved 500 homes. Trump team claimed they had approval for 2500. The local appraisal was for a profit of 33,000 pounds per home; Trump claimed to the banks 83,000 pounds per home. Trump also reported to the banks that all 2500 homes had been developed and built; none had been.
Insurers The Trump team did not tell their insurers about the Attorney General’s investigation into their misrepresentations to the banks and gave them the same inflated statements of net worth they had given the banks. Trump sought and secured an increase in the Directors and Officers Insurance coverage from $5 million to $50 million without telling the insurer of the Attorney General’s investigation of fraudulent business practices. Then they filed claims with the insurer for the costs of defending the Attorney General’s investigation. On renewal, their D&O insurer sought a 500% increase in their premiums reflecting their perception of the actual risk.
Disgorgement: The judge based the damages on the differences between the two loan rates: LIBOR plus 4% v. LIBOR plus 8% over the 10 years of falsified financial statements by the Trump team. He also required disgorgement on the actual profits Trump had made with these below market loans for example by selling the Old Post Office Building.