As the $250 million civil fraud trial against former President Donald Trump reached its halfway point with attorneys for New York Attorney General Letitia James wrapping up presentation of their case this week, the drama around the trial reached a Shakespearian-level crescendo.
Following on the heels of testimony from the ex-president’s sons Donald Trump Jr. and Eric Trump, Donald Trump and his daughter Ivanka Trump — who is not a named defendant — took the stand this week to testify about the Trump Organization’s business practices before a tense courtroom packed with journalists.
Trump did not disappoint supporters of his bombastic ways, coming out swinging even on the witness stand, criticizing the presiding Judge Arthur Engoron as “hostile” and James as a “political hack” and ultimately drawing a request from the judge for his lawyers to “control” him.
But he was more reserved when it came to two key silent players in the unfolding case: his company’s annual statements of financial condition and Generally Accepted Accounting Principles. “Probably the statements are good,” Trump said, while testifying that the Trump Organization’s former CFO Allen Weisselberg and former controller Jeff McConney had “total authority” to work on the statements with outside accountants even if Trump himself did share some opinions with them.
Before the bench trial began, Engoron in September ruled that the AG’s office had established that Trump and the other defendants were liable for fraud related to its use of fraudulent documents that inflated the value of many of Trump’s signature real estate assets. James is seeking a $250 million ruling against Trump, asserting that he secured bank loans for the company on more favorable terms than would otherwise have been available if it had not falsely inflated his net worth by billions of dollars.The trial will determine what if any penalties will be paid and whether Trump will be barred from doing business in New York.
Beyond the colorful personalities, here are three financial takeaways from the trial’s sixth week:
Feds flagged GAAP deficiencies Louis Solomon, an attorney for the AG’s office, questioned Ivanka Trump on Wednesday about some negative feedback that the company got on its proposal to redevelop the U.S. General Services Administration’s Old Post Office Building in Washington D.C. Solomon asked her about a 2011 letter from the GSA which stated they had questions about Donald Trump’s financial statements that appeared to have multiple GAAP deficiencies, including but not limited to the fact that it had no provisions for income tax. As was the case for many documents she was presented with, Ivanka didn’t recall anything about the matter, including a second meeting with GSA employees in Washington to which Solomon said the accounting matter was central. But a Dec. 9, 2022 court filing made by the AG’s office states an email chain showed that Ivanka Trump directed a subordinate to “make changes to the presentation concerning GAAP and run them by Allen Weisselberg.” Under questioning on the stand this week, Ivanka Trump did not recall the GAAP matter, testifying that she only remembered that “the whole meeting was mainly about our vision for the project.” The Trump Organization ultimately converted the property into the Trump International Hotel Washington, DC.
Net worth guarantees matter Trump sought to minimize the importance of the statements of financial condition documents while on the stand Monday, stating that they can be a “positive” thing. However, Trump also asserted that because of the disclaimer clauses included by the Trump Organization in those statements, they’re “almost valueless” in that it effectively says, “do your own due diligence, do your own work, don’t take anything for granted from this statement.” But when Ivanka Trump took the stand, Solomon sought to show they were important, citing a 2011 email exchange with Deutsche Bank around negotiations for financing for the Doral Golf Resort & Spa in Miami, Florida. In it, Solomon asserted Ivanka appeared to reject a loan term under which her father would have had to maintain a minimum net worth of $4 billion. He asserted it was cut it down to $2 billion, even though in that year his SOFC showed his net worth at $4.26 billion. When Trump’s daughter was asked if the emails refreshed her recollection of the turn of events, she did not dispute the emails were accurate but maintained that she didn’t recall them. “Well, it says what it says here,” she said.
Buckle up for more GAAP talk Attorneys for Donald Trump plan to call a number of expert witnesses as they begin putting on their case Monday, when they will call Donald Trump Jr. back to the witness stand. Among the witnesses will be Eli Bartov, a professor of accounting at New York University’s Stern School of Business. Bartov is expected to address the defense team’s assertions that valuation is a subjective opinion about price and that “there is no such thing as objective valuation either in GAAP, economic theory or in the applicable laws, regulations and principles that govern this case,” according to a court document filed by the defense outlining its Oct. 2 opening statements in the case.
