Business fraud case warns us of Trump 2.0.

As with his real estate biz, a second Trump term would reek of greed and dishonesty.

Ed. note:  It has been two weeks since The Resistant Grandmother (TRG) has last posted.  But not for lack of trying.  I’ve begun and stopped several postings because the pace of the news has now become so fast that what seemed like a good idea for a story one day often appeared hopelessly outdated the next.

But I was fascinated by the story on Trump’s takedown by a New York civil court for decades-worth of fraudulent business practices.  And so were others, as for at least two days, the verdict topped the headlines and each news program on cable TV.

Soon it was replaced with other seismic topics: The Republican Congress blowing town for a two-week vacation while aid to Ukraine and Israel hung in the balance; Vladimir Putin’s assassination of his closest political rival Alexei Navalny; Tucker Carlson’s fawning interview of Putin; the resounding Democratic win in New York’s Third Congressional District to replace George Santos; and then yesterday, the blockbuster report that the Republican-led impeachment attempt of Joe Biden hinged on the testimony of a man working for Russian intelligence, thus compromising United States Republican members of Congress still pushing impeachment based solely on his tainted (manufactured?) evidence.  Let that sink in.

So I was left to wonder, should I go ahead with my planned analysis of the fraud trial verdict or dive into one of these other topics?  I chose the former, as the evidence from the New York business corruption case actually portends how an America beset by all these problems would fare under another presidency of Donald Trump. The answer – based on what we know from 2017-2021 and now, as we can see, from the way he ran his company – bad. 

His rule-breaking, norms-busting business ethic with only one man at the top calling the shots ranks as a model for Donald Trump in the Oval Office 2.0. Trump’s dirty business dealings would continue as he shows no signs of being constrained by norms held in place by 45 other presidents.  He’s even petitioning the Supreme Court for immunity from anything he does now or would do then. 

His top-down leadership style and disrespect of expertise and honesty that shone through in the New York trial would become the new normal in the Oval Office and throughout the Executive Branch as Trump has signaled he’d do away with experts throughout the various departments of government and replace them with toadies.  In a second term, he’d bring in his own dedicated, unpatriotic team of salivating sycophants ready to tear down democracy (see Jim Jordan and Elise Stefanik who routinely tout Kremlin talking points). And it’d be absent any real patriots like James Mattis and John Kelly to rein him in.

—trg

******

Engoron to Trump: “You’re Fired!”
The “carnage” Trump painted of America during his 2017 Inaugural address, now best describes what’s left of his business empire. 

With all decisions handed over to Independent Monitor Judge Barbara Jones and a new Compliance Monitor position to provide additional oversight, Judge Arthur Engoron’s 92-page decision has given Trump a taste of his own medicine. “You’re fired” now describes Trump’s relationship to the company that made him a celebrity and arguably a president because of the image of a big, strong, successful man of commerce that was manufactured from whole cloth, given just how poor a businessman he really was https://www.washingtonpost.com/documents/f203be39-020c-4f82-a423-96aa20c08e3a.pdf

Now, Trump has been humbled, whether he admits it or not.  By court edict, he faces new realities: a massive almost half a billion dollar fine, removal from having any control over his company, and an inability to serve in a business position of any kind in New York for the next three years.  Sons Don, Jr. and Eric each face $4M fines and a two year ban from business leadership.  (Daughter Ivanka managed to evade chargers due to her stint in the White House, as many of the transactions at trial occurred during that time.) 

Oh, the interest! 
In short, Judge Arthur Engoron resoundingly found for the plaintiff, the State of New York as represented by New York Attorney General Leticia James. Trump and his real estate organization committed massive fraud, routinely, over decades of doing business. Especially at issue was Trump’s habit of greatly overvaluing assets to get cheaper business loans and lying on state business loan documents to assert those claims, polluting the reliability of commerce in the Empire State. 

Trump has vowed to appeal, but while he’s dithering (rightly so, because chances for reversal are reportedly slim) interest on the amount grows by $87,000 a day and will continue to pile up throughout the appeals process (21 feb 2024 abcnews.go.com).

In his ruling Engoron singled out the former president’s aggressive demeanor in refusing to admit to his errors; unclear and unreliable testimony; and disrespect for the Court, as shown in his attacks on court officials, prosecutors, and the judicial process itself.  “After some four years of investigation and litigation, the only error (inadvertent, of course ) that they acknowledge is the tripling of the size of the Trump Tower Penthouse (from 11,000 square feet to more than 30,000) which cannot be gainsaid (i.e. denied – my add). Their complete lack of contrition and remorse borders on pathological,” Engoron said, (p 69, Engoron ruling, see above for link).

Engoron added that even the Gold Standard of swindlers, Bernie Madoff – whose investment scheme bilked billions of dollars from thousands of people – said he was “sorry” before being sentenced to 150 years in federal prison, where he died in 2022 (p 142 Engoron ruling, see above for link). 

But lies and fraud remained the coin of the realm of Trump properties, even after he became president and his business was run by sons Don, Jr. and Eric. Chief Financial Officer (CFO) Allen Weisselberg, who has a BS degree from Pace University, but is not a CPA or otherwise qualified to vouch for property evaluations, nonetheless routinely did so for business arrangements that benefited Trump at both the expense of the lenders and residents of the state. 

In evidence at trial was testimony and documentation showing how insurers and lenders did business with Trump org, at their peril. Later, Trump et al. accused these same businesses of not doing due diligence in verifying the information the Trump people put in their business documents. 

When testifying, both Trump sons said they relied on the expert appraisals of firms like DeutscheBank, Mazars, and others to verify the veracity of the property valuations represented in the state business documents they signed off on as to be true. “Trump’s oldest sons claimed on Thursday that they had no knowledge of the financial statements at the heart of the family’s $250M fraud trial” (2 nov the guuardian.com)

In reality, however, Trump org deliberately entered into their business agreements whereby Trump et al. were primarily responsible for the veracity of their financial statements, not their lenders or other partners.

Testifying to that was none other that Jeff McConney, Senior Vice President and Controller who clarified his organization’s relationship with Mazars, an international audit, tax, and accounting firm. According to the Court’s finding:
“McConney further understood that Donald Trump had engaged Mazars to perform a compilation, which differs significantly from a review or an audit. McConney acknowledged that the preparation of the compilation does not contemplate that the accountants would inquire, perform analytical procedures, assess fraud risk, or test accounting records.” Compilations are less expensive than analyses, perhaps another reason the Trump firm preferred that approach.

McConney added, “It was Donald Trump’s or his trustees’ responsibility to make sure all financial records and related information were provided to Mazars,” not the other way around (p 93 Engoron ruling, see above for link).  

A “SCIF” for secret (business) documents – at Trump Tower
There were other ways Trump and his company made it hard to work with them – secrecy. The contemporaneous notes of an underwriter Claudia Markarian of Zurich Insurance revealed that from 2017 to 2020, she was tasked with assessing the soundness of Trump’s business as a condition for loans.

Unlike the unsecured way Trump kept the nation’s most sensitive national secrets at Mar-a-Lago, Trump kept his financial information locked up at Trump Tower, where Markarian could view it only in the presence of Trump CFO Weisselberg or former Comptroller Jeffrey McConney.  Not allowed to have or make photocopies of any kind, Markarian testified this was a “rare requirement” of a customer that she had never experienced before or since.

Weisselberg lied to her face
In the all important realm of property valuations and their interconnected collateral to back up loans, Weisselberg told Markarian the property valuations and assertions as to the amount of cash the Trump organization had on hand had been determined by an “outside professional appraisal firm,” and Markarian relied on those assertions.  In truth, “the Trump Organization never retained a professional appraisal firm” to conduct the evaluations (p 17 Engoron ruling, see above for link). 

On the witness stand, Markarian admitted the now known-to-be false information had been “material” in her analysis.  Had she known the truth, it would have affected her willingness to approve the renewals of their loan requests as they were ultimately written (p 21 Engoron ruling, see above for link). 

Get it at the GAAP
McConney also testified that it was company policy that descriptions of property and their value had to be “GAPP compliant,” referring to the “Generally Accepted Accounting Principles” required on many state business forms. Yet, when asked in his deposition if he knew what “GAAP” was, Don, Jr. could not answer the question, claiming he did not come across or remember the term from his days in “Accounting 101” at the Wharton School of Business (fortune nov 01 2023). Eric Trump in testimony seemed similarly mystified of policies and procedures that are common practice in real estate organizations, saying he “didn’t know about Trump organization financial statements” (2 nov. 2023 nbcnews.com) and (p 17 Engoron ruling, see above for link). 

All the Trump children, including Ivanka, frequently “could not recall” even when presented with documentation that showed they had seen, reacted to, or signed off on what they could no longer remember.

“Yes, the Pope is Catholic”
So, did the Trump organization make a habit of over-evaluations of cash reserves and Trump property value?  That question may be answered in “Is the Pope Catholic?” fashion. 

Unlike the Trump team that could find no one special witness who could convincingly defend the former president’s operation, the Attorney General’s team did for their side — an impeccable expert in real estate and tax matters who would, in compelling detail, assess Trump org’s schemes and how they benefited the 45th president.

From Queen Elizabeth II to the Empire State
The witness was Michiel (sic) McCarty, chairman and CEO of his own investment bank specializing in debt and equity transactions and mergers and acquisitions.  He holds a gold-plated resume having graduated with an MBA from the Wharton School of Business with a concentration in capital markets and has worked on financing engagements and underwriting projects for Fannie Mae, the Marriott Corporation, AT&T, and the late Queen Elizabeth II (p 37 Engoron ruling, see above for link). 

McCarty looked at four Trump properties and their loans – all taken out in either 2014 or 2015: the Doral Golf Club, the Old Post Office building in Washington DC that was converted into a Trump hotel, the Chicago Trump tower and hotel, and the 40 Wall Street building in Manhattan.

According to Engoron’s filing:
“McCarty’s calculations determined that Donald Trump improperly saved the following amounts on interest as a result of the banks relying on Donald Trump’s fraudulent SFCs (evaluation statements) and fraudulent personal guarantee” based on misleading if not fraudulent information:

• $72,908,308M on the Doral loan

• $53,423,209 on the Old Post Office loan

• $17,443,359 on the Chicago hotel loan, and

• $24,265,291 on the 40 Wall St. loan (p 38 Engoron ruling, see above for link). 

As a result of the lies and misstatements of personal wealth and real estate evaluations, the total saved on just those four those properties alone amounted to $168,040,167.

Alas, no good rebuttal
Trump needed good evidence and witnesses to refute McCarty’s grade A testimony.  But as Engoran’s ruling described it, Trump’s witnesses and evidence were not up to the task.  One Trump witness chose to testify extemporaneously without studying the documentation presented by banks and other lenders. Another admitted he was neither an appraiser nor an accounting expert, although had been asked to weigh in on issues requiring such expertise.  

A third witness was a personal friend who was not compensated for his testimony and said little one way or the other.  Another – this time, a high-priced witness –  misinterpreted the deed restrictions on Trump’s Mar-a-Lago property. And another’s attestation was so wishy washy about the terms for the Old Post Office property as to be of little value to Trump or the overall case (pp 39-40, Engoron ruling, see above for link).

Working the playbook
Since the trial’s Feb. 16 conclusion, Trump has taken to rallies, social media, and the campaign trail to complain of “unfair treatment” under the law, just as he’s done during and after the E. Jean Carroll trials and in advance of Manhattan D.A. Alvin Bragg’s election interference case commencing on March 25, and Special Counsel Jack Smith’s Jan. 6 trial, currently on hold in Washington. The only exception – the national secrets trial in Florida where Judge Aileen Cannon has seemingly bent over backwards to help Trump’s cause.

Speaking immediately after the trial, Trump proclaimed, “I’m an innocent man! I’ve been persecuted by someone running for office!”, the candidate running for a second term as president asserted, underscoring New York Attorney General Leticia James’ reinforcement of Engoron’s conclusion that Trump “shows a complete lack of contrition and remorse.” The former president added, “It takes away my rights. It (sic) doesn’t give me a jury!” omitting that he and his attorneys opted for a bench trial in which a judge makes the determination. 

Perhaps Trump also forgot the two E. Jean Carroll jury verdicts who, like that of Judge Engoron, also sided with the plaintiff, in Carroll’s case ordering Trump to pay the defamed New York writer $5M + $83.3M.

Trump’s going blue in Michigan
Speaking to a relatively small crowd of about 2,000 followers in an airport hangar in the crucial swing state of Michigan, Trump inveighed in his defense that that everything he’s done has been “perfect.” For good measure, he then lobbed the all-too-familiar epithets of “crooked” and “lunatic” at the presiding judge (detroit free press 18 feb 2024).

Wrapping things up, the former president concluded by playing the martyr/savior card: “I’m being indicted for you. They want to silence me because I will never silence you!”  

If the speaker were Alexei Navalny, you could believe him, although Navalny was too gracious a human being to ever demand pity and abject adulation in such a way.

But given that it’s Donald Trump, obsequious friend of the dictator who just killed Navalny, it’s just another unseemly assault on the institutions in this country that are doing their job.

What the case teaches or reminds us
Bottom line, the New York fraud trial reminds us of what Trump 2.0 would mean for all Americans, whether at least a third of them that reportedly constitute Trump’s hard core base understand it or not: 

• That, like his witnesses and his real estate company, Trump would bring in family members, cronies, or temps – not experts – to replace the vast breadth of knowledge across the Executive Branch with compliant hacks. TRG believes that describes the level of expertise Trump relied on in his business, so thus it must be ever so in Trump’s mind. 

• Whenever anything goes wrong, Trump will look for a fall guy – not take ownership or find root causes and fix them: old news, but bears repeating.  To this, TRG asks, who wants a president whining constantly when there’s important work to do – such as saving democracy from him.  Increasingly, it appears most of us do not want such a man.

• The fraud case proves Trump’s method of leadership is to throw your wealth and position around and create distrust among your relationships.  Use people up and get your piece of the pie; everyone else be damned.  TRG sees this as what an unleashed Trump will do even more than he did in his first term if he wins another (never-ending) soul-crushing stint as America’s top executive.  

Such are the lessons of “The Supreme Court of New York, New York County v. Donald J. Trump.”  Will a majority of Americans learn them by Nov. 5?

— trg

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