In his ongoing fraud trial, Mr. Donald J. Trump does not deny that his financial statements were falsified or that they made him look much richer than he was (and is). The banks provided hundreds of millions of dollars in loans to Mr. Trump for real estate projects based on fraud. But Mr. Trump persists in his view that he should not be held accountable because of the disclaimer clauses in the financial statements. He should not have relied on the disclaimers for legal protection. It was bad judgment on his part to think that he would always be above the law.
As I explained in an earlier blog post, Mr. Trump’s accountants “compiled” the financial information for Mr. Trump and did not check it for accuracy. As long as his accounting firm did not audit the information, they offer no opinion as to whether the financial statements are accurate or not — so the accountants are off the hook for fraud. For example, at Trump Park Avenue, 502 Park Avenue, Mr. Trump and his company owned 12 rent stabilized units (where price increases are capped). His company valued the rent stabilized apartments at $50 million — not $750,000, their actual value, as reported in the New York Times. The accountants merely accepted what Mr. Trump told them.
Justice Arthur F. Engoron read the disclaimer clause in Mr. Trump’s financial statements and he saw the following:
“Donald J. Trump is responsible for the preparation and fair preparation of the financial statement in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statement.”
In other words, Mr. Trump’s own disclaimer clause sunk his defense.
On November 6, 2023, after Justice Engoron ruled that Mr. Trump bears the responsibility for the fraudulent statements, Mr. Trump was apparently desperate and pulled out a piece of paper in court with the disclaimer clause on it and asked Justice Engoron if he would like to see it, according to published news reports. Justice Engoron declined.
The fraud case against Mr. Trump is civil and not criminal which means that he is not being accused of a crime. But the civil case does threaten his business empire because he could be barred from doing business in New York and be forced to sell his businesses.
As I have seen in my investigations and legal practice, a woman in divorce may shell out thousands of dollars to forensic accountants in the hopes of proving her fair share of the marital holdings —all in vain because financial fraud by lying spouses is often treated lightly. Maybe Mr. Trump, having been divorced two times himself, believed that Justice Engoron’s court would operate like so many divorce courts do, and turn a blind eye to the fraud, allowing him to get away with it. But Justice Engoron is not a divorce court judge, and as he wrote, the state has an interest in “guaranteeing a marketplace that adheres to the standards of fairness. . .”