New York Court Appoints "Independent Monitor" Over The Trump Organization
NY AG Tish James Is On A Bigger Winning Streak Than Lebron James
Today, New York State Supreme Court1 Justice Arthur Engoron entered a decision and order that is incredibly debilitating to FPOTUS and the Trump Organization.
Justice Engoron announced that he was appointing an “independent monitor” to oversee the submission of any financial disclosures by the Trump Organization or any corporate restructuring or disposition of significant assets.
Entered a preliminary injunction barring the Trump Organization from selling, transferring or otherwise disposing of any asset listed on FPOTUS’s 2021 Statement of Financial Condition, without giving the Court and NY AG Letitia James 14 days notice.
Ordered the defendants (FPOTUS, Donald Trump, Jr., Ivanka Trump, Eric Trump, and a large number of Trump Trusts and Companies) to provide the Independent Monitor with complete financial disclosure on all subjects, and access to all records.
Announced that the Independent Monitor would be appointed by November 15, and stay in place until further order of the Court.
Taken together, these orders would have made this a horrible day for FPOTUS, as I’ll explain each in further detail below. But, even worse, the Court made factual findings that FPOTUS, his children and his companies have a “demonstrated propensity to engage in persistent fraud.” These factual findings make it extremely unlikely that FPOTUS will be able to get the restrictions imposed today lifted before the end of trial. Meaning, time is no longer on FPOTUS’s side.
THE COURT’S FOUND THAT FPOTUS ENGAGED IN “PERSISTENT FRAUD”
Justice Engoron based his finding that FPOTUS and the other defendants had a “propensity to engage in persistent fraud” on seven pillars. These are not questions of opinion, but rather matters of objective fact. Any one of these would have been enough.
A. Lying About The Size Of His Trump Tower Apartment
For decades, FPOTUS lied on his Statements of Financial Condition about the size of his Trump Tower Triplex Apartment. He claimed that it was "over 30,000 square feet”. However, Justice Engoron found “[i]t is undisputed that the square footage of the Triplex is 10,996 square feet.” This overstatement of the size of the Triplex overstated its value (according to the testimony of former Trump Organization CFO (and now-confessed felon) Allen Weisselberg) by “give or take $200 million.”
Justice Engoron also noted that FPOTUS changed the claimed value of the Triplex from $80 million in 2011 (which already was 3x the price/sq.ft. of any other apartment in Trump Tower) to $180 million in 2012 (which would was $100 million more than the selling price of any apartment in NYC history).
B. Lying About The Value Of 12 Rent-Stabilized Apartments by $50 Million
Justice Engoron found that the Trump Organization lied about the value of 12 apartments it owned in Trump Park Avenue to the tune of $50 million. The Trump Organization claimed that the apartments were worth $50 million, which would have been their value if they could be sold on the open market without tenants. The fraud was that the 12 apartments were all rent-stablized, with active tenants.
In NYC, rent-stabilized apartments are barely break-even for landlords. Tenants cannot be forced to leave at the end of a lease. The maximum rent increase is set by a state board, which responds to political pressure from tenant groups. Even if the rest of the building has been converted to co-op or condominium, the rent stabilized tenants can stay in their apartments forever, since their children (or grandchildren) succeed to the rights of the tenants when they die.
The real value for all 12 of the rent-stabilized apartments — according to the Trump Organization’s own accountant — was $750,000. That is roughly $72k per apartment. It is not a joke to say that it is impossible to buy a fourth story, walk-up 200 sq. foot apartment in Midtown Manhattan for $72,000.
C. Lying About The Value Of the Trump Organization’s Interest in 40 Wall Street
Justice Engoron found that the Trump Organization committed similar fraud in vastly overstating the value of its “ground lease” in the office building at 40 Wall Street. If you want to know what a ground lease is, here is a good description. Here, the Trump Organization received an appraisal from a highly qualified real estate company in 2010 that the ground lease was worth $200 million. But the Trump Organization valued the 40 Wall Street ground lease at over $500 million each year from 2011 - 2013, while keeping the Cushman & Wakefield appraisal a secret from its own accountants.
D. Donald Trump Jr.’s Claimed Ignorance of GAAP
Donald Trump Jr. actually substantively testified at his deposition (unlike his father). During his deposition, Jr. testified that he “had no knowledge of Generally Accepted Accounting Principles (“GAAP”) outside of ‘Accounting 101’ at Wharton.” That may have been true, but it directly conflicted with the representation on each of the annual statements he provided to the Trump Organization’s accountants for over decade.
For about a dozen years, Junior swore that he had fulfilled his “responsibilities for the preparation and fair presentation of the [financial statement] in accordance with accounting principles generally accept in the United States of America.”
Either his testimony was a lie, or the representation was a lie. Justice Engoron found that either way, it’s fraud.
E. FPOTUS Lied About The Value Of Mar-A-Lago
FPOTUS lied about the value of Mar-A-Lago, in basically the same way he lied about the value of the 12 rent-stabilized apartments in Trump Park Avenue. He claimed that Mar-A-Lago was worth between $347 million and $739 million (between 2011 and 2021), which might have been the fair market value if the Mar-A-Lago could be sold and further developed. It can’t, because FPOTUS “in 2002, Mr. Trump signed a Deed of Development Rights convey to the National Trust for Historic Preservation “any and all of [his] rights to develop the Property for an usage other than club usage.” As a club, Mar-A-Lago might be worth $40 million.
F. Zurich Insurance Fraud
When Zurich Insurance asked that its underwriters be allowed to view FPOTUS’s statement of financial condition, they were only allowed to do so in the presence of Allen Weisselberg, who was then the CFO. Each year, Mr. Weisselberg represented to Zurich that the valuations of the properties were based on appraisals from reputable companies, like Cushman & Wakefield. In fact, “the Trump Organization itself concocted2 them out of whole cloth.”
G. FPOTUS’s Invocation Of The Fifth Amendment 400 Times At His Deposition
The Fifth Amendment provides that “No person . . . shall be compelled in any criminal case to be a witness against himself.” At his deposition, FPOTUS invoked this Fifth Amendment protection over 400 times, refusing to answer any substantive question. These invocations of the Fifth Amendment could not be used against FPOTUS in any criminal case.
NY AG James’ case against FPOTUS and his co-defendants, however, is not a criminal case. It is a civil case. In a civil case, “a negative inference may be drawn in a civil context when a party invokes the right against self-incrimination”). Justice Engoron held that, although it was “not dispositive on any single issue”, he was drawing “a negative inference from Mr. Trump’s invocation of his Fifth Amendment right.” The opinion pointed to particular questions that FPOTUS refused to answer, as ones where the Court believed a negative inference was appropriate.
THE INJUNCTION
THE “INDEPENDENT MONITOR” HAS THE POWER TO SEE OVERSEE EVERY FINANCIAL STATEMENT PREPARED BY FPOTUS OR THE TRUMP ORGANIZATION
The Court rejected FPOTUS’s argument that appointing an “independent monitor” was tantamount to “nationalizing” his companies, because the “independent monitor” does not have complete control - like a “receiver” would have.
But, the powers of the Independent Monitor are still broad. The Independent Monitor has the power to “oversee the: (1) submission of financial information provided to any accounting firm compiling a 2022 SFC [Statement of Financial Condition] for Mr. Trump; (2) submission of all financial disclosures to lenders and insurers; and (3) corporate restructuring or disposition of significant assets.”
Moreover, the Trump defendants were ordered to provide the Independent Monitor (1) access to virtually every financial record in any of the companies within the Trump Organization and (2) a “description of the structure and the liquid and illiquid holdings and assets of” the entire corporate structure.
FPOTUS IS REQUIRED TO GIVE THE COURT AND NY AG JAMES 14 DAYS NOTICE BEFORE THE SALE OF ANY ASSET
Although the order does not completely bar the Trump Organization from selling any asset, it is required to provide the Court and NY AG James fourteen days notice before the sale of any non-cash asset listed on the 2021 Statement of Financial Condition of Donald J. Trump. This basically will prevent the Trump Organization from selling any asset for less than fair value.
FPOTUS IS REQUIRED TO GIVE THE INDEPENDENT MONITOR, THE COURT AND NY AG JAMES 30 DAYS NOTICE BEFORE ANY RESTRUCTURING OR REFINANCING
This basically means that FPOTUS can not act upon his efforts to move his assets from New York to a newly-created series of Delaware corporations, which perfectly mimicked the structure of the Trump Organization in NY.
THE INDEPENDENT MONITOR WILL STAY IN PLACE UNTIL AFTER TRIAL
To me, this is game-changing part of Justice Ergoran’s order. Up until now, FPOTUS has had every incentive to delay the investigation by NY AG James and the eventual trial. He sued (and lost) in federal court, trying to get the investigation shut down. He sued (and lost) in state court, fighting against the document requests by AG James. At every turn, FPOTUS slowed things down.
Now, he has a dilemma. Until he goes to trial, he basically cannot make any major financial moves. If he tries to sell any assets, it will become public knowledge at least 30 days before closing, and likely tied up in court for a long time. I cannot imagine the buyer who would to deal with the Trump Organization under those circumstances. If he goes to trial, FPOTUS might permanently lose control of his empire, because a receiver might be appointed over everything. On the other hand, if FPOTUS were to go to trial and win, he could get rid of the Independent Monitor and once again have unfettered control of the Trump Organization.
CONCLUSION: Today was a good day for the good guys.
In New York State, the “Supreme Court” is the trial court. It is not the highest court of appeals. The highest court of appeals in New York State is called the “Court of Appeals”. Also, the Bronx is up and the Battery’s down.
Any time a judge says that your side has “concocted” something, that is a very bad sign.
great article - i found more info on land leases: https://www.nestapple.com/land-leases-what-nyc-buyers-should-know/