Chip SomodevillaProPublica published a piece Wednesday that put the spotlight once again on some questionable financial practices of the Trump Organization, which showed one set of books to banks (inflating value) and another to
New York City tax authorities (deflating value).Is this just the usual Trump mendacity, or can prosecutors see this as part of a pattern? And if so, could it be prosecuted? Who would be tagged as the defendant(s)? If not, what more is needed to bring the guilty parties to justice?Before we explore these questions, let’s look at the facts. Both versions of them.ProPublica obtained property tax docs for four Trump properties. These docs became public when Trump appealed the tax bills, and the loan records became public when Trump’s lenders sold the debt on the properties. Significant discrepancies were unearthed between the tax records and loan records for two of the properties: Trump International Hotel & Tower, on Central Park West, and 40 Wall St.Tax and loan documents for 40 Wall St. showed significant discrepancies in how certain costs such as insurance were reported. Further, Trump representatives reported different occupancy rates to lenders and tax officials: 81 percent to lenders (rising later to 95 percent), and just 59 percent to tax authorities. Rising occupancy rates are valued by lenders because they are indicative of rising income level which is material to securing refinancing, while lower rates, of course, mean lower taxes.Meanwhile, documents for the Trump International Hotel & Tower showed that city tax officials were advised that this property made about $822,000 in 2017 from renting space in the building to other businesses, while loan officials were told that the building made about $1.67 million. ProPublica further notes that Trump appeared not to report income from leasing space for television antennas on tax documents but did report the income on loan docs.Each of the above-noted discrepancies is indicative of potential fraud. But do they represent instances of a prosecutable case?The short answer is: not yet. The discrepancies do reflect a situational ethics approach toward financial obligations and responsibilities. But more evidence will be needed to prosecute anyone should criminal prosecution be considered by the authorities.Who might be prosecuted here? It is unclear just who is responsible for submitting the doctored financial statements to the lending authorities and tax officials. Were the folks who submitted the documents the same folks who prepared them? If so, what were their marching orders? Who directed the Trump Organization officials to tailor the financial statements to minimize property taxes or maximize occupancy rates to obtain loans?Investigators need to home in on the work papers prepared to support the finagled financial statements in order to determine “willful intent,” or “mens rea” that James Comey so infamously referenced. Such evidence may well be found at Mazars USA—the Trump Organization accounting firm that is the subject of intensive litigation with regard to subpoenas served by both the U.S.
Congress and the Manhattan DA’s office.Accountant work papers have been found to be beneficial when uncovering evidence of intent to defraud in case after case of white-collar fraud, specifically tax fraud. In fact, accountant work files and testimony provided critical evidence leading to the conviction of
Paul Manafort in the Mueller investigations and prosecutions. It should be noted that tax fraud, bank fraud, and the falsification of business records may result in felony charges that could be contemplated by the Manhattan DA and provide for
prison sentences that could lead the convicted defendants to land in Rikers Island for a stretch with the aforementioned Manafort. Evidence of corrupt intent to defraud either a financial institution or a public tax authority is critical to a successful criminal prosecution. The use of a double or triple set of books and records by company officials for fraudulent purposes is a terrific example of overt acts of corrupt intent. But further evidence will be needed here to link all those involved in each of the instances denoted above. Email, texts, voice mail, notes to the file and other evidence of directions to finagle the financial docs are needed. Further forensic analysis of the documents, for example fingerprint analysis, ink chemistry analysis and handwriting analysis are investigative tools available to the prosecutors to tighten the vise and provide the links in the chain of potential targets.Cohen was reportedly debriefed in detail recently by the Manhattan DA’s office. His testimony will be needed to outline just who in the Trump Organization was responsible for the preparation of the questionable documents referenced above. Cohen’s credibility will clearly be attacked in court by the defendant(s) and will become a question for the jury to grapple with. Cohen provided the Southern District of New York with a prosecutive path for those responsible for cooking the books at the Trump Organization with regard to the reimbursement of “hush money” payments to Cohen. That path is now available to the Manhattan DA. Add Cohen’s now corroborated congressional testimony outlining the transactional financial ethics referenced above, used by the Trump team in their shady business dealings and the jury will likely be sitting on the edge of their seats. All the DA needs to do now is fill in some blanks in combination with demonstrating a pattern of fraud over time—the closing argument is shaping up to be very persuasive.The allegation that the Trump Organization appeared not to report income from leasing space for television antennas to tax authorities but did report the income on loan docs revives memories of the landmark New York Times tax fraud series on Fred Trump and Donald Trump’s financial shenanigans in the ’90s wherein the Times detailed multiple instances of unreported income streams tailored by Fred Trump for the Donald. While the statute of limitations has long expired with regard to the multi-million dollar gift tax evasion schemes entered into by
Donald Trump, prosecutors can use evidence of historical frauds to depict a pattern of fraudulent conduct on the part of a defendant no matter how long ago the fraud occurred. It goes to willfulness or corrupt intent exhibited by Individual-1.The Manhattan DA’s case against the Trump Organization may appear to be on its surface just a mundane business fraud type of case. But fraudulent documents don’t change stories, particularly when there are witnesses available to tie the documents and the corrupt intent together. Add the historical pattern of fraud engaged in by Individual-1 and the Manhattan DA’s case appears to be silently moving along like a stealth nuclear submarine under the radar and there are no available defenses available like an Office of Legal Counsel opinion to protect the prospective defendants from a potentially lethal prosecutorial attack.