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NY Attorney General Investigating Trump Organization For Inflating Asset Values: Lawsuit

New York
Trump Organization Executive Vice President Eric Trump

New York Attorney General Letitia James hit The Trump Organization with a lawsuit Monday as part of her office's investigation into whether the president and his company inflated values of properties on financial statements to score tax breaks and loans.

In the suit, filed in New York State Supreme Court, the office alleges the Trump Organization has refused to comply with subpoenas for records and Eric Trump, who is running the company while his father sits in the White House, “has refused entirely to comply with the subpoena for his testimony.”

Eric Trump, an executive vice president at the company and chair of the trust in which the president's assets are being held, had previously agreed to comply with requests, per the suit. However, the Trump Organization now says Eric Trump will not adhere to the subpoenas, citing rights afforded under the Constitution.

“Eric Trump’s categorical refusal to appear is unlawful, and he should be compelled to testify,” Deputy Attorney General Matthew Colangelo wrote in the filing. The case is civil, but if criminality were uncovered, Gov. Andrew Cuomo could order a prosecution, per the New York Times.

The attorney general also wants Westchester-based land-use attorney Charles Martabano to testify under oath and Morgan, Lewis & Bockius attorney Sheri Dillon to give evidence, as both have represented the president and the company. Dillon spoke at the January 2017 press conference announcing how Trump's finances would be dealt with when he took office, notorious for its table full of manila folders.

There are four properties noted in the court filing: the office building at 40 Wall St., the “Seven Springs” estate in Westchester, a Los Angeles golf course and the Trump International Hotel and Tower in Chicago. The Attorney General’s office is seeking documents about the financing of the properties.

The investigation was sparked after Michael Cohen testified before Congress last year, stating that the president had previously lied about the assets’ values to lock in loans, but lowered them in order to cut back on taxes.

President-elect Donald Trump, next to the documents he says gives control of the Trump Organization to his sons at Trump Tower, Jan. 11, 2017.

Referenced in the AG's suit are appraisals the Trump Organization commissioned from Cushman & Wakefield, which valued 158 acres of the Seven Springs property at $56.5M in 2015, when Trump had sought to claim a tax write-off for placing a conservation easement on it. C&W appraised the easement's value at $21.1M, according to the suit.

The same process bore out in Los Angeles, at the Trump National Golf Club, which C&W valued at $107M before a conservation easement was placed on it, making the easement worth $25M. Further evidence was filed in relation to those properties, but they were filed under seal because the AG hasn't decided whether to bring charges against the company or the other defendants.

An unnamed Cushman appraiser testified that he was brought on to give a preliminary valuation of the real estate in question, not advise on specific business decisions. The AG is investigating whether Trump valued the properties differently on his taxes than he did when placing easements on them.

The AG's office's investigation already turned up emails between Dillon and C&W officials haggling over the value of the land, with Dillon requesting it to be edged higher. The lawsuit cites repeated instances of the real estate services firm pushing back on suggestions to inflate the value.

"At Ms. Dillon’s instruction, a Morgan Lewis lawyer then asked one of the Cushman appraisers in a voicemail to backdate the appraisal to March 15," the suit states, referencing an April message discussing the Seven Springs property. "The appraiser refused, citing her obligations under appraisers’ professional standards."

Cushman & Wakefield provided records to the AG for its investigation, the lawsuit states. A spokesperson for the company said it does not comment on ongoing litigation. 

The Trump Organization's defense for not producing records related to the transactions is that they fall under attorney-client privilege, according to the AG's office, which dismissed those claims by asserting that non-attorneys, including an engineer and an accountant in two separate instances, were cc-ed on the emails in question.

It is not the only active investigation into Trump’s business dealings. The Manhattan District Attorney’s Office has subpoenaed the company's preferred lender, Deutsche Bank, and court filings from earlier this month suggested for the first time that prosecutors are looking at whether or not Trump's company engaged in fraud.

Prosecutors are also trying to force Trump to release his tax returns. Last month, the Supreme Court found that Trump had no right to stop state prosecutors seeking his returns, but that Congress could not see the documents for the time being.