In a $250 million lawsuit that strikes at the heart of Donald Trump’s business empire, New York Attorney General Letitia James alleged Wednesday that the former president artificially inflated his net worth by billions of dollars by greatly over-valuing his portfolio of assets.
Trump’s Florida properties, including his waterfront home in Palm Beach, are important cogs in the suit.
The attorney general said the lawsuit is the culmination of a three-year investigation. It names Donald Jr., Eric and Ivanka, as well as longtime Trump Organization Chief Financial Officer Allen Weisselberg, and it accuses the Trump Organization of using false and misleading statements to qualify for massive loans at favorable rates. It further alleges that the “misrepresentations... violated a host of state criminal laws,” including falsifying business records, insurance fraud and issuing a false financial statement.
“These acts of fraud and misrepresentation were similar in nature, were committed by upper management at the Trump Organization as part of a common endeavor for each annual statement, and were approved at the highest levels of the Trump Organization — including by Mr. Trump himself,” the lawsuit alleges.
In a statement to the Miami Herald, a Trump Organization spokeswoman called Wednesday’s filing a “culmination of nearly three years of persistent, targeted, unethical political harassment” by New York’s attorney general.
“As we all know, today’s filing has nothing to do with the facts or the law. Instead, it is about politics, pure and simple,” the spokesperson said, adding that the attorney general is protecting the interests of “large, sophisticated Wall Street banks.”
“However,” the spokesperson said, “not only was no bank harmed — actually, they profited handsomely — to the tune of hundreds of millions of dollars in interest and fees — and never once took issue with any of the loans in question — all of which are either current or have been paid off (in many cases early).”
The lawsuit lands about six weeks after FBI agents served a search warrant on Trump’s Mar-a-Lago home in Palm Beach, seeking government documents, some of them highly classified. The government-documents investigation and the probe by the New York attorney general are among several involving the former president.
Mar-a-Lago Social Club, Palm Beach
Trump valued Mar-a-Lago, which doubles as an exclusive private club, as high as $739 million, according to the lawsuit. With an annual revenue of under $25 million, the lawsuit alleges, it should have been valued at closer to $75 million.
Much of that inflated value, the lawsuit alleges, is based on the “false premise” that Mar-a-Lago is an unrestricted property that can be developed for residential use.
But a series of deals set strict limitations on the property.
In 1995, through an agreement with the town of Palm Beach, Trump converted Mar-a-Lago from solely a private home to a club. The agreement came with “onerous preservation restriction,” the lawsuit says, that required maintenance of the property’s “critical features,” including gates, doors and open vistas facing the ocean.
About seven years later, Trump forfeited development rights for Mar-a-Lago. The change restricted the property from future development, which greatly decreased the property value — and Trump’s property taxes.
The deed, signed by Trump in September 2002, states that “the club and Trump intend to forever extinguish their right to develop or use the property for any purpose other than club use.”
The deed also “limits changes to the property including, without limitation, the division or subdivision of the property for any purpose, including use as single-family homes, the interior renovation of the mansion, which may be necessary and desirable for the sale of the property as a single-family residential estate, the construction of new buildings and the obstruction of open vistas.”
Palm Beach County records show that in 2002, prior to the deed signing, the property was appraised at about $27.5 million. The next year, the appraised value dropped to $14.7 million. It wasn’t until 2021, with a $27.6 million appraisal, that the value eclipsed what it was before Trump forfeited the development rights.
“Despite full knowledge and awareness of those facts, the Trump Organization valued Mar-a-Lago in each year from 2011 to 2021 based on the false premise that those restrictions did not exist,” the lawsuit says. “For these and a host of other reasons, all of the valuations of this property were false and misleading.”
The lawsuit also accuses Trump of adding a 30% club-based premium to Mar-a-Lago’s total value based on the Trump brand.
Trump National Golf Club, Jupiter
Through Jupiter Golf Club LLC, the Trump Organization in 2012 purchased what became the Trump National Golf Club in Jupiter for $5 million in cash. Less than a year later, the lawsuit states, Trump valued the property at $62 million — a 1,100% mark-up, the lawsuit says.
“Indeed, for every year from 2013 to 2020, virtually all of the value attributed to Jupiter was fraudulently overstated due to several deceptive methods and assumptions,” the lawsuit alleges.
In order to overstate the club’s purchase value, the Trump Organization assumed liability for the $41 million in refundable membership deposits. By treating the $41 million as a debt purchased with the club, the lawsuit alleges, Trump was able to claim to have paid $46 million for the property.
However, the lawsuit alleges, only members who remain in good standing for 30 years are eligible for a full refund of the membership deposit: “Therefore, the liabilities for ‘refundable’ memberships would need to be paid out only decades in the future, if at all.”
But even the $41 million figure is overly inflated, the lawsuit alleges. The seller of the property, the Ritz-Carlton, did its own value assessment five months before the sale closed. Their “conservative” assessment valued membership liabilities at under $2.2 million, according to the lawsuit.
The suit alleges the Trump Organization also overstated the value of the Jupiter golf course by adding 30% from 2011 to 2014, and 15% from 2015 to 2020 because of a so-called “Trump brand” premium.
Miami Herald Staff Writer Nicholas Nehamas contributed to this report.