What to know about the civil fraud lawsuit Donald Trump and family face in New York

CNN  — 

An intricately detailed, 200-plus page civil lawsuit lays out New York Attorney General Letitia James’ case that former President Donald Trump, three of his children, his companies and his business executives defrauded lenders, insurers and other entities.

“This conduct cannot be brushed aside and dismissed as some sort of good-faith mistake,” James told reporters Wednesday.

“No one, my friend, is above the law,” she added.

Trump and his company used “false and misleading” financial statements, her lawsuit alleged, “repeatedly and persistently to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available to the company, to satisfy continuing loan covenants, and to induce insurers to provide insurance coverage for higher limits and at lower premiums.”

Trump responded to the lawsuit by calling James “a fraud who campaigned on a ‘get Trump’ platform, despite the fact that the city is one of the crime and murder disasters of the world under her watch.”

Filing the lawsuit allows James to publicly air a wide-ranging assortment of financial fraud allegations, which the attorney general says played out for a decade and touched on nearly all aspects of Trump’s business empire. James said she’s also made referrals to federal law enforcement authorities.

Here’s what to know about the new case James has brought:

In 200-plus instances, James said, Trump embellished value of his assets

According to the schemes alleged by James, the financial statements compiled by Trump – which were offered to banks and other entities Trump was doing business with – include values of assets that were blatantly contradicted by internal records or otherwise falsified.

“All told, Mr. Trump, the Trump Organization, and the other Defendants, as part of a repeated pattern and common scheme, derived more than 200 false and misleading valuations of assets included in the 11 Statements covering 2011 through 2021,” the lawsuit said.

James characterized one of the episodes as a “two sets of books” scenario: “one internal set of records reached one conclusion regarding market value, but the figure presented on Mr. Trump’s Statement was considerably higher.”

James claims that Trump reaped a “substantial” financial benefit by putting forward faulty information in his financial statements, including $150 million in the form of favorable interest rates he obtained from the banks that James said his team misled.

The alleged schemes touch a variety of Trump properties, including golf courses, hotels and Mar-a-Lago

James said the misrepresentations on Trump’s financial statements affected “most if not all of” his and his company’s “real estate holdings in any given year, including several of Trump’s highest profile business ventures.

Trump valued his Mar-a-Lago club in Florida as high as $739 million when the property was likely worth about a tenth of that, James alleged, while accusing Trump of further boosting the resort’s value by tacking on a “brand premium.”

US accounting principles prohibit such premiums and the Trump financial statements “expressly claim to exclude brand value,” James said.

Included in the 2011 valuation of Trump’s Westchester golf course in New York was the notion that new members would pay $200,000 in initiation fees, even though Trump instructed the club to reduce or waive those fees in a bid to increase club membership numbers, according to the lawsuit.

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The defendants are accused of skewing the worth of the Trump Park Avenue property, by putting a value on several units that was roughly six times more than what an outside firm calculated in an 2010 appraisal. James pointed to testimony from Donald Trump Jr., one of the defendants, that indicated the company was aware that the units were rent stabilized, which is the reason the appraiser had put them at the much lower value.

Other Trump ventures – including his Doral golf resort in Florida, the Old Post Office property he leased for a hotel in Washington, and Trump International Hotel and Tower in Chicago – are implicated in the lawsuit, with James saying that loans were extended for those properties because of inaccurate representations the Trump team made to banks.

James also claimed that the Trump financial statements describes profits from real estate properties as being part of Trump’s liquid assets when they were in fact cash held by a real estate trust, Vornado Partnerships, in which Trump had a minority stake. Doing so contradicted both US accounting principles (known as generally accepted accounting principles or GAAP), according to the complaint.

“In some years these restricted funds accounted for almost one-third of all the cash reported by Mr. Trump,” the lawsuit said.

Trump’s statements falsely claimed he had outside help for valuing assets, lawsuit says

The lawsuit said that “no outside professionals were retained to prepare any of the asset valuations” that were presented in his annual financial statements, despite representations on those statements that the evaluations were done with “outside professionals.”

“To the extent Mr. Trump and the Trump Organization received any advice from outside professionals that had any bearing on how to approach valuing the assets, they routinely ignored or contradicted such advice,” the complaint said.

Jeffrey McConney – a Trump Organization executive and a defendant in the lawsuit – was asked by the attorney general’s office in a 2020 interview about the references to outside professionals on the Trump financial statements, according to the lawsuit.

“After that interview, the Trump Organization changed the wording for the 2020 Statement, omitting any representation that any particular valuation was reached in consultation with ‘outside professionals’ and instead listing outside professionals as merely one factor that may have been ‘applicable’ in some unspecified manner,” James’ complaint said.

McConney has not responded to a request for comment from CNN.

What penalties does Trump face, if the lawsuit is successful

James said that the conduct justifies canceling the Trump Organization’s corporate certificate, which would effectively force the company to cease operations in New York state.

She is also seeking a financial penalty of what she estimated is $250 million in ill-gotten gains.

Additionally James said Trump and his threree eldest children – Trump Jr., Eric and Ivanka – should be barred from serving as officers at any New York registered business. The lawsuit wants to impose several limits on what Trump’s businesses can do going forward, with proposals to bar them for the next five years from acquiring real estate in the state and from applying for loans from New York chartered banks.

She also seeks the replacement of the current trustees of the Donald J. Trump Revocable Trust and the appointment of an independent monitor to oversee the Trump Organization’s financial dealings for the next five years.

Trump responds with attacks on James

Trump has been railing against James on social media since the lawsuit was unveiled Wednesday.

“I never thought this case would be brought,” Trump wrote on Truth Social, accusing James of filing the wide-ranging lawsuit to reverse “her really bad poll numbers.”

Trump’s hostility towards James has stretched for years, including when he was President and she was spearheading several lawsuits challenging the policies of his administration.

His personal attorney Alina Habba said in a statement that the lawsuit was “neither focused on the facts nor the law,” but rather “on advancing the Attorney General’s political agenda.”

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“It is abundantly clear that the Attorney General’s Office has exceeded its statutory authority by prying into transactions where absolutely no wrongdoing has taken place,” Habba said. “We are confident that our judicial system will not stand for this unchecked abuse of authority, and we look forward to defending our client against each and every one of the Attorney General’s meritless claims.”

What’s next in the lawsuit

James’ complaint is a civil lawsuit, meaning it could take years for the case to work its way through the legal process in the New York state court system before it even goes to trial.

The process will likely include months and months of litigation over what shape that trial should take – or if the case even warrants going to trial at all.

James’ office and the defendants could settle the lawsuit, though James resisted that route in recent months when the Trump Organization, according to sources, offered to settle to ward off the lawsuit even as they denied any wrongdoing. James’ office made it clear it isn’t interested in the deal, people familiar with the matter said.

However, at her news conference announcing the lawsuit, James said that her office’s “doors were open.”

What does this mean for Trump’s criminal exposure?

By launching a civil investigation against Trump, the New York attorney general’s office faced a lower burden of proof than what would have been necessary to bring a criminal case against Trump.

To mount a criminal case, prosecutors would need evidence of Trump’s state of mind and whether he intended to mislead or defraud anyone when he approved the statements mischaracterizing the value of his assets.

A criminal investigation by the office of Manhattan District Attorney Alvin Bragg is”active and ongoing,” Bragg said in a statement Wednesday. But those investigators, as CNN previously reported, have not secured a key insider from Trump’s world who could tie Trump to the allegedly false valuations.

The district attorney’s office has brought charges against Trump companies and former Trump Organization chief financial officer Allen Weisselberg. Weisselberg agreed to a plea deal earlier this year.

James also said she was referring the conduct to federal investigators at the Manhattan US Attorney’s Office and at the Internal Revenue Service. Her complaint cited federal law that the alleged conduct could have “plausibly” violated, including bank fraud and false statements to financial institutions.

The US attorney’s office declined to comment. An IRS spokesperson said that the agency receives “potential criminal activity from a variety of sources every day,” adding that its agents “review information received for further criminal investigation. The agency “doesn’t confirm the existence of investigations until court documents are publicly available,” the spokesperson said.

Regardless of where those referrals go, James’ lawsuit adds another battle line to the multi-front legal war Trump is fighting. Several of his former White House deputies have testified or have been subpoenaed in the Justice Department’s criminal investigation into the plots around the 2020 election. Documents from his White House that were seized by the FBI at his Florida home in August are the subject of a DOJ criminal investigation as well, though limits have been placed on that probe while a third-party review of those materials proceeds.

CNN’s Kara Scannell, Curt Devine, Marshall Cohen, Katelyn Polantz and Gabby Orr contributed to this report.

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