Trump has been a financial fraud for decades

The evidentiary record in the $250 million Trump civil fraud trial in New York State Supreme Court has been completed. But the evidence before Judge Engoron does not tell the entire sordid tale behind former President Donald Trump’s fraudulent financial statements.

What the trial has not revealed is that the Trump Organization’s false financial statements are connected to a much larger corrupt pattern of persistent and continuing financial fraud and tax cheating that originated at least as early as the 1990’s, when Trump’s businesses turned into a colossal financial train wreck.

This background was neither a subject of the trial nor an element of the claims alleged in New York Attorney General Letitia James’s complaint. But it does suggest why Trump ultimately falsified his financial statements. It also soundly rebuts Don Jr.’s trial testimony that his father was a “visionary” and an “artist with real estate.” What it does show is that Trump is nothing more than a classic con artist.

The financial woes that led to Trump’s creation of the false financial statements can be traced back to 1991, when he filed for bankruptcy after the financial collapse of his Taj Mahal casino in Atlantic City. That debacle was followed by five other bankruptcy filings — two more casinos in 1992, the New York City Trump Plaza hotel in 1992, the 2004 bankruptcy of the Trump Hotels and Casinos Resorts and the 2009 bankruptcy of Trump Entertainment Resorts.

Having run his businesses into the ground, Trump became a financial pariah unable to obtain funding from legitimate financial institutions. Trump then engaged in a concerted criminal effort to resuscitate his businesses through tax evasion and old-fashioned business fraud.

In 1992, in the midst of his bankruptcy filings, the Trump family created a fictitious company, “All County Building Supply & Maintenance.” It appears the company’s main purpose was to evade gift taxes on funds that Fred Trump, Donald’s father, funneled to Donald and his siblings as ostensibly legitimate tax-deductible business expenses.

I know tax fraud when I see it. As an assistant special Watergate prosecutor, I conducted the grand jury tax evasion investigation into President Richard Nixon for back-dating his gift of vice-presidential papers to the National Archives in order to take a bogus tax deduction. As an Assistant U. S. Attorney in the Southern District of New York, I prosecuted a large number of tax evasion cases involving white collar and mafia defendants. Since leaving the government, I have regularly represented private clients under investigation for tax fraud.

Creating a sham corporation as the Trumps did to cheat the IRS is a classic method of perpetrating tax evasion. Indeed, it is no coincidence that the reporting by the New York Times of that alleged fraud led to Trump’s sister, Maryanne, to resign as a judge from the Sixth Circuit Court of Appeals rather than answer to a judicial investigation.

The Times also raised numerous issues of other questionable Trump tax practices that, if they had been investigated further by the IRS, would likely have revealed a much broader pattern of tax evasion in addition to the gift tax scheme.

While reaping the proceeds of tax fraud, Trump raised funds through highly questionable sources. In 2008, Don Jr. announced, “In terms of high-end product influx into the U.S., Russians make up a pretty disproportionate cross-section of a lot of our assets.” One of those assets was Trump SoHo, a condo-hotel tower announced by the Trump Organization in 2006 on Trump’s reality show “The Apprentice” and built in downtown Manhattan near the Holland Tunnel. That project was reportedly financed with Russian funds, allegedly fronted by Russian businessman Felix Sater, whose shady background included a conviction for racketeering.

Don Jr. and Ivanka Trump, both witnesses at the fraud trial who denied any knowledge of the falsities in the financial statements, were intricately involved in a fraudulent scheme to sell the condos in the Trump SoHo project. Emails obtained by the Manhattan District Attorney’s Office showed them knowingly defrauding purchasers by lying to them about the number of units that had been actually sold.

Under the offering plan for the SoHo project filed with New York state, 15 percent of the units had to be sold before the Trumps were permitted to retain the sales proceeds. In 2012, Cy Vance, the Manhattan District Attorney, chose not to indict Don Jr. and Ivanka after Trump’s lawyer made a $25,000 campaign contribution to Vance’s reelection campaign.

The Trump Organization most likely created the false financial statements in response to Russian money no longer being available or the need to use legitimate funding sources. In 2014, the Trump Organization entered into a 60-year lease agreement with the federal government for the Old Post Office building in Washington, D.C. to convert it into a luxury hotel. Because the government was the landlord and there was close regulatory review to approve that lease, the Trump Organization had a need to use a legitimate banking source, namely Deutsche Bank, to obtain the $170 million payment to the U.S. government.

Not only did Trump’s fraudulent inflated financial statements provide the appearance of adequate collateral and thus entitlement to lower interest and insurance rates, they were also used as instruments to cheat the U.S. Treasury out of millions of dollars in taxes. For example, the Attorney General’s complaint alleges that Trump donated a portion of his Seven Springs property as a conservation easement “for giving up” certain development rights and took a tax deduction on his federal tax returns based on his fraudulently inflated value of the property.

According to the complaint, that tax deduction “ultimately, and fraudulently, reduced Trump’s tax liability by more than $3.5 million.” This blatant use of phony financial statements to facilitate tax evasion, coupled with Trump’s past fraudulent history, shows that the false financial statements were simply part of the Trump way of doing business.

Nick Akerman, a former Assistant Special Watergate Prosecutor and a former Assistant U.S. Attorney in the Southern District of New York, is an attorney in New York City.