In the civil fraud trial that is threatening Donald Trump’s real estate empire, his lawyers are now turning to external accountants, blaming them for their role in preparing financial statements at the heart of New York Attorney General Letitia James’ lawsuit. The blame was upped with expert testimony from a former federal financial regulator.
During the trial, Jason Flemmons, an accounting expert, questioned some of the practices of the outside accounting firm, Mazars USA LLP, and raised doubts about earlier testimony from a retired Mazars partner, Donald Bender, who had worked on Trump’s financial statements for several years.
Bender, the first witness called by state lawyers, had testified that he had asked a Trump Organization executive for all of the company’s property appraisals – not just ones used for the financial statements – and that he was surprised to learn years later that some hadn’t been turned over. Flemmons, however, deemed Bender’s claim as “not professionally plausible” as such diligence isn’t required under professional accounting standards.
According to Flemmons, compiling financial statements involves a “much lighter touch” than more stringent accounting practices, like audits, and requesting appraisals “would be highly unusual” and “entirely inconsistent” with what’s required. In preparing financial statements, also known as compilations, accountants only need documentation used to determine the value of assets, such as Trump’s skyscrapers, golf courses, and other properties.
Trump’s company provided justification for the determined numbers and explained instances where it used different standards to determine a value, which is permitted. However, Flemmons has not been asked to address the state’s specific claims that Trump executives used a variety of methods – sometimes misclassifying properties – to attain the highest values.
According to Flemmons, there would be no obligation or expectation on the part of Mazars or any accountant performing compilation services to request appraisals that weren’t used to arrive at the values. Mazars, which cut ties with Trump last year, had stated that his financial statements “should no longer be relied upon” after concerns were raised about their accuracy by Letitia James.
During the trial, Trump’s lawyers seek to refute the state’s claims that Trump, his company, and top executives manipulated the value of his assets to make him look wealthier and his properties more successful than they actually were. Letitia James alleges that Trump and his company exaggerated his wealth by billions of dollars on the financial statements by inflating property values, seeking more than $300 million in what she says were ill-gotten gains, and wanting the defendants banned from doing business in New York.
Prior to the trial, Judge Arthur Engoron ruled that Trump and other defendants committed fraud by exaggerating his net worth and the value of assets on his financial statements. The judge imposed a punishment that could strip Trump of some marquee properties, though an appeals court is keeping them in his control for now.
Trump has denied wrongdoing and has maintained that disclaimers on the financial statements insulated him from liability for discrepancies or misstatements.
“It’s effectively saying user beware,” testified Flemmons.
Trump has argued that, if anything, his financial statements…
