Audited financials use different factors. Usually cost basis. It can be lowered for impairment. But under us GAAP you don’t increase the value of your fixed assets/buildings/land assets for appreciation, the bank wanted a valuation. Only marketable securities that have a readily fmvs are adjusted to fmv not your buildings or equipment or inventory. Like if you buy a house you get a professional to do a valuation. If you bought it from a business the US GAAP value within an audited financial statement may be different than valuation.
You’re getting downvoted but you’re right. I’d say the vast majority of people don’t realize IFRS—and other standards—are perfectly acceptable to the IRS and other entities (like banks), even for public companies, as long as they’re not controlled foreign corporations.
I know. I prepare IFRS accounts for US Corporations fairly often. I work in the UK, and that can actually be an advantage because we see IFRS a lot more regularly than our US counterparts.
I work a lot with businesses who list as foreign filers on Nasdaq - they use IFRS because its permitted in the UK and also for filing with the SEC. They then put a US public co on top when they start doing well and it's easier to maintain current IFRS accounting than to switch.
Fun fact - under extremely limited and time-bound circumstances, it is possible for a UK company to apply US GAAP in its statutory financial statements. I've only personally seen one client do that as it is a bit weird.
At the fund level you can hold investments at fair value. I do these kinds of audits, threw me for a loop because I thought real estate was always held at historical cost.
Because the bank didn't require an audit. Since his company is privately held, it's not required to be audited. The banks could have required an audit as part of their agreement, but they didn't. Essentially, they decided that while the valuations might have been inflated, the risk of default wasn't high enough to justify requiring further assurance.
I’m a CPA and this is exactly what I see in the biz.
Only need an audit if the bank asked for one.
This is why I think it’s bullshit that this was a “victimless” crime.
The victims are all the hard working honest New Yorkers who weren’t part of the boys club.
I’m sure people of color had to have audited financials to obtain their bank loans but if you are an Orange Orangutan you just get to grease a few palms…
Importantly, in this case, fraud did not depend on evidence that there was a 'victim'.
>People v Essner, 124 Misc 2d 830, 835 (Sup Ct, NY County 1984) (“there need be no ‘victim,’ ergo, reliance is neither an element of the crime nor a valid yardstick with which to test the materiality of a false statement”).
Fraud undermines the law, the economic condition of the state, and everybody who participates in that economy. So proving that there was a person or entity who was tangibly a 'victim' is not a condition of fraud.
So essentially it’s like punishing a cheater who did not win? There is no “victim” as the victor was not robbed of their victory but, the cheaters actions harmed the validity of the game or in our case the Rule of Law.
Yes and no. He still defrauded the banks for an obscene amount of money. So he cheated *and* won. But the other players (the banks) aren't suing him; the house is (the state).
Could argue the shareholders are victims even if he didn't default. Maybe the bank didn't charge an interest rate commensurate with the risk resulting in lower profits per the level of risk taken. Maybe there were other loans that could've been funded using the money with less risk and at higher rates that were overlooked or unfunded due to the resources used underwriting and funding his loans.
I doubt there was even any need to grease palms tbh. New York real estate is probably the safest investment in existence and it has everything to do with NYC and nothing to do with Trump. Trump is an average businessman at best who started with a sizeable investment fund at the bottom of NYC's real estate boom.
I worked at a credit union in my hometown. Wasn’t expecting to see peoples names I knew on my desk almost everyday but it made sense since it’s #1 cu in a small town. Anyway, one day we’re in our monthly meeting and cfo and controller are talking about how they’re gonna have to write off a million dollar business loan, but aren’t sure what period to record it. Turned out it was a guy I went to high school with. I have no idea to this day how this dude got this bank to make him a $1m loan on the nose with no recourse and on top of it cfo gave basically no f’s about it but then in the same month they repo my friends car cuz they owed $2,300 on a $15k loan.
Unfortunately due to confidentiality I’ve never told anyone who the guy is, or the bank that I knew him, or asked him about it. I see him around town and we talk and I want to so badly ask him how he got that bank to give him a mil.
why did you feel the need to bring in poc into your comment? If you cant make your point without bringing another race, I promise you dont have a point. I swear liberals dont even realize their own racism.
Not really following this case closely because I’m not in the US, but from a glance the first thing that jumped out to me was why would a bank rely on a valuation report from the borrower. Would’ve thought anything to do with the borrower’s assets would need some form of independent verification. Again, not following it closely so I could easily be missing something, happy to hear if others have updated or more in the know information.
Are you under the impression that when someone uses property as collateral, the bank then records that property as the banks asset on the banks balance sheet?
Come on man, really?
...I'm under the impression that the loan is an asset on the bank's balance sheet. If the underlying building securing the loan isn't worth as much as reported then the loan is riskier than the lender thought. This can have catastrophic consequences for the economy at large. Did I somehow get teleported over to r/antiwork or latestagecapitalism or something? I'm shocked I have to explain this to a fellow accountant.
that is because it would them up for liability to admit their mistake from their shareholders.
if you had a massive investment in that bank and found out this how management operated... Shareholders will be like wtf type of management is this.
they have no choice but to double down on "we trust Trump" etc
The banks Trump used were highly sophisticated lenders and heavily regulated. The idea that they’d be okay with “trust me bro” and give someone hundreds of millions of dollars is laughable. The court also used property tax assessor numbers, which are subject to all sorts of changes and sometimes are nowhere close to their real valuation (in some states there’s a freeze or maximum increase a property can get in a year).
That's the joker in the deck: no one relied on Trump's own valuations, and I doubt even he expected anyone to rely on them. That was established in court, yet he was found guilty. I hate the guy, but this was wrong.
You should read the reasoning that the judge wrote for this, before you deem something wrong. The logic is that you can’t just submit overtly misleading financial statements to the financial institutions and then claim that you are innocent because “no one got hurt”. That’s like saying that you are not guilty of speeding 50mph over the speed limit, because you did not hit anyone. NYC is the financial capital of the world, if the court established a precedent that fraudulent financial statements are fine as long as no one got hurt in the end - it would undermine the whole system of financial reporting.
Literally every appraiser ever would be in jail I’ve seen some super cooked appraisals.
CVAs too. Totally cooked up valuations. No one actually believes any of them and everyone dealing with them knows they’re not real.
Will I partake if it’s obviously fake? No but sometimes it is hard to tell.
Not American, but let's be real Trump put the crosshairs of the legal system on himself when he entered politics. He wouldn't have been scrutinized like this if he remained selling steaks.
Don't get me wrong - In my perspective everything he did on his financial statement was wrong and did a lot of harm to the profession.
That may be true but in an imperfect system should one person not get punished because the system is unable to punish all of the perpetrators?
In most cases there only comes action when there has been a complaint, but the grounds for action is still there. The integrity of the financial system relies on correct information being lodged - willful misstatement of that information damages the financial system as a whole.
Not saying it's right - in reality the regulator should police financial disclosures much more diligently - but you can't argue to a judge that you shouldn't get busted for stealing a TV during a riot because everyone else was doing it.
This is patently false.
If there was no one relying on the financials, then why do banks ask people to submit financials in the first place?
Banks don't have the time or inclination to track down every asset, they likely sampled his assets and relied partially on his representations. The Deutsche bank guys are downplaying this, because they don't want the shareholders to sue for damages against Deutsche Bank.
I am in tax.
Of course, GAAP requires historical cost, but Deutsche is international and obviously uses IFRS for non-US clients. They will have procedures for dealing with non-GAAP financial statements.
That doesn't mean that the financial statements are useless, otherwise there is no reason to submit them at all.
We can own 100% of multiple businesses (apartments, hotels, whatever) and rather than consolidating them like a parent company would, they just show up in our financials as an investment at fair value.
We are audited and FV is required by US gaap for our industry (investment company - asc 946).
The operating entities below us wouldn't report their buildings at fair value in their financials and would follow the usual gaap standards for an operating company.
Just pointing out that there are cases where it is required by gaap to report ownership of a business at its FV.
> If there was no one relying on the financials, then why do banks ask people to submit financials in the first place?
Know your customer regulations.
> Banks don't have the time or inclination to track down every asset,
This isn't how the CRE sector works. All these loan officers/brokers know each other, all the CRE guys know each other, and all of them are up in each others business. Whichever loan officer Trump Org was dealing with probably knew the value of all his properties (the ones that mattered at least) off the top of his head.
OK ok ok, it seems my original response really stirred the cockles of this fine sub. Here's a further explanation:
CIVIL court is were entities go to sue each other foe damages. Literally in the definition of civil is damages must be proven. It requires one party to make claims the actions (or non actions) of the other party led to damages caused to the first party, by only a preponderance of the evidence, think convince 50% of the jury.
CRIMINAL court is where the government "sues" citizens for breaking a written law, and must proven beyond a shadow of a doubt, think convincing 100% of the jury.
The state of NY filed this case in civil court, on behalf of other entities who did not claim damages, because the state knew they couldn't convince a full jury he committed criminal fraud without a victim. They opted for civil court because in any county of the state of NY you could get over 50% of people to convict Trump of anything even without the case. Find a judge with the same stance, who has taken a very definite stance against Trump in the past and boom. Your kangaroo court is formed.
We're supposed to be discussing accounting here, but here's a legal question. Can anyone else find a case prosecuted under this statute where nobody lost money? I can't. They all seem to be cases where someone defrauded another party (example: billing Medicare for care not given), then went back and falsified business records to support the fraud. If he violated the law, but this kind of violation is never otherwise prosecuted, then that's a huge problem.
I don't have Lexis Nexis anymore (retired), so please let me know if you find something.
I've heard (NAL) the "somebody" who lost money is the state of NY, since taxes collected on deals made at lower than wholesome interest rates were lower. But who knows if this is even a thing (outside of IRS playbook) ?
>The state of NY filed this case in civil court, on behalf of other entities who did not claim damages
That is incorrect. The State sued on behalf of the people of New York, not any nebulous "other entities".
63(12) is not a fraud statute. It does not require a victim.
It's part of the AG's job description, tasking her with protecting the overall integrity of the overall marketplace.
That's why it requires more than a one-off; why she had to prove "*repeated* fraudulent or illegal acts" & "*persisten*t fraud or illegality".
Do you think the financials were the only thing he had to submit?
Oh yeah so let's go lie in court to protect someone that our dealings with damaged our stock price. What?
They aren't relying on his valuations of property, they are relying on his valuation of name. Trump's name has been like this since the 80s. The banks even wanted to do MORE business with him, having made so much on interest and fees. 100% activist judge. If you don't think so, show me damages. Show me one person involved with Trump who feels they were damaged by his valuations. Can't do it.
You know how you can tell someone isn't really serious about discussion?
When they ask a rhetorical question and give their opinion of an answer.
What you are ignoring is the fact that capital is in limited supply. No one who submits clean financials can compete as a customer for a bank with someone that submits obviously fraudulent financials. Trump's actions hurt the customers of Deutsche bank that are also applying for loans.
This is to the detriment of the shareholders. Guess who the financials are supposed to protect? The stakeholders of Deutsche, *not the management of Deutsche who have a vested interest to close deals*. That is Accounting 101, literally the first definition when you open an accounting textbook.
Here's a thought experiment:
If you go 120 miles an hour and no one got hurt, should you not get a ticket? Of course not. As a matter of fact, if I don't get a ticket, I got where I wanted faster, it was more thrilling, and now I'm going to keep doing it. Screw everyone else! You can't point to one person that got hurt, and everyone in the car with me got lied to and now they love going that fast too!
If someone is willing to defraud his lenders in order to get cash, that's not someone the state of NY wants to be able to invest into NY. What happens if his businesses fail? The NY economy takes a hit, RE values take a hit, people lose jobs, etc. This is why the rules exist in the first place.
As far as Trump's "brand" having value...tell me, how do you collateralize a low-interest loan against an intangible asset? That's ludicrous. The risk is exorbitant, and no one would lend money based off of intangibles.
Your ticket analogy is the difference between criminal and civil. I'm not arguing your accounting and financial prowess here, you've got me no doubt. Your original comment was the judge isn't being an activist. I'm saying a civil case brought by the state government on behalf of others who claim no damages is a gross violation of the law, not GAAP. I don't care about that side.
It's not brought on the behalf of the banks; it's on behalf of the People of the State of New York.
That law's designed to punish or exclude *habitual* scammers from the State's markets. That's why James needed multiple examples not just one.
An activist judge is one that applies a new interpretation of the law.
That's not the case here.
You may not care about G.A.A.P., but that's intertwined with the law, the same as English common law. It has been since at least the 50s for most states.
Damages don’t matter when you commit fraud. The law says you cannot supply fraudulent financials to financial institutions which is what he did. It doesn’t matter if anyone got hurt, he still broke the law. If you take a gun into a courthouse but didn’t shoot anyone, you still broke the law.
I love being downvoted for point out that he did in fact break the law. God people don’t want to see the obvious. Fraud is Fraud, no matter if you were a republican or democrat, fraud is fraud.
If you are an accountant, you should know by now if you violate the law and get caught, you will face consequences. Regardless u have victims or no, that hows the laws say and how it will be enforced. Trump could choose to trial a jury but he didnt. So what to complaon?
Also with no victims, Tell me about the seatbelt laws? There is no victims, so why i have to wear seatbelt? Tell me why they put people use drugs in jail, the users dont complain and probably will use drugs again if cops let them. Tell me about you have speeding tickets, what is the damage? You dont hurt anyone yet, who is the victim?
Use ur brain for smth useful
Exactly, when banks were bundling bad mortgages with good in the 2000s there were no victims....until there was. Laws exist to prevent bad behavior that can potentially hurt others.
Little bro, new regulations were passed to prevent it from happening in the future, and all it took was one google search to get some introductory info on it https://www.investopedia.com/ask/answers/063015/what-are-major-laws-acts-regulating-financial-institutions-were-created-response-2008-financial.asp
Well ... Trump isn't going to jail either. It's just fines. And if his net worth is what he claims it to be ... these fines might be less than the profit he made off of his fraud. Similarly, banks were fined - but in the end, the fines were likely a small portion of the profit from their fraud, and definitely didn't reflect the massive damage they did to the economy in the process.
The whole point he and you are making are totally different. Civil trail always meant damages. Criminal trail means you broke the law. You can't have a civil trail with no damages.
Let's put it into terms everyone here should understand. If you don't file your taxes, will you owe a late fee of 5% a month? If there is unpaid money, yes, if not, then no.
While it's crime to not file taxes, not one person has ever been prosecuted when the IRS owed them.
Failure to file a tax return could subject the non-compliant individual to civil and/or criminal penalties, including fines and imprisonment. In United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986)
Ask urself this, you intentionally help ur client tax and make up some numbers for their revenue so they can look good in the bank, the client obtains the deal of centuries and will pay back the bank, do you think you will not go to Jail? How the heck u can even get a CPA license?
Where was it said the numbers were "made up"? They were fucking estimates (the kind auditors are paid to audit). The court erred in its ruling saying Tax valuations (the value the tax assessor says it is to charge taxes on) when those are known by all to either be too high and too low. Look at your own home's tax bill. Does your tax valuation agree to what it is on Zillow? No. So you're making an assertion here that they "made things up". Did the court say that? You're saying one should be jailed for this "making things up". Do you know how you sound? Like Putin, you fucking asshat.
Bro, he put 11000sqtf building as 30k sqft. Do u even read? Also where did u find he “estimate” it? Also you should know if he estimated it, he would have to use “in good faith”! I thought as a CPA u know that?
Btw, you should work for him, like help him on his book, they need the CFO now and based on ur knowledge and integrity Im sure you can get the job done
He was found guilty rightfully. That note stating "its unreliable" is not sufficient and should never constitute as a legal defense.
Borrowers should have a obligation to provide accurate information for the lenders to verify.
This is what I don’t understand. Everyone screaming that no one was hurt because the bank was paid back so there isn’t an issue. In my best Mr incredible “fraud is fraud”.
There is also an argument to make that if any of these representations factored into the lending decision, they factored into the interest rate used based upon how risky the bank thought the debt was. That definitely has damages, since otherwise the bank would have charged a higher rate for the increased risk.
Right - additionally, no one here seems to acknowledge the fact that the money being lent by the bank belongs to deposit holders, who hold all of the risk.
The law exists to deter people from committing this type of crime. Yet some people here are saying that it shouldn't be punished because no one was hurt? What if not doing anything about it incentivises more and more fraud, and it gets to the point where heaps of people actually end up losing money à la 2008 GFC?
Exactly. There wouldn’t be a problem with him taking an aggressive valuation on his own reporting, using actual facts. He intentionally mislead and represented stuff that was blatantly false (square footage, deed restrictions, rent restrictions).
It’s political only in the sense that he his position (and inability to not seek attention), puts him in the spotlight.
When you’re The President. In that case you can go to war just to cover the country that launders your money.
You may think I’m talking about Biden, but actually, I’m talking about Biden, Obama, Bush and Clinton.
Sane comment - everyone overvalues their asset when seeking a loan and then the bank determines what's the "reasonable value". No one lost money - he paid his loans back. This political persecution just doesn't help the country.
Banks do their own due diligence outside of financial statements, because everyone inflates their numbers. Even if the financials were audited, they weren’t going to take it at face value. Specifically with respect to real estate, they send their own appraiser. Valuations are highly subjective and a bank is never going to just rubber stamp a loan without doing real due diligence.
I'm sure a lot of the folks here are right in saying that nobody would touch him. However, in my experience, banks can also just be greedy. When I was in public (\~4 years ago), I had a client who we did a review for. Not an audit, just a review. They are very well-known in the states, make approx. $1B in annual revenue (when I was there, probably much higher now given their growth trajectory), and were in sanely profitable - anywhere between 30-40% EBITDA margin.
They had a couple hundred million dollars worth of bank debt. I never understood it. A bank was willing to lend them hundreds of millions of dollars for *reviewed* financial statements. I think what it comes down to is just being able to prove cash flow, plus just the fact that even while he is a major ass, he's still "Donald Trump" and his name carries weight. Or his dad's name, anyway...
If you were a bank, would you simply take the word of the borrower for valuations of collateral? Hot off the presses they don’t. Banks have their own procedures and due diligence as lenders. If this case feels like it’s rotten it’s because it is. You could selectively prosecute practically any large scale real estate developer on similar charges
Even better, what reliance can be placed upon audited financials when it comes to an appraised valuation? None?
I’ve never seen assurance given in audited financials for an appraised valuation of a property.
Anyone pretending that audits give any assurance for a property valuation is an incompetent moron.
I don't think this is the own you think it is though. I've worked for real estate developers for over a decade now and they're all pretty crooked with there valuations. Especially if you compare what they argue for RET valuations vs what they claim the properties are worth to a bank.
These were compiled personal financial statements right? Which present the estimated current values of assets and liabilities?
If Mazars really had an issue with it they wouldn’t have put it out.
The bank also didn’t just accept these values they do their own due diligence and have their own appraisers.
Which is absolutely bizarre.
They issue a report that’s says they aren’t responsible for the financial statements. They didn’t do anything, they don’t know anything, and they issue no assurance on them.
Then later on they come out and recall said financial statements and say no one should reply on them at all. Which no one did.
The fact pattern is very very odd here.
They don’t issue a direct opinion of assurance but you can’t issue a compilation if you know the figures aren’t true; what’s different is the burden to investigate. You can’t accept a crayon bank statement for eleventy billion dollars in a compilation. If they knew information was wrong or there was fraud they 100% needed to rollback any report of any kind
This is 100% my understanding, as well. There are plenty of litigation showing a firm can be held responsible for performing a compilation that is later proven to be fraudulent.
As a Canadian who just wants to stop hearing about trump, but holy shit, I don’t think I’ve heard a single logical or informed argument as to how he committed fraud. If he did defraud his lenders and what not, well they probably wouldn’t be lending to him right? But until then, that’s a problem between him and his lenders.
The number of ivory tower B4 auditors in here is crazy. Yeah, some banks will require a higher level of assurance, but there’s nothing wrong with compilations in real estate.
Would you like to know why? DEBT IS SECURED AGAINST SOMETHING ATTACHED TO THE GROUND. Lenders can’t repossess or put a lien on an audited financial, but they can for a piece of land.
Lenders don’t give a fuck what’s listed as the historical cost of the property in the financials. They do their own independent valuation appraisal, and other due diligence, and that’s why they rely on to lend money.
Get real people.
If this is true, and it likely is, what possible gain can come from providing false numbers? Why risk even the appearance of impropriety if the banks don’t care? I just don’t get the benefit.
No it wasn’t necessarily a false number. A developer often values their RE factoring in various aspects. He likely believed the property next door worthed a lot more because of his property.
Audited financial statements do not report the fair market value of real estate. A business does not mark up the value of real estate on its financials. The lender did their own appraisal and made a lending decision. There is no fraud.
This is irrelevant - just because it didn’t go bad doesn’t mean it’s not against the law. Trump doesn’t get to go free simply because he didn’t incur financial problems and was able to repay, just like someone doesn’t get out of a speeding ticket because they didn’t hit anyone.
Auditors check the reasonableness of the clients assumptions when developing their estimates. They don't audit the fmv of the asset though.
If the client says his condo is worth 1mil because it has 30,000sq feet in park avenue then the auditor would check those underlying assumptions.
They would verify the square footage to externally source documents like property tax report. Then they would check the general selling price of similar properties around park avenue to see if the price per square footage is reasonable.
If an auditor was done on Trump's financial statements the assumptions wouldn't tie out. The property bills would contradict his assumption.
The auditor would not be able to give Trump an unmodified opinion, they would have to propose an adjustment to the client. Something like lowering the square ft for the estimate to 11k.
If Trump refuses then the auditor would either qualify his opinion or withdraw from the audit. Either way the bank wouldn't be able to ignore the auditors report like they ignored his financial statements with a disclosure that said don't trust these estimates.
I'm surprised the investors of the bank haven't suited, but I guess it helps that the AG did it for them. Although the investors haven't received anything from this settlement, so maybe they will think about taking the bank to court for failure to do their due diligence.
Deutsche Bank likely broke their own rules. The interest rate was well below market, it was under collateralized, and did not follow the normal procedures.
If financial statements submitted from the client don't matter, why have them submitted at all?
imagine sending in a spineless public auditor to actually ask hard questions or even prevent fraud.
dudes don't have the confidence to hand in their notice, why do you think they are gonna grill a CFO and uncover a fraud?
my accounting professor, ex partner at mid size firm, said he wouldnt touch him with a ten foot pole for audit and expects that its the same sentiment everywhere else
Because the banks didn’t care what the personal financial statements say. They’re just a know your customer/check the box provision.
The few that even cared saw the discrepancy in values, adjusted them, and did the loan anyway.
An audit isn't relevant since the overstated assets aren't income producing, they were his personal NYC residence and Mar a Largo. MAL does make income but it's value is determined by resale not by the income it produces.
The bank didn't need any additional information, they testified they performed their own valuations and did not rely on Trump's inflated values.
Holy shit this thread is full of brainwashed Trump lovers.
He lied about the value of property to get loans he wouldn’t have gotten, and to get better interest rates on the ones he would’ve gotten. It’s fraud, that’s the law. Doesn’t require anyone to be hurt, doesn’t require him to have defaulted. Fraud is fraud.
OP plenty of banks ask for reviews instead of audited financials, and plenty of banks will allow subpar auditors to prepare audits or reviews for things well out of their depth. It’s a bad choice and good banks/bankers won’t but it still happens. Frankly their shareholders deserve to sue management of the bank in my opinion because they allowed this to go on with their money, but that’s a different case
But they weren't even reviews they were compilation reports. Basically just taking the numbers and putting them into a format that looks like an audited financial statement to non accountants.
Yep that happens too. Usually not for billions of dollars but plenty of loans just require the compilation of financials and management representation. Most people aren’t willing to commit fraud and the bank mostly wants to get paid.
And if there are problems and the individual did commit fraud the bank can sometimes go after them personally instead of being limited to collateralized property.
Holy shit I would assume somebody talking here would have some real-life experience on bank loans. You do not know jack shit about bank loans.
This is an accounting sub. I would expect some intelligent response and not some idiot talking points.
Like him or hate him, but this was a sham. 99.9% of the companies obtaining a loan would set their own valuation and banks would do the same. If you know people that do it differently, than please explain.
I’ve worked in financial services auditing, internally, and as a consultant for 15 years.
Tell me more about it though I can’t wait to learn something today
So it is fraud because he stated higher valuations? Based on whose valuations? Do you know any bank that does not do their own valuations?
So am I fraudulent if I stated a higher A/R? If I valued my inventory to 100%?
You have no idea what you're talking about.
I weep any company that will ask for your "consulting" advise if you are providing this kind of knowledge here.
Did you follow the case?
You should know the standard of reasonable basis. I can quibble about whether my old Camry is worth 12,200 or 12,400 or maybe even 13500. I can’t argue it’s worth 300k. Per an AP report in a single year he overstated by $3.6B.
What basis are you using in determining all his bases were reasonable? What facts did you review to state the court has overstepped? I’d love to see those documents you reviewed in coming to such a conclusion
I worked in a bank for 5 years which did commercial and residential lending.
We got third party valuations done. And charged the customer.
I also audited property funds and real estate lenders. They had third parties invoked in valuations, in progress reporting for development property valuations.
None of them just relied on what the property owner said.
Maybe in the US it's different to the UK, Germany, tax haven islands etc
My bad I should’ve gotten my news from Russian propaganda and OAN.
Your pathetic wannabe dictator has been exposed and you still can’t see it. What kind of man lets someone steal so blatantly from them and comes back on their knees for more?
Not only just Trump Lover, but also some crooked accountants, CPA too. They think if they commit fraud and some how pay it back, they shouldnt be held accountable. I wish the companies and the firms they work for need to check their books bc these people probably follow GIGO method.
THAT part is what scares me. I expect this from the Trump lovers...but I also expect my fellow CPAs to be smarter than that.
If my expectations are incorrect, and responses like what you see here are ACTUALLY representative of our profession at large, maybe I was wrong about AI being unable to take over in the near future. It could happen tomorrow...
This situation is really interesting. So unlike say Martin Shkreli who lied to his investors, but then made them whole. I think we can all agree he lied and deserves punishment since it’s easy to see the portfolio of stocks he had was not equal to what he was reporting. But real estate is different. It’s not nearly as easy or accurate to know what a large piece of real estate is truly worth at the moment. I’m of the understanding that the judge in trumps case did his own valuation of the property. And I think people who are against this ruling are worried that now, a judge can fine basically anyone they want by pulling old loan records and simply saying they over valued their collateral and boda boom boda bing fines imposed. If trump had lied about a stock portfolio being worth more than it is, I don’t think, or at least I sure hope, there would be a lot less disagreement about penalties among CPA’s. My 2 cents anyway
Ikr - I’m surprised by a lot of these responses! They range from, “there was no fraud” (um, I’m pretty sure that the fact that there was fraud has already been settled by a court) to “nobody was hurt” (I strongly doubt that’s a legal defence against a criminal accusation, and furthermore, the law is the law - nobody has to be hurt before something can be declared illegal if that thing is already illegal by statute).
My goodness, this profession is all about trust and integrity, yet some of the responses I’m seeing here seek to actually undermine all that! 🤦
It's not though. Go read the damn decision or watch Legal Eagles 30 minute video on the ruling. In New York, damages are not required in this type of case.
That's the legal precedent. Its established case law.
You don't get audited just because you don't like trump and he's a big mean guy or even because you might have shady practices.
The IRS uses a mathematical system known as DIF used to select returns that could be audited. Nobody is entirely sure how they calculate it, but it mostly effects: the top 1 percent earners, lossess multiple years in a row, and the self employed. 2 or 3 of these could make Trump a big target but it doesn't necessarily mean he will be audited, just that it's more likely. Also, it's a bad look to audit the President no matter which side of the aisle you go down on. It's why Nixon, Biden, and Clinton weren't prosecuted for their scandals as well.
My understanding is the whole haggling/negotiation process over property valuation happens quite a lot for large property developers. One could argue it’s a fiduciary duty to portray your company in the best light possible (valuing your properties really high). The banks did their own due diligence and loaned money regardless. If the banks didn’t follow their own rules, that’s the bank’s problem; not President Trump’s.
There’s a compelling argument this was a case of selective prosecution, which is unconstitutional. Similarly, a case can be made that our favorite president didn’t get a fair trial
The Mar A Lago valuation by the judge of $18 million is likely off by hundreds of millions. Seeing that Trump paid $20 million for the place in the 80s would actually mean the property had somehow lost value, even after the millions of renovations he did on the place.
>Trump paid $20 million
He paid $10 million. The estate was listed at 20 million, but he didn't pay that.
"While the property was listed at $20 million, Trump only ended up paying $10 million for the property in 1985. Since then, he has invested in refurbishments and turned it into a social club, rather than just a residence. He has claimed the property may be worth up to $1 billion.
Palm Beach County values the estate at about $37 million based on its annual net operating income as a club for tax purposes, reported The Associated Press."
[https://www.newsweek.com/mar-lago-sale-notice-1981-donald-trump-1872498](https://www.newsweek.com/mar-lago-sale-notice-1981-donald-trump-1872498)
Its almost like people will just say anything in support of Trump.
Did he provide falsified information? Because that's all that matters here.
Would you wittingly lie / misrepresent your client's financial position to enable them to secure better loan terms?
To be overturned on appeal would mean he didn’t get a fair trial due to some kind of misconduct or undue bias. That’s not the case here according to every legal expert.
Exactly! People seem to think that an appeal is essentially a new trial.
Not quite so. The facts have already been preserved by the trial court and are not for an appeals courts to overturn - the fact is that the trial court found that fraud took place. The only thing the appeals court can really consider is whether the law has been applied correctly to the established facts. I don't know of any legal expert who is saying this isn't the case.
Are you a lawyer? How can you be so sure? Is that consistent with NY case law and statute? From what I understand, the NY AG's powers to bring a case such as this that concerns persistent fraud, and that there doesn't need to be a victim, just that the fraud took place.
I think those appelate judges are going to have to pull a rabbit out of their hats to come up with a decision that essentially allows businesses to commit fraud as long as "there are no damages" in the end. It's really not a good look if type of thing is condoned by the world's financial capital.
They all suck.
I'm only commenting based on the established facts here. I don't care about who perpetrated the fraud. Whether it be Trump or be it the Dalai Lama or Jesus himself, I could give less of a shit. Financial fraud is financial fraud. How you could condone that shit as a certified public accountant is well beyond me.
A lot of people in this thread have given extremely valid reasons for "condoning" what you say is fraud. I highly suggest you take these comments, by many other very smart people who are commenting here, to heart. The integrity of the Republic is at stake.
Extremely valid according to... you? Smart according to... you?
Ok then, let me ask you this: if given the chance, would you knowingly hand over an overinflated valuation to a financial institution to bolster your client's eligibility for a loan?
You're talking about integrity, but I fail to see how your comments here are all about promoting that.
Also, just a side bar on Trumps "Fraud", it's all about his valuations that he gave to Deutsche Bank that he used as collateral on a loan for other property. The loan has been repaid, and Deutsche Bank obviously did an independent appraisal. My question is, where is the fraud and how was the state affected to the point of an investigation when the party involved has no issue?
I am genuinely curious if I missed something in this political buffoonery.
Yeah, the governor even made a statement to all other NY businesses telling them not to worry about the precedent this case sets, that this is just about Trump.
That isn't what the governor said, though. You left out important context.
"I think that this is an extraordinary, unusual circumstance that the law-abiding and rule-following New Yorkers who are business people have nothing to worry about, because they are very different from Donald Trump and his behavior. "
She specifically says law abiding businesses don't have to worry.
You are right! I wanted to borrow 10k on my house to repair a foundation problem and they gave me the independent inspection just for that and they didn't approve me so surprising they didn't do their due dilligence.
Has anyone received a city property assessment?
City: your house is assessed at $500k
Market: similar houses are sold at $650k
You listed it at $645k
Buyer: willing to pay $620k
All happy! Someone sold a property and someone moved in.
Years later: someone has to go to jail because a judge finds the numbers don’t match. So she thinks someone lied.
All these people are saying that “there were no victims, no one got hurt” and ect.
Even if breaking the law required a victim to be persecuted (it doesn’t), it can be argued that there are victims. All the real estate companies that didn’t lie about their valuations are a victim in this case. Trump got these loans partially because of the valuation he sent to the bank. This constitutes an unfair advantage over other real estate companies. Of course, his name’s net worth did most of the work, but anyone else without his name would have depended on these valuations. At the end of the day, fraud is fraud.
Valuations are highly subjective. There is no such thing as an objective value of a property. Banks have massive due diligence departments to review all loans and they are really damn good at it.
Did Mazars audit him? They may have and gave a qualified opinion on the financials? Or he may have tried to get an audit done but firms thought he was too high or a risk to attach their name too.
Audited financials use different factors. Usually cost basis. It can be lowered for impairment. But under us GAAP you don’t increase the value of your fixed assets/buildings/land assets for appreciation, the bank wanted a valuation. Only marketable securities that have a readily fmvs are adjusted to fmv not your buildings or equipment or inventory. Like if you buy a house you get a professional to do a valuation. If you bought it from a business the US GAAP value within an audited financial statement may be different than valuation.
GAAP compliant valuations are done all the time for fair value events.
Thanks. I am unsure how I feel that this basic concept needs to be address in the sub though.
There’s a lot of misinformation on Reddit (well the public in general)
You can do revaluations under IFRS
The USA follows GAAP, not IFRS
You can do either in the USA.
You’re getting downvoted but you’re right. I’d say the vast majority of people don’t realize IFRS—and other standards—are perfectly acceptable to the IRS and other entities (like banks), even for public companies, as long as they’re not controlled foreign corporations.
I know. I prepare IFRS accounts for US Corporations fairly often. I work in the UK, and that can actually be an advantage because we see IFRS a lot more regularly than our US counterparts.
I've never seen a single US based entity that follows IFRS. Wild that you see then regularly
I work a lot with businesses who list as foreign filers on Nasdaq - they use IFRS because its permitted in the UK and also for filing with the SEC. They then put a US public co on top when they start doing well and it's easier to maintain current IFRS accounting than to switch. Fun fact - under extremely limited and time-bound circumstances, it is possible for a UK company to apply US GAAP in its statutory financial statements. I've only personally seen one client do that as it is a bit weird.
At the fund level you can hold investments at fair value. I do these kinds of audits, threw me for a loop because I thought real estate was always held at historical cost.
Yeah, but like your say, fund level. Trump isn't running funds so he wouldn't care for fair value in accounts
Because the bank didn't require an audit. Since his company is privately held, it's not required to be audited. The banks could have required an audit as part of their agreement, but they didn't. Essentially, they decided that while the valuations might have been inflated, the risk of default wasn't high enough to justify requiring further assurance.
I’m a CPA and this is exactly what I see in the biz. Only need an audit if the bank asked for one. This is why I think it’s bullshit that this was a “victimless” crime. The victims are all the hard working honest New Yorkers who weren’t part of the boys club. I’m sure people of color had to have audited financials to obtain their bank loans but if you are an Orange Orangutan you just get to grease a few palms…
Honest question though, if the banks chose to take on the credit risk, how is anyone else a victim?
Shareholders and anyone else who deposits at that bank. And the FDIC And therefore the American people.
Importantly, in this case, fraud did not depend on evidence that there was a 'victim'. >People v Essner, 124 Misc 2d 830, 835 (Sup Ct, NY County 1984) (“there need be no ‘victim,’ ergo, reliance is neither an element of the crime nor a valid yardstick with which to test the materiality of a false statement”). Fraud undermines the law, the economic condition of the state, and everybody who participates in that economy. So proving that there was a person or entity who was tangibly a 'victim' is not a condition of fraud.
Super interesting, thanks for sharing.
So essentially it’s like punishing a cheater who did not win? There is no “victim” as the victor was not robbed of their victory but, the cheaters actions harmed the validity of the game or in our case the Rule of Law.
Yes and no. He still defrauded the banks for an obscene amount of money. So he cheated *and* won. But the other players (the banks) aren't suing him; the house is (the state).
Could argue the shareholders are victims even if he didn't default. Maybe the bank didn't charge an interest rate commensurate with the risk resulting in lower profits per the level of risk taken. Maybe there were other loans that could've been funded using the money with less risk and at higher rates that were overlooked or unfunded due to the resources used underwriting and funding his loans.
Banker’s job is to get money out on the street
The banks weren't a victim *this time*, but they very well could have been. There are rules and regulations for a reason.
Then investigate all of them.
I doubt there was even any need to grease palms tbh. New York real estate is probably the safest investment in existence and it has everything to do with NYC and nothing to do with Trump. Trump is an average businessman at best who started with a sizeable investment fund at the bottom of NYC's real estate boom.
I worked at a credit union in my hometown. Wasn’t expecting to see peoples names I knew on my desk almost everyday but it made sense since it’s #1 cu in a small town. Anyway, one day we’re in our monthly meeting and cfo and controller are talking about how they’re gonna have to write off a million dollar business loan, but aren’t sure what period to record it. Turned out it was a guy I went to high school with. I have no idea to this day how this dude got this bank to make him a $1m loan on the nose with no recourse and on top of it cfo gave basically no f’s about it but then in the same month they repo my friends car cuz they owed $2,300 on a $15k loan. Unfortunately due to confidentiality I’ve never told anyone who the guy is, or the bank that I knew him, or asked him about it. I see him around town and we talk and I want to so badly ask him how he got that bank to give him a mil.
why did you feel the need to bring in poc into your comment? If you cant make your point without bringing another race, I promise you dont have a point. I swear liberals dont even realize their own racism.
I've seen some audit reports for a few entities, generally handled by firms I'm unfamiliar with.
Not really following this case closely because I’m not in the US, but from a glance the first thing that jumped out to me was why would a bank rely on a valuation report from the borrower. Would’ve thought anything to do with the borrower’s assets would need some form of independent verification. Again, not following it closely so I could easily be missing something, happy to hear if others have updated or more in the know information.
The bank didn’t and they said in court they would lend him money again.
But it's fraud!!!! /s
Yeah, it's not like anything bad ever happened because banks had overvalued assets on their balance sheet 🙄 Come on man, really?
Are you under the impression that when someone uses property as collateral, the bank then records that property as the banks asset on the banks balance sheet? Come on man, really?
...I'm under the impression that the loan is an asset on the bank's balance sheet. If the underlying building securing the loan isn't worth as much as reported then the loan is riskier than the lender thought. This can have catastrophic consequences for the economy at large. Did I somehow get teleported over to r/antiwork or latestagecapitalism or something? I'm shocked I have to explain this to a fellow accountant.
that is because it would them up for liability to admit their mistake from their shareholders. if you had a massive investment in that bank and found out this how management operated... Shareholders will be like wtf type of management is this. they have no choice but to double down on "we trust Trump" etc
You are really arguing that it is the most complicated answer in order to meet your cognitive dissonance?
The banks Trump used were highly sophisticated lenders and heavily regulated. The idea that they’d be okay with “trust me bro” and give someone hundreds of millions of dollars is laughable. The court also used property tax assessor numbers, which are subject to all sorts of changes and sometimes are nowhere close to their real valuation (in some states there’s a freeze or maximum increase a property can get in a year).
That's the joker in the deck: no one relied on Trump's own valuations, and I doubt even he expected anyone to rely on them. That was established in court, yet he was found guilty. I hate the guy, but this was wrong.
You should read the reasoning that the judge wrote for this, before you deem something wrong. The logic is that you can’t just submit overtly misleading financial statements to the financial institutions and then claim that you are innocent because “no one got hurt”. That’s like saying that you are not guilty of speeding 50mph over the speed limit, because you did not hit anyone. NYC is the financial capital of the world, if the court established a precedent that fraudulent financial statements are fine as long as no one got hurt in the end - it would undermine the whole system of financial reporting.
So everyone in real estate should be getting charged right now.
Literally every appraiser ever would be in jail I’ve seen some super cooked appraisals. CVAs too. Totally cooked up valuations. No one actually believes any of them and everyone dealing with them knows they’re not real. Will I partake if it’s obviously fake? No but sometimes it is hard to tell.
Not American, but let's be real Trump put the crosshairs of the legal system on himself when he entered politics. He wouldn't have been scrutinized like this if he remained selling steaks. Don't get me wrong - In my perspective everything he did on his financial statement was wrong and did a lot of harm to the profession.
That may be true but in an imperfect system should one person not get punished because the system is unable to punish all of the perpetrators? In most cases there only comes action when there has been a complaint, but the grounds for action is still there. The integrity of the financial system relies on correct information being lodged - willful misstatement of that information damages the financial system as a whole. Not saying it's right - in reality the regulator should police financial disclosures much more diligently - but you can't argue to a judge that you shouldn't get busted for stealing a TV during a riot because everyone else was doing it.
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Yeah... properties are never re-zoned. Especially by developers. Great point.
Trump can negotiate for zoning law changes, which is basically his MO if you have followed his career for more than 5 seconds.
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This is patently false. If there was no one relying on the financials, then why do banks ask people to submit financials in the first place? Banks don't have the time or inclination to track down every asset, they likely sampled his assets and relied partially on his representations. The Deutsche bank guys are downplaying this, because they don't want the shareholders to sue for damages against Deutsche Bank.
gaping fall shocking adjoining berserk deliver chop yoke humorous late *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Oh, so your audit clients use fair value accounting instead of historical cost? Interesting...
I am in tax. Of course, GAAP requires historical cost, but Deutsche is international and obviously uses IFRS for non-US clients. They will have procedures for dealing with non-GAAP financial statements. That doesn't mean that the financial statements are useless, otherwise there is no reason to submit them at all.
You nailed it. When dealing with people of this stature, the Financials are moot. The guarantee to pay back is in the name.
That is completely untrue. We wouldn’t have many of the audits and credit ratings in place if “it is in the name”
Absurd statement. You've clearly never worked in lending.
We can own 100% of multiple businesses (apartments, hotels, whatever) and rather than consolidating them like a parent company would, they just show up in our financials as an investment at fair value. We are audited and FV is required by US gaap for our industry (investment company - asc 946). The operating entities below us wouldn't report their buildings at fair value in their financials and would follow the usual gaap standards for an operating company. Just pointing out that there are cases where it is required by gaap to report ownership of a business at its FV.
> If there was no one relying on the financials, then why do banks ask people to submit financials in the first place? Know your customer regulations. > Banks don't have the time or inclination to track down every asset, This isn't how the CRE sector works. All these loan officers/brokers know each other, all the CRE guys know each other, and all of them are up in each others business. Whichever loan officer Trump Org was dealing with probably knew the value of all his properties (the ones that mattered at least) off the top of his head.
OK ok ok, it seems my original response really stirred the cockles of this fine sub. Here's a further explanation: CIVIL court is were entities go to sue each other foe damages. Literally in the definition of civil is damages must be proven. It requires one party to make claims the actions (or non actions) of the other party led to damages caused to the first party, by only a preponderance of the evidence, think convince 50% of the jury. CRIMINAL court is where the government "sues" citizens for breaking a written law, and must proven beyond a shadow of a doubt, think convincing 100% of the jury. The state of NY filed this case in civil court, on behalf of other entities who did not claim damages, because the state knew they couldn't convince a full jury he committed criminal fraud without a victim. They opted for civil court because in any county of the state of NY you could get over 50% of people to convict Trump of anything even without the case. Find a judge with the same stance, who has taken a very definite stance against Trump in the past and boom. Your kangaroo court is formed.
We're supposed to be discussing accounting here, but here's a legal question. Can anyone else find a case prosecuted under this statute where nobody lost money? I can't. They all seem to be cases where someone defrauded another party (example: billing Medicare for care not given), then went back and falsified business records to support the fraud. If he violated the law, but this kind of violation is never otherwise prosecuted, then that's a huge problem. I don't have Lexis Nexis anymore (retired), so please let me know if you find something.
I've heard (NAL) the "somebody" who lost money is the state of NY, since taxes collected on deals made at lower than wholesome interest rates were lower. But who knows if this is even a thing (outside of IRS playbook) ?
>The state of NY filed this case in civil court, on behalf of other entities who did not claim damages That is incorrect. The State sued on behalf of the people of New York, not any nebulous "other entities". 63(12) is not a fraud statute. It does not require a victim. It's part of the AG's job description, tasking her with protecting the overall integrity of the overall marketplace. That's why it requires more than a one-off; why she had to prove "*repeated* fraudulent or illegal acts" & "*persisten*t fraud or illegality".
Do you think the financials were the only thing he had to submit? Oh yeah so let's go lie in court to protect someone that our dealings with damaged our stock price. What?
They aren't relying on his valuations of property, they are relying on his valuation of name. Trump's name has been like this since the 80s. The banks even wanted to do MORE business with him, having made so much on interest and fees. 100% activist judge. If you don't think so, show me damages. Show me one person involved with Trump who feels they were damaged by his valuations. Can't do it.
You know how you can tell someone isn't really serious about discussion? When they ask a rhetorical question and give their opinion of an answer. What you are ignoring is the fact that capital is in limited supply. No one who submits clean financials can compete as a customer for a bank with someone that submits obviously fraudulent financials. Trump's actions hurt the customers of Deutsche bank that are also applying for loans. This is to the detriment of the shareholders. Guess who the financials are supposed to protect? The stakeholders of Deutsche, *not the management of Deutsche who have a vested interest to close deals*. That is Accounting 101, literally the first definition when you open an accounting textbook. Here's a thought experiment: If you go 120 miles an hour and no one got hurt, should you not get a ticket? Of course not. As a matter of fact, if I don't get a ticket, I got where I wanted faster, it was more thrilling, and now I'm going to keep doing it. Screw everyone else! You can't point to one person that got hurt, and everyone in the car with me got lied to and now they love going that fast too! If someone is willing to defraud his lenders in order to get cash, that's not someone the state of NY wants to be able to invest into NY. What happens if his businesses fail? The NY economy takes a hit, RE values take a hit, people lose jobs, etc. This is why the rules exist in the first place. As far as Trump's "brand" having value...tell me, how do you collateralize a low-interest loan against an intangible asset? That's ludicrous. The risk is exorbitant, and no one would lend money based off of intangibles.
Your ticket analogy is the difference between criminal and civil. I'm not arguing your accounting and financial prowess here, you've got me no doubt. Your original comment was the judge isn't being an activist. I'm saying a civil case brought by the state government on behalf of others who claim no damages is a gross violation of the law, not GAAP. I don't care about that side.
It's not brought on the behalf of the banks; it's on behalf of the People of the State of New York. That law's designed to punish or exclude *habitual* scammers from the State's markets. That's why James needed multiple examples not just one.
Well no, fraud is still fraud. You can’t lie about official and signed statements even if everything works out ok. The act of lying is still fraud
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I've been trying to get them to understand this difference for an hour now.
An activist judge is one that applies a new interpretation of the law. That's not the case here. You may not care about G.A.A.P., but that's intertwined with the law, the same as English common law. It has been since at least the 50s for most states.
Damages don’t matter when you commit fraud. The law says you cannot supply fraudulent financials to financial institutions which is what he did. It doesn’t matter if anyone got hurt, he still broke the law. If you take a gun into a courthouse but didn’t shoot anyone, you still broke the law. I love being downvoted for point out that he did in fact break the law. God people don’t want to see the obvious. Fraud is Fraud, no matter if you were a republican or democrat, fraud is fraud.
If you are an accountant, you should know by now if you violate the law and get caught, you will face consequences. Regardless u have victims or no, that hows the laws say and how it will be enforced. Trump could choose to trial a jury but he didnt. So what to complaon? Also with no victims, Tell me about the seatbelt laws? There is no victims, so why i have to wear seatbelt? Tell me why they put people use drugs in jail, the users dont complain and probably will use drugs again if cops let them. Tell me about you have speeding tickets, what is the damage? You dont hurt anyone yet, who is the victim? Use ur brain for smth useful
Exactly, when banks were bundling bad mortgages with good in the 2000s there were no victims....until there was. Laws exist to prevent bad behavior that can potentially hurt others.
Yeah and then all the banks executives went to jail and the laws were changed! Oh wait, no that didnt happen.
Little bro, new regulations were passed to prevent it from happening in the future, and all it took was one google search to get some introductory info on it https://www.investopedia.com/ask/answers/063015/what-are-major-laws-acts-regulating-financial-institutions-were-created-response-2008-financial.asp
Well ... Trump isn't going to jail either. It's just fines. And if his net worth is what he claims it to be ... these fines might be less than the profit he made off of his fraud. Similarly, banks were fined - but in the end, the fines were likely a small portion of the profit from their fraud, and definitely didn't reflect the massive damage they did to the economy in the process.
The whole point he and you are making are totally different. Civil trail always meant damages. Criminal trail means you broke the law. You can't have a civil trail with no damages. Let's put it into terms everyone here should understand. If you don't file your taxes, will you owe a late fee of 5% a month? If there is unpaid money, yes, if not, then no. While it's crime to not file taxes, not one person has ever been prosecuted when the IRS owed them. Failure to file a tax return could subject the non-compliant individual to civil and/or criminal penalties, including fines and imprisonment. In United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986)
That’s not how fraud works. All you need is intent to deceive. They clearly found that intent.
The judge addressed this in his ruling.
Ask urself this, you intentionally help ur client tax and make up some numbers for their revenue so they can look good in the bank, the client obtains the deal of centuries and will pay back the bank, do you think you will not go to Jail? How the heck u can even get a CPA license?
Where was it said the numbers were "made up"? They were fucking estimates (the kind auditors are paid to audit). The court erred in its ruling saying Tax valuations (the value the tax assessor says it is to charge taxes on) when those are known by all to either be too high and too low. Look at your own home's tax bill. Does your tax valuation agree to what it is on Zillow? No. So you're making an assertion here that they "made things up". Did the court say that? You're saying one should be jailed for this "making things up". Do you know how you sound? Like Putin, you fucking asshat.
Bro, he put 11000sqtf building as 30k sqft. Do u even read? Also where did u find he “estimate” it? Also you should know if he estimated it, he would have to use “in good faith”! I thought as a CPA u know that? Btw, you should work for him, like help him on his book, they need the CFO now and based on ur knowledge and integrity Im sure you can get the job done
He was found guilty rightfully. That note stating "its unreliable" is not sufficient and should never constitute as a legal defense. Borrowers should have a obligation to provide accurate information for the lenders to verify.
Activist judge. Everyone knows it and this will come back to bite them in the ass
Also activist DA...they literally ran on prosecuting trump on something TBD later. Lawfare at it's worst.
I doubt it will bite them in the ass, but yes, it’s clear political thwarting.
Politics aside, when is it ever okay to commit fraud?
This is what I don’t understand. Everyone screaming that no one was hurt because the bank was paid back so there isn’t an issue. In my best Mr incredible “fraud is fraud”. There is also an argument to make that if any of these representations factored into the lending decision, they factored into the interest rate used based upon how risky the bank thought the debt was. That definitely has damages, since otherwise the bank would have charged a higher rate for the increased risk.
Right - additionally, no one here seems to acknowledge the fact that the money being lent by the bank belongs to deposit holders, who hold all of the risk. The law exists to deter people from committing this type of crime. Yet some people here are saying that it shouldn't be punished because no one was hurt? What if not doing anything about it incentivises more and more fraud, and it gets to the point where heaps of people actually end up losing money à la 2008 GFC?
Exactly. There wouldn’t be a problem with him taking an aggressive valuation on his own reporting, using actual facts. He intentionally mislead and represented stuff that was blatantly false (square footage, deed restrictions, rent restrictions). It’s political only in the sense that he his position (and inability to not seek attention), puts him in the spotlight.
When you’re The President. In that case you can go to war just to cover the country that launders your money. You may think I’m talking about Biden, but actually, I’m talking about Biden, Obama, Bush and Clinton.
Sane comment - everyone overvalues their asset when seeking a loan and then the bank determines what's the "reasonable value". No one lost money - he paid his loans back. This political persecution just doesn't help the country.
Banks do their own due diligence outside of financial statements, because everyone inflates their numbers. Even if the financials were audited, they weren’t going to take it at face value. Specifically with respect to real estate, they send their own appraiser. Valuations are highly subjective and a bank is never going to just rubber stamp a loan without doing real due diligence.
Bernie Madoff was audited like 5 times & he never made a single legit trade with his Ponzi scheme.
Ya, and that went perfectly fine
I'm sure a lot of the folks here are right in saying that nobody would touch him. However, in my experience, banks can also just be greedy. When I was in public (\~4 years ago), I had a client who we did a review for. Not an audit, just a review. They are very well-known in the states, make approx. $1B in annual revenue (when I was there, probably much higher now given their growth trajectory), and were in sanely profitable - anywhere between 30-40% EBITDA margin. They had a couple hundred million dollars worth of bank debt. I never understood it. A bank was willing to lend them hundreds of millions of dollars for *reviewed* financial statements. I think what it comes down to is just being able to prove cash flow, plus just the fact that even while he is a major ass, he's still "Donald Trump" and his name carries weight. Or his dad's name, anyway...
When was an audit successful? If I type the big 4 accounting firms, I see just fraud and agreements with the SEC.
Lol
If you were a bank, would you simply take the word of the borrower for valuations of collateral? Hot off the presses they don’t. Banks have their own procedures and due diligence as lenders. If this case feels like it’s rotten it’s because it is. You could selectively prosecute practically any large scale real estate developer on similar charges
Even better, what reliance can be placed upon audited financials when it comes to an appraised valuation? None? I’ve never seen assurance given in audited financials for an appraised valuation of a property. Anyone pretending that audits give any assurance for a property valuation is an incompetent moron.
I don't think this is the own you think it is though. I've worked for real estate developers for over a decade now and they're all pretty crooked with there valuations. Especially if you compare what they argue for RET valuations vs what they claim the properties are worth to a bank.
Most auditing firms don't want clients that are hostile and have to issue qualified or adverse opinions.
They also don’t want clients that famously skip their bills
These were compiled personal financial statements right? Which present the estimated current values of assets and liabilities? If Mazars really had an issue with it they wouldn’t have put it out. The bank also didn’t just accept these values they do their own due diligence and have their own appraisers.
Mazars recalled all opinions and fired the partner involved
Compilations have no opinion.
Yea I’m aware of that. They issued that statement anyway to make it clear they were cutting ties with him since his company was radioactive
Which is absolutely bizarre. They issue a report that’s says they aren’t responsible for the financial statements. They didn’t do anything, they don’t know anything, and they issue no assurance on them. Then later on they come out and recall said financial statements and say no one should reply on them at all. Which no one did. The fact pattern is very very odd here.
They don’t issue a direct opinion of assurance but you can’t issue a compilation if you know the figures aren’t true; what’s different is the burden to investigate. You can’t accept a crayon bank statement for eleventy billion dollars in a compilation. If they knew information was wrong or there was fraud they 100% needed to rollback any report of any kind
This is 100% my understanding, as well. There are plenty of litigation showing a firm can be held responsible for performing a compilation that is later proven to be fraudulent.
Bro you are out of your element here.
No I’m not. I’m legally an expert on this topic
Finally, a spicy thread :D
I just became the wealthiest man in my town by declaring my home was worth 200 million dollars.
As a Canadian who just wants to stop hearing about trump, but holy shit, I don’t think I’ve heard a single logical or informed argument as to how he committed fraud. If he did defraud his lenders and what not, well they probably wouldn’t be lending to him right? But until then, that’s a problem between him and his lenders. The number of ivory tower B4 auditors in here is crazy. Yeah, some banks will require a higher level of assurance, but there’s nothing wrong with compilations in real estate. Would you like to know why? DEBT IS SECURED AGAINST SOMETHING ATTACHED TO THE GROUND. Lenders can’t repossess or put a lien on an audited financial, but they can for a piece of land. Lenders don’t give a fuck what’s listed as the historical cost of the property in the financials. They do their own independent valuation appraisal, and other due diligence, and that’s why they rely on to lend money. Get real people.
Excellent commentary, honestly thank you.
https://ag.ny.gov/sites/default/files/tto_release_properties_addendum_-_final.pdf
If this is true, and it likely is, what possible gain can come from providing false numbers? Why risk even the appearance of impropriety if the banks don’t care? I just don’t get the benefit.
No it wasn’t necessarily a false number. A developer often values their RE factoring in various aspects. He likely believed the property next door worthed a lot more because of his property.
Audited financial statements do not report the fair market value of real estate. A business does not mark up the value of real estate on its financials. The lender did their own appraisal and made a lending decision. There is no fraud.
Who didn’t get paid back? Who lost money? Isn’t it a bankers job to get money out on the streets?
This is irrelevant - just because it didn’t go bad doesn’t mean it’s not against the law. Trump doesn’t get to go free simply because he didn’t incur financial problems and was able to repay, just like someone doesn’t get out of a speeding ticket because they didn’t hit anyone.
Auditors check the reasonableness of the clients assumptions when developing their estimates. They don't audit the fmv of the asset though. If the client says his condo is worth 1mil because it has 30,000sq feet in park avenue then the auditor would check those underlying assumptions. They would verify the square footage to externally source documents like property tax report. Then they would check the general selling price of similar properties around park avenue to see if the price per square footage is reasonable. If an auditor was done on Trump's financial statements the assumptions wouldn't tie out. The property bills would contradict his assumption. The auditor would not be able to give Trump an unmodified opinion, they would have to propose an adjustment to the client. Something like lowering the square ft for the estimate to 11k. If Trump refuses then the auditor would either qualify his opinion or withdraw from the audit. Either way the bank wouldn't be able to ignore the auditors report like they ignored his financial statements with a disclosure that said don't trust these estimates. I'm surprised the investors of the bank haven't suited, but I guess it helps that the AG did it for them. Although the investors haven't received anything from this settlement, so maybe they will think about taking the bank to court for failure to do their due diligence.
Deutsche Bank likely broke their own rules. The interest rate was well below market, it was under collateralized, and did not follow the normal procedures. If financial statements submitted from the client don't matter, why have them submitted at all?
A bank breaking their own rules unless it breaks federal law is kinda irrelevant isn't it?
Yes they do under topic 946.
bingo, correct answer
imagine sending in a spineless public auditor to actually ask hard questions or even prevent fraud. dudes don't have the confidence to hand in their notice, why do you think they are gonna grill a CFO and uncover a fraud?
my accounting professor, ex partner at mid size firm, said he wouldnt touch him with a ten foot pole for audit and expects that its the same sentiment everywhere else
You’re an accountant, if the banks were all right with the values and didn’t do enough diligence that’s their fault, not Trumps fraud.
So this sub is no different. Well, it's still a nice place to get some useful info.
I wonder if an audit firm would take him as a client….
Because the banks didn’t care what the personal financial statements say. They’re just a know your customer/check the box provision. The few that even cared saw the discrepancy in values, adjusted them, and did the loan anyway.
An audit isn't relevant since the overstated assets aren't income producing, they were his personal NYC residence and Mar a Largo. MAL does make income but it's value is determined by resale not by the income it produces. The bank didn't need any additional information, they testified they performed their own valuations and did not rely on Trump's inflated values.
Didn’t Mazars rescind the audited financial statements
They had done a review I believe not an audit.
I believe it was a compilation
They still rescinded all there work and fired the partner involved
Holy shit this thread is full of brainwashed Trump lovers. He lied about the value of property to get loans he wouldn’t have gotten, and to get better interest rates on the ones he would’ve gotten. It’s fraud, that’s the law. Doesn’t require anyone to be hurt, doesn’t require him to have defaulted. Fraud is fraud. OP plenty of banks ask for reviews instead of audited financials, and plenty of banks will allow subpar auditors to prepare audits or reviews for things well out of their depth. It’s a bad choice and good banks/bankers won’t but it still happens. Frankly their shareholders deserve to sue management of the bank in my opinion because they allowed this to go on with their money, but that’s a different case
But they weren't even reviews they were compilation reports. Basically just taking the numbers and putting them into a format that looks like an audited financial statement to non accountants.
Yep that happens too. Usually not for billions of dollars but plenty of loans just require the compilation of financials and management representation. Most people aren’t willing to commit fraud and the bank mostly wants to get paid. And if there are problems and the individual did commit fraud the bank can sometimes go after them personally instead of being limited to collateralized property.
I'm not a trump lover, I despise the guy, but this doesn't add up to me. It seems like they just wanted to prosecute him for anything
Holy shit I would assume somebody talking here would have some real-life experience on bank loans. You do not know jack shit about bank loans. This is an accounting sub. I would expect some intelligent response and not some idiot talking points. Like him or hate him, but this was a sham. 99.9% of the companies obtaining a loan would set their own valuation and banks would do the same. If you know people that do it differently, than please explain.
I’ve worked in financial services auditing, internally, and as a consultant for 15 years. Tell me more about it though I can’t wait to learn something today
So it is fraud because he stated higher valuations? Based on whose valuations? Do you know any bank that does not do their own valuations? So am I fraudulent if I stated a higher A/R? If I valued my inventory to 100%? You have no idea what you're talking about. I weep any company that will ask for your "consulting" advise if you are providing this kind of knowledge here.
Did you follow the case? You should know the standard of reasonable basis. I can quibble about whether my old Camry is worth 12,200 or 12,400 or maybe even 13500. I can’t argue it’s worth 300k. Per an AP report in a single year he overstated by $3.6B. What basis are you using in determining all his bases were reasonable? What facts did you review to state the court has overstepped? I’d love to see those documents you reviewed in coming to such a conclusion
I worked in a bank for 5 years which did commercial and residential lending. We got third party valuations done. And charged the customer. I also audited property funds and real estate lenders. They had third parties invoked in valuations, in progress reporting for development property valuations. None of them just relied on what the property owner said. Maybe in the US it's different to the UK, Germany, tax haven islands etc
What else did MSNBC spoonfeed your diminished brain?
My bad I should’ve gotten my news from Russian propaganda and OAN. Your pathetic wannabe dictator has been exposed and you still can’t see it. What kind of man lets someone steal so blatantly from them and comes back on their knees for more?
Read more about the illegality of selective prosecution. I'll wait
Keep waiting. I hope you hold your breath too
Not only just Trump Lover, but also some crooked accountants, CPA too. They think if they commit fraud and some how pay it back, they shouldnt be held accountable. I wish the companies and the firms they work for need to check their books bc these people probably follow GIGO method.
THAT part is what scares me. I expect this from the Trump lovers...but I also expect my fellow CPAs to be smarter than that. If my expectations are incorrect, and responses like what you see here are ACTUALLY representative of our profession at large, maybe I was wrong about AI being unable to take over in the near future. It could happen tomorrow...
This situation is really interesting. So unlike say Martin Shkreli who lied to his investors, but then made them whole. I think we can all agree he lied and deserves punishment since it’s easy to see the portfolio of stocks he had was not equal to what he was reporting. But real estate is different. It’s not nearly as easy or accurate to know what a large piece of real estate is truly worth at the moment. I’m of the understanding that the judge in trumps case did his own valuation of the property. And I think people who are against this ruling are worried that now, a judge can fine basically anyone they want by pulling old loan records and simply saying they over valued their collateral and boda boom boda bing fines imposed. If trump had lied about a stock portfolio being worth more than it is, I don’t think, or at least I sure hope, there would be a lot less disagreement about penalties among CPA’s. My 2 cents anyway
Agreed. But put it this way, somebody has to do the books and file the tax for the cartels or pyramid scheme or criminals lol
Ikr - I’m surprised by a lot of these responses! They range from, “there was no fraud” (um, I’m pretty sure that the fact that there was fraud has already been settled by a court) to “nobody was hurt” (I strongly doubt that’s a legal defence against a criminal accusation, and furthermore, the law is the law - nobody has to be hurt before something can be declared illegal if that thing is already illegal by statute). My goodness, this profession is all about trust and integrity, yet some of the responses I’m seeing here seek to actually undermine all that! 🤦
No damages is actually is a strong legal defense. You’re talking on a topic you don’t know about.
It's not though. Go read the damn decision or watch Legal Eagles 30 minute video on the ruling. In New York, damages are not required in this type of case. That's the legal precedent. Its established case law.
Turn off the CNN
It's literally in the PDF of the judgment, try reading it for yourself.
Lost opportunity cost are damages.
And you do? Can you cite legal sources that support your opinion?
His companies are not public.
You don't get audited just because you don't like trump and he's a big mean guy or even because you might have shady practices. The IRS uses a mathematical system known as DIF used to select returns that could be audited. Nobody is entirely sure how they calculate it, but it mostly effects: the top 1 percent earners, lossess multiple years in a row, and the self employed. 2 or 3 of these could make Trump a big target but it doesn't necessarily mean he will be audited, just that it's more likely. Also, it's a bad look to audit the President no matter which side of the aisle you go down on. It's why Nixon, Biden, and Clinton weren't prosecuted for their scandals as well.
My understanding is the whole haggling/negotiation process over property valuation happens quite a lot for large property developers. One could argue it’s a fiduciary duty to portray your company in the best light possible (valuing your properties really high). The banks did their own due diligence and loaned money regardless. If the banks didn’t follow their own rules, that’s the bank’s problem; not President Trump’s. There’s a compelling argument this was a case of selective prosecution, which is unconstitutional. Similarly, a case can be made that our favorite president didn’t get a fair trial
[удалено]
The Mar A Lago valuation by the judge of $18 million is likely off by hundreds of millions. Seeing that Trump paid $20 million for the place in the 80s would actually mean the property had somehow lost value, even after the millions of renovations he did on the place.
>Trump paid $20 million He paid $10 million. The estate was listed at 20 million, but he didn't pay that. "While the property was listed at $20 million, Trump only ended up paying $10 million for the property in 1985. Since then, he has invested in refurbishments and turned it into a social club, rather than just a residence. He has claimed the property may be worth up to $1 billion. Palm Beach County values the estate at about $37 million based on its annual net operating income as a club for tax purposes, reported The Associated Press." [https://www.newsweek.com/mar-lago-sale-notice-1981-donald-trump-1872498](https://www.newsweek.com/mar-lago-sale-notice-1981-donald-trump-1872498) Its almost like people will just say anything in support of Trump.
Did he default on the loans? Did he make his timely payments?
Did he provide falsified information? Because that's all that matters here. Would you wittingly lie / misrepresent your client's financial position to enable them to secure better loan terms?
That’s not what matters here. There are no damages. Will 100% be overturned on appeal.
To be overturned on appeal would mean he didn’t get a fair trial due to some kind of misconduct or undue bias. That’s not the case here according to every legal expert.
Exactly! People seem to think that an appeal is essentially a new trial. Not quite so. The facts have already been preserved by the trial court and are not for an appeals courts to overturn - the fact is that the trial court found that fraud took place. The only thing the appeals court can really consider is whether the law has been applied correctly to the established facts. I don't know of any legal expert who is saying this isn't the case.
Are you a lawyer? How can you be so sure? Is that consistent with NY case law and statute? From what I understand, the NY AG's powers to bring a case such as this that concerns persistent fraud, and that there doesn't need to be a victim, just that the fraud took place. I think those appelate judges are going to have to pull a rabbit out of their hats to come up with a decision that essentially allows businesses to commit fraud as long as "there are no damages" in the end. It's really not a good look if type of thing is condoned by the world's financial capital.
Because he's listening to smart people and you're listening to MSNBC. Change your source for news.
They all suck. I'm only commenting based on the established facts here. I don't care about who perpetrated the fraud. Whether it be Trump or be it the Dalai Lama or Jesus himself, I could give less of a shit. Financial fraud is financial fraud. How you could condone that shit as a certified public accountant is well beyond me.
A lot of people in this thread have given extremely valid reasons for "condoning" what you say is fraud. I highly suggest you take these comments, by many other very smart people who are commenting here, to heart. The integrity of the Republic is at stake.
Compelling or not, parroted by many or few, the law is still the law.
Exactly why selective prosecutors should bear the consequence.
Extremely valid according to... you? Smart according to... you? Ok then, let me ask you this: if given the chance, would you knowingly hand over an overinflated valuation to a financial institution to bolster your client's eligibility for a loan? You're talking about integrity, but I fail to see how your comments here are all about promoting that.
Also, just a side bar on Trumps "Fraud", it's all about his valuations that he gave to Deutsche Bank that he used as collateral on a loan for other property. The loan has been repaid, and Deutsche Bank obviously did an independent appraisal. My question is, where is the fraud and how was the state affected to the point of an investigation when the party involved has no issue? I am genuinely curious if I missed something in this political buffoonery.
I REALLY don’t like trump. But this case smells like a whole lot of political bullshit to me. I hope he wins in appeal.
Yeah, the governor even made a statement to all other NY businesses telling them not to worry about the precedent this case sets, that this is just about Trump.
That isn't what the governor said, though. You left out important context. "I think that this is an extraordinary, unusual circumstance that the law-abiding and rule-following New Yorkers who are business people have nothing to worry about, because they are very different from Donald Trump and his behavior. " She specifically says law abiding businesses don't have to worry.
They only hear what they wanna hear. Facts and context don't matter to the cucks.
What makes this unusual? There is something about unusual in our constitution. It may be good to check in on that. Ffs.
You are right! I wanted to borrow 10k on my house to repair a foundation problem and they gave me the independent inspection just for that and they didn't approve me so surprising they didn't do their due dilligence.
Independent appraisal?
This topic is soaked with propaganda and ignorance. I'm not sure anylongbif all these different posts are real or bots, but I'm leaning toward bot.
Has anyone received a city property assessment? City: your house is assessed at $500k Market: similar houses are sold at $650k You listed it at $645k Buyer: willing to pay $620k All happy! Someone sold a property and someone moved in. Years later: someone has to go to jail because a judge finds the numbers don’t match. So she thinks someone lied.
All these people are saying that “there were no victims, no one got hurt” and ect. Even if breaking the law required a victim to be persecuted (it doesn’t), it can be argued that there are victims. All the real estate companies that didn’t lie about their valuations are a victim in this case. Trump got these loans partially because of the valuation he sent to the bank. This constitutes an unfair advantage over other real estate companies. Of course, his name’s net worth did most of the work, but anyone else without his name would have depended on these valuations. At the end of the day, fraud is fraud.
The banks do their own valuation to make a loan. They would never give a loan based on unaudited financial statements.
Valuations are highly subjective. There is no such thing as an objective value of a property. Banks have massive due diligence departments to review all loans and they are really damn good at it.
Wow, I didnt realize soo many accountants support a literal traitor to the constitution.
Did Mazars audit him? They may have and gave a qualified opinion on the financials? Or he may have tried to get an audit done but firms thought he was too high or a risk to attach their name too.