Accounting Firm Severs Tie With Trump, Says Files Aren't Reliable

Washington — 

The accounting firm that former President Donald Trump has relied on for decades to provide financial statements about his firm, the Trump Organization, has cut ties with the company, warning that a decade’s worth of documentation is not reliable.

The revelation that Mazars USA, a subsidiary of the Paris-based professional services firm Mazars, had severed its relationship with Trump came in a legal filing by New York State Attorney General Letitia James. The filing is part of an effort to have the court compel Trump and two of his adult children, Donald Trump Jr. and Ivanka Trump, to provide testimony in James’ investigation of the company’s finances.

In its letter announcing that it had ended its relationship with the Trump Organization, the company indicated that the revelations from the attorney general’s investigation, as well as an internal inquiry by the company itself, had caused it to lose confidence in the statements of financial condition it issued between 2011 and 2020.

The revelation is the latest in a series of events that have pushed the former president and his family back into the headlines in recent days.

New revelations

FILE – President Donald Trump listens to a reporter’s question at an event in the Oval Office of the White House, in Washington, Dec. 7, 2020.

Last week, it was revealed that Trump had illegally taken boxes of documents, some classified as top secret, to his home in Florida after leaving the White House in 2021. The National Archives and Records Administration retrieved at least 15 boxes of material from Trump’s representatives and is in negotiations to recover more.

Trump’s disregard for the rules governing the treatment of official documents has long been public knowledge. The former president was known for tearing up documents that White House staff would then retrieve from trash cans and tape back together in order to comply with the Presidential Records Act.

Also last week, a preview of an upcoming book by New York Times writer Maggie Haberman revealed that the former president is suspected of using other means to destroy official records. Haberman reported that during Trump’s four-year term, White House staff found documents clogging toilets in the building and believed that the president had been attempting to flush them away.

New court filing

The former president and his allies were in the news again last week, after a legal filing by Justice Department Special Counsel John Durham. Durham was appointed during the Trump administration to investigate federal law enforcement agencies’ handling of the probe into alleged ties between Trump’s 2016 election campaign and Russian intelligence services.

The filing, which dealt with Durham’s contention that a witness lied to federal investigators, included little new information. However, coverage of it by right-leaning media outlets created the false impression that it accused Trump’s opponent in the 2016 election, former Secretary of State Hillary Clinton, of hiring a technology firm to spy on Trump, even after he had taken office as president.

Trump issued a statement blasting the mainstream media for failing to report on what he characterized as a “major crime.” It soon became clear, however, that the filing made no such disclosure or accusation.

Accounting firm’s investigation

FILE – The logo of Mazars is seen on a building in the financial district of la Defense near Paris, France, May 14, 2018.

While Mazars USA’s announcement that it would no longer stand behind the Trump Organization’s statements of financial condition is certainly bad news for the company, it is not, by itself, evidence of specific wrongdoing by the firm.

Observers note it is important to understand exactly what Mazars was providing when it signed off on statements about the Trump Organization’s financial health. While Trump often characterized the Mazars reports as proof that he was extraordinarily wealthy, the documents did not actually provide proof of his net worth.

Mazars built the statements of financial condition from data provided by the Trump Organization itself, not on information from outside financial auditors or other independent analysis. Mazars was always careful to point that out in the documents, but the fact was usually omitted when Trump discussed the reports.

Discrepancies in valuations

FILE – New York Attorney General Letitia James acknowledges questions from journalists at a news conference, in New York, May 21, 2021.

The problems with this approach became evident last month, when New York Attorney General James submitted a court filing demonstrating that the Trump Organization had grossly overstated the value of many of its holdings in financial disclosures to creditors, in one case boosting a New York apartment’s value by approximately $200 million.

That meant Mazars’ statements of financial condition could have accurately reflected the data the Trump Organization provided while simultaneously presenting a wildly inflated picture of the company’s actual worth.

In its letter to the Trump Organization informing it of the decision to cut ties, Mazars said that it had “performed its work in accordance with professional standards” when preparing the statements of financial condition.

Citing that language, the Trump Organization suggested in a statement to the media that Mazars’ claim “effectively renders the investigations by the (district attorney) and (attorney general) moot.”

That claim is unlikely to carry any weight with the courts because, again, Mazars was not conducting an independent audit of the Trump Organization’s books.

Higher valuation of assets can make it easier for an enterprise to secure loans and attract investors. Whether Trump erroneously inflated asset valuations to the Trump Organization’s financial benefit is among the topics under investigation.

Trump Financial Statements Aren't Reliable

New York — 

The accounting firm that prepared former President Donald Trump’s annual financial statements says the documents, used to secure lucrative loans and burnish Trump’s image as a wealthy businessman, “should no longer be relied upon” after New York’s attorney general said they regularly misstated the value of assets.

In a letter to the Trump Organization’s lawyer February 9, Mazars USA LLP advised the company to inform anyone who had gotten the documents not to use them when assessing the financial health of the company and the ex-president. The firm also said it was cutting ties with Trump, its highest-profile client.

Mazars’ letter, made public in a court filing Monday, came just weeks after New York Attorney General Letitia James said her civil investigation uncovered evidence that Trump and his company used “fraudulent or misleading” valuations of its golf clubs, skyscrapers and other properties to get loans and tax benefits.

“While we have not concluded that the various financial statements, as a whole, contain material discrepancies, based upon the totality of the circumstances, we believe our advice to you to no longer rely upon those financial statements is appropriate,” Mazars General Counsel William J. Kelly wrote to his Trump Organization counterpart, Alan Garten.

Kelly told Garten that Mazars could no longer work with Trump because of a conflict of interest and urged him to find another tax preparer. Kelly said several Trump-related tax returns still needed to be finished, including those of the former president and first lady.

The Trump Organization said in a statement it was “disappointed that Mazars has chosen to part ways,” but took Kelly’s letter as a positive because the accounting firm hadn’t found material discrepancies in Trump’s financial statements.

The letter “confirms that after conducting a subsequent review of all prior statements of financial condition, Mazars’ work was performed in accordance with all applicable accounting standards and principles and that such statements of financial condition do not contain any material discrepancies,” the Trump Organization said. “This confirmation effectively renders the investigations by the DA and AG moot.”

Kelly said Mazars performed its work on Trump’s financial statements “in accordance with professional standards” but that it could no longer stand by the documents in light of James’ findings and its own investigation. Kelly said Mazars’ conclusions applied to Trump’s 2011-2020 financial statements. Another firm handled Trump’s 2021 financial statement.

James’ office included a copy of Kelly’s letter in a court filing as she seeks to enforce a subpoena to have Trump and his two eldest children, Donald Jr. and Ivanka, testify under oath. A state court judge, Arthur Engoron, is scheduled to hear arguments Thursday in the subpoena dispute.

James, a Democrat, said Monday that given the evidence, “there should be no doubt that this is a lawful investigation and that we have legitimate reason” to question Trump, a Republican, and his children, both of whom have been Trump Organization executives.

Trump’s lawyers have argued that any testimony they give could be used against them in a parallel criminal investigation being overseen by the Manhattan district attorney’s office — a probe that led to tax fraud charges last year against the Trump Organization and Allen Weisselberg, its longtime chief financial officer.

Trump has given his Statement of Financial Condition — a yearly snapshot of his holdings — to banks to secure hundreds of millions of dollars’ worth of loans on properties such as a Wall Street office building and a Florida golf course, and to financial magazines to justify his place among the world’s billionaires.

In a court filing last month, James’ office detailed several instances in which Trump misstated the value of assets on financial statements given to banks.

Deutsche Bank accepted Trump’s financial statements without objection in a deal for $300 million in loans for three of his properties and, in internal memoranda, emphasized Trump’s reported financial strength as a factor in lending to him, James’ office said.

Another bank said it received financial statements in 2014 stating Trump had a net worth of $5.8 billion and liquidity of $302 million. A bank official involved in that deal told James’ office that if he were aware of misstatements on Trump’s statement of financial condition, he would have killed the deal.

James’ office said its investigation started after Trump’s former personal lawyer, Michael Cohen, told Congress in 2019 that Trump had a history of misrepresenting the value of assets to gain favorable loan terms and tax benefits.

Cohen gave copies of three of Trump’s financial statements to the House Committee on Oversight and Reform. Cohen said Trump gave the statements to Deutsche Bank to inquire about a loan to buy the NFL’s Buffalo Bills and to Forbes magazine to substantiate his claim to a spot on its list of the world’s wealthiest people.

Cohen served time in federal prison after pleading guilty in 2018 to tax crimes, lying to Congress and campaign finance violations, some of which involved his role in orchestrating payments to two women to keep them from talking about alleged affairs with Trump.

Trump’s lawyers have portrayed Cohen as having a vendetta against Trump and said in a recent court filing that it “stretches all credibility to believe that” James’ office put “any legitimate stock” in his testimony.

James’ office responded Monday that not only did it rely on Cohen’s testimony, but that his testimony is “vindicated by the evidence obtained to date and Mazars’s notification that those statements should not be relied upon.”