Accounting firm cuts ties with Trump and retracts its financial statements

Donald J. Trump’s longtime accounting firm severed ties with him and his family business last week, saying it could no longer endure a decade of annual financial statements it prepared for the Trump Organization. , according to court documents.

The decision, which was disclosed to the company in a Feb. 9 letter from the accounting firm, comes amid criminal and civil investigations into whether Mr. Trump unlawfully inflated the value of his assets. The company, Mazars USA, compiled the financial statements based on information provided by the former president and his company.

The letter ordered the Trump Organization to essentially withdraw the documents, known as statements of financial position, from 2011 through 2020. In the letter, Mazars noted that the company had not “as a whole found material discrepancies between the information provided by the Trump Organization. and the real value of Mr. Trump’s assets. But given what she called “the totality of the circumstances” — including Mazars’ own investigation — the letter directed the Trump Organization to inform anyone who received the statements that they should no longer s proud of it.

The statements, which Mr Trump used to secure loans, are at the center of two law enforcement investigations into whether Mr Trump overstated the value of his properties to defraud his lenders into offering him the best deal loans possible.

Mazars’ acknowledgment that the statements were fundamentally flawed was a potential blow to the Trump Organization as it tries to push back against the long-running scrutiny of its finances. And for Mr. Trump, whose personal finances are intertwined with those of his family business and who has long faced questions about his taxes, Mazars is the latest in a long line of companies to break with him over the of the last year, following the path of several banks, insurers and lawyers.

The revelations about Mazars’ work for Mr Trump have emerged in new court documents filed by New York Attorney General Letitia James, who is seeking to interview the former president and two of his adult children under oath as part of his civil investigation.

Mr. Trump’s lawyers had asked a judge to bar the questioning, and in response, Ms. James’ office argued in court papers last month that the company had engaged in “fraudulent” practices. or misleading”.

His filing on Monday – which marked his final attempt to move forward with the questioning of Mr Trump as well as Donald Trump Jr. and Ivanka Trump – included a copy of the letter from Mazars, signed by the general counsel of the accounting firm.

The Manhattan District Attorney’s Office conducted a separate criminal investigation, with the help of attorneys from Ms James’ office.

In a statement, the Trump Organization said that while it was disappointed with Mazars’ decision, it viewed the letter as confirmation that “the company’s work has been performed in accordance with all applicable accounting standards and principles and that these statements of financial position do not contain any material misstatement.

The company argued that Mazars’ characterization of its work “effectively renders the DA and AG investigations moot.”

Mazars first decided to part ways with the Trump Organization last spring and ended its work during a transition to a new accounting firm, according to people with knowledge of the relationship. But the letter withdrawing the statements represented a sharper break, and its disclosure in the court filing was the first time the end of the business relationship had been made public.

In a statement, the accounting firm said that “in accordance with our standards of professional ethics, we cannot comment on services or client relationships”.

The company’s brief letter could bolster Ms. James’ investigation, which has focused in part on the claims and overvaluation of Mr. Trump’s various hotels, golf clubs and other properties.

Mazars said it concluded the statements were no longer reliable based in part on documents previously filed by the attorney general, its own investigations, and information the accountants received from “internal and external sources.” The letter added that Mazars “performs its work in accordance with professional standards”.

Because Ms. James’ investigation is civil, she cannot file criminal charges. But she could sue Mr. Trump and his company for financial penalties, and could try to shut down aspects of Mr. Trump’s business in New York.

“As the most recent documents demonstrate, evidence continues to mount showing that Donald J. Trump and the Trump Organization used fraudulent and misleading financial statements to obtain economic advantage,” Ms. James said in a statement. “There should be no doubt that this is a legal investigation and that we have legitimate reasons to request the testimony of Donald J. Trump, Donald J. Trump Jr. and Ivanka Trump.”

It’s unclear whether Mazars’ breakup with the Trumps will affect the district attorney’s criminal investigation of Mr. Trump. The firm has cooperated with this investigation, and Mr. Trump’s senior accountant at Mazars has previously testified before a grand jury hearing evidence relating to Mr. Trump.

District Attorney Alvin Bragg’s office declined to comment.

Both investigations still face obstacles. While the statements may contain inflated estimates of the value of Mr. Trump’s properties, those same documents also include a number of disclaimers, including acknowledgments that Mr. Trump’s accountants had neither audited or authenticated its claims.

Another disclaimer notes that Mazars “did not express an opinion or provide assurance on” the statements, a common disclaimer in financial disclosure statements. The company also revealed that in compiling the information for Mr. Trump, it “became aware of departures from generally accepted accounting principles in the United States of America”.

Mr. Trump’s lawyers would likely argue that his lenders, sophisticated financial institutions like Deutsche Bank, did not rely on the statements to make loans to him.

Yet in her court filing last month, Ms James pointed to potential misrepresentations about the value of at least six Trump properties, including golf clubs in Westchester County, NY and Scotland, as well as his own Mr. Trump’s penthouse at Trump Tower. .

According to that filing, Mr. Trump claimed the triplex apartment was 30,000 square feet, giving it a staggering $327 million worth. In truth, the apartment was 10,996 square feet.

Mr. Trump’s longtime chief financial officer, Allen H. Weisselberg, later admitted to investigators that the company had overvalued the apartment by $200 million.

Separately, Mr. Weisselberg and the Trump Organization were indicted last summer and accused of orchestrating a 15-year scheme to provide some executives with off-the-books luxury perks like free cars and apartments. Mr. Weisselberg and the company have pleaded not guilty and the case is tentatively expected to go to trial at the end of the summer.

The civil and criminal investigations looked at the underlying information the Trump Organization provided to Mazars when the accountants compiled the annual financial statements.

Often, Mr. Trump’s company estimated the value of its properties based on recent sales prices of comparable buildings, a common method of real estate valuation. Authorities focused on whether the company had selected favorable information to essentially mislead Mazars by presenting it with an overly rosy picture of Mr. Trump’s finances.

Ms James argued that the Trump Organization misjudged the value of properties for lenders, insurers and the Internal Revenue Service. Many of the statements, she argued in last month’s filing, were “generally inflated as part of a pattern suggesting that Mr. Trump’s net worth was higher than it otherwise would have been. “.