Seven Springs Estate in New Castle/North Castle, and Trump National Golf Club in Briarcliff Named in Civil Action
By Dan Murphy
Two of former President Donald Trump’s Westchester properties were highlighted by NY Attorney General Letitia James, in her ongoing civil probe of the Trump organizations finances. The Seven Springs Estate located in the Towns of North Castle and New Castle, and the Trump National Golf Club Westchester, in Briarcliff Manor, were used by James as examples of how President Trump, his children and his company have overinflated the values of these properties and several others, to obtain favorable loans from lenders.
On Jan. 18, New York Attorney General Letitia James took legal action to compel Donald J. Trump, Donald Trump, Jr., and Ivanka Trump to appear for sworn testimony as part of the office’s ongoing civil investigation into the Trump Organization’s financial dealings. The motion to compel filed seeks a court order enforcing testimonial subpoenas issued to Donald J. Trump, Donald Trump, Jr., and Ivanka Trump, as well as the production of documents held by Donald J. Trump. As the papers filed today make clear, each of the individuals was directly involved in one or more transactions under review. Earlier this month, the Trumps filed a motion to quash these interviews, and the papers filed today by the Attorney General oppose that motion.
Since moving to compel the testimony of Eric Trump in August 2020, the Office of the Attorney General (OAG) has collected significant additional evidence indicating that the Trump Organization used fraudulent or misleading asset valuations to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions.
“For more than two years, the Trump Organization has used delay tactics and litigation in an attempt to thwart a legitimate investigation into its financial dealings,” said Attorney General James. “Thus far in our investigation, we have uncovered significant evidence that suggests Donald J. Trump and the Trump Organization falsely and fraudulently valued multiple assets and misrepresented those values to financial institutions for economic benefit. The Trumps must comply with our lawful subpoenas for documents and testimony because no one in this country can pick and choose if and how the law applies to them. We will not be deterred in our efforts to continue this investigation and ensure that no one is above the law.”
Attorney General James opened an investigation into Donald J. Trump and the Trump Organization in March 2019, after Trump’s former lawyer, Michael Cohen, testified before Congress that Trump’s annual financial statements inflated the values of Trump’s assets to obtain favorable terms for loans and insurance coverage, while also deflating the value of other assets to reduce real estate taxes.
While more than a dozen current and former Trump Organization employees have provided sworn testimony, in recent weeks, Donald J. Trump, Donald Trump, Jr., and Ivanka Trump refused to appear to give testimony pursuant to subpoenas, despite their roles in certain transactions and high-ranking positions in the Trump Organization.
Since at least 2004, Mr. Trump and the Trump Organization have prepared an annual “Statement of Financial Condition of Donald J. Trump,” and since 2017, when Mr. Trump became president, these statements have been issued by the Trustees of the Donald J. Trump Revocable Trust, which is overseen by Donald Trump, Jr. and Allen Weisselberg. These financial statements contain Mr. Trump’s or the Trustees’ assertions of net worth, based principally on asserted values of particular assets minus outstanding debt. The statements were submitted to counterparties, including financial institutions, other lenders, and insurers in connection with Trump Organization business transactions. The counterparties relied on the statements and additional information provided by the Trump Organization in evaluating Mr. Trump’s financial condition.
The OAG has determined that the Statements of Financial Condition described Mr. Trump’s (or the Trustees of the Revocable Trust’s) valuation process in broad terms and in ways which were often inaccurate or misleading when compared with the supporting data and documentation that the Trump Organization submitted to its accounting firm. Among other things, the statements:
- Misstated objective facts, like the size of Mr. Trump’s Trump Tower penthouse;
- Miscategorized assets outside Mr. Trump’s or the Trump Organization’s control as “cash,” thereby overstating his liquidity;
- Misstated the process by which Mr. Trump or his associates reached valuations, including deviations from generally accepted accounting principles in ways that the statements did not disclose;
- Failed to use fundamental techniques of valuation, like discounting future revenues and expenses to their present value, or choosing as “comparables” only similar properties in order to impute valuations from public sales data;
- Misstated the purported involvement of “outside professionals” in reaching the valuations; and
- Failed to advise that certain valuation amounts were inflated by an undisclosed amount for brand value.
Seven Springs Estate
Seven Springs is a 212-acre property in Westchester County, purchased by the Trump Organization in 1995. In 2004, the Trump Organization valued the property at $80 million; in 2007 they valued it at $200 million; and by 2012, they valued it at $291 million. The principal basis of this last valuation was the contention that the property was zoned for nine luxurious homes worth a supposed $161 million of profit. Two separate, professional appraisers valued the lots that were supposedly going to be developed at mere fractions of the prices used in the Trump Statement of Financial Condition. After receiving the March 2016 appraisal, which valued the property at $56 million, Mr. Trump’s subsequent financial statement was changed in a manner that disguised what would otherwise have appeared as a more than 80 percent drop in the value of Seven Springs (from $291 million to $56 million) by moving the property to a catch-all category where no asset was itemized.
The expansive property spans across three towns: Bedford, Armonk and Chappaqua and is one of the largest privately owned properties in Westchester. The mansion was built in 1919 by Eugene Meyer, the former publisher of the Washington Post and Chairman of the Federal Reserve and later purchased by the Trump Organization in 1996. It is said to have taken nearly 5 years and 500 Italian masons, craftsmen and Artisans from around the world to ensure that the house was opulently designed and meticulously built. The grand estate also features carriage houses, all unique in design, along with a beautiful second tudor-style mansion also built in 1919 by H.J. Heinz, the founder of Heinz ketchup, and a friend of Meyer.
Over the years, members of the Trump family have worked on, and lived at, Seven Springs. Since acquiring the property, the Trump Organization has been unable to get approval from the Towns of North Castle and New Castle for a golf course-country club, or a large scale private residence complex. In recent years, the property has remained as is, one of Westchester’s greatest estate properties.
Trump National Golf Club Westchester
Mr. Trump purchased Trump National Golf Club Westchester for $8.5 million. In his 2011 financial statement, the property was valued at $68.7 million. A portion of that total reflected the value of the initiation fee for 67 unsold memberships, totaling $12.77 million on the assumption that the club was currently “getting $150,000” per membership and that amount would only rise. But the investigation determined that the $150,000 number was false. Many new members paid no deposit at all in 2011, and Trump Organization records showed no members paid an initiation fee in 2012. The valuation also included an undiscounted amount from the sale of 31 mid-rise units that the Trump Organization recognized had been “put on hold.”
The OAG is investigating the Trump Organization’s representations to banks and insurers and whether those institutions relied on Mr. Trump’s financial statements. The evidence to date indicates that banks and other financial institutions relied on Mr. Trump’s financial statements in considering whether to grant Mr. Trump and the Trump Organization access to credit and coverage.
Misrepresentations to the IRS
Evidence indicates that an appraisal commissioned by the Trump Organization also substantially overstated the value of a land donation at Seven Springs. After efforts to develop the Seven Springs property in Westchester were unsuccessful, the Trump Organization granted a conservation easement over 158 acres of the property in 2015.
The OAG has identified evidence that the number of lots relied upon to calculate the value of the conservation easement that the Trump Organization sought on this property was more than double what was permitted by development restrictions imposed by a locality — restrictions that the Trump Organization was long aware of and had agreed to on the record at a town meeting.
Donald Trump, Jr.
Donald Trump, Jr. runs the Trump Organization with Eric Trump. He is also a trustee of the Donald J. Trump Revocable Trust and has certified annual financial statements regarding the assets the Trust holds for Donald J. Trump.
Ivanka Trump
Ivanka Trump was the Executive Vice President for Development and Acquisitions of the Trump Organization through at least 2016. Among other responsibilities, Ms. Trump negotiated and secured financing for Trump Organization properties. Until January 2017, Ms. Trump was a primary contact for the Trump Organization’s largest lender, Deutsche Bank.
AG James legal action is Civil, and she does not have the authority to charge President Trump or his family with a crime. Criminal prosecution would have to come from a New York District Attorney or a U.S. Attorney.
Some legal scholars believe that winning a civil case against Trump for his questionable financial maneuvers will be difficult, because the banks that lent money to Trump for Seven Springs and other properties would have undertaken their own appraisal as a way to check against Trump overvaluing his properties. The other problem with this case for AG James is that there appears to be no harm to the public.
