Trump's Absurd Property Valuations Confirm His Disregard for Reality

The former president's lawyers argued that even the square footage of his apartment was a "subjective" judgment for which he cannot be held accountable.

In response to a lawsuit by New York Attorney General Letitia James, a state judge ruled on Tuesday that former President Donald Trump had committed fraud by dramatically overvaluing his assets in "statements of financial condition" (SFCs) that he submitted to lenders. Trump's strongest rebuttal to that conclusion is straightforward: No harm, no foul. Since none of the lenders suffered losses as a result of his misrepresentations, his lawyers say, he should not be penalized for them. As Trump lawyer Christopher Kise put it after New York County Supreme Court Justice Arthur Engoron ruled against Trump, there was "zero evidence of any default, breach, late payment or any complaint of harm."

Engoron concedes that point in his partial summary judgment. But under Section 63(12) of New York's Executive Law as interpreted by state appeals courts, he says, it does not matter. To establish a violation of that statute, he writes, James "need only prove" that "the SFCs were false and misleading" and that "the defendants repeatedly or persistently used the SFCs to transact business." And although Trump contested that first point, Engoron says, the documentary evidence overwhelmingly showed that his asset valuations were wildly at odds with reality.

As Engoron sums up Trump's defense, he argued "that the documents do not say what they say; that there is no such thing as 'objective' value; and that, essentially, the Court should not believe its own eyes." The main takeaway from this case is its confirmation of a character trait that has been apparent throughout Trump's business and political career: He does not care about the truth, even when it is legally required.

Engoron cites many examples of SFC estimates that seemed to be plucked from thin air. A few suffice to show how little regard Trump had for even the pretense of accuracy.

"The Trump Tower apartment in which Donald Trump resided for decades (the 'Triplex') is 10,996 square feet," Engoron notes. Yet in Trump's imagination, as reflected in SFCs he submitted from 2012 through 2016, that apartment was nearly three times as large: 30,000 square feet. "The misrepresentation continued even after defendants received written notification from Forbes that Donald Trump had been overestimating the square footage of the Triplex by a factor of three," Engoron writes.

In defense of that blatant misrepresentation, the judge says, "defendants absurdly suggest that 'the calculation of square footage is a subjective process that could lead to differing results or opinions based on the method employed to conduct the calculation.'" Engoron concedes that "if the area is rounded or oddly shaped, it is possible measurements of square footage could come to slightly differing results due to user error." But while "good-faith measurements could vary by as much as 10-20%," he says, it defies credulity to suppose that honest error could account for a 200 percent difference. He concludes that "a discrepancy of this order of magnitude, by a real estate developer sizing up his own living space of decades, can only be considered fraud."

Trump also applied inscrutable math to his valuation of Mar-a-Lago, his golf resort in Palm Beach, Florida. From 2011 to 2021, the Palm Beach County assessor put the value of that property between $18 million and $27.6 million. Granted, valuations for property tax purposes are notoriously manipulable and frequently understate how much a buyer might be willing to pay. But is it plausible that the true current value of Mar-a-Lago was between $426,529,614 and $612,110,496, as Trump claimed during that period, meaning it was "at least 2,300%" higher than the assessor's estimate? Engoron thinks not.

Trump's lawyers presented an affidavit from Palm Beach real estate broker Lawrence Moens, who said "if Mar-A-Lago was available for sale, I am confident that in short order, I would be in a position to produce a ready, willing and able buyer who would have interest in securing the property for their personal use as a residence, or even, their own club." Engoron notes that "Moens does not opine at what price he is 'confident' he could find a buyer (although he opines separately, without relying on any objective evidence, that he believes that as of 2023 the property is worth $1.51 billion)." Engoron deems Moens' "conclusory" opinion "speculative" and "unsupported by any evidentiary foundation."

Or consider Trump Park Avenue, a residential building that included rent-regulated units. Legal limits on rent obviously affect a condominium's value in the real world. But not in Trump's world.

"A 2010 appraisal performed by the Oxford Group valued the 12 rent-stabilized units at $750,000 total, or $62,500 per unit," Engoron notes. "A 2020 appraisal performed by Newmark Knight Frank valued the six units that remained subject to stabilization at $22,800,090 total, or $3,800,315 per unit." Yet from 2014 through 2021, Trump's SFCs "valued these rent-regulated units as if they were unencumbered, inflating the value of each unit between as much as 700% (in 2014) and 64% (in 2021)."

In Trump's defense, his lawyers said his calculation was based on the assumption that the rent-regulated condominiums would eventually be decontrolled. But "the SFCs are required to state 'current' values, not 'someday, maybe' values," Engoron notes. "At the
time defendants provided the subject SFCs to third parties they unquestionably falsely inflated the value of the units based on a false premise that they were unrestricted."

Trump was similarly optimistic in estimating the current value of Seven Springs Estate, about 200 acres of land in Westchester County, New York. "Notwithstanding receiving market values from professional appraisals in 2000, 2006, 2012, and 2014 valuing Seven Springs at or below $30 million," Engoron says, "Donald Trump's 2011 SFC reported the value to be $261 million, and his 2012, 2013 and 2014 SFCs reported the value to be $291 million."

In early 2016, Engoron notes, Cushman & Wakefield, the source of one of those prior assessments, "performed another appraisal of Seven Springs, which included the planned development, and determined that as of December 1, 2015, the entire parcel was worth $56.6 million. Even giving defendants the benefit of the $56.6 million figure as of December 1, 2015, the value submitted on Donald Trump's 2014 SFC was inflated by over 400%."

All told, according to Engoron, the discrepancy between Trump's valuations and credible estimates was "between $812 million and $2.2 billion," which "is not a matter of rounding errors or reasonable experts disagreeing." Rather, he says, it indicates a systematic bias in favor of higher valuations, generating numbers with no reasonable basis.

"Defendants essentially argue that value is subjective," Engoron writes. "Accepting defendants' premise would require ignoring decades of controlling authority holding
that financial statements and real property valuations are to be judged objectively, not
subjectively." It also would make it impossible to prove that any given valuation was false or misleading.

"In defendants' world," Engoron writes, "rent regulated apartments are worth the same
as unregulated apartments; restricted land is worth the same as unrestricted land; restrictions can evaporate into thin air; a disclaimer by one party casting responsibility on another party exonerates the other party's lies; the Attorney General of the State of New York does not have capacity to sue or standing to sue (never mind all those cases where the Attorney General has sued successfully) under a statute expressly designed to provide that right; all illegal acts are untimely if they stem from one untimely act; and square footage [is] subjective. That is a fantasy world, not the real world."

During a deposition, Trump argued that it did not really matter what he said in those SFCs because they included a "worthless clause." Here is what that clause said:

Assets are stated at their estimated current values and liabilities at their estimated current amounts using various valuation methods. Such valuation methods include, but are not limited to, the use of appraisals, capitalization of anticipated earnings, recent sales and offers, and estimates of current values as determined by Mr. Trump in conjunction with his associates and, in some instances, outside professionals. Considerable judgment is necessary to interpret market data and develop the related estimates of current value. Accordingly, the estimates presented herein are not necessarily indicative of the amount that could be realized upon the disposition of the assets or payment of the related liabilities. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated current value amounts.

On "literally the first page you're reading," Trump said, you see "this is a worthless statement from the standpoint of your using it as a bank or whatever." As Trump sees it, lenders were on notice that they should not rely on his statements but should independently investigate their accuracy. For that reason, he said, "you tend not to get overly excited about it." Although "it was a good faith effort," he said, "I felt it was a meaningless document."

Engoron rejected both Trump's claim that he made "a good faith effort" and his interpretation of the boilerplate he cited as a license to say anything, no matter how disconnected from the facts. But Trump's history of making demonstrably false claims about matters small (e.g., the size of the crowd at his inauguration) and large (e.g., a presidential election he still insists was "rigged" by systematic fraud) amounts to a "worthless clause" that he carries with him wherever he goes.

[This post has been updated with information about Moens' affidavit.]