Lawsuit alleges Trump schemed to obtain loans and lower taxes, including on Las Vegas tower 

By: - September 21, 2022 11:10 am
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The suit says the Trump organization deflated the property's value to lower its tax bills while inflating the value to pad financial statements. (Photo: Jeniffer Solis)

Former U.S. President Donald Trump undervalued his holdings, including his Las Vegas tower,  which he co-owns with Treasure Island owner Phil Ruffin, to avoid paying taxes, and inflated values to bolster his financial statements to impress lenders, according to a wide-ranging civil fraud lawsuit filed Wednesday by New York Attorney General Letitia James.

James alleges from 2013 through 2021, Trump’s financial statements inflated the value of his Las Vegas property  “using some of the same deceptive techniques Mr. Trump and the Trump Organization used to fraudulently inflate valuations of Mr. Trump’s other properties, including failing to discount future cash flows and projecting future income from the sale of residential units that assumed prices well in excess of what the units were actually selling for in the marketplace, while ignoring the values derived and methods used in earlier appraisals that were never disclosed.”

The suit says In 2011 and 2012, Trump hired an appraiser to contest the tax on Trump LV  before county and state authorities.

“The 2011 appraisal used a discounted cashflow analysis to appraise 932 unsold condominium units and the separate hotel unit, applying a discount rate of 12% to the units and 12.5% to the hotel,” the suit says. “Eric Trump sent this appraisal—which valued the units and hotel at $115,689,000 and $12,690,000, respectively—to Allen Weisselberg, writing: “The tax appeal for the hotel component is happening today and appeal on the units themselves in scheduled for March 11th. I’ll let you know how we make out later this afternoon….”

Weisselberg was the Trump organization’s longtime chief financial officer who pleaded guilty to felony charges of tax evasion last month.

In 2012, another appraisal determined the value of the tower’s unsold units was $111,500,000.

“This was far less than the roughly $178 million in outstanding loans payable on the property at the time—but that made the appraised value a favorable result for the Trump Organization, because a lower value would result in a lower tax bill,” the suit says.

“I take it you are happy with the work?” Eric Trump wrote of the appraisal to an unidentified attorney, according to the suit.

“The attorney replied, ‘I am happy with the work and think the [Clark County Board of Equalization and the Nevada State Board of Equalization] will buy the value . . . . I am optimistic.’”

“The Trump Organization and its executives, including Eric Trump and Allen Weisselberg, understood any analysis of the value of the property’s future cash flows required the application of a discount rate—and they had expressly adopted that position in their submissions to the county and state government tax authorities,” the suit says. “Despite having submitted the 2011 and 2012 appraisals to government taxing authorities, the Trump Organization ignored those appraisals when valuing Trump Vegas for the 2013 (Financial) Statement.”

“Instead, at Eric Trump’s request, a Trump Organization employee provided an approach that discarded both the assumptions and methodology used by the appraiser and incorporated misleading figures from Mr. Weisselberg into a document that purported to illustrate cashflows to the Trump Organization from the sale of Trump Vegas condominium,” the suit says.

Trump’s financial statements projected Trump LV’s condo units would be sold in five years, even though the appraisal concluded it would take a decade. The statement also inflated projected sales prices for the units, and failed to apply the appraiser’s discount rate, “in violation of GAAP (generally accepted accounting principles).”

The suit says comparing appraisals obtained by Trump for tax purposes in 2015 and 2016 to the valuations provided in financial statements “highlights the fraudulent intent—and duplicity—of the Trump Organization’s approach.”

The suit alleges In 2015, Trump obtained an appraisal to contest the tax assessed on the hotel portion of Trump LV.  The appraisal valued the hotel at $24,950,000, “after identifying numerous risks factors that would decrease the property’s value, including that the property was a ‘first venture in the Las Vegas market of a stand-alone tower that is not directly located along Las Vegas Boulevard South and contains no gaming.’”

“Outside tax counsel James Susa emailed the appraisal to Eric Trump. Emphasizing that the goal of the appraisal was to reach a lower value, Mr. Susa wrote: ‘Here is the appraisal of the hotel unit at just under $25 million. I had asked [the appraiser] to come in around $20 million but you were making too much money for him to get that low.’”

The appraisal was initially rejected by the Clark County Assessor and Board of Equalization, the suit says, but “the Nevada State Board of Equalization overturned those conclusions on appeal.   As Mr. Susa described the State hearing to Eric Trump, “We cleaned their clock . . . . First comment from the Board was ‘this is a complex appraisal assignment, the taxpayer brought us an appraisal, that does it.’ Second comment from the Board was ‘move to approve the appraised number, second, all in favor, unanimous, thanks for coming.’”

The organization’s valuation of Trump LV that year, the suit says, “was again designed to falsely inflate the value of Mr. Trump’s stake in the venture and disregarded the appraisal.”

Michael Lawton, spokesman for the Nevada Gaming Control Board said the board had “no comment at this time” on whether the allegations in the suit, if proven, would affect Ruffin’s gaming license.

The suit says Eric Trump invoked his Fifth Amendment right against self-incrimination and refused to answer questions about drafting the financial statements that inflated Trump LV’s value from 2013 through 2016.

Eric, Don Jr., and Ivanka Trump are also named in the suit.

In 2017 and 2018, the Trump organization employed “an even more blatantly fraudulent method to value the then-remaining Trump Vegas condominium units” by adding together the “list prices” of the units, a method that was “false and misleading in two respects. First, like earlier valuations, it ignored the requirement under GAAP to discount future cash flow to derive present value. Second, by using ‘list’ prices, the valuation employed per-square-foot prices that were more than 50% greater than actual recent closed sales at the Trump Vegas property…”

Clark County Assessor Briana Johnson did not immediately respond to requests for comment.

Note: This story was updated with comment from the Nevada Gaming Control Board. 

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Dana Gentry
Dana Gentry

Dana Gentry is a native Las Vegan and award-winning investigative journalist. She is a graduate of Bishop Gorman High School and holds a Bachelor's degree in Communications from the University of Nevada, Las Vegas. Gentry began her career in broadcasting as an intern at Channel 8, KLAS-TV. She later became a reporter at Channel 8, working with Las Vegas TV news legends Bob Stoldal and the late Ned Day. Gentry left her reporting job in 1985 to focus on motherhood. She returned to TV news in 2001 to launch "Face to Face with Jon Ralston" and the weekly business programs In Business Las Vegas and Vegas Inc, which she co-anchored with Jeff Gillan. Dana has four adult children, two grandsons, three dogs, three cats and a cockatoo named Casper.

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