Fraud or real estate? Five takeaways from week one of the Trump Organization trial

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The trial of Donald Trump and his real estate business kicked off this week in Manhattan as the former president faces a potential fine of at least $250m for financial fraud.

In his pre-trial ruling, the New York judge Arthur Engoron found Trump guilty of fraud for creating false and misleading financial statements. Trump boosted the value of his assets by as much as $2.2bn, according to an investigation by the New York attorney general, Letitia James, who brought the case against Trump.

Engoron had already dealt a heavy blow to Trump, cancelling the business licenses that allow him to run his business in the state.

The first week of the trial had a full cast of characters, including appearances by Trump himself, who railed against proceedings outside of the courtroom but remained largely muted as they took place inside.

Because this is a civil case, Trump will not be facing jail time. It is also a bench trial, which means the judge will be the sole decider of the outcome.

Here’s what we’ve learned so far during the first week of Trump’s New York fraud trial:

Prosecutors are narrowing responsibility down to Trump and the Trump Organization

Much of the evidence offered for the case are the tens of thousands of financial documents that prosecutors argue show Trump lied about the value of his assets. The judge already ruled these documents prove financial fraud. What’s left for prosecutors is to demonstrate – through witness testimony – that Trump and those working for his company knew these statements were false, and used them to broker deals anyway.

“They claim they weren’t involved in the valuations process,” the state prosecutor Kevin Wallace said in opening statements. But “there is ample evidence of intent”.

The first witness to take the stand was Donald Bender, a partner at Mazars USA, Trump’s former accounting firm. Prosecutors asked Bender to speak in meticulous detail about financial statements from the Trump Organization. Bender said that “from time to time” he would tell leadership at the Trump Organization that there were discrepancies on company financial statements, but it was essentially up to the company to provide its accountants with accurate information.

A second accountant, Cameron Harris from accounting firm Whitley Penn, briefly took the stand as a second witness. The Trump Organization took on Whitley Penn as its accounting firm after Mazars USA cut ties with Trump in 2022. Harris said that accountants “do not verify the accuracy of any of the information provided” and that his firm’s agreement with the Trump Organization said that they do “not express an opinion or conclusion nor provide any assurance on the financial statements”.

Trump’s lawyers tried to reverse the blame on to the accountants. One of the former president’s representatives, Jesus Suarez, told Bender that Trump’s “company is going through this hell because you messed up”. Bender asserted that while he could have caught shifts in reported information, it was ultimately the Trump Organization’s mistake for misreporting.

By removing Trump’s accountants from the equation, prosecutors are trying to show the judge that those within the Trump Organization were responsible for the financial statements. Prosecutors have a lengthy list of the company’s former employees who are set to testify in the coming week.

Trump’s lawyers argue ‘it’s not fraud, it’s real estate’

“We have renowned experts that say properties like Mar-a-Lago are worth over $1bn,” the Trump lawyer Alina Habba said in her opening statement. “I bet you there is someone who would buy that property for way over $1bn.

“That is not fraud, that is real estate.”

After Trump failed to get the case thrown out of court completely, Trump’s lawyers are focused on trying to convince the judge that Trump did not lie about the value of his properties. Even though they listed the values of the properties in the case as at least double what independent appraisers estimated, they had actually undervalued the properties because of the Trump brand.

A second argument Trump’s lawyers will try to elaborate on during the trial is that the banks that issued the loans were not cheated. They made hundreds of millions from the deals.

There were no “unjust profits, and there were no victims”, Christopher Kise, another Trump lawyer, said during opening statements. Trump’s team said they plan on calling on witnesses from the banks who will testify that the transactions were “successful”.

Finally, Trump himself has also been touting the “worthless clause”, which he argues was an addendum to the financial statements that warned lenders the figures weren’t verified.

Trump is facing an uphill battle with this strategy, as Engoron has already shut down the core of these arguments in his pre-trial ruling.

“Defendants’ respond 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,” he wrote in the 26 September judgment. Engoron said that Trump is operating in “a fantasy world, not a real world”.

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