The late Robert M. Morgenthau was a legendary prosecutor. He served as U.S. attorney for the Southern District of New York and Manhattan district attorney for 34 years. Fiercely independent and dedicated to the public interest, he relished high-profile cases and did not shrink from prosecuting public officials or well-heeled business figures, even when the illegality was not so flagrant.
It appears that, over many years, former President Trump knowingly submitted false financial statements to banks and insurers to induce them to lend. But Alvin Bragg, the newly elected Manhattan DA, seems to have put the brakes on the case against Trump for financial fraud. Last week, Bragg’s two top prosecutors on the case, Mark Pomerantz and Carey Dunne, abruptly resigned as they seemingly saw Bragg’s action to be contrary to the public interest. Pomerantz and Dunne, both of whom have impeccable reputations, had been investigating Trump for some time.
Based only on what has come out in the press (and doubtless more evidence was available to the grand jury), there appears enough of a case against Trump to take him to trial. The valuations Trump placed on business assets for purposes of obtaining bank loans were grossly inflated, and varied widely from valuations he placed on the same assets in tax returns.
New York’s larceny law requires deprivation of property, and some cases say that the deprivation must be permanent. This would indicate that intent to repay a fraudulently induced loan might be a defense. There is no way, however, that Trump could repay all or some of his loans. In fact, he has a record of fleecing his creditors, suppliers and even his lawyers. In Atlantic City, his casinos went bankrupt six times. Protesting that he had an intent to repay will ring hollow when his history has been to roll over the loans without paying down principal.
Although the penal law provision regarding “scheme to defraud” might cover fraudulent inducement of a loan, the issue is legally complicated. New York does not have an analog to the federal law which makes it a crime to submit a knowingly false financial statement or an overvaluation of property to influence action by a bank or insurance company. Intent to repay would not be a defense. Nevertheless, Bragg should have let a jury wrestle with that one.
A criminal fraud case is like a mosaic; the full picture is more important than the individual tiles. The fact that we have a decade of false financial statements in itself may be “quite sufficient” to convince a jury that Trump had actual knowledge of the falsity of the financial statements and deliberately sought to defraud his lenders.
As the iconic Judge Learned Hand put it: “the cumulation of instances, each explicable only by extreme credulity or professional inexpertness, may have a probative force immensely greater than any one of them alone.”
The key badge of fraud is that Trump’s long-time accountants, the Mazars Group, pulled their opinions on the Trump financials, and said that, despite the elaborate boilerplate disclaimers, they should no longer be relied upon. Would the banks have made the loans had they known that the financials were false, and could not be “relied upon”? Auditors do not pull their opinions on 10 years of financial statements unless they have a real issue.
Auditors normally do not render an opinion covering financial statements unless they receive a representation letter from the client that the financials are presented fairly, and are true and correct. It is not clear that Trump personally signed such a letter to Mazars, since he is known not to leave his fingerprints on anything. But it is inconceivable that his employees would have signed the letters unless Trump directed them to do it.
In the celebrated Rothko case in the 1980s, the stock book of the Marlborough Gallery was doctored to backdate Rothko painting sales. Frank Lloyd, owner of the gallery, tried to shift the blame to underlings who physically altered the records. Morgenthau prosecuted Lloyd for uttering false records, and he was convicted after a jury trial.
Bragg may have hesitated because of the problem of proving Trump’s criminal intent. Trump’s convicted lawyer Michael Cohen testified before Congress that “Trump inflated his total assets when it served his purposes…and deflated his assets to reduce his real estate taxes,” but this may not have been enough. Cohen was not viewed by Bill Barr’s Justice Department as a reliable witness. Bragg should not have been equally skeptical.
But, to prove criminal intent, you don’t need Michael Cohen or anyone else on the inside to say Trump knew everything. That is gathered from all the facts and circumstances. There is evidence of all the similar acts of Trump’s lying in sworn statements or in statements filed with government agencies, and that would have independent probative force.
Unlike in the Jan. 6 or Georgia cases, Trump has no credible counter-attack against the New York case by claiming his political enemies are out to get him. Anyway, it was Bob Morgenthau who famously said: “A man is not immune from prosecution just because a [prosecutor] happens not to like him.”
I do not know Bragg, and ascribe no improper motive to him. But I do know that Bob Morgenthau would most certainly have indicted Trump on the publicly known facts.
Zirin is a former federal prosecutor in the Southern District of New York. He was appointed by Robert M. Morgenthau.
