Recent legal news coming from New York state bodes poorly for the Trump family.
To be sure, the state and municipal cases involve dull matters like financial statements, loan applications and tax returns. The recent news that accounting firm Mazars USA dropped its longtime clients, the Trump family and the Trump Organization, is hardly a smoking gun. But considering New York Supreme Court Judge Arthur Engoron’s decision Thursday denying a bid by Donald J. Trump, Ivanka Trump, and Donald Trump, Jr. to dodge subpoena requests, it looks like the Teflon shield around former President Trump might finally be wearing thin — at least as a private citizen. Engoron ordered Trump and his adult children to comply with subpoenas for looming investigations.
The subpoenas were issued in connection with New York Attorney General Letitia James’s civil investigation into the Trump Organization’s financial practices after Trump’s former personal lawyer Michael Cohen told Congress that the company had been “cooking the books.” James remains concerned that Trump’s team illegally inflated assets to secure favorable loans but deflated the same assets when it came to calculating tax obligations.
Meanwhile, the new Manhattan District Attorney Alvin Bragg, Jr. has pledged to continue a criminal probe into the same conduct, with a grand jury already having heard from numerous key witnesses. (A civil action can produce a judgment requiring payment of money or an injunction — only criminal cases trigger jail time.) Thus far, the grand jury produced one indictment of the Trump Organization and its former Chief Financial Officer Allen Weisselberg, in July of 2021 for allegedly engaging in a 15-year tax fraud scheme involving millions of dollars.
The Mazars letter and the judge’s ruling are connected. In moving to quash the subpoenas, the Trump family argued that the civil probe is an illegitimate political attack. Although James has brought no legal action against the Trumps to date, the letter from Mazars’ general counsel came after her office stated in a January court filing that it has uncovered “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.” Based in part on this filing, Mazars informed the Trumps that “the Statements of Financial Condition for Donald J. Trump for the years ending June 30, 2011 – June 30, 2020 should no longer be relied upon and you should inform any recipients thereof who are currently relying upon one or more of those documents that those documents should not be relied on.”
The unreliable information came from the Trump camp, mind you. Both Don Jr. and Ivanka were reportedly involved in the preparation of the financial statements, which is why the attorney general wants to talk to them.
For the business world, this looks like a big deal. Given the legal and reputational implications for Mazars, its decision to cut ties with the Trumps after a period of service that stretches back to Trump’s father, Fred Trump, was undoubtedly a wrenching one. As for Trump and his businesses, the letter opens up a slew of potential financial and legal liabilities in connection with debt extended in reliance on what Mazars is now saying was materially flawed information.
A Trump spokesperson insinuated the Mazars’ letter somehow actually helps them, in that it “confirms that after conducting a subsequent review of all prior statements of financial condition, Mazars’ work was performed in accordance with all applicable accounting standards and principles [and] effectively renders the investigations by the DA and AG moot.”
Engoron, of the New York Supreme Court, went out of his way to counter this in a colorful rebuke so stinging that it warrants repetition at some length.
“The idea that an accounting firm’s announcement that no one should rely on a decade’s worth of financial statements that it issued based on numbers submitted by an entity somehow exonerates that entity and renders an investigation into its past practices moot is reminiscent of Lewis Carroll (‘When I use a word, Humpty Dumpty said . . . it means just what I chose it to mean – neither more nor less’); George Orwell (‘War is peace, freedom is slavery, ignorance is strength:’); and ‘alternative facts,’” he wrote. “To proclaim that the Mazars’ red-flag warning that the Trump financial statements are unreliable suddenly renders the OAG’s longstanding investigation moot is as audacious as it is preposterous.”
It’s not every day that seasoned attorneys are chided by judges for making arguments deemed “preposterous.” But this is where the American judicial system has found itself in the wake of the Trump presidency — batting off irresponsible and borderline unethical legal arguments in deference to a powerful TV personality-turned-politician who believes the laws that apply to everyone else do not apply to him.
Engoron ticked through the Trumps’ other arguments with less outrage but equal aplomb.
During the 2016 campaign, Trump ridiculed Hillary Clinton’s staff for invoking the amendment during congressional testimony. “You see the mob takes the Fifth,” he said at a rally in Iowa. “If you’re innocent, why are you taking the Fifth Amendment?”
This might be a rare moment in which Trump truly leveled with his supporters.
Pleading the Fifth Amendment for self-protection may be precisely what the former president and his kids are facing sometime soon, as the inevitable appeal of Engoron’s ruling will likely fail.
Kimberly Wehle is a professor at the University of Baltimore School of Law and author of “How to Read the Constitution — and Why,” as well as “What You Need to Know About Voting — and Why” and “How to Think Like a Lawyer – and Why” (forthcoming February 2022). Follow her on Twitter: @kimwehle
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