Legal Pressure on Trump Increases With Judge’s Order in Fraud Inquiry

on Jan30
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A New York judge on Friday increased pressure on former President Donald J. Trump’s family business and several associates, ordering them to give state investigators documents in a civil inquiry into whether the company misstated assets to get bank loans and tax benefits.

It was the second blow that the judge, Arthur F. Engoron of State Supreme Court in Manhattan, had dealt to Mr. Trump’s company in recent weeks.

In December, he ordered the company, the Trump Organization, to produce records that its lawyers had tried to shield, including some related to a Westchester County, N.Y., property that is among those being scrutinized by the New York State attorney general, Letitia James.

On Friday, Justice Engoron went further, saying that even more documents, as well as communications with a law firm hired by the Trump Organization, had to be handed over to Ms. James’s office. In doing so, he rejected the lawyers’ claim that the documents at issue were covered by attorney-client privilege.

The ruling was a fresh reminder that Mr. Trump — who left office about a week ago under the cloud of impeachment and who is headed for a Senate trial on a charge of “incitement of insurrection” after his supporters stormed the Capitol in a violent rampage — faces significant legal jeopardy as a private citizen.

The most serious threats confronting the former president include a criminal investigation by the Manhattan district attorney and the civil inquiry by the attorney general into possible fraud in Mr. Trump’s business dealings before he was elected.

Ms. James’s investigation began in March 2019, after Michael D. Cohen, the former president’s onetime lawyer, told Congress that Mr. Trump had inflated his assets in financial statements to secure bank loans and had understated them elsewhere to reduce his tax bill.

Investigators in Ms. James’s office have focused their attention on an array of transactions, including a financial restructuring of the Trump International Hotel & Tower in Chicago in 2010 that resulted in the Fortress Credit Corporation forgiving debt worth more than $100 million.

Ms. James’s office has said in court documents that the Trump Organization — Mr. Trump’s main business vehicle — had thwarted efforts to determine how that money was reflected in its tax filings, and whether it was declared as income, as the law typically requires.

An analysis of Mr. Trump’s financial records by The New York Times found that he had avoided federal income tax on almost all of the forgiven debt.

Ms. James’s office is also examining whether the Trump Organization used inflated appraisals when it received large tax breaks after promising to conserve land where its development efforts faltered, including at its Seven Springs estate in Westchester County.

Accusing the Trump Organization of trying to stall the inquiry, lawyers with Ms. James’s office sought a judge’s order in August compelling the company to turn over documents related to the Seven Springs estate and other properties, and requiring the former president’s son Eric Trump, a company vice president, to testify in the inquiry. (Eventually, he did.)

In December, Justice Engoron ordered the Trump Organization to turn over to Ms. James’s office an engineer’s documents related to a conservation easement at the Seven Springs property.

Ms. James’s office is examining whether the easement is legitimate and whether an improper valuation of the estate allowed the Trump Organization to take a $21 million tax deduction it was not entitled to.

Lawyers for the company had tried to keep the engineer’s documents from investigators by claiming the materials were privileged because lawyers for the Trump Organizationrelied on them in valuing the property. Justice Engoron rejected that argument.

In the order issued on Friday, Justice Engoron again found that the Trump Organization lawyers had invoked attorney-client privilege for documents to which it did not apply.

Some communications that had been marked as privileged, he wrote, were “addressing business tasks and decisions, not exchanges soliciting or rendering legal advice.” He also said that communications related to public relations were not of a legal nature and that privilege was waived in some circumstances where third parties were involved in the discussions.

Justice Engoron did not specify in the order which documents were to be provided to Ms. James’s office, but he gave the Trump Organization until Feb. 4 to turn them over.

A spokesman for the attorney general declined to comment. A representative of the Trump Organization did not immediately respond to a request for comment.

The Seven Springs estate is also now at issue in the long-running inquiry being conducted by the Manhattan district attorney, Cyrus R. Vance Jr., as first reported by The Wall Street Journal. Prosecutors involved in the inquiry, the only known active criminal investigation of Mr. Trump, have subpoenaed records related to the Westchester property, according to people familiar with the matter.

Mr. Vance’s investigation has largely been stalled since last fall, when Mr. Trump sued to block a subpoena for his tax returns and other records, sending the bitter dispute to the U.S. Supreme Court for a second time. A ruling is expected soon.

Danny Hakim contributed reporting.

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