Donald Trump and the Trump Organization used false and misleading financial statements to obtain favorable mortgages and insurance policies over the past decade, according to a 222-page civil complaint filed by New York Attorney General Letitia James after a three-year investigation. .
The suit names the Trump Organization, Donald Trump, three of his children – Vice President Ivanka Trump, Eric Trump and Donald Trump Jr. – as well as Chief Financial Officer Allen H. Weisselberg, and other Trump organizations and individuals.
While most of the fraud cases involve bank loans, the suit also charges Trump with insurance fraud under state laws that prohibit the submission of false information as part of a commercial insurance application or seeking benefits under insurance.
James alleges that each of the defendants engaged in a “continuous, concerted scheme” to use false and misleading information to inflate the fortunes of Donald Trump for a financial gain of approximately $250 million.
The lawsuit alleges that former President Trump, with the help of his children and executives of the Trump Organization, “raised billions of his own money to induce banks to lend money to the Trump Organization at a better rate than would otherwise have been available to the company, in order to meet the ongoing loan agreements.” , encouraging insurers to offer insurance at higher and lower rates, and getting tax benefits, among others.
From 2011-2021, Trump and the Trump Organization “knowingly and willfully made more than 200 false and misleading financial statements in Trump’s annual financial statements to defraud financial institutions,” the indictments said.
Trump’s financial records were critical to his insurance coverage
As punishment for the alleged wrongdoing, the attorney general wants to: permanently bar Trump from being an officer or director in any New York corporation; prohibiting Trump and the Trump Organization from engaging in any transactions in New York for five years; netting out any financial gain obtained through the ongoing fraud, estimated at $250 million.
In connection with the lawsuit, James said he has also referred the matter to the US Attorney’s Office for the Southern District of New York and the Internal Revenue Service for criminal investigation.
Trump’s lawyer, Alina Habba, told reporters New York Times the offenses are “nonsense.”
The former president took to his Truth Social page to respond, calling the New York AG “racist” for going after him and his family and calling the case a “witch hunt.” His sons, Donald Jr. and Eric, also dismissed the suit as a “witch hunt.”
The court provides details of two insurance transactions where Aon Risk Solutions was a broker and the Trumps allegedly provided false information: the security program with Zurich North America, and the directors and officers from Everest National and Tokio Marine HCC.
Trump’s financial records were critical to his insurance coverage. They were used to support Trump’s confirmation in lieu of collateral and to misrepresent the value of Trump’s assets, according to the complaint, which alleges that the Trump Organization only allowed reporters to review Trump’s activities at Trump Organization offices.
The lawsuit was filed in New York County state court.
There is no allegation that any of the insurance companies did anything illegal or fraudulent.
As for the D&O spread, the suit also alleges that in addition to providing false financial information, Trump and his organization failed to disclose investigations of Trump and other employees that could have affected their ability to receive benefits. The Trump company later tried to seek immunity under the D&O principle for the investigation.
Insurance Journal reached out to the insurance companies named in the complaint but were unable to contact them by press time. There is no allegation that any of the insurance companies did anything illegal or fraudulent.
Trump Surety Program
According to insurance records in the AG’s case:
- From 2007 to 2021, Zurich North America underwrote the Trump Organization’s security program through insurance broker Aon. Many bonds are legally required of the Trump Organization’s real estate business, such as bonds for golf course liquor licenses or construction bonds.
- Over the course of the program, based on the Trump Organization’s statements, Zurich agreed to increase the positive terms – periodically increasing the limit and reducing it until the program is terminated in 2021.
- In this relationship, Zurich required the Trump Organization to indemnify against any losses if Zurich was required to pay the debt. The Trump Organization met the indemnification order through the General Indemnity Agreement (GIA) where Donald J. Trump agreed to indemnify Zurich for claims.
- The Trump Organization received Zurich’s permission to reorganize the security program several times by deliberately falsifying Trump’s claims. The Zurich underwriter was shown a statement listing the real estate properties of the Trump Organization and the value of which Trump representatives said is verified annually by an expert appraisal firm, which the author took as a sign of their reliability. But the Trump Organization has not retained any professional research firm; instead the calculations were prepared by Trump administration staff.
- If the Zurich reporter had been told the truth, this would have distorted his analysis, made him question the veracity of the information disclosed by the Trump Organization, and questioned Zurich’s continued insurance relationship with the Trump Organization.
- The Trump Organization has also failed to disclose that the golf course listed on Trump’s personal information includes more money burned than the stated value. Under the Zurich guidelines, intangibles such as brand value should not be included. If the Trump administration had revealed the value, Zurich would have lowered the price.
Trump D&O coverage
According to insurance records in the AG’s case:
- As of December 2016, the Trump Organization was responsible for a $5,000,000 settlement from Everest National Insurance Co. at a cost of $125,000. For these reasons, the underwriters were not allowed to go beyond what Trump said, through a personal inspection at Trump Tower.
- On December 6, 2016, Aon contacted D&O underwriter Tokio Marine HCC seeking an additional $5,000,000 in financing to top the Everest criteria. The HCC librarian received authority to comment on the proposed regulations subject to a financial review of the reform. But the Trump administration is looking to rewrite the project on the day of President Trump’s inauguration with a higher limit of $50,000,000 – a tenfold increase in D&O coverage that existed under the Everest policy. The underwriters were given a small amount but saw the documents in late 2015.
- In response to direct questions from reporters at their January 10, 2017 meeting, Trump administration officials maintained that there were no lawsuits or inquiries from anyone that would lead to a claim under the D&O. The HCC author relied on this representation in concluding that there was no evidence that would trigger coverage under the D&O policy. On January 20, 2017, HCC issued a $10,000,000 initial public offering, with effective dates from January 30, 2017 to January 30, 2018.
- Although representations were made to Trump’s writers, during the meeting there was an ongoing investigation by the Attorney General’s office into the Trump Foundation and Trump’s family members, who at the time were managers and officers of the Trump Organization. Trump Organization. In October 2016, the OAG also issued third-party subpoenas in connection with its investigation. No representatives of the Trump Organization have disclosed to reporters about the AG’s investigation, although they understand that the AG’s investigation could lead to a verdict, as evidenced by the disclosures made to insurers D&O HCC, Starpoint, Swiss Re, Argo, and Allianz to Aon in January 17, 2019 seeking information regarding the AG’s enforcement.
- Soon Aon issued further notices in June 2017 and January 2018, which caused problems for HCC underwriters. Upon request, the Trump Organization provided the names of Michael Cohen, Donald Trump, Jr. and four other individuals who were or would be expected to participate in the present study. No other individuals were identified in response nor did the Trump Organization disclose in interviews in early 2018 the existence of any other investigations or inquiries that could lead to a decision under the D&O policy. HCC agreed to extend its $10,000,000 policy for another 12 months.
- Based on the re-enrollment, HCC concluded that the risk exposure was greater than previously assessed. As a result, on January 24, 2019, HCC also issued a $10,000,000 plan to significantly increase $1,600,000, more than five times the amount that was spent. The Trump Organization denied it.
- On February 8, 2019, just two days before the policy was due to expire, Aon issued a notice to the D&Os that had written about “a number of claims and/or events that could reasonably be expected to give rise” to claims under the policy. This includes various inquiries from members and committees of Congress including the House Intelligence Committee; an investigation by the US Attorney for the Southern District of New York; potential investigations by various government agencies including the IRS and Attorneys General; the investigation of Russian interference in the 2016 presidential election by Special Counsel Robert Mueller, and more.
- Apart from the investigation by the House Intelligence Committee and Mueller, the Trump Organization failed to tell reporters at the briefing about some of the questions mentioned in Aon’s February 2019 notice, or what led to those questions.
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