• Sun. Aug 7th, 2022

NY AG: Trump fraud involved tax relief for conservation easements

Former President Trump’s real estate company used an “inflated” appraisal of one of its New York properties to secure multimillion-dollar tax relief in 2016, the state’s attorney general has charged.

In court documents filed this week, Attorney General Letitia James (D) says a valuation of Trump’s Seven Springs property in Westchester County, NY, was based on “questionable assumptions” about its prospects for development. The assessment, James said, claimed that more than double the number of houses that could be built were allowed by the restrictions.

The Cushman & Wakefield valuation company has valued Seven Springs at $56.5 million, two decades after Trump bought it for $7.5 million. He then obtained a permanent conservation easement — a covenant never to develop the property — for a “multi-million dollar benefit” on his federal taxes, James said.

The allegations are part of a long petition James filed this week in New York state court, asking that Trump be compelled to testify under oath in his sweeping investigation into the real estate mogul and the former president’s financial and business dealings for years .

James said Trump and his children, Donald Jr. and Ivanka, were closely involved in ongoing business, including frequent communication with personnel working on the Seven Springs plans and the firing of a consultant for the project.

The court documents cite a 2019 speech Trump gave to the National Association of Realtors, where he wrongly complained about how federal wetland regulations have hampered property development. James says the remarks are proof that Trump, who owns 100% ownership of Seven Springs, was personally involved in its development.

“So far in our investigation, we have uncovered significant evidence that suggests that Donald J. Trump and the Trump Organization falsely and fraudulently valued multiple assets and misrepresented those values ​​to financial institutions for economic gain,” the attorney general said in a statement. “The Trumps must comply with our legal subpoenas for documents and testimony, because no one in this country can choose whether and how the law applies to them.”

Year-long struggle

After purchasing the estate in 1995, Trump attempted to develop first a golf course and then a luxury residential development. Seven Springs is a 216-acre estate and mansion built a century ago by financier Eugene Meyer.

Trump has faced numerous obstacles at several stages of development, including local opposition and concerns about the impact on the adjacent drinking water reservoir, Lake Byram. The three communes on which the property sits agreed to a reduced residential plan prior to the 2016 easement.

During his presidency, Trump complained that federal wetland regulations had impeded his property development, saying in the National Association of Realtors’ 2019 speech, “You’d have a puddle on your land, and they would consider it one of the great lakes in the world.” But local zoning rules are what presented the biggest problems for development (green wire, May 20, 2019).

Columbia University Law School professor Michael Gerrard represented the town of Mount Kisco in a lawsuit against the Trump Organization in 2004 over concerns that a golf course development on the property could lead to a pesticide pollution of Lake Byram.

He does not recall the future value of the Trump property during this trial, although Trump constantly threatened to develop homes on the property if the golf course idea failed.

Gerrard represented other clients seeking to develop properties in nearby Bedford, NY during the 1990s and early 2000s and said it was common knowledge that “the people of Bedford are keen to keep the rural character of the region” and that the environmental and zoning rules are strict. .

Indeed in 1999, when The New York Times wrote about a fight between Bedford and one of the clients of Gerrard, an elite private school that wanted to build a new high school on over 100 acres, the Gray Lady described the people of Bedford as “almost as protectors of the semi-rural character of the city as they are of their own children.

“Any real estate developer has long known that building major projects in Bedford involves a lengthy environmental and zoning review process,” Gerrard told E&E News.

“Always build”

The biggest hurdles to development were not taken into account in the 2016 assessment, James said. Representatives of the Trump Organization did not inform Cushman assessors of restrictions on the number of homes that can be built, road access issues and local limits on the number of homes that can be built at one time.

This meant that the appraisers had taken into account the company’s plans to build 24 houses, but in reality only 10 could be built, which “would be a significant issue which would be relevant to the value of the property – and according to all likelihood would have reduced the appraised value,” James’ filing said, paraphrasing the appraisers’ testimony.

The fewer homes would cut Seven Springs’ value by about half, significantly reducing Trump’s tax break, according to the attorney general’s filing.

James further claimed that Trump’s annual “statements of financial position” — estimates of his net worth provided to investors, banks and others — included still-inflated values ​​of Seven Springs, as well as some other properties.

Despite the $7.5 million purchase price and Cushman’s $56.5 million appraisal, Trump claimed the property was worth $291 million through 2014.

That same year, another of Trump’s sons, Eric, gave an interview to Forbes to the property, describing the family as “always building”. But Eric Trump described the uncertainty in plans to “build 14 houses” on the property.

“Whether we actually build those 14 houses is another story,” he said. “We will see when and how and if we finally go ahead with this plan.”

Later returns had no specific values ​​for Seven Springs, grouping it into an “other assets” category, which James says “helped mask a substantial decline in value” of the estate.

LA Golf Courses

James’ petition also alleges that the Trump Organization used an inflated valuation of part of Trump National Golf Club Los Angeles to obtain additional tax relief. The company has put a $25 million value on the land it donated for a conservation easement.

The appraisal “significantly overestimated the value of the Trump Golf LA donation by overstating the speed at which the site could be developed and failing to value a reduction in affordable housing needs that the donation enabled”, offering tax relief from worth millions of dollars to Trump, says James.

A Trump spokesperson hit back at James after his allegations were published.

“The only one deceiving the public is Letitia James. She defrauded New Yorkers by basing her entire candidacy on promising to get Trump at any cost without seeing a shred of evidence and in violation of every conceivable ethical rule,” the spokesperson said. “His allegations are baseless and will be vigorously defended.”

Congressional efforts to crack down on the abuse of conservation easement tax relief have accelerated in recent years. Lawmakers in both parties have been looking for ways to stop overstated valuations, among other issues (E&E News PM, August 25, 2020).