Comment: Trump committed financial fraud; now comes price tag

By Timothy L. O’Brien / Bloomberg Opinion

As one of Donald Trump’s much-anticipated fraud trials kicks off in a Manhattan courtroom today, consider the witness list.

Trump and his three eldest children are scheduled to testify, and some witnesses are slated to appear both in Trump’s defense and for the prosecution team lead by New York State Attorney General Letitia James. One of those switch-hitters, Rosemary Vrablic, particularly intrigues me.

Vrablic once advised Trump and his son-in-law Jared Kushner as a private banker at Deutsche Bank AG, the sprawling, scandal-plagued German bank that had long courted Trump as a way to jump-start its U.S. banking business.

And Trump was a slippery client, even for a bank that repeatedly found itself being investigated for a range of suspected violations such as money laundering, tax evasion, bribery, market manipulation and lax regulatory and compliance standards.In the late 1990s and early 2000s, Deutsche extended loans and peddled debt for Trump in deals worth about $825 million; when other large banks wouldn’t touch him because of his track record as a serial bankruptcy artist. The bank stuck by him after his casino company subsequently defaulted on $400 million in bonds that Deutsche sold on his behalf and lent him an additional $640 million to help fund a Chicago development. When that project’s viability was threatened after the 2008 financial crisis, Trump sued the bank, seeking damages and claiming he didn’t have to repay because the crisis amounted to an unforeseeable catastrophe.

After all that, Deutsche’s commercial banking unit finally ceased doing business with Trump. But then in stepped Vrablic, from Deutsche’s private banking arm. She shrugged off her colleagues’ earlier concerns about Trump and ultimately signed off on some $300 million the bank extended to him in the years before his successful presidential bid in 2016.

So whenever Vrablic takes the witness stand this week, you could imagine a prosecutor asking: “Donald Trump misled you, didn’t he, when you lent him all that money? Had you known better, you wouldn’t have, right?” Perhaps Vrablic will say: “Yes.”

You could also imagine one of Trump’s lawyers asking her: “You absolutely knew how much his properties were worth when you lent him money, didn’t you? It would have been negligent not to, right?” Perhaps Vrablic will say: “Yes.”

Whatever course the questioning takes, Vrablic can’t say yes in exactly the same way that both the prosecution and defense need her to say it. Yet each side has called her as a witness, suggesting that each is optimistic it will get the testimony it seeks. In that regard, Vrablic, who resigned from Deutsche three years ago, is the embodiment of James’ entire case against Trump.

James is contending that Trump spent years routinely inflating the value of his holdings to improperly snare loans and insurance policies. He and his advisers argue that the banks and insurers were savvy and that none of them suffered damages.

There has always been ample evidence that at least some of the banks knew exactly what they were doing.

Trump unsuccessfully sued me for libel in 2006 for $5 billion, claiming I had damaged his reputation and business prospects by saying his net worth was just a small fraction of the $6 billion he claimed. During the litigation, my lawyers got their hands on an assessment of Trump’s wealth that Deutsche had pulled together in 2004. Deutsche calculated that he had a net worth of about $788 million when he was telling them he was worth $3 billion. When Deutsche lent Trump about $100 million to help him buy the Doral Resort in Florida in 2012, it did so only after some of its bankers estimated he was inflating the value of his assets by as much as 70 percent. So the bank often seemed to be in on the joke.

Here’s the rub for Team Trump, however. All the testimony this week is really about establishing the exact penalties the Trumps will suffer. James is seeking a $250 million fine and wants the Trumps banned from doing business in New York, where a substantial portion of their business, wealth and family history is located. The judge overseeing the case has already ruled that Trump acted fraudulently and that he should lose his New York business licenses. His expulsion from New York may be a fait accompli pending any appeals.

James brought her case under the Martin Act, a New York law passed in the 1920s to make it easier to prosecute highflying securities firms of the time that had made a sport out of fleecing individual investors. It gives all New York attorneys general vast power to investigate and penalize businesses operating in the state that are suspected of wrongdoing. Critics contend that the Martin Act gives the attorney general’s office too much freewheeling power, but state courts have traditionally respected its parameters; suggesting that Trump won’t have much room to run with an appeal.

Other goodies could emerge from trial testimony this week. Trump and his two eldest sons, Donald Jr. and Eric, tend to tilt toward buffoonery and cluelessness when the prosecutorial heat is turned on. Trump savaged himself when my lawyers deposed him in 2007, saying his net worth was whatever he imagined it to be from day to day. He also was forced to admit to dozens of lies about his business success and earnings when documents were passed across the table to him.

After the judge in the New York case ruled last week that James had already demonstrated that Trump had committed fraud and had inflated the value of assets such as his Mar-a-Lago club and residence, Eric took to social media to disagree. He argued that Mar-a-Lago was worth “over a billion dollars making it arguably the most valuable residential property in the country.” I have a very hard time believing that Mar-a-Lago is worth more than $1 billion, even if Eric thinks so. And he couldn’t restrain himself from offering public proof of the very same problem — rampant asset inflation — that put his family in the legal crosshairs to begin with.

All of this suggests that the Trump clan could offer rounds of meltdowns when they visit the witness stand. Will any of that serve to undermine the paterfamilias’ appeal to his voting base? I wouldn’t count on it.

Trump’s rise in the American imagination rested on his appeal as an entrepreneurial guru and carnival barker. He has long since transitioned away from that role with his most loyal followers. He is an era-defining politician now, and he oversees a cult that cares little about his business foibles or setbacks, I suspect. They just want to make sure that he is free to fight for them.

And that’s not at issue in James’ case. It’s being tried in civil court, so Trump’s freedom isn’t in jeopardy. But his New York business story is essentially over. James is just writing the final chapter.

Timothy L. O’Brien is senior executive editor of Bloomberg Opinion. A former editor and reporter for the New York Times, he is author of “TrumpNation: The Art of Being the Donald.”