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Judge asked to decide if Trump property valuations were fraud or "genius"

Did former President Donald Trump commit fraud when he valued properties far higher than appraisers when applying for loans, or was he applying his "investment genius" to the valuations? 

That question was at the center of a Friday hearing, ahead of a scheduled Oct. 2 civil trial stemming from a 2022 lawsuit filed by New York Attorney General Letitia James accusing Trump and others of systematic fraud. 

The lawsuit is seeking $250 million from the Trumps and their company, as well as several additional sanctions designed to limit their ability to do business in the state. James has also asked the judge in the case to rule before trial that Trump and his company provided banks with financial statements that purposefully misrepresented his wealth by as much as $3.6 billion.

Judge Arthur Engoron heard arguments Friday related to the attorney general's request, as well as a motion from Trump's team to throw out the case. Trump's team argues many of the loans in question occurred too long ago to be considered as part of this case.

Andrew Amer, a lawyer for James' office, said Trump signed off on so-called statements of financial condition that portrayed a variety of properties he and his company owned as worth hundreds of millions more than the valuations of appraisers either hired by his company or working for local governments.

Among the dozen examples cited by Amer was Mar-a-Lago, a private club where Trump currently lives.

Amer pointed to a decade's worth of Palm Beach County, Florida appraisals dating back to 2011 in which the local government valued the property between $18 million and $27 million. That was nearly $700 million less than Trump's valuation of the property in 2018.

"The inflation of Mar-a-Lago is simply staggering," Amer said, pointing to representations made by Trump and his company listing the property as worth more than $700 million. 

Amer said Trump wasn't using generally accepted accounting principles and failed to disclose that to banks.

Christopher Kise, an attorney for the defendants, said the valuations complied with a separate set of accounting standards, known as ASC 274, that guide personal financial statements.

Kise said ASC 274 affords people "wide latitude" in valuations, and said Trump was being persecuted for his "success" in making properties more valuable.

Kise said Mar-a-Lago is a good example of Trump's success.

"I don't know if you've been there, but it's worth ten times" the local county's appraisal, Kise said, noting that a defense expert said it's worth more than $1.2 billion. "This is an extraordinary piece of property."

But Kise said it's another Florida property that really makes Trump's case, the Trump National Doral Miami golf club.

"This is the one that proves Mr. Trump's investment genius," Kise said. It was purchased out of bankruptcy for about $150 million in 2012, and Kise said it's worth "well more than $1 billion" now.

"What Doral demonstrates is that President Trump is a master at finding value where others see nothing," Kise said.

As Kise spoke he was peppered with questions and interruptions by Engoron and his law clerk Allison Greenfield. 

"You cannot make false statements and use them in business — that's what this statute prohibits," Engoron said at one point, banging his hand on the bench.

Engoron and Greenfield questioned whether a property's increase in value over time justifies an inflated value from years ago.

"The present justifies that his valuations were correct," Kise said. "This is why billionaires are billionaires: if anyone could do it, they would."

Engoron said that by Sept. 26, he'd issue rulings on both sides' requests for summary judgment, as well as a separate matter in which James' office wants him to fine the Trump lawyers $20,000 for repeating rejected arguments related to whether the attorney general had standing to sue Trump.

Engoron appeared to favor the attorney general's side in that dispute, repudiating Trump's team for what he called "literally crazy" arguments.

"The law on sanctions is if you've been warned, don't do it," Engoron said.

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