In the New York Attorney General’s civil fraud case against Donald Trump, two of his sons, Allen Weisselberg, Jeffrey McConney, and a bunch of Trump Organization business entities (aka “Trump and company”), the AG is alleging a pattern of pervasive fraud.
16 Flavors of Fraud
As an exhibit to her complaint, the NYAG offered this helpful chart of fraudulent practices allegedly committed by Trump and company:
The Art of the Fraud
If these methods were legal, anyone could use them to become unspeakably wealthy.
For example…
- Claiming to own something you don’t own outright, based on having a secondary and partial interest.
An extreme version of this would be claiming that you, as a U.S. citizen, are the sole owner of Yellowstone National Park. - Valuing restricted properties as if they were unrestricted properties.
This is when you value Yellowstone National Park, which you own outright, as if it could be divided into 10 million single-family housing lots. - Valuing unsold property at the asking price rather than fair market value.
This is when you intend to list your Yellowstone lots at a million dollars apiece, no haggling allowed, and assume they will entirely sell out. - Valuing unsold property that’s subject to an option at its full retail price.
This is when you offer your attorney a million-dollar discount on a Yellowstone lot in exchange for legal services, but keep the discounted lot on your books at its full value. - Calculating net operating income with lower expenses and/or higher income than reflected in the company financial statements.
This is where you register the Yellowstone Development Company, with zero expenses or income, and claim that developing, selling, and renting Yellowstone housing will net you billions of dollars in profits each year. - Using cherry-picked capitalization rates.
This is where you extrapolate the cost of an oversized cardboard box to estimate the cost of developing a single-family home on each Yellowstone lot. - Ignoring the impact of ground lease terms.
This is where, after the National Park Service seizes all the cardboard structures you’ve built on public land, you continue to list those assets on your books. - Using sales of non-comparable properties to inflate valuations.
This is where you value a Yellowstone house similarly to one that’s not made of cardboard and isn’t located atop a geyser. - Using an inflated square footage when pricing a property by the square foot.
This is where it’s revealed that your 2400-square-foot homes really are just ordinary cardboard boxes after all. - Failing to conduct a discounted cash-flow analysis to derive the present value of anticipated future income.
This is where you “sell” one of your “houses” for one million dollars, payable by the buyer’s great-great-grandchildren in a hundred years–and list it on your books as a million dollars of income. - Increasing the stated value of a property by a fixed percentage to reflect the value of your personal brand.
This is where you add a 1000% premium to everything you own to reflect how you’re ten times more awesome than everyone else. - Including income from speculative “to be determined” deals despite representing that only signed and committed deals are included in a determination of value.
This is where your company’s sales roster is a mailing list of non-customers who may yet pay all the bulk-rate invoices you’ve sent them. - Using a fixed assets approach to value a golf course.
This is where you value some of your land as if it were a popular and successful golf course, even though its rocky terrain is accessible only to mountain goats. - Inflating the purchase price of a golf course by including membership deposit liability which itself is valued at zero.
This is where you count each mountain goat as a golf club member with an unpaid $100,000 membership fee that you add to the stated value of the property. - Valuing unsold memberships at inflated prices.
This is where you determine that the course could accommodate ten times as many mountain goats, and add their unpaid membership fees to the stated value of the property as well. - Including fees from related party transactions as if they were negotiated transactions with outside entities.
This is where you establish a second Yellowstone development company, called the Second Yellowstone Development Company, which trades lots back and forth with the original Yellowstone Development Company, and represent that both companies have billions of dollars in sales.
Using these methods to extreme effect, you too can present yourself as a real estate developer, golf club owner, and 10x awesome dude with billions of dollars of income and a net worth measured in kilo-Elons!