Orange Duce

[njbill]

First of all, the judge has already ruled on the business licenses. Trump has lost them. That is not part of this phase of the case. Secondly, the “benefit,” to me, is not particularly relevant to punitive damages. The punitive damages are to punish Trump for his wrongdoing, that is, his lying to lenders, insurers, etc. You can’t have a system where people can lie in the commercial world with impunity. My understanding is that is why the law was passed in the first place.

[MDlaxfan76]

First of all, the judge has already ruled on the business licenses. Trump has lost them. That is not part of this phase of the case. Secondly, the “benefit,” to me, is not particularly relevant to punitive damages. The punitive damages are to punish Trump for his wrongdoing, that is, his lying to lenders, insurers, etc. You can’t have a system where people can lie in the commercial world with impunity. My understanding is that is why the law was passed in the first place.

I obviously agree (or I sure hope it is obvious).
HOWEVER, I think the damages will be defined as the benefit Trump achieved through fraud, meaning the lost benefit to the lenders and insurers, and the punitive will be influenced by the magnitude of that...and the punitive will be significant so as to create the clear signal that committing fraud isn't just going to punished by losing only the benefit that one uncaught was getting away with...which would encourage fraudsters to commit fraud... but rather by such a large amount that it clearly discourages other potential fraudsters.

Yes, the decision on loss of licenses was already made. And suspended enforcement pending appeal.

[Farfromgeneva]

Actually, my understanding is that this type of situation is pretty rare, such that there isn’t a lot of authority out there for how to assess damages in a case like this. Some have said the judge could calculate the damages by looking at the interest and other costs Trump saved, that is, had he told the truth, the lenders would’ve charged him higher rates. I’m not sure of this, but I suspect the judge can also award punitive damages. For those, the sky could be the limit.

Of course, Trump is going to appeal all this, including the earlier finding of fraud.

Honestly I know that world and some delta in interest rate is a nothing. At that stage and type of asset if it wasn't Brian Harris at Ladder or whoever was left at DB post crisis it woudl've been Cantor or Barclays etc. Worst case some sloppy superregional bank wouldn't ask the hard question of "why have I never been in the mix to finance this guy but now I'm the lead horse" and likely dropped their pants with even more permissive and easy terms - not hard to move down market for a while and keep getting good deals. Maybe you coud argue the capital charge (equity held) could have been utilized elsewhere but it would've been similar terms.

Punitive seems the way to go.

And his brand wasn't tarnished then and even so there's many odious CRE players in NYC who consistently get easy credit, Harry Macklowe is a name you might recongize who literally paid a dude in the 80s to tear down a SRO while an injunction was in place and the guy sat in jail for Harry and it hut numerous lenders as well and they gladly levered him up on the GM building and various hotel tear down redevelopments as one example.

I don't think the punitive will be big if the finding is that there was little benefit gained through fraud. But any amount of benefit will justify the loss of business licenses.

I think it's less about "damage" than the benefit gained (lower fees etc). Those have been estimated to exceed $100 million.

$100MM is a big number for deals that have 0.25% - 0.5% orig fees and again don't see spread changing. Proceeds could be a question (i.e. he paid Libor/SOFR + 150-250bps on $500MM in aggregate and it should've only been $450 or $400MM in debt proceeds given LTV/LTC constraints, but again, lenders can exceed policy for exceptions and do frequently.

Damages to lenders feels like $10 - $50MM type number to me and the lowe end is easy for him to grab from his various political slush funds it seems, so not very painful.

Not sure what licenses he needs to own the assets.

[Farfromgeneva]

First of all, the judge has already ruled on the business licenses. Trump has lost them. That is not part of this phase of the case. Secondly, the “benefit,” to me, is not particularly relevant to punitive damages. The punitive damages are to punish Trump for his wrongdoing, that is, his lying to lenders, insurers, etc. You can’t have a system where people can lie in the commercial world with impunity. My understanding is that is why the law was passed in the first place.

And the system is looking at a world that saw two of the ten largest bank failures in history this year with a cost to the Deposit Insurance Fund of now at least $20Bn in aggregate and growing. This fund is going to be replenished by a combination of a one time fee on large banks as well as an overall increase in the deposit insurance premium all banks pay (based on their CAMELS quality rating by the regulators as to premium level) which will cost all of society over the next decade. But that's a stretch to apply a number to him but I would think it needs to be taken into consideration.

[MDlaxfan76]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

[MDlaxfan76]

Deutsche Bank loaned Trump millions for high-end properties in Florida, Chicago and Washington, D.C., and Trump’s celebrity helped the bank lure in other high-profile clients.

Nicholas Haigh, Deutsche Bank’s former risk management officer, previously testified in the New York attorney general’s case that Trump’s statements of financial condition played a vital role in the approval of two of those loans: a $125 million loan in 2011 for Trump’s Doral, Fla., golf resort and a $107 million loan in 2012 for his Chicago hotel.

Trump was able to secure bigger loans with lower interest rates thanks to the documents, Haigh said. The Doral property had roughly an 8 percent interest rate, while the Chicago property had a 3 to 5.45 percent interest rate, according to state evidence.

Trump personally passed along his statement of financial condition to Deutsche Bank when negotiating the Doral loan agreement, writing to the bank’s CEO that Trump hoped he’d “be impressed” with the document, evidence showed.


But those cushy deals had consequences for the banks, the New York attorney general’s office argues. Earlier in the trial, an expert witness hired by the state testified that the Trump Organization’s skewed financial statements may have cost banks more than $168 million in interest across four projects.

The statements of financial condition, which detail the value of Trump’s assets and were used to secure loans and deals, are at the heart of the state’s case. Trump’s three eldest children — Donald Trump Jr., Ivanka Trump and Eric Trump — distanced themselves from the documents in their individual testimonies, but for Trump, there is no escaping the financial statements that bear his name.

Trump previously played down the importance of the documents, testifying that they were “not really documents that the banks paid much attention to.”

“I’ve been dealing with banks for 50 years and probably know banks as well as anybody,” Trump said on the witness stand earlier this month. “I know what they look at; they look at the deal.”

The former president and his lawyers have also asserted that banks are required to do their “own due diligence,” not just relying on the Trump Organization’s representations in the statements.

“Banks check the work,” Trump testified.

Deutsche Bank Managing Director David Williams’s testimony Tuesday backed that perspective. He said Tuesday that bankers viewed their clients’ statements of financial condition as “subjective or subject to estimates,” taking their own look at the reports of net worth.

“I think we expect clients’ provided information to be accurate,” Williams said. “At the same time, it’s not an industry standard that these statements be audited.”

“They’re largely reliant on the use of estimates,” he added, so bankers routinely “make some adjustments.”

Vrablic testified similarly the next day, claiming that she never personally reviewed Trump’s statements of financial condition but that the bank expected it to be accurate.

“You would have had an expectation that a borrower like Mr. Trump would present their financial information fairly?” state attorney Kevin Wallace asked, according to ABC News.

“Yes,” Vrablic replied.

The Associated Press contributed.

TRUMP INVESTIGATIONS

[Farfromgeneva]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

[youthathletics]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

If a bank is victimized by fraud but gets out whole, there is nothing to litigate? The borrower did no wrong?

[MDlaxfan76]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

[MDlaxfan76]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

I think there are situations in which a bank may prefer to not litigate a fraud. Could be lots of quite different reasons.

They may not want the attention for having been so stupid...or so complicit.
They may not want the circumstances investigated deeper, finding the explanation (we got out whole) to be more palatable than the reasons why they were involved in the first place. Were they taken in or did they decide to do a deal for reasons that went beyond the economics of the specific deal, reasons that could be quite unsavory?

This particular bank has a truly miserable history of egregiously unethical and illegal activities itself. Fact. And current leadership may prefer to put this sorry episode behind them.

In other words, cover-up.

My own speculation about DB relates to some of the most unsavory sources of their funds, depositors with whom they should have never touched and yet were enormously profitable to them to wash those depositor's monies. Was doing business with Trump, at a time when other banks wouldn't touch him, part and parcel with how monies were washed? Or was the oversight and control of all the parts of the bank so poor that individual bankers were taking kickbacks to do deals, as they were with oligarchs? Or were they getting paid on volume and any deal done was a 'good' deal for them personally?

I can see how DB would want to avoid those questions versus just saying "we good"...

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

I think there are situations in which a bank may prefer to not litigate a fraud. Could be lots of quite different reasons.

They may not want the attention for having been so stupid...or so complicit.
They may not want the circumstances investigated deeper, finding the explanation (we got out whole) to be more palatable than the reasons why they were involved in the first place. Were they taken in or did they decide to do a deal for reasons that went beyond the economics of the specific deal, reasons that could be quite unsavory?

This particular bank has a truly miserable history of egregiously unethical and illegal activities itself. Fact. And current leadership may prefer to put this sorry episode behind them.

In other words, cover-up.

My own speculation about DB relates to some of the most unsavory sources of their funds, depositors with whom they should have never touched and yet were enormously profitable to them to wash those depositor's monies. Was doing business with Trump, at a time when other banks wouldn't touch him, part and parcel with how monies were washed? Or was the oversight and control of all the parts of the bank so poor that individual bankers were taking kickbacks to do deals, as they were with oligarchs? Or were they getting paid on volume and any deal done was a 'good' deal for them personally?

I can see how DB would want to avoid those questions versus just saying "we good"...

Yes…. And let us not forget that Donald basically got his early deals done on the strength of his father’s personal guarantee. A personal guarantee can be a meaningful credit enhancement and can get deals across the finish line that wouldn’t otherwise make it. Passing off cooked financials as legitimate doesn’t go very far with me. Aside from a cheaper borrowing cost, Donald’s deals may not have gotten done without his PG which is always haircut anyway. It’s Donald’s pattern and the degree of the fraud that’s the problem. If the PG is meaningless, why bother taking it. I know these weren’t maintenance guarantees but nevertheless the PG is an enhancement. Lending to company backed by a rich guy is easier than lending to a company backed by a guy just getting by. It’s really that simple.

[MDlaxfan76]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

I think there are situations in which a bank may prefer to not litigate a fraud. Could be lots of quite different reasons.

They may not want the attention for having been so stupid...or so complicit.
They may not want the circumstances investigated deeper, finding the explanation (we got out whole) to be more palatable than the reasons why they were involved in the first place. Were they taken in or did they decide to do a deal for reasons that went beyond the economics of the specific deal, reasons that could be quite unsavory?

This particular bank has a truly miserable history of egregiously unethical and illegal activities itself. Fact. And current leadership may prefer to put this sorry episode behind them.

In other words, cover-up.

My own speculation about DB relates to some of the most unsavory sources of their funds, depositors with whom they should have never touched and yet were enormously profitable to them to wash those depositor's monies. Was doing business with Trump, at a time when other banks wouldn't touch him, part and parcel with how monies were washed? Or was the oversight and control of all the parts of the bank so poor that individual bankers were taking kickbacks to do deals, as they were with oligarchs? Or were they getting paid on volume and any deal done was a 'good' deal for them personally?

I can see how DB would want to avoid those questions versus just saying "we good"...

Yes…. And let us not forget that Donald basically got his early deals done on the strength of his father’s personal guarantee. A personal guarantee can be a meaningful credit enhancement and can get deals across the finish line that wouldn’t otherwise make it. Passing off cooked financials as legitimate doesn’t go very far with me. Aside from a cheaper borrowing cost, Donald’s deals may not have gotten done without his PG which is always haircut anyway. It’s Donald’s pattern and the degree of the fraud that’s the problem. If the PG is meaningless, why bother taking it. I know these weren’t maintenance guarantees but nevertheless the PG is an enhancement. Lending to company backed by a rich guy is easier than lending to a company backed by a guy just getting by. It’s really that simple.

And when that guy has a string of other bankruptcies, the personal guarantee may be required given the already demonstrated proclivity of sheltering resources by bankruptcy rather than digging in to get everyone paid. Upping the importance of the magnitude of the personal guarantee.

But these loans were made in a period during which other banks were turning him away, guarantee or no guarantee, so even more important to demonstrate deep personal pockets.

I just think that DB has things they don't want to admit, don't want to have investigated further.

[Farfromgeneva]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

If a bank is victimized by fraud but gets out whole, there is nothing to litigate? The borrower did no wrong?

Well I think I said earlier go the punitive route because I didn’t see the major economic loss to award for damages.

I don’t know what the max is on the punitive side, but I’m all for him getting that plus what Caligula does to the dude at his oen wedding over the cake table. No doubt his behavior has caused harm to the system and others but I was concerned that he didn’t really create damages directly for the counterparties.

[Farfromgeneva]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Yeah I don’t think you caught at the very beginning I clearly said “go the punitive route” before getting into concerns about the reality of economic damages (which I also realize in court it’s about warring mark to models with tons of embedded assumptions and which one is presented in a more compelling manner).

I absolutely Believe (know in fact from former colleagues) he’s been fraudulent for decades and you never trusted anything that he says or gives you. You do the business because it’s “money good collateral” and high end class A/B+ assets in 24hr markers are always dogfights where all the lenders have pulled their pants down once through the door. CRE lenders, especially w respect to NYC larger owners, our up with ungodly amounts of turd from their borrowers and happily ask for more because it’s just a volume game and they know if they aren’t lending to one dishonest, criminal jerk they’re just lending to another in that universe.

They all should be held accountable as this Fat Wanna Be Thug should. But the banks are all in on this game which is why I was concerned about pricing damages but just hammer his a** on punitive

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

If a bank is victimized by fraud but gets out whole, there is nothing to litigate? The borrower did no wrong?

Well I think I said earlier go the punitive route because I didn’t see the major economic loss to award for damages.

I don’t know what the max is on the punitive side, but I’m all for him getting that plus what Caligula does to the dude at his oen wedding over the cake table. No doubt his behavior has caused harm to the system and others but I was concerned that he didn’t really create damages directly for the counterparties.

Yes. Lost my original response. I agree

[Farfromgeneva]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

I think there are situations in which a bank may prefer to not litigate a fraud. Could be lots of quite different reasons.

They may not want the attention for having been so stupid...or so complicit.
They may not want the circumstances investigated deeper, finding the explanation (we got out whole) to be more palatable than the reasons why they were involved in the first place. Were they taken in or did they decide to do a deal for reasons that went beyond the economics of the specific deal, reasons that could be quite unsavory?

This particular bank has a truly miserable history of egregiously unethical and illegal activities itself. Fact. And current leadership may prefer to put this sorry episode behind them.

In other words, cover-up.

My own speculation about DB relates to some of the most unsavory sources of their funds, depositors with whom they should have never touched and yet were enormously profitable to them to wash those depositor's monies. Was doing business with Trump, at a time when other banks wouldn't touch him, part and parcel with how monies were washed? Or was the oversight and control of all the parts of the bank so poor that individual bankers were taking kickbacks to do deals, as they were with oligarchs? Or were they getting paid on volume and any deal done was a 'good' deal for them personally?

I can see how DB would want to avoid those questions versus just saying "we good"...

Yes…. And let us not forget that Donald basically got his early deals done on the strength of his father’s personal guarantee. A personal guarantee can be a meaningful credit enhancement and can get deals across the finish line that wouldn’t otherwise make it. Passing off cooked financials as legitimate doesn’t go very far with me. Aside from a cheaper borrowing cost, Donald’s deals may not have gotten done without his PG which is always haircut anyway. It’s Donald’s pattern and the degree of the fraud that’s the problem. If the PG is meaningless, why bother taking it. I know these weren’t maintenance guarantees but nevertheless the PG is an enhancement. Lending to company backed by a rich guy is easier than lending to a company backed by a guy just getting by. It’s really that simple.

You take the PG to attempt to align incentives and risk but often don’t expect to cash in on those if you need to go there on institutional deals - very different than retail and lower middle market where some credit fund (i probably have crossed paths with) will own, work and trade your charge off debt for eternity). Half the time they don’t both even taking the PG and certainly not for similar sized REOCs where they rely on the Corp gty solely.

To continue to feel the need to point out, he’s an jerk who definitely committed statutory fraud and does harm to society. But “natural consequence” as I reach my kids would lean hard on hitting him on the punitive side because they were all aware of the situation with him and in general in the space. They don’t deserve to get portrayed as victims.

[Typical Lax Dad]

ABC

Nov 01, 12:05 PM EDT
Trump's misrepresentations cost banks $168M, expert testifies

The state's expert witness, Michiel McCarty, calculated that Donald Trump's lenders lost $168 million in potential interest between 2014 and 2023, according to a report he presented in court.

McCarty's testimony appeared to reinforce a central tenet of New York Attorney General Letitia James' case: that Trump's misrepresentations in his financial statements cost banks potential earnings from interest, even if the banks made money on the loans.

State attorney Kevin Wallace directed McCarty to a footnote in Judge Engoron's earlier summary judgment order about the concept of lost interest, in which Engoron said, "The subject loans made the banks lots of money; but the fraudulent SFCs [Statements of Financial Condition] cost the banks lots of money. The less collateral for a loan, the riskier it is, and a first principle of loan accounting is that as risk rises, so do interest rates. Thus, accurate SFCs would have allowed the lenders to make even more money than they did."

McCarty, who said he agreed with this assessment, ultimately found that banks lost a total of $168,040,168 in potential interest from loans related to four of Trump's properties in Miami, New York, Chicago, and Washington, D.C.

Trump attorney Chris Kise fiercely objected, arguing that McCarty was testifying about facts not established during the trial. During questioning, state attorneys declined to ask a Deutsche Bank executive if the bank would have still done business with Trump had they known his financial statements were inflated.

"They are not ill-gotten gains if the bank does not testify it would have done it differently," Kise said.

"I decided these were ill-gotten," the Judge Engoron replied.

Following Wallace's direct examination of McCarty, defense attorney Jesus Suarez began his cross-examination.

Thanks. So maybe $100mm happens.

First off before I get into the weeds…because…I’m not advocating for leniency on this dipshit. Hammer him, he probably owes the country a heck of a lot more anyways. But where Id be hyper critical:

Of course that’s the states expert witness. I’ve done a little litigation support (not worth it usually but for people I want to work with). I also have been on the other side of accountants, they don’t often have any handle on market valution at all. Have seen some wildly incorrect confidence in accountants who think they are bankers or finance people. Hence OTTI and FMV are separated. I once had a CFO have to casters his accountants when they needed to mark some Trust Preferred Securities of an acquired bank. The accountants are sitting there is sitting it’s +700 and comparing to straight common equity (which still didn’t make sense because the client bank was trading at 3x book value and making a 18% ROE, which implies a going in 6% yield on common equity in the market) and I knew I could replace the hybrid tier 1 regulatory capital for +225-300bps. (They did it with another firm at 250 a few months later) On $100mm that accounting was off by $4mm/yr and the maturity was like 13-15yrs out on the trust preferred so do that discount math. The accountants were off by 30-40pts on par which on their issuance was tens of millions of dollars.

So that’s presumably the most aggressive, outside “wing” on the high side. The low is probably in my $10-$50mm range and then I guess it comes down to which side is more convincing to the judge. But split the two and you do get to like $75-$100mm or close to your estimate. But it could end up half that still.

I can’t stand non market experienced valuation practitioners insisting they know. Smart folks but man they get it so wrong so often I don’t know what people are paying for sometimes. There’s some good ones for sure I got a buddy with a smaller shop in Nashville but the head principal spent a lot of time in markets in a prior life with some active firms. But the 28-33yrs olds at accounting firms doing valuation and more worried about the internal utilization than getting it right. They’ll also add intangible values like “reputational cost” which lets be honest, isn’t a factor for these firms anymore. Saw one recently on Twitter where there was a Musk discount with is probably real in the market but not supportable quantitatively.

I don’t know, I just know market conditions, they really weren’t impacted in reality. This debate in court is just mark to model semantics. Of course I can’t stand the guy so hit him with $170mm and call it a day. But if we’re being fair I just don’t think they were realistically hurt by all this.

It seems Trump, in the end, employed business/econ people much like yourself, who knew the system so well, they knew where the edge of the cliff was and could flirted with it. Not implying unscrupulous on your part, just people that could work in the grey.

The changing of valuation for financial gain…. Sometimes within the same week speaks of intent to defraud. It’s the pattern. It has already been determined to be fraud. It’s how much of a penalty he will pay is what is being decided. Had he and his family not directed their employees or agents to falsify the numbers likely would result in a lesser fine. The more egregious the manipulation and the lack of contrition, the larger the fine.

That's my take as well, admittedly not a professional accountant nor litigator...but I think the pattern of deception, again and again and again, and the egregiousness of the lies, and the magnitude of the deceptions, together, take it way beyond "grey". If these were close calls on which professionals could reasonably disagree that's indeed par for the course (not that it's really ok for those rich and willing to play sharp ball to get away with such while regular folks do not), but this is an example of massive exaggeration beyond any scope of reasonable defense of the estimates, often in direct defiance of what the professionals had actually reported to their client, coupled with clear and direct lies about the assumptions an expert should work with to derive an estimate, whether square footage or deed encumbrances. Beyond the pale.

So, the question, Geneva and Youth, is really about whether deals were done that might not have been done or not done at the same terms...what's the differential in the terms worth to the borrower or insured? Apparently, all profits from such frauds are subject to recapture by civil authorities, regardless of whether the private parties wish to pursue. The state has interests in the rule of law whereas the private parties may face forces that cause them to wish to avoid litigation, regardless of the harm or benefit lost by having been fraudulently manipulated.

I tend to think the judge will come to a conclusion that the frauds benefited Trump materially, whether at the high end of the State's expert witness' argument or half that. But quite substantial. And the punitive will be multiples of such so as to clearly send the signal to others that it's not worth the risk to commit such frauds.

I'm not seeing anything in Trump's defense strategy likely to shift that outcome. Of course, they will appeal, so the judge needs to give them plenty of opportunity to make their case that the damages were insubstantial...but I doubt any appeals court will overrule the judge's ruling that the frauds actually occurred. They're too egregious and the pattern is too obvious.

Having experienced three frauds in my career…. I have little sympathy. We were fine. A whistleblower alerted us to one. We wouldn’t have known otherwise….or would not have found out until much later as the hole got larger. Don’t recall anyone saying “we good”….let’s move on because we didn’t know we were being cheated.. and these circumstances were not as bad as Trump’s lies and deception.

I think there are situations in which a bank may prefer to not litigate a fraud. Could be lots of quite different reasons.

They may not want the attention for having been so stupid...or so complicit.
They may not want the circumstances investigated deeper, finding the explanation (we got out whole) to be more palatable than the reasons why they were involved in the first place. Were they taken in or did they decide to do a deal for reasons that went beyond the economics of the specific deal, reasons that could be quite unsavory?

This particular bank has a truly miserable history of egregiously unethical and illegal activities itself. Fact. And current leadership may prefer to put this sorry episode behind them.

In other words, cover-up.

My own speculation about DB relates to some of the most unsavory sources of their funds, depositors with whom they should have never touched and yet were enormously profitable to them to wash those depositor's monies. Was doing business with Trump, at a time when other banks wouldn't touch him, part and parcel with how monies were washed? Or was the oversight and control of all the parts of the bank so poor that individual bankers were taking kickbacks to do deals, as they were with oligarchs? Or were they getting paid on volume and any deal done was a 'good' deal for them personally?

I can see how DB would want to avoid those questions versus just saying "we good"...

Yes…. And let us not forget that Donald basically got his early deals done on the strength of his father’s personal guarantee. A personal guarantee can be a meaningful credit enhancement and can get deals across the finish line that wouldn’t otherwise make it. Passing off cooked financials as legitimate doesn’t go very far with me. Aside from a cheaper borrowing cost, Donald’s deals may not have gotten done without his PG which is always haircut anyway. It’s Donald’s pattern and the degree of the fraud that’s the problem. If the PG is meaningless, why bother taking it. I know these weren’t maintenance guarantees but nevertheless the PG is an enhancement. Lending to company backed by a rich guy is easier than lending to a company backed by a guy just getting by. It’s really that simple.

You take the PG to attempt to align incentives and risk but often don’t expect to cash in on those if you need to go there on institutional deals - very different than retail and lower middle market where some credit fund (i probably have crossed paths with) will own, work and trade your charge off debt for eternity). Half the time they don’t both even taking the PG and certainly not for similar sized REOCs where they rely on the Corp gty solely.

To continue to feel the need to point out, he’s an jerk who definitely committed statutory fraud and does harm to society. But “natural consequence” as I reach my kids would lean hard on hitting him on the punitive side because they were all aware of the situation with him and in general in the space. They don’t deserve to get portrayed as victims.

Don Jr. and Eric pitched a deal to our real estate folks….came up to our offices to be turned away empty handed. A couple of years before daddy ran for office. Supposedly Don and Eric were role playing Michael Corleone with a mouthpiece playing Tom Hagen. Jokes.