(Bloomberg Opinion) -- Donald Trump’s accountants, Mazars USA LLP, decided to call it quits. For the former president and his three eldest children, it’s an unwelcome development that amplifies financial pressures enveloping their company, the Trump Organization. It also raises the stakes in a pair of high-profile fraud investigations of the family.
All of which leads to me wonder: What took you so long, Mazars? And if the Trumps can’t find an accountant while law enforcement officials continue to comb through their finances, how easy will it be for their debt-laden company to continue moving forward?
Mazars said in a letter it sent the Trump Organization last week that it could no longer vouch for a decade’s worth of financial statements it helped prepare. It also cited recent revelations in court documents, its own due diligence, the Trump Organization’s apparent unwillingness to share information and what it described as a “non-waivable conflict of interest” as reasons why it will no longer work with the family. Mazars also said that it doesn’t believe that “the financial statements, as a whole, contain material discrepancies.”
The Trumps, like most real estate developers, rely on massive bank loans to finance their operations. Their company has more than $590 million of debt coming due within the next four years, and Trump himself has personally guaranteed more than half of it. Banks are likely to find it untenable to keep doing business with a company or individuals already rejected by their own accountants. Trump still has ample political leverage he could bring to bear on potential investors and lenders, but if he (like his son-in-law, Jared Kushner) courts overseas money then a variety of national security issues arise.
It’s momentous, of course, that Mazars decided to act now, though its reasons for doing so still aren’t entirely clear. I suspect it has everything to do with the firm’s concern about its exposure to the Manhattan District Attorney and New York State Attorney General’s probes of the Trumps. The latter disclosed Mazars’s letter to the Trumps in a court filing on Monday. New York officials are examining, in part, whether the Trumps inflated the value of their assets to secure loans or more generous write-offs but low-balled the value of their properties to keep their tax bills down.
Yet, for all of the recent information that has given Mazars pause, the gist of what the firm is now responding to is hardly new. Trump unsuccessfully sued me for libel in 2006 for a book I wrote, “TrumpNation,” that also raised questions about how he valued his assets and how much money he had. During the course of that litigation, my attorneys deposed Trump’s accountants (then part of a predecessor firm, M.R. Weiser & Co.). My attorneys asked the bookkeepers how they arrived at valuations contained in documents similar to those they’re now disavowing.
Donald Bender, a Mazars partner, had difficulty explaining a memo he drafted that described Trump’s valuations as “subjective.” The veteran accountant also said in his deposition that he lacked “the professional expertise to discuss valuations.” Another accountant said he hadn’t tried to independently corroborate the information he received from the Trump Organization. His firm also noted that the documents in question didn’t comport with standard accounting practices.
Not all of the documents Trump’s accountants helped prepare were always so flimsy. If lenders or regulators wanted more thorough documentation, the accountants said, they would draw up financial statements that complied with standard procedures. Documents shared with reporters and others who were less demanding went out with less vetting.
Trump’s accountants were willing to let that stuff get out into the wild, I guess, because reporters didn’t have subpoena power or the ability to take other legal actions. But a much more serious chess match is afoot now, and those who have helped the Trumps maintain their charade in the past are now reconsidering their options. Once law enforcement enters the picture, people’s thinking changes.
It shouldn’t have taken this long for Trump’s accountants to reconsider their relationship with their client, but here we are. Now we’ll see what kind of reckoning awaits.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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