As a New York judge weighs Donald J. Trump’s civil fraud case, new allegations of deficiencies in his company’s financial reporting could provide the judge with ammunition for a sweeping ruling against the former president and his family business.
The judge, Arthur F. Engoron, will soon rule on the consequences Trump could face as a result of the New York attorney general’s allegation that he fraudulently overstated his net worth to obtain favorable loans. After a month-long trial, Attorney General Letitia James asked for a fine of about $370 million, which would come on the heels of a separate jury verdict in a defamation case that called for Trump to pay $83.3 million. of dollars.
The new allegations against Trump’s family business, the Trump Organization, emerged late last week in a report from an outside monitor whom Judge Engoron assigned in late 2022 to monitor the company. The supervisor, Barbara Jones, a former federal judge, has overseen how the company represents its finances to lenders.
Their report highlighted several paperwork problems at a family business trying to shake off a legacy of neglect: lack of information, typos, math errors and questions about a $48 million loan between Trump and one of his companies. Ms. Jones, now a partner at a law firm, told the judge that taken together, the problems “may reflect a lack of adequate internal controls.”
On Monday, Trump’s lawyers responded by questioning Jones’ fitness as a supervisor and accusing her of acting in bad faith so that the Trump Organization would have to continue paying her. They said she had not identified any fraud and that the company had addressed most of her concerns.
“The monitor now misrepresents immaterial accounting elements into a narrative that favors the continuation of his appointment and, therefore, the continued receipt of millions of dollars in excessive fees,” one of the attorneys, Clifford S. Robert, wrote in a letter. to Judge Engoron, noting that the company had already paid Ms. Jones more than $2.6 million.
Ms. Jones did not respond to a request for comment.
Jones’ findings and the response from Trump’s lawyers could embolden Judge Engoron, who often appears skeptical of the former president’s claims and sympathetic to James’ case. In addition to the $370 million fine, James asked the judge, who will decide the case himself (there was no jury at the trial), to prohibit Trump and other defendants from running any companies in the state.
In a social media post on Sunday, Trump took aim at the attorney general’s allegations, writing, “I AM MUCH MORE VAGUE THAN THE NUMBERS SHOWN ON MY FINANCIAL STATEMENTS.” He has argued that his lenders were not victims and noted that they made money from his dealings with him.
In her report, Ms. Jones found that the Trump Organization had recently presented certain financial information inconsistently. In financial statements, for example, the company said expenses associated with its midtown Manhattan building, 40 Wall Street, totaled more than $1 million. But when reporting the same expenses to a lender, the company claimed they were only $100,000.
In his letter, Mr. Robert said the difference was due to the discrepancy between a projected annual budget, which was presented to the lender, and actual expenses, which were recorded in the financial statements.
Jones also wrote that the Trump Organization’s disclosures to lenders did not appear to fully comply with loan terms that required Trump to submit information about his finances. However, he wrote that he was not aware of any concerns expressed by lenders about the missing information.
Perhaps most intriguing, the report raised new questions about the baffling $48 million loan, a transaction involving Trump’s Chicago hotel.
In a footnote, Ms. Jones wrote that when she inquired about the loan, the company told her that there was no loan agreement and that, in fact, the loan itself “had never existed.” Yet for years, on disclosure forms required of presidential candidates, Trump had mentioned the loan between him and one of his companies.
Trump’s lawyers disputed Jones’ account. The Trump Organization did not tell him that the loan never existed, his lawyers said Monday: It existed, they said, but nothing is currently owed.
“The monitor has included a demonstrable falsehood in its report,” Roberts said in his letter.
Judge Engoron tapped Ms. Jones to oversee the Trump Organization in the fall of 2022, shortly after Ms. James filed the lawsuit that led to the civil fraud trial. She was nominated by both the attorney general’s lawyers and Trump’s lawyers.
James has asked that the supervisor oversee the company for years to come, a consequence that Trump’s lawyers vehemently opposed in their letter on Monday. They compared Ms. Jones to the jealous villain police inspector from “Les Miserables.”
“Further oversight is not warranted,” they wrote, saying it would “unjustly enrich” Ms. Jones as she “engages in a ‘Javert’-type search” against them.