I appreciate the thorough and detailed response but you are missing several items IMO.RiverguyVT wrote: ↑Fri Feb 23, 2024 9:06 pm Warning: Maybe my longest post ever
1- you have no idea how/what/(anything) about R.E. developer financial statements
1- There's nothing about RE financial statements that makes them different than any other company's financial statements
Sure there is. For starters, just about every venture entered in to creates a new entity. Very few other industries operate that way. Mattel doesn’t create a new LLC every time they roll a Barbie off the line. This can create a developer’s birds nest of receivables, payables and equities between entities, and statements on every one of those entities. Another aspect of developers is that they don’t really “make” anything so much as they resell what they’ve bought upon completion of zoning and permit approvals. Their raw material is land. Which usually appreciates, but whose value is entirely subjective. Entirely.
Appraisal valuations -now- for a developer hoping to sell land in the future have little to do with what that developer thinks he can get for that land. It is pure speculation. More than almost any biz I can imagine, developers are nothing if not speculative. Appraisals are not done for the developer’s benefit, but for the banks lending the developer money. So, their assets are a lot different than contractors, manufacturers, or retailers.
Speculators' financial statements are ALWAYS speculative.
Another difference on the balance sheet would be the extreme leverage position they take. Most developers retain almost no earnings into NW, but dole earnings out to stakeholders and as overheads. This is different from most companies (other than professional LLCs like law, cpa, or engineering firms or doctors offices -service industries). But even then, unlike professional orgs is the very extreme debt-to-equity ratio that most carry. Even floor-plan oriented auto dealers don’t come close to the D:Eq developers carry.
Most large firms get audits or at minimum, reviews. Developers rarely get either, and usually (almost always) go with internal statements, or compilations. I know you know how a CPAs cover to a compilation reads: (paraphrase) "Hey, we just put together what he gave us and make no warranty whatsoever on the information.."(/paraphrase)
These are just a few of the differences.
They should all be an accurate representation of the company's income, assets, and cash flows. Trump Inc's financial statements were not accurate, and not even close.
Define “accurate”. For whose purposes? Internal management’s or outside users? (“Yes” meaning both, is an acceptable answer, but…)
Analysts (like myself) always look at compilations and internals with a very skeptical eye. Yes, we knock valuations waaay back. I always imagined assets at a “fire sale” value (if worse came to worst) because my employer was the (sort of) creditor. In an action under indemnity, there is no way in the world that (say, Travelers) would get the same price for a piece of land that Trump would. For one, Travelers would be most interested in a fire sale themselves; whereas the developer would be more likely buy-hold-sell opportunistically.
My cutting real estate values in half in my analysis doesn’t mean that NVR was defrauding me. Nor were Sandler, R G Moore, Roe, Breeden, Wilton, Ford’s Colony et al... If the deal required it, I’d get an appraisal. And I’d most often knock that way back too. Much of this knock-back was judgement based and not formulaic.
My adjustments made the statements accurate… for me. And for my employer. We were usually a form of “unsecured” credit. We relied on the owner's individual backing (as in the Trump case) 99% of the time. Personal statements are just opinion-based as well.
For the developer, his use of the financial statement was much different from mine, because he would have different purposes behind his use.. So, for his use, the statements he created were accurate for internal management.
For someone hoping to invest in that LLC, he would use the statements much differently than I would, again with a different purpose. Banks aren’t unsecured; so banks would look at the statements differently than I would. They usually collateralize the asset in question against the loan. According the trial docs, most (all?) Trump creditors also got his personal guarantee (which likely had more influence on their decision than the various LLC positions). And banks are VERY sophisticated analysts of financial statements (especially where developers are concerned). Their use is yet different again,
None of that means the statements would have been “inaccurate” simply because different users have different purposes.
Falsification… It's the falsification of the underlying documents to inflate their worth...
A developer claiming a property is worth something different than what an appraiser does, is not “falsification”. The appraiser has a different purpose in his appraisal than the developer would have in carrying the property on his statements.. The bank would rely on the appraisal. The developer, not so much.
Again. This is very very standard in the biz of development.
You said:
And the second prong in this is that at the same time he was promoting those valuations in his financial statements to lenders and investors, he was issuing tax returns with valuations significantly less.
Tax returns have no bearing on managerial-use statements, other than that tax liability should be noted on a gaap statement's balance sheet (deferred taxes, etc). Tax valuations of the properties themselves would only rarely (if ever?) be the same as internal statements. Why would they be? What is the purpose of a tax return? -to compute taxes owed by law, with the objective to legally minimize (avoid*) taxation. What is the purpose of an internal statement? Managing.
*(avoidance is not evasion)
2- You support unequal application of the law, depending upon who the accused is.
Nope. You have absolutely zero evidence to back up that claim.
Well, let’s look at your posts. Before we do that, I will assert that my claim is evident in as much as you are not calling for the fines and injunctions of all NYC developers…no, all developers everywhere in the US, that operate the way that is customary for developers.
You have agreed that it was a political prosecution. A political prosecution cannot be just, by its very definition. But you support this one, this time... because, well dRuMPf~!
Your posts:
And yet, no other NYC developer (or anywhere else, for that matter)has been either charged similarly nor been subject to with what you “Totally agree”HokieFanDC wrote: ↑Fri Feb 16, 2024 8:42 pm Totally agree with the oversight and business restrictions.
Seems pretty clear you’re saying who the accused is matters very much. And, as you said, agree with his prosecutionHokieFanDC wrote: ↑Sat Feb 17, 2024 3:38 am …
Companies manipulate their asset valuations all the time, for their benefit. Most of them form some reasonable basis for those valuations, or at least try to. And yes, developers and commercial/real estate companies are more liberal in their valuations.
But, Trump had 4 major problems that did him in. One, he made himself a celebrity. Two, he made himself a celebrity politician. …
… An appeal to the overall low character of major city developers isn't convincing. Would Trump have been charged if he hadn't been POTUS? Probably not. But he chose to put himself in the spotlight, and he created enemies where there weren't any. Most real estate developers take a lower profile and spend their time contributing/giving bribes to political campaigns and local officials in order to get favorable permitting decisions and expedited permitting and inspections. Trump decided to take a different path.
I don't feel sorry for him.
^you say it isn’t about Trump, but then basically say that it is.^HokieFanDC wrote: ↑Sat Feb 17, 2024 6:33 pm My point about his celebrity status is that someone who was doing what he did with his financial statements and valuations, should have the forethought to not bring a lot of attention to himself. But he can't control himself. His mouth is his enemy. Is that alone a reason to prosecute him? No. But he's done plenty that is worth investigating.
As the Russians said, “give me the man and I’ll find the crime”.
3- You don't understand the precedents this ruling would create
3- I understand the bad precedent that the fine would bring about. I disagree with you about there being a precedent wrt financial controls.
Precedents-
include, but are not limited to:
- • Lawfare designed to take a presidential candidate out of the running. Period. That is all this is. As you said, there’d be no lawsuit if it wasn’t Trump.
• The death of the developer business as we know it, if all developers would be expected to operate the way the NYC judge thinks
• Government say-so on property valuations. The government’s position in this case is that Mar-a-Lago is worth $18 million.
Here is what $20 million will buy in that neighborhood:
https://www.mansionglobal.com/articles/ ... kets_miami
Do we really need to compare that to Mar-a-Lago?
- • Sarb-Ox would pale in comparison to this. No more internal statements? Really? While GAAP is a great idea, GAAP is not a requirement, at the point of a spear, for someone buying farm land that wants to pop in 6 homes for resale.
- • If this ruling would be applied equally to all NYC businesses, NYC would lose businesses at a rate that would make your head spin. But fear not. The governor agrees this is all because Trump is Trump.
- • It is okay to have a trial where the defendant is not allowed to offer evidence in a defense. Wowza!
- • A judge can declare guilt before trial begins.
- • The prosecutor is the beneficiary of the $$ “settlement”.
- • So many dumbfounding “merits of the case”… made up on the fly.
4- Mild support for government setting value of private properties.
- • I could go on and on… the precedents being set are unimaginable and immeasurable.
4- Zero support. That's just you making up stupid crap.
I’ve already quoted your full throated support for this verdict (except for the $-fines). The entirety of the case rests on the court arbitrarily saying the properties in question aren’t worth what Trump said the properties were worth, and that Trump has no right to carry the values he carried on internal statements and compilations. The case is a clear move toward government determining fair value.
Forget that the banks, insurance companies, investors, and other creditors have no claim, no damages, no complaints, no problems with the valuations. The judge and DA just don’t like the valuations, so prosecuted an entirely political case.
Your support of the verdict is defacto support for the government’s valuations over Trump’s. Mar a Lago… $18 million.
Yipes.
(mops brow.... whew! That was a lot)
First, financial statements are 100% the same for every company. You're overthinking it.
They tell you how much income was generated, cash flows in and out of the business, and the value of all the assets owned by the company.
These are not forward looking, they are not speculative. They are all at current value.
Pro-forma financial statements are speculative. Projections are speculative. Financial statements, the ones that management sign off as being accurate, are historical/current.
For RE developers (which is not the entirety of Trump's business, it also includes a huge licensing division, landlord division, and yes, a developer group), there are standards and metrics for appraising the value of raw lots, permitted lots, under construction, and so on. But, all of these are used to determine the current value of any given property.
Of course the accuracy of the valuation of a vacant lot is going to be less than that of an existing property that is generating income, but there are still best practices for all of them.
The industry that the company is involved in impacts the complexity of financial statements and asset valuation, but for every industry in the country, there are standards/guidelines/rules, for determining the value of an asset. The number of entities doesn't change the equation. It changes the difficulty, but not what the rules are for I/C transactions.
With all that being said, it doesn't address how the Trump Org operated.
And that is where it would impact someone like you who is relying on accurate financial statements. You talk about how you adjust valuations by 50%. You would do that for a certain type of developer or company, and that implies that the statements you're using are similarly accurate to other similar companies.
We know that the Trump Org did not act in a similar manner.
Trump had appraisals done for many of his properties. He hired very qualified and respected companies (Newmark, Cushman, etc.). But, he didn't always use the appraisals provided. He would get the appraiser to verbally tell him what the appraisal was. If he didn't like it, they would tell the appraiser not to send them a copy of it. Then he would come up with a number that he liked, and attribute it to the appraiser. They did this with a Cushman &Wakefield appraiser, Doug Larson.
He told lenders that he had cap rate estimates for certain properties, and attributed them to Larson, even though Larson didn't do any cap rate estimates for the Trump Org.
Other examples. Trump had a property was approved for 71 units. He got an appraisal based on that quantity. The zoning for the property changed, and the number of units was reduced to 31. Trump continued to represent the property value as being allowed to build 71 units.
Trump got an appraisal for seven lots in NY. The appraisal came in at $5.5M. The Trump financial statements contained a valuation of $161M.
Another thing the Trump Org did was to allow lenders and insurance adjusters to only see the financial statements in person. They weren't allowed to get email copies, or copy the docs, or take anything with them. That's just sketchy to start with.
At first, the Trump Controller, McConney, said that he got the valuation estimates and disclaimers from Mazars. After more testimony from other people, that proved that he was lying, he then testified that his "memory was incorrect" regarding the valuations and disclaimers.
McConney calculated a valuation on Trump Park Avenue, a rent controlled building, using rates for an unrestricted building, and also with an assumption that all the units were renovated, which they weren’t. That is simply fraud.
And then you have the Trump Tower Triplex where Trump and Weiselberg (and probably the Trump sons) signed a rep letter stating that it was a 33,000sf space. It was only 11,000sf. That's not "speculation". That's fraud.
McConney also initially testified that Weiselbarg had never asked him to do anything that could be considered tax fraud. Again, after further testimony, and more evidence, he amended his testimony and said that he had followed Weiselberg's direction and knew that he was potentially committing tax fraud. We know Weiselberg committed tax fraud, and he was the fall guy. What a sucker.
There are dozens of other examples of Trump et al doing the same thing.
Your claim isn't evident with regard to calling for other NYC developers. What Trump did is unique.
I have said I don't agree with the fines, at all. Yet you keep bringing that up.
If other companies can be shown to have acted in the same manner as Trump, then yeh, I think management control should have restrictions. The SEC does that for public companies. The SEC doesn't have jurisdiction over private companies, but the same penalties the SEC can give, should have an entity that can do the same for private companies.
I'm not sure what you're getting at with Mar-a-Lago. With Mar-a-Lago, the Trump Org gave it a valuation as if it was a private residence. But, it isn't a private residence, and it's in the deed that the property can never be used as a private residence.
And your comment about the govt. determining property values, is way off. This isn't a case of Trump and internal valuations. These are valuations given to outside entities, and the excessive valuations are being represented as coming from a reliable source, ie professional appraisers.
As to the other points, yeh, it's about Trump. I've said that multiple times. That doesn't mean that he is innocent.
Letitia James is a horrible person, the worst kind of elected official. But her being an ass doesn't absolve Trump.
Do you think Trump is innocent of wrongdoing?
.
