Tag Archives: Donald Trump

Trump’s Real Estate Valuations: They Mean Just What He Chooses

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illustration by Sir John Tenniel

‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.’

 

The Daily Beast quoted me in Trump’s Bank Fraud Defense ‘Defies the Laws of Physics.’ It reads, in part,

Donald Trump’s colossal trial for faking property values starts next Monday, and one mind-boggling issue has emerged as his weakest defense yet: the idea that his past lies on financial statements were justified because prices eventually went up anyway.

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“What he is saying is completely inconsistent with how real estate professionals talk about valuations,” said David Reiss, a Brooklyn Law School professor who specializes in real estate finance.

“When you talk about valuations at a given time, you’re talking about what its value is at that time. It becomes more valuable in the future, but that’s its value at the time,” Reiss said.

That means Trump’s 2014 financial statement should have, naturally, captured the value of any given building or land at that time.

To better understand why Trump’s excuse is bonkers requires a quick review of the three basic methods to assess value employed by professional property appraisers.

One is the income approach: What income a particular property is currently generating? That doesn’t account for the future, Reiss said.

Another is the cost approach: How much does it cost to replace the property? That doesn’t consider the future either, Reiss made clear.

The third is the sales comparison approach: What are similar parcels and comparable properties selling for? This could include future expectation of development, Reiss explained. After all, sale prices are determined by supply and demand—and a fundamental concept in economics dictates that demand can be affected by consumer expectations of future price changes.

As usual, Trump’s logic seems to careen off the rails and focus solely on his property’s future value. But Trump simply can’t do that because he wants to.

“That’s not how the legal system works or how the real estate industry works… if everybody could say that, nobody could be accused of a lie. We would all do whatever the heck we want,” Reiss said.

Reiss likened Trump redefining time-bound questions on financial forms to the way Humpty Dumpty makes up words in Lewis Carroll’s sequel to Alice’s Adventures in Wonderland. The law professor read a passage in which Alice took issue with the Eggman’s improper use of the word “glory.”

Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’”

“But ‘glory’ doesn’t mean ‘a nice knock-down argument,’” Alice objected.

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

CBC Interview on Appointment of Special Counsel

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(Source: rawpixel.com)

I was interviewed by the Canadian Broadcasting Company in Special Counsel to Investigate Biden’s Handling of Classified Documents. The clip explains that a “special counsel has been named to investigate U.S. President Joe Biden’s handling of two batches of classified documents after more sensitive government materials were found in his personal home.”

The NYAG Lawsuit against Trump

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NY Attorney General James

I was interviewed by Reuters in Explainer: What New York’s lawsuit means for Trump regarding the lawsuit that New York Attorney General James filed against former President Trump and others in his circle. The video is here. The transcript reads in part,

The lawsuit seeks to have Trump and the other defendants give up $250 million in what she says were false financial gains.

James is also seeking to bar Trump and three of his children – Donald Trump Jr, Eric Trump and Ivanka Trump – from serving as directors of companies registered in New York…

and prevent them and their company from buying commercial real estate or getting bank loans in New York state for five years.

She is also seeking to appoint an independent monitor at the Trump Organization to oversee various aspects of its business for five years.

Trump, who is considering running again for president in 2024, is expected to contest the litigation. But David Reiss, a professor at Brooklyn Law School, sees another possibility…

“…He’s been very effective at pushing final outcomes in his legal battles years down the road, and maybe that’s a good enough strategy for him. That’s possible. The other possibility, even though he doesn’t say this on Twitter, is he may settle.”

Trump Wins Round Two At CFPB

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image by Slr722x

Bloomberg Law quoted me in Court Says Mulvaney Can Lead CFPB, but Legal Fight Continues. It opens,

The court battle over the Consumer Financial Protection Bureau’s top leadership has shifted in the Trump administration’s favor, but continued litigation could test its ability to revamp the agency.

Judge Timothy J. Kelly yesterday denied deputy director Laura English’s bid for an order that would have barred Office of Management and Budget Director Mick Mulvaney from serving as acting CFPB director, setting up what many expect to be an appeal to the U.S. Court of Appeals for the District of Columbia Circuit.

Although plenty of questions lie ahead, perhaps the biggest is whether and to what extent ongoing uncertainty raised by the case impacts the administration’s effort to revamp consumer protection regulation at the CFPB.

“This is clearly a win for the administration, but there’s still so much uncertainty,” David Reiss, professor of law at Brooklyn Law School in Brooklyn, N.Y, told Bloomberg Law in a phone interview. “What we’ll see for the next few months is whether that uncertainty makes it harder for Mulvaney to turn the ship.”

Kelly’s 46-page decision, which several attorneys privately described as careful and thorough, is the second such setback for English, who previously lost a bid for a temporary restraining order. Even so, hazards lie ahead for the administration.

University of Michigan Law School Professor Nina Mendelson said an eventual ruling on the merits against Mulvaney could call into question any actions based on authority he now claims, such as final regulations, settlements, or other matters.

“A court could invalidate all of those actions,” Mendelson said on a call hosted by consumer advocates. Mendelson, an expert on administrative law, said she’s taken an independent stance on the case.

New York Challenge

Kelly’s Jan. 10 ruling isn’t the last word, according to Brianne Gorod, an attorney with the Constitutional Accountability Center who also joined the call. “The legal fight here is far from over,” she said.

The decision also may boost the stakes for a separate challenge to Mulvaney in federal court in New York. There, the Lower East Side People’s Federal Credit Union also seeks a court order declaring that English, not Mulvaney, is the CFPB’s rightful acting director. The credit union says the appointment of Mulvaney has thrown the credit union into “regulatory chaos,” because it can’t identify the lawful director of the CFPB.

BTW, I am a signatory on an amicus brief filed in the Lower East Side People’s Federal Credit Union case.

Decay at Donald J. Trump State Park

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photo by Alan Kroeger

Yahoo News quoted me in New York’s Donald J. Trump State Park: A Story of Abandonment and Decay. It opens,

Donald J. Trump State Park is dilapidated and forgotten. No running path, no picnic table, no basketball hoop, no hiking trail, no ball field. It’s 436 acres of neglected land, overrun by weeds and brush. Most of the buildings that once stood on it have been demolished, and the few that remain are in utter disrepair: broken windows, rusted metal, corroded walls, missing or boarded-up doors and caved-in roofs.

That’s what became of the “gift” Donald Trump once gave to New York State.

Yahoo News sent several recent pictures of the park to Eric F. Trump, the president’s son and executive vice president of the Trump Organization, to see what he thinks of its current state. He responded that the state has failed to maintain the property and that he’s disappointed by what he saw in the photographs.

“It is very disappointing to see the recent pictures of the Donald J. Trump State Park. My father donated this incredible land to the State of New York so that a park could be created for the enjoyment of all New York State’s citizens,” Eric F. Trump told Yahoo News. “Despite the fact that the terms of his gift specifically required the State to maintain the Park, the State has done a poor job running and sustaining the property. While we are looking into various remedies, it is my sincere hope that going forward, the State will exercise greater responsibility and restore the land into the magnificent park it was, and should continue to be.”

In the ’90s, then businessman Trump purchased a large swath of open meadows and thick woods 45 miles north of midtown Manhattan for a reported two million dollars, with plans to build a private golf course. But Trump couldn’t get approval from the towns of Putnam Valley or Yorktown and wound up donating the land to New York State in 2006. He claimed to the media that this “gift” was worth $100 million (though this was likely his characteristic hyperbole), and received a substantial tax write-off.

On April 19, 2006, then Gov. George E. Pataki announced Trump’s “generous and meaningful gift” would become New York’s 174th state park. He said the park would protect open space, increase public access to scenic landscapes and provide recreational opportunities in the city’s far-northern suburbs.

“On behalf of the people of the Empire State, I express our gratitude to Donald Trump for his vision and commitment to preserve the natural resource of this property for the benefit of future generations,” Pataki said at the time.

Trump said, “I have always loved the city and state of New York, and this is my way of trying to give something back. I hope that these 436 acres of property will turn into one of the most beautiful parks anywhere in the world.”

The establishment of Donald J. Trump State Park combined two parcels of land: the 282-acre Indian Hill site, which straddles the border of Westchester and Putnam counties, and the 154-acre French Hill site in Westchester County. Pataki’s office touted the new park as an example of New York’s role as a national leader in stewarding the United States’ natural resources.

But the promised recreational facilities never were built. New York stopped maintaining Donald J. Trump State Park in 2010 because of budget cuts, even though its annual operation costs were only $2,500, and it was cared for by workers at nearby Franklin D. Roosevelt Park.

Randy Simons, a public information officer for the New York State Office of Parks, Recreation and Historic Preservation, told Yahoo News that the park is currently open and serves “as a passive park offering hiking, birdwatching and similar outdoor recreational activities.”

Simons explained that the office recently removed several vacant and shabby buildings to address potential public safety and environmental hazards. This consisted of demolishing a 3,700-square-foot house, four other structures and a swimming pool. They also conducted asbestos and lead paint abatement.

 “Trail planning is underway for a formalized hiking trail network and mountain bike trails. The first step is a natural resources review and state environmental quality review to ensure that sensitive wetlands and plant and animal habitats are protected,” Simons said. “The ultimate timeline will be determined by this review.”

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How much Trump benefited from donating the land is difficult to determine. Bridget J. Crawford, a professor at Pace University School of Law in nearby White Plains, N.Y., and a member at the American Law Institute, said it’s quite common for wealthy people to donate real property to a state or a local government for a park. The Rockefeller family, for instance, donated the Rockefeller State Park Preserve in Sleepy Hollow, N.Y., little by little starting in 1983.“

“There’s nothing unusual about the donation,” Crawford told Yahoo News. “The problem of course here is that the donation of land was made but there was no additional cash gift made in order to maintain or create the park. It seems the state and municipalities don’t have the money to do that. If these sort of deals ‘fail,’ it’s always because of lack of funding.”

Crawford’s scholarship focuses on wealth transfer taxation and property law. She said people who are serious about establishing open space parks that the public can use in meaningful ways often make substantial cash contributions as well to fund the park’s maintenance.

As for how much money Trump saved, it would depend on what valuation the IRS accepted for the land; the figure of $100 million was Trump’s unofficial estimate, for public consumption. Another variable is whether he personally owned the property or purchased it via a pass-through entity like an LLC. Crawford explained that if it were owned through an LLC that was ignored for income tax purposes, which is not unusual, a $100 million donation would have saved Trump about $35 million in taxes.

Nevertheless, it seems unlikely that the IRS would accept a $100 million appraisal of land that was sold for a few million dollars at fair market value in the 1990s.

David Reiss, a professor of law at Brooklyn Law School who focuses on real estate finance and community development, said he doesn’t doubt that Trump got an appraisal that “pushed the limits” to price it as high as possible, a move that is not uncommon. He said it’s possible that Trump got an appraisal that determined he would make more money by donating the land than he would by selling it. And it wouldn’t have to be as high as $100 million.

“If he claimed it was worth $10 million and he bought it for two or three million dollars, it’s conceivable that he came out ahead with this donation,” he said. “He actually could be better off financially. And this is not just for Donald Trump, but any donor in a comparable situation.”

Eminent Domain and Trump’s Wall

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photo by Sandeesledmere

Sucamore Gap on Hadrian’s Wall

Mashable quoted me in Sorry, Cards Against Humanity Can’t Stop Trump’s Wall. It opens,

As much as we may want to believe it, a card game company probably can’t save our country.

This week, owners of the irreverent (and kind of obnoxious, imo) Cards Against Humanity game unveiled their annual PR stunt and it has higher aspirations than last year’s pointless hole.

As part of the Cards Against Humanity Saves America campaign, it announced the purchase of “acres of land” on the U.S.-Mexico border and promised not to build a wall on it.

Going further, the company said that it had retained the services of legal representation specializing in property rights, “to make it as time-consuming and expensive as possible for the wall to get built.”

Sounds good, right? Guess there won’t be a wall!

Not so fast, patriots.

The government has a big ace up its sleeve when it comes to taking land from property owners. It’s called “eminent domain” and it’s right there in the constitution’s Fifth Amendment, below the part that people always talk about on lawyer shows. The Fifth Amendment states the government can’t take “private property be taken for public use, without just compensation.”

But it can still take land for public use, and it almost always does.

Government is mightier than the card game

The several law professors we talked to all came to the same forgone conclusion: the government will ultimately take that land from Cards Against Humanity.

“The power of eminent domain is considered to be a fundamental power of any government to use,” Professor of Law David Reiss at Brooklyn Law school said. And in this case, given the limited facts that were available to him, “ultimately the government would succeed.”

Over the past several decades, the judicial definition of eminent domain has expanded broadly. Historically, governmental use of eminent domain would fall under the umbrella of public use by using the acquired land to build a road or build a hospital. That’s changed in recent years, as the blanket phrase of “public use” has been used in eminent domain cases to include razing blighted urban areas or if the land could be seen as encouraging economic development.

Richard Epstein, Professor of Law at NYU, emphatically agreed that Cards Against Humanity would not stand much of a chance. Legally speaking, he saw, “the wall [will be seen] as a public good. There’s nothing you could do to resist them taking the land.”

Lynn E. Blais, Real Property Law Professor at the University of Texas at Austin, also thought that the government would easily win, but acknowledged how Cards Against Humanity could make an impact.

“They can’t stop the border wall for sure,” Blais said. Legally speaking, “it’s clearly for public use [but] they can challenge the process at every step if they want. That could take a long long time.”

And just as the company mentions in its announcement, it hopes to get in the way and meddle up Trump’s plans to build a wall, at least in that one plot of land it purchased. That delay tactic might prove exceptionally effective.

“They may not be looking to stop it, but merely to delay it. Delay can be very powerful. Sometimes delay can be as effective as winning the case,” Reiss said. “With enough money, it can be delayed for years.”

Did CAH fall down at the starting line? 

A few of the legal experts we talked to were adamant that Cards Against Humanity, in openly alluding to the fact that they hoped to make the wall construction “as time-consuming and expensive as possible,” invariably hurt their chances to gain favor with a judge. Basically, in flipping Trump off through a land buy, they exposed their bias and they might not receive a full case because of it.

“I wonder if they shot themselves in the foot if they admitted this was a delay tactic. Some judges might few that negatively,” Reiss said. “Judges wouldn’t look kindly on admitting delay.”

Epstein was very certain that the company’s promotion would hurt their chances of winning any case the federal government might bring against it.

“They are tacitly admitting that the goal is to block the president,” he said. “It’s one one of the dumber ideas I’ve heard of.”

He was certain that it would only invalidate any defense Cards Against Humanity tried to bring up, seeing as how the company already showed its actual intent. Still, he thought of it as a sign of the times, saying, “One of the consequences from the president acting like a crackpot means you get crackpot solutions.”

Blaise, however, believed the opposite side of this argument, and thought that land owners can do whatever they damn well please.

I don’t think it matters why you don’t want the government to take your land. As a property owner, you get to be as irrational as you want,” she said.

So you’re saying there’s a public use chance…

Even though a prospective case doesn’t look too promising for Cards Against Humanity, it still has avenues it can take to launch a defense of their new land. According to the legal experts we talked to, the most promising defense would be on whether the wall is really for public use. This is given that “public use” in the Fifth Amendment is not terribly defined and that arguments could readily be made that a border wall with Mexico might be more harmful than good.

“Public use is now often an incredibly broad term,” Reiss said. And, should the case go to federal court, the government’s potential case would invoke border security or immigration policy, which Reiss thought a judge would probably find compelling evidence.