(10-11-2023 01:17 AM)banker Wrote: (10-08-2023 01:39 PM)tanqtonic Wrote: (10-08-2023 01:16 PM)banker Wrote: Tanq, your Texas example is flatly ridiculous as a comparison and you know it. It’s just saddening that you believe anyone here would be ignorant enough to buy it. Why didn’t you just say Bernie Madoff and Trump are the same? It would have been equally valid, as in not valid at all.
First - I can show you harm in your example.
Second - I can show direct impact on the citizens (or residents) of Texas in your example.
Third - I’m willing to bet an actual complaint was filed in your reference case with the state by an affected party.
You can show none of these in the Trump case.
The Colonia example is an exact example of an instance of standalone fraud.
Not meant to be an exact perfect fact pattern. But a great instance of AG intervention in standalone fraud.
I take it you think standalone fraud should be tolerated? I have zero issue with AG action in standalone fraud. There *is* a societal interest in policing such fraud. You seem to think such fraud as victimless, and I guess you condone it? Sounds like a stupid justification. I'm not the one saying "golly gee willikers.... lie all you want as a borrower. No harm no foul."
Yeah, that's a great stance.
Question for you: what other firms of fraud do you think we should overlook just 'because"?
Edited to add: wasnt at a place I could type easily previously. Fuller explanation follows ---
A state, any state, has a fundamental and vested interest in ensuring that *no* fraud (of any sort) occurs. Fraud can be combatted in two manners -- one by private action (where an aggrieved party makes a claim for damages); or another by the state in a standalone action (where the measure of hit by the fraud perpetrator is the amount of profit they made, and/or the loss of right to conduct business in the state).
One simply cannot argue that a party has a right to lie to a lender about their financial status to obtain loans, or to obtain better terms on loans. The issue *you* look at is whether the private counterparty sustains damage. Maybe they do, maybe they dont.
The issue is whether the state as an actor will condone fraud in the loan process, or whether they will police it. If the state allows it to happen, then by default more people will engage in it. In the aggregate, more fraud in the loan application process *is* harmful to business in a state -- any state.
Your stance is apparently the above -- the state should overlook that fraud. Thus impliedly you support allowing people to generate profit using fraud and artifice as the basis. Are you comfortable with that? Im not.
In response, a state pursues a standalone claim -- if someone persistently engages in fraudulent acts, and does them in the context of business, a state has the option and power to perform the following --- a) strip the fraud perpetrator from doing business in the state, and/or b) penalize them in the amount that they profited from such fraudulent activity.
Instead of impliedly endorsing persistent fraud by simply not pursuing it, a state has a full option to the above --- and when the latter course in taken the state takes steps to keep anyone who pursues persistent fraud from benefitting from that fraud, *and* maybe strips them of their license to do business in that state.
I dont see anything wrong in the state pursuing those actions.
If you believe a state should simply allow anyone to profit from persistent fraudulent activity, you have every right to think that.
As a banker, I would assume that you understand that a borrower has an underlying obligation to be truthful in loan activity. An obligation that is independent in nature. If you believe a state should stand idly by and allow persons who persistently engage in fraud related to that activity to profit from that activity --- again, you have every right to support the idea that the state should sit on the sidelines.
My drothers is that the state actually try to inhibit that fraud activity.
As a banker, I know to never trust what I am told and verify everything. Everybody thinks their business plan is great. Everyone thinks their idea of foolproof. Everyone thinks their property is worth a fortune.
When they told me these things I never thought “wow, they are attempting to defraud me”. They are simply working their side and I am working mine.
With that said, I dealt with plenty of real fraud over my 30+ years in banking. I’ll give you a great example that impacted a lot of banks (not mine because I do my homework). I worked in Louisville in the 90s. There was a development firm that everyone was dying to bank. They were doing great projects in rapidly expanding and desired locations. The gravy was that one of the guarantors was filthy rich, mid 9 figures (over half liquid) and would personally guarantee the loans. It was old family money and one of the most known families in the city.
However, here’s how it went bad. Turns out all that money he showed on his financial statement was actually tied to a 3rd generation, last to die, trust. The only two remaining members of the trust were this guy and his aunt who was 25 years older than him, about 90 years old. The last one alive got the money instead of just the generous annual payout.
The guy represented that the money was his. A reasonable assumption, but not accurate. I think the trust paid him 4-5 million a year, so he wasn’t inconsequential without it, but if he died first the bank would have no access to the trust proceeds.
I got the trust documents because I requested copies of his brokerage statements and they showed the stock being held by a trust. I read the documents and discovered the catch. I decided not to present the loan request for approval because they wanted above market leverage based on the strength of guarantor support, which was, in reality, tenuous.
I give this example because I believe you would consider it most like the Trump case. Do I really consider it fraud? Actually, not really. The guy had every reasonable assumption that he would outlive a 90 year old woman in poor health. He had the income stream from the trust so his association to the trust obviously existed. The only way it was a lie is if he died before his aunt and the truth was easily obtained in the due diligence process.
I made a business decision based on the unlikely occurrence that he may die first, other banks took a different stance. He just happened to die first, leaving the other banks with over leveraged collateral and ensuing write downs.
To me fraud is intentional with the goal of illicit gain at the expense of another. It’s not a difference of opinion or perspective.
I appreciate the example.
But there are distinct differences in the Trump issue present, imo.
1) You mentioned 'reasonable assumption' above. Actually mentioned it twice. With a one off action (i.e. there is no pattern), that is actually a reasonable assumption. I would agree. And in the circumstances above, I can understand the conclusion of a lack of intent.
With Trump, the breadth of the actions tends, at least for me, to weigh against both 'reasonable assumption' and a lack of intent (I will come back to lack of intent later). And the testimony that is coming out directly weighs against both.
Yesterday, the ex-CFO, and co-defendant, testified as a hostile witness, and admitted to both including material false valuations in the SFCs, *and* and also testified actual knowledge of the discrepancies in the SFCs. His testimony continues today.
On Friday, the ex-controller testified that Eric Trump directly told him to value the Seven Springs development as including 7 homes (mansions, depending on the news source) that werent even built. Among a number of other issues of direct knowledge. Including inclusion of his direct testimony that the CFO directly asked him to commit various acts of fraud, including tax fraud. (and for the record, persistent tax fraud is one of the counts in the current civil trial).
McConney (the ex-controller) also testified that he and the CFO, at the behest of Trump and his sons, increased the the value of multiple golf clubs by adding what they considered the 'Trump name' brand premium.
The state attorney produced multiple annual SFCs that explicitly state: “The goodwill attached to the Trump name has significant financial value that has not been reflected in the preparation of this financial statement.” (A direct quote)
McConney confirmed he was aware that disclaimer was on the annual financial statements.
Of course there will be much more testimony, and the Trump defense case hasnt been reached at all, to be fair. But these dont strike me a 'reasonable assumptions'. And to be fair, the defense cross of the ex-CFO has yet to take place.
Another difference is that in a state enforcement action, the issue isnt a 'one off'. One of the main issues is whether there is pattern of deception or misrepresentation. And, when there is a pattern, there isnt just the issue of 'an element met' -- that pattern also goes to the reasonableness of the totality of actions as a whole, at least to me.
I can see where it would be highly improper to bring this thing to an enforcement action with a one-off item like you had. Especially with the streak of a reasonable assumption (by all parties) as you describe. But that is not what the facts and evidence is taking (at least for me) in this issue.
Thanks for the very civil, and very in depth conversation.
And thanks for the insights and background from a viewpoint that is highly pertinent. And it is much appreciated (after a private back and forth via PM with another) that you are not making whole assumptions out of thin air.