As Trump awaits a fraud sentence, a monitor report could increase his risk

As a New York judge weighs Donald J. Trump's civil fraud case, new allegations of deficiencies in his company's financial reporting could give the judge ammunition for a strong ruling against the former president and his family business.

The judge, Arthur F. Engoron, will soon rule on any consequences Trump could face as a result of the New York attorney general's accusation that he fraudulently exaggerated his wealth to obtain favorable loans. After a months-long trial, the attorney general, Letitia James, asked for a fine of about $370 million, which would follow a separate jury verdict in a defamation case that ordered Mr. Trump to pay $83.3 million.

The new allegations against Mr. Trump's family business, the Trump Organization, emerged late last week in a report by an outside monitor that Judge Engoron ordered to monitor the company in late 2022. The monitor, Barbara Jones, a former federal judge, has overseen how the company represents its finances to lenders.

Her report exposes several paperwork problems at a family-owned business trying to shake off a legacy of sloppiness: missing disclosures, typographical errors, miscalculations and questions about a $48 million loan between Mr. Trump and one of his companies. Ms. Jones, now a law firm partner, told the judge that the problems collectively “may reflect a lack of adequate internal controls.”

On Monday, Mr. Trump's lawyers fired back, questioning Ms. Jones's competence as an observer and accusing her of acting in bad faith so that the Trump Organization should continue paying her. They said she found no fraud and that the company addressed most of her concerns.

“The Monitor is now distorting intangible accounting items into a narrative that favors her continued appointment, and thus the continued receipt of millions of dollars in excessive fees,” one of the attorneys, Clifford S. Robert, wrote in a letter to Judge Engoron, in which he noted that the company had already paid Ms. Jones more than $2.6 million.

Ms. Jones did not respond to a request for comment.

Ms. Jones' findings and the response from Mr. Trump's lawyers could embolden Judge Engoron, who often appears skeptical of the former president's claims and sympathetic to Ms. James' case. In addition to the $370 million fine, Ms. James asked the judge, who will decide the case himself — there was no jury in the trial — to ban Mr. Trump and other defendants from operating any business in the state.

In a social media post on Sunday, Mr Trump addressed the attorney general's accusations, writing: “I AM WORTH MUCH MORE THAN THE FIGURES SHOWN ON MY FINANCIAL STATEMENTS.” He has argued that his lenders were not victims, noting that they made money from their dealings with him.

In her report, Ms. Jones found that the Trump Organization had recently presented certain financial information inconsistently. For example, in financial statements, the company said costs associated with the downtown Manhattan building, 40 Wall Street, exceeded $1 million. But when the company reported the same expenses to a lender, the company claimed it was only $100,000.

In his letter, Mr Robert said the difference was due to the discrepancy between a projected annual budget – which was submitted to the lender – and actual expenditure, which was recorded in the financial statements.

Ms. Jones also wrote that the Trump Organization's disclosures to lenders did not appear to fully comply with loan terms, requiring Mr. Trump to provide information about his finances. However, she wrote that she was not aware of any concerns from lenders about the missing information.

Perhaps most intriguingly, the report raised new questions about the mind-boggling $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 no loan agreement existed — and that in fact the loan itself “had never existed.” Yet for years, Mr. Trump had reported the loan between himself and one of his companies on the disclosure forms required of presidential candidates.

Mr. Trump's lawyers disputed Ms. Jones' statement. The Trump Organization did not tell her that the loan never existed, his lawyers said Monday: It did exist, they said, but nothing is currently owed.

“The Monitor has included a demonstrable falsehood in its report,” Mr Roberts said in his letter.

Judge Engoron chose 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 Mr. Trump's lawyers.

Ms. James has asked that the regulator oversee the company for years to come — a consequence that Mr. Trump's lawyers vehemently objected to in their letter on Monday. They compared Mrs. Jones to the zealous police inspector villain in “Les Misérables.”

“Further surveillance is not warranted,” they wrote, saying it would “unfairly enrich” Ms. Jones while conducting “a kind of 'Javert'-style search” against them.