Trump’s sons blame fraud on their company’s accountants

Eric and Donald J. Trump Jr., the eldest sons of the 45th president, stepped out of their father’s shadow Thursday and into a legal minefield, tiptoeing around potentially damaging evidence as they testified in a trial that threatens their family business.

Donald Trump Jr. was mostly calm but often evasive as he spent nearly two hours on the stand blaming external auditors for any errors in the company’s financial statements. The documents are at the heart of the civil case in Manhattan Supreme Court, in which the brothers, their father and the company are accused of defrauding banks and insurers.

His younger brother, Eric, who now heads the Trump Organization, was more precise in his answers but more combative in his tone. He acknowledged his central role within the company, but denied direct involvement in the documents.

At one point, Eric Trump flew into a rage when questioned by a lawyer from the New York attorney general’s office about whether he was aware of the financial statements in question. He replied that it should be assumed that a company of that size would have annual accounts.

“We are a large organization, a huge real estate organization!” he exclaimed.

Mr. Trump’s sons were called to the stand by the office of the attorney general, Letitia James, who sued the Trumps and the Trump Organization, accusing them of overvaluing the former president’s assets to get favorable loans and obtain other benefits.

Just before the trial began, the judge overseeing the trial ruled that the Trumps had indeed fraudulently manipulated financial statements sent to banks and insurers. The process will determine what consequences they may face.

The sons’ testimony, which came a full month after the trial, kicked off a parade of Trump family members to the witness stand. Their sister, Ivanka Trump, who was the heir apparent to the company before joining her father in the White House, will testify next week.

The former president himself is expected to take the stand on Monday, a long-awaited moment with widespread consequences not only for the cause but also for his image as a businessman and his latest run for the White House. If Mr. Trump, his sons and his company are found liable, they could have to pay a $250 million fine and be permanently barred from running a business in New York.

The former president was intermittently in and around the courtroom during the trial. The judge, Arthur F. Engoron, ordered him last week to testify at an impromptu hearing on whether the former president violated a gag order by criticizing the judge’s clerk. Judge Engoron found Trump’s testimony “not credible” and fined him $10,000.

The fraud case is separate from the former president’s other legal entanglements, including four criminal charges. It is a civil case and there is no jury, leaving Judge Engoron to determine the outcome. Although Mr. Trump and his sons could have asserted their Fifth Amendment rights against answering questions, doing so would have been risky: In a civil case, a jury or judge may draw adverse inferences from a suspect’s refusal to testify .

When Mr. Trump became president in 2017, he turned the company over to his eldest sons — known by some in the Trump Organization as “the boys.” While Eric and Donald Trump Jr. inherited a company with a growing global footprint, they were also saddled with its legal problems.

For the elder Mr. Trump, the civil case is a personal matter. Ms. James has amassed a mountain of evidence that challenges something close to the former president’s heart and ego: his net worth.

During Thursday’s testimony, Ms. James’ office addressed Eric and Donald Trump Jr.’s role in their father’s financial statements, which assigned value to his major properties. Donald Trump Jr. signed letters every year affirming its accuracy, and the attorney general has argued that Eric Trump influenced some of the values ​​contained therein.

Colleen Faherty, an attorney with the attorney general’s office, elicited several helpful testimonies from Donald Trump Jr. about the statements. He acknowledged that he had expected the company’s largest lender, Deutsche Bank, to rely on the accuracy of the financial statements.

Pushing even further, she had to prove that the statements were “material” – in layman’s terms, that they made a difference – and that the defendants intended to commit fraud.

When Ms. Faherty’s questions began to include the words “intend” or “intended,” Mr. Trump grew cautious. When asked whether he intended Deutsche Bank to rely on the documents, he did not answer directly. Instead, he said bankers are doing their own due diligence.

Ms. Faherty also confronted Donald Trump Jr. about an email exchange that revealed Forbes Magazine had warned him about errors in statements filed with banks and insurance companies. A reporter asked, among other things, about the actual size of his father’s triplex apartment in Trump Tower.

Mr. Trump wrote of the questions: “There’s an insane amount of stuff in there.”

Shortly after learning of Forbes’ concerns about the documents, he nonetheless told his outside accounting firm, Mazars USA, that they contained no material misstatements.

Mr Trump dismissed the letter to Mazars as a “cover your ass” communication – and tried to blame any erroneous valuations on the accounting firm.

“Every decision I made was based on all the financial information I would have gotten from Mazars,” he said in one of the most tense moments of the day, his voice picking up speed. After the judge objected to the pace, Donald Trump Jr. told him he would try to slow down.

The testimony revealed the contrasting personalities of the Trump sons — and their different roles at their father’s company. As Donald Trump Jr. took on his father’s polarizing political warfare, Eric took the reins of the company, becoming de facto CEO and the new face of the business.

Yet Eric, who stood more sharply in the stands, also distanced himself from the annual accounts and, like his brother, pointed to Mazars.

“I never worked on the state of the financial situation,” he said.

Andrew Amer, another attorney on the attorney general’s team, spent much of the hour-long investigation refuting that claim. For example, he showed that Eric Trump was likely aware of the statements when he was working on a golf club deal in North Carolina a decade ago.

Toward the end of the day, Mr. Amer also delved into the value of the family’s golf club in Westchester County, N.Y., in an attempt to show that Eric Trump had ignored an independent appraisal when advising an employee of its value of the real estate.

Mr. Trump disputes that he has paid much attention to appraisals, despite showing Mr. Amer several emails in which he corresponded with an appraiser about appraisals.

“I am a telephone operator. I’m a construction guy,” Trump said irritably. “I build projects. I don’t focus on ratings.”

The testimony was combative throughout, a stark contrast to his brother, who seemed to take to his duties as a stander with ease. At one point, Donald Trump Jr. told a cartoonist in the courtroom to “make me look sexy,” the artist told reporters.

If Donald Trump Jr. and Ms. Faherty were playing a friendly game of checkers, Eric Trump and Mr. Amer were locked in a chess match.

Mr. Amer seemed to think he had gained the upper hand. In the closing moments of the day, he made a point of telling the courtroom that Eric Trump’s testimony was “great” and “beneficial to our case.”

Kate Christobek And Susanne Craig reporting contributed.