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Deutsche Bank executive testifies loan to Trump wasn't unusual

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Publish date: Wed, 29 Nov 2023, 09:30 AM
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A Deutsche Bank AG executive gave testimony that could bolster Donald Trump’s defense in his civil fraud trial, telling a New York judge that prospective clients can get loans even after reporting a net worth far higher than the lender’s own calculations.

David Williams, who worked on at least one of three loans Deutsche Bank made to Trump in the years before he was elected president, testified Tuesday that it’s “atypical, but not entirely unusual” for the bank to cut a client’s stated asset value by 50% and approve a loan anyway, as it did with Trump.

“Is the bank capable of reaching its own judgment based on the evaluation it makes of the guarantor’s financial condition?” Trump attorney Jesus Suarez asked Williams, a managing director at the German bank.

“Certainly, yes,” Williams said.

The suit brought last year by New York Attorney General Letitia James accuses Trump of inflating his assets by as much as US$3.6 billion a year to get better terms from banks and insurers. Trump is scheduled to take the witness stand for the second time on Dec. 11, when he’s likely to double down on his earlier testimony that no banks were financially harmed by loaning to him.


‘Can’t Lie’

Kevin Wallace, a lawyer for James, told the judge at the end of the day that Wallace’s testimony doesn’t undercut the state’s case because the trial doesn’t hinge on whether Deutsche Bank was a victim. Instead, he said, its whether Trump knowingly created and used false financial documents.

“The idea that you can’t lie to a bank is pretty well established,” Wallace said.

Deutsche Bank, which loaned Trump hundreds of millions of dollars for properties in Miami, Chicago and Washington, cut his stated net worth in 2011 and 2012 from about US$4.2 billion to US$2.3 billion when evaluating his loan requests, according to internal bank credit memos used as evidence in the case. The same documents show the bank approved the loans anyway because it expected them to generate a profit based on Trump’s history of successful developments and other criteria.

Trump, who denies wrongdoing and claims the case is politically motivated, is calling to the stand this week four current and former Deutsche Bank employees - including the family’s former private banker Rosemary Vrablic - as part of his defense case, seeking to flip the script on the state’s version of events.

The testimony could undermine the state’s portrayal of Deutsche Bank as Trump’s biggest victim. But all of the bank executives called by the defense to testify this week will be cross examined by lawyers for the state, raising the prospect of answers that could be less helpful to Trump. The state also will have a chance to put on a so-called rebuttal case that could further dilute testimony that’s helpful to Trump and give the state the last word in the non-jury trial.

Deutsche Bank cut ties with Trump in July 2021, shortly after the Manhattan district attorney charged the Trump Organization and its then-chief financial officer, Allen Weisselberg, with tax fraud. An internal bank document on the decision said that while Trump met reporting requirements on his loans, he hadn’t provided the “additional clarifications” the bank sought “related to legal cases the client is facing.” The bank described it as an “orderly exit.”


‘Due Diligence’

Under questioning by Suarez, Williams said the bank always reviews a prospective client’s stated net worth and adjusts it as needed.

“As part of our due diligence, we subject a client’s asset value to adjustments,” Williams said. “It’s part of our underwriting process we apply it to every client regardless of what’s reported.”

“Is a difference of opinion in asset values between the client and the bank a disqualifying factor to extend credit?” Suarez asked Williams.

“No,” he replied.

“Why not?”

“It’s just a difference of opinion,” Williams testified. “I think we expect clients to provide information to be accurate.” But Williams added that such financial statements are made “largely relying on the use of estimates.”


No Victims

In earlier testimony by Trump and his sons Donald Trump Jr. and Eric Trump, when each took the stand as state witnesses, they all argued that no banks had been victimized by Trump’s stated asset valuations, and that lenders like Deutsche Bank made millions of dollars in interest by loaning to him. Trump also argued that his valuation of assets included their potential future development value and a boost from his Trump name.

James, a Democrat, has argued that Trump violated New York’s executive law by knowingly inflating the value of key assets and submitting the falsified documents to banks and insurers. Justice Arthur Engoron, who is overseeing the case, held Trump liable for fraud on the eve of trial, resolving the biggest claim in the case and putting Trump’s control of his assets at risk.

The trial is focusing on six remaining claims, as well as penalties. The state is seeking the return of US$250 million in “illegal profit” and a ban on Trump and his sons from serving as directors or officers of any New York-based company.


Loan Covenants

Williams testified he wasn’t aware of any breaches by Trump on loan covenants. But during his cross-examination by a lawyer for the state, Williams was shown internal bank documents referencing at least two breaches related to his commitments on cash flow, including one in 2019 related to Trump’s luxury Washington hotel. Williams agreed that both were examples of breaches.

The documents showed that Trump cured the breaches, and Williams testified that there was nothing particularly unusual about the way Trump’s company got back into compliance. Deutsche Bank “was satisfied with the resolution,” Williams said.

After Williams was excused as a witness, Trump attorney Christopher Kise asked the judge to issue an immediate verdict in favor of the former president, arguing the testimony from the Deutsche Bank executive had refuted the state’s claim that any asset inflation was material to the lender’s decisions.

“The bank had no problem with a $2 billion difference, a US$3 billion difference - large changes to net worth are not unusual,” Kise said. “There’s been no demonstration of any materiality issues at all.”

Engoron said he’d rule on Kise’s request at a later time, but suggested he wasn’t convinced by the argument.

“The mere fact that lenders were happy doesn’t mean the statute wasn’t violated,” the judge said.

 


  - Bloomberg

 

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