What the Supreme Court ruling means for Manhattan DA's Trump criminal investigation
Posted February 22, 2021 3:16 p.m. EST
CNN — After 17 months and two trips to the US Supreme Court, the Manhattan district attorney's criminal investigation into former President Donald Trump's business has received a significant boost with investigators now able to pour over Trump's tax returns and financial records.
The district attorney's office, led by Cyrus Vance, is expected to have access to the records within the next few days, according to people familiar with the matter.
Vance's office and Trump's long-time accounting firm Mazars USA, which was subpoenaed for the records, have been in discussions for months about how the documents, mainly in electronic form, would be handed over securely, these people said.
Once prosecutors have the tax-related records in hand, they will be able to dig deeper into investigative theories, pursue interviews with key witnesses, and determine whether they believe any state laws have been violated.
In addition to the tax returns going back to 2011, Vance has subpoenaed four other categories of documents, including financial statements, engagement agreements, documents relating to the preparation and review of tax returns, and work papers and communications related to the tax returns.
The records may be critical to the investigation because they are likely to contain documents that reflect the decision-making behind valuations and tax write-offs, which may be important to determine whether there was intent to commit a crime.
Prosecutors have wanted to review the documents before calling key witnesses before the grand jury, people familiar with the inquiry said. Under New York law witnesses are granted "transactional immunity" and cannot be prosecuted for any crimes relating to their testimony as a grand jury witness. Once prosecutors have those documents, they can begin to take those steps.
Still, it will take investigators time to review the records and piece it together with other documents and testimony. The Trump Organization is comprised of dozens of limited liability companies, each with their own financial statements and tax returns.
Mazars said in a statement that it "remains committed to fulfilling all of our professional and legal obligations."
Trump, in a statement, said, "For more than two years, New York City has been looking at almost every transaction I've ever done, including seeking tax returns which were done by among the biggest and most prestigious law and accounting firms in the U.S." He called the investigation a "fishing expedition."
Following the ruling, Vance said in a tweet, "The work continues."
The clock is ticking
The ruling that denied Trump's last bid to block the subpoena removes a significant hurdle to the criminal investigation, which has been underway for more than two years.
The probe recently picked up momentum with the addition of a new prosecutor experienced in financial investigations and continued interviews with witnesses.
The district attorney's office is investigating whether Trump and the Trump Organization engaged in tax fraud, insurance fraud and other schemes to defraud, including potentially providing false information to financial institutions or banks about the value of certain buildings and assets.
Prosecutors have said Trump's financial records are critical to their investigation, citing the statute of limitations. Investigators are working with a five-year statute of limitations for most New York state felonies that cover the areas under scrutiny.
As prosecutors have waited for the court to rule, they have subpoenaed records and interviewed employees at Deutsche Bank about Trump loans, and insurance broker Aon, according to multiple sources familiar with the investigation. Deutsche Bank has loaned Trump more than $300 million.
Prosecutors have also subpoenaed Ladder Capital, which has loaned the Trump Organization over $100 million.
In addition, investigators have subpoenaed the Trump Organization for records relating to fees paid to consultants, including Ivanka Trump, these people said.
And more recently prosecutors expanded their inquiry into the tax treatment of a conservation easement the Trump Organization arranged on an estate called Seven Springs in Westchester County, NY.
They've also brought in external experts, by hiring FTI Consulting and earlier this month added Mark Pomerantz, a prominent former federal prosecutor with expertise in complex financial investigations.
Last week, a representative for the New York City mayor confirmed the New York City Tax Commission received a subpoena regarding Trump Organization properties.
Tax and fraud cases are difficult
Former prosecutors say bringing a tax or financial fraud case is difficult, especially since Trump relied on lawyers and accountants for advice. Adding to that is the complexity of real estate, where there is more leeway in deriving valuations.
In some instances, they say, certain tax write-offs or valuations may on the surface appear suspicious but could turn out to be proper under the law.
Sophisticated lenders also conduct their own internal reviews before extending millions of dollars, former prosecutors say, noting that cases where the lender hasn't suffered a loss are difficult to prove.
Trump is likely to argue there were different legal reasons for valuing a real estate asset one way when seeking a loan to reflect its potential growth but would have a legal basis to value it differently in a tax return when reflecting its current value.
Another open question is whether prosecutors will complete their investigation under Vance's leadership.
Vance's term runs through the end of the year and he has not said whether he will seek reelection. Several Democratic candidates, including former prosecutors, have already declared their intention to challenge Vance for district attorney.