I don't...
by Kbyrnes (2024-03-19 16:20:20)

In reply to: I struggle with the New York Case  posted by OrangeJubilee


..."No harm, no foul" doesn't seem like a very robust concept when it comes to financial fraud. Spitting on the sidewalk, maybe.

As a real estate appraiser, I find the Trump Organization's repeated fraudulent citation of a certain appraiser as the source of cap rates and values that the same appraiser said he had never provided to anyone to be appalling, and an action that deserved punishment.

As far as the myriad other fraudulent activities, the state of New York has apparently been passing legislation for over 60 years that put the state in the position of a party that is harmed by financial fraud.

Here is J. Engoron's decision in the case: Trump fraud decision.

Here is s snippet about the appraiser:

________________________________________

Doug Larson

Doug Larson is a valuation advisor and certified New York real estate appraiser who currently works at Newmark. Prior to working at Newmark, he worked at Cushman & Wakefield for almost 25 years. TT 1558-1559.

In 2015, while at Cushman & Wakefield, Larson appraised 40 Wall Street for Ladder Capital as part of its due diligence. TT 1560-1570; PX 118.

Larson testified clearly and credibly that although his name is cited as the source to justify a 2.940 capitalization (or “cap”) rate8 on Niketown, a property in which Donald Trump owned two long-term leases on 57th Street, Larson never had a specific conversation with Jeffrey McConney in which he advised him that such a cap rate would be appropriate; nor was he aware that he was listed as a source for such a cap rate. TT 1572-1575; See, e.g., PX 758. Larson further said that he would not have advised McConney to select that cap rate, as “it’s not how we would value [it] in our practice.” TT 1583. Larson stated that McConney was incorrect in stating that he consulted with Larson when valuing Trump Tower. TT 1581.

Upon learning that his name had been repeatedly used to justify cap rates that he had not recommended, Larson said it was “inappropriate and inaccurate … I should have been told and, you know, an appraisal should have been ordered.” TT 1587.

Larson further took issue with his name being used to justify a cap rate on the property controlled by a Vornado partnership interest. In 2012, Larson appraised the property at 1290 Avenue of the Americas at $2 billion with a cap rate of 4.5 percent. PX 1824; TT 1588-1589. Notwithstanding, in the following SFC’s supporting data, McConney cites Larson as the source for using a 3.12 percent cap rate, even though he never worked with McConney to pick a cap rate to value that property, and that he would not have, as valuing minority interests is a specialized area beyond his expertise. TT 1589-1595.

In a 2015 appraisal of 40 Wall Street, Larson included the value of a Dean & Deluca lease that yielded annual rent of $1.4 million, and he applied a 4.25 percent cap rate, for a total valuation of $540 million. Notwithstanding, the 2015 SFC backup data double-counted the Dean & Deluca lease. McConney also chose a much lower cap rate than that on the appraisal and listed the total value of 40 Wall Street at over $735 million, citing Larson as the source. Larson repeatedly confirmed that he was not a source for that number, that the number was nearly $200 million more than his own appraisal, and that he did not work with McConney or anyone else at the Trump Organization to determine the cap rate used to generate the $735 million value.9 PX 118,729; TT 1601-1606.


8A capitalization rate is calculated by dividing a property’s net operating income by the current market value. This ratio, expressed as a percentage, is an estimation of an investor’s return on real estate. The higher the cap rate, the lower the value. Cap rates have an extraordinarily large effect on the value of a property.

9In a theatrical attempt to halt the testimony of Doug Larson, defendants tried to impeach him with a 2014 email showing that McConney had asked for his advice on whether the fact that a ground lease had a far-off expiration would affect the cap rate in any way. Defendants then suggested that Larson had committed perjury and should be removed from the stand to consult with counsel. As an initial matter, the Court does not find Larson’s testimony to be contradictory. The fact that McConney sent one email in 2014 that generically discussed the effect of lease expirations on cap rates does not in any way give defendants cart blanche to cite Larson as an omnibus form of counsel that immunizes all the future manufactured valuations that comprised the SFCs. Further, defendants do not cite to this email in the supporting data for the SFCs, they cite to a series of telephone calls that, by Doug Larson’s account, never even took place. Moreover, the assertions of defendants’ counsel, Christopher Kise, that Larson’s testimony amounted to such blatant perjury he should be immediately removed from the stand to consult with counsel about his Fifth Amendment rights is belied by the record and seemed like nothing more than a performance for a non-existent jury. PX 109; TT 1696-1712; 1754-1767.