As prosecutors in Manhattan weigh whether to charge Donald J. Trump with fraud, they have zeroed in on financial documents that he used to obtain loans and boast about his wealth, according to people with knowledge of the matter.
The documents, compiled by Mr. Trump’s longtime accountants and known as annual statements of financial condition, could help answer a question at the heart of the long-running criminal investigation into the former president: Did he inflate the value of his assets to defraud his lenders?
In recent weeks, prosecutors in the office of the Manhattan district attorney, Cyrus R. Vance Jr., have questioned one of Mr. Trump’s accountants before a grand jury as part of their examination of the financial statements, said the people with knowledge of the matter. Prosecutors also interviewed his longtime banker, another person said.
If the prosecutors seek an indictment, the case’s outcome could hinge on whether they can use the documents to prove that a defining feature of Mr. Trump’s public persona — his penchant for hyperbole — was so extreme and intentional when dealing with his lenders that it crossed the line into fraud.
Whenever Mr. Trump needed a loan, he would provide potential lenders with the statements, which contained optimistic projections about the value of his real estate business as well as sweeping disclaimers noting the numbers’ limitations.
Mr. Vance’s prosecutors found that the accountants who put together the statements relied on underlying information provided by the Trump Organization, Mr. Trump’s family business, according to the people with knowledge of the matter, who were familiar with the questions prosecutors asked and spoke only on condition of anonymity because they were discussing confidential testimony.
The prosecutors, working with the office of the New York State attorney general, Letitia James, have examined the possibility that Mr. Trump and his deputies at the company cherry-picked favorable information — and ignored data that ran counter to it — to essentially mislead the accountants into presenting an overly rosy picture of his finances.
While the numbers could implicate Mr. Trump, disclaimers in the statements that the data had not been audited or authenticated could help his defense, underscoring the challenge that prosecutors face as they grapple with whether to charge the former president.
A spokeswoman for Mr. Trump’s accounting firm, Mazars USA, declined to comment beyond saying that it could not discuss its clients or its work for them without their consent, and that Mazars remained “committed to fulfilling all of our professional and legal obligations.”
Jerry D. Bernstein, a lawyer for Mazars, which has assembled Mr. Trump’s personal and corporate tax returns for years, declined to elaborate.
A spokesman for the Manhattan district attorney’s office declined to comment, as did a lawyer for Mr. Trump, Ronald P. Fischetti. A spokeswoman for the Trump Organization said New York was struggling with crime and homelessness “yet the only focus on the New York D.A. is to investigate Trump for political gain.”
Mr. Trump did not personally assemble the data for the accountants, but the documents left no doubt as to who was accountable for their contents: “Donald J. Trump is responsible for the preparation and fair presentation of the financial statement in accordance with accounting principles generally accepted in the United States of America,” his accountants wrote in a cover letter attached to the statements in 2011 and 2012.
Yet the accountants also acknowledged they “have not audited or reviewed” the information and “do not express an opinion or provide any assurance about” it, a common caveat in statements of financial condition. The accountants disclosed that, while compiling the information for Mr. Trump, they had “become aware of departures from accounting principles generally accepted in the United States of America.”
Armed with those caveats, Mr. Trump’s lawyers would most likely argue that no one, let alone sophisticated lenders, should have taken his valuations at face value. And even if his valuations were false, the lawyers might argue, the lenders conducted their own analyses of Mr. Trump’s assets and concluded that he was a worthy borrower.
Mr. Trump’s lawyers could also call on people with expertise in property assessments to say that the value of a hotel or office building may be subject to various interpretations.
Mr. Trump, who has criticized Mr. Vance’s investigation as a political witch hunt, has deployed a similar defense in the past, chalking up any financial inconsistencies to “an innocent form of exaggeration,” as he called it in his 1987 book “The Art of the Deal.”
Statements of financial condition are not unique to Mr. Trump. Many businesses, including real estate developers, use them as a balance sheet to record assets and liabilities.
The public got a glimpse of Mr. Trump’s statements when his former lawyer and fixer, Michael D. Cohen, released them when he testified to Congress in 2019.
Mr. Cohen, who split from Mr. Trump during the presidency and eventually pleaded guilty to several federal crimes, told Congress that “Mr. Trump inflated his total assets when it served his purposes such as trying to be listed amongst the wealthiest people in Forbes and deflated his assets to reduce his real estate taxes.”
Mr. Cohen provided Congress with Mr. Trump’s statements from 2011 to 2013. Mr. Trump, he said, had provided the documents to Deutsche Bank when inquiring about a potential loan to buy the Buffalo Bills.
The deal never materialized, but Mr. Vance’s prosecutors have questioned witnesses about Mr. Trump’s statements to Deutsche Bank during the process, the people said. They have questioned Mr. Cohen and an employee from Deutsche Bank, Mr. Trump’s main lender.
For years, Mr. Trump shared the statements with Deutsche Bank and other potential lenders to offer a glowing assessment of his financial health when he needed a loan for a hotel, golf course or office building.
But before impressing his lenders, Mr. Trump had to have his employees assemble spreadsheets detailing the underlying value of his assets, according to people with knowledge of the process. The employees would then send the spreadsheets to his accounting firm, Mazars, which would compile the information into the annual statements.
The Trump Investigations
Numerous inquiries. Since former President Donald Trump left office, there have been many investigations and inquiries into his businesses and personal affairs. Here’s a list of those ongoing:
Investigation into insurance fraud. The Manhattan district attorney’s office and the New York attorney general’s office are investigating whether Mr. Trump or his family business, the Trump Organization, engaged in criminal fraud by intentionally submitting false property values to potential lenders.
Investigation into tax evasion. In July 2021, the Manhattan district attorney’s office charged the Trump Organization and its chief financial officer with orchestrating a 15-year scheme to evade taxes. A trial in that case is scheduled for summer 2022.
Investigation into election interference. The Atlanta district attorney is conducting a criminal investigation of election interference in Georgia by Mr. Trump and his allies.
The statements, issued as of June 30 every year, often began with a one-page list of Mr. Trump’s assets. Each property — Trump Tower, his golf clubs, his hotels — was listed next to a dollar amount that represented its supposed value. His cash and investments received a value, too, as did the Miss Universe pageants and other assets.
The second and final page of the 2011 and 2012 statements described Mr. Trump’s liabilities — essentially a list of any outstanding loans — and then reported his net worth. In 2011, Mr. Trump claimed a net worth of $4.2 billion. In 2012, it was more than $4.5 billion.
In determining the value of a property owned by Mr. Trump, his employees often looked at recent selling prices of comparable buildings, a common real estate valuation method.
But prosecutors have questioned whether the Trump Organization routinely selected the most valuable properties, even if they were not completely comparable, and disregarded sales of buildings that would have dragged down Mr. Trump’s valuations, the people with knowledge of the matter said.
The prosecutors have also scrutinized how the company projected future income that was not guaranteed, the people said.
Some of the irregularities that appeared in the statements were relatively trivial — Mr. Trump claimed, as he often has, that Trump Tower was 68 stories tall when it was really 58 — while others raised larger questions about the legitimacy of the numbers. The 2011 statement omitted his hotel in Chicago — and the tens of millions of dollars in debt Mr. Trump had personally guaranteed on the property.
The 2012 statement’s cover letter detailed a long list of disclaimers, including that the statement contained predictions about the future and that it did not include data for the Chicago hotel. The omission, the accountants suggested, ran contrary to an important rule of thumb: “Accounting principles generally accepted in the United States of America require that personal financial statements include all assets and liabilities.”
The accountants concluded the letter with a broad note of caution: “Users of this financial statement should recognize that they might reach different conclusions about the financial condition of Donald J. Trump.”
In addition to the Mazars cover letter, Mr. Trump added his own addendum to the statements of financial condition, a series of explanations and caveats that referred to the values in the statements as estimates.
His lawyers are likely to contend that these caveats absolve Mr. Trump of criminal liability. They could also argue that the lenders are not actually victims, highlighting the fact that his main lender, Deutsche Bank, made money in its dealings with Mr. Trump. (The Trump Organization is expected to soon sell the lease on its hotel in Washington for at least $375 million and pay off Deutsche Bank’s loan to that property.)
But even the former president’s own notes point to his involvement in determining the values that would be represented.
The value of Trump Tower, the notes said, was based partly on “an evaluation by Mr. Trump.”
David Enrich contributed reporting.