A Deutsche Bank wealth management group managing director testified Tuesday that the bank anticipates that the net worth of high-wealth clients like Donald Trump can be elevated on self-reported financial statements, but it wouldn’t necessarily stop the bank from issuing the loan – and didn’t for Trump’s loans.
New York Attorney General Letitia James has alleged Trump and his company defrauded Deutsche Bank by submitting his inflated net worth statements to get better rate and in doing so also violated loan requirements called covenants.
In 2013, the bank’s underwriters adjusted Trump’s net worth by about 50% from more than $4 billion to roughly $2.65 billion.
But David Williams, who’s worked in the bank’s private wealth management division for 17 years, said the bank wasn’t fazed. “It’s not unusual or atypical for any client’s provide financial statements to be adjusted to this level to this extent,” he testified in the New York civil fraud trial.
Williams was involved in loans for Trump Organization loan assets like the Old Post Office, Doral Golf Resort & Spa and the Trump International Hotel & Tower in Chicago, often signing credit reports related to the loans.
His testimony Tuesday reinforced Trump’s defense argument that the lender was not defrauded and bank personnel conducted a due diligence process that did not rely on Trump’s personal financial statements the judge ruled fraudulent before the trial started. Trump has also argued that the bank was happy to have his business.
“We expect clients provided information to be accurate,” Williams testified. “At the same time, it’s not an industry standard that these financial statements are audited they largely reliant on the use of estimate. That said, we account for that and make some adjustments as a conservative measure.”
In 2013, Deutsche Bank also adjusted Trump’s operating cash flow to a negative $26 million but Williams said, “It’s not unusual for high net worth individuals’ cash flow to vary from year to year positives and negatives.”
Trump’s lawyers have argued that any apparent inflation of Trump’s net worth or asset valuations in his financial statement weren’t material or significant to the bank whose lenders adjusted the values downward significantly when considering the loan terms in the underwriting process. Williams testified that there’s an “expectational understanding that there is a use of estimates in the preparation of the financial statements.”
Deutsche Bank verifies “material facts” in client finances, he said, and Williams personally went to Trump Tower in December 2011 to review bank and brokerage statements to verify there was $51.8 million in marketable securities $178 million cash balances.
After that review, the cash-on-hand amount was adjusted by 50% to reflect the bank’s understanding that not all of the reported liquidity was owned or held by Trump.
The lender said Tuesday he’s not aware of any covenant defaults on the loans with Trump and his company.
“Generally speaking. a payment default is more material fault than a covenant default speaks definitely to the prepayment of the loan,” Williams said.
It’s been established that Trump did not default on the loan payments. Trump has since paid off all of the company’s outstanding loans with Deutsche Bank. Suarez reviewed with Williams loan documents for Doral Golf Resort & Spa, the Old Post Office and Trump’s Chicago property that showed the loans were renegotiated at points during the life of the loan to reduce or remove Trump’s personal guaranty. Trump paid fees to the bank and kept millions in Deutsche Bank accounts per those agreements that lowered his personal liability.
Williams said Deutsche Bank offers flexible loan terms to clients like Trump to benefit their business strategy to “grow [their] noncredit relationship with the firm.”
They prioritize high net worth client’s “broader relationship” with the bank, he said.
At the end of Williams’ testimony, Trump’s attorney Chris Kise renewed a motion for a directed verdict to toss out the case against Trump and his company, arguing that Williams’ testimony confirms the bank had no problem with the loans to Trump Org.
Judge Arthur Engoron did not rule but said, “The mere fact that the lenders were happy doesn’t mean that the statute wasn’t violated, doesn’t mean that the other statues weren’t violated. I’ll take it under advisement.”
Kise cited testimony from the banker that “large changes to net worth were not unusual.” The banker’s testimony proves there was no intent to defraud and no materiality to any alleged discrepancies in Trump’s personal financial statements submitted to the bank, Kise added.
“The bank made decision based on its own analysis,” Kise said, recounting Williams’ testimony.
Assistant Attorney General Kevin Wallace responded that Engoron already decided Trump and his co-defendants committed fraud in the summary judgment ruling and the remaining claims at issue in the trial do not pertain to direct fraud against Deutsche Bank.
This story has been updated with additional developments.