Failure To Prosecute Fraud At Trump SoHo Shows How Corporations Buy Justice

Since we’re talking about the dysfunction in the US judicial system lately, I guess we should also talk about how Donald Jr. and Ivanka avoided fraud charges associated with the failed Trump SoHo project.

The Trump Soho project was one of the earlier Trump projects that apparently relied on Russian funding and included some of the shady Russian characters, such as Felix Sater and the Bayrock Group, that became associated with the Trump Organization. It was also the first project that thrust Don Jr. and Ivanka into prominence as the future leaders of the Trump Organization.

The project was ill-fated from the start. It was not in SoHo at all but near the entrance to the Holland Tunnel. Due to zoning restrictions, it could not be a residential building so it was billed as condominium-hotel combo. But condominium owners could not reside in the building for more than 120 nights per year or even a full month at a time. More importantly, however, the project was completed in late 2007, just in time for the financial crisis which further made the units a tough sell.

If the Trump Organization was not able to sell over 15% of the condo units, then the sales of condo units that had been made would be voided and those buyers would need to be refunded their purchases. In April, 2008, the Trump Organization claimed that 31% of the units had been sold. In June, Ivanka and Don Jr. called a press conference and further claimed that 60% of the units had been taken. In reality, according to the NY Attorney General’s investigation of the failed project, only 15.8% of the units had sold by March, 2010, nearly two years after the Trump’s false claims.

The buyers that made up that 15.8% realized that they had been taken for a ride and claimed that the value of a unit in building that was 60% occupied was vastly more than one that was only 16% occupied. Accordingly, they sued in civil court claiming “a consistent and concerted pattern of outright lies.” Eventually, the Trump Organization reached a settlement with the buyers and refunded them 90% of their deposits.

But before that settlement, the Manhattan District Attorney’s office, headed by Cy Vance, was also looking into the issues at Trump SoHo, especially those inflated sales figures provided by Don Jr. and Ivanka. New York law makes it illegal to knowingly make false statements in attempting to sell real estate. And the DA’s office had plenty of evidence that is exactly what the Trumps had done, including an email trail that clearly indicated that the Trump’s knew they were lying about the sales figures. According to the New Yorker article, “In one e-mail…the Trumps discussed how to coördinate false information they had given to prospective buyers…In yet another, Donald, Jr., spoke reassuringly to a broker who was concerned about the false statements, saying that nobody would ever find out, because only people on the e-mail chain or in the Trump Organization knew about the deception, according to a person who saw the e-mail. There was ‘no doubt’ that the Trump children ‘approved, knew of, agreed to, and intentionally inflated the numbers to make more sales,’ one person who saw the e-mails told us. ‘They knew it was wrong.'”

But the criminal case was apparently complicated by two unrelated incidents. First, the buyers had by that time settled their civil case and received 90% of their money back and, as part of that agreement, they agreed not to cooperate with the DA unless they were specifically subpoenaed. In addition, the lawyers for the buyers wrote an astounding letter to the DA saying they acknowledged that the Trump Organization has not violated any laws. Whether that letter was required as part of the settlement agreement is unknown. But it put the DA’s office in the awkward position of trying to prove fraud where the victims denied fraud had taken place.

The second issue for DA Vance was the intervention of Trump’s personal lawyer, Marc Kasowitz.  Kasowitz donated $25,000 to Vance’s re-election campaign which Vance immediately returned because the potential fraud case was before the DA’s office. Kasowitz then went around the prosecutors in the case and forced a face-to-face meeting with Vance where he apparently pressed Vance to drop the case. In the end, Vance seemingly overruled his investigators and prosecutors and decided to drop the fraud case. Subsequently, Kasowitz bundled another $50,000 for Vance’s campaign which Vance has now agreed to also return in light of this story.

It certainly appears that Vance was essentially bought off by Trump donation. That is the more direct approach to buying justice, the standard bribery of government officials which is already rampant these days, especially in light of Citizens United. But, to my mind, the more disturbing part of this story is that the Trump Organization was seemingly able to buy not just the silence but the support of the victims of its fraud. There is no doubt that the buyers believed they were defrauded. That was basically the basis of their civil suit. But that settlement agreement appeared to require the victims of the fraud to not cooperate with authorities in a criminal investigation. Whether it is the ability of a corporation to buy off the prosecutor and/or the victims of its illegal activity, they both indicate a criminal justice system that is seriously broken.