Trump Organization accused of misleading Zurich over surety bondsPosted On: Jan. 19, 2022 9:23 AM CST
New York authorities late Tuesday outlined alleged misrepresentations by the Trump Organization Inc. in its purchase of surety bonds from Zurich Insurance Group Ltd. in an effort to compel former president Donald Trump and some of his children to testify in a wider case against them.
In a petition filed in New York state court in Manhattan by New York Attorney General Letitia James, the state alleges that Mr. Trump’s company misrepresented the source of valuations on financial statements to obtain surety coverage at favorable rates.
The filing is part of an effort by New York to compel Mr. Trump and his children Donald Trump Jr. and Ivanka Trump to testify in the state’s civil investigation into the Trump Organization’s financial dealings. Among other things, the state alleges that the company used fraudulent or misleading asset valuations to obtain loans and tax deductions, in addition to insurance coverage.
The surety bond program, which was in place from 2007 to 2021, was placed by Aon PLC, according to the filing. Aon previously said it cut ties with Mr. Trump in the wake of the Jan. 6, 2021, assault on the U.S. Capitol.
Zurich and Aon declined to comment on the filing. Mr. Trump’s lawyer did not immediately respond to a request for comment.
According to the petition, most of the bonds were statutorily required for the Trump Organization’s real estate business.
“Over the course of the Program, based on the financial disclosures made by the Trump Organization, Zurich agreed to increasingly more favorable terms — periodically increasing the limits and decreasing the rate,” the court filing states.
In 2011, the program had a single bond limit of $500,000 and an aggregate limit of $2 million at a rate of $20 per thousand. When the program ended in 2021, the single bond limit was $6 million, the aggregate limit was $20 million and the rate was $10 per thousand, the filing states.
In accordance with its standard underwriting practice, Zurich required the Trump Organization to provide an indemnification against any loss should Zurich be required to pay under a bond, the filing states.
Mr. Trump agreed to indemnify Zurich for claims under the program and to annually disclose to Zurich’s underwriter his personal financial statements, according to the filing.
“Evidence indicates that the Trump Organization obtained Zurich’s approval to renew the Program on at least two occasions through intentional misrepresentations concerning Mr. Trump’s personal financial statements,” the filing states.
In 2018 and 2019 renewal discussions, Allen Weisselberg, the Trump Organization’s chief financial officer, represented that the value of various assets listed as the company’s real estate holdings was determined by a professional appraisal firm, and the valuations factored favorably in Zurich’s renewal of the program, the filing states.
“Had Zurich’s underwriter been advised that the valuations listed on the personal financial statements she reviewed during her on-site visits had been determined by Trump Organization staff and not a professional appraisal firm, she would have accorded them less weight and it would have negatively impacted her underwriting analysis,” the filing states.
Further, if the underwriter had known about the misrepresentation Zurich may have ended its relationship with the company, the filing states.
In addition, the Trump Organization failed to disclose that its $2.2 billion valuation of golf courses listed in the statement included a substantial “brand premium.” Zurich excludes intangible assets such as brand value in its underwriting guidelines, the filing states.