Trump Organization accused of misleading Zurich over surety bonds

New York authorities have outlined alleged misrepresentations by the Trump Organization in its purchase of surety bonds from Zurich Insurance, in an effort to compel former US President Donald Trump and some of his children to testify in a wider case being brought against them. In a petition filed in New York state court in Manhattan by New York Attorney General Letitia James, the state alleges that Trump’s company misrepresented the source of valuations on financial statements to obtain surety coverage at favourable rates. The filing is part of an effort by New York to compel Trump and two of 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. As first reported in our sister publication Business Insurance, the surety bond programme, which was in place from 2007 to 2021, was placed by Aon, according to the filing. Aon previously said it cut ties with Trump in the wake of the assault on the US Capitol. Zurich and Aon declined to comment on the filing. 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 programme, based on the financial disclosures made by the Trump Organization, Zurich agreed to increasingly more favourable terms – periodically increasing the limits and decreasing the rate,” the court filing states. In 2011, the programme had a single bond limit of $500,000 and an aggregate limit of $2m at a rate of $20 per thousand. When the programme ended in 2021, the single bond limit was $6m, the aggregate limit was $20m 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. Trump agreed to indemnify Zurich for claims under the programme and to annually disclose to Zurich’s underwriter his personal financial statements, the filing says. “Evidence indicates that the Trump Organization obtained Zurich’s approval to renew the programme on at least two occasions through intentional misrepresentations concerning Mr Trump’s personal financial statements,” it continues. In 2018 and 2019 renewal discussions, Allen Weisselberg, the Trump Organization’s chief financial officer, said the value of various assets listed as the company’s real estate holdings was determined by a professional appraisal firm, and the valuations factored favourably in Zurich’s renewal of the programme, the filing explains. But it seems the valuations were set by the Trump Organisation itself. “Had Zurich’s underwriter been advised that the valuations listed on the personal financial statements she reviewed during her onsite 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,” states the filing. It adds that if the underwriter had known about the misrepresentation, Zurich may have ended its relationship with the company. In addition, the Trump Organization failed to disclose that its $2.2bn 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. For further news from Business Insurance, please click here.