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This story was co-published with ProPublica. Our reporting on President Trump's relationship with Deutsche Bank was originally published in May 2019.

A decade ago, loan filings showed Trump Tower in New York City had a reported profit of about $13.3 million. But when the tower refinanced its debt soon after, the profits for the same year — 2010 — somehow appeared higher. A new lender listed the profits as $16.1 million, or 21% more than they had been recorded previously.  

The next year’s earnings for the building also “improved” between the two filings. Profits for 2011 were listed as 12% higher under the new loan than the old, according to reports by loan servicers and data provider Trepp. 

ProPublica uncovered the Trump Tower discrepancies by examining publicly available data for mortgages that are packaged into securities known as commercial mortgage-backed securities, comparing the same years in reports for different CMBS. If a bank had held onto the loan, instead of selling it to investors, such information would have been kept private. No evidence has emerged that the Trump Organization was involved in changing the profit figures.

Alan Garten, the Trump Organization’s chief legal officer, said: “Not only were the numbers provided to the servicer accurate, but Trump Tower is considered one of the most underleveraged commercial buildings around.” 

The discrepancies in the tower profits match a pattern described in a whistleblower complaint filed with the Securities and Exchange Commission, which ProPublica revealed this month. The complaint accuses commercial lenders of fraudulently inflating the income numbers underlying loans in many CMBS. 

The complaint named seven servicers and 14 lenders, including two of the country’s biggest issuers of CMBS — Ladder Capital and Wells Fargo. Both were involved in the more recent Trump Tower loan, one as the lender, the second as the financial institution that packaged the loan into a CMBS. The complaint does not say which entities altered specific numbers and does not address whether borrowers were involved in, or knew about, the alleged fraud.

Wells Fargo declined to comment. Ladder Capital did not respond to questions about Trump’s signature Fifth Avenue tower. Ladder did respond to questions for ProPublica’s earlier article; it acknowledged it had altered historical numbers for two other loans ProPublica asked about, to remove expenses that were not recurring in the future. The lender said its actions were appropriate. (Ladder is a publicly traded commercial real estate investment trust with more than $6 billion in assets. It employs Jack Weisselberg, the son of the Trump Organization’s longtime CFO, Allen Weisselberg, as an executive director whose job is to make loans. Jack Weisselberg declined to comment.)

When the Trump Organization refinanced its loan for Trump Tower in 2012, it increased the size of its loan from $27.5 million to $100 million, extracting $67.9 million in cash. The interest-only loan originally represented about 8% of the more than $1 billion in mortgages assembled into the CMBS. (Only the commercial part of the tower — with retail tenants such as Gucci and offices, including for the Trump Organization — served as collateral for the loan.)

For both 2010 and 2011, data shows the discrepancies in net operating income between the old and new loans for Trump Tower were largely due to the new loan reporting lower expenses. The prospectus for the more recent loan stated that “the historical expenses exclude security associated with Donald J. Trump’s personal services” — though it did not specify dollar amounts for the change. Greater revenues were cited for both years under the new loan, too, but the prospectus did not explain why.

The whistleblower complaint, filed by a CMBS-industry insider named John Flynn, concerns the nearly $600  billion CMBS market. It accuses lenders and servicers of manipulating historical cash flows, failing to report misrepresentations, changing names and addresses of properties, and “deceptively and inaccurately” describing loan representations. The complaint asserts that Flynn has found overstatements in $150 billion worth of CMBS since 2013.

The misrepresentations allowed properties to qualify for loans they wouldn’t have otherwise, Flynn asserts, while leaving investors in the dark.

The SEC has not taken any public action in response to Flynn’s complaint; the agency declined to comment. 

Altering past profits without providing an explanation is “highly questionable,” John Coffee, a professor at Columbia Law School and an expert in securities regulation, told ProPublica for its earlier article on CMBS.

As hotels, retail and office properties face unprecedented difficulties due to the virus that has shuttered much of the country, Flynn says the manipulations have increased the likelihood and potential severity of a crash. 

Last year, ProPublica revealed another set of income discrepancies at Trump Tower and other company-owned buildings, ones that seemed to hark to the testimony of former Trump lawyer Michael Cohen, who testified that Trump would inflate income figures when seeking a loan and deflate the figures when filing taxes. Other Trump Organization properties investigated by ProPublica reported higher profits in the CMBS filings than they did in tax filings. A Trump Organization spokesperson said at the time that “comparing the various reports is comparing apples to oranges” because reporting requirements differ.

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