Weiselberg , Bloomberg
After Alan Weiselberg pleaded guilty to tax fraud while he was CFO of the Trump Organization, I remember the first time he and Donald Trump were caught on financial fraud charges.
The episode focused on a misleading press release from Trump Hotels & Casino Resorts in 1999. The press release, prepared by Weiselberg and approved by Donald Trump, was “materially misleading” because, according to the Securities and Exchange Commission, it contained a “false and misleading impression” that the company has exceeded Wall Street’s expectations for better performance. Thanks if that wasn’t it.
It was surprisingly common at the time for large companies to publish pretentious earnings numbers. The name of the game in the corporate suites was to release earnings “pro forma” the way everyone has ever heard of “fake news”. This gave officers the ability to report consequences where expenses and other perishable goods were ignored, such as when a garbage truck ignored the cost of painting garbage trucks. By the time the world of finance understood that “pro forma” meant “as if” – which took some time – pundits like Enron were growing in the weeds. When the ban broke, the big energy, telecom, software and healthcare companies were caught in a wave of accounting fraud that took a toll on the entire economy and the stock market because nobody trusted anyone’s facts.
Trump jumped into this world with both feet.
In the fall of 1999, Trump decided that his ailing casino company would pro forma report quarterly earnings of $14 million. The number was misleading, the SEC said, as it didn’t mention the result, largely due to an unusual and undisclosed $17 million win. Trump Hotels was the first company to fall into a federal trap. “This case clearly demonstrates how pro forma figures can be misleading and misleading,” the SEC said.
Trump tells Wall Street Journal His problem was talking too much. The press release on the subject was “just a statement that is too detailed,” he explained. In this case, no one was charged and no wrongdoing was admitted.
After Enron’s collapse, the government cracked down on accounting by forcing CEOs to personally certify the accuracy of their financial statements. Enron’s accounting firm, Arthur Andersen, broke up after pleading guilty to an obstruction of justice trial. The Fed, alarmed at its power to break up a large accounting firm employing thousands of people, eased the enforcement of white-collar crime and began introducing deferred prosecution deals for corporate crooks. Trump channeled public outrage at these backroom deals to get a partially elected president.
Now Wesselberg, Trump’s confidante for decades, is a felon who will take the stand to testify against his former employer in a bid to reduce his sentence. Both have come a long way from the gimmicky world of pro forma mischief.