Controversial SD Bank Loans $100 Million to Trump Organization


[ESPAÑOL]

By Alberto Garcia
Investigative Reporter

A La Jolla-based online bank has provided the Trump Organization with a $100 million loan just weeks after Trump’s accounting firm said the company’s audited financials “should no longer be relied upon.”

Axos Bank, headquartered in La Jolla, started as the Bank of the Internet USA in 1999 as the country’s first completely digital bank before changing its name to Axos in 2018. It is a publicly traded company under the ticker symbol “AX”.

On February 17th, the bank provided a $100 million loan on Trump Tower, the office and residence building on New York’s Fifth Avenue where the former president lived before moving into the White House in January 2017. Neither Trump’s company nor Axos released information on the term of the loan or the interest rate.

Trump has since moved his official residence to his Mar-a-Lago resort in Miami Beach, Florida, but maintains his apartment at Trump Tower.

The loan came just a week after Mazars USA LLP, the accounting firm that had prepared financial statements for the Trump Organization for more than 10 years, notified the former president’s company that it could no longer stand behind its accounting work for the years between 2010 and 2020.

“While we have not concluded that the various financial statements, as a whole, contain material discrepancies, based upon the totality of the circumstances, we believe our advice to you to no longer rely upon those financial statements is appropriate,” Mazars General Counsel William J. Kelly wrote in a letter to the Trump Organization’s lawyer, Alan Garten.

The move by the accounting firm came one week after New York Attorney General Letitia James announced that her on-going civil investigation of Trump’s company discovered evidence that the company used “fraudulent or misleading” valuations of its golf clubs, buildings, and other properties to apply for loans with inflated valuations and to received tax benefits based on the lower valuations.

Axos has a 1.07 out of 5 star rating on the Better Business Bureau’s website, listing 75 complaints filed within the past three years and 12 complaints within the past year.

One online review posted on the BBB website last month called it “the worst bank”.

“They have been the worst bank I have worked with ever! This has been a nightmare that my husband and I have been going through for the last two years. How does this bank stay in business? Their loan department servicing does not exist,” posted Jasmine D wrote.

The bank’s market value has fallen in the weeks since the loan became public, dropping from $53.98 a share to $47.98, a more than 11% drop in its stock which has lowered the bank’s value to less than $3 billion. In comparison, Wells Fargo Bank has a market valuation of over $190 billion.

Axos’s CEO is San Diegan Greg Garrabrants, 50, was one of the country’s highest paid bank executives in 2018 when he earned a reported $34.5 million, compared to JPMorgan CEO Jamie Dimon who made $31 million that year, even though Axos only held $9.8 billion in assets compared to JPMorgan’s $2.62 trillion, or more than 267 times the size of the small bank. Garrabrants had previously worked at Goldman Sachs, McKinsey & Co., and IndyMac Bancorp Inc.

Garrabrants is also a large donor to Republican campaigns and causes, including donating to the California Republican Party, Donald Trump’s campaign committees, Ted Cruz, Devin Nunes, David Perdue’s Georgia Senate campaign, John James’ failed Senate race in Michigan, Mitt Romney’s presidential campaign in 2012, and San Diegan Diane Harkey’s failed congressional campaign in 2018. In all, Garrabrants donated more than $50,000 to Republicans between 2012 and 2021.

Axos has also funded loans for Kushner Companies, the firm owned by the family of Trump’s son-in-law, Jared Kushner. Axos’ first of three loans to Kushner came at the time he was serving as a senior White House advisor to Trump, and right after the SEC ended a two year investigation into the bank. The SEC investigation ended soon after Trump and Kushner entered the White House in 2017.

The investigation stemmed from complaints from an internal whistleblower, Matt Erhart, who reported suspicious activities including Garrarants depositing third-party checks into his own account, a deposit into Garrabrants’ brother’s personal account, and a “suspicious loan customer”.

Erhart was an internal auditor at Axos who is now suing for unlawful retaliation. In addition to the claims about Garrabrants and his brother, the lawsuit also claims Erhart uncovered evidence that several Axos customers were “criminals, even notorious criminals” who “put the bank at high risk for violating the Bank Secrecy Act’s Anti-Money Laundering Rules.”

Some of the customers included “very high level foreign officials from major oil-producing countries and war zones,” Erhart claims in his lawsuit.

The case is still pending.

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