On March 20, New York Attorney General Letitia James filed a motion to compel (aka “gonna need the court to make someone do something thx”) Whitley Penn to hand over documents and communications relating to her civil fraud case against their client Donald Trump, three of his adult children, and the Trump Organization. Whitley Penn did not oblige the request, citing accountant-client privilege.
As you may recall, Trump Organization used to be Mazars USA’s problem until Mazars cut ties and disavowed ten years of statements of financial condition. According to the AG’s filing, the Trump Organization “settled” on Whitley Penn after the Mazars breakup so now it’s their problem.
Let’s see what her beef is.
After a frantic search, the Trump Organization settled on the firm of Whitley Penn, LLP (“Whitley Penn”) based out of Fort Worth, Texas to perform audit services, compilation services and tax preparation services, including the preparation of an SOFC for the year 2021. That SOFC was then submitted to lenders including Deutsche Bank to satisfy covenants on hundreds of millions of dollars of loans. The work was performed in New York pursuant to a Nondisclosure Agreement drafted under New York law, on companies managed out of an office at 725 Fifth Avenue in Manhattan, and included the preparation of New York State tax returns.
As a result, on February 14, 2023, The New York State Office of the Attorney General (“OAG”) served a Subpoena Duces Tecum and Ad Testificandum (the “Subpoena”) on nonparty Whitley Penn, LLP (“Whitley Penn”) seeking (1) documents and communications that are material and relevant to the instant action, and (2) deposition of a Whitley Penn partner who was involved in transactions and occurrences relevant to this litigation.
Said James, Whitley Penn has not produced relevant documents and has asserted an “inapplicable” Texas privilege (Accountant-client privilege, Texas Occupations Code § 901.457). This doesn’t apply, she says, because Whitley Penn has substantial contacts in New York, is licensed to do business in New York, is licensed as a CPA firm in New York, and is actively engaged in audits, compilations, financial statements and New York State and City tax filings for almost everyone listed as a defendant in her civil case, as well as dozens of other Trump Organization entities.
Under CPLR [Civil Practice Law & Rules], the Court can order compliance with a subpoena if the Court has jurisdiction over the recipient and the disclosure sought is material and necessary to the action. Here, there is no dispute as to the relevance of the material sought: Neither Defendants nor Whitley Penn has raised such an objection, and, in any event, their time to do so has passed. The only objections Whitley Penn has raised are service and a purported Texas privilege that New York courts have held inapplicable in New York courts. Whitley Penn’s objections are meritless, and the Court should order compliance.
The filing goes on to elaborate in further repetitive detail about why the court can compel Whitley Penn to give up the documents. Among the reasons given: “the accountant-client privilege Whitley Penn has raised is not recognized in New York, was waived when Defendants produced over 5,600 communications between the Trump Organization and Whitley Penn, and may be obviated by an order of this Court in any event.” That and “one of Whitley Penn’s key partners on The Trump Organization engagements personally applied for and received a CPA license from NYSED [New York State Education Department].”
SO. The firm is licensed to operate in New York, the lead engagement partner has a New York CPA license, and Trump Organization is based in New York therefore the AG has every right to get those documents. Got it.
Full filing for your reading pleasure:
Somewhere in South Carolina right now Rick Davis is breathing one hell of a sigh of relief that this isn’t his problem.