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By Tierney Sneed, CNN

Mazars USA, the accounting firm former President Donald Trump and his companies have used for years, cut ties with him in a stunning fashion, saying it could no longer vouch for the financial statements it complied with. over the past decade.

The Feb. 9 letter was leaked Monday amid litigation surrounding a civil investigation into Trump and his companies, where New York Attorney General Letitia James alleged Trump’s company made inaccuracies. and omissions in the financial statements that were used in its dealings with banks. The Trump Organization denies these allegations and is currently seeking to freeze the investigation.

The accounting firm is now distancing itself from Trump after standing by him through years of controversy and allegations over its financial practices.

“For an accountant to withdraw their report and alert the client that the financial statements are unreliable is a pretty extreme action,” said Terri Herron, an accounting professor at the University of Montana. “Our standards require us to do this as CPAs. But that doesn’t happen very often. »

Here’s what to do with the move:

What did Mazars just do?

Mazars — via the letter to Trump Corporate General Counsel Alan Garten — advised the Trump Organization that the financial records the company compiled on behalf of the former president should no longer be relied upon. The letter was made public Monday in a court submission by James, who is investigating Trump and his companies to determine whether insurers, lenders or others were misled by their financial statements.

Mazars’ letter also confirmed previous indications that the company was ending its relationship with Trump and his companies, telling Garten that the company was “unable to provide new working product to the Trump organization”.

“Partly as a result of our decision on the financial statements, as well as the totality of the circumstances,” Mazars said, he had “reached the point where there is a conflict of interest with the Trump Organization.”

The company said it won’t even finish preparing tax returns due Tuesday for Trump and his wife Melania Trump. The letter said Mazars had been seeking “several months” of information about an apartment linked to Matt Calamari Jr., the Trump Organization’s security chief who cooperated in the criminal investigation of Trump’s businesses.

“Once this information is provided to your new tax preparers, the returns can be completed,” the letter says.

Why is it important?

The letter has implications both for investigations into Trump’s financial dealings and for the former president’s future business plans.

James disclosed the letter as part of his request for a court order compelling Trump to comply with his subpoenas in his civil investigation. Trump sought to quash the subpoenas – which included requests for testimony from two of his children – claiming James was unconstitutional seeking to ‘bypass the entire grand jury process’ by issuing the subpoenas in the proceedings civil while a separate criminal investigation by the Manhattan prosecutor plays out.

James said in court papers on Monday that Mazars’ new claims that he doubted the reliability of Trump’s financial records vindicated his efforts to investigate the statements.

Last summer, the Manhattan District Attorney’s Office filed criminal charges alleging the Trump Organization and its chief financial officer Allen Weisselberg were involved in a 15-year-old tax evasion. Prosecutors have been investigating the Trump Organization for years, and last fall focused on the accuracy of financial statements. They interviewed several former Deutsche Bank employees involved with Trump about the loans, CNN reported.

Weisselberg has pleaded not guilty and a trial is scheduled for this summer.

Who was involved?

Donald Bender, the senior Mazars partner who served as Trump’s accountant for years, is cooperating with the district attorney’s investigation and appeared before the New York grand jury.

“Any time you’re in an adversarial position with your client, that’s really a conflict of interest,” Herron said. “If he is testifying against the Trump Organization or working with the prosecution, surely that would be a conflict of interest that you would want to cut ties with.”

Calamari Jr. — the Trump Organization’s security chief mentioned in Mazars’ new letter — was granted immunity for testimony he has already given in the criminal investigation. His attorney Nick Gravante told CNN on Tuesday that it was “unquestionably clear that his apartment has always been treated correctly for tax purposes.”

Calamari Jr.’s father, Matthew Calamari Sr., is the chief operating officer of the Trump Organization and last year was told the Manhattan District Attorney had no plans at the time. to file a complaint against him.

Business issues

Regardless of the outcome of civil and criminal investigations, Mazars’ new claims could cause headaches for Trump’s business prospects.

The company has warned Trump that other parties who have relied on financial records compiled by Mazars should be told that these financial statements are unreliable.

“It’s about as calamitous a thing as you can possibly imagine to happen to any business – other than being indicted or going bankrupt,” George Conway, a conservative lawyer and outspoken Trump critic, told Monday evening. CNN’s “AC360”. “And that could lead to bankruptcy.

Why is Mazars doing this now?

The letter pointed to court documents submitted last month by James – as well as Mazars’ own investigation and “information received from internal and external sources” – to explain why the company was no longer confident in the reliability of the documents than she was producing for Trump.

In a statement on Tuesday, the firm did not provide further details on why it is now distancing itself from Trump.

“Due to the professional obligations of our sector, Mazars cannot discuss any client current or former, the state of our relationships, or the nature of our services in a public forum without client consent or as required by law,” the firm said. “We remain committed to fulfilling all of our professional and legal obligations.”

Last month, James made a litany of allegations against Trump.

James said his office identified numerous “misleading statements and omissions” in tax returns and financial statements used to obtain loans. She exposed several specific alleged inaccuracies, including about the size of Trump’s Trump Tower penthouse; the supposed “outside professionals” used to value Trump assets; and alleged misrepresentations about the process by which Trump or his associates reached the assessments. A spokesperson for the Trump Organization said at the time of filing that James’ allegations were “without merit and will be vigorously defended.”

Why does Mazars doubt the reliability of his work?

Mazars has sent mixed messages about the accuracy of its Trump financial records. The company told the Trump Organization that “based on the totality of the circumstances, we believe our advice to no longer rely on these financial statements is appropriate.” But Mazars noted that he did not conclude that “as a whole” the documents “contain material discrepancies.”

Mazars also stressed that the work carried out by the firm was carried out “in accordance with professional standards”.

The company also revealed that it believes Trump may have overpaid his taxes in past tax payments.

A spokesperson for the Trump Organization said in a statement Monday that the company was “disappointed that Mazars chose to separate,” while touting the company’s indication that it had not concluded there was material discrepancies in the statements.

“This confirmation effectively renders the DA and AG investigations moot,” the Trump Organization said.

The court presiding over Trump’s request to quash James’ subpoenas will hold a hearing on Thursday.

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CNN’s Kara Scannell, Jessica Schneider and Paula Reid contributed to this report.