Court directs ex-president Donald Trump and his children Ivanka and Donald Jr to testify over "copious evidence of possible financial fraud" allegations.

Attorney General Letitia James says Trump's company may have inflated real estate values to obtain bank loans and reduced them to lower tax bills.
Attorney General Letitia James says Trump's company may have inflated real estate values to obtain bank loans and reduced them to lower tax bills. (AP)

A New York judge has ruled that former US president Donald Trump and two of his adult children must answer questions under oath within 21 days in the state attorney general's civil probe into their family company.

Justice Arthur Engoron of the New York state court in Manhattan ruled on Thursday in favour of Attorney General Letitia James in directing Trump, his son Donald Trump Jr and his daughter Ivanka Trump to testify.

Engoron said James had "the clear right" to issue her subpoenas and question the Trumps after having uncovered "copious evidence of possible financial fraud."

Failing to issue subpoenas "would have been a blatant dereliction of duty (and would have broken an oft-repeated campaign promise)," Engoron wrote.

"Today, justice prevailed," James said in a statement. 

"No one will be permitted to stand in the way of the pursuit of justice, no matter how powerful they are. No one is above the law."

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'Stop this circus'

Lawyers for Donald Trump did not immediately respond to requests for comment. Alan Futerfas, a lawyer for Donald Trump Jr and Ivanka Trump, declined to comment.

The decision followed a two-hour hearing in which the Trump lawyers accused James of doing an end-run around their clients' constitutional rights by seeking testimony she could then use against them in a parallel criminal investigation.

Alina Habba, one of Donald Trump's lawyers, accused James of "selective prosecution and prosecutorial misconduct that this country has never seen," citing what she called the Democratic attorney general's "vile disdain" for Trump, a Republican.

"If he was not who he is, she would not be doing this," Habba said. 

"This court can help stop this circus."

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Allegations of inaccurate valuations

Last month, James said her nearly three-year investigation into the Trump Organization had uncovered significant evidence of possible fraud. She described what she called misleading statements about the values of the "Trump Brand" and six Trump properties, saying the company may have inflated real estate values to obtain bank loans and reduced them to lower tax bills.

Engoron also declined a request to put James' subpoenas on hold while the criminal case, led by Manhattan District Attorney Alvin Bragg, is pending. James joined that probe last May.

The criminal investigation, begun by Bragg's predecessor Cyrus Vance, resulted last July in tax fraud charges against the Trump Organization and its longtime chief financial officer Allen Weisselberg. 

Both pleaded not guilty.

The hearing followed last week's decision by Trump's longtime accounting firm Mazars USA to cut ties with him and the Trump Organization, saying it could no longer stand behind a decade of financial statements.

Lawyers for Donald Trump have said he did not know enough to respond to allegations of inaccurate valuations, though Trump detailed some possible discrepancies in a five-page statement on Tuesday.

The Trumps have not been accused of criminal wrongdoing.

Washington DC's attorney general is separately suing the Trump Organization and Trump's inaugural committee over the alleged misuse of $1.1 million of charitable funds. 

A September 26 trial date was set on Thursday.

Source: Reuters