A Civil Case May Have Just Cost Trump His Business
A Civil Case May Have Just Cost Trump His Business
Five things you should know about the fraud judgment and what comes next.
ALTHOUGH ALL EYES ARE ON the four criminal indictments against Donald Trump, Trump himself is undoubtedly seething over what just happened in the civil case brought against him and his companies by New York Attorney General Letitia James. On Tuesday, state court Judge Arthur F. Engoron entered a judgment against Trump on one of seven fraud-related counts. This one involves exorbitantly inflated or deflated property valuations made in statements of financial condition (SFCs), which reported his businesses’ assets, liabilities, and the value that would be returned to investors if they liquidated in a given year, for purposes of securing financing and insurance between 2011 and 2021.
In response to the ruling, Michael Cohen, who first flagged the issue in his testimony before Congress, told CNN’s Kaitlan Collins: “If you really want to get to Donald, the way to do it is through his bankbook. That’s what really gets to him.”
Judge Engoron did. Big time.
There’s a lot to unpack here, and it can easily become dizzying. Here are five key things to know.
1. The decision could mean the end of the Trump business empire—and could possibly even spell personal bankruptcy for the former president.
The judge found that Trump and the other defendants engaged in illegal fraud, and ordered the cancellation of any certificates filed under New York’s General Business Law. He also directed that the businesses be put in receivership “to manage the dissolution of the canceled LLCs.” Absent an emergency intervention by or reversal by a New York state appellate court, the following businesses will cease to exist by virtue of this decision:
the DJT Revocable Trust;
the Trump Organization, Inc. (which, as I wrote for The Bulwark a year ago after the 222-page lawsuit was filed, is “the real estate development company that owns and operates buildings, hotels, golf clubs, restaurants, and casinos”);
the Trump Organization LLC;
DJT Holdings LLC;
DJT Holdings Managing Member LLC;
Trump Endeavor 12 LLC;
401 North Wabash Venture LLC;
Trump Old Post Office LLC;
40 Wall Street LLC;
Seven Springs LLC; and
“any other entity controlled or beneficially owned under the laws of New York” by Trump, his two eldest sons Donald Jr. and Eric, Allen Weisselberg (formerly CFO of the Trump Organization), or Jeffrey McConney (Weisselberg’s right hand). (Ivanka Trump was dismissed from the case because her conduct fell outside the temporal scope of an agreement regarding the statute of limitations that James made early in the case.)
The remaining claims will go to trial—as will the question of how much money the defendants must pay in damages for this first charge. James is requesting $250,000,000. Cohen estimates that the figure will be much higher, exceeding $600,000,000. He added that Trump “does not have that liquid cash available in order to pay that off.” (Cohen, Trump’s former lawyer and personal fixer, would presumably know.)
2. Because this single charge requires no proof regarding Trump’s thinking, he could not raise any defenses relating to his state of mind.
The first count alleges that Trump and the other defendants engaged in fraud under New York’s Executive Law § 63(12), which required James to prove two things: (1) that the SFCs were false and misleading, and (2) that the defendants repeatedly or persistently used them to transact business. This claim did not require any proof of Trump’s state of mind—no knowledge, no intent to defraud, no wantonness, no conscious disregard for the truth, no malice, etc. Trump could not claim ignorance or point fingers at underlings. The simple question was: Did the defendants repeatedly use false and misleading SFCs to conduct business? As the judge wrote, it was “essentially a ‘documents case.’”
Trump’s lawyers took a stab at a slew of defenses nonetheless. Judge Engoron’s paraphrase of those defenses was withering:
Defendants respond that: the documents do not say what they say; that there is no such thing as “objective” value; and that, essentially, the Court should not believe its own eyes.
Engoron went on to quote from Trump’s own deposition testimony: “He claims that if the values of the property have gone up in the years since the SFCs were submitted, then the numbers were not inflated at that time,” and “he also seems to imply that the numbers cannot be inflated because he could find a ‘buyer from Saudi Arabia’ to pay any price he suggests.’” The judge called Trump’s “attempts to articulate [defenses] in his sworn deposition . . . wholly without basis in law or fact.”
3. The court resoundingly rejected Trump’s argument that the banks, investors, and insurance companies to whom he lied still made money, so he couldn’t have broken the law.
Trump made a Who cares? argument, which the judge framed this way: “Defendants’ stance is, practically speaking, that they may submit false SFCs so long as the recipients know, from their own due diligence, that the information was false.” Moreover, they claimed “that overvaluations of two hundred million dollars are immaterial,” because the banks made millions in interest.
The judge’s devastating response: “As has been explained to defendants many times, in many legal proceedings, and in painstaking detail, ‘where, as here, there is a claim based on fraudulent activity [under Executive Law 63(12)], disgorgement may be available as an equitable remedy, notwithstanding the absence of loss to individuals or independent claims for restitution.’” (Emphasis in original.)
The reason New York’s legislature passed this law is to “guarantee[] a marketplace that adheres to standards of fairness.” That doesn’t hinge on whether wealthy bankers only make some money instead of a whole lot of money.
4. Because the numbers are so staggering and the evidence solid, the chances that Trump would score a major win on appeal are slim.
Here are but a few examples of the discrepancies that met the government’s burden of proof, according to Judge Engoron:
Trump’s apartment in Trump Tower in New York is 10,996 square feet, but between 2012 and 2016 “Donald Trump submitted SFCs falsely claiming that [it] was 30,000 square feet.” The judge noted that, although “defendants absurdly suggest that ‘the calculation of square footage is a subjective process. . .’”—an excuse no third-grade math teacher would accept—“a discrepancy of this order of magnitude, by a real estate developer sizing up his own living space of decades, can only be considered fraud.”
Although the highest overall sale in all of New York City for an apartment in 2012 was $88 million for a Central Park West penthouse, Trump valued his apartment “at a staggering $180,000,000-$327,000,000 for the years 2012-2016.”
“Donald Trump’s SFCs for 2011-2021 value Mar-a-Lago at between $426,529,614 and $612,110,496, an overvaluation of at least 2,300%, compared to the assessor’s appraisal.” (Emphasis in original.)
This kind of evidence leaves no wiggle room. The appeals court likely will see the obvious, too. Trump should be worried.
5. Trump’s lawyers engaged in egregious and unethical misconduct, for which the judge ordered them to pay monetary sanctions.
Engoron sanctioned Trump’s lawyers to the tune of $7,500 apiece for signing the papers containing his arguments in opposition to James’s motion. (She filed what’s called a motion for summary judgment, which is essentially a resolution of the case on the papers without having to go to trial.) His counsel “glaringly misrepresent[ed] the requirements of” the applicable statute and numerous cases cited in Trump’s briefs. They also recycled arguments “in flagrant disregard of prior orders of this Court and [the appellate court].” (Emphasis in original.) In other words, they lost, appealed, lost on appeal, and came back to the same judge with the same losing arguments. What’s more, wrote Engoron:
Exacerbating defendants’ obstreperous conduct is their continued reliance on bogus arguments, in papers and oral argument. In defendants’ world: rent regulated apartments are worth the same as unregulated apartments; restricted land is worth the same as unrestricted land; restrictions can evaporate into thin air; a disclaimer by one party casting responsibility on another party exonerates the other party’s lies; the Attorney General of the State of New York does not have capacity to sue or standing to sue (never mind all those cases where the Attorney General has sued successfully) under a statute expressly designed to provide that right; all illegal acts are untimely if they stem from one untimely act; and square footage [is] subjective.
That is a fantasy world, not the real world.
Making matters far worse for Trump is that this case is being decided in its entirety by the judge, not a jury—and a judge who clearly has Trump’s number. The reason for this is, apparently, that his counsel failed to make a request on time for a jury trial, thereby waiving the jury trial right. Trump complained about the ruling on his social media, writing that “a Deranged, Trump Hating Judge” is “denying me everything, No Trial, No Jury”—apparently unaware that his own lawyers might be partly to blame. All he would have needed is two MAGA jurors who slipped through the cracks of jury selection to thwart the government’s case altogether.
Trump is running out of lawyers, and seems already to have run out of good ones. Or the ones who may have once been considered good have now tarnished their reputations, perhaps permanently. (One of the sanctioned lawyers is Christopher Kise, who is also on Trump’s defense team in the Mar-a-Lago criminal case brought by Special Counsel Jack Smith.)
What is utterly baffling is that people keep throwing themselves on a pyre for the sake of a man who clearly has nothing but contempt for the rule of law—and in all likelihood, for them, too, one day.
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