Salon
“The end of Trump’s financial empire”: Legal experts say N.Y. fraud ruling could bring him down
Areeba Shah – September 27, 2023
Donald Trump committed massive fraud in New York for years by repeatedly misrepresenting his wealth by hundreds of millions of dollars while building his real estate empire, a state Supreme Court judge ruled on Tuesday afternoon.
This startling decision came in the civil case brought by New York Attorney General Letitia James, who has argued that Trump, along his sons Donald Jr. and Eric and the entire Trump Organization, had “grossly” inflated the value of more than a dozen assets by hundreds of millions in total, and then used those fake values to defraud banks and insurers in order to obtain more favorable deals and secure loans.
James argued that Trump routinely overstated his net worth to financial institutions by between $812 million to $2.2 billion, depending on the year and the specific applications he filed, and is seeking a penalty of about $250 million in a trial scheduled to begin Oct. 2.
New York Supreme Court Judge Arthur Engoron, who issued the summary judgment on Tuesday, ordered that some of Trump’s business licenses be rescinded as punishment and ordered that an outside “receiver” must be appointed to supervise the management of those Trump properties. The ultimate outcome could well be the end of Trump’s ability to do business in the state.
Trump and his adult sons are now “barred from doing business in New York forever” under Engoron’s ruling, said Catherine Ross, a constitutional law professor at George Washington University. “And given that New York was the home base of their business, the base of their fortune, of Trump’s reputation, his credibility, his integrity — it’s all been found lacking.” The former president “is not a good businessman,” she added. “He’s a conman.”
Tuesday’s ruling came summary judgment, a decision indicating that there is no need for a jury trial because the evidence is “so strong” for one side, Ross explained, that no reasonable jury could reach a different decision.
Engoron’s ruling amounts to saying “that the New York attorney general presented an ironclad, well-documented case backed up with lots of evidence,” Ross said. In fact, she added, Engoron had already “lambasted Trump’s lawyers for trying to resuscitate defense arguments and positions that he had already expressly rejected and for essentially misleading the court in a number of instances.”
This decision was viewed as a surprise by legal observers and is clearly a major victory for James, who has been investigating claims since March 2019 that Trump and other executives at his companies had manipulated the values of various properties in order to get better deals from banks and insurers. She filed a lawsuit in September 2022.
Though the trial will determine the exact magnitude of the financial penalty inflicted on the Trumps and their business entity, Engoron has already granted one of the biggest punishments James pursued: the cancellation of business certificates that allow some of Trump’s New York properties, including the Trump Organization itself, to operate in the state. That could have major repercussions for the Trump family business.
This decision “signals the end of Trump’s financial empire,” Bennett Gershman, a former New York prosecutor and law professor at Pace University, told Salon.
“The judge declared that Trump and his family are guilty of a massive, staggering fraud in overvaluing his properties,” Gershman said. “The only issue left to be decided is the penalty to be imposed on him.”
The ruling, if it survives the appeals that are sure to follow, would deprive Trump of his ability to exercise control over critical properties in the state, particularly with regard to strategic and financial decisions. This would effectively dismantle a large portion of the former president’s business empire, and could destabilize his financial standing.
“This ruling cripples [Trump’s] ability to engage in business activities anywhere, and completely terminates his ability to do business in New York state,” Gershman said, adding that Manhattan District Attorney Alvin Bragg could now decide to reopen “his criminal investigation of Trump for falsely stating the value of his properties.” Bragg had earlier declined to prosecute Trump on those charges.
The former president has “boasted” that his personal net worth in the billions, Gershman added, although many observers have concluded that is unlikely. “The truth is that his net worth is far, far less than that,” Gershman said. “The consequences of this ruling and the upcoming trial, while not making him a pauper, will significantly reduce his net worth.”
According to Engoron’s ruling, Trump, along with his company and key executives, engaged in a pattern of false statements about their financial status in annual statements. This resulted in more favorable loan conditions and reduced insurance expenses, among other tangible benefits, the judge found.
Furthermore, these deceptive tactics violated legal boundaries, Engoron said, despite the arguments by Trump’s lawyers that a disclaimer attached to his financial statements absolved him of liability.
“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,” Engoron wrote in his 35-page ruling. “That is a fantasy world, not the real world.”
The judge ordered that Trump and the other defendants provide the names of potential independent receivers “to manage the dissolution of the canceled LLCs,” meaning the various Trump business entities, within 10 days of the ruling.
No member of the Trump family will have control over the properties in question, and according to Ross it is “very likely” that many or most will be sold to compensate for the Trumps’ fraudulent gains, a process similar to the “liquidation” that occurs in bankruptcy proceedings.
One notable finding in Engoron’s decision was that Trump had continuously overvalued Mar-a-Lago, his private club in Palm Beach, inflating its value on one financial statement by as much as 2,300%, The Associated Press reported. Engoron also challenged Trump’s claim about the size of his apartment in Manhattan’s Trump Tower, which the former president on at least one occasion had asserted was 30,000 square feet, nearly three times its actual size. Trump had estimated the apartment’s market value at $327 million, a patently implausible number even in the New York City real estate market.
“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,” Engoron wrote.
Former federal prosecutor Neama Rahmani told Salon that while the former president is a “fraudster,” his supporters will continue to claim that “he’s a good businessman,” adding that Trump has “proven time and again that he can survive these sorts of stains on him and his company.”
As far as Trump’s business ventures go, Rahmani said: “He’s done doing business in New York. He’s just done.”
In their own motion for summary judgment, Trump’s legal team had asked the judge to dismiss the case, contending that there was no evidence that the public had been harmed by Trump’s actions. They also argued that many of the allegations in the lawsuit were barred by the statute of limitations.
Engoron noted that he had rejected those arguments earlier in the case, and fined Trump’s five defense lawyers $7,500 each as punishment for “engaging in repetitive, frivolous” arguments.
James’ lawsuit is just one of many legal challenges confronting Trump, who remains the frontrunner for the 2024 Republican presidential nomination. Over the past six months, the former president has faced four criminal indictments and is also facing a second defamation suit filed by writer E. Jean Carroll, who earlier won a civil verdict against Trump for sexually assaulting her in the 1990s.
“Maybe this will affect the public’s perception of him not only as an obstructer of justice, who undermined national security and sought to unlawfully undo a fair election, but also as a financial cheat,” Gershman said.
Ross added that Trump “seems to be leveraged up to his eyeballs,” facing “enormous debts” and rapidly mounting legal bills. And this decision creates further legal jeopardy for him, she added.
“If he were to consider taking the stand in one of the many pending cases against him, whether criminal or civil,” Ross said, “this finding of fraud could be used by the other side — by the prosecution, or the other party in a civil case — to impeach his testimony. Fraud goes to the essence of whether you tell the truth.”