New York judge rules against Trump, his sons, and Trump companies in fraud case

The US is no different from most countries where those with money can influence decision makers and the state apparatus with impunity. State prosecutors and attorneys general rarely go after the big fish

By Anil Madan

A New York Supreme Court judge made a momentous ruling last Tuesday. Now, let me pause to point out that despite its lofty-sounding title, the New York Supreme Court is actually the lowest trial court in New York State. That said, the decision by Judge Engoron is a masterpiece of concise and pointed legal reasoning and decision-making.

Essentially, the New York judge found Donald Trump and his two sons Donald, Jr., and Eric, liable for persistent fraud.

Judge Engoron ruled on a motion for summary judgment brought by New York State Attorney General Letitia James, who brought the case, that Trump, his two sons, Donald, Jr., and Eric, and the overarching company known as The Trump Organization, committed persistent business fraud over several years, by knowingly inflating the value of his many properties in seeking financing from banks with the intent of getting more favorable terms on loans, or fraudulently understated values when seeking lower taxation rates.

Since the judge’s ruling, I have been asked two questions by friends: (i) He’s been found guilty of fraud (or he’s been convicted of fraud), will he go to jail?, and (ii) can he still run for President? The answers are (i) No, he has not been found guilty or convicted, this was a civil case, and (ii) sadly, yes, even a fraudster can run for and be elected President if the American people are foolish enough to do that.

How did the New York Supreme Court judge get to his ruling? As mentioned above, this was a civil case. The burden of proof in a civil case is very different from the burden in a criminal case where the prosecutor must prove every element of the crime beyond a reasonable doubt.  In contrast, in a civil case, the standard is proof by a preponderance of the evidence, or, in simpler terms, the proponent of a proposition must prove that it is more likely than not, true.

If a case proceeds to trial, it is up to the jury or the judge to determine what the facts are, which witnesses to believe, and how much weight to give to the testimony of each witness. The case against Trump and his companies was based mostly on documents and there was, in general, no dispute about the facts stated in the documents. The rules of the court allow a party, either the plaintiff or defendant, in cases where the facts are undisputed, to ask the judge to apply the law and enter judgment. This is true even in jury cases, i.e., if the facts are undisputed, there is nothing for the jury to decide and since the judge determines what the law states, he/she can decide the outcome.

Repeated and persistent fraud

In this case, the Office of the Attorney General of the State of New York contended that Trump, his sons, and the various business entities operating under the overarching name “The Trump Organization” committed repeated and persistent fraud by preparing, certifying, and submitting to lenders (banks) and insurers false and misleading financial statements in violation of the New York Executive Law.

“Trump has railed against The Deep State and the notion that there is a conspiracy against him within the government writ large. His followers seem to lap up the notion that he propagates… Trump seems to embody the resentment of the disaffected masses..”

That law provides, in relevant part that when a person or entity engages in repeated fraudulent or illegal acts or persistent fraud or illegality in conducting business, the Attorney General may apply for an order prohibiting the continuance of such business activity or of any fraudulent or illegal acts. In addition, the Attorney General is authorized to seek an order directing restitution and damages and, in an appropriate case, cancelling any certificate authorizing the business to operate in the state of New York.

The word “fraud” or “fraudulent” as used in the statute is extremely broad and includes any device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions. The term “persistent fraud” or “illegality” as used in the statute includes continuance or carrying on of any fraudulent or illegal act or conduct. The term “repeated” as used includes repetition of any separate and distinct fraudulent or illegal act or conduct which affects more than one person.

As might be expected, the Attorney General is authorized to investigate and to issue subpoenas to obtain documents and testimony. In this case, the Attorney General did obtain documents not only from The Trump Organization, but from banks and insurers.

The judge ruled that the undisputed facts showed that Trump committed years of business fraud by intentionally and knowingly inflating the value of properties to banks so that he could receive loans with more favorable terms. His sons, Donald Jr. and Eric, as well as various companies operating under the name of the Trump Organization were also found liable. 

Trump’s fantasy world

Some examples included Trump’s valuation of his Mar-a-Lago property between 2011 to 2021 at $347 million to $739 million based on the premise that it was unrestricted property and could be developed for residential use. The judge noted that Trump’s assessment was at least 2,300 percent above a Palm Beach County Assessor’s appraisal from the same period, which estimated Mar-a-Lago’s value to be between $18 million and $27.6 million. The property is listed as a social club and cannot be sold as a single-family estate.

The judge ruled that Trump’s inflated assessment of his properties, including golf courses and his Trump Tower apartment in Manhattan, came from a “fantasy world, not a real world.” That apartment has approximately 11,000 square feet but Trump misrepresented it as containing 30,000 square feet. A discrepancy of this magnitude by a real estate developer “can only be considered fraud” wrote the judge.

The Attorney General had asked the court permanently to ban the Trumps and their companies from operating their businesses in the state. Additionally, the Attorney General asked the court to levy a $250 million fine on the Trumps and the New York law provides for disgorgement of profits.

In his ruling, the judge ordered that the business certificates of all the Trump companies operating in New York be rescinded and that independent receivers be appointed to manage them. Trump effectively loses control over the companies and the well-known properties that bear his name.

Trump has promised to appeal. There are two problems with the appeal. First, Trump’s attorneys never claimed trial by a jury so it is impossible to argue that the judge should have let a jury determine the facts. Second, the Trumps and their companies did not contest the underlying facts, merely how the facts should be interpreted and that valuations are subjective not objective, so fraud cannot be found. The judge rejected these arguments. In fact, the judge also ordered a penalty of $7,500 against each of Trump’s attorneys for making and repeating frivolous legal arguments that had previously been rejected by the courts.

The remainder of the trial involves the specific financial penalty to be imposed and other ancillary matters. These will be determined by a trial before the same judge that is set to commence on October 2nd.

The Deep State’s conspiracy

So how did Trump keep on getting away with this kind of conduct over many years? At the most fundamental level, it is about money. The US is no different from most countries where those with money can influence decision makers and the state apparatus with impunity. State prosecutors and attorneys general rarely go after the big fish.

In the economic context, Trump has seemed untouchable within the Republican party. Trump’s massive support among his base of voters is daunting. Those who have condemned Trump’s behavior have often lost their political careers. Former Senator Jeff Flake, former Congressional representatives Liz Cheney and Adam Kinzinger are examples. Even Senator Mitt Romney has decided not to seek reelection. Bucking Trump and his base is often just not worth it. Trump’s acolytes and sycophants abound. From Speaker McCarthy who initially condemned Trump’s actions on January 6, 2020, to Representatives Jim Jordan, Marjorie Taylor Greene, and Matt Gaetz, they feast off the notoriety that embracing Trump gives them.

True, some of the sycophants and those sucked into Trump’s orbit have paid the price. Former New York Mayor Rudy Giuliani and Chief of Staff Mark Meadows are among those indicted in criminal cases.

Trump has railed against The Deep State and the notion that there is a conspiracy against him within the government writ large. His followers seem to lap up the notion that he propagates. He recently posted on his social media outlet: “If they can do this to me, they can do this to YOU!”

Trump seems to embody the resentment of the disaffected masses.

On the other hand, as I have written, the reach of the law is long and deep, and Trump will ultimately come a cropper. The New York judge’s ruling is just one step along the way. As a result of the judgment, unless it is reversed on appeal, which seems highly unlikely, he will lose control of his properties which will most likely be liquidated.

Will the MAGA crowd love a bankrupt baron as much? We shall see.


Mauritius Times ePaper Friday 29 September 2023

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