Trump Fraud Trial Penalty Will Exceed $450
Million
The ruling in Donald J. Trump’s civil fraud case could
cost him all his available cash. The judge said that the former president’s
“complete lack of contrition” bordered on pathological.
By Jonah E.
Bromwich and Ben Protess
Feb. 16,
2024
https://www.nytimes.com/2024/02/16/nyregion/trump-civil-fraud-trial-ruling.html
A New York
judge on Friday handed Donald J. Trump a crushing defeat in his civil fraud
case, finding the former president liable for conspiring to manipulate his net
worth and ordering him to pay a penalty of nearly $355 million plus interest
that could wipe out his entire stockpile of cash.
The
decision by Justice Arthur F. Engoron caps a chaotic, yearslong case in which
New York’s attorney general put Mr. Trump’s fantastical claims of wealth on
trial. With no jury, the power was in Justice Engoron’s hands alone, and he
came down hard: The judge delivered a sweeping array of punishments that
threatens the former president’s business empire as he simultaneously contends
with four criminal prosecutions and seeks to regain the White House.
Justice
Engoron barred Mr. Trump for three years from serving in top roles at any New
York company, including portions of his own Trump Organization. He also imposed
a two-year ban on the former president’s adult sons and ordered that they pay
more than $4 million each. One of them, Eric Trump, is the company’s de facto
chief executive, and the ruling throws into doubt whether any member of the
family can run the business in the near term.
The judge
also ordered that they pay substantial interest, pushing the penalty for the
former president to $450 million, according to the attorney general, Letitia
James.
In his
unconventional style, Justice Engoron criticized Mr. Trump and the other
defendants for refusing to admit wrongdoing for years. “Their complete lack of
contrition and remorse borders on pathological,” he said.
He noted
that Mr. Trump had not committed violent crimes and also conceded that “Donald
Trump is not Bernard Madoff.” Still, he wrote, “defendants are incapable of
admitting the error of their ways.”
The Civil Fraud Ruling on Donald Trump, Annotated
Former President Donald J. Trump was penalized $355
million plus interest and banned for three years from serving in any top roles
at a New York company, including his own, in a ruling on Friday by Justice
Arthur F. Engoron.
Mr. Trump
will appeal the financial penalty but will have to either come up with the
money or secure a bond within 30 days. The ruling will not render him bankrupt,
because most of his wealth is in real estate, which altogether is worth far
more than the penalty.
Mr. Trump
will also ask an appeals court to halt the restrictions on him and his sons
from running the company while it considers the case. In a news conference from
his home in Mar-a-Lago on Friday evening, he attacked Ms. James and Justice
Engoron, calling them both “corrupt.”
Alina
Habba, one of Mr. Trump’s lawyers, described the ruling in her own statement as
“a manifest injustice — plain and simple.” She added that “given the grave
stakes, we trust that the Appellate Division will overturn this egregious
verdict.”
But there
might be little Mr. Trump can do to thwart one of the judge’s most
consequential punishments: extending for three years the appointment of an
independent monitor who is the court’s eyes and ears at the Trump Organization.
Justice Engoron also strengthened the monitor’s authority to watch for fraud
and second-guess transactions that look suspicious.
Mr. Trump’s
lawyers have railed against the monitor, Barbara Jones, saying that her work
had already cost the business more than $2.5 million; the decision to extend
her oversight of the privately held company could enrage the Trumps, who see
her presence as an irritant and an insult.
Ms. James
had sought an even harsher penalty, asking for Mr. Trump to be permanently
barred from New York’s business world. In the 2022 lawsuit that precipitated
the trial, she accused Mr. Trump of inflating his net worth to obtain favorable
treatment from banks and other lenders, attacking the foundation of his public
persona as a billionaire businessman.
Even though
the lenders made money from Mr. Trump, they were the purported victims in the
case, with Ms. James arguing that without his fraud, they could have made even
more.
The
financial penalty reflects those lost profits, with nearly half of the $355
million — $168 million — representing the interest that Mr. Trump saved, and
the remaining sum representing his profit on the recent sale of two properties,
money that the judge has now clawed back from Mr. Trump and corporate entities
he owns.
Before the
trial began, Justice Engoron ruled that the former president had used his
annual financial statements to defraud the lenders, siding with the attorney
general on her case’s central claim. The judge’s Friday ruling ratified almost
all of the other accusations Ms. James had leveled against Mr. Trump, finding
that the former president had conspired with his top executives to violate
several state laws.
The judge’s
decision for now grants Ms. James, a Democrat, a career-defining victory. She
campaigned for office promising to bring Mr. Trump to justice, and sat calmly
in the courtroom as the former president attacked her, calling her a corrupt
politician motivated solely by self-interest.
“This long
running fraud was intentional, egregious, illegal,” Ms. James said during a
Friday evening news conference, adding that “there cannot be different rules
for different people in this country, and former presidents are no exception.”
Video
TRANSCRIPT
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New York Attorney General Speaks on Trump Fraud Case
Decision
“Today
we are holding Donald Trump accountable,” said the attorney general, Letitia
James, after a New York judge found Donald J. Trump’s claims of wealth
fraudulent.
No
matter how rich, powerful or politically connected you are, everyone must play
by the same rules. We have a responsibility to protect the integrity of the
marketplace. And for years, Donald Trump engaged in deceptive business
practices and tremendous fraud. Donald Trump falsely, knowingly, inflated his
net worth by billions of dollars to unjustly enrich himself, his family, and to
cheat the system. After 11 weeks of trial, we showed the staggering extent of
his fraud and exactly how Donald Trump and the other defendants deceived banks,
insurance companies and other financial institutions for their own personal
gain. We prove just how much Donald Trump, his family and his company unjustly
benefited from his fraud. White-collar financial fraud is not a victimless
crime. When the powerful break the law and take more than their fair share,
there are fewer resources available for working people, small businesses and
families. Today we are holding Donald Trump accountable.
Friday’s
ruling comes as Manhattan prosecutors are set to try Mr. Trump on criminal
charges late next month. He is also contending with 57 more felony counts
across three other criminal cases.
But none of
his legal troubles seem to have anguished Mr. Trump quite like the fraud case.
During the trial, he protested its premise, pleading, “This has been a
persecution of somebody that’s done a good job in New York.”
Mr. Trump’s
lawyers argued that the fraud did not have a victim in the traditional sense,
daring the attorney general to find someone who was harmed. And in a statement
on Friday, a Trump Organization spokeswoman noted that the company had “never
missed any loan payment or been in default on any loan” and that the lenders
“performed extensive due diligence prior to entering into these transactions.”
At trial,
Mr. Trump’s lawyers called as witnesses the president’s former bankers, who
testified that they had been delighted to have Mr. Trump as a client.
Eric Trump
and his brother Donald Trump Jr. also testified, but their efforts to distance
themselves from their father’s financial statements fell flat with the judge.
Justice Engoron’s decision to bar them from running any New York business for
two years — and Mr. Trump for three — will likely strike a nerve with the Trump
family.
Before the
trial, the fallout from the case seemed to threaten the Trump Organization’s
very existence. When Justice Engoron first ruled that Mr. Trump had committed
fraud, he ordered the dissolution of much of the former president’s New York
empire.
But legal
experts had questioned the judge’s ability to do that, and in his ruling on
Friday, Justice Engoron pulled back. Instead, the judge said any “restructuring
and potential dissolution” would be up to Ms. Jones, the independent monitor.
The judge
also granted Ms. Jones new authority as part of an “enhanced monitorship,” and
asked her to recommend an independent compliance director who will oversee the
company’s financial reporting from within its ranks.
The
monitorship and other penalties, including a three-year ban on Mr. Trump and
his company seeking loans from banks registered in New York, could hamstring
the company as it seeks to compete in the state’s crowded real estate market.
However,
nothing will hurt quite as much as the financial penalty. If upheld on appeal,
it could erase the cushion of liquidity — cash, stocks and bonds — that Mr.
Trump built in his post-presidential life.
Mr. Trump
claimed under oath last year that he was sitting on more than $400 million in
cash, but between Justice Engoron’s $355 million punishment, the interest Mr.
Trump owes and the $83.3 million payout to Ms. Carroll, that might all be gone.
If so, Mr. Trump might have to sell one of his properties or another asset to
cover the payouts.
The
symbolism of the punishments cannot be overlooked, either. Mr. Trump is
synonymous with the company he ran for decades, and by severing him from its
operations, the judge has written an embarrassing epilogue to the former
president’s story of his career as a New York mogul.
For now,
Mr. Trump has spun his legal misfortunes into what he sees as political gold.
He has used the cases to falsely portray himself as a victim of a Democratic
cabal led by President Biden, and he has campaigned at every courthouse he has
visited.
In Justice
Engoron’s courtroom, Mr. Trump delivered a rally-made rant from the witness
stand, marking the climax of a monthslong proceeding that was alternately
stultifying and scintillating. The former president attacked one of Ms. James’s
lawyers, saying: “You and about every other Democrat, district attorney, A.G.
and U.S. attorney were coming after me from 15 different sides. All Democrats,
all Trump haters.”
He did not
spare Ms. James herself, or the judge, calling the attorney general a
“political hack” and Justice Engoron an “extremely hostile judge.”
Mr. Trump
later delivered his own closing statement, calling Ms. James’s fraud accusation
a “fraud on me” and saying that the attorney general was the one who “should
pay me.”
He
generated drama even when not in the spotlight, rolling his eyes at the defense
table and muttering to his lawyers. He was particularly enraged by the
testimony of his former fixer, Michael D. Cohen, who linked Mr. Trump directly
to the fraud scheme.
Mr. Trump’s
lawyers succeeded in rattling Mr. Cohen, and asked, based on apparent
contradictions in his testimony, that Justice Engoron throw out the case. When
the judge declined, Mr. Trump abruptly stood up and stormed out of the
courtroom.
The judge
largely tolerated Mr. Trump’s behavior, but early on, he barred the former
president from attacking his staff members, most prominently his law clerk, who
sat near the judge throughout the trial so they could confer. Mr. Trump twice
violated that order, prompting $15,000 in fines from the judge.
Courtroom
theatrics notwithstanding, the evidence presented was often tedious, consisting
of years-old emails and spreadsheets. Through that documentary evidence, Ms.
James’s lawyers showed that Mr. Trump’s company had ignored appraisals and
manipulated numbers to inflate the value of properties such as golf clubs and
office buildings, sometimes to absurd heights.
The most
blatant exaggeration was the listed size of Mr. Trump’s triplex apartment in
Trump Tower on Fifth Avenue. For years, the former president had valued it as
if it were 30,000 square feet, when it was actually 10,996.
In his
ruling, Justice Engoron blasted Mr. Trump and the other defendants, saying that
misstating the apartment’s size was the only error to which they would admit.
Justice
Engoron wrote that he was not looking to “judge morality” — only to find facts
and apply the law.
“The court
intends to protect the integrity of the financial marketplace and, thus, the
public as a whole,” he wrote.
Justice
Engoron added that Mr. Trump’s refusal to admit error left him with no choice
but to conclude that the former president would continue to commit fraud unless
he was stopped.
William K.
Rashbaum, Claire Fahy and Maggie Haberman contributed reporting.
Jonah E.
Bromwich covers criminal justice in New York, with a focus on the Manhattan
district attorney's office, state criminal courts in Manhattan and New York
City's jails. More about Jonah E. Bromwich
Ben Protess
is an investigative reporter at The Times, writing about public corruption. He
has been covering the various criminal investigations into former President
Trump and his allies. More about Ben Protess
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