Opinion Does the New York fraud case against Trump go too far?

Ruth Marcus

As Donald Trump’s civil fraud trial begins, it’s important to keep three things in mind:

First, Trump is a fabulist and fraudster, a man who, the evidence shows, flagrantly and repeatedly inflated the value of his assets to finance his business empire.

Second, New York law provides extraordinarily broad powers to go after such misconduct. Under the law, there’s no requirement to prove that Trump’s actions harmed anyone — in this case, the banks that lent him money. There’s no requirement to prove that the fraud was intentional. And the judge in the case has wide discretion to impose the kind of draconian remedy that he did, revoking Trump’s licenses to operate in New York and appointing a receiver to oversee the dissolution of his properties.

But that brings me to a third point, which might require a trigger warning if, like me, you are no fan of the former president: The punishment in his case is, as far as I can tell, unprecedented in its scale.

Certainly, Trump should be held accountable for any misconduct. I have no qualms about ordering Trump to pay up for his chicanery — New York Attorney General Letitia James is seeking $250 million — and that’s what the trial now underway will determine. I’ll be cheering if Trump is ordered to write a big check.

But forcing the sale or other disposition of his businesses, as the judge ordered in his opinion last week, seems both unnecessary and unduly punitive, disproportionate to the offenses charged. And I worry that this consequence would not have been meted out to a different defendant who engaged in similar misconduct.

In the lawsuit filed last year against Trump, his adult sons and associated businesses, James alleged that Trump had systematically inflated the value of his holdings, by as much as $2.2 billion in a single year, to induce banks to lend him money on more favorable terms and to obtain better insurance coverage.

One particularly Trumpy instance: The financial statements he submitted to lenders and insurers asserted that Trump’s own triplex apartment in Trump Tower was 30,000 square feet; in fact, it is (a mere) 10,996.

James’s office relied on a remarkable New York statute known as Executive Law Section 63 (12), which provides the attorney general power to go after “persistent fraud or illegality” in business transactions, and “in an appropriate case, canceling any certificate” to do business in the state.

Ruling last week, Justice Arthur Engoron (in New York, the Supreme Court is the trial-level court) agreed with James’s claims and said the trial would proceed solely on the question of how much money Trump will be required to disgorge. In the meantime, Engoron ordered the business certificates canceled for “any … entity controlled or beneficially owned” by Trump or his sons. He provided that a receiver would be put in place “to manage the dissolution of the canceled” businesses.

To read Engoron’s ruling is to appreciate his justified impatience with Trump’s shenanigans and recalcitrance. “Even with a preliminary injunction in place, and with an independent monitor overseeing their compliance, defendants have continued to disseminate false and misleading information while conducting business,” he wrote. Such “ongoing flouting” of court orders, “combined with the persistent nature of the false [statements of financial condition] year after year, have demonstrated the necessity of canceling the certificates.”

Still, this is an extraordinary remedy — unusual for any business but particularly dire, if not fatal, in the situation of a real estate empire that can’t physically leave the jurisdiction to operate elsewhere.

“This is a version of business law capital punishment,” said Columbia Law School professor Eric Talley, a corporate law expert. “I’m not aware of a precedent at this scale.” Talley said he was particularly struck by the judge’s move to cancel all Trump-related business licenses in the state, not just those involving the overvalued properties.

Lee Bergstein, a real estate lawyer and veteran of the New York attorney general’s office, agreed. “Legal experts are trying to grapple with this in real time because to the extent that this remedy has been utilized before it hasn’t been utilized for a remedy of this scale and scope,” he said.

Indeed, the examples of previous cancellations appear sparse — and applied in cases where the harm to victims was far clearer. For example, one 2021 case cited by Engoron involved a company accused of tricking small-business owners into agreeing to unconscionably onerous leases for credit card processing equipment.

In that case, the attorney general’s office sought an order preventing the company, a repeat offender, “from conducting any business or performing any act in and from the State of New York involving equipment finance leasing and/or debt collection (or, alternatively, provide a performance bond).” This is a far cry from the ordered dissolution of Trump’s real estate empire, especially given the relative paucity of identified harm to specific victims.

Bergstein pointed me to another case, from 1974, in which a fly-by-night company held itself out to be a state agency — the New York Office of Consumers Interest — in soliciting advertising from home repair and improvement businesses. Again, egregious fraud with actual harm to unsophisticated parties, not banks and insurers clearly capable of looking out for themselves.

I have no brief for Trump. Like many others, I wish there were a way to adequately punish him for his misbehavior — all of it — and prevent its repetition. Not just the alleged crimes for which he has been appropriately charged, but all the noncriminal damage he has inflicted on this country and its citizens. Trump has trashed so many institutions that made the nation better and fairer and safer that no set of penalties seems equal to damage he has done. The temptation to lash out is understandable, especially in the hands of an elected prosecutor deploying a particularly powerful statute.

The rule of law means not allowing Trump to evade responsibility, criminal or civil, for his behavior. But it also entails not treating Trump more harshly than anyone else in similar circumstances, and I worry that is what is happening here.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46882748)

"But forcing the sale or other disposition of his businesses, as the judge ordered in his opinion last week, seems both unnecessary and unduly punitive, disproportionate to the offenses charged. And I worry that this consequence would not have been meted out to a different defendant who engaged in similar misconduct."

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46882758)

- Revoking permission to do business generally doesn't terminate the entity itself. Why here?

- Trump apparently kept NY entities as opposed to having foreign entities (e.g., from Delaware or Wyoming). Why?

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46882859)

Trump said pussy

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46882862)

I think this is flame but can't tell. Well done.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46886540)

Of course they concluded that there was other obvious fraud and Trump should be punished - but even they had to admit that the valuation of properties is not really all that cut and dry - and in one instance it was the judge who was way off on the valuation.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46885719)

That finding, part of the ruling that found Trump and his adult sons liable for fraud, was just one of multiple examples in which Judge Arthur Engoron found the Trump real estate empire to have been grossly inflated in value.

But the Mar-a-Lago finding in particular is raising eyebrows among real estate and legal experts because of the metric Judge Engoron relied on: the county tax assessor's appraisal value.

"From 2011-2021, the Palm Beach County Assessor appraised the market value of Mar-a-Lago at between $18 million and $27.6 million," Engoron wrote in his ruling.

The judge noted Trump valued Mar-a-Lago at between $426.5 million and $612 million, "an overvaluation of at least 2,300%, compared to the assessor's appraisal."

But it's widely known that the tax assessor valuation is typically, though not always, less than what a property would command on the open market.

In other words, it's not an apples-to-apples comparison.

"Appraisal values and market values are just not the same thing. It's a well-known fact," said Eli Beracha, chair of the School of Real Estate at Florida International University. "That's especially true for properties that are unique. And it's very easy to argue this is a unique property."

Dina Goldentayer, executive director of sales at Douglas Elliman in South Florida, said in her experience in the ultra-luxury marketplace, the tax assessor's valuation isn't considered when trying to value a property.

"He wouldn't make a very good realtor," Goldentayer said of the judge. "It's so widely known that it's not an accurate determination of market value."

Goldentayer added, "If there is a ranking as to what would have the lowest valuation, it's the tax assessor's office, followed by Zillow and then the realtor's valuation is the highest."

It's not correct to assume that a tax assessment and market value are the same thing, according to Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal company in New York City.

"They can be, in some markets, they are the same thing, but in most others they are not," Miller said.

Melissa Cintron, a partner in the insurance defense and corporate and real estate practice groups at Harrington Ocko & Monk, said it's "not contestable" that Mar-a-Lago is worth more than $28 million based on improvements and market analysis.

Of course, just because the tax assessment value used by the judge may have lowballed the value of Mar-a-Lago, doesn't necessarily mean Trump used a fair valuation for Mar-a-Lago. That point is up for debate.

"It is certainly not clear what the value is," said Miller. "The test is what the market would suss out for the property. The challenge is that isn't a single-family house."

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46886424)

But potential is certainly relevant. There are tons of developers who specialize in zoning and entitlement. And they pay more for properties where they think they can overcome the legal restrictions.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46886766)

So what's the judge trying to get away with? He has to know everyone thinks he's retarded.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46886740)

and then everyone made money on it and then a bunch of years later the government puts a magnifying glass on this transaction and uses the assessed value.

this is total banana republic shit.

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46886524)

https://twitter.com/NewYorkStateAG/status/1709997236623479180

(http://www.autoadmit.com/thread.php?thread_id=5419034&forum_id=2#46889393)