A judge ruled Tuesday that Donald Trump committed fraud for years while building the real estate empire that catapulted him to fame and the White House.
Judge Arthur Engoron, ruling in a civil lawsuit brought by New York attorney-general Letitia James, found that the former president and his company deceived banks, insurers and others by massively overvaluing his assets and exaggerating his net worth on paperwork used in making deals and securing financing.
Mr. Engoron ordered that some of Mr. Trump’s business licenses be rescinded as punishment, making it difficult or impossible for them to do business in New York, and said he would continue to have an independent monitor oversee the Trump Organization’s operations.
A message seeking comment was left for a Trump spokesperson. Mr. Trump has long insisted he did nothing wrong.
The decision, days before the start of a non-jury trial in Ms. James’ lawsuit, is the strongest repudiation yet of Trump’s carefully coiffed image as a wealthy and shrewd real estate mogul turned political-powerhouse.
Beyond mere bragging about his riches, Mr. Trump, his company and key executives repeatedly lied about them on his annual financial statements, reaping rewards such as favourable loan terms and lower insurance costs, Mr. Engoron found.
Those tactics crossed a line and violated the law, the judge said, rejecting Mr. Trump’s contention that a disclaimer on the financial statements absolved him of any wrongdoing.
“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,” Mr. Engoron wrote in his 35-page ruling. “That is a fantasy world, not the real world.”
Manhattan prosecutors had looked into bringing criminal charges over the same conduct but declined to do so, leaving Ms. James to sue Trump and seek penalties that aim to disrupt his and his family’s ability to do business in the state.
Mr. Engoron’s ruling, in a phase of the case known as summary judgment, resolves the key claim in Ms. James’ lawsuit, but several others remain. He’ll decide on those claims and Ms. James’ request for US$250-million in penalties at a trial starting Oct. 2. Mr. Trump’s lawyers have asked an appeals court for a temporary delay.
Mr. Trump’s lawyers, in their own summary judgment bid, had asked the judge to throw out the case.
They argued Ms. James wasn’t legally allowed to file the lawsuit because there wasn’t any evidence that the public was harmed by Mr. Trump’s actions. They also argued that many of the allegations in the lawsuit were barred by the statute of limitations.
Mr. Engoron, noting that he had “emphatically rejected” those arguments earlier in the case, equated them to the “time-loop in the film `Groundhog Day.”' With his ruling, he fined five defence lawyers $7,500 each as punishment for “engaging in repetitive, frivolous” arguments, but denied Ms. James’ request to sanction Trump, his two eldest sons and other defendants.
Ms. James, a Democrat, sued Mr. Trump and the Trump Organization a year ago, alleging a pattern of duplicity that she dubbed “the art of the steal,” a twist on the title of Mr. Trump’s 1987 business memoir “The Art of the Deal.”
The lawsuit accused Mr. Trump and his company of routinely inflating the value of assets like skyscrapers, golf courses and his Mar-a-Lago estate in Florida, padding his bottom line by billions.
Mr. Engoron found that Mr. Trump consistently overvalued Mar-a-Lago on his financial statements between 2014 and 2021, inflating its value on one statement by 2,300 per cent, and rebuked him for lying about the size of his Trump Tower apartment in Manhattan. Mr. Trump claimed the three-story penthouse was nearly three times its actual size, valuing the property at US$327-million.
“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,” Mr. Engoron wrote.
Mr. Trump has denied wrongdoing, arguing in sworn testimony for the case that the values on his financial statements didn’t matter because they have a disclaimer that says they shouldn’t be trusted. Mr. Trump argued that banks “made a lot of money” from him and didn’t object to the valuations.
Ms. James’ lawsuit is one of several legal headaches for Mr. Trump as he campaigns for a return to the White House in 2024. He has been indicted four times in the last six months – accused in Georgia and Washington, D.C., of plotting to overturn his 2020 election loss, in Florida of hoarding classified documents, and in Manhattan of falsifying business records related to hush money paid on his behalf.
The Trump Organization was convicted of tax fraud last year in an unrelated criminal case for helping executives dodge taxes on extravagant perks such as Manhattan apartments and luxury cars. The company was fined US$1.6-million. One of the executives, Mr. Trump’s long-time finance chief Allen Weisselberg, pleaded guilty and served five months in jail. He is a defendant in Ms. James’ lawsuit and gave sworn deposition testimony for the case in May.
Ms. James’ lawsuit does not carry the potential of prison time, but could complicate Mr. Trump’s ability to transact real estate deals. It could also stain his legacy as a developer.
Ms. James has asked Mr. Engoron to ban Mr. Trump and his three eldest children from ever again running a company based in New York. She also wants Mr. Trump and the Trump Organization barred from entering into commercial real estate acquisitions for five years, among other sanctions. The US$250-million in penalties she is seeking is the estimated worth of benefits derived from the alleged fraud, she said.
Ms. James, who campaigned for office as a Trump-critic and watchdog, started scrutinizing his business practices in March 2019 after his former personal lawyer Michael Cohen testified to Congress that Mr. Trump exaggerated his wealth on financial statements provided to Deutsche Bank while trying to obtain financing to buy the NFL’s Buffalo Bills.
Ms. James’ office previously sued Mr. Trump for misusing his own charitable foundation to further his political and business interests. Mr. Trump was ordered to pay US$2-million to an array of charities as a fine and the charity, the Trump Foundation, was shut down.