Appellate judges are skeptical of New York’s civil fraud case against Trump

Appeals court judges on Thursday signaled skepticism about New York state’s civil fraud case against Donald Trump, as the former president asked them to enter a nearly half-billion-dollar judgment against him for real estate business practices on which a trial judge declared fraudulent.

In February, Judge Arthur Engoron ordered Trump, the Republican nominee in the Nov. 5 US presidential election, to pay $454.2 million in penalties and interest for inflating his net worth to trick lenders and insurers into offering him terms better. The civil case was brought by New York State Attorney General Letitia James.

Members of the five-judge panel of the Appellate Division — the middle-level state appeals court that hears arguments in Trump’s appeal — seemed concerned about the possible overreaching of James.

Two of the justices interrupted Judith Vale, the lawyer arguing for New York, in her opening statement to ask if there were other examples of the state suing private business transactions between sophisticated parties under a law meant to protect market integrity.

“Every case you cite involves harm to consumers, harm to the marketplace,” Judge David Friedman told Vale.

“We don’t have anything like that here,” Friedman added, saying no one “lost any money.”

The justices also questioned what constraints applied to the law James cited in introducing the case — one that is typically used to go after fraudsters who target vulnerable consumers.

“How do we draw a line or at least put up railings? asked Judge Peter Moulton.

Vale, the state’s deputy attorney general, said the statute — known as Executive Law 63(12) — is generally aimed at stopping fraud and illegality and was therefore appropriate in Trump’s case.

“When risk is injected into the market, it hurts the counterparties and it hurts the market as a whole,” Vale said.

The case stemmed from Trump’s management of his family’s real estate company, the Trump Organization, before he became president in 2017. In April, Trump avoided possible asset forfeiture in the case by posting a $175 million bond while calling.

Trump’s lawyer, John Sauer, told the judges that trial testimony showed that any discrepancies in Trump’s net worth were irrelevant to his creditors.

“What is not challenged is the testimony that if the net worth had been up to a million (dollars), the business would have been exactly the same,” Sauer said.

Sauer added that none of Trump’s creditors and business partners were harmed by the discrepancies in the financial statements, an argument Trump’s lawyers have maintained throughout the case.

“There were no casualties, no complaints,” Sauer said.

During his recusal argument, Sauer said Vale “struggled to articulate any clear principle” that would limit state law enforcement power.

TRUMP’S EMPIRE

Engoron’s ruling poses a threat to the business empire Trump has built over decades, which includes hotels, office buildings and golf courses around the world. With interest still accruing, Trump now owes $478.3 million.

The case is one of several legal problems Trump has faced since leaving the White House in 2021. He owes nearly $90 million in federal civil penalties for defaming a writer who accused him of sexual abuse and was convicted in May of derivative criminal charges. from the quiet money paid to a porn star.

Trump has denied any wrongdoing and said the cases were brought to interfere with his campaign. A Reuters/Ipsos poll on Tuesday showed Vice President Kamala Harris, the Democratic nominee, leading Trump 47 percent to 40 percent nationally, though each state’s Electoral College results determine the winner.

In a July brief to the Appellate Division, Trump’s lawyers said the financial statements he submitted to the banks actually understated his wealth and there was no indication that any of the lenders suffered losses.

Attorneys also accused James, a Democrat, of targeting a political opponent.

In September 2023, before a three-month non-jury trial, Engoron found Trump liable for lying about his asset values ​​and net worth for a decade. The judge took particular issue with Trump’s claim that his Manhattan penthouse was 30,000 square feet (2,787 square meters), nearly three times its actual size.

The trial focused only on penalties. In addition to the financial penalties, Engoron banned Trump from playing a leading role in any New York company or seeking loans from state-registered banks for three years.

TOPICS
Fraud Law New York