Trump Found Liable For Fraud In NY Attorney General's Case

A New York state judge on Tuesday placed Donald Trump's assets in limbo and sanctioned his attorneys after ruling that the former president and his real estate company defrauded banks and insurers for years by exaggerating his net worth by billions of dollars.

State Supreme Court Justice Arthur F. Engoron ruled that Trump and the Trump Organization repeatedly used false statements of financial condition, or SFCs, in business transactions between 2011 and 2021, violating a civil anti-fraud enforcement statute. The judge flatly denied Trump's competing motion to toss the case altogether.The judge rejected Trump's central argument that real estate valuations are subjective and therefore there could be no fraud.

"The documents here clearly contain fraudulent valuations that defendants used in business, satisfying [the Office of the Attorney General]'s burden to establish liability as a matter of law against defendants," Justice Engoron ruled. "Defendants' respond that: the documents do not say what they say; that there is no such thing as 'objective' value; and that, essentially, the Court should not believe its own eyes."

"What OAG has established, in many cases by clear, indisputable documentary evidence is not a matter of rounding errors or reasonable experts disagreeing," Justice Engoron added. "OAG has submitted conclusive evidence that between 2014 and 2021, defendants overvalued the assets reported in the SFCs between 17.27-38.51%; this amounts to a discrepancy of between $812 million and $2.2 billion dollars."

The judge went on to call Trump's own sworn statements "wholly without basis in law or fact."

He also sanctioned Trump's attorneys — Michael Madaio, Clifford S. Robert, Michael Farina, Christopher M. Kise and Armen Morian — for repeating arguments previously rejected as frivolous by the trial court and an appeals court, fining them $7,500 each.

"Defendants' conduct in reiterating these frivolous arguments is egregious," Justice Engoron said. "Defendants' repetition of them here is indefensible."

The judge had highlighted the issue at oral arguments, calling some of the arguments "literally crazy."

"Exacerbating defendants' obstreperous conduct is their continued reliance on bogus arguments," he said Tuesday. "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," and "square footage is subjective."

"That is a fantasy world, not the real world," the judge added.

In a further remarkable move, Justice Engoron effectively ordered Trump Organization LLCs dissolved as he immediately "canceled" all New York business certificates held by Trump, his sons Donald Trump Jr. and Eric Trump, as well as their long-serving financial officers Jeffrey McConney and Allen Weisselberg.

Trump may be able to transfer his assets to other companies, but those decisions would be managed by an independent receiver. The judge asked for three recommendations for receivers "to manage the dissolution of the canceled LLCs," which appear to hold marquee properties like 40 Wall Street and the Seven Springs estate.

In the interim, a former U.S. judge for the Southern District of New York, Barbara Jones, will continue to serve as independent monitor over Trump's businesses, Justice Engoron said.

The ruling grants partial summary judgment to New York Attorney General Letitia James, handing her a significant victory one week before a bench trial in front of the same judge on her remaining related claims for false business records, false financial statements, insurance fraud and conspiracy. However, the judge found that a trial was still necessary to determine whether the defendants "intentionally and materially" violated these laws.

A further victory for James at trial could hobble the Trump family's ability to do business in the state and trigger massive financial penalties — at least $250 million in disgorgement of allegedly ill-gotten gains.

The attorney general touted the decision on Tuesday.

"Today, a judge ruled in our favor and found that Donald Trump and the Trump Organization engaged in years of financial fraud," James' office said in a statement. "We look forward to presenting the rest of our case at trial."

Trump has argued that the state is engaged in a political prosecution and is ignoring the law, the evidence, the subjective nature of real estate values and Trump's own expertise as a real estate tycoon. Through a representative, he vowed to "immediately appeal" the decision.

"Today's decision is fundamentally flawed at every level," attorney Alina Habba said. "The fact that this court summarily found that there is no question of fact, finding in part that Mar-a-Lago is worth approximately $20 million and issu[ing] a decision of this magnitude is an affront to our legal system."

Commenting on the decision, Trump attorney Kise said that "while the full impact of the decision remains unclear," the decision "seeks to nationalize one of the most successful corporate empires in the United States and seize control of private property all while acknowledging there is zero evidence of any default, breach, late payment or any complaint of harm."

Trump himself lashed out at both the attorney general and the judge in a 400-word statement on Truth Social later on Tuesday.

"The widespread, radical attack against me, my family, and my supporters has now devolved to new, un-American depths, at the hands of a DERANGED New York State Judge, doing the bidding of a completely biased and corrupt 'Prosecutor,' Letitia James," he said.

Echoing his father's sentiments, Eric Trump posted late Tuesday on X, the social media platform formerly known as Twitter, that he had "lost all faith in the New York legal system."

"Never before have I seen such hatred toward one person by a judge - a coordinated effort with the Attorney General to destroy a man's life, company and accomplishments," he said. "We have run an exceptional company - never missing a loan payment, making banks hundreds of millions of dollars, developing some of the most iconic assets in the world. Yet today, the persecution of our family continues."

New York is represented by Kevin Wallace, Andrew Amer, Colleen Faherty, Alex Finkelstein, Wil Handley, Eric R. Haren, Louis M. Solomon, Sherief Gaber, Mark Ladov and Stephanie Torre of the New York State Office of the Attorney General.

Trump and the Trump Organization are represented by Alina Habba and Michael Madaio of Habba Madaio & Associates LLP, Christopher Kise, Jesus M. Suarez and Lazaro P. Fields of Continental PLLC, and Armen Morian of Morian Law PLLC.

Donald Trump Jr. and Eric Trump are represented by Clifford S. Robert and Michael Farina of Robert & Robert PLLC.

The case is New York v. Donald J. Trump et al., index number 452564/2022, in the Supreme Court of the State of New York, County of New York.