Trump Civil Trial: Defendants Lose Bigly

In a 92-page decision and order entered on February 16, 2024, New York Supreme Court Judge Arthur F. Engoron found former President Donald Trump and his co-defendants liable on the second through seventh claims and imposed a number of remedies on account of their fraudulent conduct. A copy of the complete decision can be found here.

I have written extensively about the trial in prior costs, including on the subjects of: (a) the case or controversy; (b) the “disclaimer” defense; (c) the gag order; (d) the possibility of an adverse inference; (e) the failure to demand a jury trial; (f) Trump’s request to make his own closing argument; and (g) the Attorney General’s increased damages calculation.

Today I broadly discuss the decision and order in broad strokes. In posts to follow I will take a deeper dive into the rational underpinning the decision.

In her complaint, Attorney General Lititia James has alleged that defendants falsely inflated Trump’s “net worth by billions of dollars to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available to the company, to satisfy continuing loan covenants, to induce insurers to provide insurance coverage for higher limits and at lower premiums, and to gain tax benefits, among other things.”

Prior to the trial , Judge Engoron awarded summary judgment on the AG’s first claim in favor of the AG persistent violations of Section 63(12) of New York’s Executive Law.

The trial proceeded on the remaining claims at bench before Judge Engoron.

Judge Engoron summarized his decision as follows:

Donald Trump and entities he controls own many valuable properties, including office buildings, hotels, and golf courses. Acquiring and developing such properties required huge amounts of cash. Accordingly, the entities borrowed from banks and other lenders. The lenders required  personal guarantees from Donald Trump, which were based on statements of financial condition compiled by accountants that Donald Trump engaged. The accountants created these “compilations” based on data submitted by the Trump entities. In order to borrow more and at lower rates, defendants submitted blatantly false financial data to the accountants, resulting in fraudulent financial statements. When confronted at trial with the statements, defendants’ fact and expert witnesses simply denied reality, and defendants failed to accept responsibility or to impose internal controls to prevent future recurrences. As detailed herein, this Court now finds defendants liable, continues the appointment of an Independent Monitor, orders the installation of an Independent Director of Compliance, and limits defendants’ right to conduct business in New York for a few years.

Judge Engoron awarded a monetary judgment in favor of the AG and impose certain injunctive relief. Judgments are to be entered against: (a) each of Donald Trump Jr. and Eric Trump for $4,013,024, with  pre-judgment interest from May 11, 2022; (b) former President Trump, his revocable trust and certain entities, jointly and severally, for $168,040,168, with pre-judgment interest from March 4, 2019; (c) former President Trump, his revocable trust and certain entities, jointly and severally, for $126,828,600, with pre-judgment interest from May 11, 2022; (d) former President Trump, his revocable trust and the Trump Organization, jointly and severally, for $60,000,000, with pre-judgment interest from June 26, 2023; and (e) Allen Weisselberg for $1,000,000, with pre-judgment interest from January 9, 2023.

The decision enjoins, among other things: (a) Donald Trump, Allen Weisselberg, and Jeffrey McConney from serving as an officer or director of any New York corporation or other legal entity in New York for a period of three years; (b) Eric Trump and Donald Trump Jr. from serving as an officer or director of any New York corporation or other legal entity in New York for a period of two years; and (c) former President Trump, his revocable trust and certain entities from applying for any loans from any financial institution chartered or registered in the State of New York for three years.

The decision modified the Court’s prior decision providing for the cancellation of certain entities business certificates. Instead, the Court determined that the independent monitor should stay in place for a period of not less than three years.

Former President Trump has claimed the proceeding is a political “witch hunt” and alluded to Justice Engoron and the AG as being “corrupt”. He has vowed to appeal.

Defendants will also likely seek a stay of the decision pending appeal. As to the monetary component of the decision, a stay would require the Defendants to put up a cash equivalent to the monetary award plus a certain amount of interest or to purchase a bond of equivalent value.

Commentators suggest the question to be watched most closely on appeal will be whether this was a victimless offense given that the financial institutions that relief on the fraudulent financial statements were not harmed.

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