Donald Trump’s lawyers grapple with implications of surprise fraud ruling

Former president Donald Trump at a campaign stop in South Carolina on September 25, 2023. Photo / Doug Mills, The New York Times

Lawyers for Donald Trump appeared in a New York courtroom on Wednesday morning (Wednesday night NZT), struggling to understand the consequences of a ruling a judge had issued the night before that dealt a serious blow to the former president’s business empire.

The ruling, which found that Trump had inflated the value of his holdings to win favourable terms on loans, stemmed from a civil fraud case brought by New York Attorney General Letitia James. The surprising decision came before a trial that could begin as soon as Monday and could summarily strip Trump of control over signature properties, including Trump Tower in midtown Manhattan.

A lawyer for Trump, Christopher Kise, appeared contrite as he asked the judge, Arthur Engoron, two fundamental questions: how much of Trump’s business empire did the ruling actually affect? And as for a trial, “What’s the point?” Kise asked, now that Engoron had already validated the claim at the heart of James’ case. “You’ve already granted the relief,” he said.

A year ago, James filed a lawsuit accusing Trump of persistently overvaluing his assets to receive favourable deals on debt and insurance, in some years by as much as US$2.2 billion. She sought consequences for the former president that included cancelling the business certificates that allowed his entities to operate in New York and permanently barring Trump from running any company in the state.

The ruling could summarily strip Trump of control over signature properties, including Trump Tower in midtown Manhattan. Photo / AP

In his order on Monday, Engoron cancelled those certificates. But he also expanded on the punishment that James had sought, cancelling those of any entity controlled by Trump’s sons. While Trump could ask a higher court to overturn the ruling, and has sued the judge himself over his legal decisions, the outlook is stark if he is unsuccessful.

Kise said in court that the ruling could oust the sons, Donald Trump Jr and Eric Trump, from their New York homes, which he said are owned through the types of limited liability companies that Engoron dissolved. Kise also asked whether the ruling meant that Trump would have to sell assets including Trump Tower and 40 Wall St, a downtown commercial property, or whether they could be managed by an independent receiver who the judge said would oversee the dissolution of the cancelled companies.

Engoron did not provide a clear response. After huddling with his law clerk, Allison Greenfield, he told Kise that he appreciated his concern and understood the question.

“I’m not prepared to issue a ruling right now, but we will take that up in various contexts I’m sure,” he said. He granted Kise’s request for 30 days to devise a plan for implementing the order.

A lawyer from the attorney general’s office, Kevin Wallace, said that state lawyers had not worked out what they still needed to prove at trial, though he noted that the judge had yet to grant the other punishments they had sought, including imposing a fine of as much as US$250 million (NZ$422m) or barring the former president and his sons from running a business in the state.

The former president still has options. Already, his lawyers have sued Engoron himself, arguing that he ignored an appeals court ruling in June that they contend should gut the attorney general’s case. They argued that the judge ignored a key deadline that should have disqualified much of the attorney general’s evidence. They have asked the appeals court to delay the trial and to order the judge to implement the June ruling.

The appeals court is expected to rule as soon as Thursday. If Trump’s lawyers are unsuccessful, they could also appeal Engoron’s Tuesday order.

As matters stand, Trump’s lawyers are left facing a severe punishment for their client — the scope of which even they do not fully understand — and a trial at which James’ lawyers could exact yet more damage.

This article originally appeared in The New York Times.

Written by: Jonah E. Bromwich

Photographs by: Doug Mills, AP

©2023 THE NEW YORK TIMES