Legal experts: Days after being hit with $83 million ruling, Trump faces “financial death penalty”

Judge Arthur Engoron is expected to issue his decision this week on financial penalties in the civil fraud case brought by the New York attorney general, who has asked that former President Donald Trump be banned from doing business in the state and pay $370 million for inflating valuations on financial statements for personal gain. 

Engoron’s decision could deliver another major blow to the real estate mogul’s financial standing after Trump was ordered to pay $83 million last week for defaming writer E. Jean Carroll in 2019. 

Trump, who has repeatedly attacked the judge and accused him of being biased against him, issued similar attacks on Sunday. 

“I have been unfairly sued by the Trump Hating Democrat Attorney General of New York State, Letitia James, over the false fact that I inflated my Financial Statements in order to borrow money from Banks, etc,” Trump wrote on his social media platform Truth Social. “The Judge in the case, Arthur F. Engoron, refused to allow this case to go to the ‘Commercial Division,’ where it belongs, because he is a Trump Hater beyond even A.G. James, who campaigned against me spewing horrible inflammatory statements which are False & Defamatory. I am not even allowed a Jury!”

In another post, he referred to the New York case as a “politically motivated Witch Hunt,” that has “slandered and maligned” his company.

As Trump awaits the verdict of his civil fraud case, which could result in substantial financial penalties, legal experts suggest that the real consequences lie in Engoron barring Trump and his company from conducting business in the state of New York ever again. 

This trial has been crucial in revealing the impact of Trump’s business activities and the individuals “involved in the fraud,” whether there is anyone who can “really be trusted” to run the businesses, Laurie Levenson, a law professor at Loyola Marymount University, told Salon.

“It is hard to know how, exactly, the business will continue if there is a broad ban and huge penalties,” Levenson said. “I am sure the court is considering those issues in reaching its decision.”

In an order last September that’s currently under appeal, Engoron revoked Trump’s business licenses after determining that the ex-president and his company committed a yearslong fraud. 

The judge ordered that Trump and the other defendants provide the names of potential independent receivers “to manage the dissolution of the canceled LLCs,” meaning the various Trump business entities.

What remains unclear though is the judge’s interpretation of “dissolution” – whether it pertains to the liquidation of entities overseeing properties or the properties themselves.

“Ordering the dissolution of a business for financial fraud is an extraordinary remedy, some people even claiming it to be akin to the death penalty,” Bennett Gershman, a former New York prosecutor and law professor at Pace University, told Salon. “Dissolution, or liquidation, hardly ever happens, especially when there is no proof that victims were harmed or financial institutions lost money.”

Former federal prosecutor Neama Rahmani also agreed that dissolution is “the financial death penalty” and is not common. However, he contended that isn’t a typical case and Trump and his businesses aren’t “your typical defendants.”

“Engoron has already tipped his hand by granting summary judgment before the trial and I expect him to ban Trump from doing business in New York and appoint a receiver to oversee the dissolution of his entities,” Rahmani said.

In a worst case, some legal experts have contended that Engoron could decide dissolution means stripping Trump of not only his New York holdings such as Trump Tower and his 40 Wall Street skyscraper, but his Mar-a-Lago club in Florida, a Chicago hotel and condo building, and several golf clubs, including ones in Miami, Los Angeles and Scotland, The Associated Press reported.

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James, for her part, is seeking a business ban on Trump in New York and a $370 million payment, representing what she considers saved interest and “ill-gotten gains.” 

The attorney general made a careful analysis of Trump’s “massive and repeated fraudulent conduct” over an eleven-year span, including “a computation of Trump’s ill-gotten gains from the lending institutions, interest, and penalties,” Gershman explained.  A court has broad discretion in “meting out” a cash penalty and it is “unlikely” his ruling will be disturbed on appeal unless it amounts to a gross abuse of discretion.

“The attorney general has recommended that Judge Engoron remove Trump from operating his New York businesses and appoint an overseer of Trump’s properties for five years and after that determine whether to ban Trump from doing business in New York forever,” Gershman said. 

The former president was prosecuted under a 1956 law that empowers courts to impose a “permanent and plenary ban” on a company if its behavior is deemed egregious enough to justify such action, The New Republic reported. 

However, this isn’t the first time that New York’s anti-fraud law has been used to bring charges against Trump. In 2018, his nonprofit, the Trump Foundation, agreed to cease operations amidst allegations of misusing funds for political and business purposes.

Trump University also faced a lawsuit in 2013 under the same law, for allegedly misleading numerous students with false success promises. Although it shut down before court-ordered closure, Trump settled this and related cases for $25 million, the AP reported.

“Engoron will calculate damages based on the ill-gotten benefit to Trump’s businesses in the form of lower interest rates,” Rahmani said. “The fact that the loans weren’t in default and banks weren’t harmed doesn’t matter. This is a New York-specific law, so it won’t have any effect on Trump’s businesses in other states.”