New York Judge Deals Major Blow to Trump, Finds Former President Liable for Fraud

Emma Grant
Former U.S. President Donald Trump speaks to a crowd during a campaign rally on September 25, 2023 in Summerville, South Carolina. (Photo by Sean Rayford/Getty Images)

In a stunning rebuke of former president Donald Trump, a New York judge ruled on Tuesday that Trump is liable for fraud and engaging in illegal business practices, canceling the Trump Organization’s business certification.

Judge Arthur Engoron granted a motion for summary judgment by New York Attorney General Letitia James, finding that Trump, his adult sons Donald Jr. and Eric, and others “to be liable as a matter of law for persistent violations” of New York law.

Engoron determined that financial statements provided by the Trumps to lenders and insurers for about a decade contained numerous falsehoods and that the Trumps “repeatedly engaged in fraud.”

The decision represents a significant defeat for Trump, who argued he did not inflate the values of his various properties and assets. James has sought $250 million in damages from Trump as well as a 5-year ban on the Trumps doing business in New York. She also wants to install an independent monitor to oversee the Trump Organization’s compliance, finances and valuations.

β€œToday, a judge ruled in our favor and found that Donald Trump and the Trump Organization engaged in years of financial fraud,” James said Tuesday night. β€œWe look forward to presenting the rest of our case at trial.”

In his ruling, Engoron blasted the Trumps for their “bogus arguments” and seeming belief they could get away with lies and fabrications. The judge likened their legal defense to a comedic line from the Marx Brothers movie “Duck Soup” – “Well, who ya gonna believe, me or your own eyes?”

Among Trump’s most egregious falsehoods, the judge said, was inflating the value of his Trump Tower triplex apartment by three times its actual size, leading to overvaluations of between $114 million and $217 million.

“A discrepancy of this order of magnitude, by a real estate developer sizing up his own living space of decades, can only be considered fraud,” Engoron wrote.

The judge also accused the Trumps of living in a “fantasy world” by claiming that rent-regulated apartments are worth the same as unregulated units and that restricted land is equivalent to unrestricted land.

As part of his ruling, Engoron canceled the business certifications of several Trump entities, including the Trump Organization, and said an independent receiver will be appointed to oversee the dissolution of the companies. The judge’s order impacts two Trump properties in New York – the commercial tower at 40 Wall Street and the Seven Springs estate.

It remains unclear how far the effects of Engoron’s ruling will extend. Questions linger over how the receiver would dissolve the two New York properties and whether the decision could affect Trump’s other holdings like Mar-a-Lago in Florida. Theoretically, Trump could try to transfer assets to new companies located outside of New York to evade the judgment.

Trump’s railed against the ruling in a fiery statement, calling it unfair and politically motivated. He said his company had been “slandered and maligned” and called for intervention from higher courts in New York or at the federal level.

“THIS IS NOT AMERICA!” Trump wrote.

Trump’s lawyers also vowed to appeal the “miscarriage of justice,” arguing the judge was biased against Trump. But Engoron defended his ruling as properly grounded in New York law and the facts of the case.

With Trump now liable for fraud, the upcoming trial will focus on remedies sought by the attorney general’s office, including disgorgement of ill-gotten gains, without needing to further prove the falsity of the financial statements.

But the trial’s start date remains uncertain after an appeals court judge temporarily halted the proceedings, which were slated to begin Monday. The appeals court is weighing whether claims predating the applicable statute of limitations should be tossed out per an earlier ruling. A decision on that issue is expected shortly.

James applauded Tuesday’s ruling, saying it confirmed her allegations that Trump “lied to the American people about how successful his businesses are so he could get richer and cheat the system.”

The attorney general has accused Trump of knowingly misleading lenders, insurers and others by inflating the worth of his properties, including overvaluing his Mar-a-Lago resort by as much as $200 million. Trump is also alleged to have claimed his Trump Tower triplex was 30,000 square feet when it was actually 11,000 square feet.

According to James, Trump reaped more than $150 million in benefits from the alleged fraud by getting access to cheaper loans and insurance premiums. She claims Trump falsely inflated his net worth by billions of dollars to deceive banks and boost his public image.

Tuesday’s ruling underscores the legal peril still facing Trump as he mounts another run for the presidency in 2024. In addition to James’ civil lawsuit, Trump faces a criminal investigation from the Manhattan district attorney’s office for possible financial crimes and insurance fraud. He’s also at the center of multiple other probes related to his efforts to overturn the 2020 election results.

The former president has assailed the various investigations against him and his company as politically motivated witch hunts. But Engoron firmly rejected those claims in his ruling, saying he based his findings solely on New York law and the evidence.

With Engoron’s liability judgment, Trump’s company now faces severe repercussions, including potential dissolution of core business entities. But the final penalties await the outcome of trial, as James seeks to recoup millions in damages from the former president.

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Emma Grant is a highly regarded legal news expert with a deep understanding of constitutional law and its implications in contemporary society. With her extensive background in legal journalism and analysis, Emma Grant has established herself as a trusted authority on the intersection of law, policy, and society.