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Trump's New York Fraud Case

As of October 2, 2023, former United States president Donald J. Trump has been on trial in New York in a $250 million civil lawsuit which threatens the real estate empire and personal fortune that propelled him to fame.

The trial stems from a lawsuit brought by New York’s Attorney General Letitia James, which accuses Trump and other defendants, including his companies and his eldest sons, Donald Jr. and Eric, of fraudulently inflating the value of their assets by more than $2 billion to obtain favourable loans and insurance deals from banks. The case is being presided over by Justice Arthur F. Engoron, a Democrat who has served for 20 years in New York City Civil and State Supreme Court. As in most civil cases, Engoron will effectively be the judge and jury, and will decide the fate of Trump’s New York business. The trial is expected to continue through mid-December, with the defence counsel telling Engoron they plan to wrap up their case by December 15, 2023.

A week before the trial began, Engoron ruled that the former president had consistently committed fraud, deciding that no trial was needed to determine the claim at the core of James’ lawsuit. As a result, he revoked the licences that have enabled Trump to operate his New York Companies. The trial will determine the sufficient level of punishment Trump should face. While Trump is not at risk of going to prison, as is possible in the four criminal cases he faces in other states, James is seeking serious punishments for Trump; she is asking Engoron to impose a $250 million dollar penalty, prohibit Trump and the Trump Organization from doing any New York commercial real estate deals or applying for loans from New York banks for the next five years, and, finally, permanently prevent Trump and his sons from running any New York companies. These punishments, particularly the last one, would deal huge blows to Trump’s real estate empire. To determine the consequence Trump will face, Engoron will weigh whether Trump intended to defraud his lenders and make false statements about his assets and whether he did so for personal gain, as well as other charges.

In order to prove that there was no intent to defraud, Trump and his co-defendants have provided the court with a list of 127 witnesses who could be called to prove their case. Thus far, much of the defence's argument has been a denial of knowledge, deflection of blame, and a downplay of claims against them. On the stand, Trump boasted that several of his properties including Mar-a-Lago and 40 Wall St. were worth more than their value on paper but acknowledged that some of his properties may have been overvalued. However, he denied any wrongdoing, insisting that while he had given some input to his financial advisors on property value, he did not direct his accountants or employees on what valuations to use. One of Trump’s lawyers, Alina Habba, argued that he was simply “doing business” and that “there was no intent to defraud, period, the end.” Trump’s sons also attempted to deflect blame for the false documents, away from themselves and onto the company’s accountants and lawyers. Additionally, Trump’s lawyers have attempted to downplay the claims against him, arguing that the annual financial statements were merely estimates, a standard in the real estate business. According to Trump’s lead lawyer, Christopher M. Kise, any change in valuation simply represented changes in real estate values and Trump’s sophisticated corporation. He claims banks and insurers know the statements are merely meant to be estimates and are “not designed to be absolutes.” Either way, these banks made money from Mr. Trump, and “did not rely on his estimates” and because loans that were received from these estimates were paid back in time, no one was harmed by them in any way.

So far, Trump has denied all wrongdoing, and has said the investigation is a politically motivated “witch hunt.” He has launched several personal attacks on James as well as Judge Engoron and his staff. He called the judge “rogue” and Ms. James “a terrible person” and a “radical lunatic”. He has suggested that Ms. James is out to get him because he is performing so well in the polls as well as claiming that Engoron harbours political bias against him. He has even requested a mistrial on these grounds, which Engoron has called “utterly without merit.” Further comments about bias against Engoron’s clerk led to Engoron issuing a partial gag order against Trump, which prevented him from attacking, or even commenting on, members of the judge’s staff on social media. Trump suffered $15,000 in fines for violating it before the state lifted the gag order due to the "constitutional and statutory rights at issue." Trump wasted little time in reopening his attacks, posting "His Ridiculous and Unconstitutional Gag Order, not allowing me to defend myself against him and his politically biassed and out of control, Trump Hating Clerk, who is sinking him and his Court to new levels of LOW, is a disgrace." Many observers have noted that in making these statements, Trump is using the trial for political purposes, and potentially trying to “litigate the case in the court of public opinion” and thus bias the outcome.

In terms of the prosecution's argument, James submitted a list of 28 potential witnesses to the court to testify. Her list overlaps slightly with Trump and his co-defendant's, with Mr. Trump, his eldest sons, and some significant former and current financial advisors to Trump and his companies being called up to the stand. Trump is scheduled to testify second to last. James must prove her claims by a “preponderance of the evidence”: whether it's more likely than not that Trump and co-defendants should be held liable. That bar is lower than “beyond reasonable doubt,” which is standard in criminal cases. So far, the prosecution has argued that Trump had his employees arbitrarily assigned property values in order to achieve the former president’s desired net worth. In his opening statement, lawyer Kevin Wallace cited the inflated values of three of Trump’s properties, one being a triplex apartment in Trump Tower on Fifth Avenue. According to Wallace, Trump based the value of the Triplex on its size, claiming it was 30,000 square feet. However, in reality, the apartment was under 11,000 square feet, hardly a difference that could be attributed to estimation. Additionally, lawyers presented evidence that Trump’s sons had been presented with paperwork that suggested they had prior knowledge of statements that “clearly contain fraudulent valuations” despite their claims that they “relied on accountants” and “never had anything to do” with the valuations.

Although Trump will not go to jail no matter the outcome, as it is a civil case, his reputation and the future of his corporate empire hinges on the results. The case also overlaps with the former president’s latest White House run and has the potential to influence his campaign. While Trump faces dozens of felony convictions across four cases, the civil New York case could be the one that affects him the most. Trump has turned these felony charges into a successful campaign slogan, expertly painting himself as the victim of a politicised justice system. He remains the leader of the Republican primary race and polls suggest that he is still neck and neck with Biden. Thus, despite Democrats’ hope, it is still likely that a felony charge could be survivable for Trump.

However, while causing many legal and campaigning scheduling conflicts, the current civil case threatens Trump where it will hurt the most. It threatens his reputation as a businessman on which he built most of his career and has the potential to strip him of his licence to operate his businesses in New York, where most of his empire lies. While Trump has been able to pass off his other crimes as a part of a vast conspiracy against him, the civil case makes him look shabby, crooked, and not nearly as wealthy as he says he is, potentially posing a huge threat to his image and campaign.


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