NEW YORK (AP) — Donald Trump could be ordered to “dissolve” his vast real estate business empire within days for repeatedly misrepresenting financial statements to lenders and defrauding marketers. He could be added to the list of scammers such as He faced the ultimate punishment for violating New York's strong anti-fraud laws.
An Associated Press analysis of nearly 70 years of civil cases under the law shows such penalties have only been imposed more than a dozen times in the past, and Trump's case stands out in important ways. ing. without showing obvious casualties or major losses.
The state's lawyers in Mr. Trump's months-long civil trial have argued that principles of fair play in business alone are sufficient to justify harsh penalties, but even they are not satisfied with the judge's arguments against him. The Company does not seek the possibility of liquidation of its business or assets. Some legal experts also worry that if judges go out of their way to punish the former president under such a worst-case scenario, it could make it easier for courts to kill companies in the future.
“This is basically a death sentence for corporations,” said Eric Talley, a law professor at Columbia University. “Is he only getting dessert because of fraud or because people don't like him?”
An Associated Press review of about 150 reported cases since New York state's “repeat fraud” law was passed in 1956 found that victims and losses have been a key factor in nearly every acquisition of a company. It turned out that there was. Customers were left deceived and angry because they lost money, purchased defective products, or did not receive the service they ordered.
Additionally, businesses were most often taken over as a last resort to stop ongoing fraud and protect potential victims. Among them are fake psychologists who sell dubious treatments, fake lawyers who sell false claims that they can get students into law school, and fake lawyers who peddle financial advice and steal home deeds from people in return. They included businessmen who defrauded people.
In Mr. Trump's case, his company stopped sending exaggerated financial numbers about his net worth to Deutsche Bank and others at least two years ago, but only after Mr. Trump was indicted, and other Financial documents continue to contain errors and inaccuracies, court-appointed monitors said. Misrepresentation.
Banks also offered Trump a lower interest rate because he agreed to personally guarantee the loan with his own funds, but it's unclear how much better the rate was because the numbers were inflated. The bank never complained, and it's unclear how much, if any, it lost. Bank officials asked to testify could not say for sure whether Mr. Trump's personal values statement had any impact on interest rates.
“This has set a terrible precedent,” said Adam Reitman Bailey, a New York real estate lawyer who once successfully sued President Trump's mansion for falsifying sales to attract buyers.
William Thomas, a law professor at the University of Michigan, added: I have never seen a long list of victims. ”
“Dismantling” the empire?
Trump, the Republican presidential front-runner, has focused his anger on both the Democratic New York attorney general who brought the lawsuit and the judge overseeing the case, saying he could lose his job. I'm letting you do it.
in Ordered last September Currently on appeal, state Supreme Court judge Arthur Engoron He said Trump did commit fraud and should have the state certifications needed to operate many of his New York companies revoked. He said President Trump will then strip control of these companies, which are the legal owners of the Fifth Avenue headquarters and other prominent real estate, and hand them over to a trustee who will manage the “dissolution” of those companies. said it should.
What the judge is not clear about is what he means by the word “dissolution” and whether it refers to the liquidation of the entity managing the estate or to the estate itself. Asked specifically in court whether President Trump's building would literally be sold as in bankruptcy, Engoron said he would clarify at a later date.
According to the interpretation of legal experts, in the worst case, Engoron could decide on the means of dissolution. Deprivation of real estate tycoon Not only New York properties such as Trump Tower and his skyscraper at 40 Wall Street, but also Florida's Mar-a-Lago club, a hotel and condo building in Chicago, and Miami, Los Angeles and Scotland.
New York Attorney General Letitia James ordered Trump to be barred from doing business in New York and required to pay compensation. $370 million, what she estimates are interest savings and other “ill-gotten gains.” However, she never asked for the property to be sold, and she may not even want to sell it. “I don't think we're looking for something that would cause a liquidation,” one of her attorneys, Kevin Wallace, said in her closing argument.
Engoron said he plans to issue a judgment on the cash fine and business ban by January 31, and clarify his “dissolution” order.
history of punishment
Specifically, New York's anti-fraud statute, known as Administrative Law 63(12), makes clear that a finding of fraud does not require an intent to deceive, but rather that someone actually be defrauded or lose money. The attorney general must prove only “repeated fraudulent or illegal acts.”
However, an AP analysis based on 63(12) searches reported in legal databases LexisNexis and Westlaw found that victims and losses were factors when deciding whether to take over a business .
For example, one breast cancer nonprofit used nearly all of its $9 million donation to pay for board members' salaries, perks, and other expenses, instead of funding free mammograms, research, and support for survivors. , closed a dozen years ago.
A private equity firm that faked great investment success has been shut down after stealing millions of dollars from thousands of investors.
A mental health facility has been shut down for neglecting its patients and stealing $4 million from public funds.
There may be more dissolved companies than those found by the AP. Legal experts have warned that some of the 63 (12) cases do not appear in legal databases because they have been resolved, withdrawn or not reported.
Still, the only time the Associated Press has disbanded a business under the Fraud Act without mentioning actual victims or losses is for a relatively small business closed in 1972 to produce periodic reports for college students. It was a large company. In this case, the attorney general said the victim was the “integrity of the educational process.”
This is not the first time Trump has run afoul of New York state fraud laws.his nonprofit trump foundation It agreed to shut down in 2018 over allegations that he misused funds for political and business interests.and his trump university In 2013, it was charged under the same law for allegedly misleading thousands of students with false promises of success, but it was shut down before the courts could close it down. Trump ultimately settled the case and related lawsuits for $25 million.
The decades-long legal history of 63(12) shows many cases where defendants have been forced to continue operating their businesses despite incurring large losses to their customers.
In 2001, a judge appointed a receiver to take over a porn site despite millions of dollars in illegal credit card charges to hundreds of customers who thought they were getting a “free tour.” refused. In fact, the owners moved their funds overseas in an attempt to hide their trick. Still, the judge said appointing a receiver was an “extraordinary remedy” that should be used with caution, and that a preliminary injunction was sufficient. Years later, a prosecutor in another criminal case said that Gambino: mob family was running the business and had sent several of its owners to prison.
An auto finance company that allegedly secretly charged high interest rates was able to continue operating last year as long as it paid a fine and refrained from committing fraud in the future.
A judge also denied a rafting company's request to shut down after a customer drowned in 2011, but the attorney general ruled the company repeatedly used unqualified guides or no guides at all. showed that. Instead, he only ordered his owner to pay a $50,000 bond and clean up his act. The company is still run by the same family, but under a different name.
for playing cards
Mr. Trump's lawsuit involves 11 years of financial statements showing controversial and sometimes completely misrepresented values for real estate that would be used as collateral if the loan defaulted. was.
That includes President Trump exaggerating the size of his Manhattan penthouse apartment by three times. He listed unfinished buildings as if they were completed, and listed rent-controlled apartments as if there were no such rules. He made restricted funds appear as if they were liquid cash. And he painted Mar-a-Lago as if it could be converted into housing, even though the deed prohibits it.
As Letitia James lays out her case against Trump, she calls a lending expert to the stand who says that Deutsche Bank is making the most of Trump's loans based on calculations as if Trump had not provided a personal guarantee. estimated that they had foregone $168 million in additional interest.
But President Trump offered assurances, even if estimates of his personal wealth were exaggerated. In fact, the bank made its own estimates of Trump's personal wealth, sometimes cutting billions off Trump's numbers, and still decided to lend to Trump.
Testimony from German officials in charge of the loan also suggests that even without President Trump's personal guarantee, determining the appropriate interest rate for the loan may not be so easy.
The German unit that made business loans to President Trump was not a typical lending unit, but its personal finance unit. This group often lends to wealthy customers not only to earn interest, but also to help them manage their large personal investments and have a chance at winning the lucrative business of having other banking services purchased. . Testimony revealed that Deutsche clearly wanted to do business with the former client. -president.
President Trump has repeatedly called the case a meritless political “witch hunt” in impromptu rants at his trial. Because President Trump is richer than the reports sent to the banks suggest, and he didn't care about those numbers anyway because financiers always have their own plans. When analyzed, it was always repaid in full and continued to lend to him.
“What happened here is a fraud against me. I am innocent,” President Trump said in a statement. 6 minute statement in court earlier this month before a judge cut him off.
potential compromise
Indeed, the attorney general's office maintains that there is more at stake in Trump's case than the harm to the victims.
State's Attorney Kevin Wallace said large loans issued with an inaccurate understanding of risk harm the public and business community, “distort the market” and “discount honest borrowers.” He said it would happen.
Furthermore, Mr. Wallace said that if the banks did not take legal action themselves, “if you were wealthy enough, you could get away with doing it” to keep such lies against the banks quiet. He suggested that it would be the same as
Or, as Jerry H. Goldfeder, a New York lawyer and adjunct professor at Fordham University, put it, “Just because no one complains doesn't mean there wasn't fraud.''
In a footnote to a 94-page summary filed earlier this month, Letitia James suggested Engoron decide on a compromise. He appointed an independent monitor to monitor Mr. Trump's activities for five years, after which a court could revoke and possibly decide to revoke his business certificate. drive him out of business.
Thomas, of the University of Michigan, said he believes Engoron University may reverse its closure order, but remains concerned.
“Those who want to see Donald Trump suffer at any cost risk accusing him of disrespecting his very commitment to the rule of law,” he said. “It will be.”
___
Michael R. Sisak, Jennifer Peltz, David Caruso, and news researcher Rhonda Shafner contributed.
___
Contact AP's global investigative team at Investigative@ap.org or https://www.ap.org/tips/.
