Ultimate punishment for corporate crime, besides jail for execs
By
His
gaudy Trump Tower apartment, his golf courses, his Boeing 757 jet and even
Mar-a-Lago could all be disposed of by a court-appointed monitor, leaving Trump
with not much more than his pensions as a one term president and a television
performer.
A
New York State judge on Tuesday cancelled all of the business licenses for the Trump
Organization and its 500 or so subsidiary companies and partnerships
after finding that Trump used them to, along with his older two sons, commit
fraud.
Under
the New York General Business Law, you can only do business in your own name as
a sole proprietor or with
a business license, which the state calls a “business
certificate.” All of Trump’s businesses were corporations or partnerships
that require business certificates.
The civil fraud case was brought by Letitia James, the elected
attorney general of New York State.
The
evidence and the issues were so clear cut, Judge Arthur F. Engoron ruled on
Tuesday, that there was no reason to waste the court’s time trying them.
In
a 35-page decision, Judge Engoron also excoriated Trump and his lawyers for
making nonsense arguments, so badly misquoting legal cases that they turned the
law upside down, and other legal misconduct.
Five
Trump lawyers were each fined $7,500 for making “frivolous” arguments.
A judge calling a lawyer’s argument “frivolous” is the equivalent of saying it is no better than nonsense from a drunk in a bar, as I teach my Syracuse University College of Law students.
Those
lawyers may well find it wise to hire their own lawyers as Judge Engoron’s
findings could form the basis of disbarment proceedings, something already
underway against Trump lawyers Rudy Giuliani, the former federal prosecutor,
and John Eastman, a former dean of the Chapman University School of Law in
Orange, Calif.
In
2015 Trump claimed his net worth was north of $10 billion. When he became
president, he asked if he could file his federally required financial
disclosure statements without signing them under penalty of perjury. That
request was denied. The statement Trump then filed, by my counting, showed a
net worth of not much more than $1 billion, but was based on fantastical
assertions of value.
News
organizations, except DCReport, told their audiences next to nothing about how
from June 2015 to January 2017 Trump’s claimed net worth fell by roughly 90
percent.
Trump
will, of course, appeal. He is already suing the judge, so far without success.
I
give Trump’s chances of prevailing on appeal at somewhere between zero and
nothing except perhaps on some minor procedural point, which you can be sure
Trump will describe as complete vindication.
The
summary judgement decision Tuesday was partial, however.
A
non-jury trial before Judge Engoron next week will determine how much Trump
will be fined for his years of bank fraud and insurance fraud.
Barring
a highly unlikely reversal by an appeals court, Trump’s business assets
eventually will be liquidated since he cannot operate them without a business
license. Retired Judge Barbara Jones was appointed to monitor the assets, an
arrangement not unlike the court-supervised liquidation of a bankrupt company
or the assets of a drug lord.
Creditors,
any fines due the state because of the fraud, and taxes will be paid first from
sales of Trump properties.
The
various properties are likely to be sold at fire sale prices and certainly not
for top dollar when liquidation begins, probably after all appeals are
exhausted.
Among
these properties is the portion of Trump Tower that Trump still owns and leases
to businesses as office and retail space; his own triplex apartment there; his
golf courses; and Mar-a-Lago, the Florida mansion he bought in a corrupt
mortgage deal decades ago. He also has deals to license his name on buildings
and businesses, which similarly he can no longer operate and whose profits he
must give up.
The
fact that Trump assigned values two, four, ten times and more above their
actual values indicates that once all of the priority bills are paid there will
be little to nothing left for Trump.
Trump,
for example, has claimed that his Westchester County mansion north of Manhattan
was worth close to $300 million, ten times the highest valuation by appraisers
and bankers. Even those valuations may be inflated because of restrictions on
developing the 30-acre property with more mansions.
Trump
asserted in annual financial summaries that his gaudy Trump Tower triplex was
about 30,000 square feet when it is closer to 10,000 square feet, testimony
showed. He also valued the residence at as much as $200 million more than its
highest appraised value.
The
judge noted that these were not small differences that might be due to an
apartment having, for example, an odd shape.
Trump
of course will appeal. Trump always insists he has done nothing wrong and in
this civil matter is the victim of a judge who doesn’t know the law. It’s a
laughable argument.
Trump,
in his own mind, can do and never has done anything wrong. Indeed, in 2016 he
told a radio show host that as a Christian he has never asked for godly
forgiveness because he has never done anything in his life that would require
seeking forgiveness. No actual Christian would say that, nor would a Christian
say, as Trump has many times, that his life philosophy is a single word:
revenge.
When
Trump was deposed by the state attorney general’s litigators, he cited his
Fifth Amendment right against self-incrimination hundreds of times.
He
also asserted that his annual financial statements were meaningless and
everyone in the banking and insurance fields knew to pay them no heed so the
judge shouldn’t either.
Judge
Engoron rejected the idea that one can put out financial statements that are
meaningless. As Judge Engoron wrote about the fantastical financial valuations
and bizarre and baseless arguments Trump made in court:
“In
defendants’ world rent-regulated apartments are worth the same as unregulated
apartments; restricted land is worth the same as unrestricted land;
restrictions can evaporate into thin air. That is a fantasy world, not the real
world.”
The
carefully written 35-page decision by Judge Engoron is known as a partial
summary judgment. The judge found that on most of the civil fraud case brought
by Letitia James, the state attorney general, there were no issues in dispute
because James got the law and the facts exactly right and Trump had nothing but
distortions, lies and baseless denials.
The
principal issue to be decided at a trial scheduled to start Monday, Oct. 2, is
how much Trump will be fined.
Trump
also argued that since he paid his bank loans and insurance premiums on time no
one was hurt. He argued against “restitution.”
The
judge noted that the case is not about restitution but disgorging ill-got gains.
Here’s
the analogy I will teach my students: Suppose your employer is closing for a
day and when business is done you swipe $100 from the cash register, go to the
racetrack, make a winning bet and before business resumes you put back $100.
You
still committed a crime and if get caught you forfeit the track winnings as the
proceeds of your ill-got gain — that’s disgorgement.
Trump
also made the ludicrous claim that the state attorney general had no power to
sue him, that she lacked what the law calls “standing” to file a case because
she was not harmed.
Judge
Engoron noted that state law specifically authorizes the attorney general to
sue in such cases on behalf of the people of the state.
The
fact is that Trump’s bizarre, fact-free, and frivolous arguments may enthrall
those who see him as their hero or savior, but in a court of law all Trump
could present was distortions, lies, and childish nonsense.
David Cay Johnston co-founded
DCReport. He is a best-selling author and investigative journalist who for 13
years reported for The New York Times. Johnston is a specialist in economics
and tax issues. He won a 2001 Pulitzer Prize. He teaches at Syracuse University
College of Law