An Introduction to the Trump Civil Case

The Trump Trials: A Civil Action

“For too long, powerful, wealthy people in this country have operated as if the rules do not apply to them,” says Letitia James, the Attorney General of the State of New York. “Donald Trump stands out as among the most egregious examples of this misconduct.”

The Defendants: The Trump Family and the Trump Organization

On September 21, 2022, James filed a complaint against the former President on behalf of the People of the State of New York in the New York County Supreme Court. His children, Eric Trump, Ivanka Trump, and Donald Trump, Jr. were also named as defendants.

Accusations: Financial Fraud and Deceptive Practices

The lawsuit claims that Donald Trump, aided by his children and senior executives at the Trump Organization, deliberately exaggerated his net worth by billions of dollars. The purpose behind this alleged deception was to persuade banks to grant loans to the Trump Organization under more advantageous conditions than it would have otherwise received. By inflating his net worth, Trump also managed to meet ongoing loan requirements, entice insurers to provide coverage with higher limits and lower premiums, and secure certain tax advantages.

The Methods: How Trump Allegedly Inflated His Net Worth

How did he do this? James states that the defendants engaged in fraudulent activities by deliberately fabricating over 200 false and deceptive asset valuations in Donald Trump’s annual Statements of Financial Condition from 2011 to 2021 (see example). These statements, which Trump certified as accurate representations of his net worth, were compiled by executives at the Trump Organization and were issued with a compilation report from Trump’s accounting firm.

Inconsistencies in Accounting: The Statements of Financial Condition

The Statements of Financial Condition deviated from standard accounting principles by false claiming the presence of cash that did not exist, disregarding crucial limitations that would have significantly decreased property valuations, altering the valuation methods used for properties from year to year, and employing vastly different approaches to value different properties within the same year.

Case Examples: The Trump Tower Triplex and Trump Park Avenue

  1. The Trump Tower Triplex

The property valuations for this asset were based on deliberately incorrect figures, leading to inaccurate calculations of property values. Trump’s own triplex apartment, for example, was falsely stated to be 30,000 square feet when its actual size was 10,996 square feet. Consequently, in 2015, the apartment was valued at an exorbitant $327 million, which is an absurd price considering that only one apartment in New York City at the time had ever been sold for more than $100 million.

  1. Trump Park Avenue

This property was listed as an asset with values running from $90.9 million to $350 million. The predominant portion of the reported value for this property—exceeding 95% in some years—was attributed to unsold residential condominium units owned by Trump or the Trump Organization. These reported values failed to acknowledge the fact that many of the units were subject to rent stabilization. To illustrate, an external appraisal ordered by a bank in 2010 assessed the 12 rent-stabilized units at a total value of $750,000. However, the rent-stabilized apartments were valued as if they were market-rate units (totaling nearly $50 million) in the 2011 and 2012 Statements of Financial Condition.

The Legal Backdrop: Violations of New York Executive Law 63(12)

According to James, this conduct is in violation of New York Executive Law 63(12), which gives the Office of the Attorney General special and broad powers to go after persistent and repeated fraud and illegality. As part of demonstrating illegality under 63(12), James alleges that Trump and other defendants violated state laws, including:

  1. The falsification of business records (Penal Law § 175.10);
  2. The issuance of false financial statements (Pental Law § 175.45);
  3. The engagement in insurance fraud by submitting false and misleading information in a written application for insurance (Penal Law § 176.05);
  4. The engagement in a conspiracy to commit each of the aforementioned state law violations.

The Consequences: Potential Penalties for Trump and His Organization

Through this complaint, the New York State Attorney General’s Office seeks to permanently bar Trump from serving as an officer or director in any New York corporation. The office always wants to bar Trump and the Trump Organization from entering into any New York real estate acquisitions for five years, and it was to award disgorgement of all financial benefits obtained through the persistent fraudulent practices, estimated to total $250 million.

The Trial Date and Presiding Judge: The Honorable Arthur Engoron’s Take on the Case

A trial date has been set for October 2, 2023. Presiding over the case is the Hon. Arthur Engoron, who has described it as a “seemingly straightforward matter.” Engoron emphasized that while the case is complex, it is not inherently complicated. “You don’t need an accounting degree,” he remarked.

Prior to founding Trellis, Nicole Clark was a business litigation and labor and employment attorney who handled litigation in both state and federal courts. She regularly represented multinational corporations in claims ranging from high-profile trade secret disputes to complex class-action litigation. Frustrated by sending internal emails and collecting anecdotes on judges in order to make strategic case recommendations, she built Trellis to solve her own need for access to data, information, and analytics at the state trial court level. Prior to law school, Nicole attended Bard College, beginning her college coursework at the age of sixteen. She graduated with honors from University of Massachusetts Amherst with a BA in Journalism, and received her Juris Doctorate from Rutgers School of Law in Newark, NJ. Nicole sat for the Bar Exam in California, Massachusetts, and Connecticut, and remains licensed to practice law in all three states.