Trump Found Liable for Fraud in New York Civil Case

The Ruling

On September 26, 2023, New York Supreme Court Justice Arthur Engoron issued a summary judgment ruling that Donald Trump, his adult sons Donald Jr. and Eric, and the Trump Organization had committed persistent fraud by systematically inflating the value of real estate assets on annual financial statements used to obtain favorable loan terms and insurance rates. The judge found that Trump had overstated his net worth by billions of dollars over the course of a decade. As part of the ruling, Engoron ordered the cancellation of business certificates for some Trump entities, effectively ordering their dissolution.

The Inflated Valuations

The lawsuit, brought by New York Attorney General Letitia James, documented specific instances of what the state called grotesque overvaluations. Trump’s triplex apartment in Trump Tower, which was approximately 11,000 square feet, was listed on financial statements as being nearly 30,000 square feet, tripling its stated value. Mar-a-Lago, which had deed restrictions limiting its use to a social club and which had been assessed by Palm Beach County at approximately $18 million to $27 million, was valued by Trump at up to $739 million based on its hypothetical use as a private residence. Trump’s financial statements also claimed he had the rights to develop unused space at properties where no such rights existed.

The Trial

After the summary judgment on the fraud question, a non-jury trial began on October 2, 2023, on the remaining claims, including disgorgement of ill-gotten gains. The trial, presided over by Judge Engoron, became a combative spectacle. Trump attended voluntarily on several occasions, delivering angry remarks to cameras outside the courtroom and clashing with the judge. At one point, Engoron imposed a gag order on Trump after he made disparaging social media posts about the judge’s law clerk.

The Penalty

On February 16, 2024, Judge Engoron issued his final ruling, finding Trump liable for persistent fraud and ordering him to pay $354.9 million in disgorgement plus pre-judgment interest, bringing the total to approximately $454 million. Trump was also barred from serving as an officer or director of any New York corporation for three years, and his sons received two-year bans. Trump immediately appealed and posted a $175 million bond. The case struck at the foundation of Trump’s public identity as a successful businessman, with the court finding that his empire was built in significant part on systematically fraudulent financial representations.