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The courts are finally catching up to a man who has long behaved as though there would never be any consequences for his deceptions.
“That is a fantasy world, not the real world.”
So wrote Arthur Engoron, a New York State judge, in an unexpected ruling late yesterday that threatens the heart of Donald Trump’s business empire. Engoron was referring in particular to arguments offered by the former president’s attorneys in the case, but his words describe many of the details of the case—such as the valuations of Trump’s properties and even the square footage he claimed they contained, both of which the court found were “clearly” fraudulent. Much of the reputation Trump cultivated as a business mogul was built on lies.
The surprise is not that Trump and his co-defendants, including his sons Donald Jr. and Eric, committed fraud. What is surprising is that he could finally be punished for it—and quite harshly. The scheme that New York Attorney General Letitia James alleged last year was simple. When Trump wanted to lower his taxes, he’d claim a low valuation for a property. When he wanted to get cheap loans, he would inflate the valuation. This allowed him to inflate his claimed net worth each year, which let him obtain loans on better terms by personally guaranteeing them. Evidence of this pattern had already turned up in reporting, especially by WNYC and ProPublica, and James’s case offered much more.
Trump’s lawyers argued, in effect, that because there was no harm, there was no foul: The banks that loaned Trump money ended up making a profit (in part because they could charge higher fees to a customer whose companies had repeatedly gone bankrupt). To Engoron’s fury, Trump’s lawyers kept offering the same defenses even after they’d been thrown out in court. “Defendants’ conduct in reiterating these frivolous arguments is egregious,” he wrote, and fined the attorneys.
More consequentially, he also granted the attorney general’s request to cancel business certificates for Trump and his family. If the ruling stands, Trump could lose control of some of his marquee properties—including Trump Tower and 40 Wall Street, a prized downtown-Manhattan building. “The decision seeks to nationalize one of the most successful corporate empires in the United States and seize control of private property,” Trump’s attorney Christopher M. Kise complained. The ruling doesn’t actually amount to expropriation, as Trump would still own the buildings; he just couldn’t make financial decisions about them. The ruling also wouldn’t spell the end of Trump’s business, but it could force it to stop operating in New York State. (Trump’s properties sprawl across a range of different entities.)
Engoron’s ruling does not close the case out. Instead, it resolves some of the issues and narrows the questions for an upcoming trial, which will determine whether Trump has to pay a fine for overvaluing the properties. James has sought $250 million. This is a very large sum, though easily within Trump’s means if he is the billionaire he says he is.
The greatest blow to Trump may be reputational and psychological. He has claimed that the case against him is political persecution, and some of his supporters will find that compelling, but being found to be a fraud is no more an advantage than being indicted is. Because Trump has gotten away with this way of operating for decades, his fantasy world came to seem almost real. The idea that a judge might actually punish him seemed remote—both to Trump and to his detractors.
Though the civil case in New York has no direct connection to Trump’s other legal troubles, Engoron’s ruling suggests that the courts are now catching up to a man who has long behaved as though there would never be any consequences for his deceptions. Trump has tried to convince Americans that he won more votes than Joe Biden, that the 2020 election was stolen from him, that he had every right to abscond with classified documents and obstruct the federal government from recovering them, and that he was the greatest president in American history. This is a fantasy world, but the real world has ways of intruding on it.
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