- [Devin] It's not the
corporate death penalty, but it could be the death of
Donald Trump's bank account. Judge Engoron in New York
State Court has ordered Donald Trump to disgorge, that is pay, hundreds of millions of dollars as a penalty for years of malfeasance and for reasons we'll discuss,
he might be on the hook for almost half a billion dollars. - A crooked New York
state judge just ruled that I have to pay a fine of $355 million for having built a perfect company. Great cash, great
buildings, great everything. - Now Judge Engoron starts
his decision by noting that the common law fraud
rules in New York made it far too easy for crooks
to get away with fraud. "In mid 20th century New York, to judge by contemporary press reports and judicial opinions, fraudsters were having a field day." So by the 1960s, New York decided to pass a law replacing common law fraud. That law grants the Attorney
General the authority to seek an injunction against anyone who engages in repeated,
fraudulent or illegal acts, or demonstrates persistent fraud or illegality in business transactions to seek discouragement of ill-gotten gains to impose bans on individuals
doing business in the state and even to cancel business certificates. Now Judge Engoron took
judicial notice of the fact that New York City is one
of the financial capitals of the world, and as such, the state of New York has an interest
in an honest marketplace. Trump supporters, taking
their cue from Trump himself, often say that everybody lies
on their financial statements. That's just how it goes. And as long as he paid back the loans, then no harm, no foul. But Judge Engoron took offense to that characterization. "Timely and total repayment of loans does not extinguish the harm that false statements
inflict on the marketplace. Indeed, the common excuse that everyone does it is all
the more reason to strive for honesty and transparency and to be vigilant in enforcing the rules. Here, despite the false
financial statements, it is undisputed that defendants have made all required payments on time. The next group of lenders
to receive bogus statements might not be so lucky. New York means business in
combating business fraud." And with that out of the
way, the judge summarized what had already happened and we've talked about this
at length on this channel. In a decision and order
dated September 26th, 2023, the court granted the
state summary judgment on liability solely for
the first cause of action. The judge determined that
Trump's main defense, that his statements of financial condition
contained disclaimers and a worthless clause
did not shield defendants from liability for their
material misrepresentations. The judge found that the
Trump financial statements materially misrepresented the
value of various properties and the court ordered the cancellation of defendant's business certificates under General Business Law section 130, the so-called corporate death penalty, although the appellate division temporarily halted this cancellation pending the outcome of defendant's appeal of the summary judgment rulings, the judge then held a 44 day trial to decide the remaining causes of action alleging
illegality under Section 6312 by falsifying business records and financial statements,
committing insurance fraud and conspiracy to commit those acts. And as you probably know by
now, the trial did not go well for the Trump defendants. The judge's verdict first
reviews the highlights and lowlights of the witness testimony. Donald Trump's testimony demonstrated that he signed off on all
the financial statements, the SFCs, and sometimes
offered his opinion on specific issues. Judge Engoron said that Trump
frequently made wild claims. For example, he testified that he actually undervalued Mar-a-Lago, believing it is currently "worth more than the most expensive
private residence listed in the country by approximately 400%." There's no possible way that Mar-a-Lago with its deed restrictions that last in perpetuity is
the most expensive property in the United States. The judge also considered an
audio tape of Trump saying that 40 Wall Street was 72 stories tall when it was in fact only 63. I quote, when asked if he was misquoted in the Forbes article, Donald Trump replied, "I don't know. I don't know what I said." The judge went on, "overall,
Donald Trump rarely responded to the questions asked and he
frequently interjected long, irrelevant speeches on issues far beyond the scope of the trial. His refusal to answer
the questions directly or in some cases at all, severely compromised his credibility." So it turns out that you can
only be a terrible witness on the stand for so long
before people start noticing and it hurts you in the judgments. The judge has already dismissed
claims against Ivanka Trump because she was not involved in the preparation of
the financial statements. Ivanka testified during the trial but the court didn't find
her terribly persuasive. "On direct examination by plaintiff, Ivanka Trump had no recollection
of any of the events that gave rise to this action. No number of emails or documents
with her signature served to refresh her recollection. Notably on cross-examination
by defendant's counsel, Ms. Trump suddenly and vividly recalled
details of the projects and her interactions with Vrablic. For example, after testifying
on direct examination that she could not
recall any of the details of her father's personal guarantee of the Old Post Office
loan, on cross-examination, she suddenly recalled quote,
"there was a step down of the guarantee if I recall once the property was operational." Ivanka Trump was a thoughtful, articulate, and poised witness, but the court found
her inconsistent recall depending on whether she
was questioned by OAG or the defense, suspect. In any event, what Ms. Trump
cannot recall is memorialized in contemporaneous emails and documents. In the absence of her memory, the documents speak for themselves." As for Trump's nemesis, Michael Cohen, the court found him
credible on some things but also very skeptical, at the same time. "Michael Cohen was an important witness on behalf of the plaintiff, although hardly the linchpin
the defendants have attempted to portray him to be. His testimony was seemingly compromised by his having pleaded guilty to perjury and by some seeming contradictions
in what he said at trial. However, carefully
parsed he testified that although Donald Trump did
not expressly direct him to reverse engineer financial
statements, he ordered him to do so indirectly in his mob voice. Although the animosity between the witness and the defendant is palpable, providing Cohen with incentive to lie, the court found his
testimony credible based on the relaxed manner
in which he testified, the general plausibility
of his statements, and most importantly, the way
his testimony was corroborated by other trial evidence." Again, with most high stakes litigation, it's the documents that are
really telling the story. The court called out Don Jr for claiming that the Trump
organization, which he runs, filled the CFO position
after Allen Weisselberg left. "The role of CFO has
remained vacant ever since. A fact that Donald Trump
Jr. did not know at trial, mistakenly believing that Mark
Hawthorn was the new CFO." The court heard from
many expert witnesses. Michael Bacardi was the
state's main witness. His "calculations determined that Donald Trump improperly
saved the following amounts on interest as a result of the banks relying on
Donald Trump's fraudulent SFCs and personal guarantee." And went on to list 72 million
from the Doral golf course, 53 million from the Old
Post Office hotel loan, 17 million from the Chicago building loan and 24 million from 40 Wall Street. And the judge determined
that McCarty's methodologies were sound and accepted his conclusions. In part because Trump's expert
witnesses were not great. Most of the Trump experts declined to give their opinion on whether the valuations were correct. One expert, Gary Giulieti turned out to have a financial interest in the case. Giulieti is a close friend
of Trump's who golfs and dines with him and is a member of many of his golf clubs. He's also Trump's insurance broker. Judge Engoron said that "in
its over 20 years on the bench, the court has never
encountered an expert witness who not only was a close
personal friend of a party, but also had a personal financial
interest in the outcomes of the case for which he is
being offered as an expert." Giulieti's testimony was also wild because it insisted that a
company like Zurich would never bother looking at statements
of financial condition. He claimed that Zurich would
only consider liquidity. He claimed that Zurich's
underwriting was based on airballs and witchcraft. Of course, Giulieti's testimony
was contradicted by a person who actually worked at Zurich and one of Trump's own expert witnesses. Judge Engoron also had harsh words for Professor Eli Bartov of NYU. Although Bartov did not
assess the valuations of any of the assets on Donald Trump's SFCs, he still claimed that "the statements of financial condition were
accurate in every respect and they were 100% consistent with gap." - He's one of the most
respected people anywhere in the country for doing
this kind of thing. Expert wisdom, he said this is one of the greatest financial statements I have ever witnessed before. - But the court stated
"as this court discussed in excruciating detail in its
September 26th, 2023 decision and order, the SFCs contain
numerous significant errors. By doggedly attempting to
justify every misstatement, Professor Bartov lost all credibility in the eyes of the court. Indeed, Bartov insisted
that the misrepresentation of the Triplex resulting in a
$200 million overvaluation was not intentional or material
leading the court to wonder in what universe is $200
million immaterial." Now if you have defrauded the
state of New York for decades, you're gonna need a good lawyer. But if you want a great lawyer, my firm, the Eagle Team can help. If you've had an injury
or death in the family or had a data breach,
especially if you got one of those data breach letters or were involved in a car
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team, you need the Eagle Team. The link is down below. And the judge found that
the Trump defendants engaged in systematic deceptive practices to inflate the value of
the assets on their SFCs. "Trump told Weisselberg that he wanted his net
worth on the statement of financial condition to go up." Continuing to ensure the net worth went up between 2011 and 2015, Weisselberg and Michael Cohen were tasked by clear implication from Trump to reverse engineer the
various different asset classes in the SFCs to increase
those assets in order to achieve the number,
Trump's net worth figure that he told them to reach. Once Weisselberg and
Cohen achieved the number that Trump tasked them to reach, Weisselberg would obtain Trump's approval and send the SFCs to
(indistinct) for finalization. Now, it should go without saying
this is not how statements of financial condition
are supposed to work. You don't begin with the number you want and then manipulate the assets to reach the valuation
that you're looking for. Judge Engoron found that "there is overwhelming evidence that Allen Weisselberg
intentionally falsified hundreds of business records
during his tenure as CEO of the Trump organization. Weisselberg understood that his assignment from Donald Trump was to have his reported assets
increase every year irrespective of their actual values." Judge Engoron concluded that "the examples of Weisselberg's intent to
falsify business records are too numerous to itemize. And as Liz Dye over at
Law and Chaos points out, once the Trump org was being monitored and was required to provide
accurate financial statements, they just stopped providing them. So the court concluded that they could not
provide accurate statements and when Trump became president, he appointed Eric and Don
Jr, as his agents with power of attorney over banking and real estate. They along with Weisselberg,
were responsible for preparation of the SFCs
from 2017 through 2021. "There is also sufficient evidence that Donald Trump Jr. and Eric Trump intentionally
falsified business records. They served as attorneys
in fact for Donald Trump and were under a heightened
duty of prudence." Don Jr argued that he didn't
read the SFCs closely, but the law presumes that Junior read and understood the contents
of his representations. The court also inferred
Don Jr's intent to defraud by his acknowledgement that
third parties could rely on his representations and although the state said
that Trump inflated his numbers to make himself look more
wealthy, Trump has repeatedly said that he actually
undervalued the properties but undervaluing the
properties is also problematic, especially when you're
saying different things to different people
depending on who they are. Now, the state claimed that "Donald Trump and
his trustees falsely and misleadingly classified
his 30% interest in cash held by the Vornado Partnership Interest as a liquid slash cash
asset on his SFCs for 2013 through 2021 in amounts between $14,221,800 and $93,126,589. Now this was a major problem because the Trump defendants
frequently claimed that lenders and insurance underwriters
only cared about his liquidity, but his liquidity was also suspect. Trump apparently listed this
cash in the asset category even after Trump's personal accountant, Donald Bender told him he
couldn't include any cash that Trump did not control. "Neither Donald Trump nor the Trump organization
could access his interest in any of the assets in the partnership without Vornado's consent." Mark Hawthorne who ran
Trump hotels even said that including the Vornado
cash in the cash asset category was a red flag and a very glaring issue. Then there is Trump's
famous Triplex in New York. "For 2012 through 2016, defendants used a false
figure for the size of the Triplex of 30,000 square feet or approximately three times
the apartment's actual size." And apparently Trump calculated
the value per square foot by using the asking prices of similarly sized apartments rather than the actual sales
prices of the properties. Everyone knew the true size of the Triplex because in 1994 Trump signed
a statement confirming it was only 10,996 square feet. Nevertheless, Weisselberg insisted that it was over 30,000 square feet and even Forbes caught onto this fraud. "On February 22nd, 2017, Forbes
Magazine emailed Weisselberg and McConney to question the 30,000 figure the Trump organization
used for the Triplex's size because public records showed that it was only 10,996 square feet." When Forbes asked Trump's
counsel Alan Garten about the Triplex, he forwarded the email to Eric, Don Jr and Weisselberg and they decided not
to amend the statements of financial condition. In fact, just four days later,
they finalized the 2016 SFC with (indistinct) stating that the value of the Triplex was accurately assessed as if it were 30,000 square feet. In 2017, the SFC contained
the correct square footage, but the Trump defendants decided to add a presidential
premium which would maintain the overall value of the Triplex. Then there was the
building at 40 Wall Street. "From 2011 through 2016, McConney and Weisselberg
valued 40 Wall Street based on dividing net operating income by a capitalization rate." But rather than using
the actual appraisals of 40 Wall, McConney used cap rates from a generic market report. When preparing the SFC, McConney cherry picked a cap rate of 3.04% and excluded the pages
of the actual appraisal of 40 Wall, which had a cap rate of 4.25%, which resulted in an appraised value that was 227 million lower
than McConney's value. Jeffrey McConney, who was high
up in the Trump organization played all sorts of games
to justify the valuation such as double counting the value of a lease signed by Dina DeLuca. And the upshot of this is
that the Trump organization claimed it ran a $26.2
million net operating income onto 40 Wall Street, but
in reality it was a deficit as high as $20.9 million through 2015. There's been a lot of controversy surrounding the Seven Springs Property. Eric Trump was personally
involved in the inflated value of the Trump Seven Springs Resort. The court concluded that the
state had proved that Eric knew that an appraisal by Cushman & Wakefield
estimated the total value of the property's undeveloped lots was between 30 and 50 million. However, Trump's 2014
financial statement valued the property at 291 million
including 161 million for just seven of the undeveloped lots. The court concluded that
the state had proved that Eric knew that an appraisal by Cushman & Wakefield
estimated the total value of the property's undeveloped lots was between 30 and 50 million. However, Trump's 2014
financial statement valued the property at 291 million
including 161 million for just seven of the undeveloped lots. And that takes us to Mar-a-Lago. We've covered the Mar-a-Lago
valuation in detail in other videos, but
here's the bottom line. Between 2011 and 2021, the "defendants valued Mar-a-Lago
based on the false premise that the property could be
sold as a private residence, when years earlier,
Trump conveyed his rights to develop Mar-a-Lago for any usage other than commercial usage as a club." The court continued "in exchange for executing the 2002
Deed in which he gave away in perpetuity the right to develop or use the property as a
single family residence. Donald Trump paid significantly
lower property taxes on Mar-a-Lago." Trump's position is
basically that he can get out of the deed restriction if he wants to. However, the judge concluded that "there is no legal gray area surrounding the permanent nature of
the deed restrictions. Accordingly, there can be no mistake that Donald Trump's
valuation of Mar-a-Lago from 2011 through 2021 was fraudulent." Now the full decision goes
through errors related to several other properties, but let's move on to the issue of intent because that is pervasive, throughout all of these charges. The state proved that Trump
did not assess his net worth based on his assets. Instead, he set desired
target for his net worth and then manipulated the
valuations to hit the target. Trump took great offense to the concept that the New York executive law doesn't require a traditional victim. Now Trump continually argued
that there was no victim, so there can be no crime, but this is incorrect as a matter of law. - Just so you know, my financial
statements are phenomenal. They are actually less in terms of the numbers used than
the actual net worth. The actual net worth
is substantially more. No bank was affected, no bank was hurt. They don't even know why
they have to be involved. - The State of New York "has
an interest in protecting the integrity of the marketplace and the banks did lose money by lending at a lower interest rate than they otherwise would have." Moreover, many witnesses
actually did testify that they relied on the SFCs. A former Deutsche Bank risk
management officer testified that Trump's statements of
financial condition were key to his approval for a
$125 million loan in 2011 for his golf course
resort in Doral, Florida and a $107 million loan in
2012 for his Chicago hotel and condo skyscraper. The former Deutsche Bank employees said that those numbers helped
Trump secure bigger loans and lower interest rates. Several insurance
underwriters also testified that they relied on Trump's SFCs, most importantly, the
inflated cash figures when they completed their analyses and the state's claims
did not require proof that a third party relied on the fake numbers to their detriment. But the question was
did Trump himself know what was happening and did
he intend for it to happen? Judge Engoron said yes. "Donald Trump was aware of many of the key facts underpinning various material fraudulent
misstatements in the SFCs. He was aware of having
deeded away the right to use Mar-a-Lago as anything
other than a social club, and notwithstanding continued to value it as if it could be used as
a single family residence. He was aware that the Triplex
apartment in which he, a real estate mogul and
self-identified expert resided for decades was not 30,000 square feet but actually 10,996 square feet. He was aware that he did not control the Vornado partnership interest even though he represented it as cash. He was aware that he had permission to build only 500 private
residences in Aberdeen. Notwithstanding that he represented that he had permission for 2,500 and he was aware that 40
Wall Street was operating at a deficit despite proclaiming that it was running a net
operating income of 64 million. As Eric Trump testified,
Donald Trump sat at the top of the pyramid of the Trump
organization until 2017. Donald Trump professed to
know more about real estate than other people and to be
more expert than anybody else, he repeatedly falsified business records with the intent to defraud." So the judge found all
defendants liable for conspiracy to commit insurance fraud,
"although only Allen Weisselberg and Jeffrey McConney
performed the overt acts of the insurance fraud, all defendants are
liable for the conspiracy as only an overt act by
one of the conspirators in furtherance of a conspiracy
is needed to be shown." And since each of the defendants
participated in aiding and abetting the conspiracy
to commit insurance fraud "causing material fraudulent SFCs to be intentionally submitted
to insurance companies," Judge Engoron ruled
that the defendants had to return their ill-gotten gains. This is known as disgorgement. Disgorgement typically refers to a remedy or penalty imposed by a court
where a defendant is required to give up the gains
obtained through illegal or wrongful conduct. So here's a pie chart showing
what the state asked for, approximately 370 million
in ill-gotten gains and the judge accepted
most of the calculations of the state's expert witnesses about how the defendants
gained financially, by securing loans from Deutsche Bank's private
wealth management division. The fraudulent SFCs resulted
in reduced interest rates compared to the rates
they would've incurred as a result of accurate SFCs. And as a result, the Trump's now have to pay back hundreds
of millions of dollars. The court also concluded that
there is significant evidence that Allen Weisselberg's $2
million separation agreement was arranged to compensate
him for his ongoing refusal to cooperate with any of the
entities that are investigating or prosecuting the Trumps. And additionally, given
Weisselberg's central role in nearly all instances of
fraud, Judge Engoron found it would be unjust to allow
him to profit from his actions. Weisselberg is accountable for the funds that he has obtained through
his separation agreement as they're considered to
be unjustly acquired gains. And despite being promised
a total of 2 million, Weisselberg had only received 1 million at the time of his testimony. Therefore, Alan Weisselberg is gonna have to surrender the $1 million
that he's already received. And here's a pie chart showing
how Judge Engoron ruled. As you can see, it's remarkably similar to what the state asked for. And on top of that, the
defendants must also pay pre-judgment interest, in a case like this that adds a significant
amount to the total. Unfortunately for Donald Trump, "a defendant's corrupt intent or desire for personal profit is a factor to be weighed in the court's
exercise of discretion." And in New York State,
in a case like this, pre-judgment interest is simple 9% meaning it doesn't compound, but it's 9% from the time
that it starts to run. And here the court set the pre-judgment interest
running from 2019. So that's going to add
tens of millions of dollars to what Trump ultimately has to pay if this verdict holds up. Now additionally, an Attorney General who has demonstrated "repeated illegal or fraudulent acts may obtain
injunctive relief pursuant to the executive law at issue here." And apparently the judge
was looking for evidence of contrition but found none and compounding that the judge found that they seldom complied
with court orders. The Trump defendants were
required to report all of their goings on to independent
monitor Barbara Jones, a former federal judge. But Judge Jones said they continue to hide things including
a $50 million loan that might actually be fake. And Jones' reports
convinced Judge Engoron that "defendant's refusal to admit error, indeed to continue it, according to the independent
monitor constrains this court to conclude that they will
engage in it going forward unless judicially restrained." So the court permanently
enjoined Alan Weisselberg and Jeffrey McConney from serving in the financial control function of any New York corporation. Donald Trump himself was banned
from serving as an officer or director of any New York corporation for a period of three years. and eric trump and don jr.
were banned for two years. And one thing that could really hurt them as a growing concern is
the court banned the group from seeking a loan for three years. - They want me out low, let's
see if we can get 'em out. - But that doesn't mean
that Trump lost everything. His biggest win was the
judge vacating the order to dissolve the business licenses. That order was stayed on appeal and if the judge had gone through with it, then the Trump businesses
would presumably have to be liquidated, but the judge decided against that for now. "However, as going forward, there will be two tiered
oversight, an independent monitor and an independent director of compliance of the major activities
that could lead to fraud, cancellation of the business licenses is no longer necessary. Accordingly, this court hereby modifies its September 26th,
2023 decision and order solely to the extent of
removing the language ordering the LLCs cancellation on mass. The restructuring and
potential dissolution of any LLCs shall be
subject to individual review by the court appointed
independent director of compliance in consultation
with Judge Jones." So Judge Engoron reserved the right to dissolve the licenses
later if necessary. The court appointed independent
monitor Barbara Jones now has more power though, now
the Trumps cannot do anything with the businesses
without her prior approval. He gave Jones 30 days to
submit a proposed order with everything that
she thinks is necessary to "keep defendants honest." The judge also ordered the Trump's to appoint an independent
director of compliance who will report to Jones and Judge Jones will be in
charge of selecting this person. And why did the judge impose
such strict injunctive relief? Because "this is not the
defendant's first rodeo." You might recall in 2013, the Trump organization paid $25 million as part of a class action settlement after Trump defrauded students who went to Trump University. In 2018, the New York Attorney
General sued Don Senior, Don Jr. and Eric for malfeasance
in the administration of Trump's charitable organization. And as part of that
settlement, they agreed to dissolve the Trump Foundation. And in 2022, "the Trump organization and the Trump Old Post Office LLC entered into a settlement
agreement with the office of the Attorney General for
the District of Columbia arising out of allegations that the 58th Presidential
Inaugural Committee paid excessive fees to
the Old Post Office LLC that accrued to defendants' benefit." Yeah, so in other words, the
Trump defendants have a long and documented history of committing financial
fraud in New York State and they can't be trusted
with running any type of business or charity. I don't know how many times
we have to keep doing this, but Judge Engoron's decision
not to cancel the certificates nor impose a permanent ban on Trump and the other executives
probably takes away some good argues he
might have had on appeal. And it's gonna be tougher for
Trump to prevail on appeal because the Court of Appeals
gives a lot of deference to credibility and factual
determinations made by the trial court judge. Generally these findings
can only be overturned on a finding of clear error. And generally there's only clear error if a judge didn't cite any
evidence for factual findings or something similar like that. Judge Engoron supported
each of his conclusions with witness testimony
and documentary evidence. The Court of Appeals doesn't like to substitute their own
judgment for the person that was actually the
fact finder in the trial. So the bottom line is this
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I'll see you in court.
