Donald Trump’s corporate empire may be in jeopardy, according to a new court filing by the New York attorney general. Of all, we’ve seen this scenario before: Trump is confronted with supposedly insurmountable legal obstacles, only to emerge unscathed. From Robert Mueller’s investigation into Russian election meddling to Trump’s impeachment trial for his role in the Jan. 6 attack on the US Capitol, and countless instances in between, Trump seems to evade legal accountability at all costs.
However, New York Attorney General Letitia James’ inquiry has the potential to damage Trump where it matters most to him: his chequebook. The AG’s probe is a civil one, which means no jail time is in the cards, but huge sums of money are at stake.
A civil case for fraud under New York law, if successful, could expose Trump to millions of dollars in damages and restitution, as well as the liquidation of his company.
Subpoenas for the Trump family
Subpoenas have been issued for members of the Trump family. In fact, the Trump Foundation, marketed as the charity arm of the Trump Organization, was dissolved in 2018 as a result of a “shocking pattern of criminality” uncovered by James’ predecessor’s civil probe.
If fraudulent activity is revealed in a civil lawsuit, criminal investigators at the Manhattan District Attorney’s Office may use it in a concurrent criminal investigation. James filed a petition with the New York State Supreme Court this week to compel the former president, Donald Trump Jr., and Ivanka Trump to testify in response to subpoenas she issued. All three were in charge of the Trump Organization’s financial statements, including asset valuations.
James claims that she requires testimony from these three witnesses in order to establish whether “many misstatements and omissions” in asset valuations were made with the intent to deceive.
Trump has requested the court to quash the subpoenas rather than comply with them. He has also filed a complaint in federal court in Albany, requesting that the probe be halted in its entirety, claiming that it is being conducted primarily for political reasons.
Accusations levelled at Trump
However, claiming that a probe is without validity begs a counterattack, as James did on Tuesday. James listed a number of her findings to date in her petition, including the apparent overvaluing of at least six assets for loan applications, insurance coverage, and tax deductions. According to James, the Trump Organization stated on financial papers in 2014 that the golf resort in Scotland was valued $435 million, which was more than double its 2013 verified value.
Trump’s Seven Springs Estate in Westchester County increased in value from $7.5 million in 1995 to $291 million in 2014, according to James. The property was appraised in 2006 for $30 million. The petition also claimed that Trump overstated the size of his Manhattan apartment, claiming it to be 30,000 square feet when it is actually barely more than 10,000 square feet. Additional examples of possible fraud are included in the petition.
New York law allows the state’s attorney general to investigate “persistent fraud or illegality” in business and ask a court to prohibit the activity, allowing for restitution, damages, and the cancellation of the licence to do business. The attorney general also has the authority to issue subpoenas to obtain pertinent facts for her inquiry.
Is it a blunder that went unnoticed, or is it a fraud?
James contends that she requires the testimony of the three Trumps in this case. The simple element in every fraud prosecution is establishing what transpired. We know that the Trump Organization used figures that appeared to be incongruous with numbers on other documents in certain documents. Proving why the figures differ is the tricky part. Was it a simple oversight? Was it a problem with the books? Talking to the people who authorised the numbers can often reveal fraudulent intent.
The lawsuit case should be discontinued for various reasons, according to Trump. One theory is that James is merely circumventing the Trumps’ constitutional rights by obtaining criminal admissions through a civil case.
Witnesses may still invoke their Fifth Amendment privileges against self-incrimination during a civil deposition if their statements could be used against them in a criminal proceeding. According to James’ lawsuit, Eric Trump did just that during his October deposition, invoking the Fifth Amendment 500 times.
Another argument could be that the corporations that gave him money or offered insurance coverage were sophisticated financial institutions that were compelled to conduct their own due diligence before making financial judgments. To put it another way, they should have known better than to put their faith in him. This argument is doomed to fail. In a fraud case, it is the offender’s purpose that counts, not the victim’s.
Finally, Trump has invoked his favourite defence, claiming that he is the true victim of this probe and that it is a political witch hunt. In this case, James hasn’t helped her cause by making public pronouncements about her plans to sue Trump, but disrespectful remarks by the attorney general don’t nullify fraudulent behaviour.
If James decides to pursue a civil action for fraud, the court will decide if the evidence is adequate to award damages, restitution, or dissolution, not James.
Trump could yet pull off a spectacular rescue of his beleaguered corporation. Or perhaps the film will have a happy conclusion this time.