As Donald Trump’s lawyers tried on Thursday to overturn the gargantuan half-billion-dollar bank fraud judgment, New York appellate judges wondered aloud whether the state’s attorney general went too far in scrutinizing the billionaire’s private dealings with Wall Street.
The five-justice panel showed mixed reactions, with at least one jurist who has repeatedly sided with Trump indicating that he is inclined to do so again. Their joint decision is expected in a little over a month — precarious timing with the presidential election just six weeks away.
“Identify any previous case where AG sued under 63-12 to upset a prior business transaction that was legally sophisticated,” Associate Justice David Friedman asked deputy solicitor general Judith N. Vale. Friedman cited an argument Trump’s team has often used, which is that the former president couldn’t possibly have tricked banks who had “conducted their own due diligence.”
This appellate court will decide what to do with a historically large financial punishment that a trial court judge leveraged on the former president earlier this year. After a three-month trial last year, Trump was found personally liable for repeatedly and persistently lying about his wealth. He was barred from doing business in the financial capital of the world and slammed with a judgment that grows nearly $100,000 a day and threatens to empty his bank accounts.
Although Trump was not criminally charged, New York Attorney General Letitia James’ civil trial outlined how the business mogul had routinely faked his financial statements to secure better bank loans and insurance policies for his many real estate development projects.
Now seven months after state Supreme Court Justice Arthur F. Engoron’s sweeping 92-page order, an appellate court is picking over the judgment with a fine-tooth comb.
Friedman was the most engaged member of the panel Thursday, interrupting Vale early and often in his questioning.
In describing the AG’s lawsuit as an insertion into a private transaction that’s “protecting Deutsche Bank against President Trump,” Friedman also became the only jurist on the panel to identify Trump by his former government title.
But Friedman’s core concerns were echoed by others on the panel who considered Trump’s argument that the specific law leveraged in this case has never been wielded with such potency.
Associate Justice Peter H. Moulton brought up “the question of mission creep” and asked how far the AG would go to probe corporate dealings.
“There has to be some limitation in what the attorney general can do in interfering in these private transactions … where people don’t claim harm,” Moulton said.
“The legislature wants the attorney general to go in and stop fraud and illegality,” Vale said, stressing that Trump’s years-long deception “does have harm to the market and the public.”
Presiding Justice Dianne T. Renwick noted how the law leveraged by the AG in this case was meant “to protect honesty and integrity in the commercial marketplace,” opening up the discussion to examine how New York’s legislature enacted the law as a way to crack down on rampant fraud. That tee’d up the deputy solicitor general to argue that New York regulators shouldn’t sit on the sidelines while complex business transactions behind closed doors fuel unscrupulous dealmaking.
Vale pointed to the disastrous growth in low-quality residential mortgage-backed securities that triggered the Great Recession in 2008 and created a wave of foreclosures.
“There was probably a time when most of us didn’t know what … an RMBS was. The attorney general or someone else could have stopped that fraud and illegality when it was just sophisticated parties, before the ripple effects,” Vale said.
Meanwhile, Trump’s defense team returned to the same argument it has made for years to no avail: that investigators relied on financial statements that are too old to use as evidence, no banks or insurance companies were actually harmed and everyone involved walked away from the deals with a ton of profit.
“There were no victims, no complaints,” Trump’s lawyer D. John Sauer said. “Sophisticated parties … did do their own due diligence.”
“What about deterrence?” Moulton asked, lifting the AG’s argument that “in the future, some deal might not go down well and someone might be harmed by that.”
Sauer countered that the deals actually show the opposite, given that no bankers or insurers complained. Sauer — who successfully represented Trump before the Supreme Court when it recently granted him extensive immunity from criminal prosecution for his actions at the White House — got most emotionally charged when he claimed that Trump and his businesses had followed what are called “Generally Accepted Accounting Principles.”
“It’s the factual inaccuracies that are important,” Moulton countered. “You might be following GAAP principles, but if your data is terrible, you’re creating a fallacious statement.”
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Jose Pagliery is a reporter at NOTUS.