A New York judge’s sweeping ruling on Tuesday punishing Donald Trump for years of alleged business fraud could force the former president to sell the New York real estate empire he built over decades that helped catapult him to fame, television stardom and the White House.
The decision in a civil case accusing Trump of illegally inflating his property values orders the cancellation of his New York business licenses, potentially wresting from his control of dozens of properties worth hundreds of millions of dollars.
Among those properties are Fifth Avenue’s Trump Tower, the landmark where Trump maintained his personal residence for years, filmed episodes of the “The Apprentice” and launched his 2016 presidential campaign. His other New York properties could be affected as well, among them his 40 Wall Street office building, Park Avenue condominiums and luxury retail — locations that brought Trump notoriety and fortune in Manhattan and played a central role in his magnate persona during his first run for the White House.
Lawyers for both Trump and New York Attorney General Letitia James (D), who brought the civil case, are still scrambling to understand the scope of the ruling from New York Supreme Court Justice Arthur Engoron, with a trial on the remaining elements in the case expected to begin Monday.
Experts said the full ramifications of the ruling would only emerge with further input from the judge and noted that Trump has avenues to appeal it. But they said it seems clear that Trump’s ability to control his New York properties is in grave and immediate jeopardy because he cannot operate them without a state license.
“The judge has said this is a matter of such urgency that these LLCs need to stop operating right now,” said Celia Bigoness, a professor at Cornell Law School.
The ruling puts Trump at the greatest risk of losing control of his business in decades. Although the stakes may not be as a high as when his bad bets on Atlantic City casinos led him to file six corporate bankruptcies in the ’90s and early 2000s, the symbolism of being effectively barred from doing business in New York City — a place he has been so closely identified with nearly his entire life — may leave a more lasting mark. Trump was raised in Queens, fashioned himself as a Manhattan real estate tycoon early in his career and regularly stormed into Big Apple political battles for more than four decades before becoming president and moving to Florida.
Trump, who is separately facing four criminal indictments related to alleged illegal conduct during his 2016 presidential campaign and before and after he left the White House, issued a statement in response to the ruling saying, “The widespread, radical attack against me, my family and my supporters has now devolved to new, un-American depths, at the hands of a DERANGED New York State Judge,” and defending the valuations of his properties.
Trump understands that having the licenses canceled would be “a huge blow for him,” a person who has worked for Trump for years and knows his businesses said, speaking on the condition of anonymity to discuss private conversations, adding that the process will be “massively expensive” for the former president. Though Trump lives in Florida, he often brings up his New York companies, asks for updates and still goes into Trump Tower on occasion, this person said.
In the ruling, Engoron said Trump’s defense had repeatedly made patently “bogus” arguments defending the company’s process of valuing properties on financial statements that Trump used to get loans and insurance policies. James alleges that the Trump Organization routinely ignored professional appraisals and common accounting principles to inflate the value of its assets to get better terms from banks and insurers than the company may have otherwise received.
Trump’s defense has maintained that the case is baseless because the banks that issued him loans profited from them and Trump didn’t default on any of the loans at issue between 2011 and 2021. They have pointed to the lenders’ level of sophistication in conducting their own valuations as proof that none of them relied on or needed to rely on the Trump Organization’s financial statements.
Trump’s team has also relentlessly painted James’s suit as politically motivated, referencing comments the Democratic prosecutor made during her first campaign saying she was going to come after him if elected.
But in his ruling ahead of the trial, Engoron largely agreed with James’s arguments.
“In defendants’ world: rent regulated apartments are worth the same as unregulated apartments; restricted land is worth the same as unrestricted land; restrictions can evaporate into thin air …” he wrote.
“That is a fantasy world, not the real world,” he wrote.
The judge also ordered Trump’s attorneys to identify potential candidates to serve as a receiver in the case and “manage the dissolution of the canceled LLCs,” or limited liability corporations. In the Wednesday court appearance, Trump attorney Christopher Kise asked for clarity, saying there are 400 or 500 entities that could possibly be affected by that order, including LLCs that might own the homes of Trump’s sons. “Are they covered?” he asked Engoron, who did not provide an answer.
At trial beginning next week, Engoron will consider even bigger penalties that James has requested, among them $250 million in fines; a prohibition on Trump and the company from obtaining new loans by any bank chartered in New York for five years; and a ban on Trump, his adult sons and executives from operating or owning businesses in the state in the future.
If the judge rules with Trump on whether he can own other businesses, the former president and leading Republican candidate could possibly create new LLCs and transfer his properties into the new entities, subject to the approval of a receiver.
But given the judge’s insistence that Trump be stripped of his existing licenses, experts said that did not seem like the most probable outcome. Engoron also fined Trump’s attorneys $7,500 each for “intentional and blatant disregard” of the law and slammed the former president for continuing his alleged frauds during the case.
“The primary reason the judge imposed this is because he felt the remedies put in place so far haven’t been enough and that in his view President Trump continued to inflate the value of his properties even after the start of the litigation,” said Robert G. Heim, a partner at the New York law firm of Tarter Krinsky & Drogin who has closely followed the Trump case. “And it just escalated to the point where the judge felt there was no other remedy that could be imposed short of such a drastic, drastic remedy.”
Engoron, a Democrat first elected in 2016, has yet to detail the exact receivership and dissolution process that would apply in this case. During a court appearance Wednesday, the judge and both legal teams spoke positively of retaining former judge Barbara Jones, who has been serving as a monitor in the case, to serve as receiver. Jones has played a role in other high-profile New York cases, including those involving Rudy Giuliani and Andrew Cuomo.
Because it is a civil trial, none of the defendants face jail time even if they are found at fault. In contrast, Trump could be sentenced to prison if he is found guilty in any of the criminal cases. Those include a federal indictment in Florida for allegedly mishandling classified documents after leaving the White House and obstructing government efforts to get them back; a federal indictment in D.C. and a state indictment in Georgia over alleged efforts to obstruct Joe Biden’s 2020 presidential election victory; and a New York state indictment on charges of falsifying business records in connection to hush money payments during the 2016 presidential campaign. Trump has pleaded not guilty to all 91 counts.
If Trump is eventually barred from operating businesses in New York because of the civil trial, he would have to transfer or sell his New York real estate and move his headquarters out of state, legal experts said.
“The New York state properties will be sold off almost certainly,” said Marcel Kahan, a New York University law professor. The receiver would probably work with Trump to maximize the sale of his New York assets, or to keep them with other family members, such as Trump’s wife, Melania, or daughter Ivanka, who was removed from the case and is not subject to the rulings.
“He could have a company that is owned by Ivanka or other members of his family. They are not subject to this order,” Kahan said.
As a result of Tuesday’s decision, the New York Supreme Court bench trial that is expected to begin Monday will be focused on whether specific illegal conduct occurred in the course of committing the larger fraud. That alleged conduct, which falls under the state’s penal law, involves the falsification of business records and financial statements, as well as fraudulent dealings with insurance companies.
Trump’s lawyers recently sued Engoron over what they argue is a refusal by the jurist to dismiss significant portions of the case on the statute of limitations grounds for events that occurred before 2014 or 2016, factoring in a 2021 waiver that could complicate which defendants or claims it applies to. They have argued that Engoron ignored a June mandate from an appellate panel to eliminate parts of the case.
“Today’s outrageous decision is completely disconnected from the facts and governing law. The Court ignored fully the Appellate Division mandate and basic legal, accounting and business principles,” Kise said in a statement this week when the judge’s summary judgment failed to eliminate any part of the case as too old to proceed.
Engoron included one line in Tuesday’s ruling that made clear he did not believe the higher court dismissed anyone from the case but Ivanka Trump, who was explicitly excused. The panel instructed Engoron to sort out the rest of the statute of limitations controversy based on its interpretation of the law and the implications of the waiver.
The same appellate court declined on Thursday to postpone the trial while it decides if Engoron committed an error.
The financial statements at the heart of James’s case came to light after former Trump attorney Michael Cohen disclosed them to Congress and The Washington Post and other outlets reported on massive discrepancies between what Trump reported on the forms and the likely value of his properties.
In her lawsuit, James alleged that Trump inflated his net worth by billions of dollars and exaggerated the size and quality of his properties on his financial statements. For example, she said Trump claimed his triplex apartment at Trump Tower had 30,000 square feet when it was actually 10,006 square feet, which enabled him to vastly overstate its value. Trump’s accounting firm, Mazars USA, said in a letter last year that it could no longer stand behind the statements and cut ties with Trump.
Trump, in a deposition for the case, said his statements of financial condition were never relied upon by banks, and he said they had a disclaimer that he said made them “worthless.” He said that “this is a worthless statement from the standpoint of your using it as a bank.”
However, Engoron wrote in his ruling that Trump’s claim that the statements were worthless was itself worthless and cannot be used as a defense against fraud. Trump, his adult sons and Ivanka Trump have all been listed as witnesses.
Some observers said Trump has a strong case to get the ruling overturned on appeals.
“I don’t think this is going to stick,” said Kyle Welch, an assistant professor of accountancy at George Washington University who has followed the case. While Welch said Trump’s assessments of his financial worth were probably inflated, calling them “ridiculous,” he said Engoron’s ruling made no sense because banks haven’t complained about being misled.
“What we have here is a judge that I don’t believe understands financial statements,” Welch said.