Jonathan Turley: This could force Trump to liquidate assets in New York
Constitutional law attorney Jonathan Turley breaks down the ruling in the Trump civil fraud case on 'America Reports.'
In the wake of the massive judgment against Donald Trump, many in New York are celebrating the prospect that the former president could be forced to sell off his property just to appeal the $355 million judgment against him. While Trump has good grounds to object to this excessive fine, he still has to come up with close to a half billion dollars just to make his arguments to the New York Court of Appeals.
In order to file an appeal, the courts require a deposit for the full amount of the damages or a bond covering the full amount. Even with escrow options, the call for cash or collateral can be enough to put some executives in a fetal position.
It can be challenging enough for many companies drained from years of litigation. For Trump, the demand for $355 million plus about $100 million in interest could force a fire sale on properties to pony up just the deposit.
Many of us have been critical of the ruling of Manhattan Supreme Court Justice Arthur Engoron who imposed the astronomical fine despite finding that Trump's "victims" not only did not lose a single dollar but made handsome profits. Indeed, these banks testified that they wanted to continue to do business with Trump as a "whale" client, but Engoron is now barring them from doing so.
Putting aside the merits of this judgment, the threshold deposit rule magnifies the unfairness of this New York law that does not require that anyone actually lose money to claim hundreds of millions from a company.
One can argue that, if upheld, any insolvency is the fault of the company. However, this rule can force insolvency just to seek review of a judgment.
For Trump, even this fine would only amount to roughly 14-17% of his wealth. The addition of the recent $83.3 million in damages imposed in a separate New York courtroom for defamation would bring the demand over half a billion dollars in deposits with interest.
Many of us have been critical of the ruling by Manhattan Supreme Court Justice Engoron who imposed an astronomical fine despite finding that Trump's ‘victims’ not only did not lose a single dollar but made handsome profits.
So, by making the fine so large, Engoron not only makes an appeal difficult, but could guarantee that Trump will lose tens of millions even if his judgment is dramatically reduced or tossed out.
On top of this looming penalty, however, Trump already owes the writer E Jean Carroll $83.3 million in damages from a separate defamation case that concluded in January. His legal fees are also mounting as he battles four criminal cases at the federal and state level.
LOOMING LEGAL PENALTIES RAISE QUESTIONS ABOUT DONALD TRUMP'S FINANCES
There is already speculation about whether Trump will have to leverage or sell his iconic properties at distress prices. He has 30 days to ante up with the court and buyers could use that deadline to their advantage. The added amount is due to another New York provision imposing a massive 9% interest rate on judgments.
That means that every day, Trump is being hit by roughly $90,000 in just interest increases.
Trump could secure a bond, but such a guaranty would come at its own premium price. However, a bonding company requires a defendant to put up 10% of the total and would lose that amount even if he prevailed. That is a roughly $45 million cost just to secure the right to an appeal. In this case, the cost could be higher given the judgment and the bar on Trump doing business for three years in New York.
The expectation is that Trump can make the deposit or secure a bond to avoid what some gleefully called a "fire sale" on this properties. The deposit is now being celebrated as an added indignity and penalty.
However, as New Yorkers cheer this moment, many business leaders are likely wondering if "there but for the grace of God go I." Undervaluing or overvaluing property is a common practice, particularly in real estate. That is why representations, like the one made by the Trump Corporation, come with a warning that estimates are their own and that the banks need to make their assessments.
TRUMP ORDERED TO PAY MORE THAN $80 MILLION IN E. JEAN CARROLL DEFAMATION TRIAL
Faced with high crime and high taxes, the spectacle in Manhattan is only likely to accelerate the exodus of businesses and high- earners from the city. That prospect has already alarmed Gov. Kathy Hochul who declared "business people have nothing to worry about, because they’re very different than Donald Trump and his behavior."
FILE – New York Attorney General Letitia James sits in the courtroom during the fraud trial of former President Donald Trump and his children on Friday, Nov. 3, 2023. (Dave Sanders-Pool/Getty Images)
That sounds a lot like "you are fine so long as you are not Trump." Yet, that is not reassuring to businesses who want a legal system that is based on something other than selective and arbitrary enforcement. Attorney General Letitia James campaigned on bagging Trump without even bothering to name the offense. She also sought to dissolve the National Rifle Association.
The line between doing business and a public execution now appears to be at the dubious discretion of the attorney general.
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That is not the type of assurance that most businesses would accept in risking billions in investment. Despite high taxes and falling services in New York, the city has remained a draw for business as a commercial and legal center. The experience and objectivity of courts in dealing with business disputes was a selling point for companies.
That has been shattered by the James campaign and the Engoron ruling. Telling business to just "don't be like Trump" is more menacing than consoling.
Republican presidential candidate and former President Donald Trump carries a pair of his new signature shoes before taking the stage at Sneaker Con at the Philadelphia Convention Center on February 17, 2024 in Philadelphia, Pennsylvania. Sneaker Con was founded in 2009 and is one of the oldest events celebrating sneakers, streetwear and urban culture. Trump addressed the event one day after a judge ordered the former president to pay $354 million in his New York civil fraud trial. (Photo by Chip Somodevilla/Getty Images) (Chip Somodevilla/Getty Images)
James is now the face of New York corporate law -- it is the "face that launched a thousand ships"… toward Florida. Businesses can get lower taxes, lower crime, better schools, and a better regulatory environment in virtually any other state in the country. Fewer are likely to want to come for the shows, but stay for the disgorgement.
"Shark Tank" star Kevin O’Leary said Monday that he would "never" invest in New York again after this absurd judgment.
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Creating an ad hoc business code for Trump undermines the city's reputation as a premier jurisdiction for corporate and tax law. If the rate of exit increases, it will impact not just employees working for these companies (like the Trump companies) but the vast network of supporting businesses, including law firms.
As New York politicians campaign on "eat the rich" platforms, the confiscatory Trump judgment leaves many in the city wondering if they could be the next course.
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