Why NY AG James’ lawsuit has 'serious financial implications' for Trump’s business: law professor
New York state Attorney General Letitia James at a news conference in Manhattan on March 28, 2019. - Byron Smith/New York Daily News/TNS

Former President Donald Trump’s legal headaches escalated when, on September 21, New York State Attorney General Letitia James announced that she had filed a civil lawsuit against the former president, the Trump Organization and three of his children — Ivanka Trump, Donald Trump, Jr. and Eric Trump — for allegedly making “false and misleading valuations of assets.” Law professor Kimberly Wehle, who teaches at the University of Baltimore, examines this lawsuit in an article published by the conservative website The Bulwark on September 26 and explains why it could have “serious financial implications for the Trumps and the Trump Organization.”

“Although a trial date is likely years off,” Wehle explains, “Trump has reason to worry that the law might actually stick this time around. Bottom line: The State of New York alleges that the defendants, in their dealings with banks and insurance companies, grossly and fraudulently inflated their assets by billions of dollars — over 200 separate times — in order ‘to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available to the company, to satisfy continuing loan covenants, and to induce insurers to provide insurance coverage for higher limits and at lower premiums.’ According to the complaint, these asset evaluations were all done internally, so Trump can’t readily rely (on) an it-wasn’t-me defense.”

Wehle adds that James, in her lawsuit, “doesn’t just allege civil fraud.”

“She also claims that the Trumps ‘repeatedly and persistently violated’ three New York penal — i.e., criminal, laws — and that the defendants engaged in multiple conspiracies to falsify business records and financial statements, and to commit insurance fraud,” Wehle notes. “That is, that Trump, Don Jr., Eric, Ivanka, and (Trump Organization Chief Financial Officer Allen) Weisselberg together agreed ‘to falsify the Statements of Financial Condition, supporting data spreadsheets, and other business records,’ to make ‘materially inaccurate written instruments purporting to describe Donald Trump’s financial condition,’ and to submit ‘materially false information’…. ‘in support of insurance applications’ with the requisite intent for that conduct to violate the law.”

Wehle observes that although James’ lawsuit “cannot produce jail time” for the Trumps — as it is strictly a civil lawsuit, not a criminal indictment — it could inflict major damage on the Trump Organization.

“If she succeeds at trial, James seeks to have the corporate certificates of every entity controlled or beneficially owned by Trump under New York law canceled,” Wehle writes. “Meaning those businesses as currently constituted will cease to exist. They include, at a minimum, the businesses named as defendants in the case, including Trump Organization, Inc., the real estate development company that owns and operates buildings, hotels, golf clubs, restaurants, and casinos, and his Seven Springs golf resort in Bedford, New York.”

Nonetheless, the law professor points out that it remains to be seen whether or not the case will go to trial and what a jury would decide if it does.

“Ask yourself whether, as a matter of logic and common sense, a jury might be persuaded that Team Trump was lying making inflated claims to the banks and insurance companies,” Wehle writes. “Unlike the millions of regular Americans who routinely and dutifully tell the truth on financial forms — else they risk serious civil and criminal liability — Donald Trump’s actions reflect a lifetime of unaccountability and ‘come-and-get-me’ tactics. Thus far, they’ve worked. We’ll just have to wait and see whether Letitia James finally puts an end to Trump’s winning streak against the rule of law.”