The New York civil fraud trial of former President Donald Trump carries extremely high stakes for the self-proclaimed business mogul.
Not only could Trump be subject to hefty financial penalties and lose control of his flagship properties dotting the Manhattan skyline, the trial also could significantly reshape his business empire, said Will Thomas, assistant professor of business law at the University of Michigan’s Ross School of Business.
“It’s between severe and seismic” as to the effects on Trump’s businesses, Thomas told CNN on Monday.
In a late-September surprise summary judgment order, Judge Arthur Engoron found Trump liable for fraud and canceled business certificates for many of his entities in New York, including the Trump Organization (a sprawling entity comprised of 500 limited liability companies). Engoron called for a receiver to oversee the dissolution of the entities, which include buildings such as Trump Tower, 40 Wall Street and the Seven Springs family compound in Westchester County, New York.
Other business holdings listed in Engoron’s order included Mar-a-Lago, Trump’s Florida residence and resort; a golf course in Aberdeen, Scotland; and his US-based golf courses.
It was not immediately clear how the New York entities and properties might be dissolved under a receiver and what it may mean for holdings outside of the state. Early last month, an appeals court judge paused the dissolution process for the duration of the ongoing $250 million fraud trial.
If the ruling does proceed, things could get quite “messy” for Trump, Thomas said, even though “the legal mechanics here are relatively straightforward.”
Dissolution would typically mean that an enterprise stops doing business and a receiver takes a course of action that includes tying up business arrangements, closing or selling the entity with proceeds going back to the original owner.
“The practical implementation is — very quickly — going to get messy, complicated and, frankly, potentially quite costly,” Thomas added.
Still, Adam Leitman Bailey, a real estate attorney in New York, said it’s unlikely the former president will see any changes in his holdings for a few years. Bailey won a settlement in a 2012 federal lawsuit against Trump for misleading investors in his SoHo condo development with inflated sales figures.
The case will likely be appealed, he said, and Trump could be given a stay during that time, meaning he could continue to do business for the “two or so years” that his case is tied up in the courts.
However, if Trump is forced to sell, or if the market does not improve and he loses his appeal, he could take on “devastating, heavy losses,” said Bailey.
The former president’s attorney Alina Habba said in a Newsmax interview on Monday that she doesn’t believe the New York Attorney General has a good case against her client.
What the prosecution considers fraud, she said, is actually the industry standard.
“Just because a bank who’s giving you a loan says it’s worth what the loan amount is, which is what happens when anybody takes a loan out, they’re never going to say the real value,” she added. “They’re going to say what they want to say and not a penny more, or what the loan amount is and not a penny more.”
Most of Trump’s business holdings are in real estate, and each of those properties has an intricate web of legal arrangements and obligations such as bank loans and long-term leases.
“Real estate is a long-term business. If you’re forced to sell a property in short order, you’re going to lose money — that’s just the name of the game,” Thomas said. “It seems very likely that the solution that’s going to have to be reached, at least for some of these enterprises, is to sell the asset in order to cover the costs of dissolution.”
Trump has other properties and businesses, and this ruling certainly will not be a death knell for the entire empire, he noted.
“The key issue is whether the court can rescind [Trump’s] certificates for doing business, which is a little like taking a driver’s license away from a taxi driver,” said John Coffee, a corporate law professor at Columbia Law School. “The Court somewhat ambiguously also ordered the Trump Organization to be disbanded. The Appellate Division for the First Department has stayed enforcement of these sanctions.”
These sanctions, he said, are “excessive” but also come after Trump’s noted outbursts in court on Monday. Those interruptions, said Coffee, “may hurt him in the near future: Judges, including appellate judges, do not like defendants yelling at the court or the system and may be more prepared to uphold a severe sanction when this happens.”
A ruling of fraud could cast a cloud over Trump’s operations, especially potentially publicly traded ones like his social network.
“Without getting into the weeds, I can tell you that federal securities law makes it substantially difficult for either felons or anybody who is liable for fraud to take full advantage of federal securities law,” Thomas said.
“So, even though (social media business) Truth Social isn’t directly impacted by this case, I think that business is potentially going to suffer an immediate consequence if any of these fraud judgments hold up.”
There will likely, however, be little impact on New York’s real estate market overall, said Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal company in New York City.
“[Trump] has largely been absent from the New York market for a long time,” he said. “His assets here are relatively nominal in the scale of the market right now.”
Miller called the risks Trump is facing “unusual” but said that for the larger real estate market, “it’s essentially a non-event.”
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