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Trump's Financial Empire Under Scrutiny As New York Civil Fraud Trial Begins


Former U.S. President Donald Trump's financial empire under scrutiny as New York civil fraud trial begins. Trump, along with his eldest sons, their companies, and Trump Organization executives, made their appearance in a New York courtroom on Monday for the civil fraud trial against them.

The trial centers on allegations of inflating assets in fraudulent financial statements, and it comes on the heels of a recent ruling by Judge Arthur Engoron. In this ruling, Trump and his co-defendants were found liable for "persistent and repeated" fraud.

This ruling marked a significant victory for New York Attorney General Letitia James, who initiated a $250 million lawsuit in September of last year. The lawsuit alleges that Trump and his co-defendants engaged in a pattern of fraud by exaggerating the value of assets in financial statements, all to secure more favorable terms for commercial real estate loans and insurance policies. The trial could potentially provide the public with a more detailed insight into Trump's business activities and his overall financial worth.

According to the attorney general's office, Trump allegedly inflated his net worth by as much as $3.6 billion in three different years spanning from 2011 to 2021. Trump's legal team has contested these allegations, asserting that the valuation of assets is a subjective matter. They also mentioned that they are currently in the process of deciphering the implications of the recent ruling for the future of the Trump Organization.

What's On The Line In The Trial?

The trial could result in substantial financial penalties for Trump and his businesses, corresponding to the alleged profits acquired through fraudulent business practices. Judge Engoron will assess the extent of the financial liabilities imposed on the Trump family and their enterprises.

The judge is expected to examine allegations of business records fraud and insurance fraud in connection with prominent properties, having already determined a general level of fraud in the case.

The lawsuit encompasses six causes of action: falsifying business records, conspiring to falsify business records, issuing false financial statements, conspiring to issue false financial statements, insurance fraud, and conspiring to commit insurance fraud.

Additionally, Attorney General James' lawsuit seeks to potentially bar the Trumps from serving as officers of a New York-based business and to restrict the company from engaging in business transactions for five years.

The Impact Of The Fraud Ruling

As the trial commences, the precise scope of Judge Engoron's recent ruling remains somewhat unclear. During a hearing held on Wednesday following the ruling, Trump's attorney, Chris Kise, sought clarity by asking the judge, "And, don't take this the wrong way, but what, in the court's mind, does this trial now look like? What are the key issues?"

The judge's ruling included the revocation of business certifications for Trump-related entities named as defendants in the case, including the Trump Organization. As a result, a receiver is now mandated to oversee the "management of dissolution" of these corporate entities, as per the court order.

Several questions linger, such as how the receiver will handle the dissolution of properties, whether the ruling will have implications for properties beyond New York state, including Mar-a-Lago, and whether the Trump family can transfer New York-based assets into a new out-of-state company.

Kise expressed uncertainty about which Trump entities are encompassed by the ruling, given the existence of over 400 to 500 entities. Judge Engoron granted Trump's legal team a 30-day window to formulate a plan for the receivership.

Donald Trump addressing the public while making gestures with his hands
Donald Trump addressing the public while making gestures with his hands

Who Will Testify?

Donald Bender, a longstanding tax consultant for the Trump Organization, is anticipated to be the first witness called by the attorney general. Notably, the former president, his adult children, and his closest business advisers are all potential witnesses listed for both the attorney general's side and the defense. It's important to clarify that being listed as a potential witness does not guarantee their actual testimony.

Although Trump has the option to waive his appearance at the civil trial, his legal team has indicated his eagerness to testify in court. Previously, Trump participated in a deposition related to the case.

During that deposition, he stated that Allen Weisselberg, the former chief financial officer of the Trump Organization, and his team were primarily responsible for preparing the financial statements. Trump also indicated that he had a limited role, if any, in preparing these financial statements after 2015 when he launched his presidential campaign.

Many of the potential witnesses listed have already given testimony in recorded depositions. Interestingly, Ivanka Trump is listed as a potential witness, despite a June ruling by a state appellate court that led to the dismissal of charges against the former president's eldest daughter. The court determined that the charges did not fall within the statute of limitations.

Other potential witnesses include Michael Cohen, Trump's former personal attorney, as well as numerous current and former Trump Organization employees. Allen Weisselberg, who served time in Rikers Island as part of a plea deal related to criminal tax fraud during his tenure at the company, is also expected to take the witness stand.

The Length Of The Trial

Engoron will be the sole decision-maker in this civil bench trial, without the involvement of a jury of New Yorkers. While the judge initially allocated three months for the trial, it remains uncertain whether the case will indeed require that duration, especially now that Engoron has already determined Trump and his co-defendants' liability for fraud.

The trial is scheduled to commence at 10 a.m. ET and conclude at 4:30 p.m. daily, except on Fridays when proceedings will adjourn at 1 p.m. to accommodate the judge's other court responsibilities. Enhanced security measures have been implemented in downtown Manhattan ahead of the trial, as confirmed by a spokesperson from the New York State Unified Court System.

The former president, who is actively campaigning for a second term, is confronting an increasingly crowded schedule of legal battles, both criminal and civil, as the 2024 election draws nearer. When Trump's legal team attempted to postpone the trial in this civil case, the New York attorney general argued that even a brief delay would disrupt the trial schedule significantly, potentially leading to conflicts with his upcoming cases in other courts.

Trump is currently facing four criminal indictments that were issued earlier this year, in addition to various civil lawsuits. A second legal showdown with author E. Jean Carroll in a Manhattan federal court, revolving around civil defamation claims, is slated for a trial in January.

It's worth noting that Trump, who was previously found liable for defamation by a jury in a similar case with Carroll last year, has the option to waive his appearance at this upcoming civil trial. Two criminal cases against Trump have been scheduled for trials in March, one in New York and another in Washington, DC.

In Washington, D.C., the federal election interference case led by special counsel Jack Smith is anticipated to commence in early March. Meanwhile, in New York, the former president is confronting 34 counts related to falsifying business records to conceal hush money payments to an adult film actress. The judge overseeing this case has hinted at the possibility of adjusting the trial start date to accommodate the proceedings in D.C.

Smith's case, which alleges that Trump mishandled classified documents, is scheduled for trial in a Florida federal court in late May. As for the election subversion case involving Trump and more than a dozen co-defendants in Fulton County, Georgia, a trial date has yet to be established.

However, the trial judge has ruled that it will not commence before the conclusion of this year, potentially setting the stage for further scheduling conflicts during the 2024 election season. It's important to note that Trump has entered a plea of not guilty in all four of these cases.

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About The Authors

Hilda Workman

Hilda Workman- Hilda Workman is a licensed financial advisor with years of expertise in the industry. She has assisted a range of clients, from sole proprietors to large corporations, in reaching their financial objectives. She is informed about many different financial subjects, including tax preparation, investment planning and also in fashion. She believes that the best things are those that are imperfect.

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