It’s probably one of Trump’s worst nightmares to have an outside monitor appointed over his company’s finances, but that’s what the judge in the New York civil fraud case ordered yesterday after a gutsy, knee-capping motion by New York Attorney General Letitia James.
Judge Arthur Engoron issued a preliminary order that requires the Trump Organization to provide an outside monitor with a report of all its assets and give 30 days’ notice of any move to dispose of or refinance any significant company assets. The order also bars the company from transferring any assets without court approval.
Judge Engoron wrote:
“This court finds that the appointment of an independent monitor is the most prudent and narrowly tailored mechanism to ensure there is no further fraud or illegality…pending the final disposition of this action."
In weighing his decision, he concluded:
“...defendants’ propensity to engage in persistent fraud [and] failure to grant such an injunction could result in extreme prejudice to the people of New York.”
By way of background, James sued Trump and his three adult offspring Don Jr., Ivanka, and Eric, for misrepresenting the value of properties and presenting false information to banks, lenders and insurance companies in their annual Statements of Financial Condition (SFCs).
She is seeking $250 million in damages, but this victory and the appointment of a monitor may have even farther reaching effect.
Trump was quick to howl about the order, issuing a statement calling Engoron a “puppet judge” and saying it was:
“Communism coming to our shores.”
It is generally unwise to antagonize and name-call the judge presiding over your case, but here we are.
The Attorney General’s office noted simply that the order would not affect the day-to-day operations of the company but rather was necessary oversight to protect against “ongoing fraudulent activity” given the Trump Organization’s “consistent record of not complying with court orders.”
The Trumps almost certainly will appeal the decision and reiterate the arguments that the trial judge rejected in his order, hoping for a more receptive audience. But this is New York not Florida, and the appellate judges reviewing the case won’t have been appointed by Trump.
Though in the end that didn’t help Trump one bit before the Eleventh Circuit in Florida.
Digging a bit deeper, the order itself is quite damning because, in support of the motion for a preliminary injunction, the Attorney General’s office set out what amounts to a mini-trial on the evidence.
James undertook this laborious task because to prevail on a motion for a preliminary injunction, she needed to demonstrate likely success on the merits, meaning ultimately she likely would win at trial. James cited instance after instance of properties the Trump Organization inflated in value as evidence of a continuing fraud.
In his opinion, Judge Engoron walked through many of those examples and sided completely with the Office of the Attorney General (OAG).
In sharp language, the court noted:
“OAG attaches dozens of exhibits that contain documentary evidence…that support OAG’s contention that it is likely to succeed on the merits."
"Conversely, defendants have failed to submit an iota of evidence, or an affidavit from anyone with personal knowledge, rebutting OAG’s comprehensive demonstration of persistent fraud.”
The judge also rejected the idea financial disclaimers absolved Trump in any way from the fraud, noting the disclaimers on the financial statements came from their accountants at Mazar’s USA and not from Trump. And even those disclaimers specifically made clear Trump himself was ultimately responsible for their accuracy.
The judge also blasted Don Trump, Jr. for signing his name to financial statements attesting they adhered to generally accepted accounting principles, but then in his deposition later admitted he had no idea what those principles were and had no recollection of even working with anyone on the statements he had signed.
Rather importantly, the judge further took note of the fact Donald Trump pled the Fifth over 400 times during his deposition earlier in the case, and correctly reminded him in a civil setting he was permitted to draw an adverse inference from that utter refusal to testify.
The real head scratcher was this: The need for a preliminary injunction and a freeze on asset transfers may have been precipitated by Trump’s own brazen moves to reorganize a new company in Delaware.
If Trump thought he was being clever and secretly could move his company’s assets, the name of the new company under which he registered to do business—“Trump Organization II”—rather gave up the game.
This was especially true given Trump filed the paperwork in New York under that Captain Obvious name on the very day James filed her lawsuit for civil fraud.