UM business law scholar: Allegations in New York civil suit against Trump detailed, but delay likely

Faculty Questions and Answers

Will Thomas

White-collar crime expert Will Thomas says the lawsuit filed Wednesday by the New York attorney general against former President Donald Trump, his family and their various business entities contains allegations that are “detailed and factually specific.”

Still, the assistant professor of business law at the University of Michigan’s Ross School of Business says starting from a “very strong legal position” may not be enough to overcome Trump’s history of “delaying and derailing legal proceedings as long as possible “.

Thomas, an attorney who once focused on securities litigation and white-collar litigation in private practice, discusses where things stand with the lawsuit and where they may — or may not — go from here.

What is the essential case here?

At its core, this lawsuit alleges that all defendants engaged in “persistent,” “repeated” acts of fraud and wrongdoing against the people of New York in the conduct of Trump’s various real estate businesses for years. The complaint by New York Attorney General Letitia James identified more than 200 separate incidents over a 10-year period, ranging from falsification of records, tax fraud, insurance fraud and criminal conspiracy.

Is this a criminal case? Is it related to the New York criminal case against Trump?

This is a civil case that is separate from the criminal charges brought against the Trump Organization and its former CFO, Alan Weiselberg. Although some of the same issues will arise in each proceeding, there will likely be very little overlap in the information shared by New York attorneys. Grand jury proceedings are secret, so the AG’s office will likely do everything it can to avoid even the appearance of getting information from prosecutors.

Will it lead to a criminal case?

The AG’s complaint alleges that the defendants committed multiple New York State and federal crimes – charges include falsifying business records, conspiracy, insurance fraud and tax fraud. Since this is a civil case, the AG will not have to prove beyond a reasonable doubt that any of these crimes were committed; civil cases have a much lower standard of proof.

At the same time, losing this case would not result in any of the defendants being found guilty of a crime, and would not even necessarily mean that they would be prosecuted. On the other hand, this suit also does not rule out the possibility of future criminal charges. And while not strictly part of that lawsuit, AG James went out of her way during a press conference to say her office has sent its findings to the federal government in case prosecutors want to file criminal charges for tax fraud.

Why does it matter that the AG prosecutes?

New York state law allows the attorney general to prosecute a person who engages in “repeated fraudulent or illegal acts.” Because this statute exists to protect New Yorkers from deceptive business practices, it does not require the Attorney General to prove the kind of willful or intentional elements that often stymie many other fraud lawsuits.

Nor does it have to prove that particular persons were harmed or injured by the fraud. As a result, the Attorney General is likely starting from a very strong legal position in this case. (That’s not to say that James won’t be able to prove that intentional fraud and illegality occurred — the complaint clearly alleges that — but the AG simply doesn’t need to clear that hurdle to prevail.)

There are other benefits that AG brings to the table. State law gives the attorney general broad investigative powers, including the ability to subpoena documents and compel testimony, allowing her to gather enough evidence to support the case laid out in the more than 200-page complaint.

Additionally, the AG may seek different remedies than a private individual, which could lead to serious problems for Trump, his family, and his business.

How strong is the box?

The allegations are detailed and specific, suggesting that the prosecution has collected a lot of evidence to support its allegations. Real estate appraisals are notoriously fickle, so it can be difficult to prove that appraisals were fraudulent as opposed to simply wrong or innocently optimistic.

Anticipating this challenge, the complaint focuses primarily on objectively probable falsehoods. For example, the AG alleged that Trump lied about the size of his Trump Tower penthouse, tripling the unit’s square footage in a way that caused him to appraise the property at a mind-boggling $327 million.

One additional reason it matters that this case is civil and not criminal is that Trump and Weiselberg have refused to testify in response to subpoenas from the attorney general’s office. (Several of Trump’s children reportedly testified on their own behalf.) But while the Fifth Amendment prevents someone’s silence from being used against them in a criminal case, that same silence can be construed against the defendant in a civil case.

Accordingly, Trump may have already missed the opportunity to claim that certain records or assessments are innocuous. A judge or jury could be expected to draw a negative inference from his previous refusal to testify during his scheduled deposition last spring.

What might happen if Trump loses?

The complaint asks the court to impose dramatic sanctions, including the forfeiture of about $250 million in past profits and earnings, the termination and liquidation of Trump’s New York business and a five-year ban on Trump and members of his family from serving in executive positions for other companies.

These are draconian remedies, and the court’s willingness to impose them will depend on how persuasive the attorney general’s eventual case is at trial. For example, courts have historically been reluctant to forcibly dissolve an existing corporation, even though they have the statutory power to do so. Expect the court to insist on strong evidence of ongoing, future harm to the public before accepting this option.

What might come next?

The attorney general’s announcement comes after a public report that her office was unable to reach a settlement with Trump and the other defendants. However, a settlement is still possible – filing this complaint may have served to give the AG’s office additional negotiating leverage.

Trump, meanwhile, has consistently demonstrated a strategy of delaying and derailing court proceedings as long as possible, including by reaching out to other litigants to intervene. Expect something similar to happen here, including Trump asking a federal court to step in and stop these proceedings.

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