A New York judge has ordered the cancellation of business certificates for some of Donald Trump’s companies, finding that the former president and his organization committed fraud by inflating the value of their assets. The ruling could spell doom for Trump’s New York business empire, which includes his flagship Manhattan property at 40 Wall Street and his Westchester County estate Seven Springs.
The fraud allegations
The ruling stems from a civil lawsuit filed by New York Attorney General Letitia James in September 2022, alleging that Trump, his adult sons and nearly a dozen business entities inflated the value of their assets by billions of dollars to secure more favorable loan and insurance terms. James accused Trump and his co-defendants of violating the Martin Act, a state law that prohibits fraud in securities and real estate transactions.
According to the lawsuit, Trump and his company overstated the valuations of many properties by hundreds of millions of dollars. For instance, the Palm Beach Assessor valued Trump’s Mar-a-Lago club as little as $18 million between 2011 and 2021 — a valuation that his local property taxes were based on. During those years, however, Trump valued the same property as high as $714 million on his annual statements of financial conditions.
The judge’s ruling
On Tuesday, Justice Arthur Engoron of New York state court in Manhattan ruled that Trump and his co-defendants committed fraud and ordered the cancellation of certificates that some of his businesses need to operate in New York. He also said he would appoint independent receivers to manage the dissolution of the canceled certificates.
The order covers 10 Trump entities but includes pillars of Trump’s empire, such as his commercial property at 40 Wall Street in Manhattan, golf resort in Scotland and Mar-a-Lago resort in Palm Beach, Florida. Engoron said he based his decision on “undisputed facts” and “clear and convincing evidence” presented by James.
Engoron also scheduled a trial to begin on Monday to determine how much Trump and his co-defendants must pay in penalties. James is seeking at least $250 million and has asked the court to permanently bar Trump from serving as an officer or director of any business in New York, and prohibit him from acquiring any real estate or applying for a loan in the state for five years.
The implications for Trump’s business
The immediate impact of the ruling is unclear as Trump’s holdings comprise a network of roughly 500 entities spanning real estate, licensing and other business ventures. The ruling does not provide a timeline for the cancellations or specify which properties or businesses the Trump Organization might be forced to sell or dissolve.
Independent receivers could continue to operate the properties as businesses or liquidate them, though Trump would likely be entitled to the proceeds of any sale, legal experts say. However, the receivers would also have to pay off any creditors or claimants before distributing any remaining funds to Trump.
The ruling could also affect Trump’s ability to borrow money or raise capital for his businesses, as lenders and investors may be wary of dealing with a company that is under legal scrutiny and facing potential asset seizures. Moreover, the ruling could damage Trump’s reputation as a successful real estate tycoon and hurt his brand value, which relies heavily on his name recognition.
The reaction from Trump’s camp
Trump has denied wrongdoing and said the case is part of a political witch hunt by James, who is a Democrat and a vocal critic of Trump. He has also accused James of abusing her power and wasting taxpayer money on a baseless investigation.
Trump’s lawyers have said they will appeal the decision, which they described as an “outrageous” attempt to “nationalize one of the most successful corporate empires in the United States and seize control of private property”. They have also argued that the Martin Act does not apply to Trump’s businesses because they are not securities or real estate dealers.
Trump could also seek a stay or pause of the court’s order pending appeal, which would likely be met by a request from James to block any asset transfers while the case plays out. Trump’s lawyers have also asked Engoron to clarify some aspects of his ruling, such as whether he intends to appoint one receiver or multiple receivers for each entity.
