Former President Donald Trump has always pitched himself as the ultimate New York businessman—brash, in-your-face, and all about flash and cash.
New York is trying to blow that image up.
State officials have launched both a criminal case and a sweeping civil fraud lawsuit against Trump’s business that may soon eviscerate his status as a New York businessman. Victory would smash Trump’s golf-and-real-estate empire as it presently exists, leave him (and his children) ineligible to run a business in New York ever again, and brand his namesake company, the Trump Organization, a criminal enterprise.
“The civil and criminal trials in New York are like a double-barrel shotgun to the financial infrastructure of Trump’s businesses,” said Gene Rossi, a former federal prosecutor for the Eastern District of Virginia. “The brand, assets, and the ability to obtain future revenues will be greatly at risk if both cases are successful. CPR may be needed in the end for what is left.”
“The civil and criminal trials in New York are like a double-barrel shotgun to the financial infrastructure of Trump’s businesses.”
In the criminal case, prosecutors accuse Trump’s company of paying employees in an off-the-books scheme to avoid taxes. Trial arguments start this week after the court spent last week selecting a jury. The civil case, unveiled in September and now rolling ahead in court, accuses Trump, his company, and his adult children of lying to banks and insurance providers about the value of Trump’s assets to score financial perks.
Both cases threaten to isolate the Trump Organization by making other companies, banks, and the government reluctant to work with Trump’s business.
They’re only part of the tsunami of legal jeopardy towering over Trump, which includes a criminal investigation in Georgia into his attempts to reverse his 2020 election defeat and a probe led by the Department of Justice into whether he violated the Espionage Act by taking sensitive, secret documents to his Palm Beach resort.
But unlike those other probes, New York’s legal assault cuts to the core of the brand Trump has spent a lifetime building: the appearance of wealth and success in the New York real estate game.
Trump’s company has pleaded not guilty in the criminal case and vowed to fight the civil lawsuit. Both James and Manhattan District Attorney Alvin Bragg are elected Democrats, and Trump has dismissed the cases they’ve brought as part of a wide-reaching Democrat-run witch hunt.
The criminal trial is all about alleged “off the books” employee benefits.
And that’s where the prosecution’s anticipated star witness comes in: Trump’s longtime chief financial officer, Allen Weisselberg.
In August, Weisselberg, 75, pleaded guilty to 15 felonies and admitted to evading taxes on $1.76 million of his income, while the company covered rent for a Manhattan apartment, the lease payments on multiple Mercedes Benzs, and private-school tuition for his grandchildren.
Weisselberg refused to cooperate fully with the broad-reaching investigations against Trump. But he agreed to testify at this trial, in exchange for a much-reduced sentence of only five months. The judge has warned him he could face up to 15 years if he fails to keep up his end of the bargain and testify truthfully at trial—and Weisselberg won’t be formally sentenced until after the company’s trial ends.
The company is preparing to argue that Weisselberg is lying, a lawyer for the Trump Organization told a hearing last week, according to a transcript seen by Reuters.
“Weisselberg will testify he believed everything he was doing was wrong,” Trump Org lawyer Susan Necheles said during a video conference. “We think he's lying, and we want to show that.”
The trial may now hinge on whether the jury believes Weisselberg or the company’s lawyers.
If the company is found guilty, the firm may face a maximum fine of only $1.6 million—which would be peanuts for a company that reported earning hundreds of millions a year during Trump’s presidency.
But the longer-term consequences of a criminal conviction could deal a lot more harm: Afterward, the government and other vendors may refuse to do business with the firm.
To take just one example, a conviction could upend the lucrative Secret Service contracts Trump’s hotels have enjoyed for years.
A Ccngressional investigation found that Trump charged “exorbitant” rates to Secret Service agents protecting him, including $1,185 per night at the Trump International Hotel in Washington, D.C.
American taxpayers shelled out a minimum of $1.4 million to house Secret Service agents at Trump properties while protecting Trump and his family, the report found.
Federal regulations, however, require public spending to be done with an “impeccable standard of conduct.”
Banks, likewise, may balk at granting loans to a company with an official criminal history.
And all this criminal drama isn’t even the most dangerous legal threat facing Trump’s company.
The New York Attorney General’s office is pursuing a sweeping, $250 million lawsuit that’s playing out now in the same court complex as the criminal proceedings.
The lawsuit accuses Trump and his company of including more than 200 false or misleading statements about the value of his properties in 11 statements of financial condition over a period of a decade. Those statements were submitted to banks and insurance companies to win benefits like lower interest rates and premiums.
“The number of grossly inflated asset values is staggering, affecting most if not all of the real estate holdings in any given year,” the lawsuit states.
“The number of grossly inflated asset values is staggering, affecting most if not all of the real estate holdings in any given year.”
In just one of many examples, the lawsuit says Trump claimed his Trump Tower penthouse was worth $327 million in 2015 based on its size of over 30,000 square feet. “In reality, the apartment was only 10,996 square feet,” the lawsuit says.
The case resulted from a three-year probe of Trump’s business practices, during which Trump was personally hauled in for a deposition and forced to invoke his Fifth Amendment right against self incrimination hundreds of times—a move he once said was only for guilty people and the mob.
The civil case could likewise further isolate the company, said Daniel J. Horwitz, who investigated fraud cases as an assistant district attorney in the Manhattan DA’s office before becoming a partner at New York law firm McLaughlin and Stern.
“Any time a company is sued by a regulator over core aspects of its business, that’s really not good,” Horwitz said. “Obviously there are reputational issues for the brand, but more importantly, lenders and insurance companies may very well be reluctant to do business with you.”
The lawsuit seeks to permanently bar Trump and his adult children Don Jr., Eric, and Ivanka from serving as an officer or director of any company registered or licensed in New York State. The suit would ban Trump and the Trump Organization from entering into any New York real estate acquisitions for five years and seeks to claw back an estimated $250 million, which the AG’s office said was the approximate amount of financial benefits obtained through fraud.
Earlier this month, James’ office asked a judge to stop Trump and his company from transferring assets without approval from the court in order to protect the funds she said would be needed for the judgment if wins her lawsuit.
She noted that on the same day in September that her lawsuit was announced, Trump’s company registered a new firm called “Trump Organization II LLC.”
“The Trump Organization has since refused to provide any assurance that it will not seek to move assets out of New York to evade legal accountability,” James’ office wrote in a press release.
James asked the judge to appoint an independent monitor to oversee the company’s financial disclosures.
A response filed by Trump attorney Alina Habba called the idea of a monitor “grossly punitive, inequitable, and completely unnecessary.”
But if the company loses the case, that kind of “punitive” measure will be just a first step.
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