Letitia James’s fraud suit comes to fruition after four years. (2024)

Pinned

Opening statements are over. Trump attacked the attorney general and the judge.

Outside the courtroom, Mr. Trump fired a fusillade of personal attacks on Ms. James and the judge, Arthur F. Engoron. He called the judge “rogue” and Ms. James “a terrible person,” even suggesting that they were criminals.

Inside, Mr. Trump sat in uncomfortable silence as Ms. James’s lawyers methodically laid out their case. The attorney general’s office accused the former president of inflating his riches by more than $2 billion to obtain favorable deals with banks and bragging rights about his wealth.

“Year after year, loan after loan, defendants misrepresented Mr. Trump’s net worth,” Kevin Wallace, a lawyer for Ms. James, said during opening statements. Exaggerating for a television audience or Forbes Magazine’s list of the richest people is one thing, he said, but “you cannot do it while conducting business in the state of New York.”

Mr. Wallace cast doubt on the value of some of Mr. Trump’s signature properties, including Trump Tower in Manhattan, laying the groundwork for a reckoning of the former president’s net worth.

The trial, expected to last more than a month and to include testimony from Mr. Trump, coincides with the former president’s latest White House run. After Ms. James’s civil case ends, Mr. Trump will face four criminal trials that touch on a range of subjects: hush-money payments to a p*rn star, the handling of classified documents and his efforts to remain in power after losing the 2020 election.

Ms. James’s case, which will be decided by the judge rather than a jury, has struck a nerve with the former president. Her claims portray him as a cheat rather than a captain of industry and undercut an image he constructed while he catapulted from real estate to reality television fame and ultimately the White House.

For now, though, government scrutiny has only bolstered Mr. Trump’s political fortunes. He is polling far ahead of his Republican rivals and has used the cases against him to make fund-raising appeals, casting himself as a martyr under attack from Democrats like Ms. James and Justice Engoron.

The trial will enable Mr. Trump to bring the campaign to the courthouse steps, where he can deliver impassioned defenses and pointed attacks while his lawyers inside the courtroom grapple with accounting and financial arcana.

On Monday, Mr. Trump sat at the defense table, arms crossed and scowling, while occasionally rolling his eyes at the judge and yawning during the duller portions of the proceeding. But he came out swinging on his way into the courtroom, telling reporters that Ms. James was out to get him because he is performing so well in the polls.

“You ought to go after this attorney general,” he said, without specifying who or how. He said that Justice Engoron should “be disbarred” and that the case against him was “a witch hunt, it’s a disgrace.”

One of Mr. Trump’s lawyers, Alina Habba, echoed some of his harshest claims during her opening statement, saying that Ms. James ran for her office to “get Trump.”

She argued, as Mr. Trump nodded along, that his company was simply “doing business” and that “there was no intent to defraud, period, the end.” She spoke as though she were addressing a jury, or a television camera, rather than Justice Engoron.

Her statement, which she said he had not planned, altered the tenor of what had begun as a dry proceeding. It prompted squabbles between the defense team and the judge.

The substance of Mr. Trump’s defense is that his annual financial statements were merely estimates, and that valuing real estate is more art than science. The banks to which Mr. Trump submitted his statements, his lawyers argued, were hardly victims: They made money from their dealings with Mr. Trump and did not rely on his estimates.

“There was no nefarious intent,” said Mr. Trump’s lead lawyer, Christopher M. Kise. Any difference in valuation “simply reflects the change in a complex, sophisticated real estate development corporation.”

“Banks and insurers know that the statements are estimates,” he added. “They are not designed to be absolutes.”

Mr. Trump is starting the trial at a significant disadvantage. Justice Engoron ruled last week that the former president had persistently committed fraud, deciding that no trial was needed to determine the claim at the core of Ms. James’s lawsuit.

As an initial punishment, Justice Engoron revoked Mr. Trump’s licenses to operate his New York properties, a move that could crush much of the business known as the Trump Organization.

At trial, Ms. James is seeking more from Justice Engoron, asking that he impose the $250 million penalty and that the former president be permanently barred from running a business in New York. The trial will determine what penalty Mr. Trump must pay and whether he will be banished from the world of New York real estate that made him famous.

Ms. James’s witness list includes Trump supporters and critics alike: Mr. Trump and his sons, Eric and Donald Trump Jr., are on the list, as is Michael D. Cohen, his former fixer turned nemesis. During Mr. Wallace’s opening statement on Monday morning he played a video of Mr. Cohen saying that it was his job to reverse engineer the value of each of the company’s assets to arrive at Mr. Trump’s preferred net worth.

In the afternoon, Mr. Trump’s former accountant, Donald Bender, testified that it was the Trump Organization’s responsibility to ensure that the financial statements were in line with generally accepted accounting principles — and that they sometimes did not follow those principles.

Mr. Wallace, in his opening statement, cited inflated values of three key Trump properties in New York: the triplex apartment in Trump Tower on Fifth Avenue; 40 Wall Street in the heart of the financial district; and his Seven Springs estate in Westchester County.

According to Mr. Wallace, Mr. Trump based the value of the triplex on its size, saying it was 30,000 square feet. In reality, the apartment was about 11,000 square feet.

“For years, Donald Trump falsely inflated his net worth to enrich himself and cheat the system,” Ms. James said in a statement Monday, adding, “No matter how rich or powerful you are, there are not two sets of laws for people in this country.”

As he left the courtroom on Monday afternoon, Mr. Trump passed Ms. James in the front row. He glared at her. Soon after, his son Eric walked by and shook her hand.

William K. Rashbaum contributed reporting.

Bender’s testimony will take us in-depth into the financial statements year over year. He will likely take up much of the rest of the afternoon. Trump has settled in at the defense table to await his former accountant’s testimony.

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The Trump civil fraud trial is unlike the criminal actions he faces.

Instead of a finding of guilt or innocence, the trial will determine Mr. Trump’s liability, or his legal obligation to pay for damages. And instead of his fate being decided by a jury of his peers, it will be up to Justice Arthur F. Engoron of State Supreme Court in Manhattan.

The crux of Attorney General Letitia James’s case was decided on Tuesday, when Justice Engoron ruled that Mr. Trump and his family business had committed fraud by inflating his assets.

But this ruling addressed only one of seven claims made by the attorney general, with Justice Engoron reserving the remaining six for trial. As a result, the trial will focus on allegations of falsifying business records, issuing false financial statements, insurance fraud and related conspiracy offenses.

The outcome will determine his punishment. The attorney general is seeking $250 million in penalties and wants to bar Mr. Trump from doing business in New York.

Ms. James must prove her claims by a “preponderance of the evidence” — whether it’s more likely than not that Mr. Trump and his family business should be held liable. That bar is lower than “beyond a reasonable doubt,” the standard at a criminal trial.

Without a jury, the trial should proceed expeditiously, starting with opening statements from both sides. As in a criminal trial, both sides may also call witnesses and introduce evidence. They can also cross-examine witnesses.

Ms. James can call Mr. Trump and the other defendants to testify — a power she would not have in a criminal trial.

The trial will conclude with closing statements before Justice Engoron delivers his decision and Mr. Trump learns what, if any, punishment he will face.

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The tenor of the trial changed during Trump’s lawyers’ opening statements.

But Christopher M. Kise, a lawyer for Mr. Trump, responded in his opening that there was no objective value of the assets and that differing valuations were standard in real estate.

“There was no nefarious intent, it simply reflects the change in a complex, sophisticated real estate development corporation,” he said of the way Mr. Trump’s company represented the assets’ value.

Though Mr. Trump’s lawyers began their opening arguments with a dry presentation, the tenor of the trial changed after a lawyer for Mr. Trump, Alina Habba, gave what she said was an extemporaneous presentation in which she attacked Ms. James as politically motivated and again declared that her client’s business partners had made money from the deals. Mr. Trump watched intently, occasionally nodding in agreement.

That kicked off a sequence in which Justice Arthur F. Engoron went back and forth with Ms. Habba and the other defense lawyers, Mr. Kise and Clifford S. Robert, correcting what he thought were legal errors from their presentations.

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Trump appears very frustrated with Engoron, the judge, scoffing at one point and rolling his eyes as Engoron actively debated with his attorney. At one point, he leaned over to Christopher Kise, one of his lawyers, and whispered something, prompting Kise to put a comforting hand on his back.

Robert has already concluded. Justice Engoron asks whether it’s his position that there were no misstatements in the financial statements. Roberts insists that there were no “material” misstatements, indicating the most promising argument available to the Trump team.

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Attorney General Letitia James is still in the courtroom, sitting in the same seat in the front row. She appeared to be listening intently to Habba’s attacks on her and her case, occasionally shifting in her seat, but otherwise poker faced.

This, of course, is Habba’s terrain. She’s happy to talk back to the judge. He acknowledges that they can go back and forth arguing in open court. She acknowledges that Trump plans to appeal.

Justice Engoron corrects her again — she referred incorrectly to his summary judgment order as a “motion.” And he reminds her that the financial statements were meant to reflect the estimated current value of the properties at the time they were assembled. Habba says she won't reveal her arguments to her “adversaries” right now, but that she is confident in them.

Habba promises to “bore everyone at this room at length for three months.”

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Habba has a sense of showmanship and we can expect that her opening will be combative, and that it will be meant to appeal primarily to Mr. Trump, not necessarily the judge.

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The witness list reads like a Trump family (and company) reunion.

Mr. Trump and his adult children are just four of the 28 people appearing on the attorney general’s witness list filed with the court last week. While there is no guarantee that all will take the stand, the list provides a road map of how the attorney general plans to prove her case.

The witness list was submitted to the court in order of testimony. If called to the stand, Mr. Trump would testify second to last. The only witness listed after him is an expert on damages.

This is shaping up to be an unusual case for Mr. Trump: He rarely testifies or even appears in court at civil trials.

This year, Mr. Trump left open the possibility that he’d attend federal court and deny the sexual abuse and defamation allegations leveled against him by the writer E. Jean Carroll. The judge eventually called his bluff. Ultimately, Mr. Trump was found liable and ordered to pay $5 million in damages, having never once set foot in the courtroom.

Mr. Trump’s children are no strangers to this litigation. Both sons are co-defendants and were previously deposed by the attorney general’s office. Ivanka Trump was also a co-defendant at one point, but her case was dismissed by the Court of Appeals in June.

This trial could also reunite former and current Trump Organization associates, some of whom have testified against Mr. Trump before. Notable among them are Mr. Trump’s former fixer turned chief antagonist Michael Cohen; the former Trump Organization chief financial officer and criminal defendant Allen H. Weisselberg; the former company controller Jeffrey McConney; and Mr. Trump’s former accountant Donald Bender.

For their part, Mr. Trump and his co-defendants provided the court with a list of 127 witnesses who could be called to prove their case. Their list overlaps slightly with the attorney general’s, also listing Mr. Trump himself, Donald Trump Jr. and Eric Trump, as well as Mr. Weisselberg, Mr. McConney and Mr. Bender. They may also call up to 12 expert witnesses to testify about property valuation.

“President Trump did not make any false statements,” Kise says, reading from a slide. He says that the attorney general’s estimates are speculative, which matters as they would determine the size of any penalty the former president would pay.

Kise is making a potentially important distinction: He says that the banks set the loan terms based on their own due diligence, rather than the statements of financial condition.

He has now concluded his opening argument and is having a long back and forth with Engoron. Kise says bluntly that he disagrees with one of the judge’s rulings, and plans to appeal it.

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Engoron appears to be paying close attention to Kise, but the lawyer may have otherwise lost the room as he conducts an impromptu comparative accounting standards seminar. Trump is whispering with another lawyer, Alina Habba, and murmurs are more audible in the courtroom as we creep toward the 90 minute mark.

Trump faces a $250 million fine and other serious punishments.

While Mr. Trump is not at risk of going to prison — as is possible in the four criminal cases he faces around the country — the civil trial could still produce a number of serious consequences for the former president and his family business.

The trial stems from a lawsuit filed by the New York attorney general, Letitia James, who accused Mr. Trump of fraudulently inflating his assets by billions of dollars to secure favorable loan terms from banks.

Mr. Trump is beginning the trial at a serious disadvantage. The State Supreme Court judge overseeing the case ruled last week that the former president had persistently committed fraud, deciding that no trial was needed to determine the core of Ms. James’s lawsuit.

The judge, Arthur F. Engoron, also imposed a heavy punishment, stripping the Trumps of control over their signature New York properties — a move that could crush much of the business known as the Trump Organization.

Ms. James is now asking for more from Justice Engoron, who will determine the outcome himself in the nonjury trial.

She is seeking to recover $250 million in ill-gotten gains. She wants to prohibit Mr. Trump and the Trump Organization from entering into any New York State commercial real estate deals for the next five years and to bar them from applying for loans from any New York bank during that same period.

As a final blow, Ms. James wants to permanently prevent Mr. Trump and his adult sons from running any New York companies.

Although Mr. Trump has moved to Florida, his family business is based in New York. The trial could end that for good.

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Jurist presiding at Trump’s civil trial will serve as judge and jury.

That’s because the case was brought under a little known but powerful New York state law requiring that the matter be adjudicated at what is known as a bench trial, meaning that no jury will hear the case. The judge not only applies the law, as judges do in jury trials, but also decides the facts, a task that a jury would otherwise perform.

And that means that Justice Engoron, a Democrat, will play a far more prominent and consequential role than a judge would at a jury trial, not just during the proceedings, but in the ultimate outcome — unless he is overturned on appeal.

Last week, before the trial began, Justice Engoron issued a decision that itself could have a devastating impact on Mr. Trump and his family business. He ruled that the former president had consistently committed fraud by inflating the value of his assets by billions of dollars. The ruling could strip him of control of some of his flagship New York properties, including Trump Tower and 40 Wall Street.

Justice Engoron has been overseeing the matter for three years. When the state attorney general, Letitia James, was conducting her civil investigation into Mr. Trump’s business practices, the judge resolved disputes over evidence. Then, after she filed the resulting lawsuit a year ago, the judge began hearing arguments and ruled on pretrial litigation.

While Justice Engoron’s demeanor verged on the jovial in the earlier stages — and he still teases the lawyers and allows himself the occasional comic digression — the proceedings have become increasingly contentious. Last year, he held Mr. Trump in contempt, fining him $110,000, and later, Mr. Trump unsuccessfully sought to have Justice Engoron taken off the case. Last week, in a social media post, Mr. Trump called the judge “deranged,” and on Monday, he said he was “rogue” and should be disbarred.

Now, as a result of threats, court security officers pick him up at his home in the morning and drive him to the courthouse, officials said. At the end of his workday, the officers drive him home.

Justice Engoron nonetheless seems to maintain his sense of humor. A fan of pop culture references who also revels in puns, he quoted from the Marx Brothers movie “Duck Soup” in a footnote to underscore his position that some of the defense’s arguments were essentially designed to tell him to not believe his own eyes.

“As Chico Marx, playing Chicolini, says to Margaret Dumont, playing Mrs. Gloria Teasdale,” the judge wrote, “well, who ya gonna believe, me or your own eyes?”

Justice Engoron was appointed to the New York City Civil Court in 2003 and was elected — he ran unopposed — to the State Supreme Court in 2015. Before his time on the bench, he served as a law clerk to a State Supreme Court judge in Manhattan.

The atmosphere in his courtroom is somewhat unusual. Beyond the levity he fosters, he discourages members of the public from standing, as is typical, when he enters. He also gives broad latitude to his principal law clerk, Allison Greenfield, perhaps because he himself has served in that role. Ms. Greenfield keeps the trains running on time with a firm hand, in contrast to the judge’s generally genial demeanor.

But Justice Engoron seems to be losing his patience with Mr. Trump. He has consistently ruled against the former president, and his decision last week had withering words for the defenses put forward by Mr. Trump’s lawyers. He called the conduct of the defendants, who include the president’s two adult sons and the family business, “obstreperous” and their arguments “bogus,” saying they had ignored reality when it suited their business needs.

“In defendants’ world,” he wrote, “rent-regulated apartments are worth the same as unregulated apartments; restricted land is worth the same as unrestricted land; restrictions can evaporate into thin air.”

At a hearing two weeks ago, the judge, addressing one of the former president’s lawyers, pounded his fist in apparent frustration, saying, “You cannot make false statements and use them in business.”

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Letitia James’s fraud suit comes to fruition after four years.

Along the way, Ms. James, a Democrat, has been called a racist by the former president, who has accused her of being politically motivated.

But judges have found that the attorney general has every right to pursue the case. And last week, the trial judge handed Ms. James a major win, determining that she had demonstrated with undisputed evidence her central claim: that Mr. Trump had committed fraud by overvaluing his assets.

Ms. James, 64, has made a habit of taking on powerful men. A former member of the New York City Council and public advocate, she ran for attorney general in 2018, supported by then-Gov. Andrew M. Cuomo.

His support did not stop Ms. James from opening a civil investigation into Mr. Cuomo after he was accused by several women of sexual harassment and misconduct. At the end of the inquiry, she issued a report that her investigators said corroborated the allegation of 11 women and told a damning story about Mr. Cuomo’s efforts to fight back against his accusers.

In the Trump case, Ms. James has already succeeded in part of her goal: The judge, Arthur F. Engoron, revoked the certificates that allow Mr. Trump’s New York companies to operate in the state. But she is seeking more: Her lawsuit asks the judge to oust the Trumps from leading their family business, to permanently bar them running a business in New York again and to fine them $250 million.

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