US Politics Mega-thread - Page 4173

Within days, Donald Trump could potentially have his sprawling real estate business empire ordered “dissolved” for repeated misrepresentations on financial statements to lenders, adding him to a short list of scam marketers, con artists and others who have been hit with the ultimate punishment for violating New York’s powerful anti-fraud law.

An Associated Press analysis of nearly 70 years of civil cases under the law showed that such a penalty has only been imposed a dozen previous times, and Trump’s case stands apart in a significant way: It’s the only big business found that was threatened with a shutdown without a showing of obvious victims and major losses.

Lawyers for the state in Trump’s monthslong civil trial have argued that the principles of fair play in business alone are enough to justify a harsh penalty, but even they aren’t calling for the prospect of liquidation of his businesses and properties raised by a judge. And some legal experts worry that if the judge goes out of his way to punish the former president with that worst-case scenario, it could make it easier for courts to wipe out companies in the future.

“This is a basically a death penalty for a business,” said Columbia University law professor Eric Talley. “Is he getting his just desserts because of the fraud, or because people don’t like him?”

AP’s review of nearly 150 reported cases since New York’s “repeated fraud” statute was passed in 1956 showed that nearly every previous time a company was taken away, victims and losses were key factors. Customers had lost money or bought defective products or never received services ordered, leaving them cheated and angry.

What’s more, businesses were taken over almost always as a last resort to stop a fraud in progress and protect potential victims. They included a phony psychologist who sold dubious treatments, a fake lawyer who sold false claims he could get students into law school, and businessmen who marketed financial advice but instead swindled people out of their home deeds.

In Trump’s case, his company stopped sending exaggerated financial figures about his net worth to Deutsche Bank and others at least two years ago, but a court-appointed monitor noted that was only after he was sued and that other financial documents continued to contain errors and misrepresentations.

And though the bank offered Trump lower interest rates because he had agreed to personally guarantee the loans with his own money, it’s not clear how much better the rates were because of the inflated figures. The bank never complained, and it’s unclear how much it lost, if anything. Bank officials called to testify couldn’t say for sure if Trump’s personal statement of worth had any impact on the rates.

“This sets a horrible precedent,” said Adam Leitman Bailey, a New York real estate lawyer who once successfully sued a Trump condo building for misrepresenting sales to lure buyers.

Added University of Michigan law professor William Thomas, “Who suffered here? We haven’t seen a long list of victims.”

...


Notably, New York’s anti-fraud statute, known as Executive Law 63(12), is clear that a finding of fraud does not require intent to deceive or that anyone actually gets duped or loses money. The attorney general must only show “repeated fraudulent or illegal acts.”

But the AP analysis, based on a search of reported 63(12) cases in legal databases LexisNexis and Westlaw, found that victims and losses were factors when it came to deciding whether to take over a business.

A breast cancer nonprofit was shut down a dozen years ago, for instance, for using nearly all its $9 million in donations to pay for director salaries, perks and other expenses, instead of funding free mammograms, research and help for survivors.

A private equity firm faking big investment success was closed down after stealing millions of dollars from thousands of investors.

A mental health facility was shuttered for looting $4 million from public funds while neglecting patients.

There may be more dissolved companies than AP found. Legal experts caution that some 63(12) cases never show up in legal databases because they were settled, dropped or otherwise not reported.

Still, the only case the AP found of a business dissolved under the anti-fraud law without citing actual victims or losses was a relatively small company closed in 1972 for writing term papers for college students. In that case, the attorney general said the victim was “the integrity of the educational process.”