New York

Trump’s Lawyers Try to Grasp the Implications of Judge’s Fraud Ruling

Lawyers for Donald J. Trump appeared in a New York courtroom Wednesday morning, struggling to understand the consequences of a ruling a judge had issued the night before that dealt a serious blow to the former president’s business empire.

The ruling, which found that Mr. Trump had inflated the value of his holdings to win favorable terms on loans, stemmed from a civil fraud case brought by the New York attorney general, Letitia James. The surprising decision came before a trial that could begin as soon as Monday and could summarily strip Mr. Trump of control over signature properties, including Trump Tower in Midtown Manhattan.

A lawyer for Mr. Trump, Christopher M. Kise, appeared contrite as he asked the judge, Arthur F. Engoron, two fundamental questions: How much of Mr. Trump’s business empire did the ruling actually affect? And as for a trial, “What’s the point?” Mr. Kise asked, now that Justice Engoron had already validated the claim at the heart of Ms. James’s case. “You’ve already granted the relief,” he said.

A year ago, Ms. James filed a lawsuit accusing Mr. Trump of persistently overvaluing his assets to receive favorable deals on debt and insurance, in some years by as much as $2.2 billion. She sought consequences for the former president that included canceling the business certificates that allowed his entities to operate in New York and permanently barring Mr. Trump from running any company in the state.

In his order on Monday, Justice Engoron canceled those certificates. But he also expanded on the punishment that Ms. James had sought, canceling those of any entity controlled by Mr. Trump’s sons. While Mr. Trump could ask a higher court to overturn the ruling, and has sued the judge himself over his legal decisions, the outlook is stark if he is unsuccessful.

Mr. Kise said in court that the ruling could oust the sons, Donald Trump Jr. and Eric Trump, from their New York homes, which he said are owned through the types of limited liability companies that Justice Engoron dissolved. Mr. Kise also asked whether the ruling meant that Mr. Trump would have to sell assets including Trump Tower and 40 Wall Street, a downtown commercial property, or whether they could be managed by an independent receiver who the judge said would oversee the dissolution of the canceled companies.

Justice Engoron did not provide a clear response. After huddling with his law clerk, Allison Greenfield, he told Mr. Kise that he appreciated his concern and understood the question.

“I’m not prepared to issue a ruling right now, but we will take that up in various contexts I’m sure,” he said. He granted Mr. Kise’s request for 30 days to devise a plan for implementing the order.

A lawyer from the attorney general’s office, Kevin Wallace, said that state lawyers had not worked out what they still needed to prove at trial, though he noted that the judge had yet to grant the other punishments they had sought, including imposing a fine of as much as $250 million or barring the former president and his sons from running a business in the state.

The former president still has options. Already, his lawyers have sued Justice Engoron himself, arguing that he ignored an appeals court ruling in June that they contend should gut the attorney general’s case. They argued that the judge ignored a key deadline that should have disqualified much of the attorney general’s evidence. They have asked the appeals court to delay the trial and to order the judge to implement the June ruling.

The appeals court is expected to rule as soon as Thursday. If Mr. Trump’s lawyers are unsuccessful, they could also appeal Justice Engoron’s Tuesday order.

As matters stand, Mr. Trump’s lawyers are left facing a severe punishment for their client — the scope of which even they do not fully understand — and a trial at which Ms. James’s lawyers could exact yet more damage.

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