- Jun 6, 2007
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This week in the Donald Trump Fraud case the New York Judge Arthur Engoron acted egregiously wrong by ruling that Donald Trump and his sons committed fraud in overvaluing their real estate on their financial statements and in voiding their legal certificates to operate their business essentially shutting down the Trump real estate/development organization and devastating Donald Trump financially. This past Tuesday when the ruling came down an abundance of journalists and commentators on main-stream media were acting like they just hit the lottery celebrating the financial demise of Donald Trump completely ignoring that this was unjust ruling by an American court thereby hurting the reputation of the American Legal System. Don't label me a MAGA Republican or a fan of Donald Trump because I am neither; I wouldn't vote for Donald Trump for President under any circumstances my conscience would forbid it because the guy's make-up is that he regularly indulges the dark side of his human nature in a shocking manner and in my opinion he is capable of doing anything there is no immoral act beyond the realm of Donald Trump! That is not to say that I think ill of Donald Trump's political supporters because I don't even one iota the American political system is hugely corrupt many members of Congress have as their top priority getting reelected, lobbyists dictate what will be and will not be in legislation and the wealthy pour so much money into our political system that they largely control who will be elected and what agenda these elected officials will embark on so if a group of Americans want to use their freedom to vote for a President like Donald Trump who is driven by his King Kong size ego and in trying to build a great reputation for himself will likely do some significant good for the American people even though he will leave a wake of bad deeds following him it is completely understandable in my view!
What Judge Arthur Engoron did in granting the State Attorney General Letitia James' summary judgment motion on the "fraud" issue is that he in effect said there is no point in having a trial on this issue because there is no question of fact to be resolved by a trial after examining the records provided by both parties in this case as a matter of law the text of the law compels me to rule in the state's favor. Judge Arthur Engoron's ruling here is an epic travesty of justice, if this judicial decision is the quality of his judicial work he shouldn't be on the bench and further his character embodies such a lack of respect and consideration for the law and the ramifications of abuse of the law he shouldn't even hold a law license!
Judge Arthur Engoron's theory of the case is essentially that Donald Trump on his financial statement so overvalued the real estate he owns that he committed fraud when he presented these financial statements to Commercial Banks to get loans and to Insurance Companies to get insurance for his properties. Judge Engoron's legal reasoning in his decision and orders on the summary judgment motions by Attorney General James and by Donald Trump (NYSCEF Doc. No. 1531) are faulty and are bad law and should not stand. AG James here is suing Trump under Executive Law Sec. 63 (12); Section 63 gives the NY AG all kinds of powers and Subsection 12 gives the AG the power to go to a court and get a business' business certificates to operate in the state of NY revoked for "fraud". Judge Engoron in his decision says that the state does not have to show that the fraud or misleading statements were "material". "Material" has slightly different nuanced meanings based on the type of fraud involved but essentially what it means is that the fraud or misleading statement or behavior has to be of a nature or meaning where it would cause a reasonable person that knew about the fraud or misleading behavior to "significantly" change his or her deliberations about their involvement in the matter. The Judge cites the case of People v. General Electric for this proposition, that a showing of materiality is not required, but if one reads the case the court did not say a violation of Section 63 (12) does not require a showing of materiality it just stated that the other cause of action which the AG was suing under in that case a violation of General Business Law Sec. 349 has a materiality requirement to show fraud. Moreover, Judge Engoron's contention that this issue is settled in New York case law or jurisprudence is flat out wrong the case of People v. Northern Leasing Systems 70 Misc. 3d at 267 (2020) provides authority that supports the proposition that a "materiality showing" is a requirement to establish a violation of Sec. 63 (12) where the judge in that case wrote "Materially misleading representations violate Executive Law § 63(12)".
I am not a constitutional lawyer but if Executive Law Section 63 (12) doesn't have a materiality requirement for that fraud cause of action I would think that Donald Trump would have a good case in Federal Court claiming that this fraud law should be thrown out for being unconstitutional because it violates the Due Process Cause of the U.S. Constitution. This Due Process clause provides that the government cannot deprive a person of their property in violation of that person's substantive due process rights which in part means fairness. Just imagine if state governments could permanently shutter businesses for minor misrepresentations such as a used car dealership to drum up sales promises buyers to change the oil for free for the entire life of the car but later limits it to once a year because of cost considerations, a hotel that advertises on its website a free breakfast buffet for guests but actually only has coffee, tea and orange juice and two choice of bread (white and wheat) and a toaster available in the morning for guests because of cost considerations.
The other major basis for which Judge Arthur Engoron finds fraud is that he concludes that valuations of property on a financial statement must be based on objective standards, subjective standards are not permitted. Judge Engoron cites as his authority for this proposition of law the case of FMC Corporation v. Unmack 92 NY2d 179 (1998); this case has nothing to do with financial statements nor does the Judge in this case mention anything about financial statements, the case is a real estate tax assessment case where the property owner contended the property assessment from the taxing authority over valued the property and the issue was whether the property owner met the burden of production to challenge the property assessment which was the property owner had to show substantial evidence that it was over valued and in that case the property owner did he had a professional appraisal of the property with a comparable sales analysis that showed it was over valued the holding of the case was a professional appraisal meets the burden of production standard. Judge Engoron is totally off base trying to boot strap real estate appraisal cases for establishing the standard for determining value of real estate in a financial statement. Real estate assessments for tax purposes need to be fair to the property owner and the taxing authority so a comparable sales analysis is used but using such limitations on valuing real estate for a financial statement is unfair to the property owner because it locks the property owner into a lower valuation that he or she could readily get in the marketplace. For instance, smart real estate property sellers for high end properties list with real estate agents that have great reputations and that have a big clientele lists because some of these clients often will pay a premium for a property that meets certain criteria that the client is looking for; furthermore, it is almost a given in our country that real estate owned by a celebrity will often garnish a premium on the sale price; comparable sales and market determinations don't always do justice in valuing real estate for smart and aggressive property owners.
Judge Arthur Engoron's legal analysis is so off base, he cites the case of Assured Guarantee Municipal Corporation v. DLJ Mortgage Capital & Credit Suisse 44 Misc 3d 1206 (A) for supporting the principle that real estate valuations in financial statements have to follow an objective standard. This case is a mortgage backed security case and the specific issue Judge Engoron referenced here is that in this case the Judge essentially wrote that the "put back clause for non-conforming loans" is not a subjective standard but an objective standard meaning that even if the mortgage backed bond insurer knew that some of the underlying mortgage loans had falsity in the loan making process that didn't matter if the loan was non-conforming the issuer of the loan has to take it back! A first year law student would no this case doesn't provide any authority for the legal proposition Judge Engoron is trying to support.
This should be alarming to leaders in New York and across the nation the bad public policy being established with this Fraud case; what the meaning of this case is that the New York Attorney General for both individuals and businesses can review these individual and business entities financial statements and look to see where such parties deviated from using objective standards in the valuation of their real estate and in such cases bring civil action to revoke their business certificates and put them out of business. The law created by Judge Engoron here could cause a flood of these fraud over one's financial statement cases to flood the New York Justice System and thereby hurt the New York economy. It is difficult to comprehend how stupid this law is good public policy is that you want to allow people and businesses to be aggressive in valuing their property on financial statements because FSs are used in getting loans and good public policy wants people to be able to borrow robustly because they create economic activity with such monies they hire people and businesses to work for them, everybody wins!
What Judge Arthur Engoron did in granting the State Attorney General Letitia James' summary judgment motion on the "fraud" issue is that he in effect said there is no point in having a trial on this issue because there is no question of fact to be resolved by a trial after examining the records provided by both parties in this case as a matter of law the text of the law compels me to rule in the state's favor. Judge Arthur Engoron's ruling here is an epic travesty of justice, if this judicial decision is the quality of his judicial work he shouldn't be on the bench and further his character embodies such a lack of respect and consideration for the law and the ramifications of abuse of the law he shouldn't even hold a law license!
Judge Arthur Engoron's theory of the case is essentially that Donald Trump on his financial statement so overvalued the real estate he owns that he committed fraud when he presented these financial statements to Commercial Banks to get loans and to Insurance Companies to get insurance for his properties. Judge Engoron's legal reasoning in his decision and orders on the summary judgment motions by Attorney General James and by Donald Trump (NYSCEF Doc. No. 1531) are faulty and are bad law and should not stand. AG James here is suing Trump under Executive Law Sec. 63 (12); Section 63 gives the NY AG all kinds of powers and Subsection 12 gives the AG the power to go to a court and get a business' business certificates to operate in the state of NY revoked for "fraud". Judge Engoron in his decision says that the state does not have to show that the fraud or misleading statements were "material". "Material" has slightly different nuanced meanings based on the type of fraud involved but essentially what it means is that the fraud or misleading statement or behavior has to be of a nature or meaning where it would cause a reasonable person that knew about the fraud or misleading behavior to "significantly" change his or her deliberations about their involvement in the matter. The Judge cites the case of People v. General Electric for this proposition, that a showing of materiality is not required, but if one reads the case the court did not say a violation of Section 63 (12) does not require a showing of materiality it just stated that the other cause of action which the AG was suing under in that case a violation of General Business Law Sec. 349 has a materiality requirement to show fraud. Moreover, Judge Engoron's contention that this issue is settled in New York case law or jurisprudence is flat out wrong the case of People v. Northern Leasing Systems 70 Misc. 3d at 267 (2020) provides authority that supports the proposition that a "materiality showing" is a requirement to establish a violation of Sec. 63 (12) where the judge in that case wrote "Materially misleading representations violate Executive Law § 63(12)".
I am not a constitutional lawyer but if Executive Law Section 63 (12) doesn't have a materiality requirement for that fraud cause of action I would think that Donald Trump would have a good case in Federal Court claiming that this fraud law should be thrown out for being unconstitutional because it violates the Due Process Cause of the U.S. Constitution. This Due Process clause provides that the government cannot deprive a person of their property in violation of that person's substantive due process rights which in part means fairness. Just imagine if state governments could permanently shutter businesses for minor misrepresentations such as a used car dealership to drum up sales promises buyers to change the oil for free for the entire life of the car but later limits it to once a year because of cost considerations, a hotel that advertises on its website a free breakfast buffet for guests but actually only has coffee, tea and orange juice and two choice of bread (white and wheat) and a toaster available in the morning for guests because of cost considerations.
The other major basis for which Judge Arthur Engoron finds fraud is that he concludes that valuations of property on a financial statement must be based on objective standards, subjective standards are not permitted. Judge Engoron cites as his authority for this proposition of law the case of FMC Corporation v. Unmack 92 NY2d 179 (1998); this case has nothing to do with financial statements nor does the Judge in this case mention anything about financial statements, the case is a real estate tax assessment case where the property owner contended the property assessment from the taxing authority over valued the property and the issue was whether the property owner met the burden of production to challenge the property assessment which was the property owner had to show substantial evidence that it was over valued and in that case the property owner did he had a professional appraisal of the property with a comparable sales analysis that showed it was over valued the holding of the case was a professional appraisal meets the burden of production standard. Judge Engoron is totally off base trying to boot strap real estate appraisal cases for establishing the standard for determining value of real estate in a financial statement. Real estate assessments for tax purposes need to be fair to the property owner and the taxing authority so a comparable sales analysis is used but using such limitations on valuing real estate for a financial statement is unfair to the property owner because it locks the property owner into a lower valuation that he or she could readily get in the marketplace. For instance, smart real estate property sellers for high end properties list with real estate agents that have great reputations and that have a big clientele lists because some of these clients often will pay a premium for a property that meets certain criteria that the client is looking for; furthermore, it is almost a given in our country that real estate owned by a celebrity will often garnish a premium on the sale price; comparable sales and market determinations don't always do justice in valuing real estate for smart and aggressive property owners.
Judge Arthur Engoron's legal analysis is so off base, he cites the case of Assured Guarantee Municipal Corporation v. DLJ Mortgage Capital & Credit Suisse 44 Misc 3d 1206 (A) for supporting the principle that real estate valuations in financial statements have to follow an objective standard. This case is a mortgage backed security case and the specific issue Judge Engoron referenced here is that in this case the Judge essentially wrote that the "put back clause for non-conforming loans" is not a subjective standard but an objective standard meaning that even if the mortgage backed bond insurer knew that some of the underlying mortgage loans had falsity in the loan making process that didn't matter if the loan was non-conforming the issuer of the loan has to take it back! A first year law student would no this case doesn't provide any authority for the legal proposition Judge Engoron is trying to support.
This should be alarming to leaders in New York and across the nation the bad public policy being established with this Fraud case; what the meaning of this case is that the New York Attorney General for both individuals and businesses can review these individual and business entities financial statements and look to see where such parties deviated from using objective standards in the valuation of their real estate and in such cases bring civil action to revoke their business certificates and put them out of business. The law created by Judge Engoron here could cause a flood of these fraud over one's financial statement cases to flood the New York Justice System and thereby hurt the New York economy. It is difficult to comprehend how stupid this law is good public policy is that you want to allow people and businesses to be aggressive in valuing their property on financial statements because FSs are used in getting loans and good public policy wants people to be able to borrow robustly because they create economic activity with such monies they hire people and businesses to work for them, everybody wins!
