Judge Engoron’s New York Decision and Order regarding Donald Trump, the Trump Organization and the other defendants is truly horrendous. His calculation of the fines levied against this group demonstrates a lack of understanding of the facts of the case. His decision to order $355 million in fines plus interest seems not to consider the 8th Amendment to the Constitution, which precludes “excessive fines.” Finally, he appears to levy fines against Donald Trump and the Trump Organization, in great part, because of a lack sufficient due diligence by their lenders rather than suggest that the lenders be audited by the regulators.
Judge Engoron fined Donald Trump and the Trump Organization $168 million for “Personal Interest Rate Differentials,” the higher interest rate that one of the experts at trial testified that the banks would have charged Donald Trump and the Trump Organization on three building loans if Mr. Trump’s financial statements had been accurate. (Mr. Trump personally guaranteed the building loans.) This $168 million fine included $53 million related to a loan on the Old Post Office Building.
The Judge also fined Donald Trump and the Trump Organization $127 million to disgorge their reported May 2022 profit on the sale of the Old Post Office Building. (There were no fines on the appreciation of the other properties where there were “personal interest rate differentials”.)
The result of the two separate fines is that the Judge’s ruling with respect to the Old Post Office Building (1) fined the Donald Trump and the Trump Organization $53 million to create the ‘proper’ interest rate and then (2) fined Donald Trump and the Trump Organization $126 million to disgorge his profit on sale of the Old Post Office Building. Judge Engoron imposed fines of $180 million on a transaction with a profit of $126 million.
If Donald Trump and the Trump Organization continued to own the Old Post Office Building, based on the Judges lack of action with respect to the other properties, he would have saved $126 million in fines. This is intellectually undefendable.
One must conclude that the Judge should not have fined Donald Trump and the Trump organization for the $53 million personal interest rate differentials and then not take into consideration that the $53 million fine reduced the profit of $126 million. Most likely the $126 million fine should be set aside, but if not, that the $126 million fine should be reduced by the $53 million fine.
If Judge Engoron believes that the banks did insufficient due diligence before they loaned funds to the Trump Organization, the Judge should have recommended that the regulatory agencies review the banks, not prosecute and fine the Trump Organization.
Judge Engoron’s opinion references a Zurich Insurance representative’s testimony that: “Because the Trump Organization is a private company, not a publicly traded company, there is very little that underwriters can do to learn about the financial condition of the company other than to rely on the financial statements that the client provides to them.”
A reality that seems to be lost on the Court and perhaps the banks, other lenders and the insurance peddlers is that they were under no obligation to do business with the Trump Organization. They were under no obligation not to insist on audited financial statements instead of compilations, no obligation not to insist on third party appraisals and no obligation to be forced to only review records in the offices of the Trump Organization. No doors were locked, no governmental entity required these entities to do business with the Trump Organization; they chose to accept audit compilations, a lack of third-party appraisals and to see documents only in the offices of the Trump Organization. Perhaps these institutions were the vendors of choice by the Trump Organization because of the level of independent due diligence they chose to perform or the level of independent due diligence they chose not to perform.
If Judge Engoron wants to be upset with a party or parties in the Donald Trump and Trump Organization’s dealings with his lenders, let him take it up with the bank regulators.
In sum, after a transaction where no parties were harmed as demonstrated by a lack of civil lawsuits, the Judge has fined Donald Trump, the Trump Organization and a few other defendants $355 million plus interest based upon faulty calculations, with total denial of the excessive fines language of the 8th Amendment and ignoring that the lack of due diligence by the banks was a decision by the banks, not the Trump Organization.
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