February 29, 2024
I feel sorry for President Trump, his family, his colleagues and coworkers, and all who depend on his various enterprises for their livelihood. The seven-count New York City fraud lawsuit has been a years-long mess. But The City may well have brought about its own demise in its blinkered pursuit of one man.
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I’m no lawyer, but I have done business, so I took a look at Judge Engoron’s 92-page ruling from the perspective of a prospective investor in New York. Here’s what I learned.
In 2011, Trump received a $125 million loan from Deutsche Bank for his Doral, Florida, golf resort and, in 2012, another loan for $107 million for his Chicago hotel and residential building. Deutsche Bank and the Trump conglomeration had had a contentious relationship, but the bank still thought he was worth the risk for these collateralized loans especially because the bank, like so many others, was just coming out of the 2008 lending crisis and real estate collapse.
Trump repaid the loans in full and on time. Neither party registered any complaints. It is noteworthy that New York first began its investigations on the heels of Trump’s announcement of his candidacy for president in 2015. I would guess that this was most likely part of the Democrat cabal organized by Clinton and Obama to ensure Hillary’s election.
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So, where was the harm that allowed this lawsuit to go forward? According to the judgment, Trump et al inflated the value of properties in financial statements submitted to obtain loans and insurance. This somehow besmirched the reputation of New York City as a place to do honest business.
Image: Donald Trump (cropped). YouTube screen grab.
The bank, however, deflated those valuations. Real estate valuation, particularly commercial real estate, is not arithmetic where there is only one right answer. See Vince Conyer’s American Thinker article here. I’ve bought and sold rental properties and can say that property valuation is one of the least objective and clear-cut business activities I’ve ever engaged in.
According to the judge, in his September 2023 summary judgment on the first count, Trump, by submitting documents containing false or misleading information, created an atmosphere conducive to fraud (pg 18). Because the bank required annual submissions of financial disclosures covering many properties, not just the ones for which the loans were obtained, the judge treated each instance of submission for each property as a separate fraudulent act. The court also included documents submitted for licensing deals and other loans. Thus, he established a “pattern” of fraud.
But what I want to know is, who knew about this purported fraud that damaged New York’s reputation? The only people who saw the documents were those who submitted and received them; that is, Trump, the bank, and some insurance companies. Trump tried to make his position look very rosy, as one does; the bank downplayed it when evaluating him for the loans, as they do. The Democrat cabal must have been looking high and low for something to use to “get Trump” to find this. Remember how they were thwarted in trying to obtain his IRS records until someone leaked them?
So, how did property valuations determined by the judge to be fraud that were submitted to support fully repaid loans totaling $232 million, acquire a penalty of nearly half a billion dollars? The judge determined that disgorgement—the loss of all profits on transactions related to these properties—was the appropriate penalty for having created this atmosphere conducive to fraud that no one knew about. And interest charges kicked in immediately. The judge ordered ongoing and preemptive oversight of all Trump business dealings, as well as prohibited normal business from being conducted by all the defendants. This suit is obviously the product of a witch hunt and nothing more.
So, given the judge’s concern about New York’s reputation, what has the business community in New York City and around the world learned from Judge Engoron and Ms. James?
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That disagreements over a commercial property’s present and potential value, even when the bank’s independent review prevails in determining the value, can constitute fraud in the eyes of the city.
That financial disclosures to private entities such as banks may not be private at all if one runs afoul of the powers that be in New York City.
That any good deals the bank is willing to offer may result in equal penalties.
That accepting risk in business may be far riskier than one imagines.
That helping the home you love recover from a devastating financial collapse by expanding your business there might be a fool’s errand.
That just because there is no cause for complaint from any participating parties to a commercial transaction doesn’t mean New York City won’t jump in, years after the fact, to seize all the profits.
That operating a stable and profitable business does not prevent the city from trying to yank your license to do business, nor prevent banks from making commercial loans to your business.
That being a brash wheeler-dealer will get you punished.
That ‘no harm, no foul’ does not apply in New York City.
New York City is in dire financial straits. Five years ago, AOC chased off Amazon as a significant employer. Aging New Yorkers continue to move to warmer climes, as they have done for decades; only now the Boomers are the largest generation, and these departures are being felt more strongly. The very high state and local taxes (SALT) combined with the newish cap on the SALT federal income tax deduction has driven many more New Yorkers to move out of the state.
The greater New York metro area was already home to more than a million illegals but, since Biden’s election, the area has most likely seen a doubling of that number. What was once a city providing sanctuary that barred local authorities from turning illegal aliens over to Immigration has become total cradle-to-grave sustenance for hundreds of thousands of illegal migrants. The City cut $1 billion from the police in 2021. Major crimes went up by 22% in 2022. It makes you wonder whether Judge Engoron’s approach to assessing penalties was done with an eye to refilling the city coffers.
I would hazard a guess that Attorney General Leticia James and Judge Arthur Engoron have done more to drive away investors, thus damaging NYC’s reputation as one of the world’s preeminent financial centers, than all the crooked businessmen in the City’s history. They are obviously ignorant of Econ 101, which is that business draws business.
Trump has been a mighty draw. His persecution is now an even mightier red flag. The City needs the Trump businesses. Unless this travesty can be righted, it is not apparent that Trump needs the City.
Anony Mee is the nom de blog of a retired public servant who X-tweets at oh_yeahMee.
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