‘As bad as it gets’: Donald Trump’s New York business empire imperilled by fraud ruling

The New York real estate empire that brought Donald Trump fortune and fame has been imperilled by a sweeping judgment in a fraud case against the former US president, who could ultimately be forced to dispose of prized properties including Manhattan’s Trump Tower.

In a detailed decision on Tuesday, Judge Arthur Engoron ordered the business certificates of Trump-related entities in the state be cancelled, after finding that Trump, his oldest sons and his businesses had engaged in persistent fraud by vastly overvaluing the true worth of various buildings and golf clubs from New York and Florida to Aberdeen in Scotland.

“This is as bad as it gets for a civil decision,” said Evan Gotlob, a former state and federal prosecutor who practices in New York. The unusual order means the defendants “can’t do any business in New York for the foreseeable future”, he added, and could “be forced to sell the businesses”.

The prospect of a fire sale of Trump Tower was raised by the former president’s lawyers hours after Engoron’s order, as they sought clarification in court on Wednesday on the judgment’s scope. Christopher Kise, an attorney for Trump, said a “technical reading” of the ruling implied that various entities would have to “surrender” to the court, or be placed in receivership.

He had earlier accused Engoron in a statement of trying to “seize control of private property” in an “outrageous decision”, and vowed to appeal.

The immediate import of the decision remained unclear, however, after Engoron declined to elaborate on how it would be enforced. The office of New York’s attorney-general, who brought the case, did not respond to requests for comment on the legal consequences for Trump businesses, or issue any statement beyond welcoming the judge’s order.

Thomas Franczyk, a former New York state judge, said his interpretation of the decision was that as of Wednesday, “none of these entities can continue to do business as such”, referring to businesses owned by Trump in New York.

But he added that “as a practical matter”, it was unclear how the Trump entities could readily comply with the judgment. “How do you just stop [doing business] in a day?” he asked. In residential buildings such as Trump Park Avenue, “who are the tenants supposed to pay their rent to?”

Adam Leitman Bailey, a New York real estate lawyer, predicted Trump’s legal team would be granted a stay that delays implementation of the ruling. “The order that the judge wrote just doesn’t work,” he said.

A bench trial to decide on outstanding matters in the case, such as whether the defendants falsified business records or committed insurance fraud, is due to begin on Monday, and there was no indication that any enforcement of Engoron’s order would take place before a final judgment was issued.

Trump, who was headed to Michigan on Wednesday in an attempt to win the support of striking auto workers, took to social media to call the ruling a “political scam”. He seemed particularly aggrieved by Engoron’s declaration that his Mar-a-Lago resort was not worth anywhere close to the $612mn figure that had been falsely declared in annual business records.

His son Eric, who is also a defendant in the case, said he had “lost all faith in the New York legal system” and that his family had “run an exceptional company — never missing a loan payment, making banks hundreds of millions of dollars, developing some of the most iconic assets in the world”.

Engoron’s ruling delivered a blow to a central pillar of Trump’s popular mythology — namely that he built a sprawling portfolio of highly valuable properties over several decades by business savvy alone.

While the ruling’s specifics confused legal experts, his findings were broadcast in plain and devastating language that undercut the notion of the former president’s genius and instead cast him as fundamentally dishonest.

“In defendants’ world,” Engoron wrote, “rent regulated apartments are worth the same as unregulated apartments; restricted land is worth the same as unrestricted land . . . and square footage is subjective.” He concluded: “That is a fantasy world, not the real world.”

“The judge’s ruling in many ways was imposing the death sentence on Trump’s businesses in New York,” said Michael Bachner, a New York defence lawyer.

The ruling would make it difficult for 77-year-old Trump — the frontrunner to again be the Republican nominee for president in next year’s election — to obtain bank loans, for example, and could also trigger provisions in existing loans that would cancel them, Bachner noted.

While this judgment alone would end up costing Donald Trump “a lot of money”, Engoron’s ruling could also harm the former president’s defence in the four criminal indictments he faces, Gotlob said.

If Trump were to take the stand in any of those cases, in which he is accused of trying to subvert the 2020 election and of unlawfully retaining classified documents, among other charges, “then this finding goes to his credibility”, Gotlob said, and prosecutors could cite it in their cross examination: “It’s another thing that [can be used to] help prove that he is a liar.”