Opinion: Trump's company's case lacks credibility
Trump's legal battle highlights the dangerous extent of government power under the Executive Law, emphasizing the need for caution and reform A thought-provoking read by Alexander Talel
Alexander Talel, an attorney and author, previously served as a law clerk to Judge Jon O. Newman of the US Court of Appeals for the Second Circuit and to Judge Sidney H. Stein of the US District Court for the Southern District of New York. The opinions expressed in this commentary are his own and can be found at CNN.
During the mid-1950s in New York, there was widespread business corruption and the increasing influence of mafia families. Jacob Javits, the New York state attorney general at the time, advocated for the creation of a law that would grant his office extensive authority to detect and pursue repeat offenders of fraud. As a result of his efforts, Executive Law 63 (12) was established.
The Executive Law is currently at the heart of New York Attorney General Letitia James' case against former President Donald Trump. Ignoring the unfairness of its application to Trump would be a mistake, as it could set a precedent for its unfair use against anyone.
James is pushing the boundaries of how the Executive Law is used by accusing Trump of defrauding financial institutions that actually made a profit from their deals with him. This highlights the law's potential for biased justice, particularly when in the hands of a determined attorney general.
Former President Donald Trump speaks to Texas state troopers and guardsmen at the South Texas International Airport on Sunday, November 19, in Edinburg, Texas.
Eric Gay/AP
Opinion: What this judge said about Trump is bone-chilling
Trump was scheduled to testify once more on Monday, but he announced late Sunday that he would not be testifying. On Tuesday, Trump's defense rested its case.
James' case claims that Trump's financial statements to various lending institutions were fraudulent because they exaggerated the value of his real estate holdings. However, the attorney general does not allege that any lenders complained about Trump's valuations, that his valuations violated rules, or that Trump defaulted on any loans.
Can an individual be charged with fraud by the government even if no one is harmed by their actions? According to the Executive Law, yes - as demonstrated in the case against Trump. The potential commercial impact of this law is concerning and could be highly damaging.
For example, if a person lists two properties for sale at double their appraised value, could the Attorney General pursue fraud charges, even if buyers are willing to pay the asking price? It seems so. Similarly, could a deli owner be targeted for "fraud" for claiming to have the "best sandwiches in the world," despite receiving only positive feedback from customers? The answer is theoretically yes. Furthermore, there are no provisions in the law to limit the Attorney General's exercise of power, as New York courts have upheld the AG's authority under the Executive Law.
Following the guidance of those courts, New York State Supreme Court Justice Arthur Engoron ruled in favor of James in September, finding that Trump had violated the Executive Law. Engoron also ruled that disgorgement, the remedy sought by the attorney general, which compels an individual to return illegally made profits, is "equitable in nature, mandating that the trial be a bench trial, one that a judge alone decides." This ruling makes clear how the Executive Law allows a court to deny an accused individual their constitutional right to a jury trial.
On November 6, 2023, Donald Trump, the former President of the United States, appeared at the Trump Organization civil fraud trial in the New York State Supreme Court in the Manhattan borough of New York City. This trial was covered by Jabin Botsford/Pool/Reuters.
Title: The Potential Impact of a Penalty on Trump
Equitable disgorgement typically deals with returning unlawfully gained profits, such as in the case of an insurance scam. In Trump's situation, there are no victims and therefore no illegitimately gained profits. This penalty could potentially have a more significant impact on Trump than a prison sentence.
James is requesting a massive penalty of around $250 million from Trump, rather than a specific, fair remedy tied to the suffering of the victims. This punishment goes beyond what is typically decided by juries and is punitive. Rather than a jury, Trump is facing Engoron, who does not support the economic principles used in his defense. Engoron ridiculed Trump for arguing that value is subjective, even though in the real estate market, value often is. Engoron's ruling mainly references tax assessment cases, which are not directly relevant to the business entities involved in Trump's case.
Engoron also ridiculed Trump's claim that sophisticated business partners would not have taken his financial statements seriously when considering extending credit. However, Trump's argument does make sense from a business perspective, as a bank's decision to lend is based on its own valuation rather than the borrower's. Evidence presented at trial supports these points.
During extensive testimony just after Thanksgiving, an executive from one of Trump's lenders confirmed that there was nothing "unusual" about Trump's inflated valuations. The bank had conducted its own due diligence and found that Trump's assets were not as valuable as he had claimed, yet still chose to lend him money. Individuals and corporations have the right to value their assets as they see fit and to enter into contracts accordingly. However, under the Executive Law, the Attorney General and the court have the authority to interfere with and penalize such conduct.
Sign up for our complimentary weekly newsletter today!
Sign up for CNN Opinions newsletter.
Join us on Twitter and Facebook
Trump's case highlights why it is not desirable for the government to possess the extensive power it has under the Executive Law. It is not to excuse Trump's exaggerated claims about his real estate holdings, as he clearly did so. However, this does not justify overlooking the fact that the Executive Law grants the government an unchecked and unconstitutional authority to ruin people's livelihoods over exaggerations in private business dealings with satisfied customers. If this conduct is considered "fraud," then Trump will face consequences for it. But numerous honest and diligent individuals may also face repercussions.
