Potential Earth-shattering Consequences of Trump's Fraud Trial on His Business
Trump's ongoing fraud trial in New York holds immense consequences for his business empire, potentially causing a significant upheaval for the self-proclaimed business tycoon
The New York civil fraud trial of former President Donald Trump holds immense importance for the self-proclaimed business magnate. In addition to potential substantial financial penalties and the possibility of relinquishing control over his iconic properties scattered across the Manhattan skyline, the trial is expected to profoundly alter his business empire, according to Will Thomas, assistant professor of business law at the University of Michigan's Ross School of Business.
According to Thomas, the impact on Trump's businesses falls somewhere between severe and seismic. This revelation was made during an interview with CNN on Monday.
In an unexpected ruling at the end of September, Judge Arthur Engoron found Trump guilty of fraud and revoked business certificates for a significant number of his entities in New York. This includes the Trump Organization, which consists of a vast network of 500 limited liability companies. Engoron ordered the appointment of a receiver to manage the process of dissolving these entities, which encompass notable buildings such as Trump Tower, 40 Wall Street, and the Seven Springs family compound in Westchester County, New York.
The Trump Building on Wall Street in New York.
Victor J. Blue/Bloomberg/Getty Images
Engorons' order also included various other business holdings such as Mar-a-Lago, which is President Trump's residence and resort in Florida; a golf course located in Aberdeen, Scotland; and his golf courses located in the United States.
The process of dissolving the New York entities and properties under a receiver and its implications for holdings outside the state were initially unclear. However, last month, an appeals court judge temporarily halted the dissolution proceedings due to the ongoing $250 million fraud trial. If the ruling continues forward, it could become complicated for Trump, according to Thomas, despite the relative simplicity of the legal procedures involved.
Thomas added that the practical implementation of dissolution would rapidly become messy, complicated, and potentially expensive.
However, Adam Leitman Bailey, a real estate attorney based in New York, expressed doubt that the former president will experience any alterations in his assets for the next few years. Bailey successfully obtained a settlement in a federal lawsuit filed in 2012, accusing Trump of providing false information to investors regarding the sales figures of his SoHo condo development.
According to Bailey, the case is expected to be appealed, and as a result, Trump may be granted a stay, enabling him to carry on with his business activities during the period of litigation, which could last approximately two years.
However, should Trump be compelled to sell, or if the market fails to improve and his appeal is lost, Bailey warned of the potential for him to incur "significantly damaging losses." In a recent interview with Newsmax, Trump's attorney, Alina Habba, expressed her lack of confidence in the merits of the case brought by the New York Attorney General against her client.
The prosecution characterizes it as fraud, but she argues that it is simply the norm in the industry.
"It's common for banks, when providing loans, to state that the loan amount reflects the worth, rather than stating the true value," she explained. "They will always state exactly what they desire and not a cent extra, or state the exact loan amount and nothing more."
Most of Trump's business holdings primarily consist of real estate, each of which entails a complex network of legal arrangements and commitments, including bank loans and long-term leases.
On January 13, 2023, a striking image captures Trump Tower in New York City. Donald Trump's family business is hit with the highest possible fine of $1.6 million by a New York judge due to tax fraud. The penalty serves as a stern consequence for their actions. The photograph courtesy of Angela Weiss/AFP/AFP/Getty Images.
"Real estate is a long-term industry, and if you are compelled to sell a property quickly, it is inevitable that you will incur financial losses. That is simply the nature of the business," Thomas stated. "It appears highly probable that, at least for certain enterprises, the only viable option would be to sell the asset in order to reimburse the expenses incurred in the process of dissolution."
Trump possesses additional properties and businesses, hence this decision will by no means signal the downfall of his entire empire, he emphasized.
John Coffee, a corporate law professor at Columbia Law School, stated that the key matter at hand is whether the court has the power to revoke Trump's business certificates - a situation comparable to a taxi driver losing their driver's license. Additionally, the court's order to disband the Trump Organization was somewhat unclear. However, the Appellate Division for the First Department has currently halted the enforcement of these penalties. Coffee described these sanctions as "excessive," but they also follow Trump's disruptive behavior in court on Monday. He believes that such outbursts may harm Trump in the future, as judges, including appellate judges, generally disapprove of defendants shouting at the court or the legal system. Therefore, they may be more inclined to support severe sanctions when such behavior occurs.
A fraud ruling could potentially have a detrimental impact on Trump's operations, particularly on publicly traded entities such as his social network.
"Without delving into the intricate details, it is worth noting that federal securities law significantly impairs the ability of felons or individuals liable for fraud to fully exploit its benefits," Thomas expressed.
"While Truth Social, a social media business, may not be directly affected by this case, the potential consequences of these fraud judgments could have an immediate negative impact on the company's operations."
According to Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal company in New York City, it is unlikely that the overall real estate market in New York will be significantly affected.
Trump has been mostly absent from the New York market for quite some time. His assets in this market are relatively small in comparison to its current scale. According to Miller, the risks Trump is currently encountering are uncommon, but for the broader real estate market, they are essentially insignificant.
