Trump lawyer asks New York court to toss nearly $500 million civil fraud judgment

By Jack Queen and Luc Cohen

NEW YORK (Reuters) -A lawyer for Donald Trump sought on Thursday to persuade a New York state appeals court to toss a nearly half-billion dollar judgment against the former U.S. president over real estate business practices a judge declared fraudulent, saying no one was harmed and no lender or insurer complained.

Justice Arthur Engoron in February ordered Trump, the Republican candidate in the Nov. 5 U.S. presidential election, to pay $454.2 million in penalties and interest for inflating his net worth to dupe lenders and insurers into giving him better terms. The civil case was brought by New York state Attorney General Letitia James.

Trump’s lawyer John Sauer told the judges during arguments in the appeal that the case was brought too late and that it would be unfair to impose a “crippling financial penalty” for the former president’s decades-old financial statements, which Engoron found were illegally inflated.

“This case involves a clear-cut violation of the statute of limitations and relevant case law,” Sauer said.

Sauer told the five-judge panel on the Appellate Division – the mid-level state appeals court hearing Thursday’s arguments – that trial testimony showed that any discrepancies in Trump’s net worth were irrelevant to his lenders.

“What is not disputed is the testimony that if the net worth had been as low as one million (dollars), the deal would’ve been exactly the same,” Sauer said.

Sauer added that none of Trump’s lenders and business partners were harmed by the discrepancies on the financial statements, an argument Trump’s lawyers have made throughout the case.

“There were no victims, no complaints,” Sauer said.

Two of the judges right away appeared skeptical of the state’s argument. They interrupted the opening statement from the lawyer for the attorney general’s office to ask if there were any other examples of the state suing over private business transactions between sophisticated parties under a law aimed at protecting market integrity.

“When risk is injected into the market, that does hurt the counterparties and it does hurt the market as a whole,” Deputy Solicitor General Judith Vale replied.

Engoron’s ruling poses a threat to the business empire Trump has built over decades, which includes hotels, office buildings and golf courses around the world. With interest continuing to accrue, Trump now owes $478.3 million.

The case is one of a number of legal entanglements Trump has faced since leaving the White House in 2021. He owes nearly $90 million in federal civil penalties for defaming a writer who accused him of sexual abuse, and was convicted in May on criminal charges stemming from hush money paid to a porn star.

Trump has denied all wrongdoing and has said the cases were brought to interfere with his campaign. A Reuters/Ipsos poll on Tuesday showed Vice President Kamala Harris, the Democratic candidate, leading Trump 47%-40% nationwide, though the state-by-state results of the Electoral College determine the winner.

In a brief submitted in July to the Appellate Division, Trump’s lawyers said that the financial statements he submitted to banks actually understated his wealth, and there was no indication that any of the lenders suffered losses.

The lawyers also accused James, a Democrat, of targeting a political adversary.

“This politically motivated prosecution attempts to penalize purely proper and lawful conduct,” Trump’s lawyers wrote.

In a response in August, lawyers with James’ office said that the statute under which they sued Trump does not require proof that the banks lost money or relied on Trump’s misleading statements in deciding to lend to him. The purpose of the law, they argued, was to “protect the honesty and integrity of commercial marketplaces in New York” by stopping fraud before it causes losses.

The case stemmed from Trump’s leadership of his family real estate company, the Trump Organization, before he became president in 2017.

In September 2023, before a three-month trial with no jury, Engoron found Trump liable for lying about his asset values and net worth for a decade. The judge took particular issue with Trump’s claim that his Manhattan penthouse apartment was 30,000 square feet (2,787 square meters), nearly three times its real size.

The trial focused solely on penalties. In addition to the financial penalties, Engoron banned Trump from serving in a top role at any New York company, or seeking loans from banks registered in the state, for three years.

Trump in April averted possible asset seizures in the case by posting a $175 million bond while he appeals.