Klasfeld’s reporting is part of Just Security’s Trump Trials Clearinghouse.
Even though Donald Trump has just posted a $175 million bond, the former president still remains on the hook at this time for the entirety of his more than $450 million civil fraud judgment.
New York’s Appellate Division, First Department simply delayed a reckoning on the enforcement of the judgment, and that’s what the $175 million — provided by the California-based Knight Specialty Insurance Company, owned by the so-called “king of subprime car loans” Don Hankey — has accomplished.
Trump has succeeded in staving off any enforcement action until his appeals have exhausted.
Whether appellate courts ultimately agree or disagree with the judgment, Manhattan Supreme Court Justice Arthur Engoron did not arrive at his number arbitrarily. Understanding the reasons for his calculations helps demystify the judge’s findings about how Trump illegally profited from a massive years-long fraud, along with the defense’s arguments on appeal.
How Trump’s Civil Fraud Judgment Got So Large
Justice Engoron found that Trump fraudulently inflated his assets on statements of financial condition by hundreds of millions or billions of dollars over the course of several years. Those discrepancies, he said, “leap off the page and shock the conscience.” Trump, two of his sons, and his business associates sent those financial statements to banks and insurance companies, obtaining more favorable terms on loans and insurance than could otherwise be obtained with fewer assets.
By far, Trump’s inflation of his assets reaped his biggest benefit from Deutsche Bank, the largest single lender to the former president and his businesses. The German bank loaned hundreds of millions of dollars for the purchase of Trump’s famous Doral golf course in Florida, the transformation of the landmark Old Post Office to his former Trump International Hotel in Washington, D.C., his Chicago skyscraper, and his downtown Manhattan property 40 Wall Street.
IMAGE: A pie chart shows the various Trump assets that are subject to disgorgement. (Photo Credit: Pooja Shah, Just Security)
For each of these projects, Justice Engoron found that Deutsche Bank granted Trump artificially low interest rates based on Trump’s deceptions about his net worth. The bank would have made $168,040,167 more if they had accurate information about his wealth, the judge found, citing what he described as “conservative” estimates by the top expert witness for New York Attorney General Letitia James.
That figure represents nearly half of what the judge described as the “ill-gotten gains” that Trump must relinquish. For Trump, the other two most important categories of disgorgement relate to properties no longer in his portfolio: the Old Post Office and the Ferry Point golf course in the Bronx, now owned by the Bally’s Corporation. Trump acquired both of these properties through government agencies.
The Old Post Office’s status as a national historic site forced Trump to obtain a lease on the building from the U.S. General Services Administration in 2013. In order to get permission to transform the landmark into a luxury hotel, Trump promised to pour in hundreds of millions in Deutsche Bank dollars to refurbish the 19th century building — and provided fraudulent financial statements to the government, according to the judge’s ruling. So when Trump sold the lease to a Miami-based investor group in May 2022, that meant the former president could not keep his profits from that sale: $126,828,600.
Using the same reasoning, Justice Engoron also forced Eric Trump and Donald Trump Jr. to give up their cut of the sale: $4,013,024, apiece.
IMAGE: A “TRUMP” branded helicopter sits near a putting green during a ribbon cutting event for a new clubhouse at Trump Golf Links at Ferry Point, June 11, 2018 in The Bronx borough of New York City. (Photo by Drew Angerer via Getty Images)
IMAGE: A lone pedestrian walks by the Trump hotel in downtown Washington, D.C. on March 25, 2020. (Photo by Eric Baradat /AFP via Getty Images)
As for Ferry Point, Trump acquired the property from the New York City Department of Parks and Recreation, which awarded the contract for the golf course to him in 2012. Trump promised to invest in improvements in the course, bringing additional star power through a design by PGA champion Jack Nicklaus. The city cited the documentation that Trump provided from his accounting firm — then known as WeiserMazars LLP and now simply, Mazars — as evidence of his net worth and liquidity, but Mazars ultimately disavowed the Trump Organization’s financial statements over the course of the attorney general’s investigation. When Trump sold the course to Bally’s last year, Nicklaus’s name remained attached to the course. Trump’s name disappeared, but he received $60 million, in what the judge found to have been unlawful profits.
The smallest slice of the total disgorgement comes from former Trump Organization chief financial officer Allen Weisselberg, who has been forced to give up his promised severance payment. Weisselberg’s agreement contained a lengthy non-disparagement clause that the judge found as a way to prevent the ex-CEO from cooperating with civil and criminal investigations into the company. In return, Weisselberg was promised $2 million — representing roughly what he had to pay in criminal fines after pleading guilty to tax fraud in 2022 — but he was ultimately paid just $1 million, which the civil judge found he can no longer keep. (Weisselberg pleaded guilty earlier this year to separate perjury accusations in the civil fraud case testimony.)
Here’s How Trump Is Trying to Reduce the Judgment on Appeal
All told, Trump and his co-defendants have been on the hook for a more than $464 million judgment since the judgment became public on Feb. 16. That figure breaks down into $354.9 million in disgorgement, plus $98.6 million in prejudgment interest, an amount that has been escalating daily. Justice Engoron entered his order on Feb. 23, setting into motion the accrual of post-interest judgment at a rate of more than $110,000 a day.
Legally, “disgorgement” refers to an order requiring someone to relinquish any profits from illegal activity, and it is different from a “fine.” This distinction likely will become important during Trump’s appeal, as his attorneys plan to argue that the nearly half-billion dollar penalty violates the Eighth Amendment prohibitions against “excessive fines.” The attorney general likely will argue that the Eighth Amendment does not apply to disgorgement, which simply demands giving up profits derived from wrongdoing.
Trump’s appeal will force the five-judge panel to grapple with the various categories of “ill-gotten gains,” deciding whether each portion of the penalty is supported by the facts and the law. In reviewing factual determinations, appellate courts tend to give deference to trial judges, who have a closer familiarity with the facts and evidence. Here, Justice Engoron sat through an 11-week trial, gauged the credibility of the witnesses through firsthand observations, and reviewed mountains of evidence and legal briefs as they entered the record. That’s why the appeals court will force Trump’s attorneys to prove that Engoron got the facts wrong, applying what is known as a “clear error” standard. (A lower standard applies to challenging questions of law.)
IMAGE: Justice Arthur Engoron presides over the civil fraud trial of former U.S. President Donald Trump at New York Supreme Court on Jan. 11, 2024 in New York City. (Photo by Jefferson Siegel-Pool via Getty Images)
Here are Trump’s arguments for the various categories of disgorgement.
Deutsche Bank ($168,040,167): Justice Engoron used a government witness’s calculations to determine what the bank lost in interest from relying on Trump’s deceptions about his wealth. Trump’s lawyers argue that the bank did not rely on Trump’s financial statements, disputing any connection between the statements and the terms of the loans. His defense, throughout the proceedings, has been that the German lender performed its own due diligence as a sophisticated party to the deal.
Old Post Office ($126,828,600): Part of the Deutsche Bank disgorgement accounted for lost interest on the loan to transform the Old Post Office to Trump’s former D.C. hotel. By separately forcing Trump and his sons to pay the proceeds from the sale of the hotel, Trump’s attorneys argue, the judge “double counts” the penalties related to this property. Of course, the attorney general argues that this was justified, as the two represent separate categories of ill-gotten gains. Separately, Trump’s lawyers also hope to reduce this category of damages by arguing that the judge conflated “profits” from the sale with “proceeds,” which are distinct.
Ferry Point ($60 million): Trump submitted his financial statements to NYC Parks in 2010, before the statute of limitations in the case. The judge found that Trump’s fraud remained ongoing because the former president submitted No Material Adverse Change Letters, affirming his financial health, in the intervening years until he sold the property last June, affirming his financial health every year. On appeal, Trump’s lawyers argue that testimony from the agency’s assistant commissioner David Cerron undermines the theory that would make the attorney general’s claims timely.
There are multiple ways that the appellate court could reduce the judgment to roughly the size of the $175 million reduced bond or cash undertaking: The Deutsche Bank component fits roughly within that alone, before interest, and the Old Post Office and Ferry Point calculations are only slightly more than that. If the court leaves the original judgment intact, the Trump Organization’s ongoing internal and external monitoring will keep the former president from squirreling away his assets elsewhere to frustrate the attorney general’s efforts to collect the rest.
The five-judge appellate panel has not signaled whether they plan to sustain, overturn, or alter the underlying judgment — and have not explained any of their actions to date.