A grand court ruling finding Donald Trump liable for fraud has his own lawyers scratching their heads — asking a judge on Wednesday to explain his decision to revoke the former president’s New York business license.
Manhattan Supreme Court Justice Arthur Engoron’s 34-page ruling from Tuesday will force Trump, 77, to hand over control of his Empire State properties — including Trump Tower in Midtown — to an independent third party, known as a receiver.
During Wednesday’s hearing, Trump lawyer Christopher Kise asked Engoron: “Some entities, physical entities like Trump Tower or 40 Wall St – is the court under the assumption that those assets will be sold or just to be managed under a moderator?”
“I am not ready to make a decision,” answered Engoron.
In his ruling, the judge wrote a receiver must be appointed “to manage the liquidation of the revoked business certificate” for the Limited Liability Corporation, or LLC, under the umbrella of the Trump Organization.
A Manhattan judge found former President Donald Trump liable for fraud by exaggerating the value of his assets. Photo by Sean Rayford/Getty Images
The ruling was issued in New York Attorney General Letitia James’ civil fraud case against Trump, his namesake real estate company and executives including his children Donald Trump Jr. and Eric Trump — alleging over the years that the former president exaggerated his assets to get an advantage on loan and insurance terms.
Here’s how the ruling affects Trump’s businesses, according to legal experts:
What is a business certificate and what does it mean if it is revoked?
Business certificates are issued by the government to prove the legitimacy of the company and are used for business transactions.
Manhattan Supreme Court Justice Arthur Engoron revoked Trump’s business license in New York.REUTERS/Jane Rosenberg
They can be treated like a birth certificate for someone, former financial crimes prosecutor Diana Florence told The Post.
When a judge overturns them, it’s like being given a “death certificate” — with the verdict amounting to a “corporate death sentence,” Florence said.
This certificate is required for entities such as LLCs and comes with privileges such as protecting personal assets if the company fails, said Cornell Law Professor Robert Hockett.
Hockett said a “common but unfortunate business practice” is for companies to pretend they have more money than they really do to help them get an LLC certificate.
In this case, the LLC functions like a “shell” meant to “avoid accountability.”
“What the judge found yesterday is that Trump effectively did this,” Hockett told The Post. “He pretends that most of these businesses he owns are well capitalized and able to pay their creditors — actually doing good work that benefits the public and warrants limited liability certification.”
But Trump was found to have abused the privilege and now, “the chickens have come home to roost,” Hockett said.
“We’re going to see Trump’s name come off a lot of buildings in New York,” Hockett predicted. “The Trumps are no longer a real estate family in Manhattan.”
Will Trump appeal — and how will it affect the decision?
Trump has already said he plans to appeal the ruling, which, two lawyers said, is likely to stop the revocation of business certificates from taking effect immediately.
An appeal could be filed as early as this week, landing in New York’s mid-level appeals court called the Appellate Division, Hockett said.
Both Florence and veteran real estate attorney Adam Leitman Bailey believe that will trigger a delay in Engoron’s decision while an appeal — which could take up to two years to reach a decision — is conducted.
The judge ruled that Trump must hand over control of his New York property to an independent third party known as a receiver.AP Photo/Seth Wenig, File
The case could also reach the Empire State’s highest court — or the New York Court of Appeals — potentially drawing years of legal wrangling, Florence said.
Leitman Bailey said that he believed Engoron’s decision was excessive and that the appeal would be granted.
Still, it’s possible Engoron’s decision will prevail because “there’s a saying in law that bad facts make bad law, and in New York, there’s no worse fact than Donald Trump,” Leitman Bailey said.
The rest of the Attorney General’s case against Trump is still scheduled to go to trial on October 3, however, to determine any penalties. James is seeking $250 million in damages.
Will this stop Trump from doing business in New York?
If the decision is not overturned on appeal, it could prevent Trump from being able to do business in New York, Florence said.
He explained that Trump Orgs are like a person’s skeleton and skin and individual LLCs are like organs in the body — with varying degrees of importance.
Trump has said he plans to appeal the decision.REUTERS/Shannon Stapleton/File Photo
Some will be more like an appendix that one can live without, while others will be more like a heart, an important organ.
“I don’t think the Trump Organization will cease to exist, it’s this important LLC that will cease to exist and that’s the real blow,” he said.
Leitman Bailey agreed that canceling the LLC is a big deal for Trump and his company.
“By dissolving the LLC, the property will be worthless and he won’t be able to sell it,” Leitman Bailey said. “He will default on his loan, no buyer will be able to buy the property, no title insurance company will be able to insure it, and therefore no sale will be possible.”
Does the decision mean Trump has to give up his business?
Receivers – or independent parties – are tasked with taking over Trump’s businesses and handling the liquidation of the Trump Org. LLC.
Engoron on Wednesday gave both parties 30 days to propose a list of potential recipients.
The role can be compared to an executor of an estate who settles a person’s affairs after his death. And it is not a family member, but rather an independent person with no connection to any party.
“The receiver will now take care of the liquidation, pay the debts, liquidate the property, – if there is a multi-million dollar fine – pay the judgment, make sure the taxes are paid,” Florence said.
The decision could prevent Trump from doing business in New York if it is not overturned on appeal. AP Photo/Mary Altaffer, File
“It’s not Ivanka,” Florence added. “It will be someone who is independent, who can be accepted by both parties in the case. They will be accountable to the court not to Donald Trump.”
Hockett compares a receiver to an administrator in a bankruptcy case.
“The receiver will manage this property to avoid any loss,” Hockett said. “They ultimately want to save as much value as they can.
“How many creditors has Trump paid? How many people are left holding empty bags?” Hockett asked. “The receiver chooses who owes what. They are trying to liquidate the estate or various parts of the estate.”
Hockett said given the extent of Trump’s alleged fraud, he doubts there will be any “surplus” funds left at the end after all debts are paid.
While Trump will still own the property until the case is settled, he will not control it, the receiver will.
Is this a rare decision?
All the legal experts The Post spoke to agreed that the Engoron decision was almost unheard of – which may have contributed to the lack of clarity about how it would be implemented.
“It’s very rare,” Florence said. “Judicial dissolution almost never happens.” Instead, companies usually “die” in bankruptcy cases, he said.
Just last year, the AG lost his bid to dissolve the National Rifle Association for allegedly violating non-profit laws so executives could take over the organization for a living. The rest of the case is still ongoing.
Only a few decisions have ever been issued on whether New York courts have the right to revoke business certificates based on violations of civil fraud laws that Engoran found Trump violated, according to Leitman Bailey.
The lawyer said there were at least two similar cases in New York, with one ruling in 1959 in which a judge stripped a disc jockey school of its business license because it misled students about their qualifications after completing the program.
In another 1974 case, a judge revoked the business license of a company posing as the New York Consumer Bureau.
But none of these cases fit Trump’s profile, Leitman Bailey said.
“Nothing like this has ever happened before in the history of New York,” Leitman Bailey said of Engoron’s decision.
With Postal wires
Categories: Trending
Source: thtrangdai.edu.vn/en/
