(Bloomberg) — Donald Trump was banned from doing business in New York for three years and ordered to pay $354 million for lying about his wealth, but one thing missing from the judge’s order was an earlier edict to dissolve all the companies the billionaire owns in the state.
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In a surprise move, Justice Arthur Engoron backed off Friday when he issued punishments in the civil fraud case, walking back his earlier ruling and leaving Trump’s control over his New York empire largely intact — for now. Instead, the judge said any decision about forced sales would depend on what two appointed monitors learn about individual Trump businesses.
Back in September, the judge ordered the cancellation of all Trump Organization LLC business licenses in New York after concluding before the trial that the real estate mogul was liable for a decade of fraud as alleged by the state in a lawsuit. That could have led to a messy liquidation process that threatened to expose Trump’s murky private businesses.
Trump could fight cancellation of his business licenses, especially since the New York attorney general never requested it. Legal experts say Engoron’s order in September went above and beyond, and likened the ruling to a corporate death penalty, threatening Trump’s control of marquee properties like Trump Tower, the 72-story landmark 40 Wall Street and the Trump National Golf Club.
Anthony Sabino, a law professor at St. John’s University in New York, called the original order “draconian.” He said, “The Trump Org is a complex organization, but this is an extreme remedy of punishing the entities and the real life people who work there. This is a like using a shotgun when you need a surgeon’s scalpel for certain bad actors.”
Trump’s businesses involve hundreds of entities under the umbrella of the Trump Organization. About half the value of Trump’s real estate portfolio, worth some $1.5 billion, is located in New York state, according to the Bloomberg Billionaires Index.
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While the businesses will be allowed to keep operating, Engoron said he’ll rely on two outside overseers to monitor “major activities that could lead to fraud.” The judge ordered a compliance director for Trump’s companies — who would join the monitor he’d already appointed. Engoron said he could renew his call for “restructuring and potential dissolution” based on “substantial evidence.”
That means there’s still risk of forced asset sales in the future for Trump if Engoron changes his mind.
“This is a venal sin, not a mortal sin,” Engoron wrote in a 92-page ruling against Trump, his two eldest sons and two former Trump Organization executives.
The judge’s change of heart came as legal experts predicted the former president would have solid grounds for an appeal because dissolution orders are so rare, and because New York Attorney General Letitia James never asked the judge to consider it.
“This is a big deal and has only happened a few times over the years,” said Bennett Gershman, a professor at Pace University’s law school. “This is unlikely to be upheld on appeal.”
‘Irreparable Impact’
A Manhattan appeals court in October halted the dissolution order pending all appeals in the case.
Christopher Kise, the former president’s lawyer, argued Engoron’s September decision would cause “irreparable impact on numerous companies” and 1,000 employees within the Trump empire. “This is everything owned or controlled by the defendant,” Kise said. “Once you dissolve, you dissolve. It’s chaos. It’s chaos right now.”
Even lawyers for James said the state didn’t want penalties that kill off Trump’s businesses.
Diana Florence, who spent 25 years as a Manhattan state prosecutor handling business fraud, called the certificate cancellations a “nuclear option” that would essentially kill Trump entities in the state.
To be sure, much of the growth at the Trump Organization has increasingly come from outside New York. Revenue at his network of golf courses across the US and Britain has grown by more than 50% since 2019, and the boom in Florida has benefited his best-known assets there, Trump Doral and Mar-a-Lago.
Canceling business certificates and a forced asset sale — should those ever occur — wouldn’t completely dissolve Trump’s company, but they would certainly impact his operations in the state.
Small-Timers
Adam Leitman Bailey, a Manhattan real estate lawyer, said the law invoked by the judge is usually employed against small-time swindlers rather than big businesses that have been around for generations.
“This is not a statute they should be using to take down a billion-dollar business,” Leitman Bailey said.
Dissolution would be a little like bankruptcy, with a receiver continuing to pay bills for the business until the assets are sold off. After paying off loans, employee salaries and money owed to vendors and suppliers, it’s possible that whatever remains would be returned to Trump.
During a three-month trial, lawyers for New York argued that Trump inflated asset values on annual financial documents for more than a decade to dupe Deutsche Bank AG and other lenders into giving him better terms on hundreds of millions of dollars in loans.
In his order Friday, the judge said documents presented as evidence in the case proved the state’s claims “over and over again.” He chastised Trump and his sons, saying their “complete lack of contrition and remorse borders on pathological” and that they “are incapable of admitting the error of their ways.”
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Meanwhile, Engoron’s appointment of a compliance officer to oversee the company may complicate dealmaking and could accelerate the Trump Organization’s focus on growing outside of the state.
“The long term issue here is the Trump legacy,” said Florence, the former state prosecutor. “This is the company that survives Donald Trump and will be inherited by his kids and grandkids, but it will be a much more diminished legacy he’ll leave behind.”
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