The New York Attorney General (AG) Letitia James filed a civil fraud lawsuit against former US president Donald Trump on Wednesday (September 21), alleging that he inflated his net worth by billions of dollars, in order to obtain favourable loans, better insurance and tax benefits.
In the more than 200-page lawsuit, James, a Democrat and long-time Trump critic, claimed that her three-year investigation into Trump’s financial activities revealed that he “engaged in numerous acts of fraud and misrepresentation” in the preparation of his annual financial statements between 2011 and 2021. “They are the result of the Defendants utilising objectively false assumptions and blatantly improper methodologies”, the lawsuit stated.
The Trump Organisation (a group of his estimated 500 business entities) and his three adult children – Ivanka Trump, Donald Trump Jr. and Eric Trump — are also listed as defendants.
As part of the civil lawsuit, the Office of the Attorney General (OAG) is seeking $250 million from Trump— the estimated amount he allegedly made from the fraud. James also seeks to permanently bar Trump and his adult children from serving as an officer or director in a business registered in New York. Lastly, she wants to prohibit Trump and the Trump Organisation from entering into New York real estate acquisitions for five years.
Who is Letitia James?
The 67th AG of New York State, Letitia James is the first African-American AG and the first woman to be elected to the post. A member of the Democratic Party, she was previously elected as the New York City Public Advocate in 2013, and was the first woman of colour to hold citywide office.
James’ current investigation into Trump is not the first time she has taken on powerful figures. In 2020, she filed a lawsuit against the National Rifle Association, a powerful gun rights lobbying group in the US, alleging fraud and corruption within the organisation. She also took on former New York governor Andrew Cuomo, a member of her own party. Her investigations into the sexual harassment charges against Cuomo led to his resignation last in August 2021. She also released a report last year, revealing that his administration undercounted Covid-19 deaths in nursing homes, as reported by CNN.
James has been critical of Trump, especially during her campaign for AG in 2018, when she pledged to launch sweeping investigations into his business practices to see if he violated any laws. On the day she won the elections to become New York’s AG, she vowed to scrutinise the affairs of Trump and stated, “I will be shining a bright light into every dark corner of his real estate dealings, and every dealing, demanding truthfulness at every turn.”
Trump had used her statements to allege that her inquiries into his dealings are politically motivated. In an attempt to block her investigation into his businesses, Trump had filed a lawsuit against James in December 2021, claiming that it was in violation of his constitutional rights. However, in May this year, a federal judge dismissed the case against James, allowing the investigation to continue.
The case against Trump
The civil lawsuit against Trump alleges that he issued false financial statements and employed deceptive strategies to inflate his net worth, by providing more than 200 false and misleading valuations of his 23 properties and assets in the period between 2011-2021. He was able to make $250 million from this scheme, James alleges.
For instance, apartments in his Trump Tower in New York were valued at 30,000 square feet, despite being only 10,996 square feet. As a result, the apartment was valued at an “absurd” $327 million, a figure nowhere close to the sale-price of any other apartment in New York, the lawsuit claims.
The Office of the Attorney General (OAG) also alleges that Trump had his Mar-a-Lago resort in Florida valued to a tune of $739 million based on the false presumption that property could be developed and sold for residential use, despite him previously signing away his residential rights. The lawsuit claims that in reality, his Florida property was worth around $75 million.
During his August depositions, which was part of the investigation into his financial dealings, Trump had repeatedly declined to answer questions that were posed, and according to Reuters, had invoked the Fifth Amendment, his constitutional right against self-incrimination more than 400 times.
The law James wants to use against him
The OAG claims that Trump was in violation of a powerful piece of legislation — New York Executive Law 63 (12), which penalises any person that engages in “repeated fraudulent or illegal activities or otherwise demonstrates persistent fraud or illegality in the carrying on, conducting or transaction of business.”
The statute gives the OAG special and broad powers while pursuing legal action against people that took part in repeated fraud and illegality. The New York Times reports that unlike other civil disputes, the 63 (12) statute gives the AG the power to issue subpoenas, hold depositions and conduct other investigations even before filing a lawsuit against any person or business.
Reportedly, the prosecution also has to rely on a lower bar to prove the occurrence of fraud — they don’t have to prove that there was intent to defraud or that the defendant’s actions led to financial loss. All they need to argue is that misrepresentation of deceptive practices took place.
Trump faced legal action under the 63 (12) statute earlier as well, according to the New York Times, when a previous New York AG sued him in 2013 for defrauding students through for-profit Trump University, a now defunct organisation that was not an accredited university.
Trump’s conduct in the preparation of allegedly fraudulent financial statements, their submission to financial institutions to obtain financial benefit, the falsification of business records and engagement of insurance fraud, are according to the OAG in violation of other New York state laws as well.
What is the significance of this case?
If the lawsuit is secured, the $250 million fine, as well as the stringent financial restrictions on Trump, his three adult children as well as the Trump Organisation could have a serious impact on his businesses.
While the OAG’s lawsuit is a civil case against Trump and cannot lead to a prison sentence, James claims that other state and criminal laws may have been broken, and has referred the matter to the Internal Revenue System (IRS) and the US Justice Department.
Trump has often suggested that he intends to run for President in 2024. However, this civil case is one of the many legal obstacles that stand before his formal bid is made. Trump is facing the heat from the US Justice Department for his attempt to undermine the 2020 presidential election results, and his role in the subsequent attack on the US Capitol by his supporters on January 6, 2021. He was issued approximately 40 subpoenas earlier this month and federal agents seized the phones of at least two of his advisors.
He is also facing a separate criminal investigation by the Justice Department for his handling of classified documents that he took to his Mar-a-Lago estate after his presidency, leading to an FBI raid into his home in August. According to Reuters, a federal appeals court ruled on Wednesday (September 21), that the Justice Department could continue reviewing the classified records seized from his house as part of its criminal investigation.