'The immense penalty in this case is troubling': Appeals court highly skeptical of government and trial court in Trump civil fraud case

Attorneys for former President Donald Trump made their case for overturning his $454 million civil fraud judgment before a panel of appellate judges in New York City on Thursday afternoon.

In July , Trump filed a 116-page appellate brief with the New York Supreme Court’s Appellate Division, First Department. At the heart of the long-and-winding appeal is an allegation the trial court violated the law by allowing New York Attorney General Letitia James to bring time-barred claims against Trump and his namesake family business.

In more headline-generating terms, Trump argued the lower court, helmed by Justice Arthur Engoron, allowed James, a Democrat, to go after her avowed political enemy for violations that “do not exist at all” and to secure “draconian, unlawful, and unconstitutional penalties.”

The attorney general’s office, in response, argued there was “overwhelming evidence” the Trump Organization “acted with an intent to defraud” by engaging in an “illegal scheme to misleadingly inflate the net worth” of Trump himself “by as much $2.2 billion a year.”

“This case involves a clear-cut violation of the statute of limitations and the law of the case doctrine” Trump attorney John Sauer said at the outset of the hearing on Thursday.

An earlier appeals court decision removed Ivanka Trump from the same lawsuit based on statute of limitations issues. Trump claims that ruling proves fatal to most of the state’s present case because it concerns transactions — loans — that were completed prior to 2016.

“Why didn’t we say that?” one of the judges asked — stopping the attorney midsentence.

The issue, Sauer said, is that the trial court allowed the government to punish financial statements based on a “theory that the post-closing submission of annual financial statements constituted continuing wrongs.” Meanwhile, Trump’s attorney argued, those loans themselves had closed years beyond the statute of limitations.

The most the government could have done is look at financial statements filed beginning in 2017, Trump’s attorney argued. Instead, the government went back and used statements filed in 2012 to obtain “crippling financial penalties.”

“There was a complete disregard of the statute of limitations,” Sauer added.

While Trump’s attorney was quickly cut off — and the judges appeared generally noncommittal on statute of limitations arguments — the 45th president’s arguments, overall, received a much warmer reception from the court than those essayed by the government.

In fact, Judith Vale, speaking for the attorney general’s office, was cut off before she could even get her first sentence out.

“All of the defendants repeatedly violated,” was about as far as she could get before the first of many judges interjected — to ask a question that appeared to ridicule the state’s argument.

The first judge asked Vale for a citation to “any previous case” where the attorney general sued under Executive Law §63(12) “to upset a private business transaction” using “written disclaimers” regarding “inherently subjective valuations” and “where the victim never complained about any fraud in the transaction or losses from it.”

Then, before Vale could answer, another judge quickly piled on, adding that the government attorney should also be prepared to cite a case that also had “little to no impact on the public marketplace.”

“There was harm to the counterparties,” the attorney general’s lieutenant argued. “There was harm to the market.”

Those abrupt and askance questions set the tone for how the appellate body viewed and treated the state’s legal position.

Many of the judges were skeptical of the size of the financial penalty issued against Trump and his co-defendants.

“The immense penalty in this case is troubling,” one judge said.

Another judge criticized the math used by the attorney general and the trial court: “Wouldn’t it have been more appropriate to calculate them by calculating the difference in valuation of the property versus the valuation provided to the banks to get the loans?” she asked.

Yet another judge, when addressing Sauer, essentially agreed with Trump that the trial court underestimated the value of Mar-a-Lago to the tune of several tens of millions of dollars — at least.

The trial court valued the former president’s combined home and private club at $18 million. But, a judge on Thursday noted that there was undisputed expert testimony in the record that the property brings in some $50 million per year in revenue.

Another judge then teed up Sauer for an apparent win — suggesting the trial court’s decision to disregard Trump’s expert testimony about accounting practices was inappropriate in the present case.

“Creating an issue of fact, correct?” she asked.

“Exactly right, your honor,” Sauer said.

Just one of the judges sitting on the five-judge panel appeared conciliatory to the broad mandate contained in the statute used by the attorney general’s office — and to the state’s arguments about the reach of the law in question. But even this judge appeared hesitant to agree that the banks in question suffered any harm — or that the mandate in §63(12) was quite as broad as the state suggested.

“These misstatements and omissions were about objective facts that were extremely important and that any reasonable counterparty would want to know,” Vale said. “Any sophisticated, reasonable counter-party would want to know that the defendants were valuing an apartment based on 20,000 square feet more than it really was.”

While the nitty-gritty of the allegations against Trump was met with a muted response, the judges drilled down on the idea that the major counter-party, Deutsche Bank, dealt with, and were diligent enough to know how to deal with, similar such loan applications all the time.

“I’m sorry, but what’s being described sounds like a potential commercial dispute between private actors,” one judge said during another portion of Vale’s presentation — cutting her off again.

Another judge pushed back in similar fashion when the government attorney attempted to outline the harm as the state viewed it: “You’ve got two really sophisticated parties in which no one lost any money.”

Still, another judge outright chided the attorney general for “interfering with these private transactions…where people don’t claim harm.”

Sauer returned to the dais to highlight a key fact that, he argued, also did not factor into the trial court’s order on summary judgment: Deutsche Bank’s own representative testified that Trump would have received the same interest rate if he was only valued at $1 billion — three times less than how the state valued Trump.

Trump’s attorney played up the notion of free market participants interacting freely — with a keen understanding of disclaimers and interest rates. On the opposite end of the ideological frame, he posited: dull-edged governmental overreach.

“My colleague struggled to articulate any clear principle that would put any transaction outside the reach of the statute,” Sauer said. “Our position is narrow. Which is that, on the facts of this case…no reliance, no materiality, Deutsche Bank saying ‘We would have given him the exact same deal!’ And we have clear disclaimers. Surely this is not within the statute. And if this is, there’s nothing that falls outside of the statute. And that is a sweeping and unsettling thing.”

And, at least on Thursday, the appeals court appeared to be a largely receptive audience for Trump’s pro-business angle.

“You hear underneath all these questions, the question of mission creep,” a judge told Vale. “Has §63(12) morphed into something that it was not meant to do? And that’s something you must address. Because there must be some limit on what the Attorney General can do.”

The post ‘The immense penalty in this case is troubling’: Appeals court highly skeptical of government and trial court in Trump civil fraud case first appeared on Law & Crime .