Cutting Down the Law to Get at the Devil
An anti-morality performance premiers in New York.
Robert Bolt's masterful morality play, A Man for All Seasons, tells the story of Sir Thomas More, Lord Chancellor of England, who would not agree to bless Henry VIII’s desire to divorce his wife, Catherine of Aragon, in order to marry the unfortunate (as she proved to be) Anne Boleyn. Thomas More’s mortal enemy was Richard Rich, who later perjured himself to ensure More’s execution.
More’s daughter, Margaret, and his future son-in-law, Roper, urge More to arrest Rich because he is a duplicitous and dangerous man. More refuses, saying that “if he was the Devil himself,” Rich should remain free “until he broke the law!”
ROPER then counters: So now you'd give the Devil benefit of law!
MORE: Yes. What would you do? Cut a great road through the law to get after the Devil?
ROPER: I'd cut down every law in England to do that!
MORE: Oh? And when the last law was down, and the Devil turned round on you – where would you hide, Roper, the laws all being flat? This country's planted thick with laws from coast to coast--man's laws, not God's--and if you cut them down--and you're just the man to do it--d'you really think you could stand upright in the winds that would blow then? Yes. I'd give the Devil benefit of law, for my own safety's sake.
Today, New York State Attorney General, Letitia James, aided and abetted by a political hack in judicial robes, Arthur Engoron, are obsessed with their view of Donald Trump as the devil whose election would destroy democracy. To destroy the Devil, they have combined to “cut a great road through the law to get after the Devil.”
They have done so by cutting down this Country’s laws to destroy the man, his businesses, and his presidential campaign. Their vehicle is the crushing judgment against Donald Trump and his sons, in fulfillment of James’ campaign promises. This article will focus on just one aspect of this unwise and destructive decision – the unconstitutional monetary awards against Donald Trump.
NEW YORK v. TRUMP – A BRIEF SUMMARY OF THE CASE
To provide context, I will include a brief summary of the facts as they relate to Donald Trump. This will include an explanation of the monetary award that I have not seen reported elsewhere.
New York’s case against Trump involved allegations that he and his companies inflated the values of their real properties on their financial statements. Those financial statements were given to obtain loans to acquire and develop various properties. In addition to pledging the properties as collateral for the loans, Trump also gave the lenders his personal guaranty of the debt.
Engoron found that Trump and his companies inflated the property values on their financial statements. Under the peculiar New York statute involved, this amounted to fraud despite the fact that the agreements with the lending banks required them to perform their own analyses of the collateral and despite the fact that all lenders were paid in full and on time.
Engoran provided a glimpse into his mindset when he wrote that the defendants “crow that the borrowers paid back all loans fully and on time.” Opinion, p. 2 (Quotes from the opinion are italicized; bolded emphasis is mine). The defendants do not argue; they do not advocate; they “crow.”
THE AMOUNTS OF THE MONEY JUDGMENT
On February 16, Engoron entered his damages award in the case. The amount of his monetary judgment against Donald Trump, exclusive of pre- and post-judgment interest was $355 million (figures are rounded for simplicity). This amount encompasses three categories of claims:
(1) “WINDFALL PROFITS” FROM THE SALE OF THE TRUMP INTERNATIONAL HOTEL
In 2013, Trump acquired the “Old Post Office” building in Washington, D.C. He took out a reported $200 million in loans to refurbish it, and it reopened in 2016 as the Trump International hotel. He sold it in 2022. Although the Opinion does not identify the purchaser, other reporting indicates that it was CGI Merchant Group of Miami.
Engoron found that the refurbishment loans and the sale were tainted by inaccurate financial statements. Because of this, he assumed that the $126,828,600 that Trump personally reaped from the sale was what Engoron called, a “windfall profit.” He ordered Trump to disgorge this entire sum to New York.
(2) “WINDFALL PROFITS” FROM THE SALE OF THE LICENSE AGREEMENT FOR FERRY POINT GOLF COURSE
In 2012 the New York City department of Parks and Recreation awarded Trump a license to operate and maintain a city golf course, known as Ferry Point. In 2023, Trump assigned the Ferry Point license to Bally’s Corporation for $60 million. Engoron also characterized that sales price as “windfall profits” because Trump “maintain[ed] the license agreement for Ferry Point based on fraudulent financials.” So, like the profits from the sale of the Trump International Hotel, Endoron ordered Trump to pay the $60 million to New York, not to Bally’s.
(3) THE “INTEREST RATE DIFFERENTIALS” ON TRUMP’S DEVELOPMENT LOANS
The largest single component of the award against Trump was $168,040,168 based on what Engoron called “interest rate differentials” for four loans. Trump had personally guaranteed each of these loans. When a wealthy individual, such as Trump, personally guarantees a loan to one of his companies, it usually allows him to negotiate a lower interest rate because of the lessened risk to the lender.
For these four loans that Trump personally guaranteed, Engoron calculated the difference between the actual interest rates that Trump paid, and the higher rates that he decided the banks would have charged without the personal guarantees. For the four projects at issue, these differentials totaled $168,040,168. Engoron decided that Trump should also “disgorge” this sum to the State of New York.
(4) ADDITIONAL INTEREST ON ENGORAN’S JUDGMENT
In addition to the $355 million principal amount of the award, Engoron tacked on pre-judgment interest that reportedly is “about $100 million.” And post-judgment interest is accruing at the rate of $111,984 per day or ~$41 million per year. Thus, if it took Trump just a single year to wend his way through New York’s appellate court system and then have his case heard by the U.S. Supreme Court, the total monetary judgment against him would be ~$496 million – just shy of half a billion dollars! And that does not even count the inevitable losses Trump will incur due to the devastation of his businesses, especially if he is forced to sell properties at fire-sale prices to raise the money for an appeal bond.
ENGORON CUTS DOWN THE LAW’S LIMITS ON FINES AND PUNITIVE AWARDS
There are many problems with Engoron’s award of damages. I will not attempt to discuss them all but will provide just enough background to show how the award runs roughshod over constitutional limits on fines and other punitive awards.
Engoron’s judgment clearly is intended to be punitive. It is not paid to any of the banks or purchasers with whom Trump dealt. Rather, his order says that the amounts awarded are “liable to plaintiff,” i.e., the State of New York.
Although the State of New York stands to recover a half-billion dollars or more for its treasury, Engoron does not even attempt to make the case that it incurred such a loss. To avoid these problems, James and Endoron characterize the awards payable to New York as “disgorgement” of Trump’s “ill-gotten gains.” Calling the remedy “disgorgement” avoids the problem that there are no real victims here.
Given the absence of victims and the huge amounts payable to the State, despite how James and Engoron might try to spin it, this half-billion-dollar judgment can be accurately characterized as a penalty or fine. If I may borrow from Justice Scalia, they can call the disgorgement orders a “pink rock candy mountain” but that does not alter their nature as fines.
THE EIGHTH AMENDMENT TO THE UNITED STATES CONSTITUTION FORBIDS EXCESSIVE FINES
I do not intend to turn this into a comprehensive legal analysis by discussing all of the relevant case law. Rather, my objective is to give the lay reader a general overview of the applicable concepts that show how the award violates fundamental precepts of American jurisprudence.
The Eighth Amendment to the U.S. Constitution provides: Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
Pursuant to both Supreme Court case law and the common understanding of what a “fine” is, it is apparent that the Orders to Trump to disgorge hundreds of millions of dollars are fines or penalties and thus are subject to the Eighth Amendment. Let us first look at the Supreme Court’s description of when a penalty violates the Excessive Fines Clause of that Amendment.
In United States v. Bajakajian, the defendant was charged with violating federal reporting requirements regarding the transportation of more than $10,000 in currency out of the country. The government sought a forfeiture of the $357,144 involved. The Court held that the forfeiture violated the Excessive Fines Cause. The Court’s language shows that the Engoron-ordered “disgorgements” are “fines” within the meaning of the 8th Amendment:
“[A]t the time the Constitution was adopted, the word 'fine' was understood to mean a payment to a sovereign as punishment for some offense." The Excessive Fines Clause thus limits the government's power to extract payments, whether in cash or in kind, 'as punishment for some offense."1
In Trump’s case, the first indicia of a fine is that the payments are ordered to be made to the sovereign, the State of New York. And because the payments were not for damages to compensate victims, they clearly are intended as a punishment for the offense of submitting false financial statements.
Engoron also emphasized that one of his goals in ordering the disgorgements is to deter Trump and others from similar misconduct: “Disgorgement aims to deter wrongdoing by preventing the wrongdoer from retaining ill-gotten gains from fraudulent conduct.”
In Bajakajian, however, the Supreme Court tells us that where, as here, deterrence is an objective, it is a marker of a fine and punishment, not of compensation. “Deterrence, however, has traditionally been viewed as a goal of punishment, and forfeiture of the currency here does not serve the remedial purpose of compensating the Government for a loss.” And because it is a punishment, the order is a fine: “Because the forfeiture of respondent's currency constitutes punishment [it] is thus a ‘fine’ within the meaning of the Excessive Fines Clause.”
The conclusion that the disgorgements’ half-billion-dollar penalty levied against Trump is a fine, also comports with the common understanding of “fine.” Indeed, commentators of every political stripe, including many decidedly hostile to Trump, recognize the reality that Engoron’s Order is really a “fine.” For example, all of the ancien régime networks2 refer to it as a “fine:” ABC News (“Donald Trump and his adult sons were hit with millions in fines in the civil fraud trial . . . . ”; NBC News (“New York Attorney General Letitia James told ABC News that she is prepared to seize former President Donald Trump’s assets if he doesn’t pay the $354 million fine from a civil fraud lawsuit.); CBS News (“Former President Donald Trump and the Trump Organization must pay $354 million in fines . . . .”).
The Bajakajian Court also held that “a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense.”
In a case where there are no real victims, where not a single bank has complained that it was cheated, is an order to disgorge hundreds of millions of dollars, a grossly excessive penalty? To ask the question is to answer it. But it also is instructive to consider some of the other criteria employed by courts to determine when a penalty is excessive:
Endoron’s order recites that Trumps actions violate New York Penal Law 175.05 (falsifying business records) and 175.45 (issuing false financial statements). Both are Class A misdemeanors punishable by a fine of up to $1000. So, the ratio of the proposed judgment to the potential criminal fine is a half-million to 1!
Where state legislatures want to impose penalties for damages, as in anti-fraud statutes protecting against consumer fraud, they frequently provide for treble damages, for a ratio of the penalty to actual damages of 3 to 1.
In this case, given that the payee, New York, suffered zero actual damages, a mathematician would teach us that the ratio of the fine to New York’s actual losses is infinite! [1/0 = ∞]
As discussed below, Supreme Court cases limiting punitive damages also provide guidance on acceptable proportionality.
ENGORON IGNORES SUPREME COURT PRECEDENT LIMITING PUNITIVE DAMAGES TO GET THE DEVIL TRUMP.
In assessing the propriety of the amount of Trump’s fine and how far it departs from well-established American jurisprudence, it is relevant to consider how the U.S. Constitution limits punitive damages awards.
Because the disgorgements are intended to punish Trump rather than to compensate the State of New York losses, the hundreds of millions of dollars to be disgorged somewhat analogous to punitive damages, which, like the orders here, are intended to punish the wrongdoers and deter to others from similar misconduct.
In response to runaway punitive damages awards against unpopular defendants, the Supreme Court has sharply curtailed such damages on constitutional grounds. The general rule is that, like fines, punitive damages cannot be grossly excessive. Although there is no precise mathematical formula, several Supreme Court decisions shed light on when an award is grossly excessive.
State Farm v. Campbell (2003) is such a case. There the Court considered a Utah Supreme Court decision that allowed punitive damages of $145 million, against compensatory damages of $1 million. The Court reversed, holding that the punitive damages violated the Constitution’s due process clause because they were “grossly excessive.”
The State Farm Court also held that “in practice, few awards exceeding a single digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”
The analogy is not perfect, but nevertheless, it serves to show how out-of-touch with American jurisprudence the get-Trump lawfare has become.
THE CONSTITUTION REQUIRES THAT NEW YORK SHOULD HAVE GIVEN TRUMP FAIR NOTICE OF THE SEVERITY OF THE POTENTIAL PENALTY.
In BMW v. Gore the Supreme Court held that “elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose. That was another reason for the reversal of a $2 million Alabama punitive damages award in that case.
In other words, a defendant cannot be punished with a massive fine unless he knows that such a fine is a likely result of his misconduct.
That type of notice is glaringly absence here. As many commentators have pointed out, the case is unique in New York, indeed in United States jurisprudence. In her press release announcing the judgment, James described it as a “Landmark Victory.” Precisely. It is a “Landmark” case because such a large fine and the scope of the restrictions on Trump’s business in New York are completely unprecedented.
Lenders and borrowers disagree over the values in financial statements every day. No reasonable developer could ever have anticipated that financial statements that a New York judge finds were inflated, could result in in a fine of a half billion dollars or more. That is especially true where, as here, the lenders were contractually obligated to do their own due diligence and assess the financial statements and collateral values for themselves.
CONCLUSION
In Browning-Ferris Industries v. Kelco Disposal, the Supreme Court traced the Eighth Amendment’s Excessive Fines Clause back to its roots in the Magna Carta in language that is particularly apropos to the proposed punishment of Trump: “[T]he compact signed at Runnymede was aimed at putting limits on the power of the King, on the ‘tyrannical extortions, under the name of amercements, with which John had oppressed his people,’ whether that power be exercised for purposes of oppressing political opponents, for raising revenue in unfair ways, or for any other improper use.”
The proliferation of lawfare against Trump is intended to deny him the “benefit of the law” and to deprive millions of voters of their right to choose their president. This is precisely the oppression of political opponents that has been anathema to our legal tradition since 1215. King John signed the Magna Carta in that year to avoid a civil war.
Mature and serious politicians and judges should pause and learn from history.
[1] Quotes from cases sometimes omit internal quotation marks and citations.
[2] For the reference to ancien régime, see my February 22 article.
Unfortunately, our entire judicial system has been corrupted by partisanship and favoritism.
I feel like our constitutional republic has been turned into a giant Jenga game where each brick in the foundation of our Constitution is being removed, and eventually this Country is going to collapse on itself.
An excellent, enlightening explanation for the layman to understand the amount of corruption being directed at a citizen for political purposes.