Redeem now - A Manhattan judge on Tuesday found Donald Trump and his real-estate company liable for fraud.
- The judge ordered the Trump Organization's New York corporate charters revoked immediately.
- A receiver will be appointed to "dissolve" the company — but years of appeals may play out first.
Experts are calling it the "corporate death penalty." And what happens next is uncharted territory.
In a stunning decision Tuesday, a Manhattan judge found that Donald Trump committed widespread, long-standing, and ongoing fraud at the Trump Organization and ordered what experts in New York financial crimes say amounts to the dissolution of his company.
The penalty, awarded on behalf of New York's attorney general, Letitia James, is so extreme that Trump may fight James and the judge for years before anything actually happens.
And the penalty is so rare that the only previous time it's been attempted on such a grand scale — when James sought the corporate death penalty in her three-year-old, ongoing fraud lawsuit against the NRA — has failed.
"It's a staggering judgment," said John Moscow, a former financial-crimes prosecutor for the Manhattan district attorney's office.
"It means you are no longer a company, and the judge is appointing someone to take over the assets and distribute them as the court sees fit."
The ruling by New York Supreme Court Justice Arthur Engoron spends some 35 pages describing Trump's frauds and disassembling his lawyers' arguments; it yanks the corporate charter in two short paragraphs.
The first paragraph orders the immediate cancellation of any "certificates," meaning corporate licenses, that are held by Trump, his two adult sons, the Trump Organization, and its underlying LLCs.
The second orders that "within 10 days of the date of this order, the parties are directed to recommend the names of no more than three potential independent receivers to manage the dissolution of the canceled LLCs."
"The findings of fraud are just so obvious," said Moscow, who's now the senior counsel at Lewis Baach Kaufmann Middlemiss in New York.
James has alleged that Trump exaggerated the worth of his assets to banks and insurers by as much as $3.6 billion in a single year.
"But how it unfolds, I just don't know," Moscow said.
Trump continues to own his buildings, agreed Moscow and another veteran Manhattan financial-crimes prosecutor, Diana Florence, who's now also in private practice.
Florence likens it to losing a driver's license — it doesn't change that you own the car, but it changes everything about what you can and can't do with it.
"Without a corporate charter, you can't operate as a corporation," she said. "You can't get loans, you can't apply for a government contract.
"It's comparable to once a person dies. A dead person can't sell property. Only the executor of the estate can do that — or in this case, the receiver."
Florence continued that when corporations go away, it's usually because of bankruptcy.
"This is the same thing, but it's called a judicial dissolution," she said. "It's something that is almost never done. It's a big mess, actually."
In theory, the receiver would continue to collect rents, pay taxes, and pay the bills and the company salaries until the assets are sold off, with Trump, who is the Trump Organization's sole beneficiary, receiving what's left over after any debts and liabilities are met, Florence said.
Those debts may include a $250 million judgment the attorney general is seeking when the case goes to trial next month.
Could Trump transfer everything to a new, non-New York corporation and keep running things from out of state? Florence thinks not.
"He can't because he, Donald Trump, is no longer in charge," she said.
She continued: "The receiver will be in charge, and they are answerable to the court. Trump can't tell the receiver what to do."
Still, she added: "I think nothing will happen for a long time. It'll be years, I think."
But if the court has its way, and the ruling survives the inevitable appeals, "Trump will ultimately get the cash," she said, though "he could try to bid on the properties like anybody else."
Lawyers for Trump and the attorney general are back before the judge Wednesday for a final pretrial hearing.
Correction: September 27, 2023 — An earlier version of this story misstated one of the allegations against Donald Trump. New York's attorney general, Letitia James, has accused him of exaggerating the worth of his assets by as much as $3.6 billion in a single year, not $3.6 million. It also misstated the name of the law firm Moscow works for. It's Lewis Baach Kaufmann Middlemiss.
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