Can Trump weather this financial storm? On that question, the jury is still out.
Can Trump weather this financial storm? On that question, the jury is still out.
Q uestions abound about former president Donald Trump’s anticipated appeals of the two latest, crushing civil judgments against him — last week’s nearly $355 million verdict in the New York civil-fraud case, imposed by elected progressive Democratic judge Arthur Engoron of the New York state court in Manhattan; and last month’s $83.3 million verdict in the second E. Jean Carroll case, imposed by a jury in Manhattan federal court. These come after last year’s $5 million verdict in the first E. Jean Carroll case, imposed by a different jury in Manhattan federal court.
Let’s also keep in mind, because it is apt to bear on some of the penalties imposed, that the Trump Organization (though not Trump personally) was convicted on 17 felony tax charges in late 2022, on an indictment brought by Manhattan DA Alvin Bragg (who is poised to prosecute Trump on the Stormy Daniels hush-money indictment next month). Though these tax charges were comparatively minor, resulting in a modest fine of $1.6 million, the criminal convictions could materially affect Trump’s business prospects.
(By the way, Trump’s CFO, Allen Weisselberg, was also found liable in the civil-fraud case (fine of $1 million) and individually convicted in the criminal tax investigation. Not content with that, Bragg is reportedly considering another indictment against him, this time for perjury in his testimony at the civil-fraud trial.)
Basically, in the two relevant jurisdictions, a defendant who has been found guilty has 30 days to appeal. But unlike in the criminal system, there is no automatic right to appeal civilly. Rather, a defendant has to post the amount of the judgment, plus interest, in order to assure the court that the appeal is not simply for purposes of delay, and that the defendant will pay up if he loses.
Thus, Trump has already had to post about $6 million to appeal the first E. Jean Carroll judgment. If he follows through with his promised appeal of the January 26 jury verdict in the second E. Jean Carroll case, he will have to file a notice of appeal by early next week and post around $90 million. Judge Engoron’s astonishing verdict was rendered last Friday, February 16; hence, to appeal, Trump will have to post over $400 million. In total, then, we’re talking about half a billion dollars, or more.
Trump would have to use his own funds for these purposes. It has been widely reported that a big slice of his campaign fundraising has been going to attorneys’ fees. I am not sufficiently versed in the esoterica of campaign-finance law to analyze the justification for this practice in connection with private lawsuits in which the campaign is not a party (a subject on which experts disagree); yet, at least according to NYU constitutional-law professor Richard Pildes, a candidate is not permitted to use campaign funds to pay judgments — or, presumably, to pay for bonds posted for purposes of appealing judgments.
Timing here is critical. If an appeal is not timely filed, the judgment of the lower court is final. At that point, if the defendant does not pay up, the plaintiff can start petitioning the court to seize assets in order to satisfy the judgment. In such litigation, the plaintiff would be entitled to discovery regarding the defendant’s financial condition, the location of assets, and whether there have been attempts to transfer assets to other nominees in order to shield them from being seized.
Presumably, a presidential candidate would not want to be enmeshed in such litigation –especially one who was simultaneously facing one or more criminal trials on four pending criminal indictments. (If, for example, Trump were to testify in his own defense at a criminal trial, any dubious actions taken to try to shield assets from seizure would be fair game on cross-examination.)
Obviously, I have no idea whether Trump can afford to appeal. On this and other aspects of our discussion here, it is important to bear in mind that the injustice many of us have highlighted in the civil-fraud case is that the punishment is utterly out of proportion to the wrong done, not that no wrong was done. Trump was found liable of fraud based on his inflation of assets. While he has pushed back, insisting that he and his assets are actually worth more than attested by the statements of financial condition (SFCs) that were the heart of the state attorney general’s case, there was significant evidence of asset inflation – e.g., Trump’s claim that his Manhattan triplex apartment is three times bigger than it is (30,000 square feet, when it’s less than 11,000), which led to an astronomical exaggeration of its value. (Trump’s oft-repeated complaint that Engoron comically undervalued Mar-a-Lago is wrong; Engoron did not come up with the $18 million figure on his own — it was an appraiser’s evaluation (which was actually range-estimate of $18M to $27M) that, as state law required, factored in encumbrances on the property’s use, as opposed to what Mar-a-Lago might be worth if sold unencumbered.)
The Trump Organization is not a public company. We can’t peruse public SEC filings and the like to gauge its value based on assets, operations, opportunities, risks, etc. It is an opaque private concern run by a man who is famously prone to hyperbole, dishonesty, and secrecy. And while Trump has never personally sought bankruptcy protection, he has taken six companies into bankruptcy (three casinos, two casino holding companies, and a Manhattan hotel).
About six months ago, Forbes estimated Donald Trump’s net worth at $2.6 billion — indicating that he’s not nearly as wealthy as he sometimes claims, nor as faux rich as many skeptics suppose. It’s a lot of money. But oh, the leverage and the mounting peril.
In October 2021, ten months after Trump left the presidency, Forbes estimated that his businesses were saddled with $1.3 billion in debt. Actually, in terms of liquidity, this position was a slight improvement over what it had recently been; but the long-term picture was iffy, with huge payments coming due between 2022 and 2024. Forbes anticipated that Trump would probably be able to negotiate new loans, but that was before these three civil verdicts, the organization’s tax conviction, and the indictments.
Trump claims to have over $400 million in liquid assets, but we can’t know whether that is the case; even if it is, that sum is now markedly outstripped by civil judgments and debt (to say nothing of exorbitant, accumulating legal fees). Moreover, his organization is now subject to monitoring, so it would not be easy for him to make new loan arrangements as he saw fit if he weren’t under other restrictions. But he is — he has basically been barred from seeking loans and doing business in New York. And sure, he can move his operation to Florida just as he moved his residence there; but he can’t move real estate. He is tethered to New York as long as he holds major property there.
I’ve been asked a few times how the civil-fraud judgment affects existing, ongoing Trump business arrangements — it doesn’t automatically cancel them, right? The answer is: We don’t know.
On the surface, as long as Trump has been timely paying existing loans and insurance contracts, these would seem to be fine — at least until their termination dates. Nevertheless, financial institutions and insurance companies are public corporations. Not only do their lawyers craft escape hatches in contracts that allow them to cancel if the debtor engages in fraudulent conduct or fails to meet other conditions; these corporations also have shareholders (some of them activist Democrats) who might see fit to pressure management to cut ties with Trump.
Even if the managements of many of those corporations are satisfied with their profitable dealings (to this point) with Trump, as they indicated they were during testimony at the civil-fraud trial, a management’s fealty is to its stockholders, not to Trump. The fact that they have happily done business with Trump for years does not guarantee that they will continue to do so in light of his current financial straits.
Note, for example, that the evidence in the civil-fraud trial indicated that some counterparties required that Trump personally back loans and coverage for his businesses, and that he maintain a threshold net worth (in the $2 billion range). If the verdicts and the assets that would need to be tied up to appeal them cause Trump’s net worth to plummet, that would imperil current loan and coverage arrangements, and make new arrangements difficult, if not impossible, to secure since they would be much more expensive. And, as should be obvious, the potential of at least one criminal conviction and prison sentence, if not more, is not going to help Trump’s financial status.
If you’re asking me whether Trump can weather this financial storm, I’d say: I don’t know his true condition well enough to give a confident answer, but I have my doubts.
If you’re asking me whether it makes sense for Republicans to nominate Trump for president in these circumstances, my much more confident answer is that it would be political suicide — which, naturally, won’t stop them from doing it.