Appeals Court Seems Skeptical of New York Civil Fraud Suit Against Trump

Appeals judges in New York fielded multiple questions to the New York attorney general’s office on Sept. 26 indicating they were skeptical of its application of an anti-fraud law to former President Donald Trump’s business practices.

The questions came during oral argument over Trump’s claims that the state Supreme Court erred in handling the civil fraud case, which resulted in a $489 million penalty for the former president.

Trump’s attorney in the case, D. John Sauer, told a five-judge panel in the court’s appellate division that the judge and prosecutors flouted time limits on the claims involved. He added that Attorney General Letitia James’s office pressed an overly broad interpretation of legally punishable fraud and that, regardless, the former president hadn’t committed fraud in his dealings with banks and others.

Some of the judges questioned whether the state was acting within the bounds of its authority or had a legitimate interest in bringing the suit.

Justice David Friedman pressed New York Deputy Solicitor General Judith Vale on whether there was any precedent for the attorney general suing over transactions involving sophisticated parties where neither “lost any money.”

“Every case that you cite involves damage to consumers, damage to the marketplace. … We don’t have anything like that here,” Friedman said.

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Vale argued that “there was absolutely a public impact and a public interest here. There are at least four different public harms from the kind of misconduct here.”

She also said that “when risk is injected into the market, that does hurt the counterparties and it does hurt the market as a whole.”

Justice Peter Moulton asked, “How do we draw a line, or at least [put up] some guardrails to know when the AG is operating well within her broad, admittedly broad sphere of 63(12)?”

Moulton was referring to New York Executive Law 63(12), which is the statute James used in suing Trump. The statute allows the attorney general to apply for court intervention when “any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business.”

Part of Sauer’s argument was that the attorney general’s conception of fraud was too loose and noted that no one was victimized by Trump’s conduct.

At one point, he told the court that under existing precedent, “there has to be a capacity or tendency to deceive, or atmosphere conducive to fraud.”

“And what we’ve pointed out is that you have a situation where there were no victims, no complaints,” he said, adding that Trump’s business partners did their due diligence.

Presiding Justice Dianne Renwick was skeptical that the statute required some kind of harm in order to prove fraudulent activity. She read the relevant portion of the statute and told Vale: “I don’t read harm or threat of harm in that, but the other side is saying that that is to be read into this statute.

“Are there any cases where the language harm or threat to harm limits the scope of the attorney general?”

Vale said there weren’t “as to liability and not in cases like this where what the attorney general is seeking [is] injunctive relief and disgorgement.”

Trump is currently facing a disgorgement of $489 million with interest accruing by the day.

During oral argument, Vale encountered multiple questions about the appropriateness of the disgorgement. Moulton told Vale the disgorgement amount was “troubling” and asked, “How do you tether the amount that was assessed by [the] Supreme Court to the harm that was caused here, where the parties left these transactions happy about how things went down?”

Vale responded that “disgorgement looks at taking the gain away from the wrongdoer.” Although the amount was high, she said, “there was a lot of fraud … and illegality.”

Reuters contributed to this report.