In media coverage, the civil fraud case brought against Donald Trump, two of his sons, his CFO and comptroller, and various of his business entities is often referred to as the case that could bring down Donald Trump’s business empire.
Even with all the legal actions swirling around the former president, this is the case he speaks out against the loudest and most frequently. It’s taking place in the courthouse he’s visited most often, where he’s given the most testimony and had the most newsworthy blowouts.
This is also the proceeding where Trump earned the gag order he’s violated twice so far.
This is the case that’s gotten farthest under Trump’s skin. The question is why, and what exactly is at stake?
Trump is facing four criminal indictments, any one of which could land him in jail for the rest of his life, but this case is not one of those. The civil fraud case may yet result in a criminal referral, but for now, it’s just a lawsuit brought by the state under an equity statute.
In the Georgia RICO case, Trump was charged with multiple felonies, booked, arraigned, photographed, fingerprinted, and released on bail. But criminal indictment hasn’t damaged Trump’s political campaign. He’s been able to fund-raise off his Georgia mugshot, and his claims of political persecution have resonated with his base.
On the campaign trail in New Hampshire, Trump floated a comparison between himself and Nelson Mandela, the South African activist who spent 27 years in prison for his anti-Apartheid stance.
“I don’t mind being Nelson Mandela because I’m doing it for a reason,” Trump told rally attendees. A photo-op in orange pajamas would only up Trump’s game, especially if that taste of jail time came without the stain of a criminal conviction on his record.
I don’t know whether that’s a road Trump is willing to take voluntarily, but if it were, the quickest and easiest way would be for him to keep violating the gag order Judge Engoron put in effect to protect court staff.
So far, the appeals court has found the gag order to be narrow and appropriate. Under it, Trump is allowed to criticize the case, malign the judge, attack the prosecutor, and claim without evidence that there’s a conspiracy between the New York AG’s office and President Biden’s Department of Justice. What Trump can’t do is dox and harass Judge Engoron’s principal law clerk.
But maybe because he perceives her as a soft target or just because he’s been told not to, Trump has already violated the gag order twice since its inception.
During temporary appellate stays to the order, Trump has shown continued eagerness to direct his followers’ ire at the clerk, and the events of January 6, 2021, show that he doesn’t care that his words might cause harm or even get someone killed.
There are no “damages” in the civil fraud case. The remedy sought by the AG is the equitable remedy of disgorgement. She doesn’t need to show that banks or insurance companies have been harmed and should be compensated. Instead, she’s trying to show that some of Trump’s corporate profits were obtained through fraud, that he shouldn’t be allowed to keep those ill-gotten gains, and that maybe he shouldn’t be allowed to keep doing business in New York state at all.
The end goal of the civil action is not punishment, but to restore a level playing field among businesses that obey the law, mind their contracts, and practice sound accounting principles. The interest of the state is in preventing a business environment where fraud is rewarded with extra profits.
If Trump’s adjusted financials are right, a $250 million disgorgement would represent about 10% of his net worth. It would be a painful hit, and he would have to liquidate some assets to pay it, but afterward, he would still have $2 billion in assets. His family wouldn’t be able to burn through that amount of money for several generations.
Besides disgorgement, another equitable remedy sought by the New York AG is the cancellation of Trump’s New York business licenses and a prohibition against Trump and his co-defendants from being able to operate businesses in New York state for some amount of time.
The Trump Organization is made up of dozens, perhaps hundreds of holding companies and trusts, but is at its core a closely-held family business.
Is it possible to run a successful family business in only 49 states, the District of Columbia, Puerto Rico, Guam, American Samoa, and countries around the globe? Of course!
Trump made a name for himself as a New York developer, but he’s already moved his primary residence to Florida and there’s plenty of business he could do outside the borders of New York state.
And if Trump wanted to keep the family business alive in New York, Ivanka was excluded from the civil action and could run a Manhattan side hustle on her father’s behalf.
Reputation and Ego
For decades, Donald Trump has presented himself as a successful dealmaker, developer, brand manager, and business genius.
This case has pulled back the curtain to detail the mechanisms of his business in excruciating detail, and the real secrets to his success turned out to be cheating, lying, and fraud, as proven by a summary judgment stipulation.
Still at issue is how much the fraud contributed to Trump’s bottom line. Trump says the fraud had little to no impact while the state of New York is looking for hundreds of millions of dollars in disgorgement of fraudulent gains.
Still at issue is whether Donald Trump and his sons knew about the fraud, whether they directed the company’s CFO, comptroller, lawyers, and outside accountants to engage in the fraud, or whether all the fraud was done behind Trump’s back by a conspiracy of agents and employees who just wanted to pump up their boss’s bank accounts because they thought he was such an awesome guy.
The best possible finding for Trump would be if he’s able to prove to Judge Engoron and/or on appeal that his bottom line was burnished by fraud only slightly and without his knowledge or consent. But even if Trump is able to avoid disgorgement, keep his businesses intact, and retain his licensure, his reputation will take a major blow.
Finally, we have reached the real stakes of this case.
Perceptions of Trump’s business acumen are so foundational to his identity that an adverse ruling in this one case could damage his brand, undermine his future business endeavors, taint his political legacy, and bruise his ego beyond repair.
Ego. Legacy. Reputation. These are what matter most to Donald Trump, while money, properties, and presidential perks were only ever just a way to keep score. Trump is okay with doing time in prison if he can boost his ego with comparisons with great dissidents of history, but there’s no way to spin a finding that all his castles are sinking into the swamp.
Or maybe not.
Trump’s businessman reputation was already a house of cards built on multiple failures, bankruptcies, and lawsuits. But his base still believes the mythology he’s wrapped around himself and might shrug off any finding of material fraud, in which case the stakes of this $250 million fraud case may end up being nothing at all.