Wednesday, September 27, 2023

FAQs About the New York Judgment Against the Trump Organization and Family

There is a lot to unpack from Judge Engoron’s 39-page opinion and order yesterday finding fraud by the Trump Organization and its principals. Due to the multiplicity of issues, I’m going to use a “frequently asked questions” format. 

What is this case all about?

The New York State Attorney General filed a civil suit against the Trump Organizations, some of its related companies and individuals who were officers in those companies, including Donald Trump, Donald Trump, Jr. and Eric Trump. Ivanka Trump has been excluded as a defendant due to a prior appellate court decision. 

The suit claims that all of the defendants “committed repeated and persistent fraud by preparing, certifying and submitting to lenders and insurers false and misleading Statements of Financial Condition,” all for the benefit of Donald Trump. Although there is a great deal of accounting wiggle room in determining the value of property, the Attorney General claims that the defendants’ overvaluations were “egregious.” 

Did this opinion and order come after a trial?

No, we are still in the pretrial stage of this. There has previously been an injunction issued against the Trump Organization (upheld on appeal twice) to prevent it from transferring or otherwise disposing of property. 

The current matter concerns Motions for Summary Judgment, one filed by the Attorney General and the other by the Trump Organization. A Motion for Summary Judgment usually claims that the facts are clear enough that it is not necessary to go through an entire trial to establish them. Defendants in their motion claimed that “there is nothing here” and that the suit should be dismissed. The Attorney General asked for Summary Judgment on only one of the claims, the one alleging fraud. 

Why is this case going to a bench trial where the judge makes the decisions rather than by a jury?

Since Donald Trump is claiming in the media that this judge is biased against him, you would think he would be demanding a jury trial where 12 people would decide the case. There is a limited time after a case is filed in which to demand a jury trial. For reasons I am at a loss to explain, the defendants’ lawyers did not make a timely demand and the period to demand a jury trial has expired. Therefore, Judge Engeron is hearing the case because of a decision (or lack thereof) by the defendants. 

Who prevailed in the Motions for Summary Judgment?

The Attorney General did. Defendants’ Motion for Summary Judgment was denied. The Court found that the defendants committed fraud, the Trump Organization’s certificate to exist in New York is revoked, defense attorneys were fined, and the only matter remaining on the first count of the lawsuit is how much the State of New York is going to be owed. 

Why were the defendant’s attorneys each fined $7,500?

Judges hate it when lawyers do two things: continue to argue matters that have already been decided (here, TWICE on appeal) and make legal arguments that misquote cases. 

The first analogy that comes to mind is when someone contends that the Bible says: “There is no God.” Though that is an accurate quote, the phrase preceding it says: “The fool has said in his heart.” Defendants did the exact same thing in quoting one of their supporting cases. Really, really bad form. 

Isn’t pulling a corporation’s certificate to operate a truly severe action?

Yes, and it does not happen often. Judge Engoron noted that civil cases do not offer the same remedies as criminal ones, such as jail. When everything else has been tried and nothing else worked, only extreme measures are left. 

Some parts of the judge’s opinion have led to some talking points by the defendants. 

“How can there be fraud if we have never defaulted on a loan resulting from the financial statements?”

This is worth a Lawdromat article of its own. We usually think of money damages as restitution to the person harmed. If I am guilty of fraudulently obtaining $1,000 from you, I owe you that money back. This is restitution. 

The Attorney General here is asking for up to $250 million under a completely different, but well established, legal principle called disgorgement. Disgorgement focuses on the gain to the wrongdoer rather than the loss to the victim. As a previous New York case said: “Disgorgement aims to deter wrongdoing by preventing the wrongdoer from retaining ill-gotten gains from fraudulent conduct. Accordingly, the remedy of disgorgement does not require a showing or allegation of losses to consumers or the public; the source of the ill-gotten gains is ‘immaterial’.” 

It therefore makes no difference whether there was a default or not so long as there was fraudulent activity. 

“Even wrong valuations aren’t fraudulent because there was a disclaimer about the accuracy of the numbers.” 

From the opinion:

In his sworn deposition, Donald Trump said: “Well, they call it a ‘disclaimer.’ They call it a ‘worthless clause’ too because it makes the statement ‘worthless’.” Donald Trump goes on to say that “I have a clause in there that says, don’t believe the statement, go out and do your own work. This statement is ‘worthless;’ it means nothing.”

In finding that the “worthless” claim was indeed worthless (judge’s words, not mine), the judge cited a New York case finding that disclaimers are not effective when the facts are “peculiarly within the defendant’s knowledge.” The judge goes into much greater detail, but you get the point – disclaimers cannot be used to cover up misconduct that you create. 

“Mar-a-Lago is not overvalued. If anything, it is UNDERvalued.”

Mar-a-Lago was one example the judge used to show defendants’ fraudulent use of overvaluation. It is contained in pages 25-27 of the opinion. It makes little sense to go into the weeds about the judge’s analysis here. 

What is curious, however, is that the defendants’ current post-decision comments are not referencing (as far as I have seen) the court’s other detailed overvaluations: Seven Springs Estate in Westchester County, NY; Trump Park Avenue, 40 Wall Street, The Trump Tower Triplex, Aberdeen in Scotland; and U.S. golf clubs. These analyses cover twelve pages of the opinion. 

What is coming next?

The Summary Judgment only dealt with Count I of the complaint. The remaining counts will require additional evidence at a trial that is scheduled to begin next month. You can also expect the defendants to appeal yesterday’s order. It is never wise to predict what an appellate court will decide, but decisions such as this one, exhaustively annotated, are seldom overturned.

Wednesday, August 30, 2023

What Happens When You Ignore the Rules of Discovery – Rudy Guiliani

We have all seen those movies where people are frantically running papers through a shredder to destroy a “paper trail.” We normally associate that with criminal activity. Lawyers, though, immediately relate that to the rules of evidence because once there is even a threat of litigation, you are under a duty to keep potential evidence from being destroyed.

Once any litigation starts (civil or criminal), the first step in preparing for trial is to find out what the side has in terms of physical documents. If materials are not voluntarily turned over to the other side, as the prosecutor typically does for a defendant in a criminal matter, you can get access to documents by “discovery.” A paper is filed with the court, asking the other side to produce a variety of records that you believe are relevant to the case.

The other side may ask to limit the request if seems too all-encompassing, but they will ultimately turn appropriate material over or face penalties if they refuse. Yes, some of the material turned over may be harmful to one’s case, but the entire purpose of discovery is to make sure that the trial is based on all the facts.

So what happens if someone does not turn over those documents? The impacts increase in severity. First, the court will ask you politely to comply. Second, the court will tell you firmly to comply. Third, the court will impose financial penalties, including attorney’s fees. Fourth, the court may completely hammer your case: as a plaintiff, dismissing the case entirely; as a defendant, enter a judgment against you without even going to trial. 

Today, Rudy Guiliani got the hammer. Guiliani had been sued by two election workers in Georgia, claiming that they had been defamed by his comments. These plaintiffs repeatedly asked for documents, and even after a number of court proceedings, little was produced. Even the award of damages and attorney’s fees (which still have not been paid) had no effect. The judge had no alternative but to proceed to the next stage.

The judge’s 57-page order noted that Guiliani did not claim ignorance of the rules of evidence, having stated in Court that “he ‘understand[s] the obligations’ because he has ‘been doing this for 50 years’.” Guiliani’s total course of conduct, according to the judge, “demonstrated utter disregard for the court’s deadlines by employing tactics plainly intended to do nothing more than delay the resolution of this matter.” 

The judge, having exhausted every other means to get compliance, entered a default judgment against Guiliani, effectively finding that he did indeed defame the election workers. A jury will still meet, however, with the limited job of deciding how much Guiliani will owe the plaintiffs in punitive damages. 

As part of the jury instructions, the judge said that the jury will be instructed “that they must, when determining an appropriate sum of punitive damages, infer that Guiliani is intentionally trying to hide relevant discovery about his financial assets for the purpose of artificially deflating his net worth.” 

When the fines, attorney’s fees and punitive damages are added together, this will be a most expensive case. The failure to comply with the discovery rules also made it almost completely avoidable. 

Note: this post was written to show the importance of complying with the rules of discovery. A number of components of this particular case have been omitted for purposes of clarity.

Saturday, August 26, 2023

Why You’d Want to Move Your Case in Georgia to the Federal District Court

A number of defendants in the Georgia state racketeering case against Donald Trump and 18 others are attempting to have the case removed (or transferred) to the Federal District Court.

There is no question that the charges against these 19 individuals are for violations of Georgia state law. It made sense, then, that the prosecutor filed the charges in the state court.  As of this writing, at least two of the defendants have asked that their cases be transferred to the Federal District Court because there are federal law issues that arise from their conduct.

Here is where it gets a bit complicated. As a general rule, purely state law violations are tried in state court. Similarly, federal law violations are tried in the federal courts. The defendants are suggesting that there are state AND federal implications to their charges. As such, the only proper place to hold the trial (if the case is not dismissed) is the Federal District Court. That argument is correct. A state court does not have jurisdiction (or the authority to hear the case) when there are Federal law issues, but a federal court properly takes jurisdiction if there are both federal and state issues.

In order to have the case removed to federal court, defendants must show that their conduct raised federal law issues that were not considered when the charges against them were brought. Those federal issues are, according to the argument, essential to their defense.

As a defendant, I am telling the court that even if everything in the indictment against me is true, I still should not be found guilty because I have a complete federal excuse for what I did. Federal law provides many protections for individuals who are serving in a federal office, including being immune (free) from prosecution if what they did was part of their job. This is an important and legitimate safeguard.

The problem for defendants is that they cannot even raise the federal defense issue in the state court. Therefore, the defendants in the Georgia state case have asked the Federal District Court in Georgia to take the case to raise them. 

What the district court judge needs to decide from the outset is whether there truly is a federal issue. This is not an automatic decision. The judge must determine whether there is an actual federal issue or whether the defendant is simply trying to get the case moved to the federal court to get it out of the state court. In other words, is this a legitimate defense.

There are a number of reasons why a defendant would want the case transferred to the federal court.

The best outcome is a finding that the defendant has a complete federal defense to his or her actions. The case is then dismissed before a trial even takes place. Even if the judge rules against the defendant on the federal arguments, the case does not then go back to the state court. The federal court retains jurisdiction.

If the case goes to trial, I want it heard in the federal court. Here are a few of the many reasons.

First, delay. If one of my goals is to stretch out the process, removing the case to the federal court adds additional procedural steps before trial, and each of these take time. Some federal issues (if decided against the defendant) can be appealed even before a trial occurs. Also, due to the federal court calendar, trials will often be scheduled later.

Second, there is a larger pool of qualified attorneys to defend you. The federal rules of evidence and procedure are generally universal (with some notable exceptions). Rules and procedures in the state courts vary substantially. Therefore, lawyers who practice in the federal courts anywhere in the country have a degree of familiarity on their side.

Third, the jury pool for the district court is larger and presumably more diverse. This is especially helpful in geographic areas where the state court populace is not particularly favorable to your side. The goal of every defendant is to have jury members who do not think alike and are even antagonistic to each other.

Fourth, if you lose, you generally are processed through the federal incarceration system where conditions are generally better (a relative term) than state prisons.

With all that said, there is one “benefit” to a federal court trial that is absent when a case is removed from the state court—pardons. Federal convictions can generally be pardoned by the president; state convictions cannot. However, since the federal court is ultimately hearing a case on state issues, any pardoning options remain the same as if the trial were held in the state court.


Friday, August 18, 2023

What You May Not Know About the Right to a Speedy Trial

Individuals have many familiar Constitutional rights. Freedom of Speech and the Fifth Amendment protection against self-incrimination are notable. Nobody but the individual may claim or waive those rights. So, for example, I cannot appear in court and demand that you testify against yourself.

The right to a speedy trial is an exception to that rule. This right applies to individuals AND to society. The courts have repeatedly held that justice is best served when a defendant’s trial occurs as soon as reasonably practicable. The benefits to society of a speedy trial are many and varied. A delayed trial may affect the availability of witnesses and memories of particular events. In more egregious cases, it limits the amount of time a defendant can use to intimidate witnesses or to attempt to try the case in the media.

Interestingly, the ability (and duty) to schedule a trial as soon as practicable is one of the most valuable arrows in a judge’s quiver. In some cases, it is impractical to hold a defendant in jail pending trial. Assessing fines for improper conduct may not deter wealthy individuals. And, most significantly, issuing a gag order may arguably violate the defendant’s free speech rights.

In cases where the alternatives are ineffective, society is protected by having the trial date accelerated. A judge frequently asks both the prosecutor and defendant for a proposed trial date and, absent a clear abuse of discretion, the judge’s determination will stand.

Sometimes defendants desperately want a trial delayed. Well-disciplined prosecutors can short circuit many delay attempts. Consider what the prosecutors in the DC case against Donald Trump did.

First, they only named one defendant. The more defendants there are in a case, the more individual delay arguments that can be raised.

Second, they limited the charges to those that have a strong history of judicial interpretation, even though there were other potential charges available to them. Many delays are caused by a defendant claiming that the charges they face are “unique.”

Third, they provided trial evidence (often called “discovery”) to the defendant promptly and well outlined, giving them more time to prepare a defense. 

Parenthetically, you will hear that there are millions of pages of discovery that have been turned over. Defendants claim that it will take years to read it all. This is a red herring. The state-of-the-art in reviewing discovery is to use computer-aided, key word searches. The idea that there are paralegals actually sitting down and reading millions of pages harkens back to a bygone era. It is simply unnecessary and no longer happens in the real world. Sounds good, though.

On August 28, the judge is scheduled to hear arguments about when the trial should begin. Prosecutors will argue in favor of a speedy trial, suggesting a highly aggressive date of January 2, 2024. Defendants will counter with a date of April 2026 or the Rapture, whichever occurs first.

The judge will set the trial date based largely on the elements discussed above.

Tuesday, August 15, 2023

What Is Missing From the Georgia Indictments?

Lawyers read legal filings differently from the general public. Whereas most people (including the talking heads) react to what is there, lawyers are more interested in what is omitted. The Georgia indictment handed down in today’s early hours is no exception. 

Unlike the DC court indictment which reads like a crime novel, the Georgia indictment is intricate and tedious. Such is the nature of a racketeering case. The first count of the indictment lays out, in sequential order, the 161 acts that constituted the “criminal enterprise.” All of the 19 named defendants participated in the alleged criminal behavior at some point or another, with some of the cast of characters appearing at different times. 

There are at least two important things missing from the indictment. 

First, detail. An indictment is not required to recount in excruciating detail what the evidence is that support each of the 161 criminal acts. Therefore, at this point we do not know exactly what happened on each of these occasions. That evidence will come out later. All that is required in the indictment is to lay out the bare bones of the criminal activity. 

Second, and here’s where it gets interesting, there are 30 unindicted co-conspirators mentioned in the indictment. What this means is that there were not “just” 19 people who engaged in the criminal activity; there were 49. 

The remaining 30 individuals are most likely people who have cooperated in the investigation (or were minor characters) and have therefore not been charged. The testimony that cooperating witnesses provide at trial will help the prosecutor prove the case. Should they fail to continue cooperating, there is nothing to prevent the prosecutor from adding them as defendants at a later date. 

The existence of unindicted co-conspirators generally points to a much stronger case. It is one thing for an independent witness to recount what “they” did (and then to have their credibility challenged on cross-examination). It is entirely another to have someone testify what “we” did. 

So, what is the takeaway from the “missing” parts of the indictment?  Of the 49 people who allegedly were part of the criminal enterprise, at least some of the 30 unindicted co-conspirators are likely cooperating with the investigation in some manner. In other words, they have already flipped. Does this mean that all of the remaining 19 will go to trial? Not likely. As the strength of the evidence against them increases, expect some of the remaining defendants to change their pleas in exchange for testimony and/or a reduced sentence. If that occurs, any criminal enterprise that existed will implode on a limited number of people. 

Note that my comments are first impressions. The case is exceptionally complex, and a lot of unexpected twists and turns are likely to occur before any trial takes place.  

Thursday, August 10, 2023

Gag Orders and Protective Orders – One Affects Free Speech, the Other Does Not

“Objection, Your Honor!” I am not a fan of TV court dramas, but the one thing these programs generally get right is that both sides to a criminal trial may make objections. More often than not, these objections relate to how evidence is provided in court—or whether the “evidence” can even be heard by a jury.

The rules of evidence are highly complex, but they are designed for only one purpose –to make sure that the jury only hears what will allow them to properly make an impartial decision concerning guilt. In order to guarantee a fair trial, the jurors should be hearing that evidence for the first time in court.

The purpose of a protective order is to safeguard both the process and the people involved.  One component of such an order is that the defendant should not attempt to intimidate witnesses or jurors. You would think that this is an unnecessary admonition. Sadly, some people need to hear that.

More important for our purposes is the less frequent requirement that some information that may become evidence should be withheld from the defendant.

If you have ever taken small children to a party, you understand far too well that you never know what’s going to come out of their mouths. One way to limit the potential damage is to not discuss sensitive matters within their hearing. This is a day-to-day example of a protective order. If they haven’t heard something, they can’t repeat it.

Some defendants do not need the admonition to not speak inappropriately. Other defendants have a history of speaking without a filter. In those cases, the prosecutor will ask that some information not be shared with the defendant personally. This part of a protective order is designed to protect the integrity of the jury process and trial. On other words, it is a legitimate attempt to insure that the trial is conducted in court and not in the media.

A defendant retains the right to speak about his or her innocence and to say that the evidence, at trial, will offer vindication. A protective order, then, is not a violation of one’s First Amendment rights to free speech, and the judge may impose penalties, including fines or even imprisonment, for defendants who will not honor the rule of law. In exceptional cases, when the defendant remains intransigent, the judge may take the next step and issue a gag order.

Gag orders severely restrict what a defendant may say prior to trial, beyond weighing in on the evidence. These are orders of last resort because they have the potential to prevent defendants from strenuously affirming their innocence. Due to the severity of the restrictions, issues of the First Amendment right to free speech may arise.

Therefore, the terms “protective order” and “gag order” should not be used interchangeably. You should be wary of anyone who attempts to confuse the two.

Parenthetically, lawyers may also be subject to protective orders and disobedience to those orders may subject the lawyer to additional disciplinary action, including disbarment.

Monday, June 12, 2023

Is there enough to charge?

The most intriguing news last week was that a federal grand jury issued a 37-count indictment against former president Trump. The purpose of this note is not to take a position on the strength of the case. Rather, we will look at how the grand jury process safeguards the rights of a defendant. 

Federal felony charges can have devastating results. A conviction carries more than potential fines and jail time. It can also impact other individual rights such as the right to vote or the opportunity to obtain a security clearance. 

In our legal system, the seriousness of those impacts on individual freedom results in an added layer of protection for people charged with serious federal crimes. To put it simply, a defendant has THREE chances to win. 

A grand jury is a group of individuals, similar to a regular jury, that is selected from the general populace. It is not a politically appointed group. Their role is to examine evidence and testimony presented by the prosecutors and, on that basis, to recommend whether formal charges should be brought against a particular defendant. 

Grand juries are empaneled all the time and most of their work never receives media coverage. The reason is that many grand juries decide that there is simply not enough evidence to recommend an indictment. If the grant jury finds that evidence of a crime is lacking, the defendant wins without ever facing trial. 

The grand jury’s role, then, is to prevent the government from bringing charges to simply aggravate or penalize a defendant. The testimony and evidence that the grand jury receives is concededly one-sided. Its job is simply to look at evidence most favorable to the government and to see if there is enough evidence to warrant filing charges. In other words, the grand jury process prevents a “witch hunt” on a most basic level. 

Once charges are filed, there is a second chance for the defendant to win without going to trial. This is the pre-trial stage where the defense attorneys will argue that the charges should be dismissed from the outset. Dismissal can be granted for a variety of reasons including: the indictment was filed in the wrong court, the charges do not fall within the charged federal statute, or that the facts alleged in the indictment (when viewed most favorably to the government) do not provide enough evidence of a crime. If the judge dismisses the case at this early stage, the defendant once again wins. 

Finally, there is the trial. If the jury does not find that the government has proved its case beyond a reasonable doubt, the defendant wins. 

All of these procedural steps illustrate “due process” at its best. The systematic method of case preparation and presentation also answers the question of selective prosecution, or “why hasn’t so-and-so also been charged?” The straight-forward answer is that the prosecutor looks at the three stages where a defendant can win and decides not to waste time on those cases where success is not extremely likely.