New York appeals court throws out $500M fraud penalty against Trump

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• Amna Nawaz:

  A New York appeals court today dismissed a $500 million civil fraud penalty against President Donald Trump and his companies for overvaluing their properties and financial statements. In the ruling, the judges upheld the fraud judgment, but said — quote — "The half-a-billion dollars to the state of New York is an excessive fine that violates the Eighth Amendment of the United States Constitution."

• Geoff Bennett:

  The case centers on allegations that Mr. Trump misled banks and insurers by inflating or deflating the value of his assets when it suited him and exaggerated his net worth by billions of dollars.

  New York State Attorney General Letitia James says she plans to appeal the ruling.

  For more on the impact of the decision, I spoke earlier with former federal prosecutor Jessica Roth, currently a professor at Cardozo School of Law.

  Jessica Roth, thanks for being with us. We appreciate it.

  Jessica Roth, Yeshiva University Cardozo School of Law: It's my pleasure.

• Geoff Bennett:

  So this was a lengthy ruling, more than 300 pages. What were the main points of contention among the judges and how did their differing opinions shape the outcome?

• Jessica Roth:

  Yes, so this was a complicated split decision. As you noted, it's over 300 pages, and we have three opinions. And the reasoning of the judges divided two, two and one.

  There was one point of commonality among all the justices. And that was that the trial court's order could not stand as it was written. But beyond there, we had disagreement among the justices. The effect of the decision of the Appellate Division today is to affirm the judgment, the verdict against Trump, his sons, their business associates and their businesses, finding them liable under New York's civil fraud law of engaging in persistent fraud.

  Two of the justices thought that actually that finding was supported by the record and was appropriate under the law. Two other justices thought that the record was problematic and that there were errors in the conduct of the trial and would have sent the case back to the trial court for a new trial.

  But those two additional judges who thought there were problems in the trial decided to sign on to the judgment of the first two judge's justices in order to get the case up to the New York Court of Appeals, the highest court of New York, for a final decision.

  And the effect of those two justices joining essentially in the decision of the first two justices is that we now have a majority effectively affirming the verdict of liability against Trump and the other defendants.

• Geoff Bennett:

  OK.

  So if the appeals court upheld Trump's liability for fraud, why did it still decide to void the nearly half-billion-dollar penalty? Because, in theory, fines deter wrongdoing by imposing financial consequences that outweigh the potential gains. And that was the point of imposing this $500 million fine in the first place on the Trump Organization.

• Jessica Roth:

  So even the two justices who would have affirmed the finding of liability based on the record here thought that the penalty imposed by the trial court was excessive and that in fact it violated the U.S. and New York State Constitution's protections against excessive fines.

  They said that it was just vastly disproportionate to any harm caused by the defendants. So although they would affirm the finding of liability, that there was a pattern of fraud, they thought that the remedy for that in terms of the amount of the penalty or disgorgement of profits, that that — or ill-gotten gains, as articulated by the trial court, that that was just vastly excessive, so much so that it was unconstitutional.

  But notably the justices who were prepared to affirm the finding of liability said that the other remedies imposed by the trial court that were injunctive in nature, barring the defendants from holding corporate offices, from making applications to borrow funds, for example, and also imposing a monitor, an independent monitor on the businesses, that those could be affirmed.

  So the financial penalties, the disgorgement, they thought was excessive, but the other injunctive relief, they said was actually appropriately tailored to address the findings of misconduct and to curb potential wrongdoing in the future.

• Geoff Bennett:

  Well, we are all certainly getting a legal education today as a result of all this.

  The president crowed about this ruling in a post on his social media site, calling it a total victory. Is that how you see it?

• Jessica Roth:

  I don't see it as a total victory for the president, because, as I said, the effect of the ruling is to affirm the finding of liability. And two of the justices were prepared to say and did say in their opinion they thought that the factual record strongly supported the finding of persistent fraud by the president, his sons, his associates, and his business entities.

  So I don't think it is a total victory for the president. He's still going to have to go to the New York Court of Appeals to get that finding of liability overturned if that is the eventual outcome in this case, so not a total victory for the president, but, that said, I would say it's a significant loss for the attorney general.

• Geoff Bennett:

  And, as we mentioned, the attorney general, Letitia James, says she will appeal the ruling.

  At the same time, President Trump's justice has launched multiple investigations into her, part of a broader pattern of retribution against his perceived political enemies. What are the implications of that dynamic, and how might it affect the likelihood of her appeal succeeding?

• Jessica Roth:

  That's very hard to say how all of those factors will weigh into the Court of Appeals' deliberations on this appeal. I mean, they're going to be looking at the record here of what happened below and should not be taking into account the political machinations on either side, sort of outside of what transpired in the courtroom.

  That said, sort of the politics of this actually made its way into the opinions here to a certain extent. A number of the justices had some choice words about statements by the attorney general when she was running for office, effectively sort of pledging to take on Trump and investigate him, and suggesting that those were unwise words and sort of injected a certain amount of concern into the case, but not to the point, at least according to most of the justices, that that would be an independent reason for setting aside the verdict.

  But that's certainly a dynamic sort of atmospherically, if not legally, in the case as it goes forward.

• Geoff Bennett:

  Well, in a separate matter, Jessica, a federal judge today said that President Trump's former personal lawyer Alina Habba is not legally serving as the acting U.S. attorney for New Jersey. So, as best as we know, what happens now?

• Jessica Roth:

  Well, now that's going to go up on appeal as well. That is something on which the Third Circuit for the — the U.S. Court of Appeals for the Third Circuit, which has jurisdiction over New Jersey, is going to weigh in on.

  And they will make a determination about whether the trial court is correct that legally Ms. Habba is not authorized to serve as the U.S. attorney. And then I wouldn't be surprised if that went to the Third Circuit en banc after a panel rules, and eventually up to the United States Supreme Court.

  And New Jersey is not the only jurisdiction in which we have seen the president engage in these sort of machinations to make sure that his hand-chosen individuals and appointees serve in these functions, when they have not been accepted by the United States Senate or by the judges of the district.

• Geoff Bennett:

  Jessica Roth, former federal prosecutor and professor at Cardozo School, thanks again for being with us. We appreciate it.

• Jessica Roth:

  It's my pleasure.