REAL ESTATE, REAL STAKES
Ruling’s impact on Trump portfolio
The bombshell court ruling that finds Donald Trump liable for fraud left even his own lawyers scratching their heads — asking the judge on Wednesday to clarify his decision canceling the former president’s New York business licenses.
Manhattan Supreme Court Justice Arthur Engoron’s 34page ruling from Tuesday would force Trump, 77, to hand over control of his Empire State properties — including Trump Tower in Midtown — to an independent third party, otherwise known as a receiver.
At Wednesday’s hearing, Trump lawyer Christopher Kise asked Engoron: “Certain of the entities, physical entities like Trump Tower or 40 Wall St. — is the court under the assumption that those assets would be sold or just to be managed under the moderator?”
“I’m not prepared to make a ruling,” Engoron replied.
In his ruling, the judge said that the receiver must be appointed “to manage the dissolution of the canceled” business certificates for Limited Liability Corporations, or LLCs, under the Trump Organization umbrella.
The decision was issued in New York Attorney General Letitia James’ sprawling civil fraud case against Trump, his namesake real-estate company and executives including his children Donald Trump Jr. and Eric Trump — alleging that for years the ex-president exaggerated his assets to get an edge on loan and insurance terms.
Here’s how the ruling impacts Trump’s businesses, according to legal experts:
What are business certificates and what does it mean to have them revoked?
Business certificates are issued by the state to prove a company’s validity and are used for business transactions.
When the judge canceled them, it was like being given “death certificates” — with the ruling amounting to a “corporate death penalty,” former financial-crimes prosecutor Diana Florence said.
These certificates are required for entities like LLCs and come with privileges such as protecting personal assets if the company goes under, Cornell Law Professor Robert Hockett said.
Hockett said a common but “unsavory business practice” is for a company to pretend they have more money than they really do in order to help them get an LLC certificate.
In this case, an LLC functions like a “shell” meant to “evade accountability.”
“What the judge found yesterday is that Trump is effectively doing this,” Hockett told The Post. “He’s been pretending many of these businesses of his are well capitalized and capable of paying their creditors — in effect doing good work that benefits the public and warrants the certifications of limited liability.”
But Trump was found to have been abusing the privileges and now, “the chickens are coming home to roost,” Hockett said.
“We are going to see the name Trump coming off of a lot of buildings in New York,” Hockett predicted. “The Trumps will no longer be a real-estate family in Manhattan.”
Will Trump appeal — and how would that affect the ruling?
Trump has already said he plans to appeal the ruling which, two lawyers said, is likely to stop the cancellation of the business certificates from taking effect immediately.
An appeal could be filed as early as this week, landing in New York’s mid-level appeals court, called the Appellate Division, Hockett said.
Florence and veteran real-estate lawyer Adam Leitman Bailey believe that will trigger a stay of Engoron’s ruling while the appeal plays out — which could take up to two years to decide.
The case could also work its way up to the state’s highest court — the New York Court of Appeals — potentially drawing the legal battle out for years.
Leitman Bailey said that he believes Engoron’s decision was an overreach and that the appeal will be granted.
Still, there is a chance Engoron’s ruling would stand because “there is a saying in law that bad facts make bad law, and in New York, there is no worse of a fact than Donald Trump,” Leitman Bailey said.
The rest of the AG’s case against Trump is still slated to head to trial on Oct. 3, however, to determine any penalties. James is seeking $250 million in damages.
Will this stop Trump from doing business in New York?
If the ruling isn’t knocked down on appeal, it could stop Trump from being able to conduct business in New York, Florence said.
She explained that the Trump Org is like the skeleton and the skin of a person and the individual LLCs are like the organs in a body — with varying degrees of importance.
Some would be more like a appendix that one could easily live without, while others would be more like the heart, a vital organ.
“I don’t think the Trump Organization is going to cease to exist, it’s these vital LLCs that are going to cease to exist and that’s the real blow,” she said.
Does the ruling mean Trump has to give up his businesses?
The receiver — or independent party — was tasked with taking over Trump’s businesses and handling the dissolution of the Trump Organization LLCs.
Engoron on Wednesday gave both sides 30 days to propose a list of potential receivers.
Is this a rare ruling?
All of the legal experts The Post spoke to agreed that Engoron’s ruling is nearly unheard of — which may account for the lack of clarity on how it will be implemented.
“It’s exceedingly rare,” Florence said. “Judicial dissolution almost never happens.”
Instead, corporations usually “die” in bankruptcy cases, she said.