Donald Trump committed fraud for years while building the real estate empire that catapulted him to fame and the White House, a New York judge ruled on Tuesday in a strongly worded rejection of the former president’s bid to throw out a civil lawsuit against him.
Judge Arthur Engoron found that Trump and executives from his company, including his sons Eric and Donald Jr, routinely and repeatedly deceived banks, insurers and others by massively overvaluing assets and exaggerating his net worth on paperwork.
His ruling came in a civil lawsuit brought by Letitia James, New York’s attorney general, days before the start of a non-jury trial that will hear accusations that Trump, and the Trump Organization, lied for a decade about asset values and his net worth to get better terms on bank loans and insurance.
“The documents here clearly contain fraudulent valuations that defendants used in business,” Engoron wrote.
James has said Trump had effectively engaged in a “bait and switch” operation, inflating his net worth by as much as $2.23bn, and by one measure as much as $3.6bn, on annual financial statements given to banks and insurers.
Assets whose values were inflated include Trump’s Mar-a-Lago estate in Florida, his penthouse apartment in Manhattan’s Trump Tower, and various office buildings and golf courses, James said in the lawsuit filed in September 2022.
Alina Habba, Trump’s general counsel, described the Trump Organization as “an American success story” and called the judge’s ruling “fundamentally flawed”.
“We intend to immediately appeal this decision because President Trump and his family, like every American business owner, is entitled to their day in court,” Habba said in a statement on Tuesday.
Trump’s legal team had previously asked Engoron to dismiss the case against him, arguing James lacked authority to file the lawsuit because there was no evidence the public was harmed by Trump’s actions, and that many of the allegations were beyond the statute of limitations.
But the judge indicated last week he was not inclined to be sympathetic, rebuking Trump’s lawyers for making “frivolous arguments” and stating he was considering sanctions against them.
Chris Kise, who is also representing Trump in a federal indictment in Florida over the former president’s handling of classified documents after leaving the White House, argued: “What is happening here is what happens every day in complex business transactions”.
Engoron was not swayed.
“The fact that no one was hurt does not mean the case gets dismissed,” he said. In his ruling on Tuesday, he granted a motion by James seeking sanctions against Trump’s legal team for repeatedly making arguments already rejected, fining five attorneys $7,500 each.
Manhattan prosecutors had looked into bringing a criminal case over the fraudulent conduct but declined to do so, leaving James to sue Trump and seek penalties that could disrupt his and his family’s ability to do business in New York.
Engoron’s ruling, in a phase of the case known as summary judgment, resolves the key claim in James’s lawsuit, although six others remain.
The non-jury trial is scheduled to start on 2 October. James is seeking at least $250m in penalties and a ban on Trump doing business in New York, his home state. The hearing could last into December, Engoron has said.
The judge has penalized Trump before. In early 2022, the former president paid $110,000 in fines after failing to meet case deadlines.
The case is one of several that Trump, the runaway leader in the race for the 2024 Republican presidential nomination, must navigate while appearing on the campaign trail. He faces 91 criminal charges under four indictments, for hush-money payments to an adult movie star, illegal retention of classified information, and election subversion at the federal and state levels.
In civil court, he also faces a second defamation trial involving the writer E Jean Carroll, who said he sexually assaulted her in the 1990s. Found liable for defamation and sexual abuse, Trump was ordered to pay $5m in damages and adjudicated as a rapist.
Martin Pengelly and agencies contributed reporting
• This article was amended on 27 September 2023 because an earlier version said that in the defamation case Trump was “fined $5m”. In fact, he was ordered to pay damages of $5m.
