In a civil fraud case last year, New York County Supreme Court Justice Arthur Engoron ruled that Donald Trump's habit of exaggerating his wealth justified "disgorgement" of nearly half a billion dollars in "ill-gotten gains" and interest. A state appeals court overturned that staggering penalty last week, saying it violated the Eighth Amendment's ban on excessive fines.
The decision upholds New York Attorney General Letitia James' authority to sue Trump for violating Section 63.12 of the state's Executive Law by systematically overstating the value of his assets when borrowing money and buying insurance. The majority also thought Engoron rightly concluded that Trump had committed "fraud" within the meaning of that statute. But the court said Engoron's calculation of Trump's profits from his misrepresentations was fatally flawed and resulted in a "grossly disproportional" penalty.
"While harm certainly occurred, it was not the cataclysmic harm that can justify a nearly half-billion-dollar award to the State," writes Justice Peter Moulton in an opinion joined in full or part by four other judges. "It is a virtue of the statute that the Attorney General may act, as she did in this case, before a potential catastrophe occurs, to deter further fraudulent business behavior by defendants specifically, and to police market behavior generally. However, having achieved these goals the State is not entitled to compound its victory with a massive punitive fine."
