In a significant development that could have far-reaching consequences for the Trump family business, a New York judge is expected to issue a verdict on Friday in Donald Trump’s civil fraud trial. The former president, along with his adult sons and his company, has already been found guilty of inflating the value of assets in statements made to lenders. Prosecutors have requested a fine of $370 million and restrictions on Trump’s business activities in the state. The massive penalty, if imposed, combined with the potential impact on his real estate empire, could deal a severe blow to Trump’s finances.
Legal experts have opined that such a substantial penalty, accompanied by a consequential verdict, could significantly erode Trump’s fortune. While he won’t go from being a billionaire to working class, the financial burden will be substantial. The New York Attorney General, Letitia James, argued that $370 million is an appropriate disgorgement amount for the Trumps to pay. This financial penalty involves the return of funds acquired through fraudulent means. James arrived at this figure based on several factors, including interest rate savings allegedly earned by Trump due to misstating his assets, bonuses paid to employees involved in the scheme, and profits from property deals obtained fraudulently.
The ultimate decision on the financial penalties lies with Judge Arthur Engoron. Irrespective of the amount, Trump would also be liable to pay annual interest on the fine, dating back to the alleged offences. Considering New York’s 9% interest rate, this could add a nine-figure sum on top of the penalty. Trump has vehemently denied committing fraud and argued that the banks profited from his investments. He is anticipated to file an appeal, which would temporarily halt the enforcement until a higher court reviews the case. Nevertheless, to avoid paying the fine or having his personal assets seized during the appeal process, he must deposit the full amount with the court within 30 days.
Forbes Magazine estimates Trump’s total net worth at $2.6 billion, while the New York Attorney General’s Office puts his annual net worth at $2 billion in 2021. With a penalty of $370 million, Trump stands to lose approximately 15-18% of his wealth. However, in addition to this impending penalty, he also owes E Jean Carroll $83.3 million from a separate defamation case, and his legal fees are mounting as he faces four criminal cases at the federal and state levels. The cumulative impact of these financial obligations could surpass the available cash reserves of Trump.
Given his predicament, legal experts have outlined several potential options for Trump. One possibility is securing a bond, which would require a third-party guarantee that he can pay the full fine. This route, however, would entail additional cost, including interest and fees. Typically, issuing a bond requires putting up approximately 10% of the total owed as collateral. Therefore, if Trump were liable for $370 million in disgorgement, he might need to pay a bonding company $37 million to obtain the bond. Regrettably, this fee would not be refundable.
A deposition in the case revealed that Trump claimed to have $400 million in cash on hand, though the accuracy of this statement remains unverified. Regardless, his existing legal liabilities and expenses would render this amount insufficient to cover the new $370 million fine. To mitigate the situation, Sarah Kristoff, a former federal prosecutor, suggested considering asset liquidation or business divestment to raise the necessary funds. Trump’s wealth primarily stems from his real estate ventures, including his flagship condominium skyscraper, Trump Tower, valued at $56 million, and numerous other properties nationwide comprising golf courses, hotels, and a winery. Consequently, selling or realizing assets could potentially generate the required capital.
Another potential avenue for Trump is his extensive fundraising apparatus, which he has previously used to cover legal expenses. A portion of the funds raised from his supporters through political action committees, specifically Save America and Make America Great Again, have been allocated to his legal fees. These structures, traditionally employed for political purposes, could potentially help finance his trials, including the current civil fraud case. However, the feasibility of fundraising in Trump’s case is uncertain. A substantial penalty on the scale of nine figures would create an immense cash-flow crunch, making it challenging to amass that amount from supporters within a short timeframe.
According to Federal Election Commission filings, Trump’s Save America PAC began the year with $5 million in cash reserves. However, even if permitted by federal campaign finance rules, attorneys believe it would be arduous for Trump to gather an extraordinary amount of cash, given its sheer scale. Former federal prosecutor Michel Epner emphasized the difficulty of amassing a nine-figure sum quickly. Conversely, Shanna Ports, a senior counsel at the Campaign Legal Center, stated that Trump could potentially employ funds from Save America to settle the court-ordered penalty, albeit not from his official campaign funds.
The exact implications for Trump’s business and personal fortune remain unclear until Judge Engoron delivers his final ruling. Regardless of the manner in which he opts to pay, a substantial penalty will indubitably lead to significant financial hardships for the former president. Despite his previous misrepresentations of wealth, it is evident that Trump does possess substantial assets. However, like most individuals, he does not have $400 million lying around. As the ramifications of this case unfold, attention will be drawn to how Trump navigates these financial challenges and strives to protect his wealth amidst mounting legal obligations.
