October 2, 2023 - Trump civil fraud trial in New York begins

Former President Donald Trump was in attendance at a Manhattan courtroom for the opening day of the New York civil case against him and his namesake company.

Even though he didn't have to appear, Trump’s presence turned the courthouse into an extension of the campaign trail, where he has railed against the four criminal indictments against him, and now, a civil case where Judge Arthur Engoron ruled last week that Trump and his co-defendants were liable for fraud.

Inside the courtroom, Trump’s attorneys also sparred with the judge as opening statements began, a sign that they’re likely to take a combative approach with a trial that the judge expects to last into December.

Here’s what to know from the first day of Trump’s trial:

Trump labels it a "witch hunt": In front of the cameras and on his social media site, Trump attacked New York Attorney General Letitia James for bringing the case against him. He attacked the judge for the ruling last week. And he sought to tie them to special counsel Jack Smith’s criminal indictments, even though they are unconnected.

“This has to do with election interference, plain and simple,” Trump said before walking into the courtroom. “They’re trying to damage me, so I don’t do as well as I’m doing in the election.”

Attorney general asks to ban Trump from doing business in New York: Kevin Wallace, with the attorney general's office, alleged that Trump and his co-defendants conspired to commit persistent and repeated fraud and that Trump’s financial statements convinced banks to take on hidden risk “to the tune of hundreds of millions of dollars.”

The opening statement underscored the risk the case poses to Trump and the Trump Organization, the former president’s business in New York, where Trump built up his name and image before he launched the political campaign that led him to the White House in 2016.

Trump's lawyers say this is how real estate works: With the former president looking on, Trump’s lawyers argued Monday that the attorney general’s case was flawed, saying that the differences in valuations were just part of the commercial real estate business.

Trump's attorney, Christopher Kise, argued there was no intent to defraud and “no victims” in the case.

Kise pointed to documents from Deutsche Bank showing the bank valued Trump’s net worth $2 billion less than Trump did — but still underwrote the loan for Trump.

Judge spars with Trump attorneys: The judge noted that the defense team already had tried to dismiss the case by claiming James brought it as a “witch hunt” against Trump. He had already denied the motion, Engoron said, and his ruling had been affirmed by a New York appellate court.

The judge also sparred with Trump attorney Alina Habba over a discussion about an accounting disclaimer for Mazars, Trump’s former accounting firm. The disclaimer essentially said, “We’re relying on the Trump Organization,” Engoron said. “That’s how I read it.”

“No, your honor,” Habba responded, arguing that the Trump Organization relied on Mazars and “they’re the accountants.”

The exchanges underscored how the upcoming trial is going to be contested — especially when the judge, and not a jury, will decide the outcome.

Read more takeaways here

For former President Donald Trump, showing up in New York for the start of his civil trial Monday was more than a political stop to boost his 2024 campaign. It was also deeply personal.

Several sources who spoke with CNN said Trump's decision to attend the hearing after the judge found he had committed fraud by inflating his riches was largely driven by how the accusations strike at what the former president values the most: his business and his brand.

"They're hitting him where it hurts," one of the sources said, noting that Trump was publicly seething as he entered and exited the courtroom Monday, stopping to speak with reporters on multiple occasions.

Trump has been fuming in recent days since the judge issued the surprise pretrial ruling last week. He has vented the most about the proposed valuation of his bedrock property in Florida, the Mar-a-Lago beach club. Trump was incensed after the judge used an $18 million to about $28 million assessment for the actual value of the compound.

While in Manhattan, Trump repeatedly and brazenly attacked New York Attorney General Letitia James, who launched the case and was in the courtroom Monday, as well as the judge overseeing it, Arthur Engoron. While the public broadsides were against the advice of his attorneys, Trump has dismissed pleas to tone down the rhetoric. 

He has instead told those closest to him that he doesn't care if any of the judges in his multiple cases seek to punish him, arguing it will benefit him politically if they do. 

On Monday, he sought to tie them to special counsel Jack Smith's criminal indictments of him, even though they are unconnected.

"This has to do with election interference, plain and simple," Trump said before walking into the courtroom. "They're trying to damage me, so I don't do as well as I'm doing in the election."

Trump, leaving the courtroom on a lunch break and approaching cameras in the hallway, railed against what he had heard, attacking the judge as an "operative" and said he should be disbarred for ruling against him.

Asked why he showed up in person Monday, Trump issued a familiar refrain: "Because I want to watch this witch hunt myself."

The former president, at the end of the day, complained that he had been kept from the campaign trail — even though he was there voluntarily.

In comments to reporters before the Monday hearing, Trump spoke at length about what he called a “worthless clause” disclaimer in the financial statements that are at issue in the trial. 

Trump said, “We have a clause in the contract, it’s like a buyer beware clause. It says, ‘When you take a look at the financial statement, don’t believe anything you read’ — this is up front. ‘Don’t believe anything you read.’ Some people call it a ‘worthless clause,’ because it makes the statement, and anything you read in the statement, worthless. It says, ‘Go out and do your own research, go out and do your own due diligence, you have to study the statement carefully. Do not believe anything.’” 

He said moments later that the clause “immediately takes you out of any fraud situation and any litigation.” 

Facts First: Trump inaccurately described this clause, as Judge Arthur Engoron noted in a ruling last week in which he found Trump liable for fraud. The clause does not say “don’t believe anything you read,” its actual language is significantly softer than Trump claimed. And there is no apparent basis for Trump’s suggestion that the clause inoculates him against any litigation at all.

Engoron wrote last week that “the ‘worthless clause’ does not say what defendants say it says, does not rise to the level of an enforceable disclaimer, and cannot be used to insulate fraud as to facts peculiarly within defendants’ knowledge, even vis-à-vis sophisticated recipients.”

He also wrote that “a defendant may not rely on a disclaimer for misrepresentation of facts peculiarly within the defendant's knowledge” — and that “defendants’ reliance on these ‘worthless’ disclaimers is worthless.” 

Here’s the text of the clause:

“Assets are stated at their estimated current values and liabilities at their estimated current amounts using various valuation methods. Such valuation methods include, but are not limited to, the use of appraisals, capitalization of anticipated earnings, recent sales and offers, and estimates of current values as determined by Mr. Trump in conjunction with his associates and, in some instances, outside professionals. Considerable judgment is necessary to interpret market data and develop the related estimates of current value. Accordingly, the estimates presented herein are not necessarily indicative of the amount that could be realized upon the disposition of the assets or payment of the related liabilities. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated current value amounts.”

There is certainly language in the clause that suggests that readers of the financial statements should use caution in relying on the listed asset valuations. But the clause doesn’t say the valuations are entirely worthless and does not tell readers that they should simply not believe anything they read in the statements. Rather, it suggests there had been a good-faith effort to value the assets using a variety of reasonable methods.

“You can read it up and down; it doesn’t say, ‘I will lie to you, I will double or triple the value of these things — my statements in here are outright lies,’” CNN legal analyst Norm Eisen said last week.

The judge in former President Donald Trump’s civil trial Monday questioned whether lengthy witness testimony about 2011 financial documents was a “waste of time” because of statute of limitations applying to the case expired in 2014.

At the end of Monday’s court session, Judge Arthur Engoron responded to testimony from former Mazars account Donald Bender about the 2011 financial documents, acknowledging that a state appellate court had ruled the statute of limitations only allowed allegations from 2014 onward to apply in the case. 

“I trust that you can relate the 2011 documents to something that happened later,” Engoron said to the attorney general's lawyers. “Or this has all been a waste of time.”

The defense agreed with Engoron's assertion, prompting Trump to give a thumbs up.

The judge’s comment marked a small win for Trump because it showed the judge again recognizing the statute of limitations that had been decided by the appeals court.

At the same time, however, Engoron did allow the witness testimony about the 2011 financial documents on Monday over the objection of Trump’s attorneys, as the attorney general's office indicated it would connect the testimony to allegations that fall within the statute of limitations.

Bender is returning for a second day of testimony on Tuesday. 

In his ruling last week, Engoron wrote that the fraudulent statements of financial condition were still relevant in the case even if they're for transactions completed before 2014 because they were submitted within the applicable statute of limitations.

The judge wrote that the attorney general’s office was not “challenging the loans, the closings, or the disbursements,” but was challenging the financial documents containing false and misleading information.

Monday's comments addressing admissible evidence do not indicate that Engoron will change that ruling. 

 

Former President Donald Trump has returned to Trump Tower after spending the day attending his civil fraud trial in New York.

The trial is expected to last until December 22, according to Judge Arthur Engoron.

Asked if he would return to court on Tuesday, Trump told reporters while leaving court for the day: "We may, I’d love not to. I’d love to be campaigning instead of doing this.”

Former President Donald Trump claimed that Monday's civil fraud trial in New York took him "off the campaign trail” and cast the trial as a political attack against him.

Trump was not required to attend the trial, which is a civil action — not a criminal case.

Despite that the former president attacked New York Attorney General Letitia James' $250 million lawsuit against him in the same manner that he has railed against the criminal charges he’s facing in four other jurisdictions.

“This was for politics. It has been very successful for them — they took me off the campaign trail,” Trump said as he exited the courtroom, after court was wrapped for the day. “Because I’ve been sitting in a courthouse all day long, instead of being in Iowa, New Hampshire, South Carolina or a lot of other places I could be at.”

Asked whether he was returning for the trial on Tuesday, Trump said: “We may, I’d love not to. I’d love to be campaigning instead of doing this.”

Court has wrapped for the day in the Trump civil fraud trial. The first witness for the New York attorney general, Trump’s former long-time accountant Donald Bender, testified about financial documents from 2011.  

Mazars USA, the accounting firm where Bender worked, would not have issued these statements of financial condition if the Trump Organization did not represent that the numbers were accurate, Bender testified.  Allen Weisselberg, Trump’s former longtime chief financial officer, signed on behalf of Trump that the documents from 2011 were accurate, he added. 

Additionally, Mazars would not have issued these statements if they learned the numbers were not true, Bender said.

He is expected to continue testifying on Tuesday.

For most of the afternoon session, the former president continued to look at the documents on the monitor in front of him, looking across the courtroom at the witness and talking quietly with his lawyers. 

The New York attorney general’s office asked Donald Bender, Trump’s former accountant at Mazars, about the price of a penthouse apartment for Donald Trump’s daughter, Ivanka Trump.

Bender testified that his job was not to audit Trump’s financial statement, but “from time to time,” he would point out errors to Trump Organization officials on financial documents.

One of the examples he recalled flagging an error was when Ivanka Trump had an option to buy a penthouse apartment at Trump Park Avenue. Bender said that the value on Trump’s financial schedule was different than what was listed in Ivanka Trump’s option.

Bender said he remembered changing the asset value two different years.

The discrepancies were cited in the attorney general’s lawsuit last fall against Trump, alleging that Ivanka Trump was given the option to purchase the unit “lease that also granted her a rental payment substantially below the market rent for similar units in the building." 

"Ms. Trump’s rental agreement for Penthouse A in Trump Park Avenue included an option to purchase the unit for $8,500,000. But in the 2011 and 2012 Statements of Financial Condition, this unit was valued at $20,820,000—approximately two and a half times as much as the option price, with no disclosure of the existence of the option," the lawsuit says.

Ivanka Trump was listed as one of the defendants in the attorney general's initial lawsuit, but was removed by an appeals court.

The New York attorney general’s first witness in Donald Trump’s civil case is Donald Bender, who was Trump's long-time accountant at Mazars USA.

Bender has since retired from the firm and Mazars no longer prepares Trump's taxes. The firm resigned and said Trump's financial statements should no longer be relied upon.

Bender testified that he compiled the statements of financial condition for the Trumps and Trump Organization, meaning he compiled the information given by the Trumps to format it correctly but did no analytics on that information. He said that he did a spectrum of work for Trump Organization and Donald Trump, including statements of financial condition.

“If I saw something that didn’t make sense to me, or bothered me, I would ask him (the client, Trump Organization) about it,” Bender testified.

Trump lawyer Chris Kise objected to the admission of a Mazars engagement letter for Trump’s 2011 statement of financial condition, arguing that it should not be admitted as evidence because it details a claim ruled as time barred by the appellate court.

Judge Arthur Engoron overruled the objection because he said the document could be relevant to fraud perpetrated within the statute of limitations.

“I did no audit or review procedures,” Bender told the court about the engagement organized through the letter, which was dated July 20, 2011.