Journalist on Donald Trump’s Civil Fraud Trial

CHRISTIANE AMANPOUR, INTERNATIONAL HOST: Donald Trump, a former president, was back in court today. This time the former president is answering for his business dealings in New York and his empire might be at stake. The self-described property mogul has already been found liable for persistent and repeated fraud in this civil trial, according to documents. David Cay Johnston is Pulitzer Prize-winning economics reporter and he joins Hari Sreenivasan to discuss what this means for the Trump organization.

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HARI SREENIVASAN, INTERNATIONAL CORRESPONDENT: Christiane, thanks. David Cay Johnston, thanks so much for joining us. Last week, a judge found that the president — the former president of the United States persistently committed fraud as he built up his empire of businesses in New York. Just kind of, if you could, for people who might not have been paying attention to exactly what happened last week, walk us through what the judge said is there.

DAVID CAY JOHNSTON, PULITZER PRIZE-WINNING REPORTER: Well, the issue had to do with the values Trump placed on some of his businesses, principally real estate. And real estate is a range of value. You don’t know what your house will sell for tomorrow, but if you have a house you think is worth a quarter million dollars, it’s not going to sell for $200 million. And Trump valued some of these properties at more than 10 times what an already generous appraisal had shown they were worth. And he’s been doing this for the whole 35 years that I’ve known him, making claims like this. And finally, it’s become a legal issue.

SREENIVASAN: OK. And for those of us who aren’t familiar with how that translates into the rest of the business empire, inflating the value of, say, your penthouse and how big it is or how much it’s worth, what is the advantage you get from that?

JOHNSTON: Well, it allowed Trump to get larger loans on better terms, because it appeared to the banks that their risk level was lower because the share of the value that was represented by the loan was smaller. And even though the banks all got paid back this time, the fact is it meant other people didn’t get loans that they might have because banks all have a limited lending capacity.

SREENIVASAN: Right. Now, how big of a decision is this?

JOHNSTON: Oh, this is incredibly damaging to Donald Trump. And it goes to the heart of who he is. Donald is his money. And he’s always saying he has more money than he has.

Once he told me he was worth $3 billion. I told him I didn’t believe him. And so upset and that later that afternoon he told another journalist he was wonderful $5 billion. He just makes this stuff up. And this is the first time he’s ever been held to account for it.

SREENIVASAN: I mean, in a large way, the case that he made when he was running the first time was that, I’m a successful businessman. I’ve built this empire. And I can do the same for the country.

JOHNSTON: That’s exactly his case. Here’s the problems with it. He’s not a successful businessman, as laid out in his book, “The Art of the Deal.” What he does is rip people off and then move on to the next victim. And it’s very clear if you read the book that that’s what he does.

He has a long history of not paying his workers, not paying vendors, employing illegal aliens and refusing to pay them until they threaten to kill his supervisor. So, Trump’s whole life has been a facade. And I admire his incredible skill at telling people and persuading people he’s what he isn’t.

SREENIVASAN: So, what happens now?

JOHNSTON: Well, this trial is only about the damages due to the State of New York. The judge last week cancelled Donald Trump’s business certificates, business licenses. He cannot do business now in New York. There’s a monitor watching the companies. He can’t take money out of them to support himself.

Eventually, when the amount due is set, the businesses will be sold and all of the Trump organization enterprises, so more than 500, have to be divested because you don’t have a business license, you cannot run a business. Unless, like me, as book author, you’re a sole proprietor. The judge in this case will appoint a receiver at some point. There will certainly be appeals and arguments about that. But because Donald no longer has business licenses in New York, the receiver will accept all of the property, he will put it up for sale. Just as happens in bankruptcy, though this is state business law, the sale prices are going to be much more fire sale prices than premium prices. The creditors get paid first, people have mortgages on the building. Second, you know, the government, including the fines, (INAUDIBLE), when the state is seeking $250 million in penalties. And the person who gets paid last, Donald Trump.

SREENIVASAN: So, could the children still profit from this?

JOHNSTON: No. Now, two of his sons are named in this litigation along with the Trump organization and Donald’s eyes wide open blind trust that he created when he became president. And all of those are covered by this.

Now, Ivanka Trump got herself out of the case, and the two younger children are not involved in it whatsoever. So, Donald is — he’s out of business in New York and well, we’re going to see a lot of litigation, this will be full employment program for lawyers. At the end of the day, Donald Trump will not have his enterprises and his businesses and he may well lose Mar- a-Lago.

SREENIVASAN: Was that also inflated in value?

JOHNSTON: Oh, yes. In fact, one of Donald’s complaints is that it’s worth hundreds of millions of dollars. One of his sons was on the internet saying exactly that. The judge says, it’s worth around $18 million. Remember, Mar- a-Lago is a business. It has hotel rooms. They hold weddings and other functions there. It’s not a personal home. So, he can’t shield it from this action by government. But all of his property will have to be liquidated and it will be done by the court appointed receiver. And the person who gets paid last is Donald.

And given the inflated values, he may not end up with much, if anything.

SREENIVASAN: So, couldn’t Trump say, look, I am not an accountant. I trusted everybody around me. You should take it up with Mr. Weisselberg, you should take it up with lots of other things. And frankly, you should call the banks, because they are the ones that approved my inflated numbers, if that’s what you’re finding, right? If — shouldn’t the banks have some responsibility here?

JOHNSTON: Well, absolutely. And it’s a good example of the very poor job we do of regulating banks in America. I mean, in recent years we found one of the six too big to fail banks created millions of fraudulent accounts and all they did was pay some fines and go on. We’re doing a very, very bad job of regulating banks, and bank regulation goes all the way back to Hammurabi’s code 4,000 years ago. As for Donald trying to blame other people, he always does that. I mean, Donald was asked in the 2016 campaign, Mr. Trump, you’re a Christian, when was the last you asked God for forgiveness? And he said, ask God for forgiveness? Why would I do that? I’ve never done anything in my life that requires asking forgiveness. Donald never assumes responsibility. He always blames other people. And there are people who are gullible enough to believe that.

But in a court of law, arguments that may win you votes are not what’s at to issue. The laws about fraud are very clear, very well-developed and the evidence against Donald in this case is overwhelming. All you have to do is read the judge’s opinion. You don’t need to be a lawyer to understand it. And he lays out very clearly this was calculated intentional fraud.

And as some of his executives used to tell me and as Michael Cohen has said to me and everybody else, nothing happens in the Trump organization without the direction and approval of Mr. Trump.

SREENIVASAN: His — Trump’s lawyer, here’s what he said, he will appeal the decision. He called it “completely disconnected from the facts and governing law.” And Trump said it was a political persecution. Walk us kind of through the potential appeals process for Donald Trump.

JOHNSTON: Well, in this civil case, Donald can only appeal on matters of law. He cannot appeal on the findings of fact by the judge, which are thoroughly described in the 35-page opinion with specific examples, including Trump’s own statements where he, in essence, said about his financial statements, oh, everybody knows you can’t lie on my financial statements. And the judge said, I’m sorry, we’re not living in a fantasy world. He asserted that a rent regulated apartment was worth just as much as a free market apartment, which is absurd. And the judge knocked that down.

So, they will appeal on anything that isn’t the law, they will be ignored. And they may find some technical issue. I haven’t been able to find one and I’ve interviewed other people who know the civil law in New York well and they don’t see anything there either that is appealable as a matter law or successfully appealable.

And there is no — there should be no appeal to the federal court because there is no federal issue here. This is entirely a New York State issue. States decide who gets to run a business under our system, not the federal government, because the founding fathers never thought about corporations and regulation when they wrote the constitution.

SREENIVASAN: So, how long are we talking about, timeline wise, for the progression of this?

JOHNSTON: That depends on how successful Donald Trump’s lawyers are at delaying and Donald’s always been big on delay. But remember, his lawyers here made-up facts, just like their client does, five of them were each fined $7,500 for frivolous arguments that is repeating arguments the judge had rejected. But more importantly, they actually limited the quoted language of an important court case in the filings to turn it on its head. And give their unclean hands, their misconduct here, they’re not going to have a sympathetic appeals court and frankly, they may face disbarment or other disciplinary proceedings by the New York State Bar.

SREENIVASAN: So, if the president loses the appeals, the status of his ability to do business in the future is one thing, but all of these existing businesses, what happens to them? They have to be liquidated?

JOHNSTON: They will continue to operate under right now the eye of a monitor, a retired judge named Barbara Jones. Donald cannot take any salary or money from them.

SREENIVASAN: OK.

JOHNSTON: And the reason is that these are ill got gains. If you committed fraud and you made a profit because of the fraud, that is an ill got gain.

And here’s the way to think about that. You have an employer who you work for who closes Friday night and opens up Monday. You take $100 from the employer. You go to the casino. You win $1,000. You put the $100 back before the business reopens. You’ve committed two crimes. One, you’re a thief. But secondly, your casino win is an ill got gain. And if you’re caught, you have to give up all back that money. And that’s what’s happened to Trump here. His ill got gains have to be turned back. And we don’t know how much that’s going to be. We only know that the New York State attorney general has asked for $250 million indicating the scope of this, which is enormous.

SREENIVASAN: So, regardless of how people might feel about the president, there are employees, arguably in many of these dozens of these businesses, from the groundskeeper at, say, a golf course to a doorman in a building. What happens to them?

JOHNSTON: The employees will continue to get paid and businesses will operate until some new owner comes along. So, the businesses will operate as they have been but not at the direction of Donald Trump or his sons or the two executives that are named in the lawsuit.

SREENIVASAN: So, when you look at the findings, was there anything surprising to you? I mean, given you’re not the average person who’s been following Trump as closely as you have for the last 35 years, but when you saw something, anything jumped out from you — for you?

JOHNSTON: No. That’s a very interesting question. And no, Hari, there wasn’t anything that jumped out of me. All of these things were consistent with Donald’s long history of just creating his own reality. He says it in his mind, that makes it so. And the overvaluations, I’d written about a number of them in the past, you know, he claimed that his — a state in Westchester County, just north of Manhattan, was worth at one point $291 million. His highest appraisal put it at about $30 million, but that was based on the idea that he could carve it up into a group of other mansions and yet, local authorities said no, we’re not going to let you carve it up, which means it’s not even worth what the appraisal says. So, he was valuing this at about 40 times what it’s probably actually worth.

And, you know, a little edge here. If he’d said his 11,000 square foot Trump Tower apartment was 12,000 square feet, but he said it was over 30,000 square feet, that’s fraud plain and simple.

SREENIVASAN: You know, this is different than when the Manhattan D.A. was investigating the former president and declined to bring charges. This is a result of New York Attorney General Letitia James filing this suit. Is there a difference in the scope here?

JOHNSTON: The judge in the current civil case repeatedly cites criminal law. And I and some others have written articles saying there’s a very strong criminal fraud case. But the difference is criminal fraud requires proof beyond a reasonable doubt, whereas in a civil case, you only need a preponderance of the evidence, more than half.

And so, Letitia James took the easier route here. I think it’s a very good question. Will the Manhattan district attorney or the Southern District of New York, the federal prosecutorial agency, go back and look at this as a criminal fraud matter? I don’t expect them to. But I think they have plenty of grounds to if they want to bring a case.

SREENIVASAN: You know, the former president also has a long history of settling out of court. And is this a different era? I mean, are there kind of different stars aligned here where there is an incentive not to settle on the part of the state?

JOHNSTON: If Donald Trump had not become president, I don’t think he would see any of these cases, because he’s engaged on outrageous behavior his whole life. So, he’s not alone among business people who are really high- level con artists who get away with stuff because that’s not what law enforcement is focused. And Donald is, in my view, the greatest con artist in the history of the world. I mean, I admire his success as a con artist who conned his way all the way into the White House.

SREENIVASAN: David Cay Johnston, thanks so much for joining us.

JOHNSTON: Thank you

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