The $465 Million Trump Judgment and the Eighth Amendment

by Techno Fog

In light of the record $465 million judgment issued by New York Judge Arthur Engoron against President Trump and the Trump Organization, we present an important question: whether that judgment violates the Excessive Fines Clause of the Eighth Amendment.

The Excessive Fines Clause: A Brief History

The freedom from excessive fines has a long tradition in the West. The Excessive Fines Clause in the 8^th Amendment1 “was taken verbatim from the English Bill of Rights of 1689”, which “formalized a longstanding English prohibition on disproportionate fines” that had existed in the country since the time of Henry I in 1101, and was expanded upon in the Magna Carta in 1215.2

The prohibition of excessive fines in the English Bill of Rights was “intended to curb the excesses of English judges under the reign of James II”3 as well as other historic wrongs by English officials. During the reign of James II, “the King’s judges had imposed heavy fines on the King’s enemies.”4 In the 1680s, fines became “excessive and partisan” and opponents of the King were imprisoned because they could not pay “huge monetary penalties.”5 In one of the most striking examples of this abuse, the sheriff of London was fined £100,000 in 1682 (over $10 million present-day dollars) for “speaking against the Duke of York.”6 It was against this backdrop that the English Bill of Rights, and its guarantees against excessive fines, was enacted.

Here in America, when the States were debating whether to ratify the Constitution, advocates for the separate bill of rights stressed the need “for an explicit prohibition on excessive fines mirroring the English prohibition.”7 One Anti-Federalist, understanding the retaliatory power of government officials and mindful of English abuses, argued this provision was necessary “for the security of liberty.” By the time the Bill of Rights was ratified, “most of the States had a prohibition on excessive fines in their constitutions,”8 proving the colonists’ view of the importance of this fundamental right. And this right remained fundamental at the time the Fourteenth Amendment was ratified. As Justice Clarence Thomas has explained:

The right against excessive fines traces its lineage back in English law nearly a millennium, and from the founding of our country, it has been consistently recognized as a core right worthy of constitutional protection. As a constitutionally enumerated right understood to be a privilege of American citizenship, the Eighth Amendment’s prohibition on excessive fines applies in full to the States.9

The Application of the Excessive Fines Clause

Underscoring the importance of this right, all 50 States – including New York – constitutionally prohibit the imposition of excessive fines, and for good reason: excessive fines can be used “to retaliate against or chill the speech of political enemies” or for “retribution and deterrence.”10

Yet these prohibitions have been ignored by state and federal courts for years, allowing municipalities and state agencies to force property owners “to pay unconscionable fines for small violations” – $57,812 for failing to register a new burglar alarm; $180,000 in fines against homeowners for not having enough grass in their yard.11 Vehicles and homes are seized to pay relatively small debts, and the government attempts to pocket the remainder – a violation of both the Excessive Fines Clause of the Eight Amendment and the Takings Clause of the Fifth Amendment. In Tyler v. Hennepin County, the Supreme Court found a Takings Clause violation where the government took from the taxpayer more than she owed, stating the government could not “confiscate more property than was due.”12 (It didn’t address whether this was also an Excessive Fines violation.)

There isn’t an abundance of Supreme Court cases that have applied the Excessive Fines Clause. But there is enough guidance, and enough caselaw, to determine that Judge Arthur Engoron’s $465 million judgment against Donald Trump and the Trump Organization (and other Defendants) violates this right.

In making this determination, the starting point is to compare the civil penalty to the gravity of the offense.13 Under Supreme Court precedent, “If the amount of the forfeiture is grossly disproportional to the gravity of the defendant’s offense, it is unconstitutional.”14

The $465 Million Judgment

Before we reach that conclusion, it’s important to outline Judge Engoron’s harsh punishment of Trump and the Trump Organization, and the statute and conduct on which it relied.

New York’s Complaint, in part, alleged a violation of New York Executive Law § 63(12), which gives the Attorney General broad authority to seek a court order to enjoin “any fraudulent or illegal acts” and to request restitution, damages, and to cancel business certificates resulting from those acts. The law also gives the court the latitude to award relief “as it may deem proper.” The other causes of action alleged by New York included various provisions of New York Penal Law – under which Judge Engoron found liability, not guilt – include false financial statements and conspiracy to commit insurance fraud.

The reliance on § 63(12) is notable for a couple reasons. First, it is a civil statute – there are no criminal penalties, such as imprisonment, and thus the State need only prove its case by a preponderance of the evidence, not the traditional beyond a reasonable doubt standard found in criminal cases. Second, the State of New York did not assert a common law fraud claim against the Trump Organization, et al., which would have made the State’s case more difficult, having to prove: (1) a material statement; (2) falsity; (3) knowledge of the falsity; (4) justifiable reliance; and (5) damages. Instead, § 63(12) only required, according to Judge Engoron, that “Defendants used false statements in business.” The State didn’t need to show reliance by the banks on the alleged false statements.

The penalties issued by Judge Engoron total nearly $465 million dollars (not including enjoining multiple Defendants, such as Donald Trump and his sons, from serving as an officer or director of any New York corporation, or prohibiting the Trump Organization from applying for loans). The findings of fact discussed in Judge Engoron’s order (spanning multiple pages) includes allegations of: (1) misrepresenting the size of properties; (2) the inflation of property values, including Mar-a-Lago; (3) and inaccurate representations in loan documents. Judge Engoron further stated that this alleged “fraud” was relied on by the Trump Organization’s lenders and contract-partners, giving the company favorable interest rates and public grants and insurance coverage.

At times, Judge Engoron’s own miscalculations were the determining factor for alleged statutory violations. For example, he somehow calculated the value of Mar-a-Lago at “between $18 million and $27.6 million” and accused the Defendants of over-valuing the property by “possibly a billion dollars or more.” Such a finding is ludicrous on its face; Mar-a-Lago is a historic gem, an income-producing club sitting on 20 acres property – with its own beach – in one of the most sought-after locations in the United States. Local experts, who know property values much better than an odd New York judge, laughed at his valuation, stating it has the potential to sell in excess of a billion dollars.

From there, Judge Engoron issued the following order which made up the bulk of the $465 million judgment (all include pre-judgment interest):

• $168,040,168 – reflecting the interest payment savings for loans on the various Trump Organization properties.
• $126,828,600 – profits distributed to Donald Trump for the sale of the Old Post Office hotel in Washington, D.C.
• $8,026,048 – profits distributed to Eric Trump and Donald Trump, Jr. for the sale of the Old Post Office hotel in Washington, D.C.
• $60,000,000 – received by the Trump Organization from Bally’s Corporation relating to the assignment of a Trump contract to operate and maintain a golf course (Ferry Point Park) in the Bronx.

To summarize, the fines and penalties not only deprive the Defendants of the gains from allegedly favorable loan terms – loans which were paid back to lenders who would gladly do business with Trump in the future – but also disgorge (take back) profits and income earned on the loan proceeds. For example, with respect to the profits from the sale of the Old Post Office in DC, Judge Engoron concluded that “the net profits received on its sale were ill-gotten gains” because there would have been no loan on the property without the alleged false statements. He used the same sort of logic to claw back the $60 million sale of the golf course maintenance contract (Ferry Point Park).

As we stated earlier, the constitutionality of these fines is determined through comparing the penalty to the gravity of the offenses. If they are grossly disproportional, then the fines are in violation of the Excessive Fines Clause.

The gravity of an offense – especially in the case of alleged fraud – can be measured by another’s reliance of those representations. In fact, there was no evidence that the lenders and insurers of the various Trump properties would not have given loans on the same terms absent the alleged misrepresentations. The State argues that this is immaterial to establish fraud. We observe that it is material, however, to establish whether the penalties are unconstitutionally excessive.

In this case, the gravity (or the materiality) is greatly diminished by the testimony of a number of witnesses, and thus establishes that the fines were grossly disproportional. These alleged fraudulent acts didn’t necessarily induce action; many times, they were ignored or not considered by the lenders. As argued in the Trump Organization’s appeal:

• A Deutsche Bank representative testified that all financing decisions were “based on the bank’s own internal analysis” and that “President Trump’s financial strength was assessed on the basis of Deutsche Bank’s own adjusted values.”
• A representative of Ladder Capital testified that representations in various filings were not a “key factor” in the company’s underwriting decision to refinance a loan on a Trump property.
• A representative of the New York City Park’s Department testified that the Department “did not rely on President Trump’s Statements of Financial Condition” and that the financial capability of the proposed contractor was a small part in the contract’s criteria award.

Moreover, it’s important to note how the New York Penal Law treats the alleged offenses. As Trump’s appeal argues, “the offenses that Defendants supposedly committed are mere misdemeanors.” With no victims (the multi-billion-dollar lenders never pursued their own civil cases against Trump), and no award of restitution, the $465 million penalty is grossly disproportionate to the alleged offenses. No doubt that the State can penalize allegedly wrongful conduct by a business – the issue is the degree of what is permitted.

Further supporting the basis for a finding of a violation of the Excessive Fines Clause is the purpose of New York Attorney General Letitia James’ persecution of Trump. Recall her words before she was elected: that she would use the power of her office to take down Donald Trump, that Trump was “illegitimate,” that Trump should “be indicted from criminal offenses.”

Attorney James’ promises – and her subsequent actions in trying to decimate the Trump Organization and its leadership, including President Trump – make very real the Supreme Court’s warning that excessive fines can be used “to retaliate against” political enemies. All it took to complete her scheme was to find a judge willing to go along with it. And Judge Engoron complied.

Of course, that’s not the only issue with Judge Engoron’s ruling. As Trump now argues (and argued before the Court), many of the State’s claims against Trump, et al. are barred by the statute of limitations. Properly applied, this would reduce the judgment by approximately $351 million.

The New York Court of Appeals at least seems to agree that there might some problems with the judgment. Today, its order allowed Trump to post a $175 million bond (reduced from nearly $465 million). It also stayed (1) the order barring the Defendants, including President Trump and his sons, from serving as officers or directors of any New York corporation; and (2) the order barring the Defendants (including the Trump Organization) from applying for loans from New York financial institutions.

It’s hard to tell whether that means Judge Engoron’s decision is in jeopardy – the New York Courts can’t be said to be a friendly venue for Trump. But it’s a step in the right direction.

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