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Donald Trump will not be able to pay the damages that could be imposed on him by a judge overseeing New York Attorney General Letitia James' fraud lawsuit and will be forced to declare bankruptcy, according to his former lawyer Michael Cohen.
Cohen, whose 2019 congressional testimony triggered the investigation that resulted in James' $250 million suit against the former president and his company, The Trump Organization, made the claims after a judge ruled that Trump had committed fraud while providing financial statements valuing several of his properties for years.
On Tuesday, Judge Arthur Engoron resolved one of the main claims in James' lawsuit that Trump had provided "false and misleading" statements inflating the value of his properties and assets by billions of dollars in order to obtain financial benefits and better loans.
Engoron ruled that the New York business certificates of The Trump Organization will be canceled, as well as any certificates of companies owned by Trump and two of his sons, Eric and Donald Trump Jr., which may result in the former president's companies being removed from his control and dissolved.
In a statement after the ruling, Trump said the "widespread, radical attack" has "devolved to new, un-American depths" and is planning to appeal. Newsweek has contacted The Trump Organization for comment via email.
The ruling means that the issue of whether Trump, his two sons, and The Trump Organization committed fraud while valuing numerous properties will not need to be decided in the civil trial when it begins on October 2 and will now mainly determine the size of the penalty.
Speaking to CNN's Kaitlan Collins on Tuesday, Cohen said that while James' filed a $250 million lawsuit against Trump and his real estate company, this is just a "baseline figure" and that the judge could impose a far greater fine which Trump will not be able to pay.
"Judge Engoron will be the sole decider on what the damages are. The damages, in my estimation with interest and penalty, will exceed $600 million," Cohen said.
"Does that put the company into bankruptcy? He [Trump] does not have that liquid cash available in order to pay that off."
Trump's office has been contacted for comment via email.
Cohen said that there are a "multitude of reasons" to suggest Trump will not be able to pay off a fine larger than the $250 million cited by James, even if he manages to sell his 40 Wall Street building in Manhattan, New York, for $400 million.
"Many of the assets that he owns, he has limited to no basis in them like 40 Wall Street, $1 million basis. You also have, say, a $100 million mortgage onto it," Cohen said. "He's also going to have to pay Uncle Sam tax on the money between the basis and the sale price.
"He doesn't escape that. Everybody has to pay that. So, let's say it's 50 percent. So that would be 200 million, minus the 100 that he owes to the banks on it. So there's 100 million left in order to be used to offset whatever the judgment will be."
Collins asked Cohen whether Trump would be able to continue to conduct business in New York following Engoron's ruling, to which he replied "no."
"Because what ultimately happens is the Attorney General will cease to allow those companies to exist by pulling the licenses, by pulling its license to be active in the state of New York," Cohen said. "So all of those assets will end up going into some form of a receivership, and as a result of the receivership, the companies will end up getting liquidated."
In a statement after the ruling, Trump called the judge "deranged" and accused him of "doing the bidding" of the "completely biased and corrupt" New York Attorney General.
"We are rapidly becoming a communist country, and my civil rights have been taken away from me," Trump said. "This is Democrat political lawfare and a witch hunt at a level never seen before."
In her own statement following Tuesday's decision, James said: "A judge ruled in our favor and found that Donald Trump and the Trump Organization engaged in years of financial fraud. We look forward to presenting the rest of our case at trial."
About the writer
Ewan Palmer is a Newsweek News Reporter based in London, U.K. His focus is reporting on US politics, and Florida ... Read more