On February 16, 2024, a judge in New York State imposed fines totaling just over $360 million on former president Donald J. Trump, The Trump Organization, and several related Trump companies and trusts in the civil case brought by the New York attorney general. President Trump’s sons Donald Trump, Jr. and Eric Trump were fined just over $4 million each. The court imposed additional sanctions, including injunctions against former president Trump; Donald Trump, Jr.; and Eric Trump from serving as officers or directors in New York corporations for specified numbers of years, among other sanctions.
The media reporting on the court’s decision has been massive since the decision was rendered. However, little or no reporting focused on the constitutionality of the fines under the Eighth Amendment to the United States Constitution. President Trump and his co-defendants all have substantial 8th Amendment “excessive fine” challenges to raise. In fact, a review of the facts and applicable law reveal that this decision is simply more election interference.
The fines stem from a civil suit filed by New York attorney general Letitia James in 2022, claiming that former president Trump and his companies used falsely inflated asset valuations and misleading financial statements in dealings with lenders. The suit alleges various different claims, chief among them the New York State Executive Law Section 63(12) “fraudulent or illegal acts” claims.
Importantly, the Trump case involved no victims. The court could not order any lender to be paid back or made whole, because the lenders not only were paid back, but all made money on the loans made to Trump. Since the case did not present any victims, the New York judge ordered what is known as disgorgement — that is, to give up “profits.” In this case, the court relied on expert testimony submitted by the State of New York to claim that the Trumps’ “profits” were lower interest rates on various loans.
The court ordered Trump and his companies to cough up $168 million on supposedly “ill-gotten interest savings” on multiple loans involving several different commercial properties. On this issue, the court simply fails to acknowledge the fact that “recourse” loans, like those involved in the Trump case, entitle the borrower to lower interest rates. A good discussion of the court’s error in this regard may be found here.
The court also fined former president Trump over $126,000,000 based on his profit from the sale of the “Old Post Office” in Washington, D.C. Trump purchased the Old Post Office in 2012, and, after remodeling it and turning it into a hotel, the Trump Organization sold its interest in it in 2022 for $375 million. Again, the court ordered “disgorgement” of the profits, finding that the original $170-million loan obtained by the Trump Organization to finance the purchase and renovation of the property was obtained using false financial statements.
Finally, the court ordered “disgorgement” of some $60 million in profits obtained by Trump on the assignment or sale of a contract on a public golf course in the Bronx called Ferry Point for the same reasons.
The Eighth Amendment to the United States Constitution provides that “excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishment inflicted.”
The New York court’s ruling ordering the Trumps to pay over $360 million under New York State law likely violates the Eighth Amendment prohibition on “excessive fines.”
First, in 2019, The United States Supreme Court held that the Eighth Amendment prohibition on “excessive fines” applies to states, not just to actions by the federal government. Thus, New York State fines are subject to the Eighth Amendment. Next, while the fines imposed by the New York Court in the Trump case are characterized as “disgorgement,” the United States Supreme Court and federal appellate decisions confirm that “disgorgements” are penalties or fines for purposes of federal law. Thus, the New York Court’s “disgorgement” penalties are subject to an “excessive fine” challenge under the Eighth Amendment.
The United States Supreme Court’s decision in U.S. v. Bajakajian adopted the standard of “gross disproportionality” in excessive fines determinations. If the amount of the fine or forfeiture is “grossly disproportional to the gravity of the defendant’s offense, it is unconstitutional.” Importantly, an excessive fines challenge is reviewed de novo by the reviewing court. This means the higher court reviews this question without any deference to the lower court’s decision and is free to substitute its judgment for that of the lower court.
As the United States Supreme Court’s decisions instruct, the focus of the “grossly disproportional” inquiry is on the following factors:
Applying these factors to the New York court’s decision reveals that the fines are clearly excessive. There are no victims in the Trump case. No one was harmed. Each and every financial institution involved was fully repaid and made money on its loans. Further, a review of case law in New York demonstrates that there simply are no cases ordering a defendant to pay hundreds of millions of dollars in disgorgement without any victim being deprived of anything. Finally, just how “reprehensible” is it to obtain loans and credit facilities and then pay the lenders back, in full, on time, in compliance with the agreement? The answer is, not very. Once again, a court in New York issued yet another political decision masquerading as justice. The fines imposed by this New York court on former President Trump and his sons and businesses are grossly and unconstitutionally excessive. While President Trump and his co-defendants undoubtedly have many defenses to the claims to raise on appeal, chief among them should be a constitutional challenge to these grossly excessive fines.
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