Trump Blustered… And Blundered

His first time testifying in court reveals a losing strategy and a losing hand

Artist’s sketch of Trump’s testimony on Monday, courtesy of the BBC

There are many ways to describe Donald Trump’s performance—and it was a performance—on the witness stand on Monday in the New York civil fraud case. This is the first time Trump has testified live and in court, and at stake is nothing less than his livelihood: his continuing ability to operate his vast business empire and avoid up to a $250 million judgment.

Trump had neither the law nor the fact to pound, so instead he pounded the credibility of the proceedings and the motives of the judicial officers. Predictably, he attacked Attorney General Letitia James; the judge who will decide his fate, Arthur Engoron; the Biden Administration; the U.S. and New York judicial systems; and anyone else who dared to try to hold him to account.

But bluster aside, when all is said and done, this case will turn on the facts, the law and the evidence. And on this score, Trump came up woefully short. 

He regurgitated legal arguments on which the judge has already ruled against him. And he made startling admissions, including that the financial statements at issue and his personal guaranty were there to induce banks to lend him money.

That’s what you call a key admission.

Trump may be hoping he can win this on appeal, but the higher courts aren’t going to be watching his performance. Instead, they’re going to be reading select pieces of the transcript where Trump gave up the game.

So let’s look past all the sound and fury and take a more even, serious look at why Trump is likely to lose this case and pay a very heavy price.

It was a “worthless clause”!

Trump calls it the “worthless clause.” It’s a more or less standard disclaimer that appears on every financial statement, warning that it shouldn’t be taken at face value, and that others should do their own due diligence. As a result of the clause, Trump argued, the banks didn’t even care what the financial statements said.

“They just weren’t a very important element in a bank’s decision making process, and we’ll explain this as this very crazy trial goes along,” he testified.

Trump thinks this absolves him from any claim of fraud, but he is dead wrong. Imagine for a moment that the “worthless clause” was actually the get-out-of-fraud free clause that Trump claims. Wouldn’t every con artist, fraud, and huckster simply hyperinflate everything, then seek to hide behind a “disclaimer” and say, “You shouldn’t have believed me! I even told you not to believe me!”

Fraud laws exist to prevent these kinds of shenanigans. They prevent people like Trump from making wild, unsupported claims when they’re trying to obtain financing or insurance. In fact, when Trump tried to raise this argument again in his testimony, the judge cut him off and told him to go read his opinion which already addressed this argument.

In that opinion, the judge noted that such disclaimers “do not insulate defendants from liability.” In this case, they plainly state that “Donald J. Trump is responsible for the preparation and fair presentation of the financial statement in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statement.”

The instances where such a disclaimer can absolve a party from a misrepresentation are quite limited, wrote Judge Engoron. It can’t be a blanket disclaimer, but rather a specific one related to a specific fact or representation. And it has to concern facts not within the disclaiming party’s knowledge—a burden not met by Trump here.

Moreover, parties who issue such statements still have a duty to try to provide accurate information, despite a disclaimer. Otherwise, what is even the point of providing a financial statement, if the numbers can be entirely made up? 

Trump has no answer to this because there is no good answer.

But the loans were paid off, no one was hurt!

A second argument Trump has made, and that he launched into again while on the stand, was that the loans he obtained from these fraudulent statements were paid in full, and therefore the banks weren’t hurt in any way. 

No harm, no foul, right?

“There was no loss of money. They made a lot of money, and everyone is trying to figure out why you’re doing it,” Trump said, presumably referring to the civil complaint against him.  

There are two problems with this reasoning. 

First, the fraud laws are there to protect New York consumers generally against false representations. That creates a more level playing field, because otherwise those who make false statements wind up taking away loan opportunities from those who make true ones, and that shouldn’t be allowed. It’s unfair competition based on fraud, plain and simple. But Trump has always been incapable of thinking about what harm his words and actions might cause others, which is why to him it seems obvious that no one was hurt because everyone got paid. 

Second, it isn’t even true that the banks themselves were not harmed. As the state pointed out last week to the judge, Trump was able to con the banks into giving him loans at lower interest rates because of his supposedly excellent financial condition and his personal guaranty—none of which was true. Had he played by the rules and managed to get a loan, it would have been at a higher risk to the bank and therefore would have carried a higher interest rate. Indeed, according to the state, the banks lost out on some $168 million in interest that they could have earned and should have been paid.

Watch for that number to figure highly into how much Judge Engoron assesses in damages.

I would have gotten the loans anyway!

A third line of argument claims that Trump’s financial statements were terribly undervalued already because they didn’t include the “brand value” of his name—the thing he claims even won him the presidency. Because of this, it doesn’t matter if the financial statements themselves were inflated or inaccurate, because he would have qualified anyway.

From the above discussions on the reason we have fraud laws in the first place, and how the injury from such fraud is also one upon the consuming public, we can make quick work of this defense. The state has an interest in preventing false financial statements in order to deter fraudulently obtained financing and to keep the playing field level for all. It doesn’t matter what you think the rest of your empire is worth; what matters is what you claimed and signed your name to.

And in any event, the fantastical valuations that Trump wanted to claim on his properties aren’t supported by the facts. The most obvious one is his triplex apartment in New York, which he stated under oath was 10,000 square feet, then 11,000, then 12,000. But he claimed on paper to the banks that it was 30,000 square feet, which you simply can’t arrive at by any stretch. 

Trump also tried to claim that Mar-a-Lago is actually worth between $1 billion and $1.5 billion, rather than the $18 million that a Florida property assessor valued it at. But this incredible claim itself relies on a fictional ability to subdivide the property, develop it further, and sell it off in pieces. The problem is, Trump already agreed to many onerous restrictions as part of the property’s development plan, including not to subdivide it.

Trump tried to wiggle out of this fact, but it strains credulity. For example, the “deed of development rights” for Mar-a-Lago states that “the Club and Trump intend to forever extinguish their right to develop or use the Property for any purpose other than club use”—but to Trump this somehow isn’t binding.

“‘Intend’ doesn’t mean we will do it,” Trump said with a straight face.

Statute of limitations

Trump also likes to talk a lot about the “statute of limitations” on the case, claiming it has passed and that the case must be dismissed. This defense is worth reviewing and knocking out quickly. 

The principle of a statute of limitations says that you shouldn’t be able to sue on a claim that is too old or stale. But the question in this case, as it is in many cases, is when the claim actually arose. That’s when the clock actually starts ticking.

Trump wants to say that the clock started when the loan “closed” and was funded, but there’s a problem to this argument. His loans required him to continue to submit periodic statements of financial condition. That condition was baked into the language of the loan agreement. If each of those subsequent statements was also false, they each constitute a separate and new act of fraud. 

As Judge Engoron noted in his opinion, you can’t knock out all of the claims in an action for fraud just because some of the fraudulent misrepresentations fall outside the time period.

Bluster cannot blow him to victory

Trump continues to present his defense to the court of public opinion, and not to the court (and higher courts) that will actually decide his fate. On the witness stand in New York, he rambled on, to the obvious annoyance of the judge, talking more or less out of his ass. And he stubbornly refused to understand why his arguments simply hold no legal water.

Assuming this was a taste of what we can expect in his criminal cases, and that he actually takes the stand in his own defense, it doesn’t bode well for him. Courts, unlike social media or far-right news outlets, are places governed by facts, evidence and law. It’s the reason back in 2020 that he lost more than 60 court challenges over the election. He simply didn’t have the goods to back up his claims.

This lack of supporting facts, evidence and law is playing out in real time here in the New York case, and it will happen again when he faces his first federal criminal trial before Judge Chutkan in the spring.

No amount of bloviating is going to improve his chances there either.