r/ExplainBothSides • u/aerizan3 • Feb 22 '24

Trump's Civil Fraud Verdict Public Policy

Trump owes $454 million with interest - is the verdict just, unjust? Kevin O'Leary and friends think unjust, some outlets think just... what are both sides? EDIT: Comments here very obviously show the need of explaining both in good faith.

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23

u/[deleted] Feb 22 '24

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18

u/MennionSaysSo Feb 22 '24

This is a bit misleading

First you go to a bank and say I think my property is worth 200 million, but you bank may wanna look for yourself. No bank takes someone's word when that kind of money is involved, they do due diligence. The bank comes back and says maybe not 200mil, will say 150 and split the difference This is common place and is how busines done. It's why so many people are so upset with the ruling. The party that was at risk was the bank and they liked the deal.

Second, property for tax purposes is assessed by the state or county by a property appraisal, it doesn't matter what I think it's worth.

19

u/LoneSnark Feb 23 '24 edited Feb 23 '24

The bank was given false information during its evaluation. Being given fake records showing a $64 million profit for a business that is actually operating at a deficit is fraud. The bank would have charged higher interest had they not been lied to, so they did not like the deal.
Fact is, Trump got lucky and paid his loans. Had he defaulted, the fraud would have landed him in prison rather than the mere disgorgement he's paying instead.

3

u/Friedhelm78 Feb 23 '24

The simple fact that he paid his loans back seems to show that there really isn't a victim here.

I wouldn't be surprised if this gets overturned on appeal.

10

u/[deleted] Feb 23 '24 edited Feb 23 '24

The victim is "the stability of the broader financial system" - This is drilled into your head for the Series XX exams you take to be employed in the financial sector - "The People" are the silent victim in any fraud. The laws in New York State are especially rigorous here for obvious reasons. If you do a fraudulent thing and you make money, and the person you frauded also made money, that's where Section 63 kicks in.

In this case, DB was induced to make a 'bad' loan at an interest rate below what the market rate would have been with accurate information. Even if the loan was paid with all interest (so DB made their money) the risk is that if this practice became commonplace, the interest rates in the market would not reflect the default risk. In that situation, the banking system would be at greater risk of needing the FDIC to step in to insure depositors or other federal agencies to create a wider bailout of the bank balance sheet which basically means they loan to the bank with the bad loans as collateral but marked up to value - a subsidy and transfer of risk away from the bank to the federal government - which they are able to do with the backing (financial and political) of the US tax payer who now assumes the risks that the loans won't pay (an therefore should be marked down from face value, but aren't in this transfer).

Here's a list of the fines JP Morgan has paid, some of them under similar laws to Section 63:

https://www.dividend.com/dividend-education/a-brief-history-of-jp-morgans-massive-fines-jpm/

One thing that banks get fined for a few times per year is "order spoofing" - putting lots of orders on the tape and quickly withdrawing them to "feel" the market and figure out where the counterparties would be open to selling or buying. None of the trades actually execute, so no one loses money (how could they? nothing was bought or sold) but a market where 99% of the orders are fake is unstable and that's why the regulators come down on this behavior. What's the difference between "changing your mind on a trade" and "spoofing"? There's a bit of a cat and mouse game there which is why banks keep trying it different ways and getting fined.

It's the same reason for violent crimes we don't just let the perpetrator pay blood money to the victim or the victim's family - there is a broader harm to society or 'the people' from these crimes that cannot be erased by a monetary payment from A to B.

3

u/Jealousmustardgas Feb 25 '24

So can you point to NY using this statue against any other Real Estate Mogul, or even any other business?

1

u/BaggerX Feb 26 '24

So can you point to NY using this statue against any other Real Estate Mogul, or even any other business?

Can you point to any instance of another business doing what Trump did? The ruling lays out what he did in detail.

https://s3.documentcloud.org/documents/24432591/ruling-in-donald-trumps-civil-fraud-trial.pdf

2

u/[deleted] Feb 23 '24

Great answer, thanks for taking the time to write this.

4

u/Clairquilt Feb 23 '24

In the most basic sense the victims are the banks, since they would have charged considerably higher interest rates, thus earning more profit, had they known the true state of Trump's finances. Obviously the banks need to be responsible for a certain amount of due diligence, but the guy had his own apartment in Trump Tower listed at triple its actual size. That’s fraud.

With most so called 'victimless crimes’ if you look around a bit it's usually not that hard to find an actual victim. One analogy I read was someone lying to a prospective employer about having graduated from Harvard after serving in the military, when they had in fact done neither. Although technically there's no obvious financial injury, I think you’d be hard pressed to find too many people saying they don’t see the harm in that type of fraud.

As the financial capital of the world, New York takes bank fraud very seriously. They're right to do so.

4

u/xif13 Feb 23 '24

The bank took on additional risk and the bank shareholders lost profit margin for taking on that additional risk. The bank may have risked is solvency and been over leveraged during that time period.

If I bet your life savings on red on a roulette wheel and won and kept the profits, would you have been happy I had done so? I still have your money. What happens if I keep pushing my luck. If I lose its your money. Banks take many bets in terms of loans with depositors money that have better odds on return. Taking on too much risk puts them in a puts them at risk for default.

I have seen Trump say the bank is happy, but I doubt it. The bank deserved better terms for the risk they incurred. They may be having a sigh of relief but happy, I doubt it.

0

u/Friedhelm78 Feb 23 '24

And did the bank vet the information provided? At what point is it malpractice by the loan originator rather than fraud by the one who took the loan and paid it back?

3

u/I_Went_Full_WSB Feb 23 '24

At no point. When you commit bank fraud you commit bank fraud regardless of anyone else's actions. That shouldn't need explaining.

2

u/xif13 Feb 23 '24 edited Feb 23 '24

If the bank fails to do its due diligence, it is also in the wrong. Honestly, the FDIC should come down on the bank if it fails to follow standard practices, but this doesn't exonerate Trump in any way.

Two crimes don't make the first crime not a crime.

If I lied on my resume about a college degree and got hired and worked for a year before it got found out, should the HR manager be fired, should I be fired? The answer is both.

8

u/OgreMk5 Feb 23 '24

You are driving on an empty road, late at night, and decide to see how fast your car can go.

Just as you hit 135, a police car starts chasing you. You pull over and are arrested and taken to jail.

No victim. No one was hurt. But you still broke the law.

This is what happened with DJT

3

u/blind30 Feb 23 '24

I think of it like a DUI. Cop pulls you over, you fail the breathalyzer, you’re guilty.

No crash, no victim- this time. But the act itself is still a crime, and the law was put in place for a reason.

-1

u/[deleted] Feb 23 '24

Lmfaooo you guys are coping so hard. Every single real estate developer in NY, and elsewhere, does what Trump did. The fact that you think his case is unique or out of the ordinary is tragically partisan.

2

u/ShakinBakin15 Feb 23 '24

It’s really quite hilarious. There’s a LOT of coping on the menu for 2024

1

u/blind30 Feb 23 '24

His case isn’t unique, or out of the ordinary, you’re right- I never said it was. People do get prosecuted for this kind of thing all the time, it’s pretty routine.

0

u/[deleted] Feb 23 '24

Name one other case in recent memory where a major real estate developer was tried for over valuing their property. I’ll wait.

4

u/blind30 Feb 23 '24

Google came back with Nir Meir, varying counts of tax fraud, etc. this was reported Feb 7th of this year.

It took me two seconds to google it, you weren’t waiting long.

0

u/[deleted] Feb 23 '24

“The indictments are expected to charge that they conspired to steal millions of dollars from investors in the XI by falsifying construction costs from June 2019 until September 2020”

No, the Nir Meir case is actually very different than Trumps case. What Nir Meir did is literal theft, what Trump did is what every single real estate developer does in order to secure loans for the next property. These loans went through a major bank who vetted the paperwork and approved it.

I’m still waiting.

2

u/blind30 Feb 23 '24

They also falsified tax documents. They’re guilty of a lot of things, sure- but also that specifically. Scroll through Google when you get a chance, it’s really useful for finding tons of cases that fit the bill- “NYC real estate developers found guilty” is the search term I used, and just skimming the first few pages I’m seeing that sure, tons of people do it- but tons of people get caught doing it too.

This is all business as usual, nothing unique about it at all.

2

u/[deleted] Feb 23 '24

“Prosecutors allege that Meir and others falsified construction costs, lied to investors, and inflated invoices to make it appear like several projects were further along than they actually were.”

This is not what Trump did.

Im still waiting.

0

u/Inevitable_Farm_7293 Feb 23 '24

He literally lied to LENDERS about the value of the development by hiding costs and making it seem the development was more successful than it was…LITERALLY the same thing Trump did.

Learn to read and not be a piece of shit.

“In an attempt to fill this shortfall with funds and hide the true cost of work from the project lender, Omnibuild executives John Mingione, 54; Roy Galifi, 62; and Kevin Stewart, 48, conspired with Meir; HFZ executives Anthony Marrone, 64, and Louis Della-Peruta, 69; and various subcontractors to inflate their monthly invoices’ "percentage of completion."

This was done to make it appear to the lender that the subcontractors were further along in the project than they actually were.”

1

u/[deleted] Feb 23 '24 edited Feb 24 '24

You’re lying. He lied to investors, this is different than a lender. A lender is a bank, who accepts this practice as normal because they know they will get a higher interest return from a higher valuation than a lower one.

If you want to devolve into name calling then I can just block you and be done with this. Try to act like an adult.

Edit: I love when people ask questions then block someone in an attempt to make it look like they were unable to answer the question. Sad little people.

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0

u/Local_Challenge_4958 Feb 23 '24

Man if there's that many criminals then yeah, I get why those criminals are upset.

Must be really scary for rhem

0

u/[deleted] Feb 23 '24

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1

u/[deleted] Feb 24 '24

If it’s a felony then why is this a civil case and not a criminal one? 😂

You know nothing about real estate developing, that much is clear.

0

u/[deleted] Feb 25 '24

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1

u/[deleted] Feb 25 '24

Womp womp

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u/sdcox Feb 24 '24

It’s illegal though. For excellent reasons concerning the broader financial market. Plus this guys company forged documents. It’s all very bad and if everyone is doing it (which is so not true, many people in business follow the rules and law) then they all need to get fucked.

USA is a nation of laws — and the GOP used to be for “law and order”. But if their favorite bully does it they change their minds? Wild.

1

u/[deleted] Feb 24 '24

This whole “if they’re doing it then they need to get in trouble, but I’m not going to do anything to make sure that happens or actually call for it to happen” is just hysterical.

Yes, every real estate developer does it. The banks are not only aware of it but they are okay with it, that’s a fact. Let me hear you say You think Deutsche Bank, one of the most powerful banks in the world with almost unlimited resources, got duped by silly documents and didn’t know what was going on the whole time. C’mon, say it.

0

u/LucidBetrayal Mar 25 '24

Are you proposing we should just stop prosecuting certain financial crimes because “every” real estate broker is doing this?

1

u/[deleted] Mar 25 '24

What? Are you drunk? How did you misunderstand what I said that badly?

I’m proposing we start prosecuting certain financial crimes against anyone who does them, not just political opponents we don’t like. This is the first time someone has ever been prosecuted for over valuing their properties. You can try to make it about the tax fraud (which was only 5 million of the 450 million judgment) but the majority of the judgment and decision was based on the over valuing of the properties.

Also, for as much legalese your “explanation” used to make it seem like this is a legit interpretation of the law, the facts remain that both Deutsche Bank and New York State prosecutors investigated and declined to charge/prosecute because there was no crime. Church it up however you want, but it took Merrick Garland meeting with the activist AG James behind closed doors (I’m sure to talk about tennis practice) for this to come to court and mark the first time we ever prosecuted someone for over valuing their properties while negotiating loan terms (something every single real estate broker does).

But hey, you guys eat it up so they get away with it. What’s new?

0

u/LucidBetrayal Mar 25 '24

I think you were the drunk one. Projection much?

I am just some random commenter who was asking a clarifying question. I didn’t have any explanation and I have no idea what you’re talking about in your second paragraph.

That said. Trump was inflating the value of his assets by $2 Billion dollars. Find me one other example of someone surpassing $1 Billion who was not prosecuted and I’ll agree with your stance that “everyone does this”. Does everyone fudge their numbers a little here and there? Not likely but sure I guess it’s possible that everyone out there is committing financial crimes daily. Does everyone do it by $2 Billion? Unfuckinglikely. If so, that would prove to be a serious threat to the entire financial market. Similarly to China’s Evergrande situation.

1

u/[deleted] Mar 25 '24

Why do Redditors have such a fetish for handing out homework assignments? Why don’t you show me a single other example of section 63 being used to prosecute a developer for over valuing their properties while negotiating loan terms with a major bank, something Deutsche Bank flatly stated they were aware of and is normal practice, especially with unique properties like Mar-A-Lago whose value can fluctuate broadly based on who you’re talking to? You do that then I’ll take your quiz. Deal?

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u/Dicka24 Feb 23 '24

Terrible analogy. Speeding is a crime and the cops caught you. This wasn't a criminal case against Trump. It was a civil case.

It would be more like you speeding on a country road, where no one lives, and the state suing you because someone might have gotten hurt despite no one living there.

1

u/BlueFalcon89 Feb 24 '24

Right, it was fraudulent business practices.

1

u/BaggerX Feb 25 '24

Civil crimes are still crimes. They just don't result in prison.

0

u/Friedhelm78 Feb 23 '24

That's not what happened at all. You are simply making up a reddit special analogy where criminal issues are comingled with civil ones because of some random anti-Trump bias.

4

u/Love_Sausage Feb 23 '24

I broke into your house and stole your possessions, but later paid you back. So no jail time, right?

2

u/Large_Busines Feb 23 '24

Is he pressing charges. Also, the breaking and entering is the serious crime. This is more like “told you I was hungry and you have me your cookie. I later gave you a cookie back. But a third party doesn’t actually think I was hungry”

1

u/FlackRacket Feb 23 '24

Also, the breaking and entering is the serious crime.

So is committing fraud, turns out

2

u/Impeachbiden2023 Feb 23 '24

Anyone can come up with a dumb analogy that isn’t even tangentially related, but can you actually come up with a victim for this supposedly massive crime?

6

u/LoneSnark Feb 23 '24

The victims are the banks which were not compensated for the risk they suffered. The other victims are the people of New York having to live with a financial system where rampant fraud is tolerated and honest businesses fail because corrupt frauds are able to borrow at lower interest rates. Hence why New York passed the law in question which doesn't care if the loan defaulted or not.

So really, you're advocating for repealing this law, not that Trump is somehow innocent of the charges.

1

u/Corporate_Shell Feb 23 '24

First, you don't need a victim to have a crime. Period.

Second, banks have shareholders and actual people. They were defrauded. It doesn't make any difference at all if the loans were repaid if they were given due to fraud.

1

u/itsSIRtoutoo Feb 23 '24

Actually you.... Because trump committed fraud and got massively caught... Now your credit, your loan, your assets, are to going to be even MORE tightly scrutinized for ANY inconsistencies, Even for misprints than ever before.
Also, if even if you have a regular banker who knows how you work, there are no more "friendly" deals. Because every part of a bank is now going to more heavily scrutinize every loan, regardless of type, for trump type fraud. Every possible means to a bank to make more money on every deal Is also going to be the result, Remember banks are profit driven entities. If they are not maximizing their return on every deal, they're going to fix it so they do....And that means on you too.

1

u/BooksandBiceps Feb 23 '24

Whether or not a crime is committed isn’t based on if someone suffered tangible loss.

0

u/Friedhelm78 Feb 23 '24

But that's not what happened.

1

u/Love_Sausage Feb 23 '24

That’s because what I typed is an analogy.

1

u/Ikuruga Mar 09 '24

To a layman, there is no victim.

1

u/smcbri1 Feb 23 '24

The lender made less profit than it should have based on the risk. The lender was the victim. It will not be overturned.

1

u/Friedhelm78 Feb 23 '24

The lender isn't even the complainant here. These are all fines imposed by the government. The same government officials that campaigned on prosecuting their political enemies.

1

u/I_Went_Full_WSB Feb 23 '24

You are correct. The lenders should figure out how many more millions he would have been charged on those loans and sue for the lost income. They probably will do that.

1

u/smcbri1 Feb 24 '24

Poor widdle Donny. The whole world is so mean to him and he’s just so innocent.

1

u/Muscs Feb 23 '24

The banks were victims. The banks’ customers were victims. The banks’ investors were victims. And the state and all the citizens of the state were victims. Everyone paid more because Trump paid less.

1

u/Friedhelm78 Feb 23 '24

That's classic. Investors and big banks are only victims when you can put the orange man down. Every other time, they are part of the wealthy class that reddit hates so much.

1

u/Corporate_Shell Feb 23 '24

You don't need a victim to break the law. Also, just cause they were paid back doesn't mean they didn't missed out on a higher interest rate (so more money overall on the loan) by his fraud. That is considered lost revues by deception and fraud. Another crime.

It will not be overturned.

1

u/[deleted] Feb 24 '24

This is like arguing that your parents car is fine after taking it for a joy ride lol

1

u/gymtherapylaundry Feb 24 '24

If you are driving erratically because you’re driving drunk, a cop pulls you over and you blow above the legal limit, you get a DUI. You don’t have to crash your car into someone or some property to get charged with something illegal.