Donald Trump can't dodge his NY fraud verdict by moving Trump Org or giving it to, say, Ivanka: experts

• A Manhattan judge has said he'll reach a verdict in the Trump civil-fraud trial by late January.
• He has already ordered the dissolution of all Trump properties licensed to do business in New York.

Remember how outraged Donald Trump's fraud-trial judge sounded in September, when he ordered the dissolution of much, if not all, of the Trump Organization?

Back then, six days before trial, the judge scorned Trump's history of fraudulent, "pie-in-the-sky" net-worth statements in a company-crippling ruling that's on hold, for now, pending appeal.

Three months later, things are not looking any better for Trump and his golf-resort and real-estate empire.

After 10-and-½ weeks of testimony, and with only closing briefs and arguments left before he issues his verdict, New York Supreme Court Justice Arthur Engoron appears even more convinced of, and gobsmacked by, Trump's fraud.

"Voluminous," Engoron called the state attorney general's evidence of wrongdoing, in a mid-December decision that described Trump's $1,350-an-hour star accounting witness with this wry statement: "For a million or so dollars, some experts will say whatever you want them to say."

So what can we expect next from a Manhattan judge who's already openly affronted by a decade's worth of proven fraud and three long years of fighting Trump over pretrial subpoenas, contempt-of-court rulings, and gag orders?

When the verdict comes down sometime before the end of January, will Engoron kill, cripple, or merely sting Trump's business empire?

Experts Business Insider reached out to are leaning toward "kill."

"The judge has already declared the corporate death penalty," Diana Florence, a veteran financial-crimes prosecutor for the Manhattan district attorney's office now in private practice, said.

"So unless he backs off of that, from now on it's all about how painful and slow the death is," she said.

Could the Trump Organization really be dissolved?

Potentially, yes — though years of appeals would play out first.

A lawyer and spokesperson for Trump did not respond to a request for comment for this story. But Trump has long challenged the attorney general and judge by maintaining that the case is a political witch hunt and that he committed no fraud.

Those challenges will intensify, experts predict, if the verdict doubles down on the corporate death penalty, aka "judicial dissolution.''

It's the worst thing a judge can do to a company. Trump would fight dissolution all the way to the Supreme Court, John Moscow, a veteran financial-crimes prosecutor for the Manhattan DA who's now a senior counsel at Lewis Baach Kaufmann Middlemiss in New York, predicted.

"He can try to claim he was deprived of his property without his Constitutional right to due process," Moscow said.

"And the answer will be, 'You've had three years of process of law,'" he said, noting the length of time that the case has been before Engoron, both pretrial and on trial.

"It's bullshit," Moscow said. "But they'll try it."

How would dissolution even work?

It would start with zapping the certificates.

In his September ruling, Engoron found that the evidence already on the record proved, pretrial, that Trump fraudulently added billions of dollars in imaginary wealth to annual net-worth statements he sent to banks. And Trump, the judge added, continues to issue faulty financial statements.

To stop the wrongdoing immediately, Engoron ordered the cancellation of all of Trump's New York "GBL 130 certificates," without which a company, partnership, or LLC cannot legally do business in the state.

You can't buy property, you can't borrow money, you can't collect rents, you can't enter into contracts — not legally, anyway — unless you have an active "GBL 130" filed with New York's Department of State, Florence said.

"It's like a company's birth certificate," she said. "Except that if I tear up your birth certificate, I don't kill you."

Engoron's September ruling struck at each Trump business entity that has one of these certificates on file in New York. State records show this includes two asset-packed entities: DJT Holdings Managing Member LLC and DJT Holdings LLC.

According to a 2017 organizational chart of the Trump Organization, prepared by the company as part of an insurance deal, these two LLCs contain the bulk of Trump's corporate subsidiaries and property-owning LLCs. The Trump Organization has about 500 entities, though state records show some are no longer active.

Moving down the chart, The Trump Organization, Inc., and The Trump Organization, LLC, are both named as defendants in James' lawsuit. They, too, have state certificates, records show.

And if pulling the certificates for these four umbrella entities somehow wouldn't bring all of the Trump Organization to a skidding stop, the New York certificates for multiple individual Trump business entities, located further down the organizational chart, are also in peril.

That includes the LLCs and corporations for his flagship Trump Tower, his 200-acre Westchester, New York estate, many of his licensing deals, and his stakes in other buildings, such as his ground lease for 40 Wall Street.

This spree of certificate-yanking is precisely what New York State Attorney General Letitia James asked for when she filed the massive, $250 million lawsuit now on trial: it's first on her list of proposed fraud punishments.

But the judge went way beyond James' request in his September ruling, which remains on ice pending appeal.

Engoron ordered that once the Trump certificates are pulled, a receiver be appointed "to manage the dissolution of the cancelled LLCs," meaning to manage the sale of the Trump properties that lost their certificates.

Wait, Letitia James doesn't want the corporate death penalty?

She very specifically does not.

James just wants the Trump Organization to stop committing fraud. She isn't trying to put it out of business entirely.

Her lawsuit asks that the Trump Organization be subjected to five years of audits and monitoring, along with five-year bans on any New York-based borrowing and property acquisition.

She specifies in her suit that the Donald J. Trump Revocable Trust — the top of the organizational chart, and the entity that owns 100% of Trump's business empire — should survive, though under "independent governance." The sole trustee is Donald Trump Jr.

It would be a startling, unexpected move if, in closing briefs due January 5, James suddenly starts demanding the Trump Organization's death.

Engoron is expected strike the bigger blow.

Engoron made a point of noting that, in instances of persistent, ongoing fraud, a big hammer called "permanent injunctive relief" is a tool in his judicial toolbox under New York's AG-empowering Executive Law 63(12).

The judge's September 26 fraud ruling swung that big hammer and means to inflict permanent damage.

Which properties would have to be sold?

Again, before dissolution, Engoron's upcoming verdict would have to double down on his September ruling — and would have to be upheld on appeal. But if that happens, nobody seems to know precisely what would be "dissolved," or sold off.

Florence and Moscow believe the September ruling zaps Trump's state certificates from the top of the Trump Organization down and would liquidate almost everything in this New York-headquartered empire of golf courses and skyscrapers.

The entirety of Trump's estimated $2.6 billion in assets hangs in the balance, they believe.

But even the judge has conceded that more clarity is needed.

How many "GBL 130s" does Trump Organization have? How many of the underlying licensing deals and properties have co-owners and partners, or any other interest-holders? In a court-ordered fire sale, what happens to them?

Engoron noted these questions himself in an October 5 "supplemental order" to the September dissolution ruling.

It ordered Trump Organization officials to work on answers with the retired federal judge Barbara S. Jones, the independent monitor that James asked for, and Engoron installed, a year ago.

How bad, beyond Trump, could dissolution get?

Complicating matters more is that it's not just Trump's certificates in play.

Engoron also ordered the cancellation of certificates for any business that four longtime Trump executives — also defendants in the James lawsuit — own.

They are Trump's two eldest sons — the Trump Organization executive vice presidents Donald Trump Jr. and Eric Trump — the former Trump Organization CFO Allen Weisselberg, and the former Trump Organization comptroller Jeff McConney.

If Engoron's September 26 ruling survives as is, the New York certificates of any business entity those four men own, including any LLCs for personal property, would also be canceled.

Expensive homes are often held in LLCs, which protect their owners' privacy and legal liability.

"What entities are covered here?" Trump's defense lawyer, Christopher Kise, asked Engoron in person during a pretrial hearing one day after the September dissolution order.

"You have New York entities that just own a house or a townhouse," he said.

"Maybe Don Jr.'s or Eric's residence. Are those covered?" the lawyer asked.

"At least under a technical reading of the order, those entities should be surrendering their GBL 130s even though they have no connection to this," Kise added.

And what if Donald Trump, Jr.'s and Eric Trump's properties have co-owners and mortgages? What happens to these other stakeholders?

The judge had no immediate guidance, promising only to figure things out with help from Jones.

A week later, as the fraud trial began, the Trump defense team filed its appeal of the September dissolution order, complaining that it was "overbroad" and could irreparably harm non-parties to the lawsuit.

Can't Trump just Houdini his way out of this?

Couldn't Trump wriggle out of all this by merely moving Trump Organization headquarters out of New York, changing some LLC names, or transferring everything to, say, Ivanka Trump?

No, no, and no, Florence and Moscow said.

Trump tried some name-game funny business early on, claiming in court documents a year ago that the Trump Organization can't be sued because technically that's just branding shorthand and not a legal entity. Engoron rejected the argument.

Then there was the time Trump formed Trump Organization II, LLC — registered in New York the same day James sued him and still an active entity, state records show.

The attorney general's office sounded the alarm, concerned that Trump could try to move assets to some sound-alike company that's not being sued.

Engoron quickly ordered Trump to alert the court-imposed monitor about "any corporate restructuring, disposition or dissipation of any significant assets."

In still more oversight, Trump was ordered to give the monitor 30 days warning of any "anticipated restructuring," and "any plans for disposing, refinancing, or dissipating any significant Trump Organization assets."

Alternatively, each month, Trump must submit a sworn statement attesting that no such activity has taken place.

Given how closely he's being watched, an appeal remains Trump's best Houdini move, though it's a long shot.

So far, Trump has lost, and Engoron has won, nearly every fraud-case appellate contest, including his efforts to remove James from the case, stop her investigation into the Trump Organization, halt her many subpoenas, and dismiss the lawsuit.

A notable win came over the summer when a Manhattan appellate panel removed Ivanka Trump from the lawsuit for statute-of-limitations reasons.

But the temporary stay on dissolution remains, for now, Trump's biggest appellate victory.

What if the judge doesn't kill Trump Org outright?

Let's say Engoron has a change of heart or realizes he's kicked a legal hornet's nest swarming with Trump's angry outside licensing and leasing partners. Let's say that in his verdict, the judge removes "dissolution" from his list of Trump-fraud punishments.

It's hard to imagine those Trump "GBL 130s" will survive in their current form.

James wants the Trump Organization to continue under a harsh spotlight of court oversight. Transferring those certificates to a receiver who reports to the judge is the likeliest way that will happen.

Somebody has to run the thing. You can't just pull Trump's certificates and leave it at that, Moscow said.

Trump would continue to own whatever buildings, licensing deals, and other assets that lose their GBL 130s.

But without them, Trump would immediately lose his LLC protection against lawsuits if someone tumbled down the escalator at Trump Tower.

"That's one big bullseye on his forehead, that's how I read it," Moscow said. During any window of time when the properties have no certificates, "you could sue Trump directly."

What other sad tidings could a verdict bring?

Plenty more penalties loom on the verdict horizon, and they'd hurt like hell.

The state's trial evidence suggests the attorney general will ask for well over $250 million in penalties, plus interest — a sum that, if ordered, would represent the ill-gotten gains from a decade of Trump lying to banks about his worth.

The sum includes the interest savings from $400 million in loans. Trump used fraud to trick bankers into lending this money at rock-bottom interest rates of as little as two and three percent, James alleged at trial, at a total interest savings of $168 million — a number the defense disputes.

The cash penalty may also include more than $100 million in proceeds from Trump's sale of his Washington, DC, hotel and Bronx golf club, money James said he couldn't have pocketed without lying to banks about his worth.

So Trump could lose control of his company and a big pile of cash. Anything else?

Back when she sued, James also asked that Trump and his sons be permanently barred from running a New York business.

Trump would become a real-estate mogul in exile, a penalty that Trump biographers told BI would alone take a tremendous financial and psychic toll.

Trump "grew up fantasizing about Manhattan," the biographer Michael D'Antonio, the author of "The Truth About Trump," said.

"This would be the rare case that he's actually punished in a way that matters," he said.

Closing briefs are due January 5, with closing arguments set for January 11.