NY judge orders monitor to oversee all Trump Organization financial reporting

New York - The judge hearing a massive civil fraud lawsuit against former President Donald Trump, his businesses and three of his adult children on Thursday ordered the appointment of a monitor with sweeping authority to oversee all Trump-related business operations.

Acting Manhattan Supreme Court Justice Arthur Engoron issued the ruling after hearing arguments from the New York Attorney General's Office, which filed the lawsuit and sought the appointment, and a lawyer for Trump, who said the Attorney General' lacked the authority and legal standing to seek a preliminary injunction appointing the monitor and to pursue the lawsuit.

"Defendants are wrong," wrote Engoron, whom Trump's legal team has sought unsuccessfully to have removed from hearing the case.

Engoron's ruling preliminarily bars the Trump businesses from selling, transferring or disposing of non-cash assets without first providing 14 days written notice to the Attorney General's office and the court. It also orders appointment of a monitor to ensure compliance with the order.

Trump businesses must give the monitor access to financial statements, statements of financial condition and "full and accurate descriptions of the structure and liquid and illiquid holdings and assets for the Trump Organization" and its subsidiaries and affiliates, the state trial court judge ordered.

The businesses must give the monitor at least a 30-day advance notification of any planned reorganization or restructuring of the Trump Organization. Engoron set a Nov. 10 deadline for the submission of up to three monitor candidates each from state officials and Trump lawyers.

"This court finds that the appointment of an independent monitor is the most prudent and narrowly tailored mechanism to ensure there is no further fraud or illegality...pending the final disposition of this action," wrote Engoron.

His ruling added: "Defendants have failed to submit an iota of evidence or an affidavit from any one with personal knowledge rebutting" the attorney general's "comprehensive demonstration of persistent fraud."

The decision is certain to be appealed by Trump. Barring a successful appeal, the ruling marks a major defeat for Trump and a preliminary victory for the state in the September lawsuit filed by New York Attorney General Letitia James, a Democrat who has frequently clashed with Trump.

“Today’s decision will ensure that Donald Trump and his companies cannot continue the extensive fraud that we uncovered," James said in astatement. "No number of lawsuits, delay tactics, or threats will stop our pursuit of justice."

Christopher Kise, an attorney for the Trump business entities, said in an email statement "this unprecedented order effectively seizes control of the financial affairs of a highly successful private corporate empire based on nothing more than gross exaggeration of standard valuation differences common in complex commercial real estate financing transactions."

He also argued that James has "stretched the bounds of her authority to set a very dangerous precedent" that will affect other businesses.

Trump, in a statement posted on his Save America political action committee, called the ruling "Communism come to our shores."

The lawsuit argues that Trump was part of a 10-year scheme "that grossly inflated" his personal net worth by billions of dollars, and then used the higher values "to induce banks to lend money to the Trump Organization on more favorable terms than would otherwise have been available."

The alleged actions violated New York laws and likely saved Trump, his business and his family more than $150 million from 2011-2021, the complaint argues.

James' office is seeking $250 million in penalties and an order barring Trump and his children from holding executive posts on any New York businesses.

Lawyers for the Trumps say there was no wrongdoing.

Attorneys for both sides stated their positions for nearly three hours Thursday during an at-times heated hearing before Engoron.

Kevin Wallace, a top lawyer in James' office, argued that appointment of a monitor and other steps were necessary to halt alleged "ongoing fraudulent activities" by the Trump Organization.

He said the recent creation of the Trump Organization II required a legal block preventing the new organization or other entities from receiving financial transfers from Trump's long-existing businesses. Any such transactions could foil efforts to enforce the $250 million in penalties demanded by the lawsuit, said Wallace.

Wallace also cited reports about a major asset-shedding move since James filed the civil lawsuit. The Trump Organization reportedly is moving to sell its rights to the Trump International Hotel in Washington, D.C., said Wallace.

And he cited a lawsuit Trump lawyers filed against James in a Florida state court on Wednesday. The filing, replete with criticism of James, argued that her office lacks jurisdiction to seek internal details of a Florida-based trust that holds all of Trump's businesses on behalf of the former president. Trump previously lost a federal court action to end James' investigation.

That new lawsuit filed by Trump aims to "preclude any visibility" into the trust's decisions and transactions, making it difficult for James' office to detect potential ongoing or future frauds, said Wallace.

A court-authorized monitor would resolve potential financial questions about Trump's companies, said Wallace, who added that the monitor would not "inhibit the day-to-day operations of the Trump Organization."

However, Kise, a Florida-based attorney, contended that appointment of a monitor represented an extraordinary step unsupported by any evidence.

He argued that James lacked legal standing to win such an appointment, particularly before any court proceedings have been held on the accuracy and merits of the civil fraud allegations.

There have been no efforts to avoid penalties that would be levied if James wins the case, said Kise. Two of Trump's Manhattan real estate properties, including Trump Tower, collectively are worth more than $250 million and "aren't going anywhere," he argued.

Kise noted that major banks and insurance companies involved in Trump-related real estate development projects never complained or lost money on loan agreements they reached with the Trump Organization.

He also argued that James' office misunderstood the nuances and complexities of the loan agreements that he said were "negotiated by experts on both sides."

"This is a private dispute, and the private parties have not seen fit to complain," said Kise. "We view this as a manufactured bill of grievances."

If a monitor were appointed,"then every business in the state of New York needs to be very concerned" about similar "nationalization of a private corporation," said Kise.

Engoron, who questioned the attorneys during Thursday's arguments, is the judge who issued a contempt order against Trump and fined him more than $100,000 for failing to cooperate with subpoenas for James' investigation.

Late Wednesday, Engoron declined to grant a request by Trump's lawyers to move the civil lawsuit to the court's Commercial Division, which typically handles complex corporate cases. Engoron said a previous denial of such a transfer by a New York supervisory judge was final and could not be appealed.

Keys to the civil case against Trump: What to know about the NY attorney general's lawsuit against former President Donald Trump

This article originally appeared on USA TODAY: NY judge orders monitor to oversee Trump Organization financial reports