Donald Trump won’t face the corporate death penalty after all.
A New York judge on Friday spared the ex-president that worst case punishment as he ruled in a civil case alleging Trump fraudulently misrepresented financial figures to get cheaper loans and other benefits.
Still, Trump got slammed hard, facing big cash penalties, outside supervision of his companies and restrictions on his borrowing.
In a pretrial ruling last year, the same judge threatened to shut down much of the Republican presidential front-runner’s business by calling for the “dissolution” of corporate entities that hold many of his marquee properties. That raised the specter of possible fire sales of Trump Tower, a Wall Street skyscraper and other properties.
But New York Supreme Court Judge Arthur Engoron called off the dissolution.
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Instead, he said the court would appoint two monitors to oversee the Trump Organization to make sure it doesn't continue to submit false figures.
“It's a complete reversal,” said real estate lawyer Adam Leitman Bailey. “There's a big difference between having to sell your assets and a monitor who gets to look over your shoulders."
In his ruling, Engoron banned Trump from serving as an officer or director in any New York corporation for three years, prohibited him from taking out loans with New York banks and said his company and other defendants have to pay hundreds of millions of dollars in fines.
Here is how the decision is likely to impact his business:
CASH DRAIN
This is possibly the worst hit from the ruling.
Trump and his businesses were told they would have to pay $355 million for “ill gotten gains." Trump’s sons, Eric and Donald Trump Jr., who help run the business, were ordered to pay $4 million each. Trump's former chief financial officer was ordered to pay $1 million, for a total judgment of $364 million.
“I don't think there is any way Trump can continue to operate his business as usual,” said Syracuse University law professor Gregory Germain. "It's a lot of money.”
The penalties will slam Trump's finances at a moment he is facing other steep legal bills stemming from several criminal cases. Trump separately was hit with $88 million in judgments in sexual abuse and defamation lawsuits brought by writer E. Jean Carroll.
It gets worse.
Trump is also required to pay interest from the dates when he received benefits from his alleged fraud. That so-called pre-judgement interest adds another $100 million to Trump's bills, according to New York's attorney general.
But don't expect him to dig into his pocket anytime soon.
Trump lawyers have said they will appeal. That means he won’t have to hand over the whole amount yet, though he will have to post a bond or escrow, which could tie up cash while waiting for the appeal.
In any case, Trump already has enough in cash to pay much of that penalty, assuming he is telling the truth about his finances. In a deposition in the fraud case, he said he had more than $400 million in cash.
NO TRUMP PROPERTY FIRE SALE
The judge’s summary ruling in September was vague in exactly what he meant by a “dissolution” of Trump businesses. But several legal experts told The Associated Press that in the worse case it could have led to a sale of not only of his New York properties, but his Mar-a-Lago club in Florida, a Chicago hotel and condo building, and several golf clubs, including ones in Miami, Los Angeles and Scotland.
One of Trump's lawyers, Christopher Kise, called that potential outcome a “corporate death penalty.”
Not even the New York attorney general, who filed the lawsuit against Trump, had asked for a “dissolution.”
An Associated Press investigation confirmed how unusual such a punishment would have been if carried out: Trump’s case would have been the only big business in nearly 70 years of similar cases shut down without a showing of obvious victims who suffered major financial losses. The main alleged victim of the real estate mogul ’s fraud, Deutsche Bank, had itself not complained it had suffered any losses.
But Engoron on Friday backed down, saying monitors were good enough, basically handing New York Attorney General Letitia James most of what she had sought: bans, monitors and a massive penalty.
THREE-YEAR BAN
The ban on Trump serving as an officer or director for a New York corporation suggests a big shakeup at the Trump Organization, but the real impact isn't clear.
Trump may be removed from the corner office, but as an owner of the business his right to appoint someone to act on his behalf has not been revoked.
“It's not that he can't have influence at these enterprises," said University of Michigan law professor William Thomas. “He just can’t hold any actually appointed positions.”
Thomas added, however, much depends on how the monitor will handle Trump's attempt to run his company by proxy.
"He might want to walk in the office and tell them what to do, but there will be pushback,” he said. “It could limit the avenues through which he can exert control.”
Two obvious candidates to help Trump maintain control, his two adult sons, are already off-limits. The judge's ruling barred Donald Jr. and Eric from being officers of New York companies for two years.
BUSINESS LOANS
Trump is also banned from getting loans from New York-chartered banks, a potentially devastating blow given so many major lenders are based in the city.
Luckily for Trump, he has cut his debt by hundreds of millions in recent years and so won't need to refinance as much. He also has pushed out the maturity of many loans still on the books by several years.
The impact on funding for future businesses could be crushing, though. Without access to banks, he may be forced to use cash to finance new ventures, something that real estate moguls are loath to do and that won't be easy given his cash payments.
Still, only banks appear banned in the ruling, leaving Trump free to borrow from fast-growing alternative financiers, the private equity and hedge funds that make up the so-called shadow banking world.
“I could imagine a load of private equity funds with very little prospects sitting on a bunch of dry powder saying, ’Hey, we’ll lend you $300 million,'” Columbia law school professor Eric Talley said, adding, “I can imagine the Saudis lending him $300 million.”
