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Judge appoints independent monitor to oversee Trump Organization's financial transactions

A New York judge granted the state attorney general's request for a monitor after it was alleged the company inflated its assets by billions of dollars.
Former President Donald Trump
Former President Donald Trump at a rally in Warren, Mich., on Oct. 1.Sarah Rice / The Washington Post via Getty Images file

A New York state judge on Thursday ordered an independent monitor to oversee the Trump Organization's financial statements after it was alleged that the company has been vastly overstating its assets.

State Supreme Court Justice Arthur Engoron signed off on a preliminary injunction that also blocks former President Donald Trump's company from transferring assets without court approval. In his ruling, Engoron said the company must also make the monitor aware of all its holdings and assets and give 30 days’ notice of any restructuring at the company and any plans for "disposing or refinancing of significant Trump Organization assets." (Supreme Court is the name of New York state’s top trial court.)

Given "defendants’ propensity to engage in persistent fraud, failure to grant such an injunction could result in extreme prejudice to the people of New York,” he wrote.

Engoron ruled in a civil suit the state attorney general's office filed against the company alleging that it had been inflating its worth in financial statements to banks and insurers by billions of dollars. The ruling cited numerous examples of fraud alleged in the attorney general's lawsuit, which he described as "more than sufficient to demonstrate OAG's likelihood of success on the merits."

In a hearing earlier in the day in state Supreme Court in Lower Manhattan, Trump attorney Chris Kise argued that the move was unnecessary and that it could hamper the company's business.

"It's really about seizing control of a successful company," Kise said of the request for a monitor.

Kevin Wallace, a lawyer for the attorney general's office, said, "Our goal is not to impact the day-to-day operations" of the company; instead, he said, it seeks "oversight."

He said that the office is trying to protect against "ongoing fraudulent activity or deceptive activity" and that the "Trump Organization has a consistent record of not complying with court orders."

"It should not be incumbent on the court or the attorney general to be looking over their shoulder," he said.

State Attorney General Letitia James asked asked Engoron to act last month, citing actions the company took around the time she filed a $250 million lawsuit against Trump, his three oldest children and the Trump Organization alleging fraudulent business practices in September.

The motion for a preliminary injunction said Trump Organization representatives created a new company with the same name in Delaware six days before James’ office brought the suit. The company then filed paperwork to register Trump Organization II LLC in New York on Sept. 21, the day the civil action was filed.

James praised Engoron's ruling in a statement, saying it "will ensure that Donald Trump and his companies cannot continue the extensive fraud that we uncovered."

"No number of lawsuits, delay tactics, or threats will stop our pursuit of justice,” she added.

Kise responded that the ruling is "unprecedented," saying it "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."

"The corporate titans the New York Attorney General purports to represent here were fully capable of negotiating complex agreements and remain fully able to exercise their rights. They have never done so because the Trump Entities never even had a late payment on any loan and the parties to these complex agreements made millions off of these lucrative transactions," Kise said.

Trump was less measured, blasting Engoron as a "puppet judge of the New York Attorney General" in a statement.

"Today’s ridiculous ruling by a politically-motivated, hand-picked judge makes it even more vital for courts in both New York and Florida to do the right thing and stop this inquisition," Trump said.

Trump's attorneys have been trying to get the case transferred away from Engoron in New York, and the Florida mention was a reference to a highly unusual suit Trump filed against James in his new home state Wednesday night. The suit seeks a court order blocking James from getting financial information involving Trump's trust in Florida, which the attorney general's office has noted holds the entities comprising the Trump Organization.

"President Trump comes before this court for protection from James’ ongoing abuse and efforts to interfere with, control, gain access to, and publicly expose the terms of his Florida revocable trust," the suit argues, contending that James' investigation is a political vendetta.

In a letter to Engoron on Thursday morning, James' office said the trust documents "pertain to ownership and control of the business assets." The letter said the suit was evidence that Trump is trying to "frustrate" the investigation by hiding documents the attorney general's office should have access to, saying it highlighted the need for immediate court action.

Kise told NBC News after the letter that James was overreaching in the New York case and contended the institutions the company is accused of misleading are sophisticated banks and insurers who have their own accounting procedures.

"The attorney general should not be in the business of policing private transactions between sophisticated commercial parties," Kise said.

Trump has been critical of the judge, who found him in contempt of court this year for dragging his feet over subpoenas from the attorney general's office. That temporarily resulted in a $10,000-a-day fine until Engoron found Trump in compliance.

Trump blasted Engoron on social media last week, calling him “vicious, biased and mean.”

The company faces a criminal trial about a block away from Engoron's courtroom. The Manhattan district attorney's office has charged the company with participating in a 15-year scheme to cheat on taxes by paying some officials off the books.

In opening statements this week, a lawyer for the company suggested the scheme was all the work of former Trump Organization chief financial officer Allen Weisselberg, who has pleaded guilty and is scheduled to testify against his former employer after the trial resumes next week.