New York is suing Donald Trump for fraud. Three questions.

The Explainer

On Wednesday, when New York Attorney General Letitia James filed a civil complaint against Donald Trump and other executives in his business organization, she added yet another front in the many legal battles the former president now faces.

In this case, the New York attorney general announced that the stakes in this civil complaint were high: She is seeking to bar Mr. Trump and three of his adult children – Donald Trump Jr., Ivanka Trump, and Eric Trump – from ever running a business in their former home state again.

“It’s one of a big stack now,” says Cassandra Burke Robertson, professor of law at Case Western Reserve University in Cleveland, Ohio. “The former president is facing a lot of legal peril from a lot of different angles, too, and I don’t know which is going to end up being the most significant.”

Why did New York bring civil charges against former President Trump this week?

New York prosecutors launched an investigation into Mr. Trump’s business practices after his former attorney Michael Cohen testified before Congress in February 2019, detailing some of the Trump Organization’s alleged fraudulent practices. Wednesday’s civil complaint followed a three-year investigation into these accusations. 

In the 222-page civil complaint filed Wednesday, Ms. James accused Mr. Trump, his three oldest children, and other executives of “knowingly and intentionally” engaging in illegal financial schemes to benefit his organization. Company executives “falsely inflated his net worth by billions of dollars to unjustly enrich [Mr. Trump] and cheat the system,” the attorney general said. 

Ms. James framed the civil complaint against the former president within a larger context, calling it “a tale of two justice systems, one for everyday working people, and one for the elite, the rich, and the powerful.”

“For too long, powerful, wealthy people in this country have operated as if the rules do not apply to them,” she said. “Donald Trump stands out as among the most egregious examples of this misconduct.”

The civil complaint alleges that Mr. Trump’s company made more than 200 false statements about the values of his properties, allowing him to deceive lenders, insurance brokers, and tax authorities and save an estimated $250 million from 2011 to 2021. 

“It essentially paints the Trump Organization as engaging in a long-running fraud scheme to try to adjust the valuation of its assets upward when that served their interests to obtain loans or for insurance purposes,” says Robert Mintz, a partner in the Newark office of McCarter & English law firm. “And then, at the same time, adjusting those same valuations downward for tax purposes.” 

The New York attorney general said she would seek to fine the Trump Organization a $250 million penalty. More significantly, in addition to seeking to permanently bar Mr. Trump and three of his children from running any business registered in New York, she also wants to bar them from taking out any loans or entering into any real estate deals in New York for five years.

State prosecutors in New York filed similar civil complaints against Mr. Trump’s business organization over the past decade. In 2013, civil charges against Trump University led to a $25 million settlement, and in 2018, charges of fraud against the Trump Foundation, a charitable organization, led to a $2 million settlement. Mr. Trump then shuttered both organizations.

How is this civil complaint related to Mr. Trump’s other legal troubles?

While New York’s attorney general filed a civil complaint on Wednesday, the Manhattan district attorney’s office, now led by Alvin Bragg, has been conducting a criminal investigation into many of the same issues. 

On Oct. 24, Manhattan prosecutors will bring criminal charges against the Trump Organization to trial. The company’s longtime chief financial officer, Allen Weisselberg, has already pleaded guilty to 15 felonies, including participating in company schemes to avoid paying taxes. He must testify as part of his plea agreement, but he refused to testify against Mr. Trump.

Mr. Bragg declined to bring criminal charges against Mr. Trump or any other individuals in his companies, however, and only the Trump Organization will be on trial next month.

But Mr. Trump faces a number of other investigations:

• The Justice Department is investigating possible crimes Mr. Trump may have committed when he took a trove of classified documents with him after he left office. On Aug. 8, FBI agents with a search warrant entered the former president’s Mar-a-Lago estate in Florida to retrieve what they say are highly sensitive documents relating to national security. On Wednesday, the 11th Circuit Court of Appeals said investigation into those classified documents could continue in a strongly worded ruling that found a federal judge may have overstepped by denying investigators access to classified documents. 

• In Georgia, Fulton County District Attorney Fani Willis is investigating the former president and others in a case that could allege conspiracy to commit election fraud, experts say. 

• The House committee investigating the Capitol attack of Jan. 6, 2021, continues to collect evidence that could be used by the Justice Department as it also investigates allegations of a conspiracy to commit election fraud as well as the former president’s role in the Capitol Hill riot.

• In August, a federal judge allowed a civil case against the former president to proceed after four U.S. Capitol police officers injured in the Jan. 6 insurrection sued Mr. Trump for instigating the riot. 

• A New York journalist who has accused Mr. Trump of sexually assaulting her in the 1990s is preparing to bring a civil case against the former president after New York passed a law giving survivors an opportunity to sue their attackers even if statutes of limitations have expired.

Is the civil complaint against former President Trump’s business practices politically motivated?

Mr. Trump and his attorneys have labeled most of the charges against him as part of a partisan “witch hunt” as he defends himself on multiple fronts, including the most recent civil complaint in New York. 

“Today’s filing is neither focused on the facts nor the law – rather, it is solely focused on advancing the attorney general’s political agenda,” said Alina Habba, one of Mr. Trump’s attorneys, on Wednesday. “It is abundantly clear that the Attorney General’s Office has exceeded its statutory authority by prying into transactions where absolutely no wrongdoing has taken place.” 

As a candidate in 2018, Ms. James promised to investigate the former president, and during her celebrations on the night she was elected attorney general, the former city councilwoman and public defender pledged to shine “a bright light into every dark corner of his real estate dealings, and every dealing, demanding truthfulness at every turn.”

Some legal experts suggest the Trump Organization’s practices may have never been scrutinized so closely if Mr. Trump had never entered politics.

“Fraud cases like these are somewhat difficult to prove, because there’s not a lot of time or money dedicated to enforcement,” says Professor Robertson. “Even the IRS and state tax officials only have so much money to conduct investigations, so they go after either the most obvious cases or the cases that come up to them.”

“This is a case that wouldn’t get brought unless there was overwhelming documentation,” Professor Robertson continues. “Yet, even if the Trump Organization may have had this very long history, at least according to the attorney general, of engaging in these practices, it really came to light when he entered politics, and it might not have, had he not entered politics.”

It is not the businesses who had dealings with the Trump Organization bringing a civil case alleging fraud, says Mr. Mintz, a former federal prosecutor and current chair of his firm’s government investigations and white collar defense practice.

“If this case gets to a trial, the defense team is going to say that the parties on the other side of these deals were extremely sophisticated banks and sophisticated lenders and sophisticated insurance adjusters, and they certainly had the ability to do their own valuation of these assets that they were using as collateral to make loans,” Mr. Mintz says. “And at the end of the day, as former President Trump’s lawyers have already pointed out, the lenders made millions of dollars in interest from placing loans with the Trump Organization, loans that he has not defaulted on.”

This may be one reason Ms. James framed the civil complaint as “a tale of two justice systems” rather than the state protecting New York businesses.

“But [Mr.] Trump has really forced the issue here. Where do we as a country ... draw the line between avoiding partisan investigations and allowing for impunity because somebody has a political role?” says Professor Robertson. “On the other hand, if the law enforcement community can’t prosecute because it doesn’t want to look like we’re engaging in politics, then are we allowing people to be above the law? I don’t personally know where to draw that line, but I think it’s a really hard question.”