Isaac Laquedem

Judge Engoron was the Trump fraud trial judge, but he wrote for the court of appeals

Judge Arthur F. Engoron presided over New York's civil fraud trial against Donald Trump, two of his children, two of his associates, his trust, and nine companies that he controls.  On February 16 Judge Engoron handed down his final ruling on February 16.  In 92 pages he held Mr. Trump and various entities liable for $355 million plus interest, found his sons Eric Trump and Donald Trump, Jr. liable for $4 million each, and barred Mr. Trump, his accountant Allen Weisselberg, and Jeffrey McConney (formerly the Controller at the Trump Organization) from serving as an officer or director of any New York entity for three years. 

Political aficionados with a thirst for blood can be excused for skipping to the last two pages, where the judge laid out the penalties he was imposing, in the manner of the impatient reader of a mystery novel who reads only up to the crime itself and then jumps to the detective's solution, skipping over the 200 pages of investigation in the middle.  The casual reader who skips over Judge Engoron's 6 pages that recite the history of the case, the 67 pages discussing the facts, and the 17 pages of legal conclusions has missed a great deal.  Herewith Isaac's take on what Judge Engoron said.

First, Judge Engoron explained why New York cares about financial fraud.  "New York State, particularly New York City, is the financial capital of the country and one of the financial capitals of the world."  (Page 3.)  "The common excuse that 'everybody does it' is all the more reason to strive for honesty and transparency and to be vigilant in enforcing the rules.  Here, despite the false financial statements, it is undisputed that defendants have made all required payments on time; the next group of lenders to receive bogus statements might not be so lucky.  New York means business in combating financial fraud."  (Page 4.)

Before he dug into the testimony, Judge Engoron threw a dash of shade at Mr. Trump's lead lawyers, Christopher Kise and Alina Habba, stating (correctly) that as the state sought only equitable relief in the form of injunctions and disgorgement of fraudulent profits, the defendants were not entitled to a jury.  The shade came in the form of a footnote on page 6, "In any event, neither party applied nor moved for a jury trial."

Then the judge described the testimony of the 14 non-party witnesses (mostly bankers and outside accountants), the five individual defendants, the eight other witnesses from the Trump Organization, the state's expert, and the 13 expert witnesses that the defendant called.  What's important in his descriptions of the testimony of the witnesses is not what they testified to, but the judge's evaluation of their credibility.  (Isaac will explain why this is important later on.) 

Judge Engoron did not comment on the credibility of the 14 non-party witnesses.  He began his saltiness with four of the five individual defendants.  In the  judge's view, Jeffrey McConney's credibility was "severely impaired" (page 25), then "further compromised" (also page 25), and then further strained when he could not recall if his separation agreement prohibited him from voluntarily cooperating with governmental investigations of the Trump Organization, which lapse the court found "implausible" (page 26).  Allen Weisselberg came in for more direct treatment: his separation agreement bars him from cooperating with the government, which "renders his testimony highly unreliable.  The Trump Organization keeps Weisselberg on a short leash, and it shows." (page 26.)  The judge turned to Eric Trump, whose "credibility was severely damaged when he repeatedly denied knowing that his father ever even compiled a [statement of financial condition] that valued his assets and showed his net worth 'until this case came into fruition.'" (Page 32.)  And the court kept firing salvos in his direction: "When the documentary evidence against him became overwhelming, Eric Trump reversed his previous testimony."  (Page 32.)  "Eric Trump's testimony [about appraisals] was shown to be false when he was confronted with the ample contemporaneous documentary evidence demonstrating otherwise." (Page 33.)

And then there was Donald Trump himself, whom Judge Engoron deflated in a footnote.  On page 36, the judge wrote, "Nonetheless, Donald Trump insisted that he believed Mar-a-Lago is worth 'between a billion and a billion five' today, which would require not only valuing it as a private residence, which the deed prohibits, (footnote 19), but as more than the most expensive private residence listed in the country by approximately 400%."  Footnote 19 reads, "A fact of which he is well aware, having signed the deed himself."  He concluded with this politely damning description of the former president's time on the stand: "Overall, Donald Trump rarely responded to the questions asked, and he frequently interjected long, irrelevant speeches on issues far beyond the scope of the trial.  His refusal to answer the questions directly, or in some cases, at all, severely compromised his credibility."  (Page 37.)

Yet it was not the Trump family but its hired experts that drew the sharpest of the judge's stiletti.  One expert witness, Steven Witkoff, "conceded that he is neither an appraiser nor an accounting expert, nor is he familiar with what 'estimated current value' is under GAAP."  (Page 48.)  Of Steven Laposa, whom the defense offered as an expert witness on real estate research, the court observed that he had "formed no opinion as to whether any of the valuations at issue in this case were accurate, and, prior to this assignment, he had no experience preparing or reviewing personal financial statements."  (Page 50.)  The next expert witness earned a more severe burn from the judge.  He was Gary Giuletti, offered as an expert in surety underwriting and surety brokering.  He testified that he has known Donald Trump for about 25 years, plays golf and eats lunch with him, and is a member of "a bunch of his clubs."  He's also the Trump Organization's insurance broker.  (Page 51.)  The judge's evaluation:  "In its over 20 years on the bench, this Court has never encountered an expert witness who not only was a close personal friend of a party, but also had a personal financial interest in the outcome of the case for which he is being offered as an expert."  (Page 51.)  In 2022, Mr. Giuletti's firm earned $1.2 million in commissions from insurance that he handled for the Trump Organization. 

Mr. Giuletti got off easier than Robert Unell, whom the Trump Organization offered as an expert in commercial real estate finance and banking.  The court summarily disposed of his work: "On the whole, the Court was unable to ascribe any reliability to Unell's 'expert' opinions, finding them unresearched, unsupported, inconsistent, and contradicted by ample other documentary and testimonial evidence."  (Page 56.)

Why are the trial judge's conclusions on credibility important?  Judge Engoron undoubtedly knew that Mr. Trump and the other defendants, except possibly Allen Weisselberg, would appeal his final decision.  It's a principle of appellate law that the appellate court will usually defer to the trial judge's assessment of the credibility of the witnesses.  The trial judge sees and hears the witnesses and their demeanor; the appellate judges read their words from a transcript and only rarely will watch or listen to the testimony. Judge Engoron underscored this point on page 6: "Witnesses testified from the witness stand, approximately a yard from the Court, who was thus able to observe expressions, demeanor, and body language."  My sense is that he's emphasizing to the appellate court that most of the Trump Organization's principal witnesses, including Donald Trump, Eric Trump, and Ivanka Trump, were simply not credible.

As with a good detective story, the description of the crime is at the beginning and the resolution is at the end.  In the case of Judge Engoron's decision, the good stuff is the part in the middle.

The Trump Administration kicks a bad banker out on his assets, and high time, too

Eleven years ago this week - in fact, during the first days of the Obama administration -  I offered a Laquedem Plan for how the federal government should deal with the bankers whose carelessness, fecklessness, and recklessness threatened to bring down the banking system and, with it, the nation's economy.  I proposed that the government should buy up the bad assets of the major banks and then make the bad bankers leave their sinecures and work for the banks with the bad loans that they had created - the "Kick the bad bankers out on their assets" plan.

A year and a half later I went farther, and proposed that the Federal Deposit Insurance Corporation should treat the bad bankers the same way that life insurance companies treat those with serious and chronic health problems: declare them to be uninsurable, or, more exactly, declare that any bank that engaged any of the bad bankers to be an officer or director would not be eligible for FDIC insurance.  The FDIC, I thought, should start a "no-fly" list of its own to protect our nation's financial institutions.  As far as I know it didn't happen under the Obama administration.

You may recall the interchange between Senator Elizabeth Warren and John Stumpf, then the chief executive officer of Wells Fargo, when he was testifying before (read:  haled before) a Senate committee about his bank's having created millions of fake bank accounts and issued millions of bogus credit cards so that account representatives and mid-level officers could meet their sales targets.  Mr. Stumpf lost the debate and shortly afterward, retired -- very gently and lucratively -- from Wells Fargo.  That was about all that happened to him . . . until this week.  Much as I disagree with President Trump, I was delighted to read today that the Office of the Comptroller of the Currency has obtained Mr. Stumpf's agreement to pay $17.5 million to the Treasury and to never, ever work in any financial institution again - think of him as the Pete Rose of the banking world.

My delight in the OCC's expelling Mr. Stumpf from civilized financial society is tempered, however, by the fact that he got in trouble not for running his bank into the ground but for using unsavory methods to make $billions for the shareholders.  I suppose that makes him a good bad banker.  For its next expulsions the OCC should select the bankers who lost billions - the bad bad bankers.

Venerable Mom's credit was not good enough for Macy's, but it satisfies her bank

Six years ago Macy's turned down Venerable Mom's application for a credit card, despite her good credit history and enviable financial status.  I wrote about it here.

This week VM received an invitation to apply for a Platinum Visa card from a more local institution, which acknowledged her good credit and years as a customer.  I wrote a response on her behalf:

I received the solicitation that you directed to my mother, Venerable Mom Laquedem, to apply for a Greatest Bank Visa Platinum Card, and the recognition of her good credit that your offer implies.  Mom was very proud of her sterling credit history – I think her last late payment on anything was in 1953 – and she reacted with chagrin in 2011 when Macy’s turned her down for a credit card, something she and I couldn’t explain, given her substantial private income and complete freedom from debt.  I think at the time her debts totaled $674, the amount of her charges that month on her credit card, and she had then lived for 15 years without a home mortgage and 50 years without a car payment.

She’s not, unfortunately, able to accept your offer, because in the fall of 2013 she died, quite peacefully and still debt-free.  She’d likely be cheered by your offer, almost as much as she’d have reveled in the news that Macy’s has closed the store that invited her to apply for a credit card and then rejected her as unworthy of the honor.

Very truly yours,

Isaac Laquedem

 

The Laquedem Plan to Improve the $10 Bill

Our currency has never honored a politico who achieved the vice presidency but did not serve as president.  We can remedy this oversight and at the same time create a real conversation piece on our currency by redesigning the $10 bill.  Push Alexander Hamilton's picture to the right side, and put Aaron Burr's picture on the left, making this bit of our currency the only one issued with (sorry) duel portraits. 

The Facebook sellers have sent you a friend request

They haven't?  They should, particularly if you bought some of the newly public shares from Facebook's initial public offering (IPO) 11 days ago.  The stock, expected to be offered in the low $30s, came to market on May 18 at $38/share, and popped up to $45 on opening day before settling down . . . way down, in fact, closing at $28.84 today.  The press and other commentators have roundly derided Facebook's IPO as a failure because the stock has gone down instead of up.  A successful IPO, they say, is one where the stock goes up smartly above the offering price.  A company called Splunk (traded as SPLK), for example, went public in April at $17/share and is now trading at $36.

That makes the offering a success for the lucky souls whose brokers allot some of the shares to them, and for the investment banks that don't let their shares out to the buyers at once, but a failure for the company and its owners.  Take Splunk, for example.  The sellers and the company received $17/share for something that the market was willing to pay $30 or more for.  (Since going public last month, the stock has never traded below $28.)  Although the Splunk offering is hailed as a success, if you were one of the Splunk sellers, or the company itself, it was a huge failure -- the company received about 40% less for its stock than the market was willing to pay.

By contrast, the Facebook sellers received top dollar for their merchandise.

A failure, or a success?  It depends on which side of the table you're sitting. 

The new and improved protest movement: Preoccupy Wall Street

The Occupy Wall Street movement has attracted some public attention but hasn't really done anything to achieve its goals.  (Actually, it's not clear to me what its goals are, or even if it has any particular goals.)  Its activities seem designed to get the attention of local government but not to have much effect on the people and institutions it's complaining about.

Although I'm on the outskirts of the group against which Occupy Wall Street is protesting, I like to see protests done right -- call it an artistic sensibility if you wish.  In that vein, I'd like to propose a change in approach.

The problem with occupying Wall Street is that Wall Street, in the sense against which Occupy Wall Street is protesting, is a concept -- a network of people and relationships -- and not a physical place.  Yet all they are doing is occupying the physical place.  Instead of occupying Wall Street, they should preoccupy Wall Street.

Preoccupy Wall Street?  Yes!   The PWS movement, as yet unstaffed (I'm inventing it, not joining it), will take as its mission to distract from its tasks those parts of the financial world that got us into this mess, and the senators and representatives who stood by and enabled it, by preoccupying them with responding to the citizens whose lives they've upended.  Here are some ways that the PWS movement can preoccupy Wall Street:

1.    Call up Phil Gramm at UBS AG and ask him if he still thinks that the Gramm-Leach-Bliley Act was a good idea.  (That's the act that legitimized incest between banks and investment banks.)  If your senator or representative was in office in 1999 and voted for Gramm-Leach-Bliley, call him or her and ask the same question.

2.    Leave a message for your favorite bank president, asking if he or she favors deregulating deposit insurance and letting the marketplace set the rates for deposit insurance so that bad banks have to pay more or go without deposit insurance.

3.   Buy a large supply of old Zimbabwean bank notes (the ones that have denominations as high as $100,000,000,000,000 because of hyperinflation and economic collapse).  Then pick a day and hire every bike messenger in lower Manhattan to deliver them to the offices of investment bankers, one at a time throughout the day.

4.    Call your least favorite bank and ask what rate it will charge you to lend you money to speculate in the stock market.  Then ask if that's the same rate it would have offered MF Global before it collapsed on Hallowe'en.  (Trick or treat!)

5.    Send a note to the offices of some of the 61 members of the House Committee on Financial Services, and ask them if they'll forswear contributions from officers and directors of the institutions they regulate until the mess has been cleaned up and banks have stopped going under.  Its members include Michael Capuano and Brad Miller, about whom I've written before.  You can even ask Michelle Bachmann what she thinks -- she's a member also! 

6.    Participants away from Washington and New York can visit the district offices of the nearest members of the Committee, and explain their feelings on their elected representatives accepting gifts from the culprits.

7.    Get a thousand or two people together at Wall Street (or its functional equivalent) and have everyone place cell phone calls at the same time, right before the stock market opens.  See if everyone can get through.

Many other ways exist to creatively annoy Wall Street that don't require a tent and a portable toilet, and that will get attention of the industry and its regulators more effectively.  Don't occupy Wall Street -- preoccupy it!

Portland has a Dimon in the rough

A helicopter is hovering over the Hilton Hotel downtown, where Jamie Dimon, head of JPMorgan Chase, is speaking now to a group of businesspeople, financiers, and golfing types.  I can't tell whether it's a news helicopter whose passengers are hoping to film scenes of protest, or a private conveyance poised to remove Mr. Dimon from the crowd of unticketed Portlanders outside the hotel awaiting their chance to tell him their views on financial deregulation.

Why bankers should support ObamaCare: they're already covered!

My banker friends are mostly Republican, conservative, and strong supporters of free markets.  Consistent with their principles, those I've talked with are skeptical about mandatory national health insurance and, as a group, opposed to ObamaCare.  This is a delicious irony, because banks are among the few artificial persons who already have ObamaCare, or what amounts to the same thing: mandatory insurance coupled with regular physical examinations, prescriptions, and even surgical coverage.

I'm referring, of course, to our system of federal and state regulation of banks, which contains all the major elements that Republicans fear in ObamaCare.  Consider:

1.  Banks are required to purchase insurance from the federal government to protect their depositors.

2.  Banks must obtain and pay for annual examinations into the condition of their health, and don't have a choice of providers.

3.  The government may mandate that banks in poor health change their lifestyle by replacing their officers and directors, abstaining from making loans secured by non-nutritive collateral, and strengthening their physical condition with capital-raising exercises.

4.   The government can even order ailing banks to submit to surgery and have pieces cut off and discarded or sold.

As banks are people too (see the Supreme Court's recent Citizens United decision), and have enjoyed ObamaCare since the 1930s, their executives should acknowledge that other people might want the same benefits.  While my analogy between banking regulation and ObamaCare isn't perfect, it's pretty good.  Isn't the FDIC a glorified death panel?  Washington Mutual would say so.

Yet another night the lights went out in Georgia banks

The FDIC closed another four banks today, including two in Georgia.  The Peach State's given us -- or, rather, we've taken -- 22 banks this year, more than a quarter of all the 84 failed banks of 2011.  That's a slight improvement over last year, when 139 banks had been shuttered by October 22, but it's not a sign that the banking crisis is abating.  Far from it: all the slowdown means is that the FDIC killed off the terminally ill last year, and is only now getting around to dealing with the walking wounded.

Pioneer Square was a more appropriate location for the protest than they knew

The several thousand people of the Occupy Portland protest who filled Pioneer Square today to protest the antics of Wall Street and the nation's principal banks likely viewed their location as the block between Nordstrom on the west and the Pioneer Court House on the east.  Observers with a knack for historical irony might look not west and east, but north and south.  To the north stands what is now called the American Bank Building, but was originally the Northwestern Bank Building, housing the eponymous bank from shortly after its opening in 1913 until its collapse on Tuesday, March 29, 1927, following a weekend when telephoned rumors led to a massive run on the bank on March 28.  To the south stands the former home of Pacific First Federal Savings Bank, purchased in 1993 by Washington Mutual, which after a decade of bloat and a series of misguided acquisitions was seized by the federal government three years ago September and pushed into the waiting hands of JPMorgan Chase.

So even as the crowd protested the abuses of the present, they were shadowed by the relics of the past.  Protestor, si monumentum requiris, circumspice.