Trump Must Pay $110K Fine To Nix Contempt In NY AG Probe

Law360, New York (May 11, 2022, 12:57 PM EDT) -- A New York judge said Wednesday he will lift a civil contempt order against former President Donald Trump in the state attorney general's financial fraud investigation if Trump pays what is now a $110,000 fine, his assistants detail policies on how they kept or destroyed documents, and a few final boxes are searched.

New York Justice Arthur F. Engoron ruled that Trump had done nearly enough to halt the $10,000 daily fine imposed on him for failing to comply with a subpoena seeking documents in the AG's investigation of the Trump Organization.

"I'm going to issue a conditional order, so don't get all excited until we get to the substance of it," Justice Engoron said during a Wednesday morning hearing, noting that his demands must be met by May 20. If not, the contempt fine will be retroactively reinstated, the judge said in his final order.

"The $110,000 should be paid to the attorney general to purge the contempt," the judge ruled, noting the meter stopped when Trump filed a new set of affidavits Friday evening "that complied in significant part but not completely" with the court's order.

In a written order Wednesday afternoon, Justice Engoron said the money will be held in escrow while Trump appeals the original contempt order.

Paying the fine was only one of three conditions that needed to be met to lift the contempt order.

"To the extent that anyone submitted an affidavit relying on somebody who doesn't have an affidavit, we need an affidavit for that person or a statement that that person can't be located," the judge said, citing a previous critique that Trump had relied on hearsay evidence by citing the word or work of others in swearing that he did not have any documents to hand over.

In his order, the judge identified 11 individuals who should file sworn statements as well as the executive assistants that Trump said handled his phones, documents and records.

As a third condition, the judge said an independent discovery firm, HaystackID, would need to finish searching a number of boxes and provide its report with enough time for the attorney general to review its findings.

But while Justice Engoron credited Trump's attorneys' efforts, he was unimpressed with a line in Trump's latest affidavit that he branded false. Trump swore under oath that "it has been my customary practice to not communicate via email, text message, or other digital methods of communication."

"That sentence is just not true," Justice Engoron said at the hearing, his voice rising. "It was his customary practice — or it was within the last 10 or 12 years — to communicate via digital or electronic methods," citing the tens of millions of followers Trump had on Twitter before he was banned.

"I don't really care about it, but it just stood out like a sore thumb," the judge said.

Trump attorneys Alina Habba and Michael Madaio quickly noted that their client had also mentioned he now posts on his own social network and had not intended to mislead the court.

The judge also raised the "almost humorous" issue of the missing Post-It notes. He noted that the Trump Organization's chief legal officer had testified that the former president used the palm-sized papers to communicate with his staff.

Habba said she had personally asked Trump about the sticky notes and searched Trump Tower to see "is there anything I'm missing here." She said she confirmed that "any Post-Its that were on the documents were scanned as they are," and were not removed.

Habba mocked what she saw as the attorney general's request for Trump's executive assistants to swear to their retention policies for the notes. "I don't think any person has a formal policy in regards to Post-Its," Habba said with a smile. "I don't have a formal policy on Post-Its, do you?"

Brandishing a sticky note of her own, Habba added, "I can assure you that these aren't going anywhere but the round receptacle."

"I don't think the question is, 'Do organizations have Post-It retention policies?' But when they keep the document do they rip off the Post-It," the judge said shortly before handing down his ruling.

Attorney General Letitia James is examining whether the Trump Organization, the ex-president or his adult children broke the law by misrepresenting the value of the family business' assets on financial statements, loan applications and tax forms and misled others to get favorable loans, insurance coverage and tax breaks.

In order to enforce her subpoenas, James filed a special proceeding where she has demanded the Trump Organization hand over documents related to how properties were valued, claiming in court filings that fraud investigators have evidence of misstatements designed to benefit the former president's real estate firm.

After a March 31 deadline passed for Trump to comply with a subpoena seeking documents in his personal possession, the court found him in civil contempt for failing to either turn over the records sought or provide an adequately detailed accounting of how he had searched for any relevant documents. Justice Engoron set a $10,000 daily fine to coerce compliance.

Trump's attorneys scrambled to escape the steadily mounting fine, filing a flurry of affidavits from attorneys and Trump himself. The judge spurned Trump's initial two-sentence affidavit, calling it "completely devoid of any useful detail." His attorneys' initial affidavits were dubbed "woefully inadequate."

Justice Engoron then commanded Trump to submit a new affidavit detailing where he kept his files, how he stored them, who had access to them, how long he retained them and "importantly, where he believes such files are currently located" in order to purge his contempt.

Trump and his attorneys then responded with the most recent affidavits Friday, which Justice Engoron credited as resolving most of the previous problems.

During arguments Wednesday morning, Habba told the court that Haystack had already "thoroughly examined 1,327 boxes of documents" from the 25th and 26th floors of Trump Tower, arguing that her client truly had no documents to give the attorney general and that he had done more than enough to purge his contempt.

Later Wednesday afternoon in an uptown appellate courtroom, Donald Trump, Donald Trump Jr. and Ivanka Trump asked a panel of judges to block a different order from Justice Engoron compelling them to testify in the case.

Trump attorney Alan Futerfas told the panel that James' investigation was grounded in political animus and that she was unfairly using her civil investigation to feed the ongoing criminal inquiry into the Trump Organization. He asked for a hearing to determine explore the cooperation between James and the Manhattan District Attorney's Office.

"Whatever information they get under the guise of this civil subpoena is going right to the DA's office," Futerfas argued. "They've never denied it."

"What's wrong with that?" Presiding Justice Rolando T. Acosta cut in. Attorney general investigations often start with civil investigations for fraud that could lead to criminal charges, he noted. "If that civil investigation creates criminal jeopardy, then it creates criminal jeopardy."

Case law banning prosecutors from circumventing the grand jury process doesn't apply here, Justice Acosta said. "You are asking us to eliminate dozens of years of precedent or somehow act like a legislature."

The solution, the judges noted, is notifying those under scrutiny that they face potential criminal jeopardy.

"It's not like you are unaware of your criminal jeopardy, meaning your clients," Justice Acosta said, adding that the Trumps could then invoke their Fifth Amendment right against self-incrimination and decline to answer. "That's the remedy that you have. You can invoke the Fifth."

The Trumps are left in an unenviable position of facing potential civil liability for failing to answer questions, counsel for the attorney general Judith Vale acknowledged, but they have to balance that against their desire to avoid implicating themselves in a crime.

By comparison, the allegations of political prosecution received little attention from the panel, with Associate Justice Peter H. Moulton noting the attorney general's investigation began after Michael Cohen's congressional testimony claiming Trump misrepresented his assets and that she had "gathered quite a lot of evidence since then."

The First Judicial Department panel reserved judgment and adjourned.

New York is represented in the state court case by Kevin C. Wallace, Andrew Amer, Colleen K. Faherty, Alex Finkelstein, Wil Handley, Eric R. Haren, Louis M. Solomon, Austin Thompson and Stephanie Torre of the Office of the New York State Attorney General.

Donald J. Trump is represented in the state court case by Alina Habba and Michael T. Madaio of Habba Madaio & Associates LLP.

Judith Vale argued for the attorney general in the appellate case, while Alan Futerfas argued for Trump.

The case is New York v. The Trump Organization et al., case number 451685/2020, in the Supreme Court for the State of New York, County of New York. The appeal is case number 2022-00814 in the Supreme Court of the State of New York, Appellate Division, First Department.

--Editing by Alyssa Miller and Emily Kokoll.

Update: This story has been updated with more details about the case and information from an afternoon hearing.

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