(CNN) – A massive $355 million verdict and other punitive measures in the New York civil fraud trial against former President Donald Trump, his children and the Trump Organization will deal a serious, though perhaps not fatal, blow to its upstate New York headquarters .
At least not directly or immediately.
There's still a lot to analyze about the ruling and its potential impact on Trump's business empire, but here's what we know so far.
Trump and his sons Donald Jr. and Eric are barred from holding positions as officers or directors of their New York-based companies for the foreseeable future: for Trump it will be for three years, for his sons two years. That's thanks to a Friday ruling by Judge Arthur Engoron in a case brought by New York Attorney General Letitia James against Trump and his companies for submitting fraudulent financial reports to obtain favorable loans and insurance. Trump and the Trump Organization will also be barred from borrowing money from financial institutions licensed or registered in New York State for three years.
“Trump still owns his companies. But he and his family can’t really manage and maintain them,” said Will Thomas, an assistant professor of business law at the University of Michigan’s Ross School of Business. “Their ability to control has been drastically reduced.”
The ruling on paper, Ross added, “seems to me to be a really dramatic block on their ability to access capital.”
It could be worse.
Trump and his children also faced the possibility of losing their state business certificates, which would have prevented them from operating their numerous limited liability companies in New York. And Trump himself could have been permanently banned from New York State's real estate industry, something James had called for.
“The bottom line is that the New York Attorney General’s Office got the money, but not the permanent bans [sobre las empresas de Trump] That’s what he wanted,” said David Cay Johnston, a Pulitzer Prize-winning journalist and author of three books about Trump.
Instead, the final ruling calls for the Trump Organization to be essentially run by an independent monitor appointed by the court in 2022 and a new independent chief compliance officer.
The ruling expanded the observer's role “by at least three years.”
This new government structure is the reason Judge Engoron cited in not canceling the Trumps' business certificates. “Going forward, there will be two-tier oversight – an independent monitor and an independent compliance director – over key activities that could lead to fraud, eliminating the need to revoke business licenses,” he wrote in the decision.
Trump is expected to appeal the ruling. But Engoron's failure to effectively unwind its businesses and instead demand independent oversight could hurt its chances of winning. “The court's decision to impose state requirements [a las empresas de Trump] makes it more likely that the court order will survive appeal,” Thomas said.
How the $355 million payment could affect Trump's business
The $355 million that Trump and his companies must pay is a repayment of ill-gotten gains from the fraudulent practices for which Engoron held him responsible. And plus interest, calculated retroactively to the dates specified by the judge in the ruling, the total amount could exceed $450 million, according to NYAG office estimates.
Trump is expected to appeal the ruling. You have two ways to do this. First in the Appellate Division and then in the New York State Court of Appeals. This will take time and could result in the case not being concluded until 2025 at the earliest.
However, payment of the $355 million plus interest cannot be deferred. Basically, it must be kept in escrow during the appeal process to ensure that the plaintiff receives the money ordered by Engoron if his judgment is fully upheld.
It is unclear where the money will come from. Trump, who claimed last year to have $400 million in cash, could provide it himself if his claim is true.
Judge Arthur F. Engoron attends the Trump Organization's civil fraud trial in New York in November 2023. (Shannon Stapleton/Pool/Portal)
But it is also true that he is again facing a hefty $83.3 million judgment in the civil case he recently lost against E. Jean Carroll.
So you could borrow money and use a large asset (such as one of your buildings) as collateral.
Since Engoron's ruling prohibits him from taking a loan from a New York-registered financial institution (which likely excludes most major international banks with branches in New York, as Thomas noted), this could mean that Engoron is making a loan to employees of a non- financial institution would have to procure. Banking company, a financial institution or an unregistered financial company.
Or he may need the help of a high net worth individual who may also need a Trump business asset as collateral to secure the loan.
But lending money to Trump carries special risks.
“Who would lend money to Donald Trump after this verdict and given that he has four criminal cases before him?” Johnston asked.