Readers undoubtedly are aware that late last week the judge presiding over the New York civil fraud trial against Donald Trump, the Trump Organization and related entities, and various Organization’s executives (including two of Trump’s sons) entered a post-trial verdict against the defendants that, together with pre-judgment interest, exceeds $450 million in value. In making the award, the judge concluded that Trump and the other defendants had fraudulently misrepresented the Organization’s and Trump’s financial condition to banks, insurance companies, and public officials. Of interest to readers of this blog, among the allegedly fraudulent acts was the procurement of D&O insurance, as well as surety insurance, through alleged misrepresentations. As discussed below, there are several interesting things about the insurance part of the court’s verdict. A copy of the February 16, 2024, Decision and Order of New York (New York County) Supreme Court Justice Arthur F. Engoron can be found here.


The New York Attorney General Letitia James first filed a civil complaint against Trump and the other defendants on September 21, 2022. The complaint asserted seven causes of action, including alleged fraudulent or illegal financial activity in violation of New York Executive Law Section 63(12); intentional falsification of business records; conspiracy to falsify business records; and conspiracy to submit false financial statements. Count VI of the complaint alleged that defendants Allen Weisselberg and Jeffrey McConney (the Trump Organization’s CFO and controller, respectively) committed insurance fraud in violation of Executive Law Section 63(12) and New York Penal Law Section 176.05. The Seventh Cause of Action alleged conspiracy to commit insurance fraud against all defendants.

The insurance fraud allegations pertained to the Trump Organization’s acquisition of D&O insurance in January 2017 (just as Trump as about to be inaugurated as President), and its acquisition of surety insurance during the period 2017 through 2020.

On September 26, 2023, Justice Engeron granted the Attorney General’s motion for summary judgment on the first count of the complaint (that is, the initial count alleging that the defendants engaged in fraudulent or Illegal activity in violation of Executive Law Section 63(12)) and the case went to trial starting on October 2, 2023 as to the other six counts.

As Justice Engeron recited in his recent decision, because the Attorney General was seeking only equitable remedies (in the form of disgorgement and injunctive relief), the defendants did not, the court stated, have the right to a jury trial; the case was tried to Justice Engeron. The court ultimately heard the testimony of 40 witnesses over the course of 43 trial days. The trial concluded on December 13, 2023 and the court heard closing arguments on January 11, 2024.

As summarized in Justice Engoron’s decision, much of the trial testimony related to the financial information in Trump’s Statements of Financial Condition (SFCs). The Attorney General essentially alleged that the defendants used the SFCs, reflecting inflated valuations for various property assets of the Trump Organization, to obtain real estate loans at favorable rates, and other benefits.

Much of the trial testimony, as summarized by Justice Engoron, related to the issue of the valuation of the real estate assets. The recitation of the trial testimony makes for interesting reading. Among many examples, various trial testimony indicated that the valuation of 71 potential attached units at the Briarcliff golf club was in the $43.5 to $45 million range, but that the asset was carried on the 2016, 2017, and 2018 SFCs at just over $101 million. The Trump National Golf Club LA appraised at $107 million, but the 2015 SFC carried the asset at $140 million. The potential construction easement on certain Seven Springs construction lots were collectively evaluated at $5.5 million but the back-up data for the 2014 SFC carried the assets at “a staggering” $161 million.

Some of the exaggerations about the Trump real estate assets were really kind of pathetic. Trump apparently inflated the size of his luxury apartment in Trump Tower. In financial statements from 2015 and 2016, Trump claimed that his triplex apartment was over 30.000 square feet in size, valuing it at $327 million. The actual size of the apartment was 10,996 square feet. There was also trial testimony that Trump or the Trump Organization exaggerated the number of floors in certain Trump office buildings. For examples, Trump reportedly claimed that the 58-floor Trump Tower in Manhattan had 68 stories. The trial summary in the Decision recites numerous other similar examples.

The asset valuations used in the SFCs mattered because the SFCs were the basis on which Deutsche Bank and other lenders agreed to extend credit and make real estate loans to the Trump Organization and agreed to do so on more favorable terms – the credit and loans were extended at the more favorable rates based on Trump’s personal guarantee, which it turn was accepted as sufficient based on the SFCs. The Court ultimately concluded that the interest cost savings the Trump Organization secured in this way were substantial; indeed, as significant portion of the massive monetary amount Judge Engoron awarded reflects the supposed amount of interest cost savings the firm secured this way.

The Attorney General also alleged that the Trump Organization obtained D&O insurance and surety insurance based on alleged financial misrepresentations. The court heard the testimony of a D&O insurance underwriter from HCC, Michael Holl, and a surety underwriter from Zurich, Claudia Markarian.

Holl testified that in December 2016, he was contacted by the Trump Organization’s insurance broker in connection with the renewal of the firm’s D&O insurance. Apparently, in light of Trump’s upcoming inauguration, the firm wanted to increase the limits of liability of its D&O insurance program, from $5 million to $50 million. Holl testified that in order to see the Organization’s financial statements, he had to view the statements at the firm’s offices in the Trump Tower. His notes reflect that he “saw very few financials” but did see a 2015 balance sheet. The balance sheet reflected cash of $192 million, which Holl testified was meaningful to him as a “measure of liquidity.” Holl’s notes also reflected that he had been told that there was “no material litigation or communication from anyone.” Holl testified that based on the financial information and representations, HCC decided to renew coverage.

Markarian testified that in order to underwrite the firm’s surety insurance, she too had to visit the firm’s offices to view the financial statements. She met there with Allen Weisselberg and Jeffrey McConney, the firm’s CFO and comptroller. She was also shown the 2018 and 2019 SFCs, which listed real estate holdings that Weisselberg represented to Markarian had been determined each year by an outside appraisal firm. (Engoron expressly found that the Trump Organization had never retained a professional appraisal firm.) Markarian’s notes also reflect that she specifically reviewed the amount of cash on hand as an indicator of the firm’s liquidity. When told that Weissleberg had testified at trial that the Trump Organization did not engage professional appraisers for property evaluations she said that would have been “material” to her analysis to approve the renewals; she also said that misrepresentations about the amount of cash hand would have had “great bearing” on her decision to approve of the renewals.

In his findings and conclusions, Justice Engoron specially found that “Zurich relied on false representations by Weisselberg and McConney, and the intentionally false and misleading information in the SFCs about the amount of cash on hand, when determining to underwrite the policies for the Trump Organization.”

With respect to the D&O renewal, Judge Engoron expressly found that the representation to Holl that there was “no material litigation or communication from anyone” was “false,” as at the time of the January 10, 2017, meeting there was an ongoing investigation by the Office of the Attorney General into the Trump Foundation and the Trump family members Donald Trump, Donald Trump, Jr., Ivanka Trump, and Eric Trump, all of whom were directors and officers of the Trump Organization and aware of the investigation. Justice Engoron found that at no time prior to the binding of the renewal policies did anyone at the Trump Organization inform HCC of the existence of the investigation. However, the Trump Organization two years later submitted a claim to its insurers for the enforcement action arising from the Attorney General’s investigation.

Judge Engoron’s opinion states that “When HCC became aware of the claims, its underwriter determined that the exposure on the risk was significantly higher than it had been priced at and offered a renewal policy at more than five times the existing premium.” Judge Engoron also found that HCC further relied on the false representation that Donald Trump had $192 million in cash on hand), as reflected in the 2015 SFC, “which,” Judge Engoron concluded,  “was material to HCC’s analysis of whether to write the policy.”

In his legal conclusions, Justice Engoron found that Weisselberg and McConney were each liable under the sixth cause of action for “repeatedly and persistently committing insurance fraud in violation of Executive Law Section 63(12) and New York Penal Law Section 176.05.” Weisselberg and McConney, Engoron said, both participated in the insurance meetings in which “they made false representations to the insurance representatives about Donald Trump’s SFCs, including misrepresenting the value of his cash assets, representing to the insurance companies that the real estate valuations in the SFCs came from outside appraisals, and lying about the existence of potential claims against the Trump Organization.” Each of these actions caused the insurance application to “contain materially false information for the purpose of misleading the insurer.”

Even though Justice Engoron found that only Weisselberg and McConney performed the overt acts of the insurance fraud, he nevertheless found all defendants to be liable under the seventh cause of action for conspiracy to commit insurance fraud, citing legal authority that only an overt act by one of the conspirators in furtherance of the conspiracy need be shown. He added that “each of the defendants participated in aiding and abetting the conspiracy to commit insurance fraud by their individual acts in falsifying business records and valuations, causing materially fraudulent SFCs to be intentionally submitted to the insurance companies.”

While Justice Engoron concluded that the defendants had committed insurance fraud (or conspired to commit insurance fraud), the relief granted largely related to the alleged misrepresentations with respect to the real estate loans. Thus, of the massive amount awarded, approximately $168 million related to interest cost savings the Trump Organization secured through the use of the false SFCs. A substantial portion of the remaining amount of the award pertains to the “ill-gotten gains” the defendants secured through the profitable sale of certain substantial real estate assets, including, for example, the Old Post Office Building in Washington. (The theory on the return of the asset sales profits seems to be that without the financial misrepresentations the defendants could not have afforded to purchase or been in a position to profit from the sale of the assets.)

In addition to the monetary relief in the form of disgorgement, Justice Engoron also awarded injunctive relief in a variety of forms: Trump, Weissleberg, and McConney are banned from serving as the officer of any New York corporation for three years; Donald Trump, Jr. and Eric Trump are banned from serving as an officer or director of any New York company for two years; Trump is banned from applying for loans from any New York financial institution for three years; a new Independent Director of Compliance was instituted at the Trump Organization to ensure the company establishes and follows internal controls and financial reporting obligations; and the current monitor, which Judge Engoron previously ordered, will continue to oversee the company’s financial dealings.


The dark heart of the Attorney General’s allegations is that Trump, the Trump Organization, and the various other individual defendants inflated the valuations of the Organization’s various real estate assets. The massive disgorgement amount awarded consists primarily of the approximately $168 million in interest cost savings the Trump Organization allegedly achieved through the misrepresentations of the assets in the SFCs, while the remainder (before application of pre-judgment interest) relates primarily to the “ill-gotten gains” Trump and others realized through the sale of certain real estate assets (including the Old Post Office Building in Washington).

While Justice Engoron expressly found that the company’s D&O insurance and surety insurance renewals were procured by insurance fraud, there is no portion of the disgorgement amounts awarded relating to the insurance transactions. It is implicit, rather than express, in Justice Engoron’s Decision, that the insurance application misrepresentations enabled the Trump Organization to obtain insurance or to obtain insurance on better terms that it would otherwise have received; Justice Engoron’s Decision does not expressly spell out in so many words exactly how the Organization was benefitted by the alleged misrepresentation. To be sure, the court’s findings about the insurance undoubtedly supported his various awards of injunctive relief (including, for example, the officer bars); however, the Decision makes no direct connections between the alleged insurance misrepresentations and the injunctive relief awarded.

As a long-time observer of the insurance world, it comes to me as something of a novelty that allegedly material misrepresentations in connection with the procurement of insurance is the basis of a finding of fraud in an action brought by a state’s attorney general. Typically, allegations of application misrepresentations are asserted by the allegedly misled insurance company, and the relief sought is the rescission of the misleadingly procured insurance policy. To be sure, merely because an application misrepresentation might serve as the basis of a policy rescission is not preclusive of the possibility that the misrepresentation might also serve as the basis of a fraud allegation; it is just that policy rescission alternative is the more familiar approach.

At least according to Justice Engoron’s recital of the trial testimony, it does appear that there was substantial trial evidence that the Trump Organization procured its D&O insurance and surety insurance through misrepresentations to the insurers’ representatives. However, while there was testimony that Weisselberg and McConney made active misrepresentations to the insurers’ representatives, the extension of that evidence to the further legal conclusion that all of the defendants engaged in a conspiracy to commit insurance fraud is less convincing – unless you were to say that the habitual and casual way that the various defendants compulsively misrepresented the financial condition of Trump and Trump Organization was extensive enough to encompass a general conspiracy that included the commission of insurance fraud. Certainly, Weisselberg and McConney’s overt acts of insurance fraud were undertaken for the benefit of the other defendants. Just the same, the insurance fraud conspiracy determination against the other defendants seems less than convincing.

That the Statements of Financial Condition reflected inflated asset valuations, and that the various defendants used the SFCs to procure various benefits for Trump, the Trump Organization, and various related entities, arguably is supported by substantial trial testimony and other evidence. Just the same, there are some puzzling things about the court’s findings of fraud. For instance, and as the defendants apparently repeatedly pointed out, the various credit facilities and loans that the defendants procured through the use of the SFCs all performed as intended; all of the debt obligations were repaid in full and on time. The credit facilities and the loans were, in the end, profitable for Deutsche Bank.

Justice Engoron expressly acknowledged these facts in his written opinion, but he also had this to say: “Timely and total repayment does not extinguish the harm that false statements inflict on the marketplace… despite the false statements, it is undisputed that the defendants have made all required payments on time; the next group of lenders might not be so lucky.”

Protecting the market may well justify the litigation, but does it justify the massive amount of the award? There is something peculiar about the way the massive award was calculated. As noted above, approximately $168 million of the amount of the award represents the supposed interest cost savings the Trump Organization secured through the use of the fraudulent SFCs. In effect, the court seems to be saying, the Trump Organization defrauded Deutsche Bank of $168 million. But if Deutsche Bank thought for a moment they had been defrauded of $168 million, wouldn’t the bank itself seek to pursue its own fraud remedies?

And to what extent was Deutsche Bank really defrauded in the end? Deutsche Bank officials testified at the trial that when presented with personal financial statements from high net worth individuals, the bank routinely and as a matter of course applies a 50 percent haircut. The bank’s own practice seems to reflect a recognition that wealthy individuals like Trump regularly inflate their wealth. Given the 50 percent haircut, was the bank in fact even misled? Or to put it another way, can there really be a fraud if nobody believed the supposed misrepresentations and if the supposed victim of the fraud does not believe it was harmed?

All of that said, Justice Engoron’s written Decision does give the strong impression that the defendants regularly and routinely misrepresented the financial condition of Trump and the Trump Organization. Justice Engoron also noted, in explaining the massive size of the disgorgement award and the harshness of the injunctive relief that he took into account not only the defendants’ refusal to admit error (“The complete lack of contrition and remorse borders on pathological”) but also the Trump Organization’s extensive history of “corporate malfeasance” – among other things, Justice Engoron cited the fraud allegations and settlement against Trump University; the fraud allegations against and dissolution of the Trump Foundation; the settlement of charges that the Trump Organization received excessive fees in connection with Trump’s inauguration; and the guilty plea of the firm’s CFO (Weissleberg) to 15 criminal counts of tax fraud, including allegations of falsification of business records. Based on these considerations, Justice Engoron said that he “finds that defendants are likely to continue their fraudulent ways unless the Court grants significant injunctive relief.”

The defendants undoubtedly will appeal. How any appeal will turn out remains to be seen. The appellate court might well conclude that based on the trial testimony that some or all of the injunctive relief is warranted and appropriate. On the other hand, it will be very interesting to see what the appellate court makes of the massive disgorgement award; it will be interesting to see if the amount of the award survives appeal.

Special thanks to a loyal reader for calling my attention to the insurance aspects of Judge Engoron’s Decision and for providing me with a copy of the Decision.