One of the benefits of living in Manhattan is that there are many interesting things to go and see. For example, there are lots of plays, concerts, museums, and even the occasional political show trial. Today, I thought I might stop by the state government’s civil fraud trial against ex-President Trump, to see how it’s going. The trial, now nearing the end of its second week, is taking place at the main state courthouse at Foley Square in Lower Manhattan.

The last time I dropped in on a political trial in Manhattan, it was the New York AG’s case against Exxon for supposedly defrauding its investors by using different valuation methodologies to assess projects for internal versus external corporate purposes. I covered that trial in an October 2019 post titled “A Serious Contender For The Stupidest Litigation In The Country Goes To Trial.” The AG quickly lost that case ignominiously, which I covered in a further post in December 2019.

Is this case any better? If you haven’t been following this closely, here’s the short version of where things are. After making a campaign promise to get Trump in any way she could using the powers of her office, state Attorney General Letitia James then spent several years in a massive investigation to try to figure out something, anything, to charge him with. She never came up with any criminal charge, but ultimately filed civil claims accusing Trump of fraud by inflating the value of his assets in obtaining loans from banks. The loans in question have always been fully performing, which make these claims of fraud highly unusual if not completely unique in the annals of American law. But New York has a business “fraud” statute that deems that there can be fraud on the sole element of a misrepresentation (in other contexts, a charge of fraud requires multiple additional elements, including materiality, reliance, intent, and damages). Shortly prior to commencement of the trial, the Judge (Arthur Engoron of the New York State Supreme Court) granted what is known as “summary judgment” (i.e., final judgment without need for trial) to the AG on the intent-and-reliance-free fraud claim. But some additional claims, that can entail additional remedies if additional elements are proved, remained for trial.

When I got to the courthouse around 10 AM, there was a lot of beefed-up security to get in, but not a single person was waiting in the security line. So I breezed through, and headed up to the courtroom. At the courtroom (number 300 on the third floor) there were metal barricades and several guards. You needed a special New York State “secure pass” (available for lawyers) to get in — but I had one! (If you didn’t have one, they had a second courtroom on the floor below with a livestream playing.)

When I walked in, the first thing I noticed was that the lead lawyer for the AG’s office at counsel table was the exact same guy who had been the lead lawyer in the case against Exxon four years ago — one Kevin Wallace. I guess this guy gets all the good assignments. At least they didn’t hold the disaster in the prior case against him.

On the witness stand, a guy named Nicholas Haigh was testifying on cross-examination by one of Trump’s lawyers. It emerged that Haigh was the lead guy at Deutsche Bank who had been responsible for the review of Trump’s creditworthiness for the loans in question, and had signed off on annual credit review reports. During the time I was there (a little under two hours), Haigh was taken through the DB credit reviews for 2013, 2014 and 2015.

I had not seen the direct, which had taken place the prior day. There are a few reports on that direct testimony — including this one at Mother Jones — which indicate that Haigh’s testimony supported the AG’s claims at least to some extent.

However, I would characterize the portion of the testimony that I saw as surreal. The DB credit review documents — shown in the courtroom on a screen — contained charts of the values of properties that were used as collateral for the loans in question. The charts had two columns for the values, one supplied by the client, and the other supplied by DB’s own “Valuation Services Group.” The latter values were uniformly lower.

It emerged that certain terms of the loan depended on what was referred to as the “loan-to-value ratio.” For example, Trump had a personal guarantee for a portion of the loan balance (not all of it), and as the loan-to-value ratio got lower, the percentage Trump was required to guarantee personally dropped. But when computing the loan-to-value ratio for such purposes, the values provided by the DB Valuation Group, not those provided by Trump, were used. No surprise for me there. I have never heard of a bank taking the borrower’s word for the value of the property, and at least as far as the testimony I watched today, that was uniformly the case. Maybe there were exceptions to that in the direct testimony that I did not see. On the other hand, I would find it very hard to understand why Deutsche Bank, with its own Valuation Services Group, would take the word of a borrower as to valuation for any purpose.

At one point Judge Engoron got annoyed at Trump’s lawyer, who was asking the witness whether these loans were at all times fully performing. Engoron said (paraphrase) “I already said in my summary judgment opinion that the loans were all fully performing.” I guess Trump’s lawyers shouldn’t have been wasting his time on such trivial matters.

Anyway, it looks to me like the fix is in on this one for the AG at the trial level. It is a bench trial, without a jury, so Engoron is the sole decider. However, the Appellate Division will get its say next. I am hopeful that that court is not yet fully politicized, but in today’s New York I would not have any confidence.