Monday, February 19, 2024

The Wild, Wild West 🤠

The article is worth reading if you’re a lawyer. But the tl;dr is that the linchpin here is intent to defraud.

Trump himself, and apologists like Turley and Byron York:
are confusing what was actually charged in court with what they think they know. It’s a common problem. I learned long ago that, unless you are a lawyer working on the case, you don’t know what’s going on in the case. Unless, as was done for the article, you actually study the case.

Common law fraud does require someone suffer a loss due to the fraud. But common law fraud is predicated on damages recoverable due to the fraud. The charges against Trump, et al., in simple (there were many), are an intent to defraud by misrepresenting financial information presented to lenders and others, with the intent those misrepresentations be relied on (a key element of common law fraud), to the benefit of the defendants. Put simply, the state proved (the article was written before final arguments in the case, so it argues the state presented good evidence. The final judgment determined the state proved its case.) an intent to defraud, and the remedy is disgorgement of monies earned by that intent and action on it (i.e., profiting from the fraud). The state interest is to police and prevent fraudulent business practices.

If the apologists for Trump think this is unfair or unjust, they are arguing for a “wild West” business environment where the strong survive, the weak suffer, and caveat emptor is the only law. The rule of con men and grifters, in other words. Where financial statements mean nothing because disclaimers clean up all details, and you screwed up! You trusted us!

It’s really quite that plain and simple. The article is a more comprehensive (and better!) review of the trial, but in the simple argument of what fraud was, it was not, committed, Trump and his apologists (and likely some of his counsel), are dead wrong.
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1 comment:

  1. rustypickup9:17 AM

    "But the bank got paid back" is not the defense they think it is. Letting this kind of fraud go would be worse than the wild west, the banking system would basically stop functioning. This is the example I used when explaining this to an acquaintance. Two neighbors find themselves in desperate financial conditions. Each owns a home worth $300K and completely mortgaged. Each goes to the bank and fraudulently claims their house is worth $1M and gets a loan for $500K. The bank loans each of them the half million based on a properties worth $1M only having mortgages of $300K. Both home owners go to the casino, one places their money on red, the other on black. The first home owner wins and walks out with $1M, the second home owner loses. The first home owner pays back the bank and keeps the other $500K, the second home owner obviously can't pay back the bank. What is the difference between the first home owner that paid back the bank and the second who didn't? They both committed fraud, it was only luck that let the first pay back the bank. If we let the first home owner walk away because they paid the bank back, it's not hard to see that over time if enough people engage in this behavior the bank will ultimately fail.

    In a less legalistic discussion, the system only works if everyone acts with a modicum of good faith. Part of my career was heavily devoted to contractual work. Where trust was low, agreements were long and complicated to cover as many possibilities of bad faith action by the other side. Negotiations were time and resource consuming, there was a lot of friction and business was slow. Where there was reasonable commercial trust, then the parties could agree to terms rational terms, most of the negotiation was on things like price and delivery, not how to avoid getting screwed, and generally everything was mutually beneficial. There were occasions where trust was so low, a sense that the other party would act in good faith, that it wasn't worth contracting. Nobody benefited. One-off agreements were harder, there was less incentive for either party to behave if things went wrong (or one side tried to take undue advantage even if nothing went wrong). You had to cover as many contingencies as possible. Agreements where the parties would have a continuing relationship were easier. The need to continue to work together would result in the parties working past the specific language of the agreement if things went wrong, because both sides saw a benefit in continuing.

    Ultimately norms, good faith, trust, matter. Maybe you can get away without them in the one off situations. But longer term, be it banking or legislating, they ultimately are needed for even a modestly function system. The current problems in the house of representatives can be traced to a complete lack of good faith behavior within the Republican caucus, and between the Republican leadership and the Democrats. Violating norms, bad faith negotiation, failing to keep commitments, straight up lying, are all bad for any system.

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