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Appeals Court Hearing Arguments In Trump $454M Fraud Judgment; Hurricane Helene Threatens "Unsurvivable" Storm Surge. Aired 12:30-1p ET

Aired September 26, 2024 - 12:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[12:30:00]

JUDITH VALE, DEPUTY SOLICITOR GENERAL, NEW YORK STATE ATTORNEY GENERAL: -- whatsoever for liability, and the statute is written broadly because the legislature wants the attorney general to go in and stop fraud and illegality whether --

PETER MOULTON, NEW YORK APPEALS COURT JUDGE: An example of what you're talking about I think is People versus Allen, isn't it? There was just a dispute among partners.

VALE: Yes, and --

MOULTON: It didn't affect the public, I mean, at all. But I think you hear underneath all these questions, the question of mission creep as 63(12) morphed into something that it was not meant to do. And that's something you must address because there has to be some limitation on what the Attorney General can do in interfering in these private transactions, as Justice Freedman said, that where people don't claim harm. So what is the limiting principle?

VALE: Well, I'll say two things, Your Honor. Well, first of all, the limiting principle are what's in the law. So the illegality claims require intent. They require materiality most of them.

MOULTON: Let's talk about the -- but talk about the stand alone.

VALE: Just for the 63(12) fraud.

MOULTON: Yes.

VALE: Well, there -- this court has defined that rather broadly, but there are still limits. It is not falsity in the wind, first of all. It is not falsity that you whisper to someone on the couch. It has to be related and relevant to the business at hand. And it does have to have a capacity or tendency to deceive. It has to have a capacity or tendency to deceive.

And I will stress, Your Honor, that this does have harm to the public and to the markets. And I think what Your Honor is saying is that in the other -- in some of the other cases, the ripple effects happen to happen. It went so far that the ripple effects from fraud went on to hurt the market.

But what the legislature wanted was 63(12), just like for the Martin Act. And the Court of Appeals talks about this in Assured Guarantee --

UNIDENTIFIED MALE: How many does case --

UNIDENTIFIED MALE: Should it be prophylactic? Is that what you're about to say, Counsel?

VALE: Yes. Look at the Assured Guarantee case from the Court of Appeals. It talks about how a big point of these statutes, not the only point, but a big point is for the Attorney General to go in quickly to stop the fraud and illegality before it gets to the point that counterparties are harmed or it has those kinds of ripple effects in the market.

I do want to though push back on the idea that Deutsche Bank or the never complained and wasn't harmed at all. Deutsche Bank did complain when they first found out about the alleged misstatements at omissions. They raised serious concerns with defendants, said that misstatements in the financial statements would be an event of default.

They asked for more information. And when they didn't get more information, they exited the entire relationship with the Trumps. That shows that they cared about the financial statements being truthful and accurate, and that they were --

UNIDENTIFIED MALE: What geo is that in? What geo is that in?

VALE: That was in -- it was right when they first heard about the allegations. So I believe as it was 2020, Your Honor, although I'd have to check the precise year on that. And Mazars as well. When Mazars found out about the alleged misstatements and omissions, they also sent a letter saying these financial statements should not be relied upon anymore. So it is not true that the counterparties didn't care or never complained, even though that's not required for 63(12).

DIANNE RENWICK, PRESIDING JUSTICE, NY STATE SUPREME COURT APPELLATE DIVISION: And so -- I'm sorry.

UNIDENTIFIED MALE: Go ahead.

RENWICK: I'm moving off topic. So if you have a question on this, go ahead.

JOHN HIGGITT, NEW YORK APPEALS COURT JUDGE: Maybe a better topic than mine. Back to Justice Moulton's point about line drawing, because I do think that that is very important in this case. You know the history of this statute. It's passed under then AG Javits and then was really amplified by AG Lefkowitz over the years.

And when I went back and read the bill Jackets, the common thread was always we need greater -- the AG needs greater powers as the people's lawyer to protect consumers, civil rights and the environment. And so, again, with that sort of historical backdrop to this law, how do we draw a line or at least put up some guardrails to know when the AG is operating well within her broad -- admittedly broad sphere of 63(12). And when she is going into an area that wasn't intended for her jurisdiction?

VALE: Sure, Your Honor. Well, I will say, although there was certainly concern about consumers, especially at the outset of 63(12), in some of the legislative history, there were multiple bills being passed, and some of them were more specifically consumer protection statutes, which I think explains some of the focus.

And the legislature wrote this statute. It doesn't say consumers in it. It wasn't focus -- I mean, of course, we want to protect consumers. I'm not saying otherwise, but --

RENWICK: And it does start off -- it does start off with the words to protect honesty and integrity in the commercial marketplace. So --

VALE: Yes, Your Honor. And it also is -- it says quite broadly, whenever any person, whenever any person engages in fraud or illegality, that is meant to include businesses, large or small because this kind of deceptive risk does cause problems for the honest business people who don't do it this way and don't get the ill-gotten gains. And it does inject risks into the market.

I mean, Your Honor, there was probably a time when most of us didn't know what a Repo 105 was, which is what brought down Lehman or what RMBs was.

[12:35:03]

And maybe, you know, in an ideal world, the attorney general or somebody else would have gone in and stop that fraud and illegality when it was still just among the sophisticated counterparties and before it had the enormous harms and ripple effects that it ended up having.

RENWICK: So let me just ask you, you mentioned about the ripple effect, you know, going on. If the threat of harm or whatever the ripple effect is so remote, does the conduct fall still -- I mean, how remote does it have to be? It's the same question with regard to this line drawing in order for the AG to follow through?

VALE: I mean, I think the remote --

RENWICK: Or until it's outside --

VALE: Yes.

RENWICK: -- of the scope of the statute as intended.

VALE: Sure. I mean, I think at least for 63(12) fraud standing alone, I think the limit does come in through the capacity or tendency to deceive requirement. I don't think that the legislature wanted to have this kind of like evaluation about the precise harm out of a specific transaction. I mean, that's why harm is not -- I mean, harm is an issue that might be for restitution, but that's not an issue here.

But there is a limit, and it comes from the tendency or capacity to deceive standard that this court has put on, that does incorporate a materiality like standard. I think it -- when we say materiality is not required, we're talking about the reasonable investor that that materiality is not required. It's just which objective person you're looking to. There's still an objective standard. So there are --

UNIDENTIFIED MALE: That's a good point. And so which objective person are we looking to here given that it is the nature of the transaction that it is? I don't want to belabor the background.

VALE: I mean, it doesn't -- this court has said that the standard for 63(12) fraud standing alone is the objectively reasonable, ordinary and even unthinking person. But in this case, the court could use the higher standard and it would be fine. Because this --

DAVID FRIEDMAN, NEW YORK APPEALS COURT JUDGE: I notice you say the ordinary standard on page 55 of your brief, you say these deceptive strategies had a capacity, a tendency to deceive because they would have been relevant to and likely to mislead an ordinary person involved in the business dealings and you cite to General Electric.

Isn't the test here, whether they were likely to mislead Deutsche Bank or Ladder Capital or the City of New York awarding a golf license, or Zurich on a surety bond program, or Everest National Insurance Company on a director's and officer's policies, the defendant's statements were not meant for ordinary people. They were directed at some of the most sophisticated individuals and entities in business.

VALE: If the court wants to use the standard of a objectively reasonable counterparty, sophisticated counterparty, fine. They had a capacity or tendency to deceive that sophisticated party as well. Because these misstatements and omissions were about objective facts that were extremely important and that any reasonable counterparty would want to know.

Any sophisticated, reasonable counterparty would want to know that the defendants were valuing an apartment based on 20,000 square feet more than it really was. Based on pretending that rent regulations on certain apartments didn't exist. Based on pretending that the Mar-a- Lago restrictions didn't exist.

Your Honor asked about that. The trial court was very clear that it was not coming up with a magical valuation for itself. The problem with the Mar-a-Lago valuation is similar to what happened with the rent regulated apartments. The restrictions in the deed are there. They are an objective fact. They are very restrictive.

And even defendant's own expert at summary judgment, this is at 16502 of the record, agreed that the restrictions would decrease the value of Mar-a-Lago, but defendants valued it as if those restrictions didn't exist at all.

LLINET ROSADO, NEW YORK APPEALS COURT JUDGE: Counsel, I want to ask my question because your red light is on.

VALE: Absolutely, Your Honor.

ROSADO: Madam PJ, is that OK? UNIDENTIFIED FEMALE: Yes.

ROSADO: For the disgorgement calculations, when it have been more appropriate to calculate them by calculating the difference in valuation of the property versus the valuation provided to the banks to get the loans?

VALE: No, Your Honor. The discourse and the calculation, what we needed was a reasonable approximation. What is the reasonable approximation of what defendant's fraud gained them? And defendant's theory is that the guarantee and the financial statements each year were worth nothing. But the point of the guarantee and the financial statements each year was to get the extremely favorable interest rates.

And we were not speculating about the difference in interest rates. We had the counteroffer that Deutsche Bank, their own lenders, provided them for a loan without the guarantee and the financial statements. I do -- if I could touch very briefly on the statute of limitations, Your Honor --

UNIDENTIFIED FEMALE: I think we have it. Did you have another question?

UNIDENTIFIED MALE: I have a question that's similar to Judge Rosado's actually, which is, the immense penalty in this case is troubling. So how do you tether the amount that was assessed by Supreme Court to the harm that was caused here, where the parties left these transactions happy about how things went down?

[12:40:05]

VALE: Well, disgorgement, Your Honor, looks at taking the gain away from the wrongdoer. And although this is a large number, it's a large number for a couple reasons. One, because there was a lot of fraud. This went on -- and illegality. It went on for seven years during the statute of limitations period.

Another reason is because the guarantee and the financial statements each year worked to get enormously favorable interest rate savings to the defendants. It was a different -- a difference of approximately 4 to 8 percentage points obviously varied by year. That is an enormous benefit that they got from the misconduct. And it is not an excuse to say, well, our fraud was really successful, so we should get some of the money.

UNIDENTIFIED MALE: Was there double counting in the damages assessed for the old post office and the ferry point?

VALE: No, there was not double counting, Your Honor. Two points on this. First of all, the interest rate savings, And the sale profits are separate pots of money. The defendants got the interest rate savings off the top. There's no suggestion that they invested that savings into the OPO.

They were using the loan and so they got the interest right off the top. That was the savings that they got each year. I mean, each year within the statute of limitations. They were getting a savings by doing the fraud over and over again and the illegality. And then the sale profits are separate. And the sale profits, it's not the proceeds.

The proceeds of the loan were over of the sale were around $370 million. The trial court took out the repayment of the Deutsche Bank loan, and I think defendants themselves had taken out already the taxes. And Mr. Trump testified that the number for him, around $126 million in profits was his profit. That was his profit or more.

I mean, I'd happy to talk about the statute of limitations quickly, although I see that my red light is on. So --

ROSADO (?): Well, I'll give you more time for it.

VALE: Sure, Your Honor. On the statute of limitations --

ROSADO (?): I'll give you three minutes.

VALE: Thank you, Your Honor. On the statute of limitations, each use of a misleading statement in business and each issuance of a false financial statement --

MANU RAJU, CNN ANCHOR: All right, we've been watching lawyers for Donald Trump in the New York Attorney General's office facing off in Manhattan. The former president trying to get a -- this appeals court to reverse a lower court ruling, handing down that 454 -- 455 -- $454 million civil fraud judgment against him. We'll see if he's successful in doing that. That judgment came down back in February.

Laura Coates you've been -- we've been listening to these arguments. Did the judges seem more skeptical of Trump's attorneys or of the state's attorneys on this issue?

LAURA COATES, CNN ANCHOR & CHIEF LEGAL ANALYST: There's a bit of a divide we're seeing right now, which is often what happens when you have an appellate review and a panel who are really talking to the witness -- to the attorneys, but really talking to each other. This all comes down to no harm, no foul. We heard this initially.

If there were no victims, so to speak, then why has Tish James even brought this case? That's the argument of Trump's attorneys. It's now the argument of his appellate attorneys, questioning what the parameters of the law should have been. They're essentially saying, look, they were sophisticated parties who knew what they were doing, assumed the risks of the actual negotiation. Therefore, no one should be involved.

Now, of course, the judges are saying, well, that's not the actual statute. Harm is not explicitly required here should this have been enough.

RAJU: And then Trump's team says that it was unconstitutional, this scope of this judgment handed down against him. SHAN WU, FORMER FEDERAL PROSECUTOR: Right. And really that's such a dangerous argument for the public good to actually rule here that the attorney general's jurisdiction or authority is limited. Really, you carry this notion out, no harm, no foul. It's like, oh. private rich businessmen can do anything they want. They can play with the numbers to enrich themselves, and the AG can't do anything. So that's a very far-reaching argument if they go that way.

RAJU: And just a reminder that what Trump was found liable for, over 200 false and misleading claims valuations intended to secure better terms for loans and insurance. Some properties were valued hundreds of million dollars over reasonable estimates and of course that $454 million fine plus interest that's adding up. How did you see what just happened in court?

PAULA REID, CNN CHIEF LEGAL AFFAIRS CORRESPONDENT: I actually thought this was great for a solo plug, for having cameras in courtrooms so that people can see how this works. I think this was extremely fair because there were questions about why Trump was charged. Can you point to any other times when you brought a case like this and really she could not find an apples for apples comparison.

But then there were also questions about, well, is there really any bar on the attorney general doing this? And the answer seemed to be no. So, I think it was great for people to see this process, see how fair this was, but it's unlikely we're going to actually get this decision for the election.

RAJU: And we're very quickly. No reaction from Trump yet.

KRISTEN HOLMES, CNN NATIONAL CORRESPONDENT: None at all. But I do expect to watch clips of this and assess how he thinks Jonathan Sauer did, because one of the things he's been doing lately is watching all of his lawyers and giving them feedback.

RAJU: Yes, sometimes in real time.

HOLMES: Exactly.

RAJU: All right, we will monitor that, and there's a lot more to come in this very busy news hour, including FEMA administrator at the White House briefing about that monster storm about to hit Florida.

(COMMERCIAL BREAK)

[12:47:42]

RAJU: All right, more great news this hour. This is the guard (ph) of the White House with FEMA Administrator Deanne Criswell.

DEANNE CRISWELL, FEMA ADMINISTRATOR: And as I told him, we have been preparing for this storm for a number of days. And we began moving resources into Florida on Monday. I just want everybody to know that this is going to be a multi-state event with the potential for significant impacts from Florida all the way to Tennessee. And the president wants to make sure that everyone is paying attention to the potential life-threatening impacts that this storm may bring, and he has directed me to travel there tomorrow to assess the impacts. The entire state of Florida is under some type of warning right now, whether that's a hurricane warning or a tropical storm warning. And we expect like threatening flash flooding in the states north as the storm continues to move north.

And so I need everybody to pay attention to their local officials. They're going to have the best information on the specific risks where you are at. We're already seeing impacts in Florida, and the forecast indicates that we could see up to 20 feet of storm surge.

So just think back two years ago to Hurricane Ian. The peak storm surge from that was 14 feet. And we saw the amount of destruction, and 150 people lost their lives. The majority of them from drowning. So please, take this threat from storm surge seriously.

Residents that are in these areas, they can still take action. They can take action now to move out of harm's way. Remember that you may only need to go 10 miles or 15 miles inland to get away from the threat of the storm surge itself because water is the number one reason that we see people lose their lives in these storms. So please don't underestimate what the impacts could possibly be.

So at the president's direction, we have over 1,100 personnel so far across the federal government supporting the preparedness efforts for this storm. We also have an additional 700 personnel from FEMA that are already in these states supporting other disasters that we can quickly pivot to support any of the response needs as needed.

Some of the resources that we have already deployed include eight search and rescue teams across Florida and Georgia, as well as resources from the Coast Guard, the Department of Defense, to immediately support any lifesaving operations as needed.

[12:50:12]

The Army Corps of Engineers has power restoration teams and debris specialists who are going to be able to help restore power and support debris removal operations as soon as it is safe to do so. We have health and medical task forces from Health and Human Services to evaluate the impacts to medical facilities.

We have food, water, generators, and tarps that are deployed to staging locations across the region, and so they are easily accessible and movable post-storm. And the Red Cross is actively standing up shelters in areas that are expected to see and feel the impacts from Helene.

My regional administrator is currently embedded in the Florida Emergency Operations Center as well as incident management assistance teams in Florida, Georgia, and Alabama, and we have one currently moving to North Carolina today. So we can ensure seamless communications between the federal government and the needs of the states. I'm very grateful. As you heard, President Biden quickly approved pre- landfall declarations for Florida, Georgia and North Carolina. And this allows us to immediately provide any of that lifesaving support in the coming days. And I'm grateful for the rest of the federal family that is there on the ground working with us side by side as we prepare to support the American people for what is to come over the next several days.

I just want everybody to know that the Biden-Harris administration, we are ready for this event. We have aggressively pre-deployed resources. We are postured for whatever response might be needed. And so let me just say one more time before I take any questions, take the storm seriously.

People in Hurricane Helene's path, you need to listen to your local officials. If they tell you to evacuate, please do so. And if they tell you to shelter in place, then that's what you should do. They're going to give you the best information that you can do for your specific situation. Those decisions can save lives.

And with that, then I'll take questions.

UNIDENTIFIED FEMALE: Thanks for that. Thanks, Deanne. So this is likely to be the 21st billion dollar weather or climate disaster this year. So does FEMA have the resources to keep on responding to disaster after disaster like this?

CRISWELL: So we have absolutely enough resources to continue to support the lifesaving response that we need to for this event. I think everybody's aware that we went into immediate needs funding as our disaster relief fund, the funding was running low. But the reason we do that is to make sure we have enough money for an event just like this.

And so I want everybody to know that we have exactly what we need, and there are no limitations to our ability to support the response for this disaster. As we continue to go through the recovery, though, for all of these disasters that also takes personnel and we're going to continue to work through with our states about what they need and how we can best adjudicate those resources. But we are seeing an increase and we're seeing a strain on our staff with more of them deployed for longer periods of time helping to support these communities recover.

UNIDENTIFIED MALE: And just also related to the money here, some pretty substantial losses projected in terms of the crop (ph) insurance, in terms of the flood insurance, is there -- and there's no new money in the CR as far as this is concerned, is there any expectation that you're going to have to go back with a supplemental request?

CRISWELL: So, we -- yes, so we did put a supplemental request in with the CR, does not give us a supplemental at this time, but it gives us the ability to spend the money that was put forth in the president's budget. But we're already, through INF $9 billion, close to $9 billion in projects that we have put on hold that we can't reimburse communities for. Once we lift INF and once the CR goes into effect, we'll be able to pay those. But without a supplemental, we will be back in INF probably in the January time frame.

UNIDENTIFIED FEMALE: Thanks, Deanne. Can you talk more about how widespread you think prolonged power outages will be and what those power restoration teams are doing to prepare? Is there anything they can do proactively, you know, before the storm?

CRISWELL: So, Florida has a really robust plan and they have really aggressive targets to try to get the majority of people. I forget what the exact percentage is. I think it was 85 percent or 90 percent within 48 hours back up. And they have several thousand resources that have been prepositioned to come in and support Florida power and light or the other utilities to help them get the power back on.

We expect widespread power outages from this. When we think about Tallahassee, it's got a lot of tree canopy. So those trees are going to come down and impact those power lines and the debris and the ability to detangle. The debris from the power lines is what could take a long time.

The power restoration teams, they do a couple of things from the Army Corps. One, they can help us put generators in on critical facilities to help make sure that those facilities have power. But they can also make assessments on how to prioritize some of the work.

[12:55:10]

So we know where we need to put our efforts to help the private sector, utility companies get the power restored as quickly as possible.

UNIDENTIFIED FEMALE: Could you talk a little bit about how the response has changed based on the severity of the storms? I think we're seeing an increasing -- storms with increasing severity. So how does that change the response for you? I mean, I know it's more manpower, but what else? How else does it change?

CRISWELL: I think the biggest thing is that we want to get things in place early. This is why we've been moving resources into the area since Monday and having -- we know there's a large population that's really vulnerable in Florida. And so that's why we have so many search and rescue teams that are able to come in and augment the really impressive amount of teams that Florida already has within the state, right?

So this is on top of what they already have. And so, for us, it's making sure that we are sending more than we think that we'll need. And if I don't need them, I can send them home. What I don't want to do is be short. I want to make sure that I have enough that can support whatever the state's my request.

UNIDENTIFIED FEMALE: Go ahead, MJ.

MJ LEE, CNN SENIOR WHITE HOUSE CORRESPONDENT: You said that you are headed down there tomorrow. Did you discuss with the president whether it might be possible for him to make the trip down in the coming days? And secondly, is there a single piece of advice or warning that you wish in these kinds of situations, people would heed more seriously that you might want to emphasize in this setting?

CRISWELL: Yes. So the purpose of my visit is to assess the impacts and I'll be briefing him on what those impacts are. I'll leave it to Karine to talk with him about what, you know, actions he might take. But I think the message is take this seriously. I mean, we look at the cone, and the cone is the wind. But the water is what kills people.

And so, we need to really look at where this storm surge is going to be in Florida. But Georgia, South Carolina, North Carolina, and those Appalachians, they're going to have up to 20 inches of rain in an area that can have significant flash flooding, and that is really life threatening, and it comes so much faster than what we see from a storm surge, right?

They're going to have less warning once the rain starts there. So they need to know what they're going to do now. Put those plans in place today for where they're going to go, how they're going to contact their family and their friends, what they're going to need to take with them, like medicine or power devices for medical reasons.

It's not too late. They should be able to put those plans together today so they can take the actions that their local officials tell them to do.

UNIDENTIFIED FEMALE: Go ahead, (INAUDIBLE).

UNIDENTIFIED FEMALE: Thank you. You keep talking about the need to follow evacuation orders if local officials give them. We know from past storms that people don't always heed that, not because they don't want to, but because they can't afford to leave the area, don't have anywhere to go, don't have family members to help them. Is FEMA doing anything to work on that particular issue given what you're talking about with water and the danger that can come from that if people stay in place?

CRISWELL: Yes, so part of the pre-landfall emergency declaration is specifically to reimburse states and local jurisdictions for any of the costs that they incur to do sheltering and evacuation, because we want them to have the resources to put in place whatever measures that they need. I think the important thing on the evacuation to remember is if you're told to evacuate, especially from the storm surge area, it doesn't mean you have to go to a whole other state.

And I think we often think of those pictures of contraflow lines and backed up traffic. But you really sometimes only need to go a few miles to get out of harm's way. And so the local officials should be able to tell you where there's local evacuation centers that you can go to until the threat of the storm has passed.

And then when we get to the point where if they are displaced, then we have the long-term sheltering concerns that we'll have to work with. But the initial sheltering concern is just getting out of this storm's path for right now. Then we can work on what those long-term needs are. And that's why the pre-landfall declaration is so incredibly important that the president approved, is to make sure that those states have the resources to stand up those shelters and to help people get to safety.

UNIDENTIFIED FEMALE: And do you feel that the state is ready to stand up those shelters? I mean, you're talking about how you're going to reimburse them, but is Florida ready to do that?

CRISWELL: Florida has stood up many shelters and the American Red Cross is also there supporting that. I just need people to evacuate and go to them.

UNIDENTIFIED FEMALE: We're going to wrap it up. Go ahead, John (ph).

UNIDENTIFIED MALE: Thanks, Karine. What resources are available not only to families, but also the small business in the aftermath of this storm of making landfall? Resources coming not only from FEMA, but also from the SBA.

CRISWELL: Yes, there's a number of programs that are available for FEMA. We specifically made some changes into our disaster declaration, the Stafford Act recently, which allows people that work from home to actually get compensated for some of their business losses if they work from home, like if they had a computer or other --