Trump could face stiff penalties thanks to a powerful New York law

If a New York judge issues a final ruling in Donald J. Trump's civil fraud trial on Friday, the former president could face hundreds of millions in fines and new restrictions on his family business.

That may seem intense in a case where no victim is asking for redress and no key witness is pointing the finger at Mr. Trump. But a little-known 70-year-old law made the punishment possible.

The law, often referred to by the acronym 63(12), which stems from its place in New York's rulebook, is a regulatory bazooka for the state's attorney general, Letitia James. Her office has used it to target a wide range of corporate giants: oil company Exxon Mobil, tobacco brand Juul and pharmaceutical executive Martin Shkreli.

In the Trump case, Ms. James accused the former president of inflating his assets to obtain favorable loans and other financial benefits. Mr. Trump, she argued, defrauded his lenders.

Still, the lenders said they were thrilled to have Mr. Trump as a customer. And while a parade of witnesses repeated Ms. James's claim that the former president's financial statements were fiction, not a single witness offered evidence that Mr. Trump explicitly intended to fool the banks.

It may seem a fatal error, but under 63(12) such evidence was not necessary to establish fraud.

The law does not require the attorney general to prove that Mr. Trump intended to defraud anyone or that his actions resulted in financial loss.

The law “destroys a blow,” said Steven M. Cohen, a former federal prosecutor and top official in the attorney general's office, noting that the attorney general was not required to show that anyone had been harmed.

With that low bar, Judge Arthur F. Engoron, the judge presiding over the case, sided with Ms. James on her core claim before the trial began, finding that Mr. Trump had engaged in a pattern of fraud by the exaggerate the value of his property. assets in statements filed with its lenders.

Ms. James' burden of proof at trial was higher: To convince the judge that Mr. Trump had violated other state laws, she had to convince him that the former president acted deliberately.

Yet its ability to elicit further punishment based on those other violations is also a product of Article 63(12), which gives the Attorney General the right to prosecute those who engage in “repeated fraudulent or illegal acts.”

In other fraud cases, authorities must convince a judge or jury that someone has actually been defrauded. But 63(12) only requires Ms James to show that conduct was deceptive or 'created an atmosphere conducive to fraud'. Previous cases suggest that the word “fraud” itself is actually a synonym for dishonest conduct, the attorney general argued in her lawsuit.

Once the attorney general convinces a judge or jury that a suspect has acted deceptively, the punishment can be severe. The law allows Ms. James to seek forfeiture of money obtained through fraud.

The attorney general is seeking to recover about $370 million from Mr. Trump and his company, a potentially crushing sum. Of that total, $168 million represents the amount Mr. Trump has saved on loans by inflating his value, she argues. In other words: the extra interest that the lenders have missed.

The punishment is in the hands of the judge – there was no jury – and Article 63(12) gives him wide discretion.

The law also gives Judge Engoron the authority to impose new restrictions on Mr. Trump and his family business, all of which he is expected to appeal. Ms. James is seeking a lifetime ban on Mr. Trump's actions as leader of any New York company, including his own. She also wants the judge to prevent the company, known as the Trump Organization, from receiving loans from New York banks for five years.

Ms. James did not spare Mr. Trump's adult sons. She similarly asked Judge Engoron to ban them from running a business in New York, raising the prospect that a Trump might not run the family business.

The law allows for other creative – and potentially painful – penalties, including the revocation of corporate certificates that companies use to operate in New York. Judge Engoron did so in his pretrial order, though he also went a step further and ordered that some of Mr. Trump's New York operations be completely dissolved.

Legal experts have questioned his ability to do so, and Judge Engoron could modify that order.

Even before filing her lawsuit against the Trumps in 2022, Ms. James used 63(12) as a cudgel to bolster her investigation.

The law grants the attorney general's office something akin to prosecutorial investigative power. In most civil cases, an individual or entity planning to file a lawsuit cannot gather documents or conduct interviews until after the lawsuit has been filed. But 63(12) allows the Attorney General to conduct a substantive investigation before deciding whether to prosecute, settle, or discontinue a case. In the case against Mr. Trump, the investigation lasted nearly three years before a lawsuit was filed.

The law became so important to the case that it caught the attention of Mr. Trump, who complained about the sweeping authority it granted to Ms. James.

He wrote on social media last year that 63(12) was “VERY UNFAIR”.

William K. Rashbaum reporting contributed.