NEW YORK (Reuters) -A New York state appeals court on Thursday threw out an approximately half-billion-dollar penalty that Donald Trump had been ordered to pay after a judge found the U.S. president fraudulently overstated the value of his properties and other assets to bolster his family business.
The decision by a five-judge panel of the Appellate Division in Manhattan represented a defeat for New York Attorney General Letitia James, whose office brought the civil fraud lawsuit against Trump in 2022.
James’ case had been among Trump’s biggest legal losses in a slew of lawsuits against him in recent years.
Lawyers for Trump did not immediately respond to requests for comment. James’ office did not immediately respond to similar requests.
The appeals court was splintered.
Two judges found Trump was properly held liable, and James “vindicated a public interest” by pursuing her fraud case, but the penalty was an excessive fine that violated the U.S. Constitution.
Two other judges also found James had authority to sue, but a new trial was necessary because the trial judge should not have held Trump liable for fraud at the outset. The fifth judge said the case against Trump should have been dismissed.
Trump was appealing a judgment entered by Justice Arthur Engoron in a state court in Manhattan, following a three-month nonjury trial.
Engoron found Trump had inflated his wealth over several years before first becoming president in 2017, to dupe lenders and insurers into providing better terms to the Trump Organization.
Trump has denied wrongdoing. His lawyers argued that the penalty was too high and that James had overreached.
In February 2024, the judge ordered Trump to pay $454.2 million in penalties plus interest, which has continued to accrue.
Trump was personally liable for nearly 98% of the judgment, with his eldest sons, Donald Trump Jr. and Eric Trump, and former Trump Organization chief financial officer Allen Weisselberg responsible for the remainder.
Referring to Trump and other Trump Organization figures, Engoron said their “complete lack of contrition and remorse borders on pathological.”
Engoron also banned Trump and the Trump Organization from applying for loans from banks registered in the state for three years, and effectively barred Donald Trump Jr. and Eric Trump from running the business for two years.
The appeals court put these restrictions on hold during the appeals process, while letting a court-appointed monitor for the Trump Organization continue her work.
(Reporting by Jonathan Stempel in New YorkEditing by Noeleen Walder and Rod Nickel)
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