Category Archives: Politics

Election 2024: Catching Up

I’ve been on vacation for the past two weeks, without the capability of posting any blog entries during that time. As such this post’s purpose is to summarize a variety of recent developments on various fronts of interest:

Primaries. By now, both Trump and Biden have mathematically clinched their party’s nominations. Even so, the results from the most recent set of primaries — three days ago, or thirteen days after Haley dropped out — are a little surprising: Trump managed only 81% of the vote in Florida and Illinois, 79% in Arizona and Ohio, and 75% in Kansas (whose ballot offered an explicit ‘none of the above’ option).

Shortly after Super Tuesday, Biden gave a very effective State of the Union address that doubled as the kickoff of the Presidential campaign, although he took pains to never mention Trump by name, referring only to “my predecessor.” Biden also previewed in that speech a strategy to deflect criticisms of his age not only with humor, but also with an argument that Trump’s agenda of “hate, anger, revenge and retribution” represents “the oldest of ideas”.

Congress. As I write this we are less than 1 hour away from a potential partial government shutdown, a can that has been continually kicked down the road through the entirely of Mike Johnson’s speakership. Today Speaker Johnson managed to cobble together the required two-thirds majority for a $1.2 trillion spending package to avoid the shutdown, even though more Republicans voted against the bill than voted for it. However, there may be some technical impediment preventing the Senate from getting the bill passed prior to midnight tonight.

As the Speaker’s reward for attempting to actually govern, radical MAGAite Representative Marjorie Taylor Greene today filed a motion to once again vacate the Speakership. Moreover, with an upcoming resignation in the Republican ranks taking place next week, the Republican majority will soon drop to 217-213 (with 5 vacant seats), meaning that with unified Democratic opposition two Republican defections would be enough to defeat the Speaker on anything.

Trump v. U.S. (SCOTUS). This week Trump submitted his merits brief for the presidential immunity SCOTUS case (his interlocutory appeal from the Jan 6th federal case), accompanied by what struck me as a surprisingly large number of amicus briefs taking his side. The government’s merit brief (and briefs from amici supporting the government) isn’t due until April 8th, and oral argument has been set for April 25th.

New York v. Trump (criminal). Until recently the trial in the New York hush money case was set to commence this Monday, but delays have arisen. Instead a hearing will occur on Monday that is expected to set a revised trial date, quite possibly April 15th.

Georgia v. Trump, et al. Fulton County D.A. Willis recently survived the effort to have her removed from the case over a perceived conflict of interest, but the distraction probably hasn’t helped her ability to swiftly bring the case to trial. Also, Judge McAfee has dismissed a subset of the charges against Trump on the grounds that they were too vaguely stated to allow for the preparation of a defense; it is unclear whether Willis will seek to re-file those charges or simply proceed with the remainder of the case, which still includes the RICO charges.

U.S. v. Trump (Florida). While it is difficult to concisely summarize recent developments given the flurry of legal documents flying back and forth, Judge Cannon’s management of the trial in the Mar-a-Lago documents case continues to leave many observers on the left half of the political spectrum believing that she’s in the tank for Trump.

Carroll v. Trump I. Trump successfully arranged for a major insurer, Chubb, to post a $91.6 million surety bond while he appeals the jury’s verdict.

New York v. Trump, et al (civil). However, Trump has been unable to arrange for Chubb, or any other party, to post a $464 million appeal bond while he appeals Judge Engoron’s verdict in the Trump Org fraud case. Trump attempted to get the amount of the necessary bond reduced to $100 million, without success. Monday is the deadline. Among the difficulties here is an apparent lack of completely unencumbered assets that could be pledged as collateral.

Absent some deus ex machina solution, it is imaginable that New York could start seizing some of Trump’s assets next week…

TMTG. Did someone say deus ex machina?

We haven’t talked before about TMTG, which stands for Trump Media & Technology Group. This company was founded by Trump in 2021 to launch a Twitter competitor called Truth Social (recall this was before Musk’s takeover of Twitter, during a period where Twitter had banned Trump in light of Jan 6th), under the leadership of former Representative Devin Nunes. Almost two-and-a-half years ago, during the height of the SPAC (special purpose acquisition corporation) craze, TMTG had announced plans for it to be purchased by a SPAC called DWAC, or Digital World Acquisition Corp.

Although Truth Social is itself unprofitable, DWAC in effect became a meme stock, a means for investors market participants to signal their support for Trump. Like any other SPAC, DWAC stock was initially worth $10 per share, but it closed at $45 the day after the deal was announced in October 2021, and by March 2022 it had reached a high of $98.

However, for a variety of reasons the merger’s closure kept getting delayed, and for a while it was unclear whether the merger would ever occur. For most of 2023 DWAC traded in a tight range around $15 per share, reflecting the risk that the merger would get called off and DWAC’s investors would simply receive a $10 per share payout instead. In recent months things had regained momentum, with DWAC trading in the vicinity of $40 per share since mid-January. And then, today, the merger was finally approved.

What this means is that, by early next week, Donald J. Trump will own a majority of the shares in a newly public company, and at the current stock price Trump’s stake will be worth approximately $3 billion, on paper.

However, there appear to be lock-up restrictions on Trump’s ability to sell his TMTG stock, or even to pledge those shares as collateral, over the next six months. It will be interesting to see if Trump can come up with a plan to overcome those restrictions and find a way to monetize his TMTG holdings in order to alleviate his imminent liquidity crisis.

Having said that, It is important to note that there is a massive difference between having $3 billion in the bank, versus having a majority position in an illiquid investment that has little or no tangible value but that, measured at its current market price, is theoretically worth $3 billion. (Just ask Sam Bankman-Fried.)

Even if Trump were able to sell TMTG stock into the market, how realistic is it that he could swiftly raise $500 million in cash via stock sales without completely tanking the stock price? By the same token, if Trump were able to pledge TMTG shares as collateral, how much of his total holdings would a lender seek as collateral for a $500 million loan, given the risk of a collapse in the stock’s value (particularly in the event that Trump defaulted on the loan and the lender sought to monetize the collateral)?

Election 2024: Tuesday Stupor

Last year I changed my voter registration from Illinois to Minnesota, and back in November I cast my first ballot up here, in a local election.

Yesterday afternoon I’m driving my daughter home from school when I notice a “VOTE HERE” sign outside a local church. And that is, literally, the very first time it had occurred to me that Minnesota is a Super Tuesday state and this was the primary election day.

Here I am, somebody who cares enough about politics to make time out of his busy life to blog about the upcoming election, and I had no idea that it was election day in my state until three hours before polls closed! That’s embarrassing.

But at the same time, kind of understandable. If I had gone to the polls yesterday, what would that have accomplished? There was no primary competition on the Democratic side for either my House seat (Craig) or the Senate (Klobuchar). I suppose I could have racked my brain over whether to vote for Biden, for “uncommitted”, or for renegade Minnesota Representative Dean Phillips in the presidential primary, but to what end? So, both my wife and I sat this Super Tuesday out. November, obviously, will be a different matter.

More globally, Super Tuesday marked the end of the Haley campaign; she officially suspended her bid this morning. She did manage to win a single state, though: that Republican hotbed of Vermont, 50-46. (Over the weekend she had won her first primary contest in another Republican hotbed, the District of Columbia.) I heard at one point last night that, across all states yesterday, she was only attracting something like 25% of the vote. In Texas, for instance, she lost 78-17.

The race I was most interested in yesterday was the jungle primary for an open Senate seat in California, which featured three compelling Democratic House members – Adam Schiff, Katie Porter, and Barbara Lee – and an uninspiring Republican field led by former baseball star Steve Garvey. Three months ago I’d have thought that Schiff and Porter would advance to the general, which would have been a potentially expensive internecine race in the fall. However, Porter and Lee both underperformed and it only took half an hour after polls closed for Garvey to clinch the second position in the runoff. I’m sad to see Porter leave office, and I was also sad to see a former high school classmate, Joanna Weiss, finish 3rd in the jungle primary for Porter’s open seat in California’s 47th district (perhaps better known as the seat that Sam Seaborn ran in, in a by-election, when Rob Lowe wanted to leave The West Wing in mid-season).

But the most interesting political news of the day came in a state whose primary isn’t until later this month: Arizona, where first-term U.S. Senator Krysten Sinema announced that she would not be running for re-election. A former Green, she had been elected as a Democrat but later became an independent, while still caucusing with the Democrats. Unlike Sanders, she left the party not because she was to its left, but because she had drifted to its right. Congressman Ruben Gallego had announced he would primary Sinema, and it was widely believed he would win. After she left the party to avoid that primary, it was presumed that there would be a three-way general election this fall. As such, Sinema’s decision to stand down rather than run as an independent is a good sign for the Democrats’ ability to retain a key swing seat in the Senate, particularly if as expected the Republicans nominate MAGAite Kari Lake to face Gallego; it is easier to imagine Lake winning a three-way race than a head-to-head against Gallego.

Election 2024: Forfeit

When I was growing up, if you’d asked what “9-0” meant to me, I’d have instantly responded that it was the official score of a major league baseball game in which one team has forfeited.

Forfeits are awfully rare. I remember the one in 1977, the debut season of my beloved Blue Jays, when Earl Weaver pulled his Orioles off the field at Exhibition Stadium over purported safety concerns, leading the umpires to award the game to the Jays. There have been only two since then: the infamous Disco Demolition game at Comiskey in 1979; and a game in 1995 when baseballs had been given out at the door (oops!) and the Dodger fans threw them on the field.

Given this rarity, as an adult “9-0” has come to mean something rather different to me: a unanimous SCOTUS decision. Yesterday we had one of those, in Trump v. Anderson, but at the same time it also feels like a forfeiture.

From the standpoint of form, the Court’s opinion is unusual. It is styled as a per curiam opinion, which is uncommon, particularly with respect to a case that reached the oral argument stage: there was only one such instance last term, in Gonzalez v. Google. Additionally, and somewhat unusually for a per curiam decision, there were two additional signed opinions, both of which are technically concurrences: one from Barrett, and one from the three liberal judges.

All 9 justices agreed on a core holding that, based on the oral argument, was relatively easy to foresee: while a state can disqualify a candidate for state office under Section 3 of the 14th Amendment, there is no state role in assessing the qualifications of a candidate for federal office under Section 3. That holding is sufficient to resolve the Colorado lawsuit, and all other state challenges to Trump’s placement on the 2024 ballot.

In light of that jurisdictional holding, the Court’s opinion is completely silent on another question that was hotly debated, namely whether or not the Presidency even falls within Section 3’s scope. Nor, with this holding, did the Court have any reason to ever discuss the factual finding at the Colorado District Court level that Trump’s Jan 6th conduct makes him an “oath-breaking insurrectionist.”

However, the per curiam opinion does go beyond the minimal holding necessary to resolve the case, in a manner that attracted the ire of the 3 liberal justices and that as a practical matter appears to forfeit any ability to apply Section 3 in the 2024 election and possibly beyond. Quoting from the liberals’ quasi-dissent:

“[F]ive justices … decide novel constitutional questions to insulate this Court and petitioner from future controversy. Although only an individual State’s action is at issue here, the majority opines on which federal actors can enforce Section 3, and how they must do so. The majority announces that a disqualification for insurrection can occur only when Congress enacts a particular kind of legislation pursuant to Section 5 of the Fourteenth Amendment. In doing so, the majority shuts the door on other potential means of federal enforcement. We cannot join an opinion that decides momentous and difficult issues unnecessarily, and we therefore concur only in the judgment.

In short: Per a majority of the Court, the path to enforcing Section 3 against a federal officeholder necessarily involves Congressional legislation under Section 5, which legislation in turn needs to meet the Court’s “congruence and proportionality” test articulated in its 1997 decision, Boerne v. Flores (hence the liberals’ reference above to “a particular kind of legislation”). Barrett joins the liberals in saying that issue shouldn’t have been reached (hence the reference above to “five justices”).

A criticism of this decision is that it seems incoherent for the Constitution to specifically require a two-thirds vote of both houses of Congress to reinstate an ineligible insurrectionist’s right to hold federal office, while at the same time giving a majority in either house the ability to prevent an individual from being identified as an ineligible insurrectionist in the first place, simply by its refusal to enact implementing legislation under Section 5. Yet, that view is now the law of the land.

There is also an interesting passage in the per curiam opinion:

The disruption would be all the more acute—and could nullify the votes of millions and change the election result—if Section 3 enforcement were attempted after the Nation has voted. Nothing in the Constitution requires that we endure such chaos…

This seems to be saying, sotto voce, that (contrary to the views of many amici) Congress cannot use Trump’s putative status as an oath-breaking insurrectionist as justification for not counting electoral votes cast for him when Congress fulfills its duties on January 6, 2025.

As such, other than death, there appears to be no further potential impediment to a Trump-Biden rematch on all states’ ballots in November 2024 – a rematch in which, per the latest NYTimes poll, the candidate who was recently fined upwards of a half-a-billion dollars, still faces 91 criminal charges in 4 different jurisdictions, and was recently named the worst President of all time by a panel of political scientists leads 48-43.

What a country.

Election 2024: Leap

It’s Leap Day today, which I guess is one of the ways we know it’s a US Presidential Election year. Although for me, the main function of Leap Day is that appointed actuaries get one more day to submit their annual actuarial opinions to state insurance regulators…

On Saturday Trump beat Haley in the South Carolina primary, 60-40, and then followed that up with a 66-27 win in Tuesday’s Michigan primary. We’re now four days away from Super Tuesday, and there are no signs of Haley being able to win in any state, having already missed what were probably her two best chances (NH and SC). By this time next week it seems likely that Haley will have suspended her campaign, but unlikely (at least in my mind) that she will immediately endorse Trump.

As such we are rapidly reaching the point in the quadrennial cycle where the National Committee of the out-of-power party subsumes itself to the electoral apparatus of the presumptive nominee. RNC Chair Ronna McDaniel, who has survived in that role since 2017 despite the Republicans having underperformed during her term in three straight elections, has announced her intention to resign. It is widely expected that Trump’s daughter-in-law Lara will become a Co-Chair of the RNC, despite her lack of political experience (she toyed with running for U.S. Senate in North Carolina in 2022 but never entered the race).

It looked like yesterday’s big political news was going to be Senator McConnell’s announcement that he would step down from Republican Senate leadership at the end of this Congress. This continues the recent trend of mainline Republicans walking away from political roles as the party continues to remake itself in Trump’s image. The most logical candidate to take up McConnell’s mantle is likely South Dakota Senator John Thune, who recently endorsed Trump despite having previously described Trump’s conduct on Jan 6th as “inexcusable”.

But the big news hit at the end of the day yesterday, when SCOTUS announced that it would indeed hear Trump’s interlocutory appeal in the Jan 6th case, thereby extending the stay that prevents Judge Chutkan from making any further forward progress towards a trial date. Notably, the scope of the SCOTUS case will be limited to Trump’s arguments on presidential immunity; SCOTUS will not be entertaining Trump’s exceedingly silly interpretation of the Constitution’s Impeachment Judgment Clause.

Ordinarily, when SCOTUS agrees in February to add a case to its calendar, the oral argument will get scheduled for the Court’s next term (fiscal year), starting in October. In Trump v. U.S., as this SCOTUS case will be styled (since Trump lost below and is the appellant above), the Court deviated from that practice and scheduled the oral argument during the week of April 22nd, the final week of oral argument for the current SCOTUS term. Given that accelerated timeline, we can expect a SCOTUS ruling on Trump v. U.S. to be issued by the last week of June.

However to the extent the SCOTUS decision does take that long, even if Trump loses (as everyone seems to expect he will) this delay will seriously impair the likelihood that the trial in U.S. v. Trump (D.C. edition) is completed prior to the election.

Yesterday I heard Neal Katyal argue on MSNBC that he thinks SCOTUS could fast-track its action after the oral argument, in either of two ways. First, the Court could accelerate the normal course of releasing its opinion, which might be easy to do here since the issues have already been well-briefed below and the decision might (like the D.C. Circuit decision below) be issued on a unanimous per curiam basis, with the decision already essentially written before oral argument. Second, the Court could announce its judgment on an accelerated timeline while delaying the publication of accompanying opinions. I’ve never heard of such a thing happening, but if Katyal says SCOTUS has the ability to do it I trust him.

But even in Katyal’s rosy scenario, it would seem impossible to get Chutkan’s trial even started, let alone completed, prior to the Republican National Convention in mid-July. And the optics of making a nominated major-party candidate leave the campaign trail to sit through a criminal trial are admittedly troubling.

So, is SCOTUS acting with political motives here? Or are there sound judicial reasons why they’re taking up the case, rather than letting the D.C. Circuit’s decision stand?

In a vacuum, the question of “does a former President have criminal immunity for actions taken during his term” certainly seems like a question that ought to be resolved definitively by the Supreme Court, rather than by a lower court. As such, from an institutional standpoint, I can see Chief Justice Roberts arguing that SCOTUS needs to issue a decision here, rather than decline to hear the case. Of course, that is essentially why Special Counsel Smith had argued two months ago that SCOTUS should hear the case on direct appeal from the district court, skipping the normal appellate layer entirely.

But on a more practical level, the real reason SCOTUS needs to hear the case may have more to do with U.S. v. Trump (Florida edition).

Last week, Trump filed a motion with Judge Cannon arguing that the federal charges in the Mar-a-Lago documents case ought to be dismissed on presidential immunity grounds. Now you might wonder: Why would Trump even bother raising that argument anew, given that the D.C. Circuit just ruled against him on that very issue, albeit in a different case?

The answer is, because federal jurisprudence is a strange beast…

The country is divided into 13 regional circuits, each of which has their own set of case law that is binding within that circuit, but not binding outside that circuit. This is in essence most of what SCOTUS does — accepting cases to resolve “circuit splits”, situations where judges in one circuit have said “this federal law implies XYZ” and judges in a different circuit have said “no it really instead implies ABC”. A judge in one circuit reviewing an issue of law that has never before arisen in their circuit, but has been the subject of opinions in other circuits, may well be influenced by the judicial reasoning expressed by other circuits, but in any event they are not bound by that reasoning.

And Judge Cannon is not part of the D.C. Circuit; she’s part of the 11th Circuit, because Special Counsel Smith made the decision to charge those crimes in Florida, where most of the alleged obstruction of justice activity took place. As such, the D.C. Circuit’s decision in Trump v. U.S. is not binding on Judge Cannon. She could, in principle, reach a different decision on the scope of presidential immunity, and throw out the Mar-a-Lago documents case. Then Smith would need to appeal to the 11th Circuit, and if the 11th Circuit were to uphold Cannon (or decline to hear the case) there would be a circuit split that SCOTUS would need to resolve. Or, if the 11th Circuit issued a ruling that was adverse to Trump but differed in some material respect from the D.C. Circuit’s ruling, then when Trump appeals the 11th Circuit there might still be a circuit split that SCOTUS wants to resolve.

Moreover, Cannon so far has proven herself to be a (forgive the pun) loose cannon, judicially. She was only appointed to the bench in the waning days of the Trump administration, making her relatively inexperienced as federal judges go (she is in her early 40s and had 7 years’ experience as an AUSA before her appointment). Some of her early rulings in the Mar-a-Lago case were very favorable to Trump and were immediately rebuked by the 11th Circuit, and her subsequent management of the case has led many observers to suggest that Smith ought to call for her recusal. As such, one can imagine that Cannon could be predisposed to agree with Trump’s presidential immunity arguments, even in light of the D.C. Circuit’s recent decision.

As such, there may be sound judicial arguments why SCOTUS felt like taking up Trump v. U.S. was the appropriate thing to do. It is very unfortunate, however, that the practical implications of that decision likely involve an inability for the judicial system to resolve the Trump Jan 6th case before voters enter the ballot box in 2024.

Which now means that NYC District Attorney Bragg’s hush money case, which felt like a sideshow in many ways, may well be the only one of Trump’s four potential criminal trials to actually occur before the election.

Election 2024: Thoughts on the Trump Org Fraud Trial, Part 1

I have been meaning to write a long essay about Judge Engoron’s decision last week in New York v. Trump, the civil fraud trial regarding the interconnected series of Trump-owned enterprises that is commonly known as the Trump Organization. However this is a very busy time of year for me, which has delayed my ability to do that. As such I am now going to break the essay into two pieces: one that talks about background relevant to the case, and then a later one that delves more into the decision itself.

Many of the things I will write about in this essay start to get close to my professional interests. For that reason, I want to clarify that everything I write here are my personal opinions and should not be construed as the views of my employer.

The heart of the prosecution’s case in New York v. Trump is that, over an extended period of time, Donald J. Trump repeatedly disseminated to lenders and insurers Statements of Financial Condition that were fraudulent, in that they purported to comply with U.S. GAAP (Generally Accepted Accounting Principles) but did not in fact do so.

This is a strange case in many ways. To understand why, we need to step back and talk about how businesses generally prepare financial statements.

Many, if not most, of the businesses that we encounter in modern American life are public corporations — entities whose stock can be bought and sold on stock exchanges. These companies are required, by the Securities & Exchange Commission (SEC), to publicly file financial statements on an annual basis that comply with U.S. GAAP. Moreover, these companies are required to hire an independent public accounting firm to audit those financial statements and express an opinion that the statements are fairly stated.

An under-appreciated point is that the financial statements are the responsibility of company management, not the audit firm. The audit firm does not tell management what to record. However, the audit firm does play a societally important role in verifying the material accuracy of the financial statements, by performing various types of audit procedures. One example of this would include validating that management has appropriately followed/interpreted the applicable accounting literature in preparing its financial statements.

As another example that hits particularly close to home for me: If the company’s financial statement involves liability or asset balances that are uncertain and that require specialized expertise to estimate, the audit firm may employ their own specialists to assess the reasonableness of management’s estimates. That assessment includes looking at the data, assumptions, and methodology underlying management’s estimate, and may involve constructing an independent range of reasonable estimates. (This is, in fact, what I do for a living, with respect to a particular class of estimates relating to health insurance risk.) To the extent company management is unable to convince the audit firm and its specialists that management’s estimate is reasonable, and the difference is considered by the audit firm to be material to a reader of the financial statements, the audit firm could be unwilling to issue an unqualified audit opinion unless management agrees to change its estimate.

That is the audit firm’s ultimate “stick” in the audit process — the threat to withhold the “carrot” associated with the firm opining that the financial statements fairly present the company’s financial position. For this reason, it has become relatively rare for public companies to have significant material errors in their GAAP financial statements coming from either the misapplication of accounting principles or use of inaccurate data as inputs: An audit firm would likely detect, and require their client to correct, such an error before it appears in published financials. There are occasionally frauds perpetrated by companies that their auditors fail to detect, to be true, as well as misapplications of the accounting literature that initially went undetected before later being found and corrected. But for the most part, the audit process significantly enhances the reliability of a public company’s financial statement.

In light of this, it has become very common for privately held companies to also prepare GAAP financial statements, and get those financials independently audited, even in the absence of an SEC-imposed requirement to do so. These private company GAAP statements are often not released to the public. However, the providers of equity and debt capital to a private company may require that audited GAAP financial statements be prepared annually, so that they can monitor their investment. Also, if the company has ambitions of going public someday, they will need audited GAAP financials as part of their initial public offering registration statement. As such, even for many private companies whose financial statements aren’t publicly disclosed, an audit firm is in the background, playing a role to provide assurance that management’s financial statements comply with GAAP.

Which brings us to the Trump Organization. Not only is it not a public company, it is not even a traditional private company: There is no corporate entity called “Trump Inc.” whose stock is owned by Donald J. Trump and other family members, and that in turn operates various business ventures. Instead, the “Trump Organization” is an interweaving and opaque collective of various assets, most of which are organized into separate limited liability companies (LLCs), and all of which ultimately come under the common control of Donald J. Trump.

As such, when we’re talking about Statements of Financial Condition issued by the Trump Organization, we’re actually talking about a GAAP concept known as a “Personal Financial Statement,” covered by a piece of accounting literature called ASC 274. These statements, generally prepared by high-net-worth individuals who need to provide financial statements to lenders, focus on the balance sheet — that is, assets and liabilities — and the measurement attribute for those balances is called “estimated current value,” which is defined as “the amount at which this item could be exchanged between a buyer and seller, each of whom is well informed and willing, and neither of whom is compelled to buy or sell.”

Obviously there is considerable judgment involved in arriving at the estimated current value of the types of assets that Trump owns, such as office buildings and golf courses. Nevertheless, that doesn’t mean one has unfettered ability to invent the values reported on the financial statement; those values need to be supportable, by relevant data and methods and assumptions, as an estimate of current value consistent with the objective articulated in the language I quoted above.

Additionally, there are other more general aspects of GAAP that need to be adhered to in an ASC 274 financial statement, such as (to pick an example that will become relevant) what does or does not quality as “cash”. There are also disclosure requirements, many of which relate to things like the methodologies in use and the year-over-year consistency of the balances reported.

At the end of the day, a personal financial statement is the responsibility of the person involved, just as a corporate financial statement is the responsibility of the management of the corporation. In principle, an independent accounting firm could be involved in auditing a personal financial statement, just as they are involved in auditing a corporate financial statement. And if so, that audit would involve the accounting firm expressing an opinion that the financial statements are fairly stated in accordance with GAAP, which would mean the firm had reviewed the various estimates made and the application of accounting principles.

But more commonly, accounting firms perform what are called compilation engagements, rather than assurance engagements, with respect to personal financial statements. That is, an accounting firm is involved in helping the individual prepare and issue the statements, but does not actually audit the financials.

That’s what we’re talking about, when we’re talking about these Statements of Financial Condition that the Trump Org prepared on an annual basis and sent to its lenders and insurers. They are GAAP statements showing estimated assets and liabilities; they are the responsibility of, ultimately, Donald J. Trump; they were compiled by an external accounting firm, generally Mazars; but, importantly, they were not audited by Mazars.

And as such, there was no external gatekeeper making sure that the estimated values reported for various assets by Trump Org were reasonable, or that the overall financial statements and associated disclosures were compliant with the applicable accounting literature. However, Trump himself certified that the statements were compliant with GAAP, as part of the process for Mazars to release the compiled statements.

A question one might be asking at this point is: Why did Donald J. Trump organize his business affairs in this fashion? Why is there no umbrella holding company called “Trump Inc.” that would prepare normal corporate financial statements and have them audited by an independent accounting firm? Why instead does Trump have ownership of an opaque web of LLCs and then prepare personal financial statements that are not audited but compiled?

I’m sure the answer to those questions is multi-faceted. However I will observe the following: If one wanted to be able to play fast and loose with the accounting rules — to be able to inflate the values of one’s assets and hence one’s net worth without external oversight from accountants and their specialists — then issuing compiled personal financial statements, rather than audited corporate financial statements, would be the way to go.

I’ll pick up on that theme in part two, at a later date.

Election 2024: Verdicts

Two major news stories broke yesterday, each involving a verdict of sorts, each involving a death penalty of sorts, and each seemingly inevitable.

One story involved Trump. Judge Engoron released his ruling in the Trump Org civil fraud case, and it was roughly as unfavorable to Trump and his family as one would have expected. I intend to write at greater length about this case another time, but the bottom line is that Trump et al owe New York State $355 million in penalties, plus interest that could amount to almost another $100 million. Additionally, Trump himself cannot serve as the director or officer of any New York corporation for 3 years, and his sons cannot do the same for 2 years. I guess that leaves Ivanka in charge?

Trump is also banned for applying for a loan from any entity licensed by the New York Department of Financial Services for 3 years. Moreover, there is ongoing injunctive relief with respect to the Trump Organization. Judge Jones’ appointment as independent monitor will extend for another 3 years, with additional powers; also, Trump Org will now be required to hire an independent director of compliance, reporting directly to Jones.

The only good news the ruling provided for Trump is that Engoron reversed his previous decision (which had been stayed) to cancel all of Trump’s New York LLC licenses; instead, this new compliance director will individually review each LLC for “restructuring and potential dissolution.” As such, the ruling is not a ‘death penalty’ with respect to Trump’s continued ability to conduct business in New York. However, it is a significant black mark on his record, as well as a massive strain on his liquidity due to the need to either put up the fines in escrow or obtain a bond, as with the Carroll defamation judgment.

The other story involved Alexei Navalny, the most prominent Russian opposition political figure. He died yesterday in a Siberian prison at the age of 47, three-and-a-half years after he had been poisoned (almost assuredly by Russian security forces), and three years after he voluntarily returned to Russia only to be immediately arrested.

The cause of death is unknown, but surely the proximate cause was his life of political resistance to Putin. Indeed, once he had decided to return to Russia by himself, leaving his wife and teenagers in exile, it was hard to imagine an ending to his story that didn’t end with his death as a political prisoner.

This may be too much to hope for, but possibly Navalny’s death will stem the rising tide of pro-Putin sentiment within the Republican party and its hangers-on, most recently illustrated by Tucker Carlson’s trip last week to Moscow to fawningly interview Putin.

Election 2024: Quartet

Today there is active news in four different legal fronts involving Trump.

First: There is reporting that Judge Engoron’s decision in the Trump Org fraud trial is very likely to be issued tomorrow.

Second: As I had predicted, it only took Special Counsel Smith one day out of the seven allotted to him to submit a 40-page response to SCOTUS regarding Trump’s request for a stay of the D.C. Circuit’s denial of his interlocutory appeal. Trump’s reply brief was then submitted today; three briefs in three days, that’s the shadow docket for you. SCOTUS has a conference already scheduled for tomorrow, and some court-watchers are speculating that Smith was seeking to get his brief submitted early enough that the case could be added to the agenda for that conference.

Third: Today New York State Judge Juan Merchan denied Trump’s motion to have the state felony charges in the hush money case dismissed, and confirmed March 25th as the trial date. This trial is expected to last for six weeks.

Lastly we have Georgia, which I haven’t talked about until now, so some context is necessary.

When Special Counsel Smith made his federal charging decisions regarding Jan 6th, he intentionally took a very streamlined path: Trump was the only person named in the indictment, although six unnamed unindicted co-conspirators were noted and are generally believed to include both Rudy Guliani and former chief of staff Mark Meadows.

However, much of the conduct relating to Jan 6th, such as Trump’s famous call with Georgia Secretary of State Raffensberger, also ran afoul of state statutes, particularly in Georgia. As a result the Fulton County District Attorney, Fani Willis, also launched an investigation. She chose a very different and expansive prosecutorial path than Smith, resulting in Georgia RICO charges being filed against 19 defendants, including Trump and Guliani and Meadows.

The existence of the Georgia Jan 6th case has been considered important by many, due to the fact that if Trump wins election in 2024 then he could make the DOJ dismiss all federal indictments against him (and/or pardon himself if any convictions had occurred), but he can’t do the same with respect to state charges. However, many pundits felt that the Georgia case was so complex that a trial before the 2024 election was unlikely to occur, notwithstanding Willis’ protestations to the contrary. Moreover, it is at best unclear whether a state prosecution of an individual could continue if that defendant were to be elected President.

However, in recent weeks an unforeseen obstacle has arisen, related to Willis’ own personal conduct. Without getting into lurid details, it is conceivable that Georgia State Judge Scott McAfee could rule that Willis has a conflict of interest that would disqualify her and her office from continuing to prosecute the case. In that event, a new prosecutor would need to be assigned, which might delay the trial significantly. Today, Willis herself had to testify about the timing and nature of her alleged romantic relationship with the lawyer she had hired to manage the prosecution of the case.

Election 2024: Drip Drip

It has yet to be a particularly eventful week, but there have been an accumulation of minor political and legal developments to memorialize.

There was a by-election tonight in New York’s 3rd District, in northern Long Island. This district has the fourth-highest average income of any US Congressional district, but even so when it flipped to the Republicans in the 2022 midterms that was a surprise. The then-incumbent, moderate Democrat Tom Suozzi, had decided to instead run (unsuccessfully) in the Democratic gubernatorial primary. Facing an open seat, the Republicans ran an appealing young Republican who had never before held office but had lost 44-56 to Suozzi in 2020, a Brazilian immigrant named George Santos. This time Santos won, 54-46.

Of course, it was only after the election that the national media made any attempt to dig into the background of Representative Santos, rapidly discovering he was a serial fabulist: Almost nothing he had claimed about his background, or reported on campaign finance paperwork, turned out to be true. Despite this, with the House Republican majority as narrow as it was and with the seat likely to flip back to the Democrats without Santos, it took almost half of his term before the House finally expelled him on ethics charges. Suozzi then announced he would run for his old seat back. As of this writing the election has been called for Suozzi, who is leading 54-46 with 84% of the vote in.

With the Democrats about to gain a seat, the House Republicans made a second attempt today to impeach DHS Security Mayorkas, and this time they had the votes: Representative Scalise returned to D.C. after a six-week absence due to cancer treatment, casting the deciding vote for the first-ever impeachment of a Cabinet secretary, 214-213.

Yesterday was the deadline imposed by the D.C. Circuit for Trump to make a request that SCOTUS stay its decision denying his interlocutory appeal in the Jan 6th federal, or else Judge Chutkan would have been allowed to unpause the proceedings. He filed his brief yesterday, and today Chief Justice Roberts asked Special Counsel Smith to reply within the week; I strongly suspect that reply will get filed tomorrow. Two amicus briefs were filed today, both opposing Trump’s request for a stay; one of the briefs is from a long list of former Republican officials, headed by former Senator John Danforth, but also including Michael Luttig and George Conway.

No further news yet from SCOTUS on Trump v. Anderson, or from Judge Engoron.

Election 2024: And In Other News…

While I was organizing my thoughts on the Trump v. Anderson oral arguments, there were meaningful developments in another legal matter involving a presumptive 2024 Presidential candidate – except this time the matter involves President Biden.

Some context to start:

So far, in this series of posts that I started a few weeks ago, I have yet to mention the “Mar-a-Lago documents case”. This is one of two federal criminal cases styled U.S. v. Trump, both brought by Special Counsel Jack Smith; the other is what I’ve been calling the “Jan 6th federal case”, the case in which this week the D.C Circuit denied Trump’s interlocutory appeal on presidential immunity. That case is being heard by a D.C.-based federal judge, Chutkan; the Mar-a-Lago version of U.S. v. Trump is being heard by a Florida-based federal judge, Cannon.

The meat of the case before Judge Cannon is that, allegedly (but with no apparent shortage of compelling evidence), after leaving the White House Trump not only brought dozens of boxes of government documents inclusive of highly classified material to his semi-public compound at Mar-a-Lago, but also obstructed justice when the government asked for those documents’ return.

While investigations into Trump’s mishandling of classified documents were underway, lesser numbers of classified documents were also found a little more than a year ago at the homes of the two most recent Vice-Presidents, Pence and Biden. Several weeks after Attorney General Garland had appointed Jack Smith as a Special Counsel to lead the Trump investigations, and shortly after the news broke of classified documents being found at Biden’s home, Garland appointed a second Special Counsel in January 2023 to lead the investigation of Biden’s handling of documents. That Special Counsel, Robert Hur, had been an appointee in the Trump DOJ.

Hur had sent his final report to Garland on Monday, but news of it didn’t break until today when Garland sent a letter accompanying that report to Congress. The report’s conclusion is that no federal charges are warranted.

However, one paragraph in the 350+ page report is kicking up a firestorm and attracted a two-page rebuttal from Biden’s counsel in an appendix to the report. In a subsection called “For other reasons, a jury will be unlikely to unanimously convict Mr. Biden” Hur writes:

“Mr. Biden will likely present himself to the jury, as he did during his interview with our office, as a sympathetic, well-meaning, elderly man with a poor memory. While he is and must be accountable for his actions–he is, after all, the President of the United States–based on our direct observations of him, Mr. Biden is someone for whom many jurors will want to search for reasonable doubt. It would be difficult to convince a jury they should convict him–by then a former president who will be at least well into his eighties–of a serious felony that requires a mental state of willfulness.”

This, of course, plays right into one of Trump’s major campaign themes, namely the purported cognitive impairment of the man he frequently calls “Sleepy Joe”.

Moving away from legal news for a brief moment: This week, a new poll of key swing state Wisconsin had Trump and Biden tied 49-49 in a head-to-head matchup, while having Haley ahead by an astonishing 57-42 in a head-to-head matchup. However, this week Haley couldn’t even win a primary on which Trump wasn’t on the ballot, losing 30-63 on Tuesday in Nevada to “None of the above”.

Election 2024: Oral Arguments

This morning SCOTUS held its oral arguments in Trump v. Anderson, Trump’s appeal of the SCOCO decision banning him from the Colorado Republican primary ballot.

The arguments were scheduled for 80 minutes but ran a little over 2 hours. I’ve read a large number of SCOTUS transcripts after the fact, for fun, but this was the first time that I actually listened to an oral argument in real time; it was an interesting experience made slightly confusing by the fact that I don’t know the justices’ voices that well, but I mostly guessed correctly who was speaking, only confusing Roberts with Gorsuch.

The general consensus is that things went very well for Trump. Halfway during the arguments, electoral law expert Rick Hasen predicted a 9-0 or possibly 8-1 decision for Trump, with Sotomayor the only possible holdout. Shortly after things ended, Neal Katyal (a former #2 in the Solicitor General’s office) went on TV and said he’s listened to 400 SCOTUS oral arguments and made 50 himself, and that today went about as badly for the respondents as any SCOTUS oral argument he can remember.

My preview of the legal issues was largely on point: They indeed talked a lot about Griffin’s Case, and they talked a lot about whether the President is an “officer of the United States” to which Section 3 of the 14th Amendment could apply. On that point, I was rather surprised by Justice Jackson, who seemed to be advocating a point of the view that the framers of the 14th Amendment weren’t worried about the potential for a Confederate to assume the Presidency but instead were far more worried about Confederates infiltrating the government at lower levels, and hence the lack of explicit mention of the President within Section 3 may have been intentional. It was then that I think it became crystal clear that Trump would be winning this case.

But, winning on what grounds?

That remains unclear. My feeling from listening to the argument is that SCOTUS may be inclined to rule that a state does not have the right to enforce Section 3 against a federal official, as opposed to a state official. Chief Justice Roberts made an interesting argument to the effect that it would be very strange to read the 14th Amendment as giving a state that power, given the over-arching purpose of that amendment:

ROBERTS: “I mean, the whole point of the Fourteenth Amendment was to restrict state power, right? States shall not abridge privilege of immunity, they won’t deprive people of property without due process, they won’t deny equal protection. And on the other hand, it augmented federal power under Section 5. Congress has the power to enforce it. So wouldn’t that be the last place that you’d look for authorization for the states, including Confederate states, to enforce … the presidential election process? That … seems to be a position that is … at war with the whole thrust of the Fourteenth Amendment and very ahistorical.

There was also a lot of discussion, largely led by Justice Alito, about the practical difficulties involved if one state (Colorado) had a finding of fact based on the record it had developed that Trump was an oath-breaking insurrectionist, and some other state, based on the record it had developed, reached the opposite conclusion. These difficulties arguably contra-indicate the existence of a state role in adjudicating this type of situation.

If SCOTUS were to choose to resolve the case strictly on those grounds, then they could kick the can down the road on other issues, like whether Section 3 could actually apply to Trump. Where would that leave matters, more globally?

To that effect, I noted an interesting exchange between Justice Jackson and Jason Murray, the lawyer for the CREW respondents:

JACKSON: “If we think that the states can’t enforce this provision for whatever reason in … the presidential context, what happens next in this case? I mean … is it done?

MURRAY: “...I think this case would be done, but I think it could come back with a vengeance because ultimately members of Congress … may have to make the determination after a presidential election if President Trump wins about whether or not he is disqualified from office and whether to count votes cast for him under the Electoral Count Reform Act. …

JACKSON: “And there is no federal litigation, you would say?

MURRAY: “Well, that’s correct, because there is no federal procedure for deciding these issues, short of a criminal prosecution.”

This latter point calls back to an earlier discussion between Murray and Justice Kavanaugh:

KAVANAUGH: “[S]ome of the rhetoric of your position seems to suggest, unless the states can do this, no one can prevent insurrectionists from holding federal office. But, obviously, Congress has enacted statutes, including one still in effect. Section 2383 of Title 18 prohibits insurrection. It’s a federal criminal statute. And if you’re convicted of that, you are — it says, “shall be disqualified” from holding any office….”

MURRAY: “That’s absolutely right, Your Honor. But I would just make the point that the framers of Section 3 clearly understood that criminal prosecutions weren’t sufficient because oftentimes insurrectionists go unpunished, as was the case in the Civil War, and that the least we can do is impose a civil disqualification penalty so that even if we don’t have the stomach to throw someone in jail –“

KAVANAUGH: “Well, they had the quo warranto provision that was in effect then from 1870 until 1948, but then, obviously, that dropped out and hasn’t been seen as necessary since then.

Wait, quo what? And what does 1948 have to do with it?

Apparently, after the ruling in Griffin’s Case, Congress had passed the Enforcement Act of 1870, which among other things enabled federal prosecutors to issue a writ of quo warranto to remove a government official who was disqualified under Section 3. However, for reasons that nobody alive seems to know, in 1948 those quo warranto provisions were repealed as part of a technical effort to codify existing statutes.

So, because somebody 76 years ago reached the conclusion that some language in a then-78-year-old statute must be obsolete, it appears that we no longer have a federal judicial vehicle to enforce Section 3. Terrific.

But, as Kavanaugh notes, we do have a federal statute against insurrection. Of course, Trump’s lawyer pointed out that Trump believes presidential immunity would insulate him from charges under that statute, notwithstanding this week’s D.C. Circuit decision.

More importantly, however, Special Counsel Smith’s indictment in the Jan 6th federal case does not include insurrection as one of the charges. Six months ago, when Smith’s indictment came out, the decision to not charge Trump with insurrection was generally hailed as a prudent tactical prosecutorial decision, one that would smooth the way towards a speedier trial focused on charges that were easier to prove.

To sum up: Based on today’s oral arguments, it seems certain that SCOTUS will not make a ruling to the effect that Trump is disqualified under Section 3, but at the same time I am unconvinced that SCOTUS will make a ruling to the effect that he is not disqualified under Section 3. Either way, it would appear Trump is going to remain on ballots throughout the 2024 electoral cycle. It is hard to know what else to say until we see the actual SCOTUS opinion.