Election 2024: Spring Training

As a lifelong baseball fan, when I hear the phrase “Florida and Arizona” my thoughts naturally turn to baseball’s spring training season, where all 30 MLB clubs spend several weeks in one of those two states preparing for the season, in either Florida’s so-called “Grapefruit League” or Arizona’s “Cactus League”.

While spring training is over by April, recent news has linked these two states in a different manner that could have a significant impact on the 2024 election.

In my last post I mentioned two recent SCOFL decisions, one reversing previous precedent to rule that laws banning abortion do not violate the Florida Constitution’s explicit right to privacy, and another allowing a proposed abortion rights amendment to the Florida Constitution to be on the ballot in Florida. This week, it was SCOAZ who joined the fray with its ruling in Planned Parenthood v. Mayes, the upshot of which is that an 1864 territorial statute criminalizing the performance of abortions remains valid law in Arizona.

Reading the opinion, I was struck by the following phrase: “When this litigation was initiated in 1971…” How many lawsuits span over a half-century?!? Forgive me while I go on a tangent to try and explain what happened here…

Way back in 1971, Planned Parenthood had sued the Arizona Attorney General, arguing that the 1864 statute violated both the U.S. and Arizona Constitutions. Planned Parenthood won at the trial court level, but in 1973 lost at the appellate court level. However at that point, SCOTUS issued its decision in Roe v. Wade, which then led the Arizona appellate court to reverse itself, holding the 1864 statute unconstitutional and enjoining its enforcement against healthcare providers.

The 1864 statute remained on the books, however. As a result, after Roe was overturned in 2022 by Dobbs the then-AG of Arizona, a Republican named Brnovich, sought to set aside the injunction against enforcing the 1864 statute. This was successful at the trial court level.

However to complicate matters somewhat, shortly before the 2022 election Arizona had adopted another statute, creating a ban on abortions after 15 weeks (now that Roe was no longer an impediment to such a law). As such at the appellate court level, the question turned to whether/how to harmonize the 2022 statute with the 1864 statute. And to that end, the Arizona Court of Appeals ruled that a provider performing services that were permissible under the 2022 statute was not in violation of the 1864 statute.

What SCOAZ did this week, on a 4-2 vote, was overturn that appellate court decision, ruling that a service that is not illegal under the 2022 statute viewed in isolation could nonetheless be illegal under the 1864 statute. As such, although SCOAZ has stayed its decision for 14 days, we are currently on a glidepath for Arizona to become a state where the only permissible abortions are those necessary to save the life of the mother (an exception provided in the 1864 statute).

At least, on paper. The “Mayes” in Planned Parenthood v. Mayes is current Arizona AG Kristin Mayes, a Democrat who won an open seat (Brnovich having been term-limited out) in 2022 by the incredibly narrow margin of 49.94%-49.93%, or 280 votes out of 2.5 million. She told NPR that her office will not be enforcing this law, drawing analogies to other ancient laws on the books banning adultery and bigamy that are not being enforced.

Additionally, there was already a group called Arizona for Abortion Access that was organizing to get an abortion rights amendment to the Arizona Constitution on the ballot for this November. Days before the SCOAZ decision came out, the group had announced that they had obtained the requisite number of signatures to get the measure on the ballot.

So, to sum up: It is now looking like the November ballot in both Florida and Arizona will contain abortion rights amendments, in the wake of recent State Supreme Court decisions that restricted abortion rights in those states. Given that Arizona was one of the most closely fought states in the 2020 election, this appears to be good news for not only President Biden but also for the Democrats’ chances to retain Senator Sinema’s seat. The Republican candidate in that election, Kari Lake, is now trying to get Arizona Republicans to repeal the 1864 statute even though in her 2022 gubernatorial race she had expressed support for that statute.

In other news, DJT stock continues to slide, briefly dropping below $30 today before recovering to close around $32.50. That means the price has now halved since it closed above $66 sixteen days ago, on March 27th.

Former Trump Org CFO Allen Weisselberg pled guilty this week to having committed perjury in the New York v. Trump et al civil trial, and will spend another five months in jail for his troubles.

And, despite multiple unsuccessful legal actions filed by his attorneys this week, Trump’s criminal trial in New York remains on schedule to commence on Monday. Today Judge Merchan denied Trump’s motion to indefinitely adjourn proceedings on the grounds that Trump is prejudiced by the volume of pre-trial publicity, noting that “the situation Defendant finds himself in is not new to him and at least in part of his own doing.” Big trial in N.Y.C. on April 15th. Be there, will be wild!

Election 2024: Eclipse 2024

Today was the second of the two Great American Eclipses of the first quarter of the 21st century.

Back in 2017, when I still used this blog for occasional posts unrelated to politics (or genealogy), I had written about the previous eclipse. As was true 7 years ago, I spent today working in cloudy Minnesota, outside the path of totality, while other members of my family managed to partake in the full experience. In particular my eldest son will have the distinction of being the only member of the family to have seen both total eclipses, having gone road-tripping today with some of his University of Illinois frat brothers to Washington, Indiana.

As I was watching the TV coverage early this afternoon, I was suddenly overcome with remorse for not having made an effort to see the eclipse — particularly since today’s path of totality included Kingston, Ontario where my parents live. Adult life gets complicated. Still, it was wonderful to watch the TV coverage, and see glimpses on social media of friends’ eclipse experiences.

And now we return to our irregularly programmed schedule

Today is the deadline for submission of the government’s reply brief to SCOTUS, and amicus briefs aligned with the government, in Trump v. U.S. Just checked and I do not see the reply brief yet, but many amicus briefs have trickled in. I will write more about that case in a couple days once the government’s brief is out.

Trump has continued to make various last-ditch efforts to avoid the trial in New York v. Trump from starting as scheduled a week from today, including apparently filing a lawsuit against Judge Merchan yesterday, although as of this point those proceedings are sealed.

As previously reported, Trump obtained an appeal bond in the amount of $175 million from Knight Security Insurance Company in connection with the New York v. Trump et al judgment. However, a number of questions have arisen about the legitimacy of that bond, including but not limited to the fact that KSIC is not an admitted insurer in New York and that KSIC’s statutory surplus appears to be less than the face amount of the bond. There will be a court hearing related to the appeal bond two weeks from today.

Turning from law to politics:

Trump was apparently pressuring Republican politicians in Nebraska to end that state’s practice, shared only with Maine, of awarding 1 electoral vote for each congressional district won. This is salient because the Nebraska 2nd (Omaha) voted 52-45 for Biden in 2020, even though Republican Representative Don Bacon managed to hold onto his seat, 51-46. However it is now looking unlikely that such a change will get enacted before the April 18th end to the Nebraska legislative season.

In Ohio, the Democrats may have boxed themselves into a corner that could result in Biden being excluded from the presidential ballot. Ohio has an unusual law requiring that presidential candidates be named by their parties more than 90 days before election day. The 2024 DNC is scheduled less than 90 days before election day, while the 2024 RNC is scheduled more than 90 days before. As such, without state legislative action–which had occurred in a previous cycle when both parties’ conventions were within the 90 days, but may not be forthcoming this year in a state whose state-level politics have turned bright red in recent years–is it possible Biden will not appear on the ballot in Ohio? If somehow he didn’t, the resulting expected depression of Democratic turnout would perhaps be fatal to Senator Sherrod Brown’s effort to hold his seat for the Democrats.

In Florida the State Supreme Court recently overruled precedent that the State Constitution’s 1980 amendment to create a “right to privacy” protected abortion rights in Florida, thus allowing Governor DeSantis’ vaunted 6-week abortion ban to take effect. However, at the same time SCOFL allowed a proposed constitutional amendment protecting abortion rights to be placed on this fall’s ballot. It will be interesting to see if having abortion explicitly on the ballot in Florida is enough to bring this state, once the purplest of purple states but more recently solidly red, back into play in 2024.

Finally, speaking of abortion Trump made an announcement this morning that while he remains proud of his role in enabling the SCOTUS decision to overturn Roe v. Wade, he believes that abortion rights should be a state issue. This immediately attracted criticism from all sides. Quoting from the AP: “Religious conservatives said they were deeply disappointed. Progressives said he was lying.” It is unclear if, politically, he is better off trying to walk a fine line on abortion to attract independents, at the risk of demotivating his base who would like to see something like a 15-week federal ban.

Election 2024: $100.7 Million

That’s the calendar year 2023 net after-tax loss reported yesterday by TMTG, on an unaudited pro forma basis, as if the pre-merger TMTG and DWAC had been combined for the entire year. $100.7 million of after-tax losses, on $4.0 million of revenue. (Much of the reporting on this has focused on a different number, $58.2 million of after tax losses; that number reflects TMTG on a standalone basis, without DWAC and without intercompany eliminations.)

The market did not take kindly to this news, as DJT stock went down from $62 to $48 during the day, bringing its market cap down to $6.5 billion and costing Trump himself $1 billion of paper wealth in a day. The stock price is now considerably off its post-merger peak of $75.

In other Trump financial news, yesterday he did manage to post a $175 million bond as he appeals the $454 million judgment in New York v. Trump et al. The bond was written by an insurer with which I am unfamiliar, Knight Specialty Insurance Company; it is a private company owned by 80-year-old billionaire Don Hankey, who started by inheriting his father’s car dealership and made his fortune primarily from subprime car loans.

Things are relatively quiet on other fronts, with Congress out on break after avoiding a government shutdown, two hours after the midnight deadline. Judicially, the New York v. Trump trial starts in 13 days, and the SCOTUS hearing in Trump v. U.S. is in 22 days. After Trump recently attacked Judge Merchan’s daughter on social media, yesterday the judge extended the scope of an existing gag order relating to the upcoming trial to cover family members of the court and district attorney, but leaving Trump free to criticize Merchan and Bragg themselves.

There are other stories that have wafted in and out of the news, such as Ronna McDaniel’s very brief tenure as a paid NBC contributor before a mutiny by the network’s news talent led to her termination, and Trump’s decision to start hawking $60 “God Bless the USA” bibles during Holy Week.

Election 2024: DJT

As discussed in my last post, earlier this week a SPAC called DWAC officially acquired the Trump-owned parent of social media concern Truth Social, TMTG. The merged company is called TMTG, but its stock ticker symbol is DJT. Which is particularly appropriate here, since the market price of DJT appears to be almost entirely disconnected from the fundamentals of TMTG as a business venture.

A very instructive comparison is Reddit, the social media concern that had its IPO last week. Reddit stock has performed quite strongly, with the IPO price being at the top of the suggested range, followed by a very nice day one pop, and continued price appreciation since then. The stock closed down today, at about $58 per share, giving it a market capitalization of $9.2 billion. While Reddit has never been profitable, it did have $800 million in 2023 revenue, and it has 73 million active daily users and 267 million active weekly users. To my tastes as a value-oriented investor, RDDT is massively over-priced; but at least it is an established company, with real revenue sources, and a large, devoted user base.

TMTG, by contrast, only reported $3.4 million of revenue for the first nine months of 2023, on which it had $10.6 million of operating losses. It has never reported active user counts, unlike other social media platforms, but external parties have estimated that Truth Social has maybe 1 million active monthly users. And yet… at today’s closing price of about $66 per share, TMTG’s market capitalization is $9.4 billion, slightly more than Reddit’s.

If RDDT is, arguably, massively over-priced, what words suffice to describe the extent to which DJT is over-priced? Clearly, the market for DJT stock has almost nothing to do with TMTG the company, and everything to do with Donald J. Trump the personal brand. With Trump’s paper net worth having gone up by billions this week, it will be interesting to see how much cash he can ultimately realize from his TMTG holdings, and what the eventual path of TMTG’s stock price looks like.

However, the immediacy of Trump’s potential need to convert TMTG stock to cash was alleviated on Monday by a New York appellate court decision in the Trump Org fraud case, reducing the amount of his appeal bond to $175 million and giving him a further 10 days to post the bond. The appellate court decision also stayed many of Judge Engoron’s findings, such as the order prohibiting Trump and his sons from serving as an officer of a New York corporation, pending appeal; however, the appellate court did not stay the requirements for an independent monitor over Trump Org, or for Trump Org to hire an independent director of compliance.

In other news, yesterday the Democrats unexpectedly won a by-election for an Alabama State House seat. In 2022 the Democratic candidate, a white woman named Marilyn Lands, had lost the seat 45-52. The victor was then indicted for voter fraud and resigned his seat several months ago. Lands ran again and this time focused her campaign on reproductive rights, which is currently a hot-button issue in Alabama due to a State Supreme Court decision several week ago that frozen embryos are human beings. She won yesterday by the surprising margin of 62-38, continuing to underscore the extent to which the Dobbs decision is impacting the electoral landscape in red states.

However, perhaps the most important political news of the week came on Monday, when Judge Merchan announced that the criminal trial in New York v. Trump (the hush money case) would indeed commence on April 15th.

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.