« Passing the batons: Reform and Reckoning in 2024 Legal Education | Main | JOTWELL: Thomas on Frampton on jury integration »

Monday, February 19, 2024

Calabresi and Kerr on Trump's "Victimless Crimes"

My friend and colleague Steve Calabresi has posted a long essay at The Volokh Conspiracy titled "President Trump's Kafkaesque Civil Trial in New York State." Among his other condemnations of what he calls a "Stalinist nightmare in New York State," Calabresi writes, "not a single bank claimed that it had been defrauded by Trump in the loans it had made to him.  This is truly a victimless crime."

Orin Kerr disagrees, also at the Volokh Conspiracy, in a post titled "Thoughts on Judge Engoron's Opinion, A Response to Calabresi." According to Kerr, it does not matter whether the loans, obtained via Trump's lies, were "successfully repaid." Using the analogy of drunk driving prosecutions, Kerr points out that it doesn't matter "if the person who drove drunk made it home safely on that particular trip" because "it's the established risk of harm, not actual harm" that constitutes the offense."

I agree with Kerr, but I think there is a better analogy. Everyone knows that drunk driving is wrong and dangerous, but that is not so obvious  -- or so Trump argued, and Calabresi agreed -- about inflating one's net worth on a loan application.

So consider Model Rule of Professional Conduct 1.15, which prohibits lawyers from depositing clients' funds in their office operating accounts. The offense of "comingling" occurs when the lawyer fails to keep clients' property "separate from the lawyer's own property." Clients' money must always be kept in "one or more trust accounts."

It makes no difference if the clients' are eventually paid or made whole. Lawyers can be sanctioned, and some have been disbarred, for repeated comingling -- in other words, endangering -- clients' funds, even when the clients have suffered no financial loss. There is nothing Kafkaesque or Stalinist about it.

Posted by Steve Lubet on February 19, 2024 at 05:40 PM | Permalink


Banana republic--proven by Hochul's remarks afterwards.

The case itself is absolutely Stalinist, too: a regulatory/criminal proceeding PRESENTING AS an equitable cause of action, where the STATE is the plaintiff, let alone the party entitled to the disgorged funds (rather than the "victim" banks). How is Executive Law 63(12), especially its use in tandem with penal laws, constitutional?

And what are the criteria for application of 63(12)'s definition of fraud? Can't rely on the judge for that, since he straight-up lied in his use of citations (e.g., about reliance not being an element--EVEN IF reliance isn't actually an element under this frightfully expansive equitable-ish fraud concept, rendering the judge accidentally correct).

Do other states have a comparable pseudo-equitable cause of action for the state qua state to run?

Even if American blue team cheerleaders tell themselves that they're defending the rule of law and democracy in this fashion, do they really expect their peers and allies in more civilized Western democracies to believe them?

Posted by: A non | Feb 22, 2024 12:58:56 AM

Lets be honest my liberal friends, this is political persecution of someone you believe is dangerous. I understand you dont like him but the reality is that Trump is being targeted.

Posted by: UniversityProfessor | Feb 21, 2024 2:28:54 AM

With all due respect, one’s net worth can differ with time due to the fact that valuation can go up and down with time , and is not necessarily fixed.

If we consider the fact that “not a single bank claimed it had been defrauded by Trump in the loans it had made to him”, this is not a “victimless” crime as there is no evidence that a crime was committed.

One could certainly argue that intentionally making a claim a crime was committed without providing any evidence, could be considered a fraudulent claim that is not, in this case, victimless.

Posted by: ND | Feb 19, 2024 11:09:06 PM

Prof Kerr:

"I also don't like the state intervening and preventing someone from doing business in the state, especially when everyone is on notice that he's not truthful. So if the opinion is wrong, and gets reversed, I certainly don't mind that."

He is not -- full stop -- prevented from doing business.

Anyway, this "on notice" concept seems fatuous to me. Is this how the law of business works?

Posted by: Joe | Feb 19, 2024 9:57:08 PM

While it is true that you don't need a victim to establish liability in many instances, the absence of an identifiable victim will typically affect the remedy, and in the Trump case is goes to whether the relief ordered is even authorized under the statute.
The statute in the Trump case authorizes the State to seek equitable relief (injunction, restitution and damages); it does not authorize the imposition of penalties or fines. The statute also does not specifically authorize disgorgement.
The judge held that the court had the power under its broad equitable authority to order disgorgement on the ground that disgorgement is an equitable remedy. But the status of disgorgement is actually a bit more complex: it is sometimes treated as a legal remedy and sometimes an equitable one. In 2017, the Supreme Court in Kokesh v. SEC held that at least in some instances disgorgement is a penalty (a quintessentially legal remedy). In 2020, the Court in Liu v. SEC held that disgorgement is an equitable remedy so long as the "disgorgement award does not exceed a wrongdoer's net profits and is awarded for victims."
The lack of victims in the Trump case makes the relief ordered there appear very much like a penalty, and indeed is at least partly characterized as such in the opinion: "In this civil action, the People of the State of New York ... seeks monetary penalties and injunctive relief against ... Trump." (New York v. Trump)
The problem is the statute doesn't authorize monetary penalties, and to the extent that disgorgement is a penalty it is not authorized under the court's broad equitable powers.
David Rosenfeld

Posted by: David Rosenfeld | Feb 19, 2024 7:56:59 PM

Post a comment