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Manhattan Prosecutors Explain Trump’s ‘Corporate Death Penalty’

Trump has more legal issues to face beyond his recent RICO indictment. On Sept. 22, a Manhattan judge found the former U.S. President liable for fraud at his organization.

The decision alleged that Trump inflated his worth to banks and insurers by over 3.6 billion in one year, in a case that could result in the rare “corporate death penalty,” so rare that the only time its been attempted previously was shut down. However, if established, it could lead to the Trump organization’s downfall, according to Business Insider.

The details of Trump’s fraud were displayed in 35 pages of the filing by New York Supreme Court Justice Arthur Engoron, resulting in the immediate dissolution of his corporate charter. Any corporate licenses under Trump’s domain, including the Trump organization, his two sons, and any subsidiary LLCs, are canceled, immediately, according to the document.

In addition to the cancellation, Trump and his affiliates overseeing the companies must recommend “potential independent receivers to manage the dissolution of the canceled LLCs.”

“It’s comparable to once a person dies. A dead person can’t sell property. Only the executor of the estate can do that — or in this case, the receiver,” former financial-crimes prosecutor on behalf of Manhattan, Diana Florence, told Business Insider.

However, what is actually happening to Trump and the numerous businesses under his belt remains unknown, given the lack of precedent. The final charges will most likely be delayed. In the meantime, Trump’s corporations cannot operate under regular provisions; the stripping of their charter prohibits them from receiving loans or working on government contracts.

According to Florence, this type of dissolution typically occurs only when a business goes bankrupt. However, the difference stems from this process being court-mandated.

“This is the same thing, but it’s called a judicial dissolution,” she said. “It’s something that is almost never done. It’s a big mess, actually.”

The receiver appointed to the position will facilitate all rents, salaries, and taxes until the assets are sold off to fulfill all debts, including a hefty $250 million that the New York attorney general is asking for in the October trial.

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