A five-judge New York appellate panel questioned both the size and validity of a judgment of more than $450 million against Donald J. Trump at a hearing.
A New York appeals court expressed skepticism on Thursday about a civil judgment of more than $450 million that a trial judge had ordered former President Donald J. Trump to pay after finding that he had fraudulently inflated his wealth.
At a hearing in Manhattan, members of a five-judge panel questioned both the size of the judgment and the validity of the case, which New York’s attorney general brought against the former president and his family business two years ago.
While some of the judges appeared to acknowledge the substance of the attorney general’s case, several of the panel’s questions suggested concern about whether the office had exceeded its jurisdiction. And the tenor of many of their questions indicated the possibility that the court could whittle down the huge judgment and potentially deal a blow to the attorney general, Letitia James.
Justice Peter H. Moulton, who seemed unswayed by many of the arguments by Mr. Trump’s lawyers, nonetheless said that “the immense penalty in this case is troubling.”
The trial judge in the case, Arthur F. Engoron, found Mr. Trump liable for civil fraud last year, concluding that he had lied about his wealth to secure favorable loan terms and other financial benefits. The judge imposed the judgment against the former president in February after a lengthy bench trial.
Judith N. Vale, New York’s deputy solicitor general, had barely begun addressing the court before one of the judges, David Friedman, interrupted her to cast doubt on the lawsuit. Other members of the panel inquired about possible “mission creep” by the attorney general’s office. They also questioned what “guardrails” might have ensured that Ms. James did not overstep her authority by second-guessing the net worth estimates that Mr. Trump had provided to lenders.
Justice Friedman, who appeared the most skeptical of the case, asked Ms. Vale to identify any other case in which the attorney general’s office had sued “to upset a private business transaction that was between equally sophisticated partners.”
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Before she could respond, Dianne T. Renwick, the court’s presiding justice, who generally seemed supportive of the case, added her own question. “And little to no impact on the public marketplace?” she asked.
Ms. Vale replied that there was “absolutely a public impact” as a result of Mr. Trump’s misconduct. She said that Mr. Trump had hidden certain risks, which had a ripple effect on how his lenders dealt with other clients. And while the statute that the attorney general’s office used in the case did not require proof that his lenders had been harmed, Ms. Vale noted that the statute was intended to protect honest business people.
The judgment hinged on evidence that the former president and others had manipulated figures to inflate the value of his properties and to misrepresent his net worth, and had then used the phony numbers to obtain lower interest rates from Deutsche Bank and other lenders.
In his sweeping ruling, Justice Engoron barred Mr. Trump from serving in top roles at any New York company, including portions of the Trump Organization, for three years and ordered him to pay the penalty, which, with interest, could reach $500 million or more.
The ruling capped years of litigation that threatened Mr. Trump’s business empire, undermined the claims of lavish wealth that have been central to his identity and angered the former president and his allies. They complained that Ms. James, a Democrat, had singled Mr. Trump out for punishment.
In their appeal, filed in July, Mr. Trump’s lawyers argued that the judgment should be reversed. Institutions that had lent Mr. Trump money were repaid in full and had turned a profit, the lawyers wrote.
And, the lawyers said, the size of the penalty ordered by Justice Engoron was excessive. “The ratio of the award to actual harm is astronomical,” they wrote.
The appeal also said that if Justice Engoron’s judgment were upheld, Ms. James, who is Black and whom Mr. Trump has called “corrupt” and “a racist,” would be allowed “limitless power to target anyone she desires, including her self-described political opponents.”
In arguing for the judgment to be upheld, Ms. James’s office said that Mr. Trump’s appeal lacked merit and that “defendants tellingly ignore almost all their deceptions.”
Evidence showed that the defendants had inflated the former president’s worth by up to $2.2 billion a year and had used “false and misleading statements” while conducting business, lawyers for the office wrote in a court filing.
“For years, the Trump Organization and its top executives engaged in a fraudulent and illegal scheme to misleadingly inflate the net worth of defendant Donald J. Trump,” the lawyers wrote. As a result, they added, the defendants had “derived significant economic benefits they otherwise could not have obtained.”
The questioning by the five-judge panel was vigorous.
Justice Friedman asked at one point whether the attorney general’s office had conceded that, although “Trump received a lower interest rate than he might otherwise have received,” he still had sufficient assets to receive a preferential rate.
“Absolutely not your honor,” Ms. Vale replied. “The evidence is to the contrary.”
As she continued, another judge, John R. Higgitt, interjected.
“Sorry,” he said, “but what’s being described sounds an awful lot like a potential commercial dispute by private actors.”
Justice Friedman soon weighed in again, saying the cases that the attorney general’s office had cited involved the Lehman Brothers collapse and a scheme that induced naïve consumers to take out loans they could not afford.
“That hardly seems that it justifies bringing an action to protect Deutsche Bank against President Trump,” he said, adding: “You’ve got two really sophisticated parties in which no one lost any money.”
Justice Higgitt asked what could be done to ensure that Ms. James was acting within her authority.
“How do we draw a line or at least put up some guardrails to know when the A.G. is operating well within her admittedly broad sphere,” or when she was entering “an area that wasn’t intended for her jurisdiction?” he said.
The attorney general, Ms. Vale said, was permitted by the law to act “whenever any person engages in fraud or illegality.” The defendant’s “misstatements and omissions were about objective facts,” she added.
Toward the end of the hearing, Justice Moulton asked how the attorney general’s office could “tether the amount that was assessed” by Justice Engoron “to the harm that was caused here, where parties left these transactions happy about how things went down?”
“It’s a large number for a couple of reasons,” Ms. Vale replied. “One, because there was a lot of fraud.”