(Bloomberg) -- Donald Trump was found liable for fraud for exaggerating his net worthy by billions of dollars a year on financial records submitted to banks and insurers, a major blow to the former president in the biggest civil case against him that is scheduled to go to trial next week.

The ruling Tuesday by Justice Arthur Engoron in Manhattan resolves the state’s biggest claim against the former president and narrows a trial set to start as soon as Oct. 2. The non-jury trial will now focus on the state’s remaining claims including falsifying business records and issuing false financial statements. The suit seeks $250 million in restitution and other penalties.

Engoron held that New York Attorney General Letitia James, who filed the suit in September 2022, had demonstrated liability by Trump as well as his sons Donald Trump Jr. and Eric Trump, along with the Trump Organization and its former chief financial officer, Allen Weisselberg. He also ordered Trump’s lawyers, including Christopher Kise, to pay sanctions of $7,500 each for repeatedly advancing failed legal theories in the case.

The judge concluded his ruling by saying James is now entitled to a court order dissolving any certificates issued to Trump’s LLCs under New York’s executive law, putting at risk his ability to continue operating his sprawling Manhattan-based company. 

Though the case has been overshadowed in recent months by the four criminal cases filed against Trump, James’s case could have far-reaching consequences. Along with monetary penalties, the attorney general is seeking to bar Trump from serving as an officer or director in any company in the state where he was born and where he first rose to fame.

In a statement posted to his Truth Social social media platform, Trump reiterated many of his claims in the case, including some that were rejected by the judge, whom he called a “Trump hater.” The former president said he was worth more than his financial statements, that the banks suffered no harm from his statements and that a disclaimer on the statements made clear that they should not be relied upon.

“It is very unfair, and I call for help from the highest courts in New York state, or the federal system, to intercede,” Trump said.

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The suit accuses Trump of inflating the value of the former president’s biggest assets from 2011 to 2021 to get better terms from banks and insurers. The judge sided with James on her allegation that Trump repeatedly engaged in fraud by claiming exaggerated values for some of his best properties on his annual statements of financial condition. 

The judge cited in his ruling several examples, including that the former president frequently claimed that his Trump Tower penthouse was three times as big as it actually was, even after he was alerted to the error.

“A discrepancy of this order of magnitude, by a real estate developer sizing up his own living space of decades, can only be considered fraud,” the judge wrote.

In sanctioning Trump’s lawyers, Engoron said they had repeatedly raised frivolous arguments that had already been rejected, including that James lacked standing to sue their clients. “Infants, legally declared incompetents, and persons under certain legal disabilities are not allowed to sue,” the judge said. “The New York attorney general is none of the above.”

‘Worthless Clause’

Engoron went on to describe Trump’s defense team as inhabiting a “fantasy world” in which “rent regulated apartments are worth the same as unregulated, restricted land is worth the same as unrestricted land, restrictions can evaporate into thin air, a disclaimer by one party casting responsibility on another party exonerates the other party’s lies.”

The judge was referring to Trump’s habit of valuing properties without taking into account restrictions on their use and his assertion that disclaimers about his valuations signaled to banks and accountants that they should do their own. According to court filings, Trump valued his Mar-a-Lago resort in Palm Beach, Florida, at more than $700 million based on the false premise that the property could be fully developed for residential use even though he himself agreed to restrictions limiting it to use as a social club. 

“I never felt that these statements would be taken very seriously,” Trump said during his April deposition in the case, “because you open it up and right at the beginning of the statement, you read a page and a half of stuff saying, ‘go get your own accounting, go get your own this, go get your own that.’”

Trump had called the disclaimers “worthless” clauses because they meant the statements should have very little impact on the banks’ decisions. But the judge said those clauses weren’t enforceable and couldn’t insulate Trump from liability for fraud.

“Defendant’s reliance on these ‘worthless’ disclaimers is worthless,” Engoron said.

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Engoron also said in his ruling that Trump had flouted an earlier court order intended to reign in alleged violations of New York business law during the litigation.

“Even with a preliminary injunction in place, and with an independent monitor overseeing their compliance, defendants have continued to disseminate false and misleading information while conducting business,” Engoron said.

Trump, who claims James’s lawsuit is politically motivated, is likely to appeal the ruling. He’s also making a last-ditch effort to delay the trial by arguing to a New York appeals court that Engoron failed to narrow the case after an appellate panel ruled some the state’s claims might be too old.

James argued a trial on her fraud claim wasn’t necessary because the evidence that Trump violated New York’s Executive Law was overwhelming. The attorney general said in court filings that her team gathered proof that Trump inflated his net worth annually by as much as $3.6 billion by exaggerating the market value of properties including his Mar-a-Lago estate in Florida.

Trump argued against the state’s motion for so-called summary judgment, saying the annual statements of financial condition that he gave to banks and insurers had “powerful disclaimers” saying they should do their own valuations. He has also argued that James didn’t have a right to sue because the banks and insurers didn’t suffer any financial losses.

The case is New York v. Trump, 452564/2022, New York State Supreme Court (Manhattan). 

(Updates with LLC detail in paragraph 4.)

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