NEW YORK — An appeals court has overturned a significant civil fraud penalty against President Donald Trump, ruling on Thursday in a New York state lawsuit that accused him of inflating his wealth. This decision comes seven months after Trump returned to the White House.

A panel of five judges from New York's mid-level Appellate Division deemed the original verdict, which could have cost Trump over $515 million, as "excessive." The court found that Trump had engaged in fraudulent practices by inflating financial statements submitted to lenders and insurers. Last year, Judge Arthur Engoron had ordered Trump to pay $355 million in penalties, which, with interest, exceeded $515 million. Combined with penalties against other Trump Organization executives, including his sons Eric and Donald Jr., the total surpassed $527 million.

Judges Dianne T. Renwick and Peter H. Moulton stated, "While the injunctive relief ordered by the court is well crafted to curb defendants’ business culture, the court’s disgorgement order, which directs that defendants pay nearly half a billion dollars to the State of New York, is an excessive fine that violates the Eighth Amendment of the United States Constitution."

In addition to the financial penalties, Engoron had imposed other sanctions, including a ban on Trump and his two eldest sons from holding corporate leadership positions for several years. These sanctions have been on hold during Trump's appeal, and he managed to delay the collection of the penalties by posting a $175 million bond.

The court's ruling was notably divided, with no single majority opinion. Some judges supported parts of their colleagues' findings while opposing others, allowing the court to reach a decision. Two judges expressed that New York Attorney General Letitia James' lawsuit was justified and that she had proven her case, but they felt the penalty was too harsh. Another judge argued that James had overstepped her legal authority in bringing the suit, suggesting that if any lenders felt deceived, they could have pursued their own legal action.

The appeals court took nearly 11 months to reach its decision, a lengthy process compared to the usual timeframe for appeals, which typically take weeks or a few months. James, who initiated the lawsuit, has accused Trump of engaging in "lying, cheating, and staggering fraud," but her office did not comment immediately following the ruling.

Trump and his co-defendants have consistently denied any wrongdoing. In a statement following the trial, Trump declared himself "an innocent man" and labeled the case a "fraud on me." He has claimed that the lawsuit and the verdict were politically motivated actions by James and Engoron, both of whom are Democrats.

Trump's Justice Department has issued subpoenas to James for records related to the lawsuit, as part of an investigation into whether she violated Trump's civil rights. James' attorney, Abbe D. Lowell, described the investigation as "the most blatant and desperate example of this administration carrying out the president’s political retribution campaign."

Trump's legal team argued that his financial statements were not misleading, as they included disclaimers indicating they were not audited. They also pointed out that banks and insurers independently assessed the figures and that the loans were repaid. Despite discrepancies, such as inflating the size of his Trump Tower penthouse, Trump maintained that the financial statements were conservative estimates of his wealth.

During a hearing last September, Trump's lawyers contended that many allegations were too old to be valid, a claim they had previously made unsuccessfully before the trial. They also argued that James misapplied a consumer protection law to sue Trump and improperly intervened in private business transactions that were satisfactory to the parties involved.

State attorneys countered that the law applies to fraudulent or illegal business conduct, regardless of whether it affects consumers or corporations. They argued that Trump's inflated financial statements led lenders to make riskier loans, ultimately harming honest borrowers.

The civil fraud case is one of several legal challenges Trump faces as he campaigns for a second term. He was recently sentenced in a criminal hush money case to an unconditional discharge, which leaves his conviction on record but imposes no jail time or fines. Trump is appealing this conviction. Additionally, a federal appeals court upheld a jury's finding that he sexually abused writer E. Jean Carroll in the mid-1990s, resulting in a $5 million judgment against him. Trump is also appealing a subsequent ruling that requires him to pay Carroll $83.3 million for additional defamation claims.