Government

Trump Demands Sanctions On AG For Noticing That His Civil Fraud Bond Reeks To High Heaven

The one who smelt it dealt it?

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Donald Trump yelling

(Photo by Win McNamee/Getty Images)

Even as Trump’s first criminal trial gets underway in New York, we’re still dealing with fallout from the civil fraud case which wrapped up in February. The parties are still arguing about the bond, which the First Judicial Department reduced to $175 million from somewhere north of $500 million including interest. Specifically, Trump says that Knight Specialty Insurance Company (KSIC), a company owned by Don Hankey, a rando billionaire from California, is qualified to underwrite it. And Attorney General Letitia James says he isn’t.

On April 1, Trump announced on social media that he’d found someone to guarantee the bond which would stave off the AG’s effort to collect on the judgment pending appeal.

“I’ve just posted a 175 Million Dollar Bond with the sadly failing and very troubled State of New York, based on a Corrupt Judge and Attorney General who used a Statute that was never used for this before, where no Jury was allowed, my financial statements were conservative and had a 100% perfect caution/non-reliance clause, there were no victims (except me!), there was no crime or damage, there was only success and HAPPY BANKS,” he howled.

But the state rejected the paperwork for multiple defects, including a missing financial statement — kinda on the nose in a case regarding fraudulent financial statements, but the writers on the Trump show long ago wandered off, so WYGD.

Knight’s amended filing raised a lot of questions already answered by its “Absolutely, totally qualified to underwrite this bond” T-shirt, and so the AG’s office filed an exception on April 4 in which it noted that providing a surety bond requires a certificate of qualification from New York State Department of Financial Services under Insurance Law § 1111, and Knight doesn’t have one. It’s also unclear whether Knight is adequately capitalized to cover the note if Trump loses his appeal.

Justice Arthur Engoron set a hearing for April 22, and yesterday Trump and Knight responded in an indignant brief demanding sanctions on the AG for daring to question the bond at all. To wit, they assured the court that the surety is adequately capitalized by Trump himself, who granted Knight a lien on an account at Schwab containing $175 million,

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“KSIC, the Trust, and Schwab have entered into a Pledged Asset Account Control Agreement (the “Control Agreement”) whereby Schwab, as custodian of the Account, has acknowledged KSIC’s right to control the Account within two (2) business days of receiving notice from KSIC of KSIC’s intent to activate said control,” the write, adding in a footnote that “Defendants’ deposit and dedication of $175 million under the Control Agreement undoubtedly qualifies
as an undertaking in its own right.”

This sounds a lot like Trump suggesting that he, himself, is the guarantor of his own surety bond. Also the motion appears to fudge the distinction between KSIC, which is on the hook to the state of New York, and the affiliated business Knight Insurance Company, which is not.

KSIC also independently maintains more than $539 million in assets and $138 million in equity and has access to more than $2 billion in assets and $1 billion in equity, of which nearly $1 billion is cash and marketable securities, pursuant to a reinsurance agreement with its parent company, Knight Insurance Company (“KIC”).

Trump goes on to insist that Knight is not subject to the same certificate requirement as a domestic entity, and he argues that the sufficiency of the bond is so facially apparent that the state should be sanctioned for daring to question it.

“While a certificate of qualification obviates the need for justification, CPLR § 2507 permits the Court to justify a surety in the absence of a certificate,” his lawyers huff, adding that “The documentary evidence in support of justification is overwhelming and obviates any need for a hearing to set aside the exception or to justify KSIC as surety.”

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“The NYAG’s exception is taken unnecessarily and should be set aside with costs. Her sparse notice identifies no insufficiency other than the failure to enclose a certificate of qualification,” they went on, arguing that “KSIC was and is authorized to issue the Bond here, and the Bond is more than sufficiently collateralized in the event the Court’s judgment is affirmed.”

This argument provoked skepticism from Diana Florence, who spent more than two decades in the Manhattan District Attorney’s Office.

“The whole thing is very unique,” Florence told ATL. “I cannot imagine any other defendant that could submit a bond of this type and not immediately face the nuclear option. The requirements for licensing are not optional and exist for exactly these reasons.”

Thus far, Justice Engoron has not seen fit to take the case off his calendar for April 22 and order the state to pay Trump’s legal fees. But hope springs eternal in MAGAworld.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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