With all attention on Donald Trump’s criminal trial, counsel for the former president quietly resolved a dispute over the nature of a bond he obtained as part of the hefty judgment imposed against him in the New York attorney general’s civil lawsuit.
“Where is everyone?” Before hearing arguments on Monday, Judge Arthur Engoron made the only mention of the criminal proceedings taking place one block north at 100 Centre Street.
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Letitia James, the New York Attorney General, had questioned the legitimacy of the former president’s business’s $175 million bond. If Judge Arthur Engoron had decided in James’ favor, the state might have seized some of Trump’s most valuable properties.
However, counsel representing the former president was able to dodge that fate—for the time being—by agreeing to various stipulations set by the Attorney General’s Office.
James’ office had voiced concern over “awkward language” in the bond agreement that could allow the defendants or their guarantor to exchange the cash bond for a “less secure” kind of collateral, such as mutual funds or other assets that fluctuate in value.
According to Andrew Amer, a prosecutor in the attorney general’s office, this is a “huge loophole… that quite frankly you could drive a Mack Truck through.”
Amer suggested five conditions to address the state’s concerns, including a guarantee to keep the bond account in cash and a provision granting the surety, Knight Specialty Insurance Company, exclusive control over the account.
After a 20-minute break, Trump’s attorney, Chris Kise, agreed to the state’s proposed terms. Kise had prepared two witnesses to testify on Monday, but the parties were able to reach an agreement before the testimony began.
“What we’re really after here is to move forward with the litigation, with the process,” Kise stated earlier in the hearing. “The cash is not going anywhere… It’s cash. There are no ambiguities.”
Engoron accepted the new terms, and Kise stated that the parties would file a formal agreement in the court docket by Thursday, if not sooner.
Trump’s bond story began in February, when Engoron ordered the former president and co-defendants to pay $464 million in disgorgement and prejudgment interest for what he discovered to be a decade of corporate deception. Trump attempted to postpone the fine, saying in an appellate court that finding a guarantor ready to manage a $500 million bail was a “practical impossibility.”.
James threatened to seize Trump’s assets, including his namesake structures, if he did not pay the penalty.
“If he does not have the funds to pay off the judgment, then we will seek judgment enforcement mechanisms in court, and we will ask the judge to seize his assets,” James told ABC News.
As the deadline for Trump to pay the judgment approached, New York’s Appellate Division First Department approved the former president’s last-minute appeal to reduce the size of his deposit, allowing him to post a bail of $175 million.
A few days later, the Donald J. Trump Revocable Trust, managing a Charles Schwab brokerage account, secured a $175 million bond for Trump and his co-defendants.
Because the corporation behind the bond was not admitted in New York, James served a notice requiring Knight Specialty Insurance Corporation to establish their ability to pay the amount if necessary.
“KSIC is a respected, well-capitalized, Delaware-domiciled insurer that has long underwritten surety bonds and other types of insurance placed around the country,” attorneys for Knight Specialty Insurance Company and Trump stated in a filing last week.
Knight, controlling a brokerage account with its own assets worth more than $539 million, secured the bond with more than $175 billion, according to the filing. The petition also indicated that the corporation had access to more than $2 billion in assets via its parent company.
“By any standard, KSIC has therefore provided assurance to the plaintiff judgment creditor that she can collect the designated amount if the award is affirmed on appeal,” according to the complaint.
The New York Attorney General asserted in a declaration on Friday that the defendants’ failure to prove Knight’s ability to carry out “this extraordinarily large undertaking” and the bond’s adequate collateralization warranted the rejection of the bail.
According to James’ declaration, Knight does not have exclusive control over Trump’s brokerage account funds, which may be problematic if the account’s holdings fall below $175 million. James also highlighted concerns about Knight’s business practices, which she claimed should disqualify the company from doing business in New York.
According to the filing, federal authorities have found that KSIC’s management has operated affiliated companies within its holding company structure in violation of federal law on multiple occasions over the past several years, disqualifying KSIC from acting as the surety under this standard.
In an interview with ABC News on April 4, Don Hankey, chairman of Knight Specialty’s parent business, declined to comment on the attorney general’s filing.
“We rarely have our applications or bonds rejected.” Hankey explained, “I imagine they’re scrutinizing it very carefully, checking to make sure all the i’s and t’s are crossing.” “It’s a large amount for anybody.”
