Top line
The $175 million bond posted by former President Donald Trump in his civil fraud case came under scrutiny Thursday as the New York attorney general’s office asked the insurance company that helped secure it to prove that are financially stable enough to pay the bond – posting the bond risks having it canceled after 10 days if no proof is provided.
Former President Donald Trump speaks to the press in Massapequa, Long Island, New York, March … [+]
AFP via Getty Images
Key facts
Trump and his business partners posted bond on Monday for $175 million in his civil fraud case after an appeals court reduced the amount Trump had to pay immediately while he appeals the case (down from more than $464 million the judge ordered the defendants pay after being found liable for fraud).
That bond was underwritten by Knight Specialty Insurance Company, chaired by billionaire Don Hankey, who told Forbes he approached Trump about the bond, which he said was backed by a mix of cash and investment-grade bonds.
The attorney general’s office, which brought the case against Trump, filed a lawsuit Thursday demanding that Knight provide more information about its finances and how the bond was secured because the company is not incorporated in New York.
For bond companies that are not admitted in New York, they must show that they are able to cover the full amount of the bond by demonstrating that the company is financially sound and that the person owing money has provided sufficient collateral. to cover the full connection.
Trump and his co-defendants filed an updated affidavit in court on Thursday — ahead of the attorney general’s filing — that included more information about the company’s financials and certified their accuracy, but the attorney general’s office said it did not fully match what the company and the defendants are required to provide.
Trump and his co-defendants now have 10 days to provide the court with additional information about Knight’s bond and financial condition, the attorney general’s filing states — and if they don’t, the bond will be “without effect,” even though Knight it will still have to pay $175 million until Trump secures a new bond.
Judge Arthur Engoron scheduled a bond hearing for April 22, suggesting that any action voiding the bond would likely not be taken until then (attorneys for Trump and Knight have not yet responded to requests for comment on the attorney general’s filing and whether they will present more evidence).
What to watch out for
The former president is appealing his loss in the civil fraud case, but it’s unclear how long that will take. Although the appeals court allowed him to post only the $175 million bond while he appeals the decision, he and his co-defendants will still be liable for the full amount they owe if they lose the appeal. That amount grows by the day as it accumulates at an interest rate of nine percent each year — which amounts to more than $111,000 a day for Trump alone, who has been ordered to pay a total of more than $454.2 million. (The rest of the $464 million payment is based on $4 million in fines for Eric Trump and Donald Trump Jr. and $1 million owed by former CFO Alan Weiselberg.) Interest will continue to accrue until the amount is fully paid despite bond and Trump is appealing the sentence.
Surprising fact
In its updated bond, Knight reported a surplus to policyholders of $138 million — which is actually the company’s net worth, made up of its assets minus its liabilities. Since this is less than the $175 million that Trump owes, this means that if Trump’s bonds were not fully secured by collateral or he was unable to pay the amount when it came time to do so, the repayment of debt can destroy a company’s cash.
Key background
Trump and his co-defendants — made up of his business associates, including his sons, and companies within the Trump Organization — were found liable in February for fraudulently misrepresenting the value of their assets in financial statements, which New York Attorney General Letitia James said was done to get more profitable business deals and reflect a higher net worth of Trump. Judge Arthur Engoron found there was “overwhelming evidence” suggesting Trump and his sons signed documents knowing the numbers were false, rejecting their arguments that they were simply following the advice of the company’s accountants. In addition to the monetary penalties, Engoron imposed other penalties, such as banning Trump and his sons from running companies in New York for three and two years, respectively. How Trump would pay the nine-figure judgment against him was a matter of widespread speculation before an appeals court reduced the amount, with Trump’s lawyers arguing in filings that it was impossible to secure bail for the full amount and that the former president could be forced to ” fire sale’ to sell off real estate for cash. The appeals court partially granted Trump’s request to delay the payment on March 25, the same day James could have begun seizing Trump’s assets if he didn’t pay.
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