Judge Who Handed Down $454 Million Trump Penalty Set to Rule on Validity of Bond

President Trump has frequently criticized New York Supreme Court Justice Arthur Engoron for ‘ignoring’ appeals court orders.
Judge Who Handed Down $454 Million Trump Penalty Set to Rule on Validity of Bond
(Left) New York State Supreme Court Judge Arthur Engoron. (Dave Sanders/Pool Photo via AP) (Right) Former President Donald Trump in the courtroom on Oct. 17, 2023. (Seth Wenig/Pool/Getty Images)
Catherine Yang
4/21/2024
Updated:
4/22/2024
0:00

After weeks of trying to secure a bond and arguing to an appeals court that a $454 million bond was “impossible,” former President Donald Trump secured a $175 million bond to stay judgment only to now have to make the case all over again why this should satisfy the New York Attorney General and stop her from seizing his properties.

On April 22, New York Supreme Court Justice Arthur Engoron, the trial court judge who set the $454 million judgment, will hear the attorney general’s challenge to the sufficiency of President Trump’s bond.

The $175 million figure had been set by the appellate division of the New York Supreme Court, and President Trump has frequently criticized Justice Engoron for “ignoring” appeals court orders, such as when he allowed evidence past the statute of limitations set by the appellate division during the trial.

Who’s Backing the Bond?

The attorney general has sought to cast doubt on the stability of LA-based Knight Specialty Insurance Company (KSIC), calling it a “small insurer” and arguing it is not authorized to do business in New York.

They argued that KSIC has never before written a surety bond, and has “a total policyholder surplus of just $138 million.”

Amit Shah, president of the insurance company, demanded the court compel the attorney general to show cause, or prove the allegation that the insurance company is not sufficient.

Mr. Shah submitted a sworn affidavit explaining that KSIC now has control over a bank account of President Trump’s that will maintain $175 million cash for the duration of the appeal. The insurance company entered into a collateral agreement with the Donald J. Trump Revocable Trust. Mr. Shah submitted documents establishing that his company is in “good standing” and was approved for excess line eligibility in New York in June 2021.

“As an eligible excess line insurer in the state of New York, KSIC is, therefore, properly authorized to issue the surety on behalf of Defendants,” he stated. This authorization stands as long as the insurance company meets the Excess Line Association of New York’s requirement of maintaining a minimum $47 million policyholder surplus, and Mr. Shah stated his company is maintaining a $48 million surplus minimum.

He added that as of the end of 2023, the insurance company had $539 million in assets and $138 in equity, and its parent company, Knight Insurance Company, had on a consolidated basis $1 billion in assets and $1 billion in equity. The parent company also maintains $56 million in cash and $937 million in marketable securities to support reinsurance obligations.

“At my direction, KSIC also performed diligence to confirm its legal authority to act as surety before issuing the subject bond,” Mr. Shah stated. “Although KSIC had not before placed a surety bond in New York, KSIC is an excess line insurer in the state of New York.”

The attorney general also took issue with the fact that KSIC does not have “exclusive right” to the account containing $175 million in cash, and highlighted the fact that it would need “two days’ notice” to move that cash.

State attorneys urged the court to “not rely on KSIC’s financial summary” because the insurance company “sends 100% of its retained insurance risk to affiliates in the Cayman Islands,” which they argued “artificially bolsters its surplus.”

They argued that excess line insurers are only authorized if the management is found “trustworthy and competent,” and KSIC did not qualify because “its management has been found by federal authorities to have operated affiliated companies within KSIC’s holding company structure in violation of federal law on multiple occasions within the past several years.”

Knight is under The Hankey Group of financial companies, which includes the affiliate Westlake Financial Services LLC. The attorney general argued that Westlake was found to have “violated numerous federal laws by pressuring borrowers through the use of illegal debt collection tactics, including using phony caller ID information, falsely threatening to refer borrowers for investigation or criminal prosecution” in 2015 by the U.S. Consumer Financial Protection Bureau. The company was fined and provided $44 million in restitution to consumers.

The attorney general is requesting that President Trump be required to post a replacement bond within seven days.

30 Companies Said No

The bond required was originally $454 million, but attorneys for President Trump argued that they had employed four brokers who for weeks negotiated with the largest sureties in the world to no avail.

Some 30 companies would not fill the bond, they argued, because sureties normally will not take hard assets—like real estate, Trump Organization’s primary asset—as collateral.

Instead, they would require the bond amount in cash, plus additional premiums given the unusually large size, totaling to what they estimated to be more than $550 million cash.

On the eve of the deadline for posting bond, President Trump took to social media to claim that he had close to $500 million in cash, but had planned to use much of it on his reelection campaign and did not want to hand it over to a New York court as he fights to keep his buildings.

He further claimed in a follow-up press conference that the $454 million figure was one the attorney general and judge arbitrarily settled on because they had seen a number similar to it in his bank accounts, which have been disclosed to the court during the course of the civil fraud case.

The attorney general had originally sought $250 million, which increased to about $370 million by the end of the trial. Plus backdated interest, President Trump was ordered to pay $454 million in all.

Trump attorneys submitted a sworn affidavit from one of the brokers hired to negotiate the $454 million bond, who explained that in the surety world, $100 million was a large bond, and hardly issued to private individuals. He stated that only a “handful” of sureties are even authorized by the federal government to issue bonds that big, and many had internal policies limiting bonds they issue to $100 million. He also affirmed that sureties do not take hard assets as collateral, because they are not designed to quickly liquidate them in the event a bond has to be paid.

The attorney general urged the court not to take these affidavits at face value, calling into question the lawyer and broker’s credibility by claiming they had prior connections with President Trump. The state attorneys suggested that the reason President Trump could not fill the bond was instead because his companies may not be in as good standing as he claimed.

Trump attorneys pointed out that a court-appointed monitor has given the attorneys and court full access to Trump Organization finances since 2022, and the finances have been transparent.

Catherine Yang is a reporter for The Epoch Times based in New York.