The legal dispute over ex-President Donald Trump’s financial debts has shifted this week as the New York Attorney General’s Office questioned the validity of a $175 million bond Trump posted to postpone the enforcement of a civil fraud ruling. A hearing to discuss these issues is set for April 22.
The bond, underwritten by California-based Knight Specialty Insurance Company, has become a point of contention for New York State Attorney General Letitia James, who has filed papers calling for Trump’s lawyers or the bond underwriter to justify the bond’s financial backing.
Trump’s posting of the bond was an effort to forestall the immediate collection of more than $454 million owed after losing a lawsuit in which he was found liable for fraudulently inflating his assets to obtain favorable loan terms. The bond’s posting followed a decision by a New York appeals court to reduce the required amount from $464 million to $175 million.
“If they seek court approval of Knight Specialty, I believe that the attorney general will want proof that the company is actually holding the $175 million in cash collateral so the bond can be immediately paid if the judgment is affirmed without needing to wait to try to liquidate pledged assets,” said Bruce Lederman, an attorney with DL Partners,
The attorney general’s office has expressed concern about the ability of Knight Specialty Insurance Company to fulfill the bond, especially as it is not regulated by New York state. State lawyers have filed a “notice of exception to the sufficiency of the surety,” requesting additional details from Trump or the underwriter within 10 days, or the bond will not be considered valid.
The request for justification typically involves proving that the underwriter is financially sound and that the bond is backed by sufficient collateral. Trump’s lawyer, Christopher Kise, has labeled the attorney general’s actions as a continuation of a “witch hunt,” suggesting that the request for more information is an effort to provoke a public quarrel.
Eric Trump, one of the former president’s sons and a top executive in his company, stated on social media that the bond was backed entirely by cash. The bond’s underwriter, Knight Specialty Insurance, and related reinsurer Knight Insurance Co. Ltd., have disclosed assets of over $539 million and $2.1 billion, respectively. Nonetheless, the attorney general’s office is seeking more comprehensive details to establish the financial stability of the underwriter and the legitimacy of the collateral backing the bond.
If the bond is considered inadequate, it may result in the state seizing assets to fulfill the judgment against Trump, who denies the claims and is appealing the decision. With interest accruing daily, Trump and his legal team must promptly demonstrate the bond’s financial stability.
Relevant articles:
– NY state is demanding more information on Trump’s $175 …, ABC News – Breaking News, Latest News and Videos, 2 hours ago
– New York AG questions out-of-state underwriter of $175 million Trump bond, CNN, April 04, 2024
– New York AG questions whether California company can handle Trump’s $175M bond, ABC News, April 04, 2024
– Trump’s $175 Million Fraud Bond Could Be Invalidated If Insurance Company Doesn’t Prove It Can Cover It, Forbes, April 04, 2024