"They're still playing games": Ex-prosecutor warns Trump may face asset seizure over invalid bond

Judge Arthur Engoron is "going to have very little patience here," predicts ex-assistant NY AG Adam Pollock

By Tatyana Tandanpolie

Staff Writer

Published April 10, 2024 4:41PM (EDT)

Letitia James and Donald Trump (Photo illustration by Salon/Getty Images)
Letitia James and Donald Trump (Photo illustration by Salon/Getty Images)

The $175 million bond Donald Trump posted in New York last week appeared to be the former president's saving grace, bringing the enforcement of the more than $460 million judgment in his civil fraud case to a halt pending his appeal. But the New York attorney general indicated soon after that all that glitters is not gold. In a filing last Thursday, New York Attorney General Letitia James, who brought the suit against Trump, expressed her concerns with the bond, writing that she "takes exception to the sufficiency of the surety" given to Trump and the other defendants. 

James then gave Trump and the bond provider, Knight Specialty Insurance Company, 10 days to file a motion to "justify" the bond, proving that the company is financially capable of paying it.

The skepticism the attorney general's filing outlines appears to demonstrate her distrust for Trump given the nature of the case she brought against him and its findings, Bennett Gershman, a Pace University law professor and former New York prosecutor, told Salon. 

"After litigating and winning cases involving Trump’s dishonest business practices, including phony charities and a phony college scam, and then winning a $465 [million] lawsuit in which Trump was found [liable] of massive fraud, AG James doesn’t trust anything Trump does or says," Gershman said. "It’s really that simple."

Experts told CBS News that the surety bond was missing typically necessary information, including documents related to power of attorney for Knight Specialty, a financial statement from the company and a certificate of qualification from the Department of Financial Services. 

The New York Supreme Court directed the company last Wednesday to refile its posting, which it did that Thursday prior to James' challenging the bond, CBS News notes. Knight Specialty's updated filing included a joint limited power of attorney signed by the chairman and president of the subsidiary's owner, Knight Insurance, Don Hankey and Amit Shah, respectively, as well as a financial statement showing the company's surplus to policyholders amounts to $1 billion. 

Former Assistant New York Attorney General Adam Pollock told Salon that the initial bond was "completely procedurally and substantively flawed" because it failed to "secure the judgment." The updated filing, though "slightly better," still falls flat, he explained. 

Knight Specialty does not have a license to issue surety bonds in New York and is not listed in the Department of Financial Services database because it is "not a New York insurer," Pollock said. New York law CPLR 2505 requires an insurance company be "authorized to execute the undertaking within the state," CBS News notes. 

The company will also be unable to submit the required certificate of qualification because the Department of Financial Services only issues that documentation to New York insurers, Pollock said, pointing out that the bond filing also seems to indicate that Trump, abnormally, will "make good" on the bond rather than the insurer. 

Shah told CBS News that the company is authorized to issue a surety bond in New York through the Excess Line Association of New York, adding that ELANY permits the company to issue bonds from its home state of Delaware, where it is allowed to write surety bonds. ELANY's communications manager John Rosenblatt, however, told The Daily Beast that “Knight Specialty Insurance Company is not on the ELANY voluntary list” and that the government-created nonprofit has “no knowledge of the specific transaction at this time.”

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Knight Specialty also does not appear to fulfill a qualification under New York insurance law requiring companies put no more than 10 percent of its capital at risk, CBS News notes.

In order to post the bond, the company would have to have 10-times the bond total in "surplus capital," amounting, in this case, to $1.75 billion in available money, Pollock explained. In its updated filing, Knight Specialty indicated it has $138 million of surplus on its own and included a financial statement for Knight Insurance, which lists a $1 billion surplus to policyholders. 

"The problem with the consolidated financials is that they don't claim that all the consolidated entities are all responsible for this bond," Pollock said, adding: "If I told you that, me and all my friends have enough money to back your car insurance, you probably want to know who are my friends and have some written commitment from my friends that they're also going to back your car insurance. Otherwise, it's kind of meaningless that I have a bunch of friends with money."

Shah told CBS News that that restriction does not apply because the company is not a New York insurer — which Pollock notes flouts the legal requirement — and that Knight Specialty has over $1 billion in equity. 

As the attorney general's deadline closes in, the stakes rise for Trump, experts suggested. Gershman, Pollock and Syracuse University law professor Gregory Germain said that a failure to meet the deadline would allow the attorney general to begin executing the judgment, seizing and liquidating Trump's assets including real estate holdings, bank accounts and stocks. Pollock added that James "should" if that becomes the case.  

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But Germain said he thinks James doing so is "unlikely." He expects Knight Insurance will clarify that the affiliated policyholders described are backing the bond and have the financial resources to pay. The court, he added, may also "direct the New York insurance commissioner to review the qualifications of the bonding company and report back."

Trump isn't completely out of luck if he fails to meet James' deadline, Gershman and Pollock added. In normal situations, a civil defendant has nine months to carry out an appeal after giving notice, which allows them to post a bond at any time during that timeframe that would stop the enforcement, Pollock said. If the court doesn't find that Knight Specialty sufficiently "justified" the bond, he speculated, it may revert the $175 million reduced bond — which was contingent on being posted in 10 days — and put Trump on the hook for the full sum. 

A hearing is scheduled to discuss the bond and its potential issues on April 22. 

Knight Specialty is "going to have to try to argue that the bond is valid. This is going to be very hard for them because it's not," Pollock said, noting that Trump's bond situation is "unprecedented."

"This is a trial about Trump's financial chicanery, and after he found Trump liable for persistent fraud in his finances, amazingly, they're still playing games with the bond that they filed in the appeal of that," he added, predicting that presiding Judge Arthur Engoron is "going to have very little patience here."

By Tatyana Tandanpolie

Tatyana Tandanpolie is a staff writer at Salon. Born and raised in central Ohio, she moved to New York City in 2018 to pursue degrees in Journalism and Africana Studies at New York University. She is currently based in her home state and has previously written for local Columbus publications, including Columbus Monthly, CityScene Magazine and The Columbus Dispatch.

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