Attorneys representing Donald Trump have claimed that the $175 million bond he posted for his New York civil fraud case is financially sound. But is it really?
According to CNN, Trump’s legal team has been insisting that the bond, secured by Knight Specialty Insurance Company, is backed by his Charles Schwab account, which holds over $175 million in cash. This means that Knight Specialty can access the Schwab account, and that its parent company completely covers any risk involved.
Former New York insurance superintendent Gregory Serio also made this claim, stating, “The DJT Trust granted KSIC a security interest in a Schwab brokerage account, in which the DJT Trust is obligated to maintain no less than $175 million in cash or cash equivalents at all times.’
However, some experts are not too sure. Gregory Germain, a law professor at Syracuse University, thinks that Trump’s arguments about the bond’s validity are mistaken. His point is that the insurance company must have enough capital to pay the bond immediately when it is needed, which Knight Specialty might not have.
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Germain also questions whether the parent company of Knight Specialty, Knight Insurance Company, Ltd., has been properly authorized to issue surety bonds in New York. Without this authorization, we can question if the bond is valid or not.
Attorney General Letitia James has also contributed to this conversation. Her concern is about Knight Specialty’s financial ability to even support the bond. She gave the company and Trump a deadline to prove they could meet the bond’s requirements, and even threatened to seize their assets if they do not do so.
The first filing of Knight Specialty had some errors, which made them file the bond posting again. Even though the company officials speak of how true they are, some still have their doubts about it.
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Knight Specialty has a lot of capital and this too is a bit suspect. New York law does not allow for bonds to be over 10 percent of a company’s surplus capital, which would make Knight Specialty to have a good amount more than what they claim to have.
Knight Specialty’shas filed again so that the attorney general can be much more convinced, they also raise some new questions. Adam Pollock, a former Assistant New York Attorney General, believes that the parent company’s capitalization and authority to issue bonds need to be checked again.
The source of the $175 million in Trump’s Schwab account also has some questions to it. If Trump has the cash, why use a surety bond? Andrew Weissmann, a former Mueller prosecutor, thinks Trump might be earning some interest on the money.
Some also think that the Schwab account might be double-pledged as collateral, which would make it unavailable for the bond. Additionally, Trump’s use of a similar account for previous bonds makes it more confusing.
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Presiding Judge Arthur Engoron has scheduled a hearing to discuss the bond’s validity. Pollock thinks the hearing is necessary to determine if the bond truly secures the judgment.
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