NY uses obscure civil-practice law to demand a closer look at Trump's $175M appeal bond — and at its underwriter, Knight Specialty
Ryan Collerd/AFP/Getty Images
- The LA company that underwrote Trump's $175M appeal bond needs major vetting, NY says.
- Officials want the company to prove its financial soundness and show the underlying collateral.
- Judge Arthur Engoron, who presided over Trump's civil fraud trial, gets final say over the bond.
The New York Attorney General's Office wants a closer look at Donald Trump's $175 million appeal bond.
In a two-page court filing Thursday, state officials are giving Trump or his underwriters — the Knight Specialty Insurance Company — ten days to "justify," or prove the sufficiency of, the bond.
The step is necessary, the state notes in its filing, because the Los Angeles-based Knight is a "non-admitted carrier" under state insurance law, meaning it is not automatically qualified to provide bonds in New York.
"Admitted" insurance carriers are certified by New York's Department of Financial Services as qualified to underwrite bonds.
Because of Knight's non-admitted status, Attorney General Letitia James is allowed, under New York's civil practice rules, to ask for proof that Knight is financially sound and that the bond's collateral is sufficient.
The final call on whether the Knight bond sinks or swims will be up to New York Supreme Court Justice Arthur Engoron, who has set April 22 for a hearing on the matter.
Engoron is the judge who presided over Trump's civil trial, finding in February that the GOP frontrunner and his company executives fraudulently exaggerated the value of Trump Organization assets for a decade.
Trump needs the bond in order to keep the winner of the lawsuit, New York, from seizing his properties while he appeals Engoron's judgment, which by Thursday has risen to more than $469 million, according to a penalty calculator maintained by the Associated Press.
The Los Angeles-based Knight is owned by billionaire Don Hankey, described by Forbes as the "king of subprime car loans." The company did not immediately respond to a request for comment.
Because large appeal bonds are almost always underwritten by "admitted" insurance carriers, the need for Knight to "justify" their bond's underwriting and collateral is an unusual extra step.
Justifying was not necessary, for example, when Trump used insurance giant Chubb to post a $92 million bond last month for his E. Jean Carroll defamation appeal.
This time around, though, shopping for a bond has been harder. Before getting his bond through Knight, Trump had complained through his civil fraud defense lawyers that "about 30 surety companies through 4 separate brokers" had turned him down — including Chubb.
Despite the temporary delay, things could have gone far worse for the GOP frontrunner.
On March 25, an appeals court in Manhattan allowed Trump to post a bond covering only $175 million of what he owes New York.
Without that lifeline, Trump would have had to pay half a billion dollars in cash to purchase a bond covering the full amount he owes, experts told Business Insider.