State of New York vs Trump, et al - the civil fraud case against the Trump Organization

[chancery]

Prompted by Dave Kingston, Esq.'s tweet just upthread, I took a look at NY Insurance Law § 1111(a), which provides

Whenever by any law of this state any policy or contract of insurance is required, or is acceptable in lieu of any other requirement imposed by such law, the superintendent may, upon written request containing such information as he deems necessary, issue to any person a certificate of qualification, stating the qualification of any insurer authorized to do such business in this state if he finds that, as shown by the insurer's last filed annual statement or last filed report on examination, whichever is later, the insurer is solvent, responsible and otherwise qualified to make policies or contracts of the kind required.

https://codes.findlaw.com/ny/insurance- ... sect-1111/

Also NY CPLR § 2506 "Exception to surety: allowance where no exception taken."

(a) Exception to surety. If a certificate of qualification issued pursuant to subsections (b), (c) and (d) of section one thousand one hundred eleven of the insurance law is not filed with the undertaking, a party may except to the sufficiency of a surety by a written notice of exception served upon the adverse party within ten days after receipt of a copy of the undertaking.

https://law.justia.com/codes/new-york/2 ... e-25/2506/

And CPLR § 2507 "Justification of surety."

(a) Motion to justify. Within ten days after service of notice of exception, the surety excepted to or the person upon whose behalf the undertaking was given shall move to justify, upon notice to the adverse party and to the sheriff if he was served with the undertaking. The surety shall be present upon the hearing of such motion to be examined under oath. If the court find the surety sufficient, it shall make an appropriate indorsement on the undertaking. A certificate of qualification issued pursuant to subsections (b), (c) and (d) of section one thousand one hundred eleven of the insurance law shall be accepted in lieu of a justification.

(b) Failure to justify. If a motion to justify is not made within ten days after the notice of exception is served, the undertaking shall then be without effect, except as provided in this subdivision. Unless otherwise provided by order of court, a surety on an undertaking excepted to and not justified shall remain liable until a new undertaking is given and allowed, but the original undertaking shall be otherwise without effect.

https://law.justia.com/codes/new-york/2 ... e-25/2507/

I also took a look at the appeal undertaking filed by Federal Insurance Company (Chubb subsidiary) in Carroll v. Trump, and I see that it contains the supporting documents missing from the Knight Specialty Insurance undertaking, viz, a certificate of solvency under Insurance Law § 1111 issued to the Federal Insurance Company by the NYS Department of Financial Services, with a statement of assets, liabilities and surplus.

https://storage.courtlistener.com/recap ... 29.1_1.pdf

So, whether or not Knight Specialty Insurance is authorized by the NYS Department of Financial Services to write surety bonds, the bond filed does appear to be defective on its face for lack of a certificate of solvency aka certificate of qualification.

[RTH10260]

[chancery]

Kingman says that the NYAG will have to move to strike the bond, but there will likely be someone in the First Department clerk's office who knows whether or not Knight Specialty Insurance is allowed to write surety bonds in New York state. I would expect that the clerk's office would bounce the bond sua sponte ... but I didn't practice in this area.

So I'm glad I qualified that post, because my speculation appears to have been off base. CPLR § 2506(b) provides:

Allowance where no exception taken. Where no exception to sureties is taken within ten days or where exceptions taken are set aside the undertaking is allowed.

As I read this, sua sponte bond bouncing by the clerk isn't a thing; it's up to the opposing party to object.

[chancery]

Except ...

I clicked on a link to the Knight Specialty Insurance bond to look at it again. The court website displayed an error message:

This document is not available for public viewing at this time.

Going to the docket (note, the bond was filed in the trial court, not in the First Department appeal proceeding), I saw this:

1707        BOND/UNDERTAKING [date field blank] Returned For Correction

So I dunno, maybe a clerk did bounce it, and told Trump's lawyers to refile it with a certificate of qualification.

Here's a conundrum: if an undertaking is "returned for correction," is the 10-day deadline for filing an exception still running from the date it was originally filed?

And if there is no bond on file at the end of the day April 4, when the 10-day deadline set by the First Department for trump to file a $177 million bond expires, is enforcement of the full judgment stayed or not?

I wish some of the journalists following this action were asking these questions.

Edit: here's a copy of the undertaking as originally filed, from a Forbes article: https://www.documentcloud.org/documents ... -insurance

[chancery]

https://twitter.com/NYadvocateJKL/statu ... 90799?s=20

Jeffrey K. Levine
@NYadvocateJKL
BREAKING NEWS:
Court rejected #TrumpBond filing in #TrumpFraudVerdict for several reasons, 1 of which was #Trump failed to upload his "current financial statement" to the Court [looking forward to read].
175 million reasons why 1 mistake should not have been made, much less 3 !

The image of the clerk's notice states:

The court has returned the documents listed below for the following reasons: Please include a current financial statement and Power of Attorney. Additionally, please list the name of the Attorney-in-Fact under the signature line on the Undertaking. Please use the "Refile Document" link for Doc. No. 1707 to resubmit the corrected filing. Thank you and have a great day.

This and all of the other comments that I've seen about the clerk's action assume that the "current financial statement" should come from Trump, which makes no sense in the context of a surety bond. The financials need to come from the insurance company.

Also, the clerk didn't mention the absence of a certificate of solvency. Based on the Carroll bond, the financial statement is attached to the certificate, so maybe the clerk viewed them as part of the same package. Or, and this happens a lot, the clerk stopped looking after spotting sufficient cause to bounce the filing. It's not safe to assume that, just because you fixed the errors called out by the clerk, your papers are adequate for filing.

Apart from Davd Kingman, Esq., no one who I follow on twitter has figured out about the need for a certificate of solvency.

[much ado]

Didn’t Engoron place some restriction requiring information from Trump when submitting a bond, perhaps financial statement?

[Reality Check]

Appears the clerk rejected the bond for failing to supply some required financial statements and a few other issues. They can resubmit.

[sugar magnolia]

Is it still due by Friday or does the deadline to post it get extended?

[RTH10260]

from the description to above clip

The COURT HAS REJECTED Trump’s purported $175 million bond to stop collection of the $465 million dollar fraud judgment because the unknown bonding company backed by the “King of the Subprime Auto Loan” didn’t provide its balance sheet to show that its solvent and made other rookie mistakes in the form of the bond. Does that mean that the NY AG can get back to collecting the judgment against Trump? Michael Popok has the answers including why Trump used this bonding company.

[p0rtia]

..And Popok's answer is, "no."

[chancery]

In most courts, certainly including New York courts, there's usually wide latitude for correcting a filed paper to fix things like typos, mis-citations, dropped paragraphs, missing pages, mangled exhibits, missing signatures, and the like. How far it goes before the "fixes" are deemed an inappropriate violation of a previous deadline and rejected is hard to predict in advance. It depends on the individual practices of judges and clerks' offices, the courtesy of opposing counsel, and how strict the deadline was in the first place.

An opposing counsel who assumes that the corrections will be rejected and that the filing can therefore be ignored does so at peril. The NYAG isn't going to unilaterally decide that the First Department's stay order is null because a proper bond wasn't filed within the 10-day deadline just because the clerk returned the filing for correction.

The bigger problem is going to be whether there is an unfixable problem, namely lack of a certification of solvency from the New York DFS demonstrating authorization to write surety bonds in NYS. Dave Kingman, Esq., who first raised the issue, says that it can't be fixed. And since CPLR § 2506 provides a mechanism for challenging the bond, the NYAG will presumably file an exception. We'll see. As I've said, this isn't an area I'm familiar with.

[chancery]

Interesting watching a good reporter playing catch-up in an area she's not familiar with. She obviously hasn't taken the time to review the CPLR and the Insurance Law, although, to be fair, now that she's a reporter, that's probably not her job.

https://twitter.com/lawofruby/status/17 ... 9290496015

Today, I learned that the court filing reflecting Trump’s bond in the civil fraud case was “returned for correction” and specifically, for the inclusion of a current financial statement and power of attorney. But all is not what it seems. 1/

The financial statement that is missing does not seem to be Trump’s. Rather, the court appears to be demanding these documents from Knight Specialty Insurance Co. to ensure that company is sufficiently capitalized and authorized to post the bond. 2/

As of tonight, those documents do not appear on the docket. 3/

Meanwhile, we still don’t know what fee Trump paid for the bond or exactly what collateral he pledged, especially as Don Hanley gave slightly different accounts to various media outlets. 4/

But you know who likely DOES have all of those details? Retired federal judge Barbara Jones, the court-appointed monitor in the case. Under a 3/21/24 order, the Trump Org must give her advanced notice of their efforts to secure surety bonds. 5/

The information she is entitled to includes “any financial disclosures requested or required, any information provided in response to such requests, any representations made by the Trump Org. in connection with acquiring such bonds…” 6/

“…any personal guarantees made by any of the defendants, & any obligations of the Trump Organization required by the surety.” 7/

And I can think of a courtroom full of journalists, as well as a bunch of lawyers in the New York Attorney General’s office, who would love to know what Barbara Jones presumably knows right now. FIN

[chancery]

A miscellany of additional posts by Dave Kingman, Esq., whose twitter follower count has now risen from 78 to 126 132.

https://twitter.com/DaveKingman8/status ... 6072249531

Dave Kingman, Esq.
@DaveKingman8
I have serious questions about whether a "surety" that is not authorized to do business in NY, that doesn't do any other business in NY, that doesn't have assets in NY, and that is close to Trump would pay the bond and not make the AG chase them in California to collect.

https://twitter.com/DaveKingman8/status ... 901283273

Dave Kingman, Esq.
@DaveKingman8
I told someone else -- surety is a niche practice and I always dreamed one day we'd have our day in the sun. Never really thought it would happen though.

https://twitter.com/anonymous75248/stat ... 4558751971

Anonymous75248
@anonymous75248
Do you know if he has to correct the filing within the original 10 day deadline (which ends tomorrow)?


Dave Kingman, Esq.
@DaveKingman8
there's no deadline for him to fix this defect with the bond, but while there's no bond, there's no stay preventing the AG from taking steps to collect the judgment.

https://twitter.com/Stepman19/status/17 ... 5756606607

Rich Stepman
@Stepman19
When did the NY AG realize this? After reading your tweets?

Dave Kingman, Esq.
@DaveKingman8
I don't know if she has realized it yet at all. The Clerk rejected the bond because it was not complete. The Clerk can't reject the bond because of who the surety is. The procedure is that the AG has to serve an "exception" to the bond upon Trump.

Rich Stepman
@Stepman19
Well I assume someone in that office will realize it (I guess...)

https://twitter.com/YancyFaith/status/1 ... 4761886139

YancyFaith
@YancyFaith
The bond may be null and void?

Dave Kingman, Esq.
@DaveKingman8
Yes but the AG needs to challenge it (called an "exception"). They are not qualified to write the bond in NY. They cannot file the certificate of qualification required for court bonds because they're not qualified. They cannot justify the bond and beat an exception.

https://twitter.com/DaveKingman8/status ... 0398844022

Dave Kingman, Esq.
@DaveKingman8
Looking at that bond when it was filed, it was clear that Knight Specialty had no idea what it was doing.

https://twitter.com/DaveKingman8/status ... 2037713946

Dave Kingman, Esq.
@DaveKingman8
A bond has to have a power of attorney and financial statement when filed to be valid. This bond has neither. But they can fix that and refile. This insurance company is not authorized to write surety bonds in NY. If the AG contests the bond, the Court has to reject it.

https://twitter.com/JeanNB10/status/1775713602839654753

Jean NB
@JeanNB10
Apart from not being authorized, is it unusual for an insurance company (I assume that it is referring to the holding company) with about $25b in assets to write a $125m bond? Isn’t that a concentration risk?

Dave Kingman, Esq.
@DaveKingman8
bond limit is based upon capital, not assets -- if they had $25 billion in capital, they could write a $175 million bond no problem

[Chilidog]

am I the only one who thinks of this guy, reading this thread ?

IMG_1745.jpeg (38.72 KiB) Viewed 823 times

[chancery]

Have you seen Dave Kingman, Esq.'s twitter avatar?

[zekeb]

Trump's $175M bond backer is a subprime car loan billionaire who has run afoul of regulators

[Slim Cognito]

Insert gif from Casablanca here.

[RTH10260]

As with many of DJTs choices - only the best

[Tiredretiredlawyer]

Oh, Lords, and Ladies, of Wealth, please explain the difference between assets and capital.

Dave Kingman, Esq.
@DaveKingman8
bond limit is based upon capital, not assets -- if they had $25 billion in capital, they could write a $175 million bond no problem

[bbflatt]

Oh, Lords, and Ladies, of Wealth, please explain the difference between assets and capital.

Dave Kingman, Esq.
@DaveKingman8
bond limit is based upon capital, not assets -- if they had $25 billion in capital, they could write a $175 million bond no problem

Assets are all the stuff you have, regardless of the amount of debt incurred to acquire them. Capital (in this context) is the amount the owners have invested in the company. Assets = liabilities + capital.

[Tiredretiredlawyer]

[chancery]

Trump has posted a corrected bond, with a financial statement and power of attorney.

https://iapps.courts.state.ny.us/nyscef ... l09aJOjw==

No certificate of qualification. So we'll see.

It's conceivable to me that NYAG might rationally decide that they are better off with a bond from Hankey's sketchy insurance company than embarking on a lengthy, labor-intensive, and expensive judgment enforcement campaign.

[Dr. Ken]

Knight only has about 500m cash on hand

[andersweinstein]

Tish files exception to bond, noting lack of certificate of qualification.



Filing here

Dave Kingman, Esq., gets an RBI.

[Tiredretiredlawyer]

Assets are all the stuff you have, regardless of the amount of debt incurred to acquire them. Capital (in this context) is the amount the owners have invested in the company. Assets = liabilities + capital.

It seems using capital as a bond basis risks more for the creditor by giving a glowing picture without revealing the liabilities.