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

[Tiredretiredlawyer]

Thank you, chancery, for slogging through the “statutory spaghetti” that is Turnip’s sordid attempts to get an appeal bond!

[zekeb]

Thank you, chancery, for slogging through the “statutory spaghetti” that is Turnip’s sordid attempts to get an appeal bond!

Back when I was an upstart whippersnapper taking business classes, I was taught that the reason why most business fail is due to insufficient liquidity. Drumpf need to look into getting a SBA loan.

[Tiredretiredlawyer]

[RTH10260]

$175 million bond? Teh Donald must be doing something wrong ...

► Show Spoiler

[RTH10260]

This guy, Ethan Bearman, comments on the (mis-)fortune of a FL senior. His special take here is that the WSJ quoted a person from the bond company who looked at the assets, especially MaL, and says that its value is far from what djt claims it to be. Bearman believes that this snippet can act as additional evidence for E James ought she need to proof her case in the appeal.

According to what Bearman says in this clip djt has the $175 million in cash as collateral for the bond at hand, but it is cheaper for him to pay fee and interest to the bond company than paying it personally into a court account where it does not collect interest.



(clip positioned to above discussion)

[chancery]

Edit: By which I mean, if the evidence already in the record doesn't persuade the First Department of the correctness or Judge Engoron's ruling about the valuation of Mar-a-Lago, an anecdote about Mr. Hankey isn't going to fix it.

[Chilidog]

This guy, Ethan Bearman, comments but it is cheaper for him to pay fee and interest to the bond company than paying it personally into a court account where it does not collect interest.

it is my understanding that New York requires interest to be paid on escrow accounts.

[Chilidog]

Edit: By which I mean, if the evidence already in the record doesn't persuade the First Department of the correctness or Judge Engoron's ruling about the valuation of Mar-a-Lago, an anecdote about Mr. Hankey isn't going to fix it.

IMG_1843.jpeg (34.62 KiB) Viewed 877 times

[W. Kevin Vicklund]

Off Topic

Hankey the Christmas Pooh inspired one of my favorite mnemonics for Calculus. If you sub x=hi and y=ho into the equation for d(x/y), the solution is (ho d(hi) - hi d(ho))/(ho ho)

[Sam the Centipede]

Off Topic

Hankey the Christmas Pooh inspired one of my favorite mnemonics for Calculus. If you sub x=hi and y=ho into the equation for d(x/y), the solution is (ho d(hi) - hi d(ho))/(ho ho)

Doesn't that come into the category of memory aids that are more difficult to remember than what they represent?

F'rinstance, I'm sure there are clever mnemonics for the order of the planets, but I get the order from more general knowledge: Mercury is the hot rock closest to the Sun so position 1, Venus is closer to the Sun (hence also hot) than Earth, which is the third rock from the sun, so Venus is position 2, Mars is quite close to earth, but because Venus etc. must be further out, so next at position 4, the asteroid belt lies between Mars and Jupiter, so Jupiter next at 5, Uranus and Neptune are a long way out and weren't found early so Saturn must be Jupiter's neighbor at position 6. Uranus or Neptune next? That's given by the fact that I know Pluto's orbit crosses Neptune's orbit, so Neptune must be the furthest of the (known) major planets at position 8 and Uranus at position 7.

Hmm. Perhaps it would just be easier to remember the order?

[W. Kevin Vicklund]

Off Topic

Hankey the Christmas Pooh inspired one of my favorite mnemonics for Calculus. If you sub x=hi and y=ho into the equation for d(x/y), the solution is (ho d(hi) - hi d(ho))/(ho ho)

Doesn't that come into the category of memory aids that are more difficult to remember than what they represent?

F'rinstance, I'm sure there are clever mnemonics for the order of the planets, but I get the order from more general knowledge: Mercury is the hot rock closest to the Sun so position 1, Venus is closer to the Sun (hence also hot) than Earth, which is the third rock from the sun, so Venus is position 2, Mars is quite close to earth, but because Venus etc. must be further out, so next at position 4, the asteroid belt lies between Mars and Jupiter, so Jupiter next at 5, Uranus and Neptune are a long way out and weren't found early so Saturn must be Jupiter's neighbor at position 6. Uranus or Neptune next? That's given by the fact that I know Pluto's orbit crosses Neptune's orbit, so Neptune must be the furthest of the (known) major planets at position 8 and Uranus at position 7.

Hmm. Perhaps it would just be easier to remember the order?

No, it actually helps in remembering the sequence, it's not intuitive that the first term is ydx rather than xdy.

Hi Ho - the 7 dwarves sing this, sets the order of substitution
Ho-de-hi - nonsense syllables
Hi-de-ho - what Hankey says
Ho Ho - what Santa says, and Hankey is a Christmas Poo, so obviously these have to be next to each other, and Christmas is at the end of the year

As I recall, the mnemonic also worked with the show Home Improvement (Tim's neighbor Wilson(?) would say "hi-de-ho, neighbor" and Tim would often grunt "Ho Ho")

[keith]

I was told there will be no math and Santa says "ho ho ho".

Your answer is wrong, and your exam paper makes every one who reads it more stupider.

[raison de arizona]

James files against the so-called bond: https://www.documentcloud.org/documents ... law_i_1738

[chancery]

Ha! I'm a little late. But I'll post this anyway, and then look at the papers.

Thank you, chancery, for slogging through the “statutory spaghetti” that is Turnip’s sordid attempts to get an appeal bond!

Just to be clear, I only sniffed at the spaghetti; I was too lazy to slog through it.

Here are my thoughts as we wait for the NYAG's papers.

1. The fact that Knight Specialty lacks a certificate of qualification to write indemnity bonds in NYS is no longer an issue. Lack of the certificate means that Knight Specialty's bond is not entitled to automatic approval without a hearing, but now that it has moved to "justify" the bond (the archaic term used in CPLR §§ 2506-07 to mean court approval), Judge Engoron has full discretion to approve or not approve the bond based on the facts and arguments in the record, as I've said all along. Initially I thought that Trump needed to move under CPLR § 5519(a) for a discretionary approval, but on reflection Judge Engoron probably has the same power in a motion under CPLR §§ 2506-07.

2. But Dave Kingman, Esq. told us that indemnity written by a non-admitted out-of-state excess/surplus lines carrier isn't a thing?

I've got no reason to doubt him, and the fact that former Superintendent Serio didn't provide any examples confirms it. But I suspect the reason he's never seen such a thing is due to market forces. Excess/surplus lines insurance is expensive (unless you have a shady pal in the business), because it's specialty insurance, for unusual risks that are hard to assess, and thus comes with a hefty price.

Why would a litigant pay an upcharge for a bond from specialty carrier, which will factor in the cost of hiring counsel and experts to defend the bond, when he can get a cheaper deal from the Elmer Hyde agency, which pretty much wrote the book on NYS surety bonds?

3. What about the fact that the undertaking doesn't contain language that clearly obligates Knight Specialty to pay?

The language is probably good enough. I have anecdotal experience here. I've only ever seen two or three appeal bonds, and the first time I was puzzled, precisely because it didn't seem to work. After reading it several times I noticed a short enigmatic phrase. I concluded that while it could be interpreted to express an obligation to pay, I wouldn't want to bet that a court would necessarily construe it that way. When I mentioned this to an experienced lawyer, he told me not to worry: that was the language used in the tight little world of surety insurance, and since it was an Elmer Hyde bond, it was by definition written correctly.

Dave Kingman, Esq. says as much: https://twitter.com/DaveKingman8/status ... 6639334510

Dave Kingman, Esq.
@DaveKingman8
Yes. But the bond says that it is provided pursuant to CPLR 5519, which should be enough for a court to construe it as a promise that the surety will pay if Trump doesn't. The language of surety bonds is arcane and they sometimes don't say expressly that the surety will pay.

By "yes" I mean that it's true that the bond doesn't say that the surety will pay with clear language. But I don't believe the bond is a "sham" because it says that it's being provided pursuant to the statute. Any court would enforce this bond against Knight.

4. What about the fact that Trump Jr.'s signature page indicates that the agreement is with a Chubb subsidiary, so that, on its face, there is no collateral security agreement with Knight Specialty?

It's _really weird_, and sloppy, that Trump's lawyers haven't fixed that. Not a good look. But it's probably fixable, and so won't matter.

5. What about the financial statements, the sleazy Cayman Islands incorporation, whether Knight Specialty & the parent can be sued in NYS, the sketchy intra-corporate reinsurance, and the two-days notice to take control of the collateral, etc.?

That's what the the dispute will be about, and I don't know enough to express an opinion. It will be interesting to see what the NYAG says. Remember, it's not about "counting coup" based on stupid things in Trump's papers; it's the practical question of whether the undertaking is sufficient under the imperfect circumstances presented.

[p0rtia]

Thanks!

[raison de arizona]

https://x.com/TristanSnell/status/1781429230678503570

Trump lost a $464M case because he fraudulently overvalued his properties -- from 200% to 3300%

Then for the bond, he found an insurer that is illegally taking on a risk far higher than they're allowed to under NY law -- by 1260%

Trump literally found the Trump of insurance

[chancery]

I've taken a quick look at the NYAG's brief, and my predictions held up fine.

1. The fact that Knight Specialty lacks a certificate of qualification to write indemnity bonds in NYS is no longer an issue.

Check:

Movants seriously misconstrue the reason for Plaintiff’s notice of exception, contending that the bases are the mere absence of a certificate of qualification and a misapprehension about the ability of a non-admitted insurer to write business in New York on an excess lines basis.

KSIC is permitted under New York Insurance Law to issue insurance in this state on an excess lines basis through a New York-licensed excess lines broker and is authorized by the Delaware Insurance Department to write surety risks (among other lines of business) as an excess lines company. NYAG Brief at 1, 4.

2. The reason no one has ever seen an appeal bond written by a non-admitted out-of-state excess/surplus lines carrier is due to market forces, not because it's illegal.

Check: Follows from ¶ 1 above.

3. The language [in the undertaking] is probably good enough; surety law has an ancient and obscure vocabulary.

Check:

Tracking the language required for an undertaking pursuant to CPLR §5519(a)(2), the Bond provides that KSIC “undertake(s)” that the Defendants “shall pay to Plaintiff . . . the sum directed to be paid by the Judgment” as affirmed, provided however the amount of the Bond shall not exceed $175 million. Bond at 2-3. This language—which traces back to a predecessor statute in effect over a century ago—creates a binding promise on the part of the surety to pay Plaintiff in the event the judgment debtor does not. NYAG Brief at 3 (citing caselaw)

4: Trump Jr.'s signature page, indicating that the agreement is with a Chubb subsidiary, is a sloppy mistake that's probably fixable, and so won't matter.

Check:

The Trust signature page of the Pledge Agreement contains an obvious typographical error that needs to be corrected; it refers to the surety as “Federal Insurance Company” rather than KSIC. NYAG Brief at 5 n.6.

Footnote 6 on the same page identifies more sloppiness: pages of an earlier reinsurance agreement, apparently included by mistake.

5: What about the financial statements, the sleazy Cayman Islands incorporation, whether Knight Specialty & the parent can be sued in NYS, the sketchy intra-corporate reinsurance, and the two-days notice to take control of the collateral, etc.?

Check: The NYAG does a strong, though not rock-crushing job with these issues. See NYAG Brief at 7-19. It's not rock-crushing in that they don't show that the Department of Financial Services has established express regulations that make captive reinsurance arrangements void on their face, but they persuasively show that the DFS views them with deep concern and disfavor, sufficiently so that the court should do so as well. And they poke lots of other holes. I would be surprised if Justice Engoron accepts the undertaking in its current condition.

Also, an aggressive touch:

Pursuant to CPLR §2507, testimony in support of a motion to justify must be presented by the surety’s witnesses at the hearing “to be examined under oath,” thereby guaranteeing to the judgment creditor taking exception to the surety the right of cross-examination. CPLR §2507(a). To the extent that Movants’ affiants are not present at the upcoming hearing “to be examined under oath,” their affirmations should be stricken from the record as inadmissible hearsay. NYAG Brief at 5 n.4.

I dunno if the judge really wants to conduct an evidentiary hearing; we'll see.

[p0rtia]

Fascinating. Thanks again!

[Foggy]

Tomorrow is the day we learn more about this bond.

I suspect Trump’s attorneys will not have an expert in NY bond practice, so Ms. James might have the only expert in the field. Trump’s lawyers will doubtless bring on some functionary of the trust company to tell the judge how solid the bond is, and how it would definitely be acceptable if it was filed in California. I can't see any witness who really is an expert in NY bond practice testifying for Trump, but we'll see.

I hope somebody forces the company witness to admit they have never issued a bond in a civil lawsuit before, not even in California. Have they, and is this ordinary business for them, or is it clearly a whack-a-loon billionaire trying to do a favor for his crooked buddy? In a perfect world, Trump's buddy the billionaire will show up in person, take the stand, and open himself to cross-examination.

And the judge grills everyone like tuna steaks before he rules that the bond is too stupid for the courts of the state of New York.

That's how it happened in my dream, anyway.

[andersweinstein]

I hope somebody forces the company witness to admit they have never issued a bond in a civil lawsuit before, not even in California. Have they, and is this ordinary business for them, or is it clearly a whack-a-loon billionaire trying to do a favor for his crooked buddy?

The AG's brief says Knight Specialty Insurance "...had never written a surety bond in New York and never in the past two years in any other jurisdiction", citing the affirmation from their president Amit Shah. Checking chancery's links I didn't immediately notice any place in the short affirmation that said they had done so. But the AG's "not in the past two years" formulation suggests that they HAVE written some form of surety in some other jurisdiction more than two years ago. The company's justification touted the fact that they were licensed to write surety risks in their home state of Delaware.

[raison de arizona]

I hope somebody forces the company witness to admit they have never issued a bond in a civil lawsuit before, not even in California. Have they, and is this ordinary business for them, or is it clearly a whack-a-loon billionaire trying to do a favor for his crooked buddy?

The AG's brief says Knight Specialty Insurance "...had never written a surety bond in New York and never in the past two years in any other jurisdiction", citing the affirmation from their president Amit Shah. Checking chancery's links I didn't immediately notice any place in the short affirmation that said they had done so. But the AG's "not in the past two years" formulation suggests that they HAVE written some form of surety in some other jurisdiction more than two years ago. The company's justification touted the fact that they were licensed to write surety risks in their home state of Delaware.

No it doesn’t. It suggests that they didn’t bother looking more than two years back.

[sugar magnolia]

I hope somebody forces the company witness to admit they have never issued a bond in a civil lawsuit before, not even in California. Have they, and is this ordinary business for them, or is it clearly a whack-a-loon billionaire trying to do a favor for his crooked buddy?

The AG's brief says Knight Specialty Insurance "...had never written a surety bond in New York and never in the past two years in any other jurisdiction", citing the affirmation from their president Amit Shah. Checking chancery's links I didn't immediately notice any place in the short affirmation that said they had done so. But the AG's "not in the past two years" formulation suggests that they HAVE written some form of surety in some other jurisdiction more than two years ago. The company's justification touted the fact that they were licensed to write surety risks in their home state of Delaware.

No it doesn’t. It suggests that they didn’t bother looking more than two years back.

And just being licensed doesn't mean diddly either.

[andersweinstein]

I hope somebody forces the company witness to admit they have never issued a bond in a civil lawsuit before, not even in California. Have they, and is this ordinary business for them, or is it clearly a whack-a-loon billionaire trying to do a favor for his crooked buddy?

The AG's brief says Knight Specialty Insurance "...had never written a surety bond in New York and never in the past two years in any other jurisdiction", citing the affirmation from their president Amit Shah. Checking chancery's links I didn't immediately notice any place in the short affirmation that said they had done so. But the AG's "not in the past two years" formulation suggests that they HAVE written some form of surety in some other jurisdiction more than two years ago. The company's justification touted the fact that they were licensed to write surety risks in their home state of Delaware.

No it doesn’t. It suggests that they didn’t bother looking more than two years back.

Ah, ok. I wondered what it meant that they chose such a restricted formulation.

[chancery]

I suspect Trump’s attorneys will not have an expert in NY bond practice, so Ms. James might have the only expert in the field. Trump’s lawyers will doubtless bring on some functionary of the trust company to tell the judge how solid the bond is, and how it would definitely be acceptable if it was filed in California. I can't see any witness who really is an expert in NY bond practice testifying for Trump, but we'll see.

The NYAG's office doesn't have either an expert or an attorney with DFS expertise, at least not on the papers. Trump, by contrast, does have a real expert: Gregory Serio, former NYS Superintendent of Insurance, previously Deputy Superintendent, general counsel to the department, etc. And, while I suspect that the NYAG would be perfectly happy to win on the papers, they have pointed out that CPLR § 2507 requires that "[t]he surety shall be present upon the hearing of such motion to be examined under oath," and have argued that if Trump's affiants do not appear to testify their affirmations should be stricken. So I suspect that the former Superintendent will show up.

The thing is, both sides have treaded somewhat gingerly in their arguments. Although I haven't taken the time to print out 20 pages of statutes and draw up a flow chart of their inter-relation, my current thought is that the legal and regulatory status of a surety bond written by an alien non-admitted excess and surplus lines carrier isn't exactly clear. Serio's affirmation states: "I see no reason why KSIC may not lawfully underwrite surety bonds in New York as an eligible excess line insurer approved by the Excess Line Association of New York (“ELANY”)," which is a touch guarded. The NYAG responded by conceding that KSIC may write business in New York state on an excess lines basis, "but only through a licensed excess lines broker." NYAG Brief at 12. The argument proceeds based on the various duties NY law imposes on an excess lines broker for the protection of customers. NYAG Brief at 12-13.

However, there's no indication that a broker was involved in the KSIC's bond, and it's apparently clear that a customer may deal with a non-admitted carrier "independently," i.e., directly, without a broker's participation. https://www.elany.org/contentHTML/1133. ... icits%20or
It's possible that such independent transactions are on something of a caveat emptor basis, the idea being that corporate customers have or can acquire the necessary expertise.

So KSIC and Trump may challenge the relevance of the duties of a broker. I assume that the answer will be that Judge Engoron has an independent obligation to satisfy himself that the Trump/KSIC transaction protects the interests of the NYAG as third party beneficiary, and that the customer protection policies expressed in the duties imposed on brokers are appropriate sources of guidance.

Although the DFS's investigation into "shadow insurance" took place a number of years after Serio left public service, the department might have expressed similar concerns during his tenure as Superintendent (2001-2005), which would be fodder for cross-examination. And in any event, Serio probably wouldn't want to testify that the DFS's current concerns about shadow insurance are baloney.

So it should be an interesting hearing. I wonder if it will be streamed.

[andersweinstein]

The AG's brief says Knight Specialty Insurance "...had never written a surety bond in New York and never in the past two years in any other jurisdiction", citing the affirmation from their president Amit Shah. Checking chancery's links I didn't immediately notice any place in the short affirmation that said they had done so. But the AG's "not in the past two years" formulation suggests that they HAVE written some form of surety in some other jurisdiction more than two years ago. The company's justification touted the fact that they were licensed to write surety risks in their home state of Delaware.

No it doesn’t. It suggests that they didn’t bother looking more than two years back.

And just being licensed doesn't mean diddly either.

In factDave Kingman, Esq.has been emphasizing his view that the fact that they’re licensed to sell excess line insurance in NY and the fact that they’re licensed to do surety business in Delaware in no way entails they’re legally authorized to write a surety bond in NY, though the judge has discretion to accept the bond anyway.

ETA: DK,E thread commenting on AG’s brief: