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

[chancery]

In fact Dave Kingman, Esq.has been emphasizing 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 qualified to write a surety bond in NY, though the judge has discretion to accept the bond anyway.

Dave Kingman, Esq. has been a reliable guide to the law of surety bonds. However, I don't fully follow the basis for his statement that KSIC "can't write any bond in New York" (https://twitter.com/DaveKingman8/status ... 9611849198). It doesn't matter, though, since he agrees that Judge Engoron has the power to find the bond "sufficient" under CPLR §§ 2502 and 2507.

[chancery]

My twitter feed and list are swamped today.

Does anyone know who will be covering the hearing before Judge Engoron?

[p0rtia]

Screenshot 2024-04-22 at 10.22.48 AM.png (99.13 KiB) Viewed 733 times

[chancery]

Great, thanks!

[chancery]

https://twitter.com/rscharf_/status/1782415176509096163

Rachel Scharf
@rscharf_
Engoron seems dubious of relying on Charles Schwab to maintain $175M of collateral:

"What if they break the agreement?” he asks.

"Your hypothetical is calling into question the veracity of one of the largest financial institutions in the world," responds Trump atty Chris Kise.

[chancery]

https://twitter.com/rscharf_/status/1782416581131124901

Rachel Scharf
@rscharf_
Kise tells Engoron that even if the bond falls thru (which won't), there's a sold backup for collecting on the judgment:

“There's hundreds of millions of dollars worth of real estate that the defendants own right here in the city that could be seized with the stroke of your pen"

That's an extraordinarily weak argument for upholding the bond, apart from the fact that it's substantially untrue. The real estate may be worth hundreds of millions of dollars, but Trump's share is worth much, much less. And seizure can take a long time. The point of the bond is so that you don't have to go through execution and foreclosures. This suggests that Kise is on the ropes.

[p0rtia]

Thanks, Chancery

From my IANAL perspective, I was shocked that Kise said that. Empty words. -

ETA - I thought the whole idea of the bond was to _avoid_ spending months/years seizing property.

[chancery]

https://twitter.com/rscharf_/status/1782420823547998218

Rachel Scharf
@rscharf_
Kise adds it's "ironic" for AG, who wants Trump Org booted from NY, to complain Knight is out of state.

"It appears no matter what we do, they’re going to find fault with it... President Trump effectively wrote a check for $175M and put it in an account. It’s not going anywhere”

Rachel Scharf
@rscharf_
Now AG lawyer Andrew Amer is up. He says the problem with the Schwab collateral is that "while the funds are cash today, under the terms of the pledge agreement and control agreement they can be swapped out for less secure collateral like mutual funds."

[chancery]

https://twitter.com/rscharf_/status/1782423064908591105

Rachel Scharf
@rscharf_
Amer proposes a settlement of sorts: Trump team agrees to keep everything in cash and a few other provisions, and they'll drop the challenge. Kise says this seems doable.

Makes a lot of sense. The NYAG would _really_ prefer a bond, and Trump _really_ doesn't want to deal with execution and foreclosure.

[chancery]

https://twitter.com/rscharf_/status/1782430881329672249

Rachel Scharf
@rscharf_
AGREEMENT REACHED: Kise says they'll agree to maintain the Schwab account in cash and give Knight exclusive control of the account. Under a previous agreement, a Trump trust shared control. Seems like this will moot the AG's challenge to the bond.

Of course for litigation drama fans like us it's disappointing that Trump's lawyers didn't get raked over the coals, but sensible judges don't have time for awarding demerits if there is a way to solve the problem. And the solution here was always obvious: real collateral that Trump can't fiddle with.

[p0rtia]

Thanks again. Fascinating to follow this and know what's going on.

[chancery]

https://twitter.com/rscharf_/status/1782431758983504102

Rachel Scharf
@rscharf_
Andrew Amer says "the AG is fine with all these conditions stipulated on the record."

Judge accepts it, and court is adjourned.

Thanks for following along folks, despite the anticlimactic ending!

I hadn't heard of Scharf until today. She doesn't appear to have the rapid stenographic ability necessary for brilliant live tweeting, but few people have those skills.

And it's likely that she reported the essence of the hearing, if not very much color.

[raison de arizona]

Trump: Letitia James just tried to embarrass a very good bonding company

[chancery]

Trump accepts new restrictions on $175 million bond in New York civil fraud case

https://www.reuters.com/world/us/trumps ... 024-04-22/

But at a hearing on Monday, down the block from where jurors heard opening arguments in Trump's criminal hush money trial, lawyers for Trump and Knight agreed that the funds would remain as cash and not be traded for securities. They also agreed that Knight would have exclusive control of the account and not withdraw funds, and to provide James with monthly statements to assure that the cash isn't going anywhere.

The agreement was reached after Engoron questioned the security of the collateral.
"You keep using the word agreement, what if they break the agreement?" he asked Trump's lawyer Christopher Kise. "It all seems like a house of cards."

Knight is owned by billionaire Trump supporter Don Hankey.
Earlier on Monday, Trump defended the bond outside the courtroom at the criminal trial.
"We put up cash and the number is 175," Trump said. "She shouldn't be complaining about the bonding company. The bonding company would be good for it because I put up the money. I have plenty of money to put up."

Hankey previously said in an interview that he charged Trump a low fee as he did not anticipate problems. "We thought it would be an easy procedure that wouldn't involve other legal problems and it's not turning out that way," he said. "We probably didn't charge enough."

Further confirmation that Hankey, Knight Specialty, and Trump's lawyers didn't know what they were doing. And probably also that their client was pressuring them to take stupid positions in the ligitation.

With much attention now focused on Trump's criminal trial, Engoron noticed the relative paucity of courtroom attendees compared with when he oversaw the civil fraud trial.
"Where is everyone?" he joked at the beginning of the hearing.

[raison de arizona]

Alina Habba in the last hour.

This is hilarious.

Judge Engoron doesn't even understand Money Market funds.

Agreement reached on Trump $175 million bond.

[chancery]

https://twitter.com/Acyn/status/1782456434031993264

Acyn
@Acyn
Trump: Letitia James just tried to embarrass a very good bonding company

In the embedded video Trump says in effect that the Knight Specialty bond his lawyers proposed had been cash, that the bond had been approved without changes, and in essence that his lawyers had embarrassed the NYAG.

Those are, of course, lies.

Trump is making a mistake by trying to micromanage all of his litigations. It leads to poor work and bad decisions on the part of his lawyers. Plus, there are more important things he should be focusing on, but if he had a better sense for what's important, he wouldn't be Trump.

I'm reminded of the title of John McPhee's wonderful early book about Bill Bradley. The title came from one of his interviews with McPhee, in which Bradley discussed his signature over-the-shoulder shot.

While some players are eccentric in their shooting, his shots, with only occasional exceptions, are straightforward and unexaggerated. Nonetheless, he does make something of a spectacle of himself when he moves in rapidly parallel to the baseline, glides through the air with his back to the basket, looks for a teammate he can pass to, and, finding none, tosses the ball into the basket over one shoulder, like a pinch of salt. Only when the ball is actually dropping through the net does he look around to see what has happened, on the chance that something might have gone wrong, in which case he would have to go for the rebound. That shot has the essential characteristics of a wild accident, which is what many people stubbornly think they have witnessed until they see him do it for the third time in a row.

He went on to say that it is a much simpler shot than it appears to be, and, to illustrate, he tossed a ball over his shoulder and into the basket while he was talking and looking me in the eye. I retrieved the ball and handed it back to him. “When you have played basketball for a while, you don’t need to look at the basket when you are in close like this,” he said, throwing it over his shoulder again and right through the hoop. “You develop a sense of where you are.”

McPhee later realized that this comment encapsulated Bradley's approach to his whole life, and so titled the book: A Sense of Where You Are.

[chancery]

For people who didn't read the NYAG's latest brief.

Trump's Schwab account wasn't exactly cash. It was in Wasmer Bonds, a Schwab proprietary fixed income product involving bond ladders and other options. Wasmer Bonds can and likely will fluctuate in value depending on market conditions. Further, the account agreement permitted Trump at his sole discretion to exchange the Wasmer Bonds for other kinds of investments, including stock mutual funds, which of course can fluctuate wildly. See NYAG Brief at 7-9.

The proposed bond was, in short, an obvious try-on, and Engoron didn't fall for it.

[raison de arizona]

It almost sounds like Habba is just making stuff up. *gasp*

[andersweinstein]

This includes some details from retired NY Supreme Court Justice Barbara Jaffe who observed the bond hearing.

Interestingly, in view of discussion here, she reports the language of the bond with respect to who would pay was raised as an issue by Engoron, said AG cited a case saying specific language was required, and that they agreed to fix it. That bit starts around 10:00.

[RTH10260]

So djt intended to maximize interest at 5% by holding money market tools rather than straight cash And his buddy was going with 1% bite out of it. And now neither gets even on their bet What is the interest rate on a savings account with limited withdrawal?

[andersweinstein]

Trump's Schwab account wasn't exactly cash. It was in Wasmer Bonds, a Schwab proprietary fixed income product involving bond ladders and other options. Wasmer Bonds can and likely will fluctuate in value depending on market conditions. Further, the account agreement permitted Trump at his sole discretion to exchange the Wasmer Bonds for other kinds of investments, including stock mutual funds, which of course can fluctuate wildly. See NYAG Brief at 7-9.

The proposed bond was, in short, an obvious try-on, and Engoron didn't fall for it.

As i understand it, the Schwab brokerage account bore the suspicious *title* “Wasmer Bonds”, but team Trump didn’t actually reveal what was in it. “Just one paltry screenshot” showing the balance, in words of AG brief. So I think it’s not impossible it originally held bonds which were sold off to convert to “cash”. We just don’t know. The new agreement makes sure.

[chancery]

This includes some details from retired NY Supreme Court Justice Barbara Jaffe who observed the bond hearing.

This was a better-than average Meidastouch video, mostly because of the guest, Barbara Jaffe, a retired NYC Supreme Court (trial court) judge, who described Judge Engoron's performance at the hearing today as "masterful."

The key points.

There was no discussion at all during the hearing of the status of Knight Specialty as a foreign nonadmitted carrier. Former Judge Jaffe speculated at the end of the video that the quid pro quo for the concessions made by Trump was that the NYAG abandoned its challenge to Knight Specialty's ability to write the bond in the first place.

The collateral will be in a money market account, not a securities trading account.

The account is under the exclusive control of the surety, which will require a tripartite agreement with Schwab.

Monthly statements to be sent to the NYAG.

Pledge & control agreements to be amended.

Knight Specialty consented to jurisdiction in NYS and agreed to a convenient mechanism for service of process.

Engoron was concerned about the clarity of surety's obligation to pay, and the NYAG come up with some additional language that they wanted in the bond. This puzzles me, because the NYAG's brief seemed to concede that the existing language created a binding obligation. It's possible that Jaffe hadn't read the briefs.

Gregory Serio, the former Superintendent of Insurance and Amit Shah, the Knight Specialty president, were indeed in the courtroom and available to testify. At the outset, however, the NYAG asked that the witnesses leave the courtroom during the legal arguments. They did, and they were never called back to testify.

[chancery]

Letter dated yesterday from former Judge Jones, the Monitor.

https://iapps.courts.state.ny.us/nyscef ... 8UPFYI2w==

In November 2022, I was appointed by the Court in the above-referenced matter as Independent Monitor. See Dkt. Nos. 193 and 194. By Order dated March 21, 2024, (the "Monitorship Order") my prior duties as monitor were supplemented to include, among other things, "reviewing the Trump Organization's internal accounting controls, governance, recordkeeping, and financial reporting policies and procedures." See Dkt. No. 1706 at 2, ¶ 2.

In addition, the Monitorship Order required the "Trump Organization to inform the Monitor, in advance, of any efforts to secure surety bonds, including any financial disclosures requested or required, any information provided in response to such requests, any representation made by the Trump Organization in connection with securing such bonds, any personal guarantees made by the Defendants, and any obligations of the Trump Organization required by the surety." Id. at 4.

Surety Bond Information

The Trump Organization provided the monitor with financial information in connection with the application of surety bonds for this matter, as well as a separate federal civil litigation. Based on our previous work, we have reviewed monthly statements for all Donald J. Trump Revocable Trust ("DJT Trust") accounts for the time period beginning January 2023 to the present. The surety bonds for both matters were pledged with assets from brokerage accounts held by the DJT Trust.

Internal Controls Assessment

The Monitorship Order requires that, "[w]ithin 30 days...Defendants shall provide the Monitor with information sufficient to assess the Trump Organization's internal controls, including day-to-day operations of its accounting, finance, financial disclosure, and compliance functions, including record-keeping, and financial reporting policies and procedures." Id. at 2, ¶ 6. My team has held several meetings with the Trump Organization regarding its accounting systems and internal controls and has been provided with the initial documents and records sufficient to meet this requirement. We have met with the Trump Organization to discuss the documents and records it provided and have requested additional information and documents that will assist in assessing its accounting systems and internal controls related to financial disclosures to third parties.

Additionally, while our assessment of the Defendant's internal controls is ongoing, we continue to review and monitor the Trump Organization's financial disclosures to third parties and have held meetings with the Trump Organization to discuss these disclosures. The Defendants have been cooperative during this process.

[chancery]

Supplemental Monitorship Order

https://iapps.courts.state.ny.us/nyscef ... CAj55o/g==

For the avoidance of doubt the 2024 Monitorship Order is modified to authorize the Monitor to share information and communicate with the Court and any party on an ex parte basis.