Lawyers for former President Donald Trump and the New York attorney general on Monday agreed to changes in the terms of the $175 million surety bond Trump secured with Knight Specialty Insurance Co. (KSIC).
Attorney General Letitia James had objected to KSIC as the underwriter of Trump’s bond. Among other concerns, she questioned whether the amount of the bond is sufficiently collateralized and controlled by KSIC.
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In the original $175 million bond proposal, the Donald J. Trump Revocable Trust granted KSIC a priority lien on a Charles Schwab brokerage account with just over $175 million in it. But the trust retained control of the account and would be able withdraw funds or make trades in the account unless KSIC objects within two business days after receiving notice of the proposed transaction.
According to the attorney general, the terms allowed for exchanging the cash for other less secure forms of collateral such as mutual funds that can fluctuate in value.
The lawyers, appearing before Judge Arthur Engoron of the New York County Supreme Court on Monday to debate the bond, got together during a short break in the proceedings and came to an agreement on changes.
Mainly, they agreed that the Schwab account will be under the exclusive control of KSIC and that Trump will submit a monthly statement certifying that the account has sufficient cash to cover the bond. The collateral will remain as cash and will not be swapped for mutual funds or other financial instruments.
California-based KSIC had said that a shortfall on the bond is “inconceivable” because in addition to the lien on the Schwab account, it has $539 million in assets, $138 million in equity, and access to billions more through a reinsurance agreement with its parent company, Knight Insurance Co.
But the attorney general’s office maintained that KSIC had never written a surety bond in New York or in the prior two years in any other jurisdiction, and questioned whether policyholder surplus of $138 million is enough. The attorney general also expressed concern that KSIC affiliated companies have been found in violation of federal law on several occasions.
They also agreed that the agreement between Trump and KSIC cannot be amended without approval from the court.
Also, KSIC will waive its right to move a case to federal court or another jurisdiction, and will officially designate an agent of process in New York. That means that KSIC, though based in California, will officially designate someone who is able to accept legal service on its behalf in New York.
Charles Schwab has to agree to the changes to Trump’s account. The agreement should be officially entered into the court record by Thursday.
Trump needs the appeal bond to prevent enforcement of a $454 million penalty levied against him in February by Engoron while he appeals a civil fraud judgment for misrepresenting his assets for years to get better financial deals.
Should Trump lose his appeal in the civil fraud case and not pay the full penalty, the bond is a promise to cover $175 million of the judgment.
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