HomeInsuranceDetails of How Trump Scored $175M Bond Revealed in Court Filings

Details of How Trump Scored $175M Bond Revealed in Court Filings

After weeks of intrigue and oddly vague court filings, documents filed at the last minute on Monday night finally revealed what Donald Trump was forced to give up to score a deal with the Knight Specialty Insurance Company.

The documents reveal that the former president was forced to sign away rights to his account at the investment bank Charles Schwab–in which he claims to have more than $175 million–just to keep the New York Attorney General from snatching his properties in recent weeks after a judge ruled that Trump committed bank fraud.

“The $175 million bond is collateralized by $175,304,075.95 in cash held in a Charles Schwab account pledged to KSIC, and KSIC has the right to exercise control over that account,” the company and Trump’s lawyers said in a joint memorandum.

His eldest known son, Don Jr., signed off on the deal on behalf of the Donald J. Trump Revocable Trust last month, granting Knight a security interest over the brokerage account.

The insurance company now has a “first priority lien and security interest” on whatever money is stored in that account. The Trump trust will be required to ensure it contains “no less than $175 million in cash or cash equivalents at all times,” according to the memorandum.

The Schwab account in question appears to be different from another Schwab account Trump put up as collateral when he secured a $92 million bond through Chubb’s Federal Insurance Co. in his federal rape defamation case.

The filings were a response to challenges from the New York attorney general’s office, which earlier this month called into question Knight’s ability to “justify the surety” of the bond. Defending its financial solvency in the memorandum, the firm characterized itself as “a respected, well-capitalized, Delaware-domiciled insurer that has long underwritten surety bonds and other types of insurance placed around the country.”

Based in California, Knight is not licensed to issue surety bonds in New York, nor has it obtained a certificate of qualification from the state’s Department of Financial Services. But company officials have insisted that that doesn’t matter.

“Knight Specialty Insurance Company is not a New York domestic insurer, and New York surplus lines insurance laws do not regulate the solvency of non-New York excess lines insurers,” Amit Shah, Knight’s president, told CBS News.

Also at issue is a New York regulation stating that a company can’t issue a bond to a single borrower that constitutes more than 10 percent of its capital. Knight had admitted in an April 4 filing that it had only $138 million in “surplus,” taking it well beyond the state’s barrier.

But Shah argued to CBS that Knight maintains over $1 billion in equity, a claim at odds with financial statements filed around the time showing that the firm had just $26 million in “cash and bank deposits” and $483 million in stocks and bonds.

Adding to the confusion was the fact that Knight initially failed to provide that data, among other errors that caused the New York court clerks to order it to refile its bond posting. “At this venture, with so much at stake, to make these kinds of mistakes, it’s almost unthinkable,” an attorney for Michael Cohen told The Daily Beast at the time.

After raising questions about Knight’s ability to take on the risk, New York Attorney General Letitia James gave the company and Trump 10 days to prove its financial mettle. Had Knight blown its midnight deadline, James could have begun the process of seizing Trump’s assets.

But instead, in Monday’s court filings, Knight contended that it “independently maintains more than $539 million in assets and $138 million in equity and has access to more than $2 billion in assets and $1 billion in equity, of which nearly $1 billion is cash and marketable securities, pursuant to a reinsurance agreement with its parent company, Knight Insurance Company.”

Elsewhere in the filings, the company explained, “KSIC also has a standing agreement with its parent company, Knight Insurance Company, Ltd. (‘KIC’), by which KIC reinsures 100% of KSIC’s risk. The $175 million bond at issue is adequately secured.”

The $175 million bond staves off the $464 million civil fraud judgment levied against Trump and his co-defendants while they appeal. A hearing on the bond has tentatively been scheduled for April 22.

Knight is owned by Don Hankey, a Golden State billionaire who made his $7.4 billion fortune through subprime loans. His shady business practices were the target of the Trump administration, whose Justice Department sued his financial company after it found it had illegally repossessed 70 cars belonging to service members.

Hankey’s company, Westlake Financial Services, agreed to pay more than $700,000 to settle the matter. Further legal woes brought by the Justice Department in later years would eventually nose its financial penalties north of a million dollars.

Though he donated tens of thousands of dollars to Trump’s 2016 presidential campaign and has copped to voting for him, Hankey maintains the bond is just business.

“This is what we do at Knight Insurance, and we’re happy to do this for anyone who needs a bond,” he told the Associated Press after Trump posted his bond.

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