USAnalysis

Donald Trump’s $464m bond is due on Monday. Does he have the money and what happens next?

End of grace period could set off next phase of fight between former US president and New York attorney general

Donald Trump appears before New York State supreme court during his civil fraud trial on January 11th. Photograph: Michael M Santiago/Getty Images

Joshua Chaffin and Joe Miller in New York
Mon Mar 25 2024 - 10:22

Does Donald Trump have the money? The former US president is due to post a bond on Monday to cover a $464 million (€423 million) fraud judgment against him – or risk having his assets seized by Letitia James, the New York attorney general.

It marks the end of a 30-day grace period James granted Trump after a New York court delivered its ruling. He has asked a state appeals court to intervene, but so far it has not issued a decision.

In theory, this should be a straightforward legal matter. In practice, as with all dealings between these antagonists, it will be shadowed by political considerations.

What are the next steps?

READ MORE

If Trump does not pay, James could deliver an “execution” notice to the sheriff in Manhattan, or to any of a number of New York marshals who are authorised to collect on behalf of the courts. If she has requested the seizure of money in Trump’s bank accounts, the sheriffs or marshals could begin collecting the very same day.

Seizing property is more complicated. Most of Trump’s buildings are held by limited liability companies. Although he controls these, Trump could delay matters by claiming he cannot unilaterally sign the assets over, and the attorney general would have to obtain a court order to force him to do so. Even then, New York law states that the sale of the properties must be advertised in local newspapers and public places at least 56 days before an auction. The properties in question are usually auctioned on the county courthouse steps.

People walk by 40 Wall Street, a Trump-owned building in downtown Manhattan. Photograph: Spencer Platt/Getty Images

The procedure is slightly different in Florida, but there is nothing to stop James attempting to seize Mar-a-Lago or Trump properties in other states.

The attorney general could more easily begin to seize items within Trump’s properties, such as art. While the former president could resist, “this judge will order a turnover order in a millisecond”, predicted Adam Pollock, a New York attorney who previously worked at the attorney general’s office. Some exceptions apply: Trump, for example, would be permitted to keep “one motor vehicle not exceeding four thousand dollars in value”, and any bibles he may own.

Does the attorney general have other options?

Some analysts warn that moving too quickly could backfire on James, a Democrat. “It’s a bit of a tightrope balance,” said Nikos Passas, a law professor at Northeastern University. The attorney general must apply the law without favour, he noted. “At the same time, you don’t want to be seen as unfair or acting out a political vendetta.”

James could freeze Trump’s assets by serving him with a “restraining notice”, which stops a debtor from making “any sale, assignment, transfer or interference with any property in which he or she has an interest”. If Trump violates this, he would be in contempt of court.

[ Trump’s image and vanity suffer blow as civil fraud case puts him in a $464m bond bind ]

Another option would be for James to subpoena financial information from Trump that would force him to disclose all the debts and encumbrances against his various assets – which might prove painful for the former president. Many of his properties are burdened by mortgages. Trump, who has staked his reputation as a billionaire, may be shown to be worth less than he claims.

Finally, James could grant Trump an extension. But further leniency seems likely only if his lawyers can prove he is on the verge of securing a bond and needs just a bit more time, according to experts.

What would a bond cost Trump?

A surety bond serves like a bank letter of credit. It guarantees that a defendant can pay a legal judgment if appeals do not succeed. To protect themselves, insurers often demand collateral totalling 100 per cent of the judgment, or more, in cash or highly liquid securities – not property.

New York attorney general Letitia James. Photograph: Brittainy Newman/AP

In Trump’s case, his attorneys have estimated that he would actually need to come up with $570 million in collateral, or 120 per cent of the judgment. There is also an upfront fee of 1 per cent to 3 per cent charged by the underwriter. Trump’s team pegged that at $18.5 million. Even if Trump were to win his appeal, he would not get that money back.

How much cash does Trump have?

Trump said in a social media post on Friday that he had “almost $500 million in cash”. That comes after he posted a $91.6 million surety bond earlier this month to cover a separate judgment from the defamation suit filed by writer E Jean Carroll. Trump’s true financial position is a mystery since his company is privately held. As the New York fraud case demonstrated, he has a long history of exaggerating his wealth.

What about Truth Social?

Trump is due for a potential windfall of $3 billion or more after shareholders approved a plan to take his social media company public through his Spac, or blank-cheque company. But there is a lock-up agreement that prevents him from selling his shares for six months. There is also no telling what the valuation of the company would be. Many investors who bought shares in the special purpose acquisition company appear to have done so based more on their adoration for Trump than the company’s fundamentals.

“The value is only on paper,” said Passas at Northeastern University. “Therefore whoever accepts it as collateral will have to assess the risk.”

One possibility, Passas said, might be for Trump to pledge a combination of cash, shares and other assets as collateral. Meanwhile, the attorney general has suggested a group of insurers could break up the bond into, say, five $100 million instruments to mitigate their risk.

Could Trump get help from a wealthy friend or donor?

While one of Trump’s wealthy supporters could front the cash, it would invite tremendous public scrutiny. It might also run afoul of campaign finance laws if the money is deemed a contribution to help re-elect Trump.

“It certainly would raise serious questions why somebody would spend that sort of money and incur all the other types of burdens that would come with it,” said Erin Chlopak, a campaign finance expert at the Campaign Legal Center.

If it were a foreign source, the scrutiny would be even greater, and the campaign finance issues would become even more sensitive. In terms of other campaign funds, Trump could tap Save America, the so-called leadership Pac – political fundraising vehicle – he controls. It had only $4.1 million on hand at the end of February.

Could Trump declare bankruptcy?

Taking this route would probably buy time for him. But the Trump team is reportedly veering away from such an option because of the political damage it would do to a candidate who has sold himself as a brilliant businessman. – Copyright The Financial Times Limited 2024

LATEST STORIES