Numerous problems are coming to light regarding the particulars of Donald Trump's miraculous $175 million dollar bond posting on April 1, 2024. It could turn out to be one of the biggest April Fools pranks ever. As of April 8, 2024, there are four key problems with the bond arrangement as New York officials and independent reporters have been able to ascertain. In a nutshell,
- The language of the contract between Trump and Don Hankey appears to be defective
- Neither Don Hankey or his firm is licensed in the State of New York to offer this type of bond
- The contract provides few specifics about the exact assets that were promised by Trump as collateral
- Trump's lawyers failed to correct prior filings with the court claiming Trump found no parties willing to back the original $464 million dollar bond when Hankey's first offer was made PRIOR to the bond reduction
ProPublica published a story on April 5, 2024 describing the events leading up to the reduced bond deal for the reduced amount.
https://www.propublica.org/article/trump-bond-disclosure-appeals-court-hankeyIt seems that each of these problems could implode the current bond agreement and the delay it has provided in grenading Trump's larger economic charade.
For problem #1, the bond contract between Trump and Hankey appears defective from several perspectives. First, it did not include a certificate of qualification required by statute. It also appears to involve more than ten percent of the company's capital which also exceeds a limit in New York State law. The president of Hankey's firm that issued the bond has counter-claimed that the company is worth more than $1 billion dollars so the ten percent rule is satisfied and the firm IS licensed to issue surety bonds via an entity called Excess Line Association of New York (ELANY) which is a mechanism by which insurance companies can leverage a license in one state to operate in another. Others argue that this ELANY mechanism applies to surety bonds in other industries like construction but surety bonds for appeals are distinct and require a direct in-state license according to the statutes involved.
Another concern regarding the contract between Hankey's firm and Trump is that while Hankey has commented that Trump offered up the entire bond amount of $175 million in "cash" assets, Hankey's firm has not actually taken possession of that cash. Trump has merely "pledged" those accounts holding that cash to Hankey's firm while keeping possession of the actual cash. That is why the state is so fixated on the ten percent limit. That ten percent limit provides a margin of error for the surety company to still pay the state if the defendant doesn't pay the surety firm for the delta between the bond and the larger judgement amount. If the surety agent hasn't even collected the bond amount from the defendant, the state faces a higher risk of not collecting the full amount due if the appeal is lost.
Regarding problem #2, if one was inclined to be charitable, one might assume that the defective contract language referenced by problem #1 is a direct result of Hankey not being licensed to offer bonding services in the State of New York and his firm thus has no familiarity with the applicable laws and regulations to know how to craft a valid appeal bond contract. That is its own problem but this may pose another problem for someone's lawyers by submitting paperwork for such a bond to the court not knowing the bonding entity could not actually serve such a function in New York State. It's hard to be charitable regarding anything involving Trump but clearly his legal team sets new lows for legal expertise every day. Submitting this deal to the court might trigger ethical penalties for those lawyers for not validating the bond agent's legal ability to participate in the deal in the first place.
The fact that Hankey and his firm are not licensed to offer appeal bonds in the State of New York is problematic on two fronts. First, a competent attorney filing the appeal bond would have looked up the applicable statutes regarding the process and would have found section 2502 which states:
https://codes.findlaw.com/ny/civil-practice-law-and-rules/cvp-sect-2502.html?/New York Consolidated Laws, Civil Practice Law and Rules - CVP § 2502. Surety; form of affidavit; two or more undertakings; condition; acknowledgment
(a) Surety; form of affidavit. Unless the court orders otherwise, surety shall be:
1. an insurance company authorized to execute the undertaking within the state, or
2. a natural person, except an attorney, who shall execute with the undertaking his affidavit setting forth his full name and address and that he is domiciled within the state and worth at least the amount specified in the undertaking exclusive of liabilities and of property exempt from application to the satisfaction of a judgment.
I'm pretty sure a first year law student could read those clauses and determine they either need to be dealing with a COMPANY licensed in the State of New York for this purpose or they need to be talking to a really wealthy RESIDENT of New York willing to sign an affidavit itemizing specific assets they control whose value equals the required bond that could be surrendered IMMEDIATELY should the appeal be dismissed or lost requiring payment of the judgement. Hankey's firm is based in California and is not licensed to provide surety bonds in the State of New York and Hankey is not a resident of New York.
The questions here are a) why did Trump's team not understand this and limit their search to qualified participants and b) why didn't the court of appeals and prosecutors IMMEDIATELY recognize this defect? Obviously, the answer for (a) could be that Trump's team is incompetent but the answer could also be they are just stalling for time. Financially, Trump is operating in a mode where the vast majority of his efforts must be targeted towards preserving the illusion of solvency, for political reasons certainly but also for critical financial reasons. He has numerous debts coming due over the next three years exceeding $700 million that need refinancing and many of his debts are subject to covenants that could trigger full payment if conditions aren't met. As a result, he is literally living day to day in his efforts to avoid any action that would require him to begin selling off assets that would begin confirming how much his prior attestations of property values used for loans were overvalued. Filing this dubious bond deal with an unlicensed, out-of-state party deferred a financial reckoning for Trump for seven days. That's a victory in Trump World.
So why did it take the court and the prosecutor so long to analyze the submitted bond deal and find an obvious flaw like this? That answer isn't clear. Maybe no defendant has ever had such incompetent counsel to make this "mistake" so the court had never formalized a checklist to follow upon submission to weed out such a bogus filing. This doesn't seem like a very good excuse with this defendant and his legal counsel who have demonstrated with nearly every interaction with the court they are grossly incompetent and have consistently acted in bad faith with zero respect for the court or the process. Everything they do must be immediately examined for compliance with the most basic expectations of fidelity to the law.
The implications of problem #3 regarding questions about the liquidity of Haney's firm to cover the bond are not clear. In some sense, this is an "interior" problem with a larger contract which is not valid in the first place due to the licensing / residency problem. It isn't clear if filing such a contract with the court with this interior defect might trigger fraud charges.
If issue #2 doesn't generate ethics charges against Trump's lawyers, problem #4 could exceed the threshold and do so. Trump's lawyers submitted a filing to the appellate court the week of March 18, 2024 stating Trump was unable to find any party willing / able to provide financial backing for the original $464 plus interest bond. The judges on the appellate panel stewed on that until Monday, March 25 at which point the required bond amount was reduced to $175 million and Trump was given another ten days to attempt to find a bond. Miraculously, on April 1, Trump and his lawyers submitted the plan backed by Don Hankey.
Unfortunately, Hankey had actually been in discussions with Trump and his lawyers PRIOR to March 25 and had told the lawyers he would be willing to back a bond for the $464 million plus interest nut. Trump's lawyers failed to report that to the court and update their prior filing that claimed no takers had been found. For these types of processes, the lawyers are expected to act as officers of the court and have an ethical obligation to factually state their client's financial position regarding bond and they failed to do so.
Perhaps the most troublesome aspect of the reporting by ProPublica is this quote from Hankey:
But, he said, the deal for the larger amount was dropped during a large Zoom call between the two sides, when Trump’s camp got a call informing them that the bond was reduced.
"They thanked us for trying to help: ‘Maybe next year, we’ll try to do business again,’" Hankey recalled them saying.
But several days later, Hankey said, they called back, hoping to make a deal for the reduced bond, and Hankey agreed.
Maybe next year, we'll try to do business again... What exactly was meant by the Trump team with that comment? Was Trump and team suggesting Trump might do Hankey favors if Trump won re-election if Hankey continued demonstrating a willingness to "play ball" in any other Trump entanglements? It certainly sounds like the intent of that statement.
It is also worth noting a few details that have come to light about Hankey's sub-prime auto loan business. As covered in a New York Times story on April 5, Hankey's businesses have been subjected to numerous penalties from regulators in the last decade.
https://www.nytimes.com/2024/04/04/nyregion/don-hankey-car-loan-billionaire.htmlIn 2015, the Consumer Financial Protection Bureau ordered two of his companies, Westlake Services L.L.C. and Wilshire Consumer Credit, to refund customers $44 million and pay a $4.2 million fine for deceiving customers. In 2022, another firm, Westlake Financial, agreed to pay $225,000 to settle allegations that it had, in violation of federal law, repossessed at least 70 vehicles from members of the United States military who had been called up for active duty.
That New York Times article goes on to cite concerns from a prior ethics advisor to George W Bush that as a business owner making money from sub-prime auto loans with a history of abusive practices, it is highly likely Hankey would love to see the Consumer Financial Protection Bureau de-fanged or completely eliminated and that it reasonable to assume such a favor might be the price for attempting to supply this bond for Trump.
Maybe next year, we'll try to do business again...
Indeed.
WTH
