Trump Says He Cannot Post Bond, Asks NY Appeals Court to Stay Enforcement of $454M Civil Fraud Judgment

Donald Trump, the billionaire former president and putative 2024 Republican presidential nominee, has told a New York state appellate court that he is not able to post a bond fully securing the enormous judgment awarded against him in the recent civil fraud trial. The judgment of nearly half a billion dollars was ordered by Judge Arthur Engoron, an elected progressive Democrat, after a bench trial of the lawsuit brought by the state’s attorney general Letitia James — an elected progressive Democrat who campaigned promising to use the powers of her office against Trump.

Trump is trying to block enforcement of the judgment while he appeals.

Trump asked the Appellate Division — First Department (which hears appeals from Manhattan cases) to bar James from starting enforcement actions. Ordinarily, though not always, a litigant who has lost in the lower court is required to post a bond in the amount of the judgment, plus interest, to prevent the winning party from collecting the judgment (by demanding payment or starting asset-seizure proceedings in court).

If the appeals court does not block enforcement, the state may begin seeking enforcement on March 25 (i.e., a week from today).

We have been observing the Trump cash crunch (see, e.g., here, here, and here). While much of the reporting on the Democrats’ lawfare campaign focuses on four criminal indictments against Trump, the civil lawsuits are potentially existential dangers for the tycoon-turned-pol.

Although James was able to establish neither fraud victims nor financial harm to the state, Judge Arthur Engoron ordered Trump and his co-defendants to pay $454 million (i.e., around $355 million plus interest) after a bench trial. Trump contends that he should have been entitled to a jury as well as a trial before the state judiciary’s Commercial Division, as opposed to the state’s proceeding against him as if the case were an ordinary civil matter before the supreme court. (In New York nomenclature, the supreme court is the lower, trial court.)

Engoron found that the astronomical penalty was necessary to “disgorge” Trump of “ill-gotten gains.” Interest is accruing on the judgment at the head-spinning rate of $112,000 per day.

Trump’s submission to the Appellate Division relates that he has made extensive efforts to obtain a bond that would cover the judgment amount, including approaching 30 different surety companies, all of which have rebuffed him. Obtaining a full bond, he argues, is a “practical impossibility.”

Anticipating that Trump’s straits were dire, I’ve explained that while he is rich in fixed assets, analyses of his financial condition suggest that he lacks the liquid assets to cover the judgment. That is plainly the case. In explaining why he has not been able to finance the bond, Trump’s lawyers aver that the “handful” of companies that would even consider securing a bond exceeding $464 million will not accept “hard assets such as real estate” as collateral; they “will only accept cash or cash equivalents (such as marketable securities).” Even if a judgment debtor can post liquid assets, the bonding company would demand substantial fees for assuming risk.

The lion’s share of Trump’s wealth is in real estate, much of which is leveraged (some heavily leveraged). As he claimed during the civil fraud trial, the value of such assets is difficult to fix with precision — which is true, even if the state is correct that he exaggerated what his were worth.

Trump’s main contention in the short term is that James is simply wrong in arguing that the appellate court has no discretion to block enforcement of a judgment in the absence of a bond in the full amount plus interest. His attorneys contend that the court enjoys broad discretion to bar enforcement, even without a bond, (a) under the text of the governing rule as it has been interpreted, (b) under the appellate court’s vaguely defined “supervisory authority,” and (c) under case law. In terms of due process, Trump posits that if enforcement pending appeal is not blocked, this would defeat the court’s appellate jurisdiction — i.e., by the time the appeal is heard and decided, Trump would be incurably harmed even if he prevails.

More substantively, Trump’s team contends that, given the lack of victims and of any appreciable harm to the state, the penalty is so out of proportion to any decipherable wrong that it violates the Eighth Amendment’s guarantee against excessive fines (and an analogous provision of the New York constitution). Trump further — and, to my mind, quite persuasively — argues that he has been selectively prosecuted, not because he engaged in extraordinary business practices but because he is a partisan opponent of the attorney general and her party, who has now gathered enough delegates to cinch the GOP nomination and run against the Democratic incumbent, President Biden, in the fall.

Moreover, Trump was sued under a fraud provision that is ordinarily applied in the context of consumer fraud — i.e., when a company deceives customers, none of whom suffered sufficient harm to warrant the prohibitive expense of filing a lawsuit. James’s suit appears to be the first time the provision was applied in a situation in which the parties on each side of big-dollar transactions are sophisticated financial actors who do their own due diligence as a matter of course. Trump elaborates that his statements of financial condition, which were the heart of James’s case, expressly admonished counterparties that valuations were subjective and that they should do their own assessments. The appellants — who include Trump’s adult sons, the Trump organization, and other executives and subsidiaries — stress that they paid all of their obligations and that, far from being defrauded, their counterparties made money.

The Trump team makes these contentions in the course of arguing that, in considering whether to prohibit enforcement of the judgment in the absence of a full bond, the appellate court may take into account the likelihood that Trump will succeed in getting the judgment reversed, or at least significantly reduced. On that score, the appellants argue that Judge Engoron made several flagrant errors in estimating what he found to be the amount of asset inflation. They also contend that Engoron erred in gauging the interest rates Trump would have been charged for loans, or premium rates for insurance coverage, if the valuations had been closer to accurate (i.e., accurate according to what was contended by James, whose allegations Engoron endorsed wholesale).

There is a possibility that Trump’s cash crunch could ease in the near term. On Friday (March 22), Digital World Acquisition Corporation (which trades on NASDAQ as DWAC) is scheduled to vote on whether to approve a merger with the private company that owns his Truth Social platform, Trump Media and Technology Group (TMTG).

As we’ve previously explained (see columns by Dan McLaughlin and me), DWAC is a “SPAC” (a “special purpose acquisition company” regulated by federal securities law), i.e., a public company formed to merge with a private company. In essence, such mergers allow the private company to become publicly traded without having to make the extensive disclosures that federal law mandates when a company goes public on its own (through an initial public offering). The proposed TMTG/DWAC merger has been postponed several times, and there is a pending threat of litigation by former TMTG founders who claim they were wrongfully pushed out of the venture. Still, the SEC recently green-lighted the potential merger, so there seems to be a better chance of its happening than in the past.

Trump owns 79 million shares of TMTG. The financial press has estimated that this could translate to $3.1 billion in value if the merger is approved (although DWAC’s stock closed at $35.58 today; it was at slightly over $40 when that $3.1 billion estimate was made). While Trump’s stock would be locked for an extended period of time after the merger — meaning he could not sell it for six months or more — he would likely be able to borrow against it. That could give him access to cash he’d need to convince a surety to back a bond that would stop enforcement of the judgment while he appeals the fraud case.

As Rich Lowry and I discussed on our podcast last week, Trump just posted a bond in the amount of $91.6 million in order to block the writer E. Jean Carroll from enforcing the $83.3 million judgment awarded to her in late January by a Manhattan federal jury. In that case, Judge Lewis Kaplan declined to block enforcement of the judgment, absent the posting of a bond in the full amount, while Trump litigates post-trial motions (and, if unsuccessful, as is likely, appeals). The staggering judgment in Carroll’s favor stemmed from a second trial against Trump in which the jury found him liable on two claims of defamation (slapping Trump with a $65 million punitive-damages penalty that makes up most of the $83.3 million judgment). A different jury in last year’s first trial found Trump liable of sexual abuse and defamation, awarding Carroll $5 million. Trump is also appealing that judgment, after posting a bond of about $6 million to block enforcement of the judgment.

We will monitor proceedings in the appellate division, where the state is opposing the former president’s attempt to block enforcement. While Trump has railed against James in public statements, she has taunted him over the gargantuan judgment, the mounting interest, and her zeal to start collecting.