Monday, March 25, 2024

Something to Know - 25 March

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Time to Pay the Piper

Trump faces Judgment Day on that $464 million verdict, as well as a possible April trial date for his Manhattan case. But does he have a lifeline?

MAR 25

Photos courtesy of NY1

It's a wild week in Trumpworld, for three reasons.

First, today is the deadline for Trump to post an appellate bond to stop New York Attorney General Letitia James from collecting on that $464 million civil fraud judgment. Trump's lawyers have argued that a bond that size is a "practical impossibility" and are asking an appellate panel to cut it down or waive it. 

Second, today was also supposed to kick off Trump's first criminal trial. He's charged in Manhattan with 34 state counts of falsifying business records to cover up hush money payments during the 2016 election. But the trial got postponed after the U.S. government produced a massive trove of documents earlier this month. Trump's lawyers have sought a 90-day delay and even to dismiss the case based on this surprise dump. 

Third, this is also the week shares of Trump Media, which owns Truth Social, become publicly tradable. That could earn Trump some three billion dollars on paper. But would this be a possible lifeline for him to make good on the bond or pay off the judgment?

Today I'll discuss the first of these in more detail before touching briefly on the second and third. I'll try to set some reasonable expectations around what is inherently a bit unpredictable. Buckle up, because it could be a bumpy week.

Judgment Day

Trump's critics have been anticipating this day for some time. Attorney General James's 30-day grace period on enforcing a $464 million civil fraud judgment expires today, meaning she can get down to the business of collection if Trump doesn't post a bond big enough to cover the judgment plus interest.

It's useful to lay out the brief history, as reported by ABC News, of how we got to this point. It's a story of delays and whining for special treatment, and it's full of contradictions.

After the verdict was rendered, Trump's lawyers asked Judge Engoron to delay entering the judgment for 30 days—a request he denied. He entered judgment on Feb. 22, starting the clock on financial penalties.

Then Trump went to the Appellate Division asking that he only be required to post $100 million—around a fifth of what would normally be required. A bond for the full amount would be "impossible," his lawyers claimed, and would have required the sale of properties to satisfy. An appellate judge denied that request on Feb. 28, but he did permit Trump to seek help from surety companies to cover the full amount. 

Still unsatisfied, Trump's lawyers went back before the same appellate court. They claimed that finding a surety to cover the entire amount—a bond of some $550 million—was a "practical impossibility." And they noted that more than 30 surety companies had turned down the bond.

Eric Trump went on social media to complain in a similar way:

A half a billion dollar bond is simply not commercially available. The 30 largest bonding companies in the United States have never seen a bond close to this size for anyone, let alone a private company. Letitia James is hellbent on a political vendetta against my father with zero regard for the lives of thousands of hard-working New Yorkers, who make their living in our buildings.

On the Fox Network, he told anchor Maria Bartiromo,

Every single person when I came to them saying, "Hey, can I get a half-billion-dollar bond?" Maria, they were laughing. They were laughing."

A couple things. 

First, as MSNBC's Lisa Ruben pointed out, there's no requirement that a single surety or lender come up with whole amount. Indeed, the state's lawyers pointed out that other large judgments have been bonded by "dividing up the bond amount among several sureties, thereby limiting any individual surety's risk to a smaller sum, such as $100 million or $200 million apiece.

Second, it's not as if this sum is the biggest bond ever. The NY AG cited multiple instances where the bond was over $1 billion. And the U.S. Supreme Court has ruled that it's really up to the states to set the bond rules and limits, and it let stand a bond as high as $13 billion in the Texaco case.

To make things even harder for his own lawyers, Trump recently went on Truth Social to undermine their claim that it would be impossible to post the bond. He boasted that he actually has $500 million cash. As the Washington Post reported,

"I currently have almost five hundred million dollars in cash, a substantial amount of which I intended to use in my campaign for president," Trump said Friday morning in a TruthSocial post in all caps. He then claimed New York Supreme Court Justice Arthur Engoron was aware of his cash on hand, and set the bond in that range on purpose.

It's unclear how much cash on hand Trump actually has, but it's unlikely that it is $500 million. If he indeed has that amount, it was very foolish of him to announce it, because as of today, Tish James has the power to seize assets from his bank accounts.

"I've never seen a stupider litigant," said former FBI General Counsel Andrew Weissman in an interview with Lawrence O'Donnell. "He has an application before the court where the application is, 'Please lower the bond amount because I cannot pay it.' And at the same time, he has said, 'I can pay it.' So just put yourself in the shoes of the judges who have that application before them. Do you think they would grant that, based on the defendant now saying, 'Oh, I can actually pay it?'"

Trump hates nothing more than appearing weak, and in his world, "broke" means weak. Either he doesn't truly grasp the enormity of what's at stake, or he intends to dare James to come collecting, just as he has with everyone else over his life whom he has stiffed by not paying what he owes. 

But James is no small-time vendor, and she has the power of liens and even the sheriff behind her should it prove necessary to seize assets. I do not believe that she will move on him right away; after all, there is the appellate application pending (which likely won't be heard until Tuesday or even Thursday given the court hearing calendar), and she might look foolish to move aggressively only to be knocked back by the courts. 

But assuming (and in hoping that) the appellate division doesn't provide Trump with any special treatment on his bond, his money and property are now fair game for James to collect. We shouldn't expect theatrics, but rather the filing of liens on several key properties, such as 40 Wall Street and the Silver Springs estate, and the freezing of his bank accounts. Then we'll see if he really has anywhere close to the $500 million he foolishly boasted about.

One other wrinkle: Trump could seek to delay all of this by filing for bankruptcy protection. That would force James to get in line with all the other creditors and would solve his temporary cash crunch. But bankruptcy would deal a severe blow to his image as a rich "winner," subject him to ridicule from the left and in the media, and even set him back significantly before the eyes of his followers, so I don't believe it is likely to happen. And Trump has privately ruled out bankruptcy, according to reports.

He may instead be hoping for the $3 billion lifeline that Trump Media going public could offer him. More on that in a bit.

Tranche warfare

There was a hiccup in the Manhattan DA's case against Trump that knocked the trial start date back at least a few weeks. Without going into too much detail, the U.S. government (which again is not the prosecuting party) was slow to produce voluminous amounts of documents requested in the case. When it finally did, on March 1, Trump's lawyers cried foul because it was a huge trove of some 100,000 documents.

They immediately demanded, and received with the DA's blessing, a continuance of the trial start date. And for added measure, they cried foul hard enough to demand the case be dismissed for abuse of discovery.

People freaked out at first, but very quickly it became clear that this was a nothing burger. In his response, Manhattan DA Alvin Bragg noted that there were only some 270 documents that were actually pertinent to the case. The rest were duplicates of things already produced or wholly irrelevant documents.

A tranche of 270 documents is a lot different than 100,000 and is no reason to delay the case for a whole 90 days. As of the time of this writing, the court hasn't issued a ruling, but most legal experts are expecting the case to go back on track for some time in April with no further delay from this dump of documents.

Great exSPACtations

On Friday, I wrote more extensively about the issues and challenges around Trump suddenly coming into a lot of money, at least on paper, due to his share of Trump Media, which is soon to be a publicly traded company. Trump's shares of the company are valued at around $3 billion, but as I mentioned Friday, there's a catch: He can't actually sell any shares for six months without a special agreement with the company, and even if he could obtain that, which seems likely, such a move might tank the stock out the gate and invite short sellers to swarm.

Following the publication of my piece, the price of Digital World Acquisition Company, the SPAC that will take Trump Media public, fell some 14 percent on the news the deal was approved. That indicates some skittishness among the shareholders.

It's unlikely that Trump could use his shares in Trump Media to secure a loan large enough to cover the bond. Those shares remain highly speculative, and the underlying company isn't very healthy. Indeed, it only brought in a few million dollars in revenue last year, versus tens of million in expenses. The only reason the stock value is high is because of wild speculation, and as financial journalist Stephanie Ruhle noted, banks generally don't like to secure loans against something like that:

Who would lend big $$ against a meme stock w/NO real revenue or profit especially one dependent on one man - plus the shares are locked up for 6 months absent a waiver.  

What's the biz plan?

Maybe if his millions of followers sign up for a $7 per month membership? 

Tough putt

Still, it's possible Trump could get permission from the board to sell at least some of his shares to cover the bond, and that he could do so without causing a stampede for the exits. But speculative meme stocks operate on vibes alone, and this is one vibe Trump might not want to test.

Juan Matute
     (New link as of 23 March - click on it)
― The Lincoln Project

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