Trump’s options dwindle as $454 million judgment bears down on him

Monday is judgment day for former President Donald Trump — the day he fears a $454 million judgment against him might come due.

Hoping to stave off a financial crisis, Trump is racing the clock to block the New York attorney general from collecting the monetary penalty imposed in a civil fraud case. The attorney general, Letitia James, who brought the case accusing the former president of fraudulently inflating his net worth, has the power to freeze many of his bank accounts and begin the long, complicated process of seizing some of his properties.

Under New York law, James could have enforced the $454 million judgment once it became final last month, but she provided Trump a 30-day grace period that expires Monday. Although James could move to collect at any moment, she is not expected to take any aggressive action Monday.

When James does act, her efforts, depending on their severity, could starve Trump’s family business of cash and drop the curtain on his final act as a New York mogul. And while Trump can seek to delay or limit some damage, that legal process is “slow torture,” said Mark Zauderer, a veteran New York business litigator who has handled many judgments.

“There’s nothing here for Trump to gain,” added Zauderer, who is a partner at the firm Dorf Nelson & Zauderer. “It’s just a question of how much he will lose and how long it will take.”

To avoid a humiliating outcome, Trump must find a company willing, for a fee, to post a half-billion dollar bond on his behalf, promising that it will cover the judgment if he loses a pending appeal and fails to pay. A bond of that size would have strings attached: Trump would need to pledge more than $550 million in collateral to the company, including as much cash as possible.

That is the problem. Despite Trump’s boasts that he is worth billions, much of his wealth is tied up in real estate, which bond companies rarely accept as collateral. A recent New York Times analysis found that as of last month, he had more than $350 million in cash plus stocks and bonds he could easily sell, but much less than he would need to post in collateral.

His lawyers, after being spurned by more than 30 bond companies, recently called their chances of securing a bond a “practical impossibility.”

Now, Trump is banking on an appeals court pausing the judgment or accepting a smaller bond. Although the court is not expected to rule Monday, it could do so later this week or next week.

James might wait for the court to give her the green light before collecting. Or, she might issue a list of properties and accounts she is eyeing, but wait before moving to actually seize them.

While waiting for the appeals court, Trump could cobble together a last-minute plan. To come up with the collateral for a bond, he could still try for a quick sale of a property or other assets, or seek a loan from a bank or private equity firm.

And he could reap a $3 billion windfall when shares of his social media company start trading on the stock market as soon as Monday. Although he is prohibited from selling the shares and converting them into cash for six months, Trump could find ways around that restriction that would enable him to use his stake for the appeal bond.

If all else fails, Trump could have the corporate entities implicated in the fraud case file for bankruptcy, which would automatically halt James from enforcing the judgment against them.

But the former president, scarred by the bankruptcies of some of his companies in the 1990s, would most likely see such a move as a political liability and last resort. And a bankruptcy would provide only so much relief: Fraud claims are not discharged in a bankruptcy, nor would the judgment be halted against Trump himself, only the corporate entities. Ultimately, James would probably seek to hold him accountable for his company’s debts.

For weeks, Trump held out hope that the Appellate Division in Manhattan would save him. In asking that court to pause the judgment, or accept a bond of only $100 million, his lawyers argued that its judges would be likely to overturn the trial judge’s $454 million penalty once they heard the substance of his appeal. The judgment, the lawyers said, is “grossly disproportionate and unconstitutional.”

The trial judge, Arthur Engoron, found Trump liable for conspiring to inflate his net worth to obtain favorable loans from banks and insurers. The $454 million penalty, which would be paid into New York state’s general fund, reflected the interest payments Trump saved by misleading his lenders, as well as the profits from his recent sale of two properties.

Trump, the presumptive Republican nominee in this year’s presidential election, has denied all wrongdoing and has accused James and Engoron, both Democrats, of leading a witch hunt against him. He has also employed the looming judgment to raise money for his presidential campaign, recently releasing a fundraising appeal claiming that the “rabid Trump-hating Democrat AG Letitia James wants to SEIZE my properties in New York” and that Democrats want to “get their filthy hands on my cash to stifle my campaign.”

Although he does not have to pay the $454 million while the appeal is pending, he must obtain the bond, which covers both the judgment and ever-accruing interest. To obtain such a large bond, which Trump’s lawyers called “unprecedented” for a private company, he would have to pay a company a fee as high as $20 million.

He can afford that, but so far has failed to raise the cash required as collateral, partly because his wealth is less liquid today than it was just weeks ago. In mid-March, he had to post a $91.6 million bond in a defamation case he lost to writer E. Jean Carroll. Trump almost certainly had to pledge more than $100 million in collateral to Chubb, the insurance company that provided the bond. That money cannot be used to underpin a second bond.

If Trump cannot produce the bond, James could send so-called restraining notices to his banks and brokerage firms, effectively freezing his accounts. She can then file a court action to access the money in those accounts.

Public records show that James has formally posted the judgment against Trump in Westchester County, a preliminary step toward staking a claim to his private estate and golf club there.

Yet any effort to seize property would most likely touch off a lengthy court fight with an uncertain result. Trump would seek to delay the matter at every turn, and even if James prevailed and forced the sale of a building, she would collect only what was left over after the property’s mortgage was paid off.

“A lot of people say freeze and seize, but the seizing of properties isn’t so easy,” Zauderer said.

He suggested that James could still inflict serious damage and collect a significant sum by pursuing Trump’s bank and brokerage accounts.

“That’s the low-hanging fruit,” he said.