Coffey Modica’s Paul Golden is one of the legal experts quoted in this Forbes article regarding Donald Trump’s troubles paying the penalty in his civil fraud trial.
Mar 21, 2024, by John Hyatt, Forbes Staff
THE QUEENS NATIVE WHO BUILT A REAL ESTATE EMPIRE IN MANHATTAN IS ON THE VERGE OF POSSIBLY FORFEITING HIS FAMOUS NEW YORK PROPERTIES TO STATE AUTHORITIES—IN ADDITION TO ALL HIS SPARE CASH. HERE’S WHAT COULD HAPPEN NEXT.
On Monday, Donald Trump’s lawyers revealed in a legal filing that Trump had failed to secure the $464 million appeals bond he needs to avoid paying the half-billion-dollar penalty as he appeals the New York civil fraud judgment against him. Securing the bond was a “practical impossibility,” they wrote, adding that about 30 different bond companies turned down the former commander-in-chief’s request, in part because very few will consider “a bond of anything approaching that magnitude” and the rest will not accept “hard assets such as real estate as collateral.” Trump is now asking the five-judge appeals court panel to pause enforcement of the civil judgment or to lower the bond amount to $100 million while the appeals court hears his case.
Trump is running out of time. New York Attorney General Letitia James has said that her office plans to collect from him on Monday, March 25. Unless Trump is able to obtain an appeals bond before then, New York prosecutors and law enforcement could initiate a wide-ranging action to freeze and then seize Trump’s assets. Forbes estimates that Trump has about $400 million of cash and liquid securities, but some of that money is already encumbered. Earlier this month, Trump obtained a $91.6 million appeals bond for the second New York civil judgment against him (in which he was found liable for defaming and sexually assaulting E. Jean Carroll) by posting a Schwab brokerage account as collateral, MSNBC reported. Those same funds cannot be used to collateralize a second bond. Trump’s attorneys say their client needs collateral of $557 million to post the $464 million bond.
“I think he is in trouble,” says Kevin O’Brien, a white collar trial lawyer in New York and a former assistant U.S. attorney to the Department of Justice. “He doesn’t have the cash to pay for this. That’s why he’s in the pickle he’s in.” Mark Zauderer, a trial and appellate lawyer in New York, says that if Trump fails to get his bond or get a favorable ruling from the appellate judges, then the Attorney General’s office will move swiftly to take control of Trump’s bank and brokerage accounts, as well as his various buildings and real estate holding companies. “You do everything. You [go after] everything at once,” Zauderer explains. “Some [assets] will take longer than others.”
Spectators can expect a long and drawn-out series of legal filings and appeals, over a period of weeks, months and possibly even years. The Attorney General is “not going to take a stake and drive a sign through the front yard that says, ‘This building has been seized,’” explains O’Brien. “It’s a legal process. It’s not like she’s going to be selling these properties next week.”
To initiate the process of seizing property, the New York Attorney General’s Office can put liens on Trump’s assets and then give execution orders to county sheriff’s offices to sell any Trump-owned properties in their counties through an auction. Trump has stakes in 13 New York properties that are collectively worth about $700 million after debt; ten of those assets are in New York County (which encompasses Manhattan), two properties are in Westchester County (a golf course and a mansion) and one is in Dutchess County (another golf course). James could also pursue Trump’s properties in other states by invoking the Uniform Enforcement of Foreign Judgements Act, though that could create more legal hurdles and raise some jurisdictional issues, lawyers told Forbes.
Under liquidation proceedings, Trump’s other creditors – like Ladder Capital, Axos Bank and Bryn Mawr Trust Company, which all lent Trump money against his New York buildings – will also demand what they’re owed, potentially complicating the process. Then there’s tax authorities owed money by Trump who will want their share. “Other people have been standing in line,” says O’Brien. “That might be a major fight over who has first dibs.”
For these reasons, James may start by liquidating buildings that are unencumbered—or even wait to sell some or all of the properties. “One theory is that the Attorney General would not actually sell any of Trump’s real property until the appellate process was complete,” says Paul Golden, a New York lawyer specializing in real estate and commercial litigation. “There would likely be complicated litigation if the attorney general sells real property at a public auction now for well under the market value, only to later discover that the end result was that Trump was not liable after all.”
There are other mechanisms for the Attorney General’s office to squeeze money out of Trump’s buildings—like taking payments from tenants that lease space from Trump. “Ultimately the Attorney General could not only look for money that Trump has in the bank, but can stop tenants that pay big amounts of rent to Trump from paying him,” says Zauderer. Extracting cash flow from Trump’s properties would further imperil Trump’s ability to service his massive debt pile: Over the next five years, he has $780 million in mortgages coming due.
Theoretically, Trump could avoid the humiliation of surrendering assets to New York law enforcement by mortgaging or even selling off some of his assets to post the bond. His largest assets in New York include a 30% interest in the 1290 Avenue of the Americas building (publicly traded Vornado owns the rest); a collection of condo units, commercial spaces and storage units he rents out in Trump Park Ave; and two ground leaseholds on 6 East 57th Street, a retail building whose anchor tenant is the jeweler Tiffany’s. Trump also owns 100% of the Trump Tower building (another Midtown tower), which leases space to retail brands like Gucci. And of course, Trump has the penthouse at the top of Trump Tower, which he infamously claimed was three times bigger than it actually is.
But of course, he is appealing the judgment against him, which means he’s trying to avoid selling any of his properties to personally post his bond. As Trump explained in a rant on Truth Social on Tuesday. “I would be forced to mortgage or sell Great Assets, perhaps at Fire Sale prices, and if and when I win the Appeal, they would be gone.” He added: “I shouldn’t have to put up any money… until the end of the appeal.”
It makes sense for Trump to wait: The panel of appellate judges could decide to lower the bond amount Trump owes, or even pause the enforcement of the civil penalty while Trump appeals the judgment against him. A final decision on his appeal could take up to a year, Zauderer says.
“It puts a shadow over his ability to do business, period,” says O’Brien. “Who’s going to trust a guy like this?”