Former President Donald Trump and his co-defendants in his New York civil fraud case took action on Monday by posting a bond of $175 million. This decision came after a judge ruled that they had been misrepresenting the value of Trump’s properties for several years. The bond has been underwritten by an insurance company led by a billionaire who initially gained success by providing high-risk, high-interest loans to individuals with poor credit who were purchasing cars.
Don Hankey, the executive whose company issued the bond, is a lesser-known tycoon who amassed his $7.4 billion fortune by establishing car dealerships and offering subprime auto loans, as reported by Forbes magazine. This places him ahead of Trump in terms of wealth, as Forbes estimates Trump’s net worth at $6.4 billion, taking into account his significant stake in the recently listed Trump Media & Technology Group.
According to Hankey, in an interview with The Associated Press, he has never had any personal interaction or communication with Trump. However, his company, Knight Speciality Insurance, has acted as a provider of cash and bonds to serve as collateral for Trump’s appellate bond. This bond serves as a guarantee for payment in the event that the judgment against Trump is ultimately upheld on appeal.
“We at Knight Insurance take pride in providing our bond services to anyone in need,” stated Hankey to the wire service.
Hankey did not respond to CBS MoneyWatch’s request for comment right away.
Who is Don Hankey?
Hankey, who is now 80 years old, began his journey in the auto industry when his father acquired a share in a Ford dealership located in Los Angeles back in 1958. During his teenage years, Hankey initially started by washing cars during the summer. However, he eventually transitioned into a sales role, as he revealed in an interview with the Los Angeles Business Journal last year.
During his time at the University of Southern California, Hankey pursued a degree in finance. Unfortunately, tragedy struck when his father passed away, and his family lost their ownership of the car dealership. However, after Hankey completed his studies, his family managed to regain control of the dealership by securing a loan of $250,000.
How did Hankey get into the car loans business?
After acquiring the dealership, Hankey actively pursued a customer base that many other car sellers tended to avoid: subprime borrowers. Instead of relying on banks for financing, his dealership directly offered loans for auto purchases.
According to Hankey, the Los Angeles Business Journal was informed that his showroom frequently hosted heated debates among individuals who felt that the terms being offered were not in their favor.
“We had ongoing conflicts, while simultaneously welcoming customers who were purchasing cars,” Hankey shared. “Surprisingly, despite the tense situations, it didn’t seem to bother the car buyers witnessing payment disputes among others.”
What other businesses does Hankey own?
According to the Los Angeles Business Journal, Hankey recognized the demand for subprime auto loans outside of Los Angeles, leading him to expand his business beyond auto dealerships.
Westlake Financial Services, a company founded by Mr. Hankey, collaborates with over 30,000 car dealerships throughout the United States to offer auto loans to individuals with less-than-perfect credit records, according to Forbes. This successful venture led to the establishment of the Hankey Group, a conglomerate that manages various financial services firms, including Knight Insurance Group, the provider of Trump’s bond.
Is Hankey a Trump supporter?
In an interview with Bloomberg News, Hankey stated that he had voted for Trump. However, he clarified that his decision to extend the bond was not influenced by his support for the real estate developer.
“Yes, I voted for him previously, but in this situation, it’s purely a business transaction, and that’s how we operate,” Hankey explained. “I haven’t had the opportunity to personally meet Donald Trump or have a phone conversation with him.”
Axos Bank, one of the largest non-institutional investors in which Hankey has a stake, has offered financial support to refinance Trump Tower and secure a $100 million loan in 2022. This move comes at a time when the Trump Organization’s real estate valuations were being closely examined in light of the New York fraud case. Hankey, however, claimed that he was not aware of the transaction until it had already been finalized.
How does the $175 million bond work?
When a defendant decides to appeal a court ruling, they may use appeal bonds to temporarily halt the enforcement of the financial judgment. This allows for the legal process to continue while ensuring that the defendant’s assets are not immediately affected.
Insurance broker NFP states that insurers usually issue the bond once they have verified collateral and impose a fee ranging from 1% to 2% of the bond amount. Consequently, Trump could potentially be paying up to $3.5 million annually to Knight Insurance for the bond guarantee.
If the ruling on Trump’s appeal is in his favor, he will not be required to make any payment to the state and will receive a refund of his money.
According to one of Trump’s lawyers, Alina Habba, President Trump has fulfilled his promise by posting bond. He is eager to appeal the verdict and seek justice.
