For the second time in a week, a federal grand jury has refused to approve an indictment against New York Attorney General Letitia James. Since grand juries almost always ratify charges proposed by prosecutors, a one-sided process in which defense attorneys play no role, those back-to-back rejections are a striking sign that the grudge-driven case against James is legally shaky.
Last month, a federal judge dismissed the original indictment against James, which charged her with bank fraud and false statements to a financial institution in connection with a mortgage loan. U.S. District Judge Cameron Currie concluded that the sole prosecutor who signed the indictment, Lindsey Halligan, had been illegally appointed as the interim U.S. attorney for the Eastern District of Virginia. That embarrassing setback also flowed from the case's weakness.
James earned a prominent spot on President Donald Trump's enemies list by successfully suing him for business fraud in New York. She alleged that Trump had systematically exaggerated the value of his assets while applying for loans and buying insurance. A judge agreed that Trump's conduct qualified as fraud under New York law, and so did an appeals court, although it set aside the judge's jaw-dropping "disgorgement order," which would have required Trump and the other defendants to pay the state half a billion dollars.
In a September 20 Truth Social message to Attorney General Pam Bondi, the president made it clear that he wanted her to prosecute James and another Trump nemesis, former FBI Director James Comey, as soon as possible. "We can't delay any longer," he said. "JUSTICE MUST BE SERVED, NOW!!!"
In that message, Trump noted that he had picked Halligan, a White House aide with no prosecutorial experience, to replace Erik Siebert, a career prosecutor who had proven insufficiently enthusiastic about charging James and Comey with federal crimes. Although Trump himself had nominated Siebert as U.S. attorney, he regretted that choice because Siebert did not think those cases were worth pursuing—a view shared by his staff.
Halligan, a neophyte prosecutor who had practiced insurance law for a decade before serving on the legal team defending Trump in one of his federal criminal cases, quickly delivered the indictments that the president had demanded. She obtained an indictment against Comey, charging him with lying to Congress, on September 25, three days after taking office. She delivered the James indictment two weeks later.
Currie dismissed both indictments without prejudice because Trump, in his rush to install Halligan as interim U.S. attorney, had ignored a statute barring that maneuver. That result was necessary, Currie said, because Halligan had taken the highly unusual step of presenting the indictments on her own—a move that reflected internal skepticism about both cases.
Career prosecutors in the Eastern District of Virginia evidently still have strong doubts about the charges against James, which would explain why Bondi assigned an assistant U.S. attorney from the Eastern District of Missouri, Roger Keller, to handle the case. Last week, Keller presented a new indictment to a grand jury in Norfolk, which declined to cooperate with Trump's vendetta. Keller tried again on Thursday with a grand jury in Alexandria, which likewise did not find probable cause to believe that James had broken the law while applying for a mortgage to finance her 2020 purchase of a three-bedroom house in Norfolk.
James paid $137,000 for that house, including $109,600 from the loan. According to the original indictment, she misrepresented the house as a "second home," a characterization that enabled her to receive a seller credit and a favorable interest rate that would save her $17,837 over the course of the 30-year loan. Those advantages, Halligan averred, amounted to $18,933 in "ill-gotten gains."
The indictment said James never lived in the house, which was actually "a rental investment property." It alleged that she received "thousand(s) of dollars in rents" from a family of three, apparently referring to James' great-niece, Nakia Thompson, who has lived in the house with her children for years and reportedly told a Norfolk grand jury last summer that she does not pay James rent.
Although James listed $1,350 in rental income on her 2020 tax return, ABC News reports that the money "was said to cover the cost of utilities." That same year, in a financial disclosure filed with the New York State Commission on Ethics and Lobbying in Government, James described the home as "investment real property" and reported rental income between $1,000 and $5,000. James did not report any rental income from the property in subsequent financial disclosures, which described it as an "investment" valued at $100,000 to $150,000.
According to the indictment, James' mortgage contract included a "second home rider" that required her to "occupy and use the property as her secondary residence." The rider also prohibited any "shared ownership arrangement or agreement that requires her either to rent the property or give any other person any control over the occupancy or use of the property."
That second provision does not seem relevant to the case against James, since the indictment did not allege that she entered into any such agreement. But James admittedly did not live in the house. Does that mean she committed bank fraud?
Not necessarily. To convict James of that crime, which is a felony punishable by up to 30 years in prison, prosecutors would have to prove beyond a reasonable doubt that she "knowingly" tried to defraud a financial institution. The charge of making false statements to a financial institution, which carries the same maximum penalty, likewise requires proving that James "knowingly" said something that was not true.
The indictment alleged that "the property was intended and used as an investment property with no intended or actual personal occupancy or use," meaning James knew when she applied for the loan that she would not occupy or use the house. "If she changed her mind, thought she might use it, or even had any reason to spend time in Virginia, it would be difficult to convict her," Fordham University law professor James Kainen, whose specialties include real estate and white-collar crime, told FactCheck.org in October. "Responsible prosecutors do not spend their time on minor cases that are hard to win."
After Siebert resigned under pressure from Trump in September, The New York Times reported that he "had recently told senior Justice Department officials that investigators found insufficient evidence to bring charges against Ms. James." Citing unnamed Justice Department officials, the Times said Deputy Attorney General Todd Blanche also "questioned the legal viability of bringing charges against Ms. James."
One reason for that skepticism: According to the Times, "Ms. James's exchanges with the lender showed her having communicated clearly that she did not plan to live in the house." Another reason: Prosecutors in Siebert's office, according to an October 23 ABC News report, "expressed concern that the case could likely not be proven beyond a reasonable doubt because federal mortgage guidelines for a second home do not clearly define occupancy, a key element of the case."
Under those guidelines, it is "unclear if a person needs to sleep overnight at the home or just visit multiple times each year," ABC explained. "Witnesses told prosecutors that James repeatedly informed realtors and loan officers that the home would be for her niece, but that she would occasionally stay there when visiting her family in Virginia." Thompson reportedly "told investigators that James visited their home multiple times a year but had not stayed overnight."
According to ABC, prosecutors "concluded that any financial benefit derived from [James'] allegedly falsified mortgage would have amounted to approximately $800 in the year she purchased the home." Contrary to the numbers offered in the indictment, ABC reported that "a loan officer who worked with James" told investigators the interest savings from identifying the house as a secondary residence would have totaled no more than $10,800 over 30 years.
Even assuming it is accurate to describe that sum as "ill-gotten gains," it is a pretty small windfall, amounting to a few hundred dollars a year. During the Great Recession, Kainen noted, "prosecutors overlooked potential mortgage fraud cases involving applicants who lied about thousands of dollars in income and then defaulted on hundreds of thousands of dollars of debt." Given the evidence against James, he said, this is "hardly" the sort of case that "would have resulted in an indictment for two federal felonies" based strictly on its legal merits.
George Washington University law professor Paul Schiff Berman agreed that the charges against James seemed like overkill. "It is very uncommon for prosecutors to bring these sorts of claims absent a pattern of malicious activity or evidence that the individual has actually harmed the bank by not paying their mortgage or [that] it's part of a much larger fraudulent scheme," he told the Associated Press in October.
The uncertainty about whether James' conduct meets the elements of these crimes, coupled with the mismatch between the gravity of the charges and the benefit that James allegedly obtained, was enough to deter Siebert and his staff. Halligan's main qualification to replace him was her willingness to overlook those problems. But assuming the charges that Keller presented to the grand juries in Norfolk and Alexandria were essentially the same as the allegations in the original indictment, it is not surprising that he encountered resistance.
Keller is free to try again with yet another grand jury. But after failing twice to persuade grand jurors that there is probable cause for the charges, he might want to reassess the odds that he can meet the much heavier burden he would face at trial.
The post 2 Grand Juries Have Rejected the Grudge-Driven Case Against Trump Foe Letitia James appeared first on Reason.com.
