The mortgage fraud case against Letitia James is ‘bupkis’, experts say | Letitia James

A prosecutor appointed by Donald Trump may have succeeded in securing an indictment against New York Attorney General Letitia James, but securing a conviction could be an uphill battle, legal experts say.

Even before a grand jury returned the indictment Thursday, there was already deep skepticism about possible charges. Career prosecutors with the U.S. Attorney’s Office for the Eastern District of Virginia reviewed James’ mortgage fraud charges and concluded there was no probable cause to file charges. Lindsey Halligan, Trump’s chosen acting U.S. attorney, nevertheless went ahead and presented the case to the grand jury. His decision reportedly took senior Justice Department officials by surprise.

The indictment released Thursday accuses James of bank fraud and making false statements when she obtained a mortgage to purchase a second home in Norfolk, Virginia, in 2020. As part of the purchase, James signed an addendum stating she would use it as a second home and prohibiting her from renting it, according to the indictment. James then rented the house, prosecutors say. By lying on the mortgage statement, prosecutors say, James obtained a better mortgage rate and seller credit that saved him about $18,933 over the life of the loan.

“In this case, prosecutors will have to demonstrate that at the time James signed the mortgage documents, she knew about the arrangements for a second home, that she intended to use it for a different purpose, and that she intended to obtain financial advantage as a result of her deception,” said Barbara McQuade, former U.S. Attorney for the Eastern District of Michigan. “This can be very difficult for an attorney to do because we can’t read other people’s minds. Anyone who has ever been involved in a mortgage closing knows the intimidating pile of papers they put in front of you.”

The vacation home contract James signed does not outright prohibit renting the house, Adam Levitin, a law professor at Georgetown University, wrote in a blog post. Instead, the addendum prevents the landlord from handing over control of rental decisions to someone else. The agreement also only imposes the restriction from one year after the agreement. The indictment unsealed Thursday does not specify when James rented the house or for how long.

The rider also includes an exemption for “extenuating circumstances,” Levitin noted, noting that the mortgage was obtained in August 2020 during the Covid-19 pandemic.

“I am not aware that the federal government has ever charged anyone with fraud based on renting a second home,” Levitin wrote in his article about credit reports. “It is clear why career prosecutors in the Eastern District of Virginia declined to file charges: James does not appear to have misrepresented his mortgage because it does not directly prohibit rentals.”

James has forcefully denied the accusations. Last month, Trump publicly urged US Attorney General Pam Bondi to indict him, former FBI Director James Comey and California Senator Adam Schiff.

“These accusations are baseless, and the President’s own public statements make clear that his sole focus is political vengeance at all costs. The President’s actions constitute a serious violation of our constitutional order and have drawn strong criticism from members of both parties,” James said in a statement Thursday evening.

Trump’s public statements, combined with career prosecutors’ findings of lack of probable cause, suggest that James will likely present a selective prosecutorial argument to try to have the case dismissed.

“Normally, a complaint [that] “It’s a vindictive pursuit that doesn’t work,” said John Coffee, a professor at Columbia Law School, before adding: “Typically the president doesn’t call these kinds of things.”

The accusations against James come as William Pulte, the head of the Federal Housing Finance Agency, has deployed mortgage records to attack Trump’s rivals. In April, Pulte, a staunch Trump ally, sent a criminal complaint to the Justice Department regarding two different real estate transactions involving James. None of the transactions referenced were the ones actually billed this week.

Pulte also accused Schiff of mortgage fraud, as did Federal Reserve Governor Lisa Cook, whom Trump is trying to remove from the central bank. In Cook’s case, Pulte made an allegation similar to that made against James, alleging that she had rented a property that she had listed as her second home on mortgage documents.

What is also unusual in James’ case is the amount of money she allegedly benefited from through the fraud. Typically, investigators with the Federal Housing Finance Agency’s Office of Inspector General, which handles mortgage fraud investigations, pursue cases in which Fannie Mae or Freddie Mac, government-sponsored enterprises that support the housing market by guaranteeing mortgage loans, suffer substantial losses.

Even the most junior prosecutor in a U.S. attorney’s office would dismiss a case with such a small loss amount, said Jacqueline Kelly, a former federal prosecutor in New York who is now a partner at Boies Schiller Flexner.

“It would never be signed by a supervisor with such a small loss amount,” she said. The small amount of losses could also bolster James’ claims of selective prosecution. “When she has to prove that someone in a similar situation would not have been prosecuted, she has a very strong case because if you look at other cases charged under these same laws, you won’t find anything similar at all.”

Although the length of James’ loan is unclear, if it were a standard 30-year mortgage, she would have defrauded the government of approximately $633 each year.

“It’s bupkis,” said a former federal prosecutor who spoke on condition of anonymity to avoid professional repercussions. “Are you really going to believe, when you get up there, that the attorney general of New York would commit this obstinacy at over $600 a year?

“It’s a race as to whether it’s weaker than the Comey case or stronger because those are the two weakest cases I’ve ever seen in my life.”