New York Attorney General Letitia James pleaded not guilty Friday to federal bank fraud charges and her attorneys have moved to dismiss the case, saying she’s a victim of vindictive prosecution and that the lone U.S. attorney who signed her indictment was appointed illegally.
James was indicted on Oct. 9 over allegations that she made false statements to a financial institution in applying for a $109,600 mortgage she took out to buy a $137,000 home in Norfolk, Virginia 5 years ago.
In their motion to dismiss the case, James’ attorneys said U.S. Attorney Lindsey Halligan “has no legal authority to litigate this case.”
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Halligan was the Trump administration’s pick to replace Erik Siebert, the U.S. Attorney for the Eastern District of Virginia who resigned on Sept. 20 after Trump publicly pressured him to bring charges against James and former FBI Director James Comey.
Two assistant U.S. attorneys who were reluctant to bring charges against James, Kristin Bird and Elizabeth Yusi, were fired on Oct. 17, CBS News reported this week. A lawyer from the U.S. Attorney’s office in Missouri who usually handles civil legislation is assisting Halligan in the case against James, Reuters reported Friday.
Halligan has no previous experience as a prosecutor, and critics say she was tapped as Siebert’s replacement because she was willing to bring charges against James and Comey despite the thin evidence in the cases.
But James’ attorneys are launching her defense with a more technical argument: That Trump appointed Siebert as an interim U.S. attorney in January, and his 120-day term expired in May. Once that happens, “the exclusive authority to appoint an interim U.S. attorney belongs to the district court,” they said — making Halligan’s appointment unlawful.
The Trump administration “seemingly believes that the Attorney General has the power to appoint an unlimited number of interim U.S. Attorneys to an unlimited number of 120-day terms” they argued, urging the court to “reject the executive branch’s brazen attempt to sidestep the constitutional and statutory limitations on the appointment of U.S. Attorneys.”
Attorneys for James also sought a court order prohibiting the government from disclosing case materials or making statements to the media and journalists in the light of “a stunning disclosure of internal government information,” by Halligan in a series of Signal messages with Lawfare reporter Anna Bower.
In that exchange, Halligan took issue with Bower’s summary of a New York Times article that suggested that James hasn’t collected rent from a niece who lives in her Norfolk home.
In reaching out to the reporter, Halligan violated the Federal Rules of Criminal Procedure, the Code of Federal Regulations, “various rules of ethical and professional responsibility” and the Department of Justice’s Justice Manual, James’ attorneys said.
Bower herself described herself as “mystified” by Halligan’s texts.
“She is currently the most scrutinized prosecutor in the country, widely seen as hand-picked to prosecute her boss’s political enemies,” Bower said in publishing the exchange of messages. “Even the slightest misstep could be seized on and picked apart by defense counsel representing James, who analysts expect will seek dismissal of her charges based on selective or vindictive prosecution.”
Following Friday’s hearing, U.S. District Judge Jamar Walker said any hearing on a motion to dismiss the case on a theory of selective or vindictive prosecution will be held on Dec. 5.
A hearing on arguments about the legality of Halligan’s appointment put forward by attorneys for both James and Comey is set for Nov. 13 and will be presided over by a U.S. District Court Judge from South Carolina to avoid any conflict of interest.
Mortgage fraud allegations
Walker set a tentative date for James’ jury trial to begin on Jan. 26.
With her attorneys focused on arguments that the case should never have been brought in the first place, they haven’t said much about the charges against her — bank fraud and making false statements to a financial institution — except that she is innocent.
But evidence collected by the Department of Justice that has leaked to the media has legal experts questioning the government’s case.
In their indictment, prosecutors alleged that James rented out the three-bedroom, one-bathroom home that she claimed would be a secondary residence. Claiming the home would be a second residence rather than an investment property allowed James to secure a $3,288 seller credit and a better mortgage rate saving $17,837 over the life of the loan, prosecutors said.
James engaged in a scheme “falsely representing … the property as a secondary residence to obtain favorable mortgage terms, while using it as an investment property with no intended or actual personal occupancy or use by her,” the indictment alleges.
The Norfolk home at the center of the case
The Norfolk, Virginia home at the center of fraud allegations against New York Attorney General Letitia James. Source: Google Street View.
The home at the center of the case against James was built in 1920, sold for $29,000 in 2010 and $114,800 in 2011, according to property records tracked by Zillow.
On Oct. 11, The New York Times reported that James’s grand-niece, Nakia Thompson, has lived at the home since James purchased it for $137,000 in August, 2020. Thompson testified before a grand jury in Norfolk that she did not pay rent — undermining the claim that the home was an investment property, the Times reported.
But the grand jury indictment signed by Halligan was issued by a different grand jury in Alexandria, which Thompson did not testify before — raising questions about jury shopping.
The Justice Department declined to comment on The New York Times report. Halligan told Bower that her take on the New York Times report was “simply not true” but did not challenge any specifics.
Other legal experts say that it’s unusual that Halligan was the only U.S. attorney to sign indictments of both James and Comey, but that prosecutors might have legitimate reasons to bring evidence to more than one grand jury.
“It’s perfectly legitimate for the prosecutor to go to a grand jury in a place where the alleged crime might have occurred with respect to a particular piece of property,” Stanford Law School criminal justice expert Robert Weisberg said. “But obviously it gives the U.S. attorney a bit of an opportunity for so-called forum shopping for friendly grand juries.”
Halligan “apparently couldn’t find anybody on her U.S. attorney staff to do the work. They just didn’t believe it,” Weisberg said on an Oct. 16 podcast with his colleague, law professor Pamela Karlan. “So, she has her name on the indictment and appeared before the grand juries herself. People experienced in federal law say this never happens.”
Other prosecutors who worked on the case for months summarized their concerns about bringing charges against James in a memo last month — noting that James made a 20 percent down payment on the home and that there was no evidence she collected rent on the property, ABC News reported Thursday.
“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,” ABC reported, citing anonymous sources. “James’ niece told investigators that James visited their home multiple times a year but had not stayed overnight.”
Experts who analyzed mortgage documents obtained by The New York Times said James had wide latitude to use the property as she wished 12 months after signing her deed, raising questions “about when exactly prosecutors believe [James] used the property as a rental,” the Times reported.
In the first year James owned the property, prosecutors concluded that any financial benefit James might have realized from the property being classified as a second home instead of an investment property would have totaled about $800, ABC reported.
The investigation into James began in April with a criminal referral by Federal Housing Finance Agency Director Bill Pulte, the head of Fannie Mae and Freddie Mac’s federal regulator, concerning two different properties.
Pulte has also sent criminal referrals targeting two other perceived enemies of the Trump administration — Democratic Sen. Adam Schiff and Federal Reserve Governor Lisa Cook — to the DoJ, suggesting they falsified property records to secure more favorable mortgage terms. Like James, Schiff and Cook deny the allegations and say they are targets of political retribution.
In making the criminal referrals, Pulte bypassed the FHFA’s Office of the Inspector General (OIG), which typically makes such requests to the Justice Department, Reuters reported on Oct. 7, citing seven anonymous sources.
Pulte has denied accusations that he has helped the Trump administration weaponize mortgage fraud, calling such claims attempts to intimidate him.
“If it’s a Republican who’s committing mortgage fraud, we’re going to look at it. If it’s a Democrat, we’re going to look at it,” Pulte said in August. “If it’s a wealthy politician or a lawyer, we’re going to look at it.”
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