Report: Letitia James’s Mortgage Agreement Permitted Her to Rent Property, Potentially Harpooning Bank Fraud Charges

A document at the heart of the Trump Justice Department’s bank fraud indictment of Letitia James, which prosecutors contend prohibited the New York attorney general and Trump political enemy from renting a modest home she owns in Virginia, actually permitted rentals, according to a report by Politico.

The document is called a “Second Home Rider” (SHR) and it is standard for mortgages of the type obtained by James. The Politico report reproduces the SHR. Contrary to the assertion in the indictment, drafted under the direction of Lindsey Halligan, President Trump’s interim U.S. attorney for the Eastern District of Virginia (EDVa), the SHR does not prohibit James from renting the property. Instead, it requires James to “maintain exclusive control over the occupancy of the Property, including short-term rentals” (emphasis added).

By the plain language, and according to real estate experts consulted for the Politico report, this language allowed James both to permit others to occupy the property and to rent the property for short terms. What the SHR prohibited was use of the home as an investment property — e.g., by transferring control to a management firm, or a similar entity or person, who would then control occupancy and generate rental income from third-party tenants.

The idea, on this analysis, is that James had to use the property as a second home or vacation home that she would at least occasionally occupy, not as an investment. As I’ve previously related, James is said to have allowed the family of her grandniece, Nakia Thompson, to live rent-free in the home (there appear to have been some payments for utilities), and James occasionally stayed in the home to visit with the grandniece and other family living nearby.

If the Politico report is accurate, it is difficult to see how Halligan’s prosecutors could prove beyond a reasonable doubt that James intentionally defrauded and made false statements to banks.

James maintains that she did not use the home as an investment property and that her creditors were accurately informed about how it would be used. Even by the government’s allegations, the benefit James derived from getting a favorable interest rate (3 percent for a second home rather than 3.815 percent for an investment property) was small — about $50 per month or less than $18,000 over the life of a 30-year mortgage; and reporting after the charges were filed indicates that any gain may have been as minuscule as $15 to $30 per month — or less than $11,000 over the life of the loan.

While there are significant questions about whether James’s conduct was fraudulent at all, it is highly unusual for the Justice Department to prosecute frauds in such negligible amounts.

James, of course, brought a massive civil fraud case against now-President Trump. That case was manifestly an abuse of prosecutorial authority — lawfare against a political enemy — and a New York appellate court recently threw out the absurd damage award (which exceeded half a billion dollars after interest).

James has not yet filed motions to dismiss the indictment. She has committed to file a motion to dismiss on the ground that Halligan’s appointment as interim U.S. attorney is statutorily invalid. That motion has been consolidated with a similar motion by former FBI Director James Comey in Halligan’s prosecution against him. These consolidated motions have been assigned by the Fourth Circuit to Judge Cameron McGowan Currie of the district of South Carolina.

Yesterday, Judge Currie ordered the government to produce the grand jury proceedings for her review so she can determine the level of Halligan’s participation.