Photo: Carlos Barria/REUTERS
On Wednesday, New York attorney general Letitia James formally alleged what many have long suspected: Donald Trump’s famous decades-long business career — the thing that made him a New York City icon, a reality-TV star, and eventually the president — was built on a foundation of lies.
The 200-plus-page complaint alleges “numerous acts of fraud and misrepresentation” in Trump’s financial statements “covering at least the years 2011 through 2021.” The document needs to be read with a full understanding of the particular legal context in which it was written, but it is clear, methodical, and detailed. Although it is the climax to date of the office’s yearslong investigation, it is also just the start of a litigation process that could go on for years, depending on how aggressively Trump wants to fight it. (Most civil cases eventually settle, as Trump well knows, and indeed, before the filing, he reportedly made an offer to settle with the office.)
The case also raises two questions I suspect are on many people’s minds: Why is this not part of a criminal case by the Manhattan district attorney’s office? And where has the Justice Department been all these years?
The most obvious feature of the lawsuit — that it is a civil case, not a criminal proceeding subject to a much higher burden of proof at trial — has several important implications as we try to make some sense of it. The first is that the AG’s office did not have to develop a robust body of evidence concerning Trump’s personal involvement in the underlying conduct. They could comfortably allege, for instance, that Trump “was well aware” of crucial aspects of the alleged misrepresentations based on the fact that the truth was accessible to him and likely to have been known by him given his role at the top of his namesake company. They could also argue that Trump was part of the alleged conspiracy to mislead lenders and insurers based in part on the fact that he invoked his Fifth Amendment right against self-incrimination on those points when he was deposed. This would be inadmissible in a criminal proceeding, but in a civil case, the fact finder can draw an “adverse inference” about what the answer to those questions would have been — in other words, that telling the truth would have incriminated him.
The AG’s office also has a potent tool in the form of the particular law being used as the vehicle for the case. The provision gives the office authority to sue based on “repeated fraudulent or illegal acts,” and it has long been the bane of New York businesses caught in the crosshairs of the attorney general’s office because of how generously New York courts have interpreted it. Many people and companies have tried and failed to challenge the breadth of the provision, which is on full display in James’s complaint. All of this — the apparent evidentiary framework for the complaint, the use of Trump’s refusal to answer questions, and the cudgel of the legal provision that undergirds the lawsuit — is standard fare for an enforcement proceeding like this.
As a legal matter, the AG’s office does not necessarily need to establish that any of the recipients of the alleged misrepresentations, such as insurers and banks, actually relied on them or suffered any losses as a result of them. That too likely helps to explain why a broader criminal case by the Manhattan district attorney’s office has not been brought. New York criminal law is less forgiving on this point, at least when it comes to offenses that might normally lead to prison time following a conviction. (The shortcomings of the state’s white-collar criminal regime are infamous, and there have been unsuccessful reform efforts.)
This is not the case for some of the most potent federal criminal-fraud charges, which, as the AG’s office itself mentions in a footnote in the complaint, generally have “no requirement of loss or reliance.” That is one reason why, under ordinary circumstances, the sort of conduct alleged against Trump (and reported in the press for years since he ran for president) should have drawn the attention of federal prosecutors, who then should have conducted a fulsome probe into Trump’s finances. This would not have been a simple undertaking, but it would have been the most robust investigative vehicle possible — as a matter of the legal tools, resources, and experience available — for ascertaining whether criminal conduct occurred within the Trump Organization, including on the part of Trump himself.
As far as the public record suggests, that has not happened. Of course, many awful Trump appointees controlled the Justice Department during his presidency, and they may have prevented or curtailed any such effort. That partly explains why many legal observers were so quick to embrace and hype the DA’s criminal investigation back when they thought it might ensnare Trump — notwithstanding a long history of suboptimal results in high-profile white-collar criminal investigations conducted during the tenure of the previous DA, Cyrus Vance Jr., who left office at the end of last year. At the time, that seemed to be the only avenue for some well-deserved criminal scrutiny of Trump’s business dealings.
That calculus should have changed after Trump lost the 2020 election, at which point the Justice Department under President Joe Biden could have gotten involved. At that time, however, Biden’s advisers were telling the press that he did not “want his presidency to be consumed by investigations of his predecessor” and that he was concerned “investigations would further divide a country he is trying to unite.” This was dispiriting and unwise but not exactly shocking since Biden had made similar comments while campaigning, at one point telling NPR that, though he would not interfere with the Justice Department’s judgment, he thought it would be “a very, very unusual thing and probably not very — how can I say it? — good for democracy to be talking about prosecuting former presidents.”
If you wanted to become attorney general, it would presumably have been unwise to be at odds with Biden on this point, at least at the time. (Biden has since reportedly had a very belated change of heart, at least as it pertains to possible charges against Trump for his conduct in the run-up to the siege of the U.S. Capitol.) There also would have been a readily accessible way out of the problem thanks to internal Justice Department guidelines that allow prosecutors to decline prosecution of a case if “the person is subject to effective prosecution in another jurisdiction” or “there exists an adequate non-criminal alternative to prosecution.” You could easily argue that the Manhattan DA’s criminal probe and the New York AG’s civil investigation, respectively, satisfied those two considerations.
In reality, these investigations were not — and have never been — adequate substitutes for a federal criminal investigation. The Justice Department has more potent investigative tools than either the DA’s office or the AG’s office. It has broader criminal statutes to draw upon than the DA’s office, greater leverage to enlist cooperators, and a much larger pool of current and former prosecutors who have conducted successful complex financial-crime investigations while demonstrating the level of rigor and professionalism necessary to handle an inquiry of this sophistication and sensitivity. This does not necessarily mean a federal criminal probe would have ensnared more people by now, but a well-run, well-resourced, and orderly federal criminal investigation would have been a much greater threat than Trump has faced in the area of his many dubious financial dealings.
Many people were heartened when Vance’s office recruited a veteran former federal prosecutor named Mark Pomerantz to helm his office’s investigation last year because it seemed to herald the possibility of a quasi-federal probe at the state level, but despite the usual glowing press coverage anytime someone leads a Trump investigation, I was skeptical of the move for reasons I have alluded to in the past. Pomerantz was popular in New York legal circles, but he had not been actively working for a long time and had not led a criminal investigation in decades. Based on my own experience, I am also temperamentally a bit more skeptical about the capabilities of the demographically homogeneous, excessively self-confident, and clubby gerontocracy (i.e., old white guys) who effectively control the New York City white-collar bar, and I heard rumblings about discontent in the office over Pomerantz’s arrival and effectiveness leading the investigation.
Some of those concerns were arguably validated in a way I never anticipated. Early this year, Alvin Bragg, then the newly elected DA, declined to let Pomerantz indict Trump based on the investigative record he and his team had compiled, and Pomerantz then seemingly proceeded to anonymously trash Bragg in the press to anyone who would listen. (At one point during this very unsubtle media campaign, he apparently forgot to go off the record with a reporter.) It was a testament to his goodwill and standing in the legal community that he managed to avoid any pointed public criticism during this period, but in private, I have heard expressions of surprise and frustration from well-respected peers. It does not suggest the existence of a particularly well-run investigation on his part.
Among the collection of possible federal criminal probes concerning Trump, a financial-fraud investigation has always struck me as perhaps the most appealing from a prosecutorial perspective. The sort of conduct James’s office has now alleged is routinely investigated by federal prosecutors using well-established statutes and legal theories, and there would be nothing particularly novel about it, factually or legally, except that a principal subject and possible target was once the president. That stands in stark contrast to both the Trump-Russia probe conducted by Robert Mueller and the ongoing January 6 investigation being conducted under Attorney General Merrick Garland.
Many people who hope Trump will see the inside of a prison have posited that he could have been federally indicted for the hush payment to Stormy Daniels that resulted in Michael Cohen’s guilty plea, but that has always been overly simplistic. Cohen pleaded to a campaign-finance charge, and those typically require evidence that the offender knew what he was doing was illegal — a higher standard of intent than the one that usually applies to criminal offenses, including financial-fraud charges. (Ignorance of the law, as they say, is typically not a defense in a criminal case.) He admitted he had this heightened intent when he pleaded guilty, but he was evidently unable to provide persuasive evidence to prosecutors that Trump had that same level of awareness. It probably did not help matters that Cohen, an arrogant doofus who has been embraced by many in the press because he hates Trump and never shuts up, is also a notorious liar who did not fully cooperate with the office.
There is nothing like a slam-dunk criminal case against Trump, but if anyone else had been the subject of, say, a lengthy exposé by the New York Times that raised serious questions about whether they had committed federal tax fraud, the criminal investigation would have practically opened itself. Prosecutors are loath to ever admit it, but most of them love working on cases that attract media attention, even when there is far less to the underlying conduct at issue.
There are also plenty of unwritten rules about what constitutes a good financial-fraud case that might theoretically apply to Trump — like the apparent dearth of evidence of anyone actually being deceived by his company’s alleged lies — but the department breaks those rules all the time, particularly when the subject is a prominent one. Plenty of white-collar cases have either no identifiable victims or wildly unsympathetic ones like the millionaires and billionaires who have principally benefited from the department’s anti-spoofing initiative or the rich morons who threw money at Elizabeth Holmes. Fear of losing is also real, but the department loses much less worthy cases.
What about the fact that, as many have noted, the sort of misrepresentations James’s office has alleged are arguably common in the real-estate and hospitality industries? This is a very real consideration and potential legal impediment depending on the actual facts, but as a prudential matter, there is in fact a strong deterrent rationale for pursuing the matter precisely for this reason — in order to use a high-profile investigation and potential federal prosecution to impose some apparently much-needed order in these large economic sectors.
Maybe we will be surprised to learn the current Justice Department actually has an open and meaningfully active investigation in this area, though I doubt it. James made a referral of her factual findings to federal prosecutors in the Southern District of New York, and maybe that will prompt some reconsideration, but the reality is it would be harder to do this now than it would have been even last year — not simply because of the passage of time or the fact that it might look like politically opportunistic for federal prosecutors to get involved while Trump considers a reelection bid but also because it can actually be harder to conduct a federal criminal probe after civil regulators and state prosecutors have been rummaging around for years. (Among other things, federal prosecutors generally like to be the first ones to interview witnesses because they can later be impeached at trial if they previously provided even arguably inconsistent testimony to other investigators.)
As it stands now, the complaint filed by the AG’s office may present the last realistic avenue for some meaningful judicial vetting of Trump’s business practices and some accountability — at least as an economic and reputational matter, if not a carceral one — for any financial shenanigans on his part. It remains to be seen how it will shake out, but it did not have to be this way.