Why New York State Is Suing Trump Instead of Charging Him with Felonies

After a three-year investigation, New York Attorney General Letitia James has filed a civil lawsuit against Donald Trump, three of his children and his real estate company, claiming they “engaged in numerous frauds and deceitful acts” for at least a decade. The suit alleges that the Trumps knowingly and consistently overstated the value of at least 23 commercial properties in order to get lower interest rates and cheaper insurance. James wants the family and company to pay out $250 million, the amount they allegedly saved by defrauding banks and insurance companies.

Um, okay? If Trump’s business practices were crooked, it is appropriate for the proper authorities to hold him accountable. And there is widespread evidence that Trump has pushed the boundaries of legality in his long career as a showman and real estate developer. A 2018 New York Times exposé, aided by the leak of family documents, alleged that Trump engaged in a series of “dubious tax schemes…including instances of outright fraud.” Trump’s former lawyer, Michael Cohen, has also accused Trump of criminal activity, including some crimes Cohen participated in and went to prison for.

And yet the suit of the New York AG seems … underwhelming? The alleged victims in James’ case are not customers Trump defrauded, contractors he stiffed, or shareholders he lied to. The victims are banks and insurance companies that allegedly underpriced Trump for loans and insurance because Trump told them his properties were more expansive and valuable than they actually were.

The government does not usually sue on behalf of large corporations that have their own well-staffed legal departments. Financial companies depend to some extent on customers telling the truth. But they also make their own guarantees for the express purpose of ensuring that they don’t commit money based on false information. When ordinary people apply for a mortgage, the bank doesn’t write a blank check with no questions asked. Instead, it does a thorough credit check, values ​​the property and prices the loan according to the risk it believes it is taking.

It’s harder to do due diligence on a complex business like Trump’s, but that’s what investment banks and other big lenders do for a living. James’ lawsuit alleges, for example, that Trump’s longtime lender Deutsche Bank repeatedly gave Trump favorable interest rates and other lax loan terms because of “the improper, repeated and persistent use of fraudulent and misleading accounting.” Terrible. But isn’t that Deutsche Bank’s problem? Shouldn’t it be the bank suing rather than the New York AG? What damage did Deutsche suffer?

‘There doesn’t have to be a loss’

James appears to be taking this approach, as opposed to a criminal charge, because New York law authorizes the AG to seek damages caused by fraudulent business conduct as a form of consumer protection. The law does not require the AG to identify a victim or even demonstrate that someone has suffered harm. Furthermore, the burden of proof is lower in civil cases than in criminal cases.

“What makes this statute particularly powerful is that there doesn’t have to be a loss,” Will Thomas, a law professor at the University of Michigan’s Ross School of Business, told Yahoo Finance. “This statute has been used to exhaust ill-gotten gains. The government can be allowed to recover all those profits. The evidentiary nature is lower and you don’t have to prove intent or will.”

A civil lawsuit also prevents James from interfering in the criminal case against Trump’s company, which the Manhattan district attorney is indicting. These two offices sometimes work together on criminal cases, as they do on the recent indictment of former Trump adviser Steve Bannon. With regard to Trump, however, they appear to be pursuing complementary approaches rather than overlapping.

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Trump, of course, claims the AG’s trial is a politically motivated “witch hunt,” his umbrella phrase for any investigation into crimes or abuses he may have committed. As Trump points out, James is an elected Democrat in one of the most anti-Trump blue states. But that doesn’t mean James is bashing Trump just because she hates him. Prosecutors and other public officials have an obligation to investigate potential wrongdoing if they become aware of it. Media exposures, allegations from former Trump staffers and plenty of circumstantial evidence give James plenty of fodder for a lawsuit. Trump’s primary business is based in New York, giving her jurisdiction. James can likely say she is acting on behalf of the New Yorkers who elected her.

To put pressure on other prosecutors

James also appears to be pursuing other possible criminal prosecutions of Trump by other agencies. She is outspoken about referring evidence of crimes obtained during the AG’s civil investigation to federal prosecutors and the Internal Revenue Service.

Do they really need the help? The Justice Department already has detailed information about Trump’s business operations, from the Cohen case and other events. Trump was eventually identified as “Individual 1” in documents related to Cohen’s 2018 indictment on charges of tax evasion, fraud and campaign finance violations. Person 1 was complicit in some of the same crimes Cohen went to prison for. In 2019 congressional testimony naming Trump as “Individual 1”, Cohen further detailed the types of financial shenanigans James is now suing Trump for.

The IRS has reportedly been auditing Trump’s taxes for years. How could it not be? Given the many public accusations of tax evasion — whether legal or illegal — the agency would be remiss not to investigate whether it is true that Trump is talking about the tax man.

Perhaps James feels it is necessary to pressure other prosecutors to do their jobs. The Justice Department has reportedly dropped its investigation into the campaign finance violations that Trump ordered Cohen to commit. Manhattan District Attorney Alvin Bragg has scaled back his criminal investigation into Trump. Criminal proceedings against the company will begin in October, but they will not focus on Trump personally, although a prominent prosecutor who left the DA’s office has said there is ample evidence that Trump himself committed crimes.

Other Trump impeachments appear to be moving quickly. In Georgia, Fulton County District Attorney Fani Willis appears poised to file criminal charges of voter fraud against Trump and others working with him to overturn the 2020 election results. The Justice Department has hinted at a possible obstruction of legal charges related to its blitz of Trump’s Mar-a-Lago estate in August, when it found lots of classified documents Trump wasn’t supposed to have.

Allen Weisselberg, former CFO of The Trump Organization, has already pleaded guilty to more than a dozen felonies as part of the Manhattan DA’s investigation. Weisselberg will testify against Trump’s company — but not against Trump himself — when that trial begins on Oct. 24.

James could end up settling the civil suit against the Trumps, though she would likely insist they agree to tough terms that make it look like she won. If there is no settlement, the case will likely go to a jury. But the case alone, and the evidence it has produced, may already be a victory of sorts for prosecutors seeking to punish Trump for years of wrongdoing.

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