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 acts of fraud and misrepresentation” for at least a decade. The suit claims the Trumps knowingly and consistently overstated the value of at least 23 commercial properties, for the purpose of getting lower interest rates and cheaper insurance. James wants the family and the company to disgorge $250 million, the amount they supposedly saved by duping banks and insurers.
Um, okay? If Trump’s business practices were crooked, it’s appropriate for the correct authorities to hold him accountable. And there’s widespread evidence Trump has pushed the bounds of legality in his long career as a showman and real-estate developer. A 2018 New York Times exposé, aided by leaks of family documents, claimed that Trump participated in a variety of “dubious tax schemes… including instances of outright fraud.” Trump’s former lawyer, Michael Cohen, has likewise accused Trump of criminal activity, including some crimes Cohen participated in and went to prison for.
And yet, the New York AG’s suit seems …underwhelming? The presumed victims in James’s suit aren’t customers Trump defrauded, contractors he stiffed, or shareholders he lied to. The victims are banks and insurance companies that supposedly undercharged Trump for loans and insurance policies, because Trump told them his properties were more expansive and valuable than they actually were.
The government doesn’t usually sue on behalf of big businesses that have their own well-staffed legal departments. Financial firms rely to some extent on customers telling the truth. But they also do their own underwriting, for the explicit purpose of assuring they don’t commit money based on bogus 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 runs, but that’s what investment banks and other large lenders do for a living. James’s lawsuit, for instance, argues that Trump’s longtime lender Deutsche Bank repeatedly gave Trump favorable interest rates and other loose lending terms because of “the improper, repeated and persistent use of fraudulent and misleading financial statements.” Terrible. But isn’t that Deutsche Bank’s problem? Shouldn’t the bank be the one suing, rather than the New York AG? What harm did Deutsche suffer?
'There doesn't have to be a loss'
James seems to be taking this approach, as opposed to a criminal indictment, because New York law empowers the AG to seek damages caused by fraudulent business behavior as a form of consumer protection. The law doesn’t require the AG to identify a victim or even demonstrate anybody suffered harm. Plus, the burden of proof is lower in civil cases than in criminal ones.
“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 disgorge profits illegally gained. The government can be allowed to claw back all of those profits. Provable nature is lower, and you don’t have to prove intent or willfulness.”
A civil suit also prevents James from bumping into the criminal case against Trump’s company that the Manhattan district attorney is prosecuting. Those two offices sometimes work together on criminal cases, as they’re doing on the recent indictment of former Trump adviser Steve Bannon. With regard to Trump, however, they seem to be pursuing complementary approaches instead of overlapping ones.
Trump, of course, claims the AG’s lawsuit is a politically motivated “witch hunt,” his umbrella phrase for every inquiry 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 hassling 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 exposés, allegations by former Trump associates and loads of circumstantial evidence provide James plenty of fodder for a lawsuit. Trump’s primary company is based in New York, giving her jurisdiction. James can plausibly say she’s acting on behalf of the New Yorkers who elected her.
Putting the pressure on other prosecutors
James also seems to be priming the pump for other possible criminal prosecutions of Trump, by other agencies. She’s overt about referring evidence of crimes obtained during the AG civil investigation to federal prosecutors and the Internal Revenue Service.
Do they really need the help? The Justice Department already has detailed information on 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 guilty plea on charges of tax evasion, fraud and campaign finance violations. Individual 1 was complicit in some of the same crimes Cohen went to prison for. In 2019 Congressional testimony that named Trump as "Individual 1," Cohen further detailed the types of financial shenanigans James is now suing Trump for.
The IRS has supposedly been auditing Trump’s taxes for years. How could it not be? Given the many public charges of tax evasion—whether legal or illegal—the agency would be negligent not to look into whether it’s true that Trump is bilking the tax man.
Maybe James feels it’s necessary to pressure other prosecutors into doing their jobs. The Justice Department reportedly dropped its inquiry into the campaign-finance violations Trump ordered Cohen to commit. The Manhattan district attorney, Alvin Bragg, has scaled back his criminal probe into Trump. Criminal proceedings against the company will begin in October, but those won’t focus on Trump personally, even though a prominent prosecutor who left the DA’s office has said there’s ample evidence Trump himself committed crimes.
Other Trump prosecutions seem to be moving briskly. In Georgia, Fulton County District Attorney Fani Willis seems to be on course to bring criminal charges of election fraud against Trump and others working with him to overturn the 2020 election results. The Justice Department has hinted at possible obstruction of justice charges related to its lightning raid of Trump’s Mar-a-Lago property in August, when it recovered troves of classified documents Trump wasn’t supposed to have.
Allen Weisselberg, former chief financial officer of the The Trump Organization, has already pleaded guilty to more than a dozen felonies as part of the Manhattan DA’s probe. Weisselberg will testify against Trump’s company—but not against Trump himself—when that trial kicks off on Oct. 24.
James could end up settling the civil lawsuit against the Trumps, though she would probably insist they agree to harsh terms that make it look like she won. If there’s no settlement, the case will likely go before a jury. But the suit alone, and the evidence it has produced, may already be a form of victory for prosecutors seeking to punish Trump for years of transgressions.