Jurisprudence

What Comes Next in Letitia James’ Case Against Trump

The civil suit had to be partly political. Trump made it that way.

Donald Trump claps in front of a crowd.
Former President Donald Trump speaks to supporters at a rally to support local candidates in Wilkes-Barre, Pennsylvania, on Sept. 3. Spencer Platt/Getty Images

Donald Trump has long believed that he lives by different legal rules than everyone else. But this week, the law finally caught up with the former president. Trump—who famously gloated that he could “stand in the middle of Fifth Avenue and shoot somebody” without consequence—now faces legal consequences for, among other alleged acts of financial fraud, inflating the square footage of his Fifth Avenue penthouse in documents he submitted to banks and insurers. Trump’s hands, it seems, were not the only thing whose size the onetime reality TV star exaggerated.

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On Wednesday, New York Attorney General Letitia James filed a lawsuit in state court against Trump, three of his adult children, two longtime executives at the Trump Organization, and various Trump-affiliated entities for allegedly lying to financial institutions about Trump’s wealth and thereby obtaining more favorable terms on loans and insurance policies. Among other remedies, the suit seeks a $250 million disgorgement payment from the defendants, along with a five-year ban on Trump and the Trump Organization acquiring commercial real estate in New York and applying for loans from New York financial institutions. “Trump falsely inflated his net worth by billions of dollars to unjustly enrich himself and cheat the system,” James said. “There are not two sets of laws for people in this country; we must hold former presidents to the same standards as everyday Americans.”

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But as with all things in the Trumpland fun house, reality is not so straightforward. Trump may have unjustly enriched himself through his financial fraud, but the targets of the fraud—including the German multinational Deutsche Bank—appear to have been enriched too. “Not only was no bank harmed,” the Trump Organization said in a statement Wednesday, but “actually, they profited handsomely, to the tune of hundreds of millions of dollars in interest and fees.” And while the Trump Organization has a lengthy history of false statements (as James’ complaint exhaustively documents), that particular statement actually contains more than a kernel of truth.

Moreover, while James insists she is holding the former president “to the same standards as everyday Americans,” it is exceedingly unlikely that any “everyday American” would be sued by the New York attorney general under Executive Law 63(12)—the state statute that James is invoking against Trump—for similar conduct. James has brought actions under that statute before—including against “Pharma Bro” Martin Shkreli, who forced patients to pay exorbitant prices for pills that treat a life-threatening parasitic infection. But in Shkreli’s case, the patients clearly were victims of the pharmaceutical mogul. It’s much harder to describe Deutsche Bank and Trump’s other lenders as victims when so far Trump has repaid his loans—with interest—on time or even early.

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So when Trump charges that James’ case against him is “political,” he has a point. And yet it’s also true that in this instance, there was no apolitical option. Yes, Trump is receiving harsher treatment because he is Trump—a high-profile politician who is toxically unpopular in the state he once called home. But the consequences for the justice system if James had not pursued the action also would have been more severe because Trump is Trump—a provocateur who sought to use his bully pulpit and the millions of MAGA maniacs at his beck and call to intimidate James from even bringing the case.

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It’s worth noting that James’ complaint is civil—not criminal—meaning that Trump and his co-defendants do not face potential jail time. It also means Trump does not have a Sixth Amendment right to a jury trial in the case and that James need only convince the judge that Trump and his co-defendants “more likely than not” violated the law (whereas in a criminal case, a prosecutor would need to prove her allegations “beyond a reasonable doubt”). Whether Trump ultimately will face serious legal consequences for his alleged financial fraud depends in large part on the judge who is assigned to handle the attorney general’s lawsuit. If Trump and his co-defendants are found liable, the judge will have wide leeway to craft a remedy, including—potentially—ordering Trump to pay the hundreds of millions of dollars that James has sought. Trump’s financial fate—though not, importantly, his freedom—now lies largely in the hands of a single, as-yet-unnamed Manhattan trial judge.

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At the core of the case is New York Executive Law 63(12), which says that whenever any person engages in “repeated fraudulent or illegal acts” in a business activity, the state AG may go to court and obtain an order shutting down that business (among other remedies). New York courts have described the statute as “extremely broad.” The state has used the statute in attempts to snare several high-profile defendants—including, in addition to Shkreli, the former American International Group CEO Maurice “Hank” Greenberg, who allegedly misrepresented the insurance company’s financial health in the lead-up to its system-shaking collapse, and Airbnb, which allegedly operated illegal hotels and dodged state and city taxes.

James’ complaint makes a powerful argument that Trump and his co-defendants violated Executive Law 63(12) by overstating the value of various assets. That allowed Trump to secure more favorable terms from Deutsche Bank and other financial institutions. By “personally guaranteeing” hundreds of millions of dollars of debt, Trump “obtained for his company a significant improvement in the interest rates on the loans,” the lawsuit alleges.

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“Trump’s crimes are not victimless,” James tweeted Wednesday morning. But in fact, as noted, James’ civil suit is not charging Trump with any crimes. As for whether the alleged civil offenses are “victimless,” the answer is more ambiguous. On the one hand, if Trump had revealed his true financial condition on the statements he submitted to Deutsche Bank, the bank almost certainly wouldn’t have lent to him without setting a much higher interest rate. On the other hand, it’s also possible that if Trump had been truthful, Deutsche Bank wouldn’t have lent to him at all. Since Deutsche Bank collected tens of millions of dollars in interest before Trump repaid the bulk of the loan, the bank—like other institutions that extended credit to Trump in recent years—is arguably better off because it didn’t see through Trump’s financial fictions.

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Legally, it doesn’t much matter whether Trump’s offenses were victimless or not. The attorney general does not need to prove that any victim was harmed in order to prevail under Executive Law 63(12). But given the frequency with which financial fraud goes unprosecuted even when there are clear victims, it seems highly unlikely that James would have prioritized a case against any financial fraudster not named Trump when the harm from the fraud is as inconclusive as it is here.

None of this is to suggest that James shouldn’t have brought the lawsuit. True, the case never would have arisen except for the intense scrutiny of Trump’s finances in light of his political role, but Trump also has tried to turn the case into a litmus test of the state’s legal system. This past January, he threatened to incite “the biggest protest we have ever had” if prosecutors in New York and elsewhere took action against him—a threat that is hard to dismiss as cheap talk given Trump’s role in the Jan. 6. protest-turned-insurrection. He upped the ante again in April, when he defied a court order that he turn over documents to the state attorney general until a judge fined him $10,000 a day for noncompliance. Here is a defendant who—if the allegations in James’ complaint are true—broke state law and then openly dared state law enforcement officials to bring him to justice. While the origins of the investigation are rooted in politics, the case has since morphed into a bellwether for whether a sufficiently powerful plutocrat can cow prosecutors from pursuing him.

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The case thus lies in the heartland of prosecutorial discretion, where the law runs out and public officials must necessarily exercise their policy judgment as to whether to bring an enforcement action or not. In this case, even with a strong factual basis for the claims against Trump and his co-defendants, James can expect a knock-down-drag-out fight—her predecessors spent a dozen years litigating against AIG’s Greenberg before settling for $9.9 million. That will entail a huge expenditure of her office’s resources, diverting attention from other cases but also testing whether Trump is—as he seems to believe—too rich and famous to be held to account.

Ultimately, the case presents a question about what sort of civil justice system New Yorkers—and Americans—wish to have: one in which high-profile defendants get off scot-free just because below-the-radar fraudsters do, or one in which prosecutors make an example out of politicians and celebrities who hold themselves out to be above the law. So yes, there are—in effect—different standards for former presidents and everyday Americans. Trump is being sued by the New York attorney general under circumstances that you or I would not be—for perpetrating a fraud in which, at least arguably, everyone came out ahead. Any hope for blind justice in this case would be starry-eyed. But given Trump’s boasts that he lives by different rules than the rest, there is at least some cosmic justice when it turns out that he does.

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