A Scrutiny of the Federal Case Against Letitia James
The recent federal indictment of New York Attorney General Letitia James centers on allegations of mortgage fraud related to a second home loan she obtained. The indictment claims James engaged in a “scheme and artifice to defraud” lenders, making “false and fraudulent pretenses, representations and promises” to secure a more favorable loan, ultimately resulting in approximately $19,000 in “ill-gotten gains.” However, legal experts question whether the case warrants federal prosecution, especially given the rarity of standalone mortgage fraud cases and the relatively small amount of money involved.
Federal mortgage-fraud prosecutions are infrequent.In 2024, only thirty-eight individuals were sentenced for the offense, a slight increase from the previous year. The alleged fraud in James’s case – specifically, misrepresenting the property’s primary occupancy – is rarely prosecuted on its own. Georgetown law professor Adam Levitin, specializing in consumer-finance law, stated he is unaware of any prior prosecutions based solely on occupancy fraud, even involving rental properties. For comparison, previous cases like that of Paul Manafort involved occupancy fraud allegations, but were part of much larger, multi-count indictments.
Further complicating the case is the evolving interpretation of the loan’s terms. Fannie Mae revised its second-home rider language in 2019, clarifying that homeowners can rent their properties, even within the first year of ownership. James’s financial disclosures to New York State reported income from the property – between $1,000 and $5,000 – in 2020 only. Sources familiar wiht James’s finances indicate the property was occupied by her great-niece, who did not pay rent and has resided there for years.
Even establishing a violation of the loan terms, prosecutors face the important challenge of proving intent to deceive. levitin explained that proving a borrower never intended to fulfill the occupancy promise is crucial for an occupancy fraud charge,and exceptionally tough to do in isolation. Notably, Halligan’s predecessor reportedly declined to pursue charges against James, and career prosecutors also expressed reservations. Levitin characterized the case as “very, very weak” and suggested it appears motivated by a “political vendetta.”
The decision to prosecute raises questions about the appropriate use of prosecutorial discretion. Federal prosecutors, with limited resources, are guided by the “Principles of Federal Prosecution,” which emphasize focusing on cases that serve the “essential interests of society.” Critics argue this indictment primarily serves the personal interests of former President Trump, who has publicly feuded with James. The case, therefore, appears to deviate from the principle of “one tier of justice for all Americans,” instead appearing to prioritize retribution over sound legal judgment.
