NORFOLK, Va. — The Justice Department failed Thursday to secure a new indictment against New York Atty. Gen. Letitia James after a judge dismissed the previous mortgage fraud prosecution encouraged by President Trump, according to a person familiar with the matter.
Prosecutors went back to a grand jury in Virginia after a judge’s ruling halting the prosecution of James and another longtime Trump foe, former FBI Director James Comey, on the grounds that the U.S. attorney who presented the cases was illegally appointed.
The Justice Department could go back to the grand jury to try again. The person spoke on the condition of anonymity because they were not authorized to discuss the matter.
James was initially charged in October by the U.S. attorney installed by the Trump administration to replace the prosecutor who resigned under pressure to bring criminal cases against Comey and James.
James denied any wrongdoing and accused the administration of using the justice system to seek revenge against Trump’s political opponents.
The allegations related to James’ purchase of a modest house in Norfolk, where she has family. During the sale, she signed a standard document called a “second home rider” in which she agreed to keep the property primarily for her “personal use and enjoyment for at least one year,” unless the lender agreed otherwise.
Rather than using the home as a second residence, James rented it out to a family of three, allowing her to obtain favorable loan terms not available for investment properties, prosecutors alleged.
Even if the charges are resurrected, the Justice Department could face obstacles in securing a conviction against James.
James’ lawyers separately argued the case was a vindictive prosecution brought to punish the Trump critic who spent years investigating and suing the Republican president and won a staggering judgment in a lawsuit alleging he defrauded banks by overstating the value of his real estate holdings on financial statements. The fine was later tossed out by a higher court, but both sides are appealing.
The defense had also alleged “outrageous government conduct” preceding her indictment, which the defense argued warrants the case’s dismissal. The judge hadn’t ruled on the defense’s arguments on those matters before dismissing the case last month over the appointment of Lindsey Halligan as U.S. attorney.
U.S. District Judge Cameron McGowan Currie took issue with the mechanism the Trump administration employed to appoint Halligan, a former White House aide with no previous prosecutorial experience, to lead one of the Justice Department’s most elite and important offices.
Halligan was named as a replacement for Erik Siebert, a veteran prosecutor in the office and interim U.S. attorney who resigned in September amid Trump administration pressure to file charges against both Comey and James. He stepped aside after Trump told reporters he wanted Siebert “out.”
The following night, Trump said he would be nominating Halligan to the role of interim U.S. attorney and publicly implored Atty. Gen. Pam Bondi to take action against his political opponents, saying in a Truth Social post that, “We can’t delay any longer, it’s killing our reputation and credibility” and “JUSTICE MUST BE SERVED, NOW!!!”
Comey was indicted three days after Halligan was sworn in by Bondi, and James was charged two weeks after that.
The Justice Department had defended Halligan’s appointment but has also revealed that Bondi had given Halligan a separate position of “Special Attorney,” presumably as a way to protect the indictments from the possibility of collapse. But Currie said such a retroactive designation could not save the cases.
Though the defendants had asked for the cases to be dismissed with prejudice, meaning the Justice Department would be barred from bringing them again, Currie instead dismissed them without prejudice — leaving open the possibility that prosecutors could try to file the charges again.
Richer and Diaz write for the Associated Press. Richer reported from Washington.
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