Five years ago, the door of a modest yellow house on a quiet stretch of avenue in Norfolk, Va., swung open to admit a young family looking for a peaceful life after years of turbulence in several cities.
The family, Nakia Thompson and her children, have lived at the address ever since, according to two people familiar with the home, and until this week, the plan for a more placid existence had largely gone as expected. Several times a year, the people said, a great-aunt who had purchased the house in 2020 with Ms. Thompson in mind would come for an extended stay.
This week, with the filing of court papers some 200 miles north, the plan came to an abrupt end. The great-aunt — Letitia James, the New York attorney general — was indicted by President Trump’s Justice Department. The yellow house, with its gabled roof and tidy lawn, was revealed to be at the heart of the case that Mr. Trump’s chosen prosecutor brought against Ms. James, one of the president’s most prominent adversaries.
In the indictment, the prosecutor, Lindsey Halligan, accuses Ms. James of having misrepresented the purpose of the house when she purchased it in August 2020 for $137,000. The indictment says that while Ms. James indicated to her mortgage broker that she expected to use the house as a second home, she had instead used it as a “rental investment property, renting the property to a family.”
But in June, Ms. Thompson testified to a grand jury in Norfolk that she had lived in the house for years and that she did not pay rent, a person familiar with her testimony said. She was not asked to testify again, and the grand jury that voted to indict Ms. James was not seated in Norfolk, but in Alexandria.
The specter of Mr. Trump’s revenge campaign has so far overshadowed the facts of the case, given how he has pushed for Ms. James’s punishment. For years, he has railed against her on social media, calling her a “crook” and “corrupt.” Last month, he also appointed Ms. Halligan, once one of his personal lawyers, to replace Erik S. Siebert, the previous U.S. attorney in Eastern Virginia. Mr. Siebert had cast doubt on the case, as had career prosecutors in the office.
That sequence of events has prompted outrage from Democrats and even some Republicans, as has the paltry amount Ms. James is accused of having stood to gain — $18,933. But Mr. Trump’s allies celebrated the indictment, calling it airtight and suggesting that it represents fair play against a state attorney general who had sued Mr. Trump in 2022, accusing him of “staggering fraud.”
A lawyer for Ms. James, Abbe D. Lowell, has flatly denied the charges on her behalf. Ms. Halligan, in a statement, said that they represented “tremendous breaches of the public’s trust.”
Ms. Thompson and Ms. James’s yearslong use of the house and Ms. Thompson’s testimony to the grand jury — neither of which has been previously reported — illuminate the straightforward factual dispute that will animate the case. Real estate and legal experts said that it would be difficult to assess the strength of Ms. Halligan’s case until more facts were presented in court.
But the burden of proof is high. If the case makes it to trial, the charges, one of bank fraud and one of false statements to a financial institution, will require prosecutors to convince a jury that Ms. James intentionally misled the mortgage broker, OVM Financial, and First Savings Bank, which, according to the indictment, acquired the loan in 2021.
Ms. Thompson’s testimony that she has lived in the house rent-free — Ms. James pays even for basic upkeep, the people said — could make it difficult for prosecutors to convince a jury that the house was meant to be used as a rental investment property.
A Justice Department spokesman declined to comment.
“The question is, what is the proof and what are the facts,” said Stuart Slotnick, a former prosecutor who heads the New York City office of Buchanan, Ingersoll and Rooney, concentrating in part on real estate litigation. “James is claiming that she was singled out,” he said. “And at the same time, this indictment can be legally sufficient. They’re not mutually exclusive and they can both be true.”
The case will ride in part on the legal definition of real estate terms — in particular, distinctions in what Fannie Mae, the government enterprise that backs the mortgage market, refers to as occupancy types. In 2020, the year the house was purchased, Fannie Mae noted in its guide to the market that a second home must be occupied by a borrower “for some portion of the year,” and “must not be a rental property or a timeshare agreement.”
That is where Ms. James’s regular visits to the property to see her grandniece and other family, including Ms. Thompson’s mother, who also lives in a Norfolk home Ms. James owns, may be useful to the attorney general’s defense team.
An investment property, by contrast, is owned, but not occupied, by the borrower. A “rental investment property” is not a specific occupancy type, and, in its glossary, the Fannie Mae guide from 2020 does not define the term “rent” or “rental.”
Mortgages on investment properties often carry higher interest rates because they are inherently riskier; the owner’s expectations of regular rent could be upended by a shifting market or an unreliable tenant.
Under the terms of a document that amended Ms. James’s mortgage agreement, she was expected to use the Norfolk property as a second home, with the exception of occasional, short-term rentals, according to the documents and to real-estate experts who analyzed them for the Times.
Beginning 12 months after the deed was signed, Ms. James had wider latitude to use the property as she wished, according to the document and the experts. “After a year, people’s circumstances change,” said Clifford Rossi, a University of Maryland finance professor who once oversaw risk management for Citi’s consumer lending practice.
That caveat raises questions about when exactly prosecutors believe that Ms. James used the property as a rental. The indictment does not include those dates.
Mr. Rossi said that during his years at Citi, he saw cases in which a parent allowed an adult child to live in a second home rent-free — prompting the bank to consider pursuing the matter in court as a violation of the original borrower agreement. Citi’s lawyers, he recalled, often advised against doing so.
“We were told by counsel basically to stand down, that it would be very difficult to prove that out in a court of law, because there’s a lot of gray in these cases,” he said.
Mr. Rossi said that at times, tax documents would reveal that a borrower had been collecting rent despite classifying a property as a second home. That would be a red flag, he said, to see if the borrower had misled the lender. “It would warrant further scrutiny,” he said.
The indictment suggests that Ms. James collected at least some rental income, saying that she filed a tax form where she reported “thousand(s) of dollars of rents received.” It does not say in what year those forms were filed.
On New York State annual financial disclosures that Ms. James is required to file as attorney general, she has only once listed rental income associated with the Norfolk house. In 2020, she said that she had made between $1,000 and $5,000 in income from it. In the following years, she did not list any income from the house.
She did, however, list the house as an “investment property” from the year she bought it until the disclosure she made this year, once she was already under investigation.
On Friday morning, children’s toys were scattered across the front porch of the house. A woman answered the doorbell intercom: “No comment,” she said, before curtly noting a no-trespassing sign.
A neighbor, Jacob Neufeldt, a Navy sailor who said he had lived next to the house for several years, was more forthcoming.
Mr. Neufeldt said he hadn’t had much contact with Ms. Thompson in the last month, though he knew her well enough to refer to her by her first name. He expressed astonishment that the drama unfolding in New York and Washington all sprang from a two-story colonial on his quiet, neighborhood block.
Susan Smigielski Acker contributed reporting from Virginia. Susan C. Beachy Jeff Adelson and Julie Tate contributed research.
Jonah E. Bromwich covers criminal justice in the New York region for The Times. He is focused on political influence and its effect on the rule of law in the area’s federal and state courts.
Kate Kelly covers money, policy and influence for The Times.
Stefanos Chen is a Times reporter covering New York City’s transit system.
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