Evidence appears to undercut claims against James, prosecutors found: Sources

Pros­e­cu­tors who inves­ti­gat­ed New York Attor­ney Gen­er­al Leti­tia James for pos­si­ble mort­gage fraud found evi­dence that would appear to under­cut some of the alle­ga­tions in the indict­ment of James secured ear­li­er this month — includ­ing the degree to which James per­son­al­ly prof­it­ed from her pur­chase of the prop­er­ty — accord­ing to a memo sum­ma­riz­ing the state of the case in Sep­tem­ber, sources told ABC News.

Pros­e­cu­tors who led the month­s­long inves­ti­ga­tion into James’ con­duct con­clud­ed that any finan­cial ben­e­fit derived from her alleged­ly fal­si­fied mort­gage would have amount­ed to approx­i­mate­ly $800 in the year she pur­chased the home, sources said.

The gov­ern­ment lawyers also expressed con­cern that the case could like­ly not be proven beyond a rea­son­able doubt because fed­er­al mort­gage guide­lines for a sec­ond home do not clear­ly define occu­pan­cy, a key ele­ment of the case, accord­ing to sources.

New York AG Leti­tia James speaks out on fed­er­al indict­ment: ‘I will not bow’
Pros­e­cu­tors detailed the find­ings to the pre­vi­ous U.S. attor­ney, Erik Siebert, in an inter­nal Depart­ment of Jus­tice memo sum­ma­riz­ing the sta­tus of the case ear­ly last month, accord­ing to sources famil­iar with its con­tents. Siebert was oust­ed by Pres­i­dent Don­ald Trump last month after refus­ing to seek charges against James amid what crit­ics call Trump’s cam­paign of ret­ri­bu­tion against his per­ceived polit­i­cal foes.

“I want him out,” Trump said the day before Siebert was oust­ed, telling reporters that it was because Vir­gini­a’s two Demo­c­ra­t­ic sen­a­tors sup­port­ed his nom­i­na­tion. Of James, Trump said, “It looks to me like she is very guilty of some­thing, but I real­ly don’t know.”

Inter­im U.S. Attor­ney Lind­sey Hal­li­gan — who Trump appoint­ed with the explic­it man­date of bring­ing charges against James and oth­ers — secured an indict­ment against James ear­li­er this month on charges of bank fraud and mak­ing false state­ments to a finan­cial insti­tu­tion.

Last week Hal­li­gan abrupt­ly fired the author of the memo, career pros­e­cu­tor Eliz­a­beth Yusi, in part due to her resis­tance to bring­ing the case against James, sources said.

Yusi did not imme­di­ate­ly respond­ed to a request for com­ment from ABC News. A DOJ spokesper­son and attor­neys for James declined to com­ment.

James, who has denied all wrong­do­ing, is set to appear in fed­er­al court in Nor­folk on Fri­day to be arraigned.

Accord­ing to the indict­ment, James false­ly described the prop­er­ty as a sec­ond home but used it as an “invest­ment prop­er­ty” rent­ed to a fam­i­ly of three. The grand jury alleged James col­lect­ed thou­sands of dol­lars in rent and would have saved $17,837 over the life of the mort­gage ver­sus a loan at a high­er rate.

Hal­li­gan described the alleged offens­es as “inten­tion­al, crim­i­nal acts and tremen­dous breach­es of the public’s trust” in a state­ment ear­li­er this month.

How­ev­er, accord­ing to sources famil­iar with the mat­ter, a memo sent last month to Halligan’s pre­de­ces­sor by pros­e­cu­tors struck a notably soft­er tone.

The memo stat­ed that in 2020, James pur­chased a home in Nor­folk, Vir­ginia, for $137,000 for her great-niece and imme­di­ate­ly allowed her and her chil­dren to live there rent-free. Pros­e­cu­tors inter­viewed the niece, who said she nev­er signed a lease, nev­er paid rent, and that James often sent her mon­ey to help cov­er house­hold expens­es, accord­ing to the sources.

Although the indict­ment claims James earned “thou­sands” in rental income, sources told ABC News that pros­e­cu­tors found no evi­dence she col­lect­ed rent beyond $1,350 report­ed on her 2020 tax return—an amount said to reflect util­i­ty costs.

As of last month, inves­ti­ga­tors had inter­viewed ten wit­ness­es, who offered dif­fer­ing views on whether James’ actions amount­ed to fraud or how much she actu­al­ly ben­e­fit­ed from them, sources said.

Accord­ing to those famil­iar with the case, James made a 20% down pay­ment on the Nor­folk property—consistent with require­ments for an invest­ment property—rather than the 10% typ­i­cal­ly required for a sec­ond home loan.

A loan offi­cer who assist­ed James told inves­ti­ga­tors that, at the time, inter­est rates for sec­ond homes were between 0.25% and 0.50% low­er than those for invest­ment properties—a dif­fer­ence that could reduce a month­ly pay­ment by $15 to $30, or rough­ly $10,800 over a 30-year loan. The indict­ment, how­ev­er, claims James avoid­ed a 0.815% high­er rate, sav­ing her an esti­mat­ed $17,837 over the loan’s life­time.

Pros­e­cu­tors also not­ed, accord­ing to sources, that the ambi­gu­i­ty of fed­er­al mort­gage guide­lines could make it dif­fi­cult to prove James inten­tion­al­ly com­mit­ted fraud by false­ly claim­ing she planned to occu­py the home. Fan­nie Mae rules do not clear­ly define what “occu­pied” means—whether it requires overnight stays or sim­ply peri­od­ic vis­its.

Wit­ness­es told inves­ti­ga­tors that James had informed real­tors and loan offi­cers the house was for her niece but that she would use it occa­sion­al­ly when vis­it­ing fam­i­ly in Vir­ginia. Her niece con­firmed that James vis­it­ed sev­er­al times a year but nev­er stayed overnight.

Pros­e­cu­tors argued that since James stayed in hotels dur­ing her vis­its rather than at the prop­er­ty, she could not be con­sid­ered an “occu­pant,” under­min­ing her claim that the house qual­i­fied as a sec­ond home.