Last Friday, New York Attorney General Letitia James pleaded not guilty in federal court to charges of bank fraud and making false statements to a financial institution. If convicted, James could go to prison for 30 years and pay a $1 million fine on each count.
\Predictably, there has been much caterwauling and gnashing of teeth over her prosecution. The left decries it as a vendetta, weaponizing the Justice Department against the woman who campaigned for office on a promise to prosecute Donald Trump on something, anything, and once elected, did so. On the right, lamentations from the usual quarters warn that James’s prosecution is a sprint down the slippery slope toward becoming a banana republic, where cycles of revenge alternate between victors and losers.
Given the uproar, you can be forgiven for thinking James’s prosecution is something unprecedented in American politics, as if the past decade of the mobilization of partisan FBI and CIA officials, prosecutors, and judges against Trump never happened.
In fact, there is a long-standing precedent for bringing financial fraud charges against a high-profile political figure. It happened in 1984. Arthur Teele Jr. and I ran the Reagan-Bush reelection campaign’s opposition research investigations of Geraldine Ferraro, the first woman to run for vice president on the Democratic ticket. Ferraro’s husband, John Zaccaro, was in the real estate business.
Don Alexander, a former IRS commissioner, was part of our investigative team. In early September, Alexander told us he had an informant in one of Zaccaro’s real estate deals. The man was nervous about the intense press scrutiny that Ferraro and Zaccaro’s financial dealings were generating and wanted to come clean with authorities in exchange for leniency. Before he would do so, Alexander said, we needed to get an investigation underway.
We told Alexander we might have good news soon. We had met confidentially with a key member of the House Ethics Committee to present evidence we felt warranted an investigation of Ferraro’s compliance with the Ethics in Government Act.
On Sept. 12, the bipartisan committee voted unanimously to investigate Ferraro. Manhattan District Attorney Robert Morgenthau was already probing another loan involving Zaccaro. Alexander’s informant added new information about a 1983 real estate deal in Queens, New York, where Zaccaro had submitted a false sales contract, an altered appraisal, and a net worth statement that overvalued his assets by $17 million to fraudulently obtain bank financing. In January 1985, Zaccaro entered a guilty plea to a misdemeanor charge of scheming to defraud financial institutions. Had the scheme been consummated, the offenses could have warranted felony charges.
Mortgage fraud is rarely prosecuted because it rarely comes to light. That doesn’t diminish its seriousness. It can weaken the financial system. Remember “liar loans” and the 2008 collapse of the subprime housing market? Mortgage fraud also indirectly contributes to the home affordability crisis by inflating real estate values.
There are several ways to benefit from purchasing real estate as a residential property instead of a rental property. In addition to a lower interest rate, a home buyer has a lower down payment. My mortgage company required a 30% down payment on a Florida condo I rented out. If it were my home, the down payment would have been 10%. That meant $90,000 down instead of $30,000. Then there’s insurance. It costs more for rental property than for a primary or secondary residence. Over the thirty-year life of a mortgage, these differences add up.
Property taxes can also be lower for homeowners in some states. They may qualify for homestead exemptions and other preferential treatment. Conversely, landlords get tax deductions for rental expenses that can completely offset any tax on rental income. According to her indictment, James allegedly filed a federal income tax return that included rental expenses and deductions on her Norfolk, Virginia, property. Don’t be surprised if the IRS opens its own probe, if it hasn’t already done so.
Like any defendant, James deserves a presumption of innocence. It’s up to a jury to decide whether she violated any laws. Still, there are two reasons why I believe her prosecution is not only justifiable, but necessary.
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First and foremost, James is an attorney and officer of the court, New York’s top legal official. Her compliance with the letter of the law is mandatory if public trust in our judicial system is to be restored.
The second reason is that the best way to prevent America from becoming a banana republic is to mete out punishment to those sworn to uphold the law who have instead unleashed their partisan passions and abused their power for political purposes. The only way to end the cycle of partisan prosecutions is to make those who initiated this travesty of justice pay a price.
The prosecution of litigious Letitia James is salutary precisely because it will make future partisan prosecutors wary of the personal consequences of engaging in lawfare.
John B. Roberts II served in the Reagan White House and was an international political strategist before becoming executive producer of The McLaughlin Group. He is the author of “Reagan’s Cowboys: Inside the 1984 Reelection Campaign’s Secret Operation Against Geraldine Ferraro.” His website is www.jbrobertsauthor.com.
