First, it’s useful to take a step back and disentangle some issues.
James’ comments accompanied a court filing that lawyers in her office made Tuesday night in an ongoing dispute concerning whether Donald Trump and two of his children — Ivanka and Don, Jr. — have to comply with subpoenas and appear for depositions over questions about apparent discrepancies in financial reports that cover various Trump properties.
The latest filing specifically relates to the office’s civil investigation — not the criminal investigations that concern potential financial misconduct on the part of Trump or others at his company. The Manhattan District Attorney’s office has a criminal investigation that resulted in the indictment last year of the Trump Organization and its chief financial officer, Allen Weisselberg, and that investigation remains ongoing. The Westchester County District Attorney’s office also has a criminal investigation that appears to concern, at least in part, potentially misleading valuations of a Trump golf club in Westchester. Further complicating matters is that last year, James announced she had assigned two of her office’s lawyers to work with the Manhattan DA’s office on its criminal investigation.
James’ decision to dispatch lawyers to the Manhattan DA’s office — overseen at the time by Cyrus Vance Jr., and now by the newly elected Alvin Bragg — resulted in so-called parallel criminal and civil investigations by James’ office, which is the proximate cause of the ongoing court dispute. Trump and his kids have claimed the civil subpoenas are an inappropriate effort to leverage the legal tools available in the civil investigation to advance the parallel criminal investigation and to “circumvent the entire grand jury process.”
The Trumps’ claim is very tenuous as a legal matter, and it mostly seems to reflect an effort to avoid a situation in which Trump, Ivanka and Don, Jr. might have to invoke their Fifth Amendment right against self-incrimination under questioning in the civil depositions — something Eric Trump already had to do and that would be particularly awkward for Trump, who has publicly asked of others, “If you’re innocent, why are you taking the Fifth Amendment?”
Reasonable minds could debate how well James’ office has managed its two investigations, but it is not unique for a government office to be conducting parallel civil and criminal investigations — the Justice Department sometimes does it too, though the arrangement can produce some tricky problems for both sides. The kind of complaint Trump and his kids are making is also not unique.
When potential defendants are subpoenaed to provide depositions in a parallel civil investigation, they often argue that they have been given a sort of a Hobson’s choice: either (a) they show up to the deposition and provide testimony that could be used against them in the criminal investigation or (b) they take the Fifth and suffer the impact of an “adverse inference” in a potential civil trial, in which, unlike in a criminal case, jurors are typically free to use that fact against the defendants in reaching their verdict. In the end, courts usually rule that the civil subpoenas are valid and enforceable, and the objectors have to show up and take the Fifth. There is no obvious reason that a court should rule otherwise here.
So, what does James’ office’s latest filing tell us about the parallel criminal investigation being led by the Manhattan DA’s office?
Tuesday night’s filing contained an unusually extensive discussion of facts that James’ office has gathered in the course of its civil investigation. This gives us some sense of the information that criminal investigators may also have gathered, but James’ office was careful to note that it had “not yet reached a final decision regarding whether this evidence merits legal action” even in the civil proceeding.
James’ office argued, for instance, that it had identified various ways in which financial statements concerning Trump’s business had been “inaccurate or misleading when compared with the supporting data and documentation that the Trump Organization submitted to its accounting firm” and said “evidence obtained” by the office “indicates that Mr. Trump was personally involved in reviewing and approving” those documents before they were used “to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions.”
By itself, this might be good evidence in a civil case, but it would not form the basis for a particularly strong criminal fraud case. That is because in a criminal financial fraud case, material discrepancies among financial documents — say, an internal accounting document that shows one value and a financial statement provided to a potential lender that shows a very different value — are often just the start of an investigation. Prosecutors then have to identify culpable individuals who had criminal intent to mislead third parties.
That effort can be complicated by a bunch of different factors. For example, there could be different valuation methodologies that might support some variations in figures for different contexts and different audiences — a particular issue in the real estate and hospitality industries. Legal disclaimers of the sort in Trump’s financial statements can also carry some weight, though they are far from dispositive. A potential defendant might also plausibly say that he did not intend to mislead anyone, even if he nominally signed off on the relevant figures, because he was relying on the advice of others — for instance, in-house financial advisers or outside accountants. A good criminal investigation will try to get to the bottom of exactly what those people were doing and saying to someone like Trump — and, in fact, that appears to be what the Manhattan DA’s criminal investigators have been trying to do.
All of this is easier said than done, but ideally, a good criminal investigation will explore and rule out the major lines of defense — through some combination of extensive document review, interviews with cooperators and other witnesses, and perhaps expert analysis — before charges are filed. Criminal investigations like this are often extremely messy, both factually and legally. The odds generally disfavor the filing of criminal charges against the head of a complex business organization — someone like Trump — but from the outside, no one can decisively rule out that possibility in an ongoing investigation.
By the same token, the odds of a civil lawsuit by James’ office concerning Trump’s business dealings appear to be increasing. That is one reason that lawyers in James’ office may have decided to subpoena Trump and his kids at this time — in order to force a resolution to an issue (whether the office can seek an adverse inference in a future trial) that could be very important later in court.
At this point, however, the practical and political effects of such a civil lawsuit are hard to assess. After all, the Trump Organization is already under criminal indictment based on Weisselberg’s alleged tax fraud. Some pundits posited that the mere filing of those charges would doom the company — one analyst suggested the charges alone would be “devastating” and lead to the company’s “bankruptcy” — but that was far from clear then and remains so even today. A lot depends on the precise nature of a possible civil case — who the defendants are, what the legal claims are and what the facts at issue are.
Moreover, short of an actual criminal conviction of Trump himself, there is good reason to believe that Trump the politician will emerge largely unscathed after these investigations are over — even if James’ office files a significant and wide-ranging civil case concerning the Trump Organization’s business dealings. Prior civil proceedings — like the settlements of cases involving the so-called Trump University and Trump’s supposed charitable foundation — did not appear to have meaningfully dented his appeal to his supporters.
Among the legal commentariat, there is a robust market — and a pretty reliable path to cable bookings — for people who remain willing to predict the dramatic legal downfall of Trump, even years after the anti-climax of the Mueller investigation. Indeed, about a year ago, one especially excitable legal pundit said that it “would be easy” for the Manhattan DA’s office to prove a criminal fraud case against Trump, and he was not alone in broadcasting such a forecast. A year later though, that assessment is a good reminder that large investigations can take time, and that they do not always end as quickly or as neatly as we might like.
