New York State Should Investigate Trump Organization (plus an argument for either the feds or state prosecutors to indict)

My op-ed in the New York Times on Monday, March 11 is here.  I am happy to report that the New York attorney general later that day issued a series of crucial subpoenas to DeutscheBank related to the fraud Michael Cohen reported in his House testimony, and also related to older loans which may or may not address long-standing suspicions of money laundering of illegal Russian assets through DeutscheBank (the only western bank that would continue loaning money to Trump after his many bankruptcies, and a bank that has been criminally fined for laundering enormous amounts of illegal Russian money).

I note that Attorney General James had only been in office for about two months, and surely been working on those subpoenas before my op-ed, so I am not suggesting a causal link, just noting my appreciation that she is making up for former and disgraced Attorney General Eric Schneiderman’s dereliction of duty on many of these matters. It is, um,  concerning that Eric Schneiderman did not take this step in his time in office, and that delay – while Congress was held by Republicans blocking such investigations – may have permanent consequences. Barbara Underwood had only a short time as Acting AG, and to her credit, she also did something that Schneiderman failed to do: file for the Trump Foundation’s dissolution with state supervision of its assets. This move succeeded and sets the stage for further investigation.  These steps by Underwood and James are  important pieces of larger process of bringing Trump to justice.

My op-ed is behind a paywall. I am going to focus on a few main points:

“The public record establishes probable cause for campaign finance felonies, and a potential case for criminal tax fraud, bank fraudinsurance fraud and suborning perjury to hide shady business dealings — a staggering mix of state and federal crimes implicating a range of Trump Organization officials.

State attorneys general — especially New York Attorney General Letitia James — should not wait for any Justice Department official to hold Trump accountable for potential crimes. They also do not need to wait to build a case for criminal indictments. The appropriate immediate path is a special state civil proceeding against the Trump Organization and its officials.

Legal status as a corporation endows businesses like the Trump Organization with great powers, and with those powers come specific responsibilities. To police these privileges, almost every state in the country has a statute that gives its attorney general the power to bring civil actions to investigate corporations for fraud and to go to court to dissolve the ones that persistently break the law. This statutory power descended from an old English proceeding called “quo warranto,” meaning “by what authority do you exercise legal power?” The question in this case is whether the Trump Organization has so abused its privileges that it has lost this legal authority.

The Trump Organization is incorporated only in New York and Delaware, so New York officials have a unique role and responsibility. New York attorneys general have not used their power to dissolve corporations often, but as recently as 1994, they brought a civil action leading to the dissolution of a fraudulent entity. New York’s highest court has described this remedy of civil dissolution as a “judgment of corporate death,” and for the state to invoke such a corporate death penalty, the corporation’s “transgressions” must not be merely incidental, but “material and serious; and such as to harm or menace the public welfare.”

If a state civil investigation turned up more evidence of criminal fraud, state and federal prosecutors could use these findings to indict the Trump Organization and its officials, including Mr. Weisselberg.

In addition to allegations of campaign finance felonies, Mr. Cohen also alleged that Mr. Weisselberg, along with the Trump Organization officials Mr. Lieberman and Mr. Calamari, engaged in insurance fraud, bank fraud and tax fraud by dishonestly inflating and then deflating the valuation of Trump assets for insurance, banking and tax advantages. Keep in mind that the Southern District of New York, when it was headed by Rudolph Giuliani in 1988, indicted a state legislator for overvaluing property and submitting false financial statements…

Mr. Weisselberg is more likely to cooperate if the New York attorney general and state prosecutors have already begun to investigate his conduct. President Trump cannot use a pardon to rescue Mr. Weisselberg from state prosecution; presidential pardons do not affect state criminal liability. Moreover, unlike federal prosecutors at the Southern District of New York or in Robert Mueller’s office, Mr. Trump cannot fire or interfere with them.

The window for these prosecutions to move forward is closing. The states are a complementary law enforcement system, and they can do what Mr. Mueller might not be able to do: Send a message that the president is not above the rule of law.

This state investigation might turn up evidence that President Trump committed crimes himself. If the Justice Department will not indict a sitting president, we must ask what is worse: the potential distraction of states indicting presidents, or the crisis for the rule of law of presidential immunity, especially during a re-election when those crimes may recur with the goal of four more years of impunity. If the specter of state indictments is unsettling, that is a reason to allow federal prosecutors to bring indictments instead, perhaps building on state officials’ findings.

Indictments, even if trials are long delayed, at least serve an important message from law enforcement to society about legal norms. Even if justice is delayed, no one will be above the law.”

Author: Jed Shugerman

Legal historian at Fordham Law School, teaching Torts, Administrative Law, and Constitutional History. JD/PhD in History, Yale. Red Sox and Celtics fan, youth soccer coach. Author of "The People's Courts: Pursuing Judicial Independence in America" (2012) on the rise of judicial elections in America. I filed an amicus brief in the Emoluments litigation against Trump along with a great team of historians. I'm working on "The Rise of the Prosecutor Politicians," a history of prosecutors and political ambition (a cause of mass incarceration), and "The Imaginary Unitary Executive," on the myths and history of presidential power in America.

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