Grand jury rejects new mortgage fraud indictment against New York Attorney General Letitia James

The Justice Department failed Thursday to secure a new indictment against New York Attorney General Letitia James after a judge dismissed the previous mortgage fraud prosecution encouraged by President Donald Trump, according to people familiar with the matter.

Prosecutors went back to a grand jury in Virginia after a judge’s ruling halting the prosecution of James and another longtime Trump foe, former FBI Director James Comey, on the grounds that the U.S. attorney who presented the cases was illegally appointed. But grand jurors rejected prosecutors’ request to bring charges.

It’s the latest setback for the Justice Department in its bid to prosecute the frequent political target of the Republican president.

Prosecutors are expected to try again for an indictment, according to one person familiar with the matter who spoke on the condition of anonymity because they were not authorized to publicly discuss the case.

James was initially charged with bank fraud and making false statements to a financial institution in connection with a home purchase in Norfolk, Virginia, in 2020. Lindsey Halligan, a former White House aide and Trump lawyer, personally presented the case to the grand jury in October after being installed as U.S. attorney for the Eastern District of Virginia amid pressure from Trump to charge Comey and James.

James has denied any wrongdoing and accused the administration of using the justice system to seek revenge against Trump’s political opponents. In a statement Thursday, James said: “It is time for this unchecked weaponization of our justice system to stop.”

“This should be the end of this case,” her attorney, Abbe Lowell, said in a statement. “If they continue, undeterred by a court ruling and a grand jury’s rejection of the charges, it will be a shocking assault on the rule of law and a devastating blow to the integrity of our justice system.”

The allegations related to James’ purchase of a modest house in Norfolk, where she has family. During the sale, she signed a standard document called a “second home rider” in which she agreed to keep the property primarily for her “personal use and enjoyment for at least one year,” unless the lender agreed otherwise.

Rather than using the home as a second residence, James rented it out to a family of three, allowing her to obtain favorable loan terms not available for investment properties, prosecutors alleged.

It’s the latest example of pushback by grand jurors since the beginning of the second Trump administration. It’s so unusual for grand jurors to refuse to return an indictment that it was once said that prosecutors could persuade a grand jury to “indict a ham sandwich.” But the Justice Department has faced setbacks in front of grand juries in several recent cases.

Even if the charges against James are resurrected, the Justice Department could face obstacles in securing a conviction against James.

James’ lawyers separately argued the case was a vindictive prosecution brought to punish the Trump critic who spent years investigating and suing the Republican president and won a staggering judgment in a lawsuit alleging he defrauded banks by overstating the value of his real estate holdings on financial statements. The fine was later tossed out by a higher court, but both sides are appealing.

The defense had also alleged “outrageous government conduct” preceding her indictment, which the defense argued warrants the case’s dismissal. The judge hadn’t ruled on the defense’s arguments on those matters before dismissing the case last month over the appointment of Lindsey Halligan as U.S. attorney.

U.S. District Judge Cameron McGowan Currie took issue with the mechanism the Trump administration employed to appoint Halligan to lead one of the Justice Department’s most elite and important offices.

Halligan was named as a replacement for Erik Siebert, a veteran prosecutor in the office and interim U.S. attorney who resigned in September amid Trump administration pressure to file charges against both Comey and James.

The following night, Trump said he would be nominating Halligan to the role of interim U.S. attorney and publicly implored Attorney General Pam Bondi to take action against his political opponents, saying in a Truth Social post that, “We can’t delay any longer, it’s killing our reputation and credibility” and “JUSTICE MUST BE SERVED, NOW!!!”

Comey was indicted three days after Halligan was sworn in by Bondi, and James was charged two weeks after that.

The Justice Department had defended Halligan’s appointment but has also revealed that Bondi had given Halligan a separate position of “Special Attorney,” presumably as a way to protect the indictments from the possibility of collapse. But Currie said such a retroactive designation could not save the cases.

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Richer reported from Washington.