There is a significant question presented as to whether Mr. Trump possessed the state of mind required for any potential New York state crime.
Some observers have wondered why—despite what appears to be an extensive investigation—the Manhattan District Attorney’s office has not yet charged former President Donald Trump with any crime.
No one outside of the Manhattan D.A.’s office, the State Attorney General’s office and a recently empaneled Special Grand Jury knows for certain what subjects are embraced by that investigation. Nevertheless, press reports based upon what appear to be well-informed sources indicate that one allegation at the heart of the potential case against President Trump (and/or the Trump Organization) is that the President falsely inflated the value of certain real estate holdings when applying for a loan from Deutsche Bank (and other lenders, including Ladder Capital)—as demonstrated by his property tax returns and by his ethics disclosure forms, which provide much lower estimated values for the very same properties.
Assuming that the Deutsche Bank loan is indeed a central focus of the D.A.’s investigation, it may be that the delay in charging President Trump is in part a function of how hard it is to identify an appropriate New York state criminal charge that fits the misconduct alleged.
As detailed below, on the facts alleged it would be fairly easy for a federal prosecutor to charge the former President with serious federal crimes, such as bank fraud and wire fraud; but there is a significant question presented as to whether Mr. Trump possessed the state of mind required for any potential New York state crime.
Larceny
What New York state charges might the Manhattan D.A. consider bringing against President Trump based on the Deutsche Bank loan?
The first and most obvious choice is larceny. Penal Law §155.42 defines Grand Larceny in the First Degree—a Class B Felony—as a larceny where the value of the property stolen exceeds $1 million. This is a serious charge for which a state prison sentence is mandatory, and for which a maximum sentence of 81/3 to 25 years in prison is authorized. A grand larceny charge might be premised on the theory that Trump stole property—namely, the proceeds of a Deutsche Bank loan for more than $1 million—by presenting a loan application that gave falsely inflated values for his real estate holdings, and that he thereby committed larceny by false pretenses.
The New York Penal Law (at §155.02(2)) states that the crime of larceny includes what were known at common law as “larceny by trick,” “larceny by false pretenses” and “larceny by false promise,” provided that the defendant possesses the intent set forth in §155.05(1).
Section 155.05(1) in turn provides that in order to commit larceny a person must act with the intent to “deprive another of property or to appropriate the same to himself or to a third person.”
So far, so good for the Manhattan D.A. But the New York state case law also makes it clear that “the intent required for larceny is to bring about a permanent or virtually permanent change in the control or benefit of the property.” Greenberg, Marcus, Fahey, New York Criminal Law (4th ed.) §12:5 (emphasis added). See People v. Jennings, 69 N.Y.2d 103 (1986): “As one commentator has noted, the concepts of ‘deprive’ and ‘appropriate,’ which ‘are essential to a definition of larcenous intent,’ ‘connote a purpose … to exert permanent or virtually permanent loss to the owner of the possession and use thereof’” (citing Hechtman, Practice Commentaries, McKinney’s Cons. Law of N.Y. Book 39, Penal Law §155.00, p. 103).
In the case of President Trump, let us assume for argument’s sake that the prosecutor can prove as a factual matter that the President intentionally made material false statements in his loan application by exaggerating the value of his real estate holdings. Nevertheless (as the President’s defenders will surely emphasize), the only evidence is that the President sincerely intended to repay the loan together with the agreed-upon interest, and that he has in fact done so to date. In that case, can it be said that the President intended to permanently deprive the bank of property?
The question is a close one; but given the requirement imposed by New York state law of an intent to permanently deprive the victim of property, there is a very strong argument that the correct answer is no. See Jennings, supra; People v. Parker, 121 A.D.3d 1190 (3d Dep’t 2014); People v. Hoyt, 92 A.D.2d 1079 (4th Dep’t 1983).
Federal Law Contrasted
From the point of view of the Manhattan D.A., the root of the problem is that New York state does not have a bank fraud statute or a loan fraud statute. Bank loan frauds are on occasion prosecuted in New York state courts—either under the Grand Larceny statute, or under the Falsifying Business Records statues. But these prosecutions almost always arise in a context where the borrower has failed to repay the loan, and likely never intended to repay the loan. See, e.g., People v. Ponnapula, 229 A.D.2d 257 (1st Dep’t 1997); People v. Angus, 81 A.D.2d 971 (3d Dep’t 1981), aff’d 56 N.Y.2d 549 (1982).
Unlike New York state law, there is a federal statute that directly addresses and expressly prohibits bank fraud, 18 U.S.C. §1344. Section 1344 makes it a federal crime, punishable by up to 30 years in prison and up to a $1 million fine, to obtain by means of false or fraudulent pretenses, representations or promises any funds held by a federally chartered or insured bank.
The federal bank fraud statute does not require that the defendant intend to permanently deprive the bank of property. Indeed, it is not even necessary to show that the bank suffered any financial injury; rather, it is sufficient for the prosecution to show only that the defendant intended to obtain by fraud funds held by the bank. See Shaw v. United States, 580 U.S. __, 137 S. Ct. 462 (2016).
On the facts alleged here, it would thus be a relatively simple matter for a federal prosecutor to charge President Trump with bank fraud in violation of §1344 in connection with Trump’s application for a loan from Deutsche Bank (an FDIC insured bank); but, for the reasons indicated, it would be a far more difficult task for a New York state prosecutor to charge the President with larceny based on the very same conduct.
Similarly, assuming that the President caused a letter to be sent by the U.S. mail and/or communicated via interstate phone call or email in the process of making his loan applications, it would also be fairly simple for a federal prosecutor to charge President Trump with wire fraud and/or mail fraud. See 18 U.S.C §§1341 and 1343. That is so because these federal fraud statutes—like the federal bank fraud statute—do not include the requirement that the defendant intend to permanently deprive the victim of property; these federal laws are instead in essence expansive false statement statutes.
And, because the investigation of President Trump appears to relate to events that took place long before he took office in 2016, the federal fraud statues have another important advantage over New York’s larceny statutes from a prosecutor’s point of view—namely, a longer statute of limitations. The statute of limitations for felony larceny under New York state law is five years. See CPL §30.10(2)(b). The statute of limitations for federal bank fraud is 10 years, and it is also 10 years for wire and/or mail fraud that affects a financial institution. See 18 U.S.C. §§3293(1) and 3282(a). (On the other hand, however, the difference between the federal and state statute of limitation periods might be less important than it appears at first blush because the Manhattan D.A. may be able to argue that the New York statute of limitations has been tolled with respect to the President since early 2017, when he moved from New York to the White House. See People v. Knobel, 94 N.Y.2d 226 (1999).)
Other Possible State Law Crimes
Given the difficulty of charging larceny, what other state law charges might the Manhattan D.A. consider in connection with the President’s bank loan?
Offering a False Instrument for Filing (P.L. §§175.30 and 175.35) would not work, because that statute applies only to instruments filed with a public office or government agency.
New York state does have a relatively new residential mortgage fraud law, P.L. §§187.00. But that law requires that the loan in question be secured by an interest in “residential real property.” §187.00(2).
Residential real property is in turn defined as a one-to-four family dwelling or as a residential unit within an apartment building. P.L. §187.03(3). Thus the mortgage fraud statute is directed at fraud committed in connection with home mortgages for individual home buyers. President Trump was not seeking a home mortgage loan. He was applying for business loans to be secured by mortgages on huge mixed-use buildings, and such mortgages fall outside the scope of New York’s mortgage fraud law.
Another possibility is the crime of Falsifying Business Records in the First Degree, P.L. §175.10. But that crime is only a Class E Felony, and it requires the intent to commit or conceal another crime—which brings the prosecutor back once again to the original problem whether a larceny is made out here.
The crime of Scheme to Defraud in the First Degree, P.L. §190.65, might also be considered by the prosecutor because—at least on its face—that statute does not include a requirement that defendant intends to permanently deprive the victim of property. But Scheme to Defraud is also only a Class E Felony. A Class E Felony is punishable by probation or, at most, by a prison sentence of 11/3 to 4 years. That seems a fairly minor crime for an investigation of such grand scope. Moreover, Scheme to Defraud requires an intent to obtain property from multiple victims through a systematic course of conduct—and so this charge would require proof of additional crimes.
Finally, it might be that whatever crimes are charged in connection with alleged bank fraud could help support a broader charge of Enterprise Corruption, P.L. §460.20.
Enterprise Corruption is a Class B Felony. It is New York state’s version of the federal RICO statute, and it can be a powerful prosecutorial tool. But the statute imposes requirements in terms of timing and proof of multiple crimes that—depending on the overall scope of the Trump investigation—may be difficult to meet. For example, Enterprise Corruption requires the prosecutor to prove that the defendant committed at least three underlying crimes, two of which must be felonies. In addition, at least one felony and one misdemeanor must have been committed within five years of the commencement of the criminal action—here, the year 2021 at the earliest. Thus—assuming that the Trump investigation is focused on the President’s conduct before his election in 2016—time may have already run out on any Enterprise Corruption charge.
A New York State of Mind
In short, even assuming that the Manhattan D.A. can prove as a factual matter that the former President lied in his loan applications, there is no New York state law criminal charge that is a good fit for the misconduct alleged. In particular, a court asked to rule upon a motion to dismiss might well find that the charge of larceny is not made out (and that the statute of limitations has, in any event, expired). So long as the President intended to repay his loans and did repay his loans, it is not at all clear that the President possessed the state of mind required by New York law for the crime of larceny.
It might therefore be wise for the Manhattan District Attorney to consider referring the case against President Trump—or at least the loan fraud aspect of that case—to federal prosecutors, because federal statutes fit the President’s case far more neatly.
Or, alternatively, it may be that for the reasons set forth here the President will win a dismissal of some or all of the New York state charges brought by the Manhattan D.A.
Time will tell.
Hon. Ethan Greenberg (Ret.) is a shareholder at Anderson Kill’s New York office. He was an Acting State Supreme Court Justice sitting in the Criminal Division in New York City for many years. He represents clients in matters involving commercial litigation, white collar crime and internal investigations. Judge Greenberg has had no connection with the investigation of President Trump, either as a judge or as an attorney. This article represents his own analysis, and does not express the views of Anderson Kill.