Reuters US Politics
By Luc Cohen and Jack Queen
(Reuters) -President Donald Trump's allies have pressed to charge Federal Reserve Governor Lisa Cook and two other prominent political foes with a crime that the federal government rarely prosecutes, a Reuters review of eight years of court records shows.
The Justice Department opened investigations into Cook and the others for allegedly misstating their primary residences on mortgage applications, which the U.S. has criminally charged only 20 times in the past eight years, according to the Reuters review of more than 600 cases involving false statements to lending institutions since 2017.
Of those 20 cases, only one was a standalone criminal charge for misstatements on a mortgage application. All others were part of broader indictments involving large criminal schemes, such as drug cultivation or bank fraud, the review showed.
Cook and the two other targets of the DOJ probes, New York Attorney General Letitia James and U.S. Senator Adam Schiff, have denied wrongdoing.
Even if no charges are ultimately brought, Trump’s critics say the launching of criminal probes and public airing of allegations related to conduct that is infrequently criminally charged by the federal government serves to exact revenge and exert pressure.
"Federal prosecutors would rarely, if ever, bring federal fraud charges against a single borrower who makes this type of misrepresentation," said Matthew Edwards, a law professor at the Zicklin School of Business at Baruch College who is an expert on mortgage fraud.
The probe of Cook comes as Trump is trying to pressure the Fed to lower interest rates. Trump, a Republican, has repeatedly lashed out at James, a Democrat who sued him and his family company for fraud, and Schiff, a Democrat who led the House of Representatives' inquiry that led to Trump's impeachment in 2019.
The DOJ opened the investigations after referrals from the Federal Housing Finance Agency director William Pulte, according to a source familiar with the matter and documents seen by Reuters. The investigations are being run by Ed Martin, a longtime Trump ally and Justice Department official who in August posted on social media a picture of himself standing outside James' Brooklyn home in a trench coat.
Pulte, who has posted regularly about the mortgage fraud allegations on social media, has said the government is not selectively targeting Trump's opponents.
"Contrary to what the fake news media says, US Federal Housing FHFA has criminally referred people of each political parties," he said in an Aug. 26 post on X. "We are focused on prosecuting mortgage fraud out of our system."
An FHFA spokesperson did not respond to Reuters' queries about which Republicans Pulte had referred to the Justice Department.
"We will root out mortgage fraud wherever we find it, and we will not be intimidated by media outlets such as the authors of this article,” the spokesman said.
A Reuters investigation found that Pulte's father and stepmother claimed two homes in wealthy neighborhoods in Michigan and Florida as their primary residences, the basis for Pulte's accusations against Cook.
The Justice Department did not respond to requests for comment.
A RARE CHARGE
The only time the federal government has charged someone with a federal crime solely for misstating their primary residence came in 2017 when a man was accused of falsely stating a property he owned in Puerto Rico was his primary residence to secure a $203,605 reverse mortgage from a bank, as part of a federal program meant to enable elderly people to stay in their homes, according to the Reuters review.
The man pleaded guilty in 2021 and was ordered to refund the money and pay a $7,500 fine. He did not go to prison.
Two of the other cases charged over such misstatements involved people who allegedly told banks they were buying primary residences in Maine but then used the properties to grow marijuana.
The Reuters review did not cover state prosecutions.
Under U.S. law, knowingly making a false statement to a federally-insured bank to secure a loan is a felony punishable by up to 30 years in prison.
Legal experts said any successful federal mortgage fraud prosecution would need to show that the loan's recipient knew they were lying about a home being their primary residence. Simply submitting incorrect information would not be enough to secure a conviction.
In his April referral letter to the Justice Department about James, Pulte wrote that she indicated in a mortgage application that a Virginia property she was buying in 2023 would be her primary residence, even though she lived in New York.
Her lawyer Abbe Lowell has said that James mistakenly stated that the property would be a primary residence. He says that she made it clear in other documents that it would not be her primary residence, and that her broker understood that.
Loans for primary residences can carry lower rates than mortgages on investment properties or second homes, which banks consider riskier. It is not clear whether James', Schiff's or Cook's lenders took their intended use of the homes into account in determining a rate.
In the civil case James' office brought against Trump, a New York state judge in 2023 found that Trump had misled banks about his family real estate company's property valuations to obtain favorable loan terms.
A New York state appeals court in August vacated the $464 million judgment James secured against Trump, but left intact the lower court's finding that Trump was liable for civil fraud.
Both Trump and James are appealing.
POWERFUL SIGNAL
The Trump administration's threats to prosecute mortgage fraud send a signal that selective enforcement of the law by a politician from one party can be met with a tit-for-tat response when the other party gains power, said Stewart Sterk, a professor at Cardozo Law in New York.
"If the prosecutorial discretion is being used as a political weapon by either party, whether it's by Republicans or Democrats, that's a very troublesome problem," Sterk said.
In Schiff's case, Pulte's office referred him to the Justice Department for declaring a house he owned in Maryland, near Washington, as his primary residence. Schiff's office said the lenders who provided mortgages for his homes in California and Maryland were aware that he used both year-round.
"The allegations against Senator Schiff are transparently false, stale and long debunked," Schiff's lawyer Preet Bharara said in a statement.
Pulte has accused Cook of committing fraud by listing more than one property as a primary residence when she applied for mortgages, potentially to secure lower interest rates. Cook owns properties in Michigan, Georgia and Massachusetts.
Trump terminated Cook last month over the allegations, prompting her to file a lawsuit challenging his effort to oust her. The Justice Department has issued grand jury subpoenas in its probe of her, Reuters reported on Thursday.
Lowell, who also represents Cook, said the Justice Department was scrambling to invent new justifications for Trump's overreach in firing the Fed governor.
“He wants cover, and they are providing it," Lowell said on Thursday.
(Reporting by Luc Cohen and Jack Queen in New York; Editing by Noeleen Walder, Amy Stevens and Michael Learmonth)
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