Friday, December 04, 2020

Were You Lying Then Or Are You Lying Now? A Thought Experiment Based On A Possible Prosecution Of Donald Trump

 by Michael C. Dorf

What fate awaits Donald Trump after he vacates or is forcibly removed from the White House at noon on January 20, 2021? Federal prosecution is a possibility, although Professor Eric Posner raises questions in a NY Times op-ed yesterday about whether Trump has committed federal crimes and even if so, whether prosecuting him would be politically unwise. There is also a chance that Trump would attempt to pardon himself--which, as Professor Buchanan argued here on the blog yesterday, shouldn't work but we can't say for sure because no prior President has had the audacity to try). Or, as Prof Buchanan also explained, Trump might purport to pardon himself, resign the presidency on January 19, and then receive a pardon from Mike Pence after he's sworn in for his one-day presidency. In this scenario Trump would want to pardon himself first as an insurance policy in the event that Pence double-crosses him by failing to issue the pardon--an admittedly low-probability event, given Pence's eager self-abasement over the last four-plus years and need not to anger the Trump base in the event that Pence makes his own presidential run at some point in the future.

Even assuming a legally effective pardon, the lack of evidence of a federal crime, or a political calculation prevents federal prosecution, none of those factors is an obstacle to state prosecution for alleged financial crimes unrelated to Trump's official conduct as President. A presidential pardon does not affect potential state law criminal prosecution; the evidence of state financial crimes would not be vulnerable to whatever weaknesses exist in a potential federal case; and neither New York Attorney General Letitia James nor Manhattan District Attorney Cyrus Vance, Jr. need worry about national political fallout.

Meanwhile, recent reportage suggests that Trump might be prosecuted in NY state court for financial crimes. I obviously have not reviewed the evidence, so I don't know how likely that is. Accordingly, for the balance of today's post, I'm going to discuss a hypothetical case involving a defendant I'll call Ronald. It's based on allegations against Trump, but my interest in it is broader. I'm going to use Ronald's hypothetical case to discuss what I regard as an oddity in the criminal law--how defendants might invoke the individuation of crimes in the criminal code to evade criminal liability in a certain class of cases in which their criminal conduct is proven to a 100 percent certainty.

Let's suppose that Ronald is a real estate mogul who owns a large multi-unit rental property. Ronald wishes to obtain a loan against the value of the property. In his application to the bank, he states that the previous year the rental property generated $5 million in net profits from rents. This statement plays a critical role in the bank’s decision to make the loan. On the same day that Ronald applies for the loan, he also files his state income tax return. On that return, he writes that his rental property showed a net loss of $3 million for the same period. He uses that loss to offset other income.

Now let's assume some more key facts:

(1) The loan application and the state tax return use the same financial accounting standards, so that one cannot plausibly characterize the property as making money under one set of accounting rules but losing money under another. At least not honestly. Rather, the only explanation is that one, the other, or both statements are false.

(2) Ronald is a hands-on manager who must have known that at least one of the documents falsely stated the rental income. He won't testify, however.

(3) The financial records are too incomplete and murky to make clear what the right figure actually is. It is thus possible that one or the other (but definitely not both) of the sets of documents accurately states the income or loss on the property. Meanwhile, the people who work for Ronald and thus might be able to testify about the underlying reality are all close relatives of Ronald or otherwise too scared of or loyal to him to say anything. Even if offered immunity, they won't bear witness. 

(4) The state has two relevant criminal laws. One is the fraud statute. It says that knowingly making a  false material statement on a loan application is criminal fraud. The other is the tax evasion statute. It says that making a knowingly false statement on a tax return is criminal tax evasion. Each crime is a felony punishable by up to five years in prison.

Let's assume that on the facts stated, there is probable cause to indict Ronald for both fraud and tax evasion, but is there proof beyond a reasonable doubt of either offense? It seems not. A jury will know beyond a reasonable doubt that Ronald is guilty of one or the other crime, but the state has no crime of “one or the other.” Ronald must be acquitted, which seems like an unjust windfall. After all, we know beyond a reasonable doubt--indeed to a certainty--that Ronald has committed at least one felony punishable by up to five years in prison.

To make matters even more unjust, if the state legislature had acted with a bit more foresight, it could have prevented this windfall. Indeed, Congress did just that in the federal perjury statute, which provides in relevant part:

An indictment or information for violation of this section alleging that, in any proceedings before or ancillary to any court or grand jury of the United States, the defendant under oath has knowingly made two or more declarations, which are inconsistent to the degree that one of them is necessarily false, need not specify which declaration is false if— (1) each declaration was material to the point in question and (2) each declaration was made within the period of the statute of limitations for the offense charged under this section.

Thus, where the charge is perjury, Congress allows proof by logical inconsistency. It's true that in the federal perjury statute, the defendant would be charged with a single offense, but we could easily imagine a legislature enacting a statute that knits together multiple provisions to allow for conviction of the either/or crime whenever it's logically necessary that the defendant committed at least one of the underlying crimes.

In crafting such an either/or statute, the legislature would need to be careful to avoid over-punishing. In my hypothetical provisions described above in (4), the penalties for fraud and tax evasion are identical, but we can imagine scenarios in which the contradictions between a defendant's statements entail that the defendant violated one or the other of two laws that carry different penalties. In such circumstances, presumably the legislature could permit a sentence no greater than the maximum sentence allowed by the more lenient statute.

Given that the legislature could have written an either/or meta-statute modeled on the federal perjury provision to ensnare a defendant whose logically inconsistent statements necessarily entail the falsity of at least one of them, are we sure that the defendant cannot be prosecuted successfully on a one-or-the-other theory even in the absence of an either/or meta-statute?

I ran that question by some of my colleagues and friends who are experts in criminal law. They and I agreed that, under conventional criminal law principles, we're sure. Proof beyond a reasonable doubt means proof beyond a reasonable doubt of the elements of each offense. In the hypothetical case as I've described it, there is proof beyond a reasonable doubt of fraud-or-tax-evasion, but there isn't proof beyond a reasonable doubt of fraud, nor proof beyond a reasonable doubt of tax evasion.

Suppose an aggressive state prosecutor proceeded nonetheless and the trial judge instructed the jury as though there were a state either/or meta-statute that generalized the principle of the federal perjury statute. The jury convicts, the defendant appeals, and eventually the state's highest court affirms the conviction. Ronald seeks and gets certiorari granted in the US Supreme Court. He argues that allowing the conviction to stand under these circumstances violates In Re Winship, which held that due process requires that the government prove every element of the charged offense beyond a reasonable doubt.

Ronald's conviction does not literally satisfy Winship, but perhaps an exception should be carved out. The Court relied in Winship on the importance of avoiding

a standard of proof that leaves people in doubt whether innocent men are being condemned. It is also important in our free society that every individual going about his ordinary affairs have confidence that his government cannot adjudge him guilty of a criminal offense without convincing a proper factfinder of his guilt with utmost certainty.

In my hypothetical, the jurors are convinced of Ronald's guilt with utmost certainty, although they aren't sure which of two crimes he is guilty of.

What about the prohibition of ex post facto laws? It exists to ensure that no one will be criminally charged for conduct that was not criminal when committed. True, case law construing the ex post facto prohibition goes a bit further than that. For example, the state may not retroactively increase the maximum sentence for a crime. But there is at least a whiff of unfairness about increasing the penalty after the crime. Perhaps a defendant who violated the law thinking he only risked a ten-year sentence by doing so would have conformed his conduct to the law if he knew he could end up with a twenty-year sentence. By contrast, Ronald in my hypothetical made no effort to comply with the law. His efforts were directed purely at avoiding detection. It is hard to see why a sensible legal system would honor any reliance interest in such avoidance.

Bottom Line: I think it would be consistent with justice and the Constitution properly construed to prosecute Ronald under an either/or theory, even absent an either/or statute, but I very much doubt that the courts would deem it legal to do so. I take solace in the fact that the issue is very unlikely to arise. I suspect that if a prosecution is actually brought against a real defendant who resembles the hypothetical Ronald, it will be possible to adduce evidence of deliberate falsehoods beyond the mutually contradictory statements.


Michael A Livingston said...

I think the question is why these cases weren’t brought before. If there’s no good answer, they are essentially political prosecutions, an for that matter quite risky. See Eric Posner in NYT couple of days ago.

Michael C. Dorf said...

I link to Posner's essay in the second sentence of the blog post. He discusses prosecution for federal offenses while Trump was President, distinguishing the sorts of conduct at issue here (or rather, in the actual Trump case that inspired my blog post, which is not at all about "the question" that concerns you, Professor Livingston). About state prosecution for pre-presidential financial crimes, Posner writes: "Investigations into allegations that Mr. Trump was involved in credit and tax fraud and campaign finance violations before his presidency are another matter. But convictions based on such pre-presidential behavior will not reflect on his presidency nor hold lessons for future presidents."

So it seems that: (a) Your comment addresses an issue that is not the subject of this blog post; and (b) you cite as support an essay that says the opposite of what you claim.

In addition, there could be any number of "good answers" to the question why these cases weren't brought before Trump's presidency. One is that, given scarce prosecutorial resources, neither the state AG nor the Manhattan DA might have been aware of Trump's alleged financial legerdemain. However, the intense media scrutiny to which presidents are subjected resulted in their becoming aware, so they investigated where they otherwise might not have. That's hardly "political." Prosecutors routinely open investigations into wrongdoing that they learn about fortuitously or through the media. So long as the investigation and prosecution, if any, is then conducted fairly, there's nothing wrong with that.

Michael A Livingston said...

I think the issue Posner addresses is less directly relevant to state prosecutions, but not wholly irrelevant. A lot of his point is that i. These cases are very hard to prosecute and ii. They will feed a narrative that the left is out for revenge rather than justice. Were Trump a very private citizen before he became President, the point about him escaping scrutiny might be persuasive. But he was quite well known in NY and elsewhere, and somehow none of these things led to prosecutions before. So the suspicion that this is largely political revenge is difficult to avoid, as is the pattern of the left claiming that Trump is authoritarian because of his politicization of legal process while doing ore or less the same themselves.

kotodama said...

Good morning Prof. D.,

This is a really fascinating hypo, so thank you for posting. I have one question and one possible solution that might be a little more straightforward. Also, I have one thought about a possible gap in the hypo.

First, I’m obviously dying to know—is this based on any real-world example, or is it purely a thought experiment inspired by current events? I feel like I’ve seen a comparable situation before, but nothing specific comes to mind right now.

Second, maybe I’m underthinking this, but why the need to charge both laws in the first instance? Why not just proceed instead by assuming that the individual broke the law having a more severe penalty?

In other words, if the tax law has a harsher penalty, which seems likely, then charge that, and your smoking gun evidence of falsity is the contrary amount stated in the loan documents. Of course, you also need some kind of narrative scaffolding to give to the factfinder, but that’s easy. The rental property was in fact very profitable, so the owner gladly leveraged that to secure a generous loan, but greediness also inspired her/him to lie to Uncle Sam (or for, .e.g., New York, Uncle Cuomo I guess?) to avoid taxes. If the story is truly the opposite—i.e., the property is in dire straits so the owner had to defraud the bank even though s/he took full advantage of the tax benefits—then let admitting that be the defendant’s problem.

That doesn’t seem particularly unfair to the defendant either. We all know 100% the defendant is guilty of one or the other, but s/he is best positioned to say which it actually is, so let the defendant be the one to set the record straight. Especially in the case where the penalties are significantly different between the two laws, it actually empowers the defendant by allowing her/him to admit to the less severe one.

I suppose one pitfall is the defendant not straight up admitting the other amount is actually false—in my example, the rental income—but only raising enough of a suggestion to just barely create reasonable doubt. And if the state goes ahead with charging bank fraud after the defendant is acquitted on the tax charge, then perhaps the defendant could make a similar argument, just in reverse, and get acquitted there too. That seems too cute or clever by half though. I don’t know if it’s a collateral estoppel kind of situation, but my gut feeling is that it’s fundamentally unfair.

Third, this hypo seems to assume that no plea negotiations take place beforehand. It’s not my specialty at all, but it seems far less risky to just plead out to the crime with the more lenient punishment. Otherwise, you’re taking quite a punt on coming out completely unscathed after possibly two separate trials on each of the charges.

It’d be great if someone with real-world criminal expertise could weigh in here.

kotodama said...

In his 11:45AM comment, Prof. Livingston stated: "Were Trump a very private citizen before he became President, the point about him escaping scrutiny might be persuasive. But he was quite well known in NY and elsewhere, and somehow none of these things led to prosecutions before."

The same argument had occurred to me too at one point, and I will grant it has a certain amount of surface appeal. Obviously, as a strictly legal matter, the prosecution has no obligation to explain its timing as long as charges were brought within the relevant limitations periods. But we all know there's such a thing as optics too.

However, giving it more thought, there seems to be a good rebuttal. It turns out that even for very high-profile individuals, sometimes these white collar misdeeds escape detection for considerable periods of time. To take a specific example from recent headlines, Robert Brockman was charged for conduct that went back at least a decade, and some as much as 12 years. Although it's a slightly different context, an amicus brief supporting the IRS in the CIC Services case argued earlier this week describes at pp. 14-16 how time-consuming it can be to identify abusive tax shelters. It seems fair to assume that at least some of those past cases have involved high-profile individuals. So I would say there's a perfectly decent explanation that the timing--to the extent there is a perception of delay--derives from the nature of the case and doesn't suggest political bias.

Fred Raymond said...

My opinion is that Democrats are always demonized no matter what they do, so I think DT should be prosecuted for everything because it won't really affect the optics at all. I'm incensed by the proposition that we should "move forward" as though that concept somehow precludes serving justice on criminals.

Joe said...

Now, Mr. Raymond. "Defund the Police" is horrible, since it is soft on crime, but we can't go after Trump, since that would be wrong and unfair.

I think financial crimes will be the most likely way various Trumps might have some liability, at least in the states.

While the Supreme Court held up settling the rules for investigating Trump (it not being an execution, no need for speed there), we have had extended media investigations showing a lot of evidence of wrongdoing there. There has also been past cases where members of the government were charged and convicted of some sort of financial related matters. OTOH, we can perhaps forsee years more of litigation on the question.

The bottom line will be that actual prosecution will often not be the primary response. I don't just mean elections. This is troublesome. We can't allow all of this stuff merely to be settled by elections, since there is a basic legitimacy to anything so flexible. Elections can turn on very important things, don't get me wrong, including a person being totally unfit. But, we are dealing with something that should go beyond mere elective politics here.

Still, there should be investigations, including on the federal level, if only because it involves how members of the government operated. Just bringing these things out in the open and perhaps help a tougher application of the rules in the future might help. I see, e.g., how Kushner's background checks were repeatedly screwed up but somehow he still had top positions in the Administration. Not cool.

kotodama said...

@Fred Raymond
Make no mistake, I’m with you all the way there. I just think it’s worthwhile to demonstrate how the optics-based arguments also don’t hold water even on their own terms.

You’re completely right about it being a waste of time anguishing over demonization. There’s a vocal—but still decidedly minority—group with two parts. One was sold from the start and even then couldn’t get enough after 4 years, while the other was originally indifferent, but witnessing the last 4 years convinced them to sign up. To me, the idea that one should worry even for a second about recapturing (or perhaps more accurately, capturing in the first instance) that group’s affections seems rather absurd.

And you can’t both-sides it either. It’s one thing where the basis for investigating is either (1) at least highly debatable or (2) in, e.g., the “lock her up!” case, totally frivolous. But it’s quite different where nobody even bothers to dispute that a very sound basis for investigating exists.

To give a vivid analogy, imagine you’re being attacked by a knife-wielding cannibalistic serial killer. Here, the serial killer’s reason for attacking with a knife is obviously improper—to make you into human kaiseki. But the both-sides crowd would chew (no pun!) you out for employing a knife of your own in self-defense, even though in that case, the purpose is clearly proper. They would say that’s not allowed because...well..the serial killer might get angry with you! I don’t think we have to belabor how preposterous that position is.

For sure, it’s only “law and order!” for the little people, doncha know. And if you’re truly cornered and have no choice but to cop to something, then at most it’s a mere “process” crime. But we know those aren’t important anyway. Actually, they’re not really crimes to begin with.

And since you bring up SCOTUS-manufactured delays, I also wonder about that aspect. Let’s assume our wish is granted, (the relevant) people wise up, and we get some federal investigations. Further let’s say one of the investigations is for conduct predating both (a) the last 4 years and (b) the previous campaign leading up to that. Even in the case, would the SCOTUS reactionaries keep being as hostile and obstructionist as they have so far? On the one hand, obviously Trump wouldn’t be president anymore—thus wiping out Article II arguments entirely, feeble as they were from the start—and you also wouldn’t have the SG/AG going to bat for him as personal concierge lawyers. But on the other hand, the reactionary contingent has since leveled up to the Sinister Six. It doesn’t exactly inspire confidence that circumstances would improve. They might even get worse.

People mostly seemed to worry that rushing to get COVID Barrett ensconced was an insurance policy for the election. But I suspect the above scenario was a big part of it as well.

Joe said...

Human kaiseki is clearly wrong

This is a vegan friendly blog.

kotodama said...

Can't argue that, my bad. Vegan kaiseki sounds pretty good right now in fact...

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Unknown said...

If the example was based on crimes relating to drug trafficking, would it come out the same? My impression is that all the talk about proof beyond a reasonable doubt as to intent has a different valence in drug cases.
In any event, I take it that recklessness as to truth does not matter to perjury based crimes?