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.