New York Attorney General Letitia James speaks after pleading not guilty outside the United States District Court, on Oct. 24, 2025, in Norfolk, Va. John Clark/AP
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 that had been encouraged by President Donald Trump, people familiar with the matter said.
Prosecutors returned to a grand jury in Virginia after a judge halted the prosecution of James and former FBI Director James Comey on the grounds that the U.S. attorney who presented the cases was illegally appointed. Grand jurors rejected prosecutors’ request to bring charges.
The setback is the latest for the Justice Department in its effort to prosecute a frequent political target of the Republican president. Prosecutors are expected to seek an indictment again, one person familiar with the matter said on the condition of anonymity because they were not authorized to speak publicly.
James was initially charged with bank fraud and making false statements to a financial institution over 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 wrongdoing and accused the administration of weaponizing the justice system against its political opponents. In a statement Thursday she said, “It is time for this unchecked weaponization of our justice system to stop.”
“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,” her attorney Abbe Lowell said.
Prosecutors allege James signed a standard “second home rider” when buying the modest Norfolk house—agreeing to keep the property primarily for personal use for at least a year unless the lender agreed otherwise—but then rented it to a family of three, obtaining loan terms not available for investment properties.
The grand jury rejection is part of a pattern of pushback the Justice Department has encountered since the start of the second Trump administration. It’s long been said prosecutors could persuade a grand jury to “indict a ham sandwich,” yet federal prosecutors have faced several recent refusals to return indictments.
Even if charges are refiled, the Justice Department could face obstacles at trial. James’ lawyers have argued the prosecution is vindictive, aimed at punishing a Trump critic who spent years investigating and suing the president and won a large judgment accusing him of inflating asset values on financial statements—a judgment later tossed by a higher court and now on appeal.
The defense also alleged “outrageous government conduct” preceding the indictment and argued those actions warranted dismissal. The judge had not ruled on those claims before dismissing the case last month over Halligan’s appointment.
U.S. District Judge Cameron McGowan Currie faulted the mechanism the Trump administration used to appoint Halligan to lead one of the Justice Department’s most elite offices. Halligan was named to replace Erik Siebert, a veteran prosecutor who served as interim U.S. attorney and resigned in September amid pressure from the Trump administration to bring charges against Comey and James.
The night after Siebert’s resignation, Trump said he would nominate Halligan as interim U.S. attorney and publicly urged Attorney General Pam Bondi to act against his political opponents, posting on Truth Social: “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; James was charged two weeks later.
The Justice Department defended Halligan’s appointment but disclosed that Bondi had given Halligan a separate title of “Special Attorney,” apparently intended to shield the indictments from collapse. Currie said such a retroactive designation could not save the cases.
Richer reported from Washington.