A big story hit the news this week after a joint investigation by ProPublica, WNYC and The New Yorker. Reporters Andrea Bernstein, Jesse Eisenger, Justin Elliott and Ilya Marritz discovered that Manhattan District Attorney Cy Vance dropped a potential felony fraud case against Ivanka and Donald Trump Jr., before a campaign contribution made to Vance.
It was a real estate fraud case involving Trump SoHo, a hotel and condo project. Investigators believed the Trumps had made falsely reassuring statements to prospective buyers of units in the complex, where sales had been tepid.
The reporters learned that the evidence included email chains in which the Trumps "discussed how to coördinate false information." In another set of communications, they apparently reassured a broker who was concerned about the deception.
When the investigation got hot in May of 2012, Trump personal lawyer Marc Kasowitz went to meet with Vance. Three months later, the case went away. Kasowitz reportedly later bragged about his work, saying it was "amazing I got them off." (The lawyer now denies making that statement). Subsequently, Kasowitz made an additional contribution to Vance of $32,000, and reportedly helped route additional contributions to the DA.
At almost exactly the same time he was meeting with Trump's lawyer, Cy Vance was pushing another case through the Manhattan courts. On May 31st, 2012, just two weeks after his meeting with Kasowitz, Vance's office moved to indict for mortgage fraud a tiny Chinese immigrant bank called Abacus Federal Savings, along with 19 of its employees.
For the arraignment in the case, the 19 individual defendants were frog-marched into court in a literal chain gang – you can see the now infamous photo in a contemporary New York Times piece – in a scene that was clearly designed to show Vance's office was throwing the book at white-collar offenders. Some of the people in the chain gang made as little as $35,000 a year.
Though the case had absolutely nothing to do with the 2008 financial crisis – more on that in a moment – Vance shamelessly pitched Abacus as a prosecution directed at the causes of the crash.
"If we've learned anything from the recent mortgage crisis," he said, "it's that at some point, these schemes will unravel and taxpayers could be left holding the bag."
Abacus was a small family-owned bank, a mainstay of the Chinatown neighborhood, that had self-reported the discrepancy that led to the prosecution. In exact contrast to the broader financial crisis dynamic, it made home loans to people who made their payments. The alleged victim, Fannie Mae, did not experience a penny of loss. Abacus was ultimately found not guilty, in a major embarrassment to Vance's office.
The absurdity of the Abacus case was that Vance could have walked in just about any direction in lower Manhattan and run into a viable mortgage fraud prosecution involving a much bigger actor. Virtually all of the country's biggest banks have since settled, in many cases for billions, for behavior far worse than anything Abacus was even alleged to have done.
But Vance picked Abacus for prosecution, seemingly because it was small and easily pushed around, rather than take on the behemoths in lower Manhattan.
The case was a metaphor for the criminal justice system as a whole, which consistently avoided treating fraudsters at big banks as criminals. The more typical resolution involved back-room settlements in which money changed hands but no executives did time or got a record.
The news about the Trumps highlights this dynamic. Underscoring that I don't know how solid the prosecution's case was against Don Jr. and Ivanka, this new story fits the pattern: The rich and connected get off, while those outside the tent are prosecutable. We've effectively divided the country into two classes, Too Big to Fail and Small Enough to Jail.
I ended up writing about the Abacus case in my book, The Divide. Hoop Dreams director Steve James and producer Mark Mitten ultimately also made a movie about the case. The film, Abacus: Small Enough To Jail, has achieved critical acclaim this year and apparently is an Oscar contender.
There is an irony in the side-by-side cases of Abacus and the Trumps. Abacus, founded by Thomas Sung and run by daughters Vera and Jill Sung, was also a New York family business with strong real estate interests. The Sungs were not politically connected in the same way the Trumps were.
This was simply a case of one successful New York family being inside the tent, and the other family being outside looking in.
When I first heard Vance had kicked the Trump case while he was targeting the Sungs, I had mixed feelings.
On the one hand, the Trump SoHo case sounds like exactly the sort of fraud prosecution that at some point long before last year's presidential run should have taken place in the orbit of Donald Trump, a man who has demonstrated over and over that he has no compunction about lying in the most high-leverage situations.
The infamous Trump University mess, which then candidate Donald "I don't settle lawsuits" Trump settled for $25 million, is an example of something that feels like it should have stuck to the Trump empire long before we got to this place.
In that highly similar situation, incidentally, Trump reportedly made an illegal campaign contribution to Florida Attorney General Pam Bondi, after Bondi had begun investigating Trump University.
My other reaction, though – and I know how this is going to sound – was that even the Trumps were relatively small-time compared to the targets Vance could have chosen.
The financial crisis of 2008 was caused by fraud on a massive, industrial scale, far beyond anything Don Jr. and Ivanka could have pulled off. The misrepresentations made by megabanks were systematic and involved hundreds of billions of dollars worth of financial instruments. When the toxic deals went south, they nearly sank the world economy.
Even if Vance had gone forward with a prosecution of the famous Trumps, in other words, it would have been a paltry effort compared to what he could have done, in terms of targeting the systemic problem. But he lacked the backbone even to take on connected individuals.
Still, the aborted prosecution(s) involving the Trumps should help Americans understand the high stakes of the Too Big to Fail era. Donald Trump has successfully danced around the law his whole life, and the consequence we share for indulging that system of kid-glove treatment for the rich and connected is that a sociopathic truthophobe and his goofball family now occupy the White House.
We don't yet know what the consequences will be for the bigger miss: letting Wall Street skate with a back-room payoff after causing the 2008 crash. Unfortunately, we'll likely find out sooner or later.