By Frank G. Runyeon

Law360, New York (October 2, 2020, 7:09 PM EDT) -- A New York state appeals court on Friday pelted the Manhattan district attorney with skeptical questions about why Paul Manafort should face state criminal mortgage fraud charges after the indictment was dismissed on double jeopardy grounds.

Manafort, a former campaign chair for President Donald Trump, is serving 7½ years in federal prison for two separate convictions: in Washington, D.C., for obstruction of the Mueller investigation and unsanctioned lobbying work, and in Virginia for bank and tax fraud. Manhattan District Attorney Cyrus Vance's case focuses on the same conduct for which Manafort was convicted in the Virginia federal case in August 2018. In May, Manafort was moved from prison to home confinement due to COVID-19 concerns.

Each member of the First Department panel wasted no time in signaling doubts about the DA's argument that double jeopardy does not apply because the alleged state crimes caused different harms to its victims than the federal bank fraud charges did. One judge even heartily agreed with Manafort's argument.

Moments after Assistant District Attorney Valerie Figueredo began speaking — arguing that the federal crimes Manafort was convicted of focus on harm to financial institutions while the state crimes in the indictment focus on harm to customers — two judges raised their voices to interrupt.

"Counsel!" Judge Ellen Gesmer cut in with a grimace.

"Counsel!" Judge Dianne T. Renwick piled on, questioning how the state charges address a "different harm or evil" by asking about the mortgage fraud charge. "I think your argument is: It's only to protect homeowners not to protect financial institutions and mortgage lenders, for example. How is that a valid argument?"

Figueredo pushed back, pointing to the legislative history and purpose of the law, arguing lawmakers "were trying to protect homeowners."

Judge Renwick let out a little laugh.

"Wasn't this all due to the 2008 crisis?" the judge asked with an incredulous smirk. "I mean, that's how this came up for the homeowners and for the banks. I don't see how this mechanism wasn't to protect stability of the overall economy. That is what the harm and evil was here."

"Or phrased differently, financial fraud," Judge Gesmer joined in. "And I have difficulty understanding how that is a very different kind of harm or evil, which is the standard."

Judge Sallie Manzanet-Daniels nodded in agreement.

The public livestream was interrupted for several minutes during the government's arguments as the screen cut to a silent desktop background showing a mountainside lake. The public was reconnected to the videoconferenced hearing shortly before Manafort's attorney began his arguments.

Todd Blanche of Cadwalader Wickersham & Taft LLP picked up the argument by deriding the government's attempt to argue that the victims in the state case are customers and not banks.

"Everyone agrees that the only victims in this case are financial institutions," Blanche said, questioning how the government could argue there are "very different harms or evils" in the state case if the victims are the same.

"So, the state mortgage statute doesn't even apply here, right?" Judge Jeffrey K. Oing asked. "I mean, by their own arguments, the state mortgage provisions are to protect the consumers."

"Correct, your honor!" exclaimed Blanche. "And the consumer fraud count as well."

"They're making the argument now to get over the double jeopardy problem now," Judge Oing said with a smile. "I see what you're saying. They had enough for the indictment but now they're doing a pivot to get over the double jeopardy."

The panel's doubts do not bode well for the district attorney's attempt to revive his case against Manafort, which was tossed out in December 2019 by New York Supreme Court Justice Maxwell Wiley, who found the state case amounted to trying Manafort for the same crime twice under the state's broad double jeopardy standard.

About an hour after his federal sentences were handed down in March 2019, Manafort was hit with a 16-count New York state indictment for residential mortgage fraud, attempted residential mortgage fraud, scheme to defraud, conspiracy and falsifying business records for alleged false statements in an effort to obtain millions of dollars in loans from roughly 2015 to 2017.

Manafort mustered a double jeopardy defense in September 2019 but Vance initially fought back by arguing that certain charges in which the federal jury deadlocked were not covered by double jeopardy under New York law. After Justice Wiley tossed out the indictment, the DA's office appealed but dropped its argument on the "federal hung counts" to focus on the issue of different harms.

After arguments on Friday morning, the panel reserved judgment and adjourned.

Judges Dianne Renwick, Sallie Manzanet-Daniels, Ellen Gesmer and Jeffrey Oing sat on the appellate panel for the First Department.

The government is represented by Valerie Figueredo of the Manhattan District Attorney's Office.

Manafort is represented by Todd Blanche of Cadwalader Wickersham & Taft LLP.

The case is The People of the State of New York v. Paul J. Manafort Jr., case number 774/2019, in the Supreme Court of the State of New York, Appellate Division, First Judicial Department.

--Additional reporting by Stewart Bishop and Dorothy Atkins. Editing by Janice Carter Brown.

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