(Adds further details from hearing)
By Jan Wolfe
WASHINGTON, May 14 (Reuters) - A federal judge on Tuesday said financial records from U.S. President Donald Trump's long-time accounting firm would be part of a "proper subject of investigation" by Congress, appearing to side with Democratic lawmakers seeking more oversight of the president.
U.S. District Judge Amit Mehta in Washington heard oral arguments on whether Mazars LLP must comply with a House of Representatives Oversight Committee subpoena, marking the first time a federal court has waded into the tussle about how far Congress can go in probing Trump and his business affairs.
In an aggressive response to congressional oversight, Trump is refusing to cooperate with a series of investigations into issues ranging from his tax returns and policy decisions to his Washington hotel and his children's security clearances.
A lawyer for the president, William Consovoy, asserted on Tuesday that the Democrats' subpoena fell outside of Congress' legislative function and that the House was claiming "unbridled" power to investigate Trump.
"They have made clear that this is not about legislation. They want to know if there has been any wrongdoing," Consovoy said. "That is not the purpose of Congress."
Mehta disputed that, saying Congress could legitimately investigate whether Trump is complying with the U.S. Constitution's Emoluments Clause, which bars Trump-owned businesses from receiving payments from foreign governments.
"That would be a proper subject of investigation," the judge said.
Mehta questioned whether under Consovoy's argument many historic investigations by Congress would have been improper, including the probe into the Watergate scandal that forced President Richard Nixon from office.
Douglas Letter, a lawyer for the House committee, contended the subpoena fell within Congress' authority, an argument that Mehta seemed to agree with.
"We have an obviously legitimate purpose," Letter said. "Congress obviously serves an extremely important informative function for the American people."
Mehta said he was reluctant to question the House's motives so long as there is a reasonable justification for the subpoena.
Even so, the judge indicated some sympathy for the president's position, saying that there had not been a clear statement from the committee on the scope of its investigation.
"It really does open the door, it seems to me, to the accusation, valid or not, that this really is sort of an effort -- if not to harass the president -- then to get into his private affairs for political purposes," Mehta said.
The judge said that he would issue a ruling as to the validity of the subpoena soon.
The House Oversight Committee claims sweeping investigative power and says it needs Trump's financial records to examine whether he has conflicts of interest or broke the law by not disentangling himself from his business holdings as previous presidents did.
"It sounds to me like the judge is leaning toward the House and favoring a broad claim to investigate and conduct oversight generally and Trump’s business dealings specifically," said Carl Tobias, a law professor at the University of Richmond. "Scholars and courts have said Congress has broad oversight authority and Trump’s apparent use of his office to profit is a legitimate focus of inquiry."
Lawyers for Trump and the Trump Organization, his company, last month filed a lawsuit to block the committee's subpoena, saying it exceeded Congress' constitutional limits.
Trump's lawyers argued that Congress is on a quest to "turn up something that Democrats can use as a political tool against the president now and in the 2020 election."
On Monday, the Republican president's attorneys objected to Mehta's plan to fast-track the lawsuit by holding a trial on Tuesday, saying that would deny Trump a "full and fair" hearing. Whatever the outcome, Mehta's ruling will almost certainly be appealed to a higher court.
Mehta was appointed in 2014 by Democratic former President Barack Obama, who was often investigated by Republicans in Congress during his two terms in office.
Mazars has avoided taking sides in the dispute and said it will "comply with all legal obligations."
Trump's challenge of the Mazars subpoena was his first effort to quash the multiple House inquiries. He has also sued over subpoenas for his financial records sent to Deutsche Bank AG and Capital One Financial Corp.
Some legal experts have said Trump's lawsuits are unlikely to succeed. They said Congress has broad power to issue subpoenas, so long as documents requested can help it legislate, and that courts are reluctant to second-guess its motivations.
Some Democratic Party leaders have argued that Trump's stonewalling represents a "constitutional crisis" and could force them to begin impeachment proceedings to remove him from office, even though such an effort would likely fail in the Republican-controlled Senate.
Reporting by Jan Wolfe; writing by Jan Wolfe and James Oliphant Editing by Kevin Drawbaugh and Alistair Bell