Untangling the Legal Issues of a $130,000 Payment
Posted May 3, 2018 8:39 p.m. EDT
WASHINGTON — The disclosure by Rudy Giuliani that President Donald Trump repaid his longtime personal lawyer, Michael Cohen, for the $130,000 hush-money payment made to a pornographic actress shortly before the 2016 election has put new scrutiny on the legal issues raised by the unusual transaction.
Trump has never reported this expenditure, loan or repayment — either in campaign filings with the Federal Election Commission or on his financial disclosure form with the government ethics office. But it remains murky what exactly Trump knew, and when he learned it.
Do campaign finance laws apply?
A threshold question is whether the payment to the actress, Stephanie Clifford, who goes by the stage name Stormy Daniels, was intended to influence the election by suppressing a claim that could hurt Trump’s chances. If so, the transaction was most likely covered by federal campaign finance laws.
Those laws barred candidates’ supporters from making donations — including in-kind donations — worth more than $2,700 to presidential campaigns during the 2016 general election. And while those laws allow candidates to spend an unlimited amount of their own money to help their campaigns, they require the candidates to disclose such self-funding, both as donations to their campaigns and as expenditures. But if the motive for the payment was unrelated to the election, then it was not covered by those laws.
Recent history suggests that it can be tricky to prove that the motive behind such a payment was political rather than personal. In 2012, the Justice Department prosecuted John Edwards, the former Democratic senator from North Carolina, over payments from wealthy donors that were used to hide his pregnant mistress while he ran for president. Edwards’ lawyers argued that he was instead trying to hide the affair from his wife.
In the end, a jury acquitted Edwards of one charge while deadlocking on the other five, and prosecutors opted not to seek a new trial. Richard L. Hasen, a professor of law at the University of California, Irvine, said that after the Edwards mistrial, federal prosecutors will be reluctant to go forward with similar cases unless they have “documentary proof, a smoking gun, that a payment was in fact election-related.”
What is the argument that the payment was not campaign-related?
In an interview on Thursday on the Fox News program “Fox & Friends,” Giuliani insisted the payment was not a campaign contribution. He said Cohen was trying to help Trump’s family “to save their marriage — not their marriage so much as their reputation.” But then, muddying that message, Giuliani said, “Imagine if that came out on Oct. 15, 2016, in the middle of the last debate with Hillary Clinton.” Separately, in an interview with The New York Times, Giuliani acknowledged that “it could overlap as a campaign problem,” but reiterated that Trump was not thinking of the payment as a campaign expense.
It could work in Trump’s favor that he and his lawyers had a long history of using legal avenues to try to fight off damaging claims. That history could form the basis of an argument that Cohen’s payment to Clifford — and Trump’s reimbursement of it — would have happened whether or not he was running for president. “If this was a first-time candidate without a public reputation, then it would be harder to argue that it wasn’t an expenditure to influence an election,” said Charles Spies, a Republican election lawyer who worked in support of one of Trump’s rivals, former Florida Gov. Jeb Bush, in the 2016 Republican primary. “But Donald Trump has a long record of aggressively defending his reputation from attacks.”
That track record could prove less compelling if authorities obtain evidence that Cohen privately discussed the payment in the context of Trump’s campaign. Last month, federal law enforcement officials in New York raided Cohen’s office and hotel room, carting away numerous documents and electronic devices that are now the subject of a fight over attorney-client privilege. One of the things they are apparently investigating is the payment to Clifford.
If the payment was a loan, is Cohen out of trouble?
Not if the loan was intended to influence the election. Campaigns routinely take out large loans from banks when they’re running short of cash ahead of elections. But federal election laws require that those loans come from banks as routine business transactions. Personal loans count as contributions that are still legally capped at the individual contribution limit — even if they are later repaid in full, according to the Federal Election Commission website.
When would this have had to be reported, and by whom?
If the payment were to be deemed campaign-related, the Trump campaign should have disclosed it in its periodic filings with the FEC, as soon as Trump or his campaign learned that Cohen had made it. If Trump or his campaign only discovered the payment after the fact, they should have amended their previous filings to reflect the expenditure, and any reimbursements to Cohen. The Wall Street Journal first reported the $130,000 payment to Clifford in January, and Trump has not moved to amend his disclosures.
In an interview with The Times, Giuliani was vague about key questions concerning what Trump knew and when he knew it, saying that Trump “did know that there was a form of reimbursements” to Cohen over the course of 2017, but maintaining that the president did not know what it was for specifically. Giuliani also said that some executives at the Trump Organization “knew about the fact that Cohen believes money was owed to him — I don’t know when that came up.”
Might a loan raise non-election-law issues?
Yes. As a government employee, Trump is also required to report any liabilities in excess of $10,000 on a financial disclosure form filed with the Office of Government Ethics. His 2017 form — which he signed in June, certifying it was “true, complete and correct” — does not list any outstanding loan from Cohen, campaign-related or otherwise. When he spoke with The Times on Thursday, Giuliani did not answer why the money was not listed on the president’s financial disclosure form.
What could the penalties be?
When campaign finance violations are punished, they typically result in fines by the Federal Election Commission that are pegged to the size of the unlawful contribution or expenditure. The Justice Department can also prosecute willful violations of election laws, or willful false statements on the federal personal financial disclosure forms, which are felonies and can result in up to five years in prison.
There is little chance that the department would file charges against Trump, regardless of what the evidence shows, because its Office of Legal Counsel has opined that the Constitution makes sitting presidents immune from prosecution.
But Cohen, after the raid last month, is under intense legal pressure.