White House

The SDNY Investigation Is Real Peril for President Trump

(Leah Millis/Reuters)
Don’t look at Capitol Hill; look a few hours’ drive to the north.

All eyes are on Capitol Hill. House Democrats, flexing their new majority muscles, wasted no time after President Trump’s State of the Union address to announce expansive investigations of the president and those around him: There will be probes into his administration, the 2017 presidential transition, the 2016 Trump campaign, and the Trump Organization — the real-estate business Donald Trump spent a lifetime conducting.

It’s a dragnet, or at least as much of a dragnet as congressional committees can muster. Their investigative powers do not compare with those of federal prosecutors and FBI agents, who compel grand-jury testimony, execute search warrants, arrest suspects, and file indictments to squeeze cooperation from potential witnesses.

That is one reason why the most consequential Trump action may be happening in the place getting the least attention from the national media: the U.S. attorney’s office for the Southern District of New York (SDNY).

This is not to belittle the congressional probes. As Rich Lowry and I discussed in this week’s episode of The McCarthy Report, Intelligence Committee chairman Adam Schiff (D, Calif.) and the chairmen of the other relevant House committees are laying the groundwork for imminent battles over the scope and disclosure of Special Counsel Robert Mueller’s eventual report to the Justice Department. They are opening the front into the president’s family-run real-estate empire — investigations that will seek his tax returns, probe fraud allegations raised in an explosive October 2018 New York Times report on the Trump empire’s accumulation of wealth, and explore the Trump Organization’s dealings with Deutsche Bank, which has been fined hundreds of millions of dollars for helping Russian oligarchs launder money.

Jousting simultaneously with at least five congressional committees will exhaust the administration. Yet the more immediate threat of criminal jeopardy for the president is posed by federal prosecutors in Manhattan.

The SDNY has already obtained a guilty plea from Michael Cohen, Trump’s former lawyer and self-described “fixer.” Two of the eight felony counts involved campaign-finance violations arising out of hush-money payments to two women who claim to have had extramarital dalliances with the real-estate magnate a decade before he became president. In the guilty plea, prosecutors had Cohen name Trump as the superior who directed him in the transactions.

This was unusual: Prosecutors normally do not name people publicly unless and until they have been charged with crimes. Moreover, even if Trump and Cohen acted in concert, Cohen’s plea does not necessarily mean Trump is guilty. (As we’ve explained, the president has strong legal defenses if he is charged with a campaign-finance violation — a transgression that, by the way, is often addressed by an administrative fine, not a criminal prosecution.)

Still, the SDNY does not name names idly. It could be that prosecutors were locking Cohen in for purposes of a future campaign-finance case against the president. (Under Justice Department guidance, a sitting president may not be indicted.) It could also be, however, that they had other investigations in mind and hope to establish a pattern of Cohen taking direction from Trump.

The matter is worth considering in light of new revelations about the SDNY’s criminal investigation of the Trump Inaugural Committee. On Monday, the Wall Street Journal reported that the committee (a non-profit organization to which campaign-finance laws apply) has received a grand-jury subpoena for a raft of documents. Subpoenas provide a real insight into what investigators are scrutinizing. Not only do prosecutors describe documents they are demanding; they spell out possible crimes the grand jury may charge.

According to CNN, which also reports having seen the subpoena, the SDNY says the investigation involves several possible fraud and money-laundering offenses related to the collection and reporting of contributions. These include donations from foreign nationals and “straw donors” (a nominee substituted for the actual contributor of funds), as well as the evasion of reporting requirements (by such tricks as having donors pay vendors directly, rather than as part of the inauguration committee’s business).

The list of potential crimes is topped by “conspiracy against the United States.” As I have pointed out on other occasions, the label “conspiracy against the United States” is a distortion; the offense, under Section 371 of the penal law, involves a conspiracy either to commit any federal crime or to defraud the United States. Nevertheless, “conspiracy against the United States” is a staple of Special Counsel Robert Mueller’s prosecutions.

That is not irrelevant here. Finances for the Trump inaugural committee were handled by Richard Gates — vice chairman of the Trump campaign and former lobbying partner of the campaign’s onetime chairman, Paul Manafort. Both Gates and Manafort have already pled guilty to conspiracy against the United States in Mueller’s investigation. Having been Mueller’s star witness in the Manafort case, Gates is reportedly cooperating with SDNY prosecutors.

My reservations about “conspiracy against the United States” notwithstanding, the theory of the crime is that the nation is defrauded by actions that impair and defeat the lawful functions of a government agency. If, for example, Ukraine lobbyists Gates and Manafort fail to register as foreign agents, they are said to conspire to defeat the Justice Department’s ability to maintain a foreign-agent registry (even if the thought never entered their minds).

It is easy to see how prosecutors could expand this elastic reasoning to cover the Federal Election Commission’s maintenance of records of campaign contributions and expenditures. For instance, the Journal reports (according to two unnamed sources) that Gates asked some vendors who provided services to the inauguration “if they would be willing to accept payment directly from donors, or through channels outside the inaugural committee.” Such arrangements would mean the committee was not accounting for all donations and expenditures. That could be woven by prosecutors into a conspiracy against the United States — i.e., a criminal agreement to frustrate the FEC’s ability to keep and disclose accurate records.

The Trump Inaugural Committee took in an eye-popping $106.7 million, twice the haul of President Obama’s 2009 inaugural committee, the previous record-holder. The committee reports spending $103 million; prosecutors obviously want to know where the money went. The committee has publicly accounted for $61 million, but it is not required to make all vendor information public.

Possible influence-peddling is an important part of the probe. I’m sure you’ll be shocked to find that this brings us back to Michael Cohen.

In the memorandum they filed prior to the sentencing of Cohen, who received a three-year prison term, SDNY prosecutors related that he had monetized his Trump connection to a fare-thee-well. He’d reaped millions of dollars in consulting fees from corporations enticed by his promises of unique insights about and access to the president. Prosecutors acknowledge that Cohen’s promises “proved essentially hollow.”

Cohen’s connection to the inaugural committee is unclear. The Journal reports that the FBI agents who searched Cohen’s premises last April obtained a recorded conversation in which Stephanie Winston Wolkoff — a top inaugural adviser and vendor — told Cohen that she was “concern[ed] about how the inaugural committee was spending money.”

Cohen did discuss the inauguration with Imaad Zuberi, a California venture capitalist and former registered agent of Sri Lanka. The Daily Beast has reported, based on two unidentified sources, that Zuberi was told he would get access to senior Trump-administration officials, including the president, if he paid upward of $1 million to attend the inaugural events. A heavy supporter of President Obama and Hillary Clinton who wanted to break into the Trump crowd, Zuberi ended up donating more than $900,000 to the inaugural committee. He is the only donor specifically named in the SDNY’s subpoena to the committee; prosecutors demand all documents related to communications with him.

The SDNY has also sought documents regarding at least one other donor directly from the donor (i.e., not just through the committee subpoena). He is Franklin Haney, and the documents relate to a $1 million contribution he made to the Trump inaugural committee in December 2016 . . . which, in turn, relates to Michael Cohen. Haney is a nuclear-energy developer. A month before he made the Trump-inaugural donation, his company contracted to buy a partially completed nuclear power plant from the Tennessee Valley Authority for $111 million. Last August, the Journal reported that Haney had agreed to pay a $10 million consulting fee to Cohen if he successfully helped obtain a $5 billion government loan and other funding for the project.

It is worth noting that Cohen is not regarded as a “cooperating witness” by the SDNY (as prosecutors explained in their aforementioned sentencing memo). He provided information to Mueller’s staff (in particular, regarding negotiations during the 2016 campaign for the possible construction of a Trump Tower in Moscow) and met with SDNY prosecutors as well. But “cooperating witness” has always been a term of art in the SDNY, where I served as a prosecutor for nearly 20 years. It applies only to a witness who enters a formal cooperation agreement, agreeing to tell the government everything and testify truthfully in exchange for sentencing leniency.

Cohen was not willing to reveal everything he knows about possible misconduct by himself and others — he is one of those geniuses who thinks he can stay a step ahead of investigators, appearing to cooperate by disclosing only things he senses they have already figured out. Mark my words: He is never going to be a step ahead of the SDNY and the FBI. So, there is no cooperation agreement, and SDNY prosecutors did not make for Cohen the sentencing motion that would have allowed the judge to impose a no-prison sentence — indeed, they sought jail time even though Cohen spilled the Trump Tower Moscow beans for Mueller. Consequently, despite his recent guilty pleas, Cohen is still vulnerable to prosecution and has a live Fifth Amendment privilege against self-incrimination. I would not hold my breath waiting for that congressional testimony he says he may be willing to give. (Did you notice that his much-anticipated appearance was quietly postponed yet again this week?)

An interesting question, then: Is Cohen cooperating in the SDNY’s investigation of the Trump inauguration committee? At the moment, he looks more like a target. That is, he looks like someone who could come to regret that he did not cut the deal and become a full-fledged cooperator when he had the chance.

Conspiracy against the United States. Prosecutors like it because it’s so pliable. And then there’s that black-letter doctrine of criminal law that goes like this: “Once a conspiracy is established, only a slight connection to the conspiracy is necessary to support conviction.” That is, to prove a conspirator is guilty, prosecutors need not show that he participated from the start, was acquainted with all the other conspirators, knew all the details, or was involved in all the misconduct. (See “Federal Conspiracy Law: A Brief Overview,” a Congressional Research Service paper, on page 8.) That is why prosecutors are able to convict big-shots who, for deniability purposes, insulate themselves from the nitty-gritty exertions of the underlings. The challenge is to establish that there really was a conspiracy; once that’s done, rolling up the members is straightforward.

To summarize, then, we have an enterprise known as the Trump Inauguration Committee, at least some of whose activities the SDNY appears to regard as a conspiracy against the United States. We have Richard Gates, a high-ranking Trump-campaign and inaugural-committee official who has already acknowledged being in one conspiracy against the United States and surely would not be averse to pleading guilty to another one if it might help him avoid prison. And you have Michael Cohen, who, when last caught in a deal that smacked of fraud — a hush-money agreement that used phony names, a payment arrangement where his reimbursement was camouflaged as fees on a legal retainer — was only too happy to tell prosecutors that Donald Trump put him up to it.

If I were working in the White House, my attention would not be fixed on Adam Schiff and Bob Mueller. I’d be focused on the SDNY.

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