Trump's Best Defense in Cohen Case May Point to More Hush Money

(Bloomberg) -- President Donald Trump’s best defense against potential campaign finance law violations may not be good for his marriage.

If prosecutors want to explore criminal charges against Trump for accepting illegal campaign contributions in the payoff of two women who say they had sexual encounters with him, he may be able to fend them off by saying he has a history of making hush-money payments.

Trump’s former personal lawyer and fixer, Michael Cohen, implicated the president when he pleaded guilty this month to violating election laws when he made payments to the women. Cohen said he did so to influence the outcome of the presidential contest.

The president could argue -- if true -- that his associates made the same kind of payments when he wasn’t a candidate as a way to protect his image, said Larry Noble, a former general counsel of the Federal Election Commission, who has been a critic of Trump. "If they can show three or four instances over the past five years that follow the same pattern, then I think they have an argument," Noble said.

That defense could undermine a claim that the money paid soon before the 2016 election to Karen McDougal, a former Playboy model, and porn star Stormy Daniels, was to influence the vote and therefore illegal.

Such a response to criminal charges would test an unsettled area of campaign finance law. There would also be a steep price for Trump: He’d have to make embarrassing admissions about payments to silence women claiming extra-marital affairs with him that may not go over well with his wife, Melania Trump.

Cohen ‘Dishonesty’

Trump’s lawyer, former New York Mayor Rudy Giuliani, didn’t immediately respond to a request for comment on potential legal strategies.

There’s no indication prosecutors are preparing charges against Trump. Giuliani said at the time of the Cohen plea deal that it wasn’t related to Trump. “There is no allegation of any wrongdoing against the president in the government’s charges against Mr. Cohen,” he said in a statement. “It is clear that, as the prosecutor noted, Mr. Cohen’s actions reflect a pattern of lies and dishonesty over a significant period of time.”

It’s not clear that a sitting president can be charged with a crime. The Justice Department’s view has been that the criminal prosecution of a president "would impermissibly interfere with the president’s ability to carry out his constitutionally assigned functions," though that’s never been tested in court.

Trump has denied any relationship with McDougal and Daniels, the stage name for Stephanie Clifford. Trump acknowledged reimbursing Cohen, telling Fox News’s “Fox and Friends” in an interview taped on Aug. 22 that he used personal funds to do so. Trump listed expenses incurred by his former fixer in a footnote to his most recent personal financial disclosure form filed with the Office of Government Ethics.

Felony Violations

Cohen admitted to a pair of felony violations of campaign finance laws for the payments. In June 2016, he solicited an illegal $150,000 corporate contribution from American Media Inc., publisher of the National Enquirer, to buy the silence of McDougal. In October 2016, Cohen paid $130,000 to Clifford. Both women claimed sexual encounters with Trump a decade before his run for the White House.

American Media publisher David Pecker’s longtime relationship with Trump could work in the president’s favor if he shared information with prosecutors about prior instances in which the tabloid purchased exclusive rights to women’s stories of relations with him and chose not to publish them, a practice called "catch and kill." Pecker was granted immunity in the Cohen case.

American Media, which publishes the National Enquirer, kept contracts in a safe detailing payments it made to those with incriminating stories about Trump and other celebrities to prevent them from being made public, according to the Associated Press. No evidence has publicly emerged indicating Trump associates made payments to additional women.

"An ongoing pattern tends to strengthen the argument that this is a business decision," Dan Backer, a political lawyer whose clients include pro-Trump organizations, said of the payments to the women.

Brand Protection

He said that Trump wasn’t just a businessman, but a brand to be protected and that the payments couldn’t have been made from campaign funds for that reason. "This is a cost of him doing business," Backer said.

According to a charging document in Cohen’s case, Pecker, identified as "Chairman-1," offered to help Cohen with negative stories that came up during the campaign. The document spells out exchanges between Cohen, Pecker and another American Media executive while arranging payments to Clifford and McDougal.

"It sounds like they knew each other and it’s not the first time it happened," said Cleta Mitchell of Foley & Lardner LLP. But she said that even if a pattern doesn’t exist, the payments weren’t campaign expenses, likening them to a candidate settling a lawsuit involving his business that’s causing bad publicity during a campaign.

"Just because a candidate makes payments out of his personal money during the campaign doesn’t convert that to a campaign expense," Mitchell said.

Campaign Funds

A separate provision in election law bars candidates from converting campaign funds to personal use. There’s a long history of candidates charged for doing so, most recently on the same day that Cohen pleaded guilty. Representative Duncan Hunter, a California Republican, and his wife Margaret, were indicted on multiple accounts stemming from their alleged use of almost $250,000 donated to his re-election committee to pay for vacations, school tuition for their children and other personal expenses. Hunter has denied misusing funds and the couple entered a plea of not guilty.

Bradley Smith, a former Republican FEC commissioner, says the agency has adopted narrow criteria for determining if campaign funds should be used for making a payment. "The more objective approach that the FEC has adopted is, does this expense exist solely because of the election, like renting office space for the campaign or buying TV ads," he said. But prosecutors have taken a broader view of the law in at least one case.

In 2011, John Edwards was indicted on election law charges stemming from the 2008 presidential race similar to those that Cohen faced. The former North Carolina senator and 2004 Democratic nominee for vice president was charged in 2011 for soliciting nearly $1 million from two donors to keep his affair with Rielle Hunter, a campaign aide, secret while he was running for the Democratic presidential nomination. The Justice Department dropped charges in 2012 after a jury deadlocked on most of the charges.

In that case, attorneys for Edwards argued the payments were made to hide the affair from the candidate’s wife, the late Elizabeth Edwards, then suffering from cancer.

--With assistance from Shannon Pettypiece.

To contact the reporter on this story: Bill Allison in Washington at ballison14@bloomberg.net

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Justin Blum, Alexis Leondis

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