The ‘stupid’ Trump mistake that led to the Michael Cohen hearings

Here’s one takeaway from the Michael Cohen hearings that probably everyone can agree on — from Donald Trump to Michael Cohen, and from Rush Limbaugh to Rachel Maddow.

If you’re running for president, and you want to make a hush money payment to a porn star, it’s probably unwise to pay by check.

“The two were very stupid,” said Alex Ozols, a defense attorney in San Diego, referring to Cohen and Trump. “When Trump wrote the check he obviously wasn’t thinking long-term and of the consequences… Cash is essentially untraceable.”

“Obviously, by writing a check for a dubious payment, one is leaving a paper trail,” said Chicago attorney Nancy DePodesta at Saul, Ewing, Arnstein & Lehr. “People (frequently) pay in cash or services, for this exact reason.” DePodesta, who was a federal prosecutor for 12 years, says checks and other proof of financial transactions were often gold dust for investigators. “We’d follow the money,” she says.

It is startling to realize that if Cohen and Trump had shown some savvy when paying off porn star Stormy Daniels in 2016, possibly none of this would be public.

Cohen wrote a $135,000 check to Daniels weeks before the 2016 presidential election, so that she wouldn’t speak up publicly about her past sexual tryst with the married Trump. On Wednesday Cohen presented Congress with checks written to him in 2017 by Trump and associates to reimburse him.

Chip Somodevilla/Getty Images
A copy of a check paid to Michael Cohen by President Trump was displayed when Michael Cohen, former attorney and fixer for President Donald Trump testifies before the House Oversight Committee on Capitol Hill.

Those payments are the only concrete proof connecting Trump, Cohen and Daniels. New York prosecutors are now investigating whether they amounted to campaign finance violations by candidate Trump. Cohen has now been disbarred — for a variety of offenses — and is going to jail, and he is co-operating with prosecutors against Trump. That has led directly to Cohen’s testimony to Congress against Trump — damaging testimony watched across America and the world.

Last year Cohen was sentenced to three years in prison and ordered to pay a $50,000 fine after pleading guilty to tax evasion, making false statements to a financial institution, unlawful excessive campaign contributions and lying to Congress as part of special counsel Robert Mueller’s investigation into Russian meddling in the 2016 presidential elections.

Cohen on Wednesday went into details about the convoluted process, including creating a shell company, that he followed in order to keep the payments secret. He wanted to hide them from Trump’s wife Melania, Cohen’s own wife, and others, he said. He also said there were other hush money payments (and, intriguingly, “not all of them had to do with women.”).

President Trump tweeted Wednesday that Cohen was “lying in order to reduce his prison time.”

But with some simple common sense none of this would have been necessary, financial and legal experts agree.

Making legal payments with checks creates a paper trail through the banking system that anyone can follow. (Another recent example: “Empire” actor Jussie Smollett allegedly paid two men with a check to help him stage an attack.)are popular with criminals. But making payments with cash or certain other alternatives would have left them completely anonymous. That’s one reason that criminals like crytocurrencies like bitcoin BTCUSD, +1.21%  

The main problem with cash, legal and financial experts say, is that the banking system is already set up to track suspiciously large cash withdrawals or deposits. If you withdraw or deposit more than $10,000 at a time, the bank has to report the transaction to federal banking regulators as a suspicious activity. Even worse, it is actually illegal to withdraw large sums under the $10,000 threshold if you are doing so in order to avoid scrutiny. (Prosecutors used that technicality to jail former Speaker of the U.S. House of Representatives Dennis Hastert, though their real target was his past behavior sexually molesting underage boys).

One simple way around this? Our old standby gold bullion — the oldest money still in use today.

You can purchase unlimited amounts of gold bullion from established dealers without triggering transaction reports, and the bullion can be used in many circumstances as a substitute for U.S. dollars or other currencies. Gold was trading at around $1,250 per troy ounce in October, 2016, around the time the Daniels hush-money payment was made. Cohen could have handed her 108 ounces — just under seven pounds — of gold Eagles or Buffaloes. Those are coins issued by the U.S. Mint and readily available from dealers. As long as Cohen wore gloves there would have been no Trump campaign fingerprints on the money, figurative or literal.

Gold, however, leaves a transaction record when it’s bought or sold, Ozols noted.

Cynics reply: That’s an argument for buying it well ahead of time. If Michael Cohen had kept $1 million in gold Eagles in a safe in his office, he could have made hush money payoffs on behalf of Trump as needed and left no money trail at all. He might still be Trump’s attorney. He might not be disbarred or going to jail. And Daniels might be seen today as nothing more than an obscure porn star telling a wild tale about getting gold coins from the president’s attorney — a tale for which she would be able to provide no evidence at all.

Trump might have learned from the case of TV talk show how and former Cincinnati mayor Jerry Springer, who was caught in a sex scandal in the 1970s when he visited a brothel and also paid by check. In Springer’s case he compounded the error because the check bounced.

The latest scandal is not the first time a minor, seemingly trivial error ended up having enormous ramifications. We shouldn’t overdo the Watergate comparisons. But that affair only broke because of a simple, stupid burgling error. And it brought down the president only because he had bugged his own office.

Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch’s free Personal Finance Daily newsletter. Sign up here.

Contenu similaire