The real danger for Trump and lawyer Michael Cohen in growing Federal investigation

  • Federal authorities wiretapped the phone lines of President Donald Trump's long-time personal lawyer Michael Cohen, NBC News reported Thursday.
  • The revelation follows Rudy Giuliani's bizarre interview with Sean Hannity on Fox News Wednesday night.
  • The growing investigation and ever-changing stories about the payment to Stormy Daniels presents a clear danger to President Trump and makes it less likely that he'll cooperate with the Russia probe.
  • That could lead to the president invoking his Fifth Amendment rights, which would be a political disaster.
President Donald Trump's personal lawyer Michael Cohen exits a hotel in New York City, April 11, 2018.
Brendan McDermid | Reuters
President Donald Trump's personal lawyer Michael Cohen exits a hotel in New York City, April 11, 2018.

Rudy Giuliani has raised more questions than answers during an interview with Fox News' Sean Hannity on Wednesday when he revealed that Trump repaid his lawyer Michael Cohen for the $130,000 settlement with porn star Stormy Daniels.

He did this to try to avert a campaign finance violation under focus by the Feds, which would be a felony, and likely to try to pacify Cohen from cooperating with prosecutors.

Unfortunately for the president, his explanation doesn't hold legal water. Cohen already publicly stated the Trump never reimbursed him.

Even if this new explanation of the 'monthly retainers' is accurate and those funds gradually paid Cohen off, moving money around after-the-fact when the election was already over cannot change the nature and intention of the payments when they were made in 2016. And those payments by Cohen before the election were likely to assist the campaign, were not reimbursed and not reported to the FEC.

This would also not alter the fact that Trump's attorney fronted those settlement funds in 2016, under documents that tried to conceal identities under fake aliases, which is simply unheard of for civil settlements.

"In fact, this is a new construct that could backfire, especially if the Cohen documents seized in the raid tell a different story."

This 'monthly retainer' theory makes no practical sense since lawyers don't operate that way.

To be clear, Giuliani stated on Wednesday night under friendly questioning on Fox News that the Stormy Daniels payments were perfectly legal, and should not be probed by prosecutors, because Mr. Trump ultimately funded the Daniels settlement with his own funds via a monthly retainer to Cohen's firm.

Thus, he argues, since Trump is legally able to simply fund his own private settlement for personal reasons, there's no predicate crime here, and prosecutors should just forget about it.

As noted above, this is an oversimplification by Giuliani that falls short from a legal standpoint – you can't sanitize this mess or the intentions of the payments in real time during the heat of the 2016 election, to get off the hook with a newly constructed argument well after the fact.

Monthly retainers for lawyers are advances for legal fees and ordinary costs, not blind trusts for secret side deals.

Neither can this theory supplant Cohen's admission that he paid the hush money from a personal line of credit, right before the election, which violates ethics rules on basic attorney settlement procedures as well as campaign finance rules.

As a result, this fails to provide a legal narrative to actually change the situation. A possible campaign finance violation does not get sanitized with a post-hoc theory that money got siphoned at the back end to fund a deal that was a secret to the client. Federal prosecutors will not be deterred.

The actual contents in Cohen's seized files are the great unknown here and one of the biggest lingering dangers for both Cohen and Trump.

If those materials contradict any of the ongoing narratives, that would torpedo Giuliani's efforts and undermine the defense. This is a real danger since Trump's lawyers don't know what lies in all those files.

Administration's new tactic

Prosecutors weigh credibility and truthfulness by consistent statements. Mr. Trump fails this simple litmus test. He's made more contortions and twists on this than a professional wrestler.

Giuliani's entry into this fray appears to mark a new tactic by the administration to somehow find an exit ramp from this messy case. In other words, Giuliani is trying to tie together from new cloth a fresh legal theory to somehow argue the money was eventually funded by Mr. Trump so everything is ok.

In fact, this is a new construct that could backfire, especially if the Cohen documents seized in the raid tell a different story.

Of course, Mr. Trump could have avoided the mess if he and Cohen simply treated this deal with Daniels in a straight and simple manner from the start, rather than hiding behind convoluted anonymous names and missteps to conceal the deal.

This change of narrative was intended to cool things down, but it will probably end up turning up the heat in an already volatile case that, at the core, points to potential felonies and pressure on Cohen to cooperate in a case against his famous client.

Further complicating matters, on Thursday, it was revealed that the FBI had wiretapped Cohen and intercepted at least one call with the White House. The Feds can only obtain a wiretap if they are able to present information to a federal judge, in this case the judge presiding in Manhattan, sufficient to demonstrate probable cause of criminal activity by Cohen.

Given this development, it becomes even more clear that Cohen is a criminal target of the investigation, even if he has not yet received a formal 'target letter' from the prosecutors. As a result, the California judge in the Stormy Daniels case was likely correct in concluding Cohen will likely be indicted soon.

In the end, this deteriorating relationship between Team Trump and the prosecutors lessens the chance he'll cooperate with special counsel Robert Mueller in the Russia investigation, but in turn perhaps face a grand jury subpoena to come to the DC federal court and either talk or take the Fifth, and asserting his Fifth Amendment right against self-incrimination would be a political disaster for the president.

Even Trump has said several times before that innocent people don't take the Fifth.

Commentary by Seth Berenzweig, a managing partner of Berenzweig Leonard. Berenzweig represents business, sports, music and entertainment clients. He has extensive corporate, business and litigation experience, and regularly handles transactions, government contracts, compliance and white collar matters in the Washington, D.C. region and nationally. Follow him on Twitter @SethBerenzweig.

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