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<\/a>Michael Cohen testifies before the House Oversight Committee, February 27, 2019. (Asahi Shimbun via Getty Images)<\/p><\/div>\n
Look next to the Southern District of New York, where they don\u2019t write, they indict<\/h3>\n
W<\/span>ill the Mueller probe end with a bang or a whimper? For well over a year, that was the question. Even as the trajectory of \u201cRussiagate\u201d appeared to bend away from suspicions about a criminal conspiracy between the Trump campaign and the Kremlin, matters of intense interest remained: Would the special counsel conclude that the president of the United States had obstructed investigations? Would Mueller find iterations of Trump\u2013Russia \u201ccollusion\u201d that, though not criminally actionable, were impeachable or at least politically crippling?<\/p>\n Who would have guessed that, as we wait on tenterhooks for Mueller\u2019s final report, said at press time to be imminent, Russia might turn out to be the least of the president\u2019s problems? There is a separate, very active investigation by federal prosecutors in Manhattan \u2014 the U.S. attorney\u2019s office for the Southern District of New York (SDNY). Mr. Trump appears to face real jeopardy. Justice Department guidance instructs that a president may not be indicted until he is out of office; nevertheless, the SDNY probe is as politically perilous now as it could be legally perilous later.<\/p>\n February ended with the spectacle of testimony by Michael Cohen, the president\u2019s former lawyer, before the House Oversight Committee. In our frenetic, split-screen, all-Trump-all-the-time era, as the president was on the other side of the planet making a high-profile but futile effort to strike a Korean denuclearization deal, Democrats rolled out the red carpet for Trump\u2019s longtime \u201cfixer,\u201d as Cohen referred to himself. At least when he wasn\u2019t claiming to be the family\u2019s \u201cTom Hagen.\u201d Evidently no one explained to Cohen that the immortal\u00a0consigliere\u00a0<\/i>played by Robert Duvall in the\u00a0Godfather<\/i>\u00a0movies is a gangster \u2014 or maybe they tried to explain, only to find that Cohen was actually the Trump family\u2019s Fredo. In any event, Cohen was invited back to the House despite having recently pled guilty (in the Mueller probe) to perjuring himself in his last congressional testimony. That guilty plea came after he\u2019d been convicted by the SDNY on several counts of tax fraud, bank fraud, and (more dubiously) campaign-finance fraud.<\/p>\n Why would lawmakers summon an inveterate liar for an encore? Because Democrats now control the House and Cohen has now turned against his former boss. All were delighted to orchestrate a national-television extravaganza at which Cohen could brand Trump \u201ca racist, a conman, and a cheat.\u201d<\/p>\n As one would expect, the hearing was more political theater than fact-finding exercise. Cohen, after all, has been under the microscope since 2017. He said nothing to the committee that was not already well known to Mueller\u2019s staff and the SDNY. There were some notable takeaways, however, the most intriguing of which was the likelihood that the SDNY is investigating Trump for a heretofore undisclosed crime \u2014 possibly obstruction of justice, possibly with Cohen as a cooperating accomplice witness.<\/p>\n Let\u2019s back up. Last April, armed with court-authorized warrants, the FBI raided Cohen\u2019s Rockefeller Center office and the Park Avenue hotel suite where he was staying while his New York home \u2014 also searched \u2014 was being renovated. In the 2016 campaign stretch run, the \u201cfixer\u201d was known to have engineered hush-money deals with two women \u2014 porn star \u201cStormy Daniels\u201d (real name Stephanie Clifford) and former\u00a0Playboy\u00a0<\/i>model Karen McDougal \u2014 who quite plausibly claim to have had extramarital flings with Trump more than a dozen years ago. (He denies it, not so plausibly.) Cohen arranged to have McDougal paid $150,000 through the offices of the\u00a0National Enquirer<\/i>\u00a0\u2014 David Pecker, chairman of the tabloid\u2019s controlling company, American Media Inc. (AMI), is an old Trump pal. A $130,000 payment to Daniels was fronted by Cohen himself.<\/p>\n There is nothing illegal per se about such arrangements, known as nondisclosure agreements (NDAs). They are common in civil-litigation settlements. Here, though, the temporal proximity of the NDAs to the election had prosecutors construing the payments as \u201cin kind\u201d campaign expenditures (very similar to the Justice Department\u2019s aggressive reasoning in the failed prosecution of former vice-presidential nominee John Edwards). The AMI payment to McDougal was seen as an illegal corporate contribution; the Stormy payment exceeded Cohen\u2019s personal-contribution limit; and neither payment was disclosed to the Federal Election Commission.<\/p>\n It turned out that the SDNY investigation of Cohen was broader in scope. He evaded taxes on millions of dollars in income; as the high life overextended him, he lied to banks to obtain loans that kept him afloat. Last August, he pled guilty to six fraud charges connected to those schemes. Prosecutors also tacked on two felony counts of campaign-finance fraud \u2014 the McDougal and Daniels hush money. Even Fredo could sense that the president is the prosecutors\u2019 real quarry. So, hoping for sentencing leniency, Cohen not only refrained from fighting these election-law charges, though there are very colorable legal defenses; he volunteered that Trump directed him to make the payments.<\/p>\n Especially problematic for the president is the fraudulent manner in which Cohen was reimbursed for the Stormy NDA. Even as Trump publicly denied knowledge of the payments made on his behalf, his company booked the October 2016 NDA expense as if it had been a fee for legal work to be performed by Cohen the following year. Cohen was directed to submit monthly invoices and received monthly checks until the debt was fully repaid in December 2017. At least one check was signed by the president.<\/p>\n If Trump, a rich man, had just paid Daniels himself, or had simply reimbursed Cohen in full in 2016, there would have been no problem except for some political embarrassment when the FEC disclosure finally came due \u2014 after the election. But because the payments were deceptively structured as being on a legal retainer, Trump left himself with a pending debt to Cohen in 2017. He did not reveal this debt on his financial-disclosure form as required by law. The Government Ethics Office has referred the matter to the Justice Department for a possible false-statements prosecution. The New York State attorney general is scrutinizing the Trump Organization\u2019s payments to Cohen for possible accounting fraud.<\/p>\n Meanwhile, in early February, we learned that the SDNY is conducting a criminal investigation of the Trump Inaugural Fund, a nonprofit organization that underwrote inauguration-related events and is subject to campaign-finance laws. The fund raised a staggering $106.7 million (double the prior record of Obama\u2019s 2009 inaugural fund). Prosecutors want to know where the money went, and the subpoenas issued to the fund and its managers indicate that charges of conspiracy, fraud, and money-laundering are under consideration.<\/p>\n The fund was run by Trump-campaign deputy chairman Richard Gates. Both Gates and his superior, former campaign chairman Paul Manafort, were convicted in consequence of the Mueller investigation for, among other things, failing to register as lobbyists for a Kremlin-tied Ukrainian political party. Gates is cooperating with Mueller and the SDNY. In the interim, in a related case in Washington, Manafort\u2019s lobbying associate, W. Samuel Patten, has pled guilty to failing to register as an agent of some of the same Ukrainians. In connection with that scheme, Patten acknowledged committing fraud via the Trump Inaugural Fund \u2014 to wit, he used a straw donor to conceal that a Ukrainian had donated $50,000 for four tickets to Trump\u2019s inaugural festivities. (Foreign donations to inaugural committees are illegal.)<\/p>\n Finally, at the House hearing, Cohen was asked whether he knew of the president\u2019s involvement in any illegality that had not been publicly disclosed. Cohen responded in the affirmative but refused to elaborate. He said that he is cooperating in an ongoing SDNY investigation of the matter and that prosecutors instructed him not to discuss it. He did, however, provide a clue: He declined to describe conversations he\u2019d had with Trump following the raid on his office and residences. We know the FBI seized documents related to the NDAs and at least one recording Cohen had made of a conversation with Trump about the hush-money payment to McDougal.<\/p>\n Cohen claimed he was not at liberty to discuss the matter because it was part of the SDNY investigation. The vague implication is that prosecutors are ex-ploring whether there was obstruction: possibly, witnesses\u2019 getting their story straight about potentially incriminating evidence. Of course, it is equally possible that Trump, Cohen\u2019s former client, was inquiring whether investigators had improperly seized materials protected by attorney\u2013client privilege \u2014 an inquiry that would have been foolish for the president to make under the circumstances (he has lawyers for that) but not necessarily illegal.<\/p>\n Having worked in the SDNY for nearly 20 years, I would add this caution: What I\u2019ve outlined here is just what can be gleaned from public reporting. Prosecutors and the FBI have much more information and could be probing angles about which we are not in a position even to hypothesize.<\/p>\n The imminent Mueller report has congressional Democrats eager to rev up their impeachment machinery. But right now, the real action is in the SDNY \u2014 where they don\u2019t write reports, just indictments.<\/p>\n