Michael Cohen's Legal Troubles: Breaking The Law

Michael Cohen, former lawyer to President Donald Trump, pleaded guilty to eight charges, including campaign finance violations, tax fraud, and bank fraud. Cohen admitted to paying hush money to two women, porn star Stormy Daniels and Playboy model Karen McDougal, to keep quiet about their alleged affairs with Trump during the 2016 election campaign. Cohen also pleaded guilty to lying to Congress about efforts to build a Trump Tower in Moscow. He was sentenced to three years in prison and disbarred from practising law.

Campaign finance violations

In 2018, Michael Cohen, former lawyer to President Donald Trump, pleaded guilty to eight criminal charges, including campaign finance violations. Cohen admitted to facilitating hush-money payments to two women, adult-film actress Stormy Daniels (legal name Stephanie Clifford) and Playboy model Karen McDougal, to keep them quiet about their alleged affairs with Trump. The payments were made in the run-up to the 2016 presidential election, and Cohen stated that he did so at the direction of Trump "for the principal purpose of influencing" the election.

The payments to the two women constituted campaign finance violations for two reasons. Firstly, Cohen's payment of $130,000 to Clifford exceeded the $2,700 limit on personal contributions to a single candidate for an election. Secondly, the payment of $150,000 to McDougal flouted the ban on corporations contributing directly to campaigns. Cohen arranged for a publishing company, the National Enquirer's parent company American Media International, to make the payment to McDougal for the rights to her story.

Cohen was sentenced to three years in prison for these and other offences, including tax evasion and bank fraud. He was also disbarred from practising law in the state of New York and ordered to pay a $50,000 fine.

Tax evasion

Michael Cohen, former lawyer to President Donald Trump, pleaded guilty to five counts of willful tax evasion in 2018. He failed to report more than $4 million in income to the Internal Revenue Service (IRS) and evaded paying over $1.4 million in taxes.

From 2012 to 2016, Cohen earned more than $2.4 million in income from a series of personal loans made to a taxi operator, none of which he disclosed to the IRS. He also concealed over $1.3 million in income he received from another taxi operator, including a bonus payment of at least $870,000.

Cohen hid additional sources of income from the IRS, including a $100,000 payment for brokering the sale of a property in Florida, approximately $30,000 in profit from brokering the sale of a Birkin bag, and more than $200,000 in consulting income from an assisted living company.

In total, Cohen failed to report more than $4 million in income, resulting in the evasion of over $1.4 million in taxes due to the IRS. As a result of his crimes, Cohen was sentenced to three years in federal prison and ordered to pay a $50,000 fine. He was also disbarred from practicing law in the state of New York.

Lying to Congress

Michael Cohen, former personal attorney to President Donald Trump, pleaded guilty to lying to Congress under the federal false-statements statute. Cohen admitted to making false statements in 2017 to the U.S. Senate Select Committee on Intelligence about a plan to build a Trump Tower in Moscow. This charge was separate from other federal charges Cohen faced involving his taxi businesses, bank fraud, and campaign work for Trump.

In the case of Michael Cohen, his false statements to the Senate Select Committee on Intelligence were material to the investigation into Russian interference in the 2016 U.S. election. Cohen's lies had the potential to influence the decisions of the committee, even if they did not actually do so. This is a key aspect of the "materiality" requirement, which states that the government must show that the statement was capable of influencing the decisions of the congressional body.

Cohen's guilty plea served as a stark reminder that witnesses who appear before congressional committees must provide truthful testimony. Lying to Congress can have serious consequences, as Cohen's case demonstrates.

Bank fraud

Michael Cohen, former lawyer to Donald Trump, pleaded guilty to eight criminal charges in 2018, including bank fraud. Cohen was sentenced to three years in prison and ordered to pay a $50,000 fine.

Cohen's bank fraud charge was related to a $130,000 payment he made to adult film actress Stormy Daniels (also known as Stephanie Clifford) ahead of the 2016 US election. Cohen admitted to facilitating the payment to Daniels at the direction of Trump, with whom she claimed to have had a sexual relationship before he became president.

The payment to Daniels was made from a home equity line of credit that Cohen held with First Republic Bank. Cohen told CNN that he transferred the funds from his home equity line of credit to his LLC account in the same bank. However, Cohen's use of the loan came under scrutiny as banks are required to carry out due diligence on customers under "Know Your Customer" rules, and transactions over $10,000 can trigger automatic reporting to financial authorities.

First Republic Bank reported Cohen's $130,000 payment as potentially suspicious to the US Treasury Department. Cohen may have had to explain to the bank why he was making the payment, and it is illegal under the US bank fraud statute to "obtain any... funds... owned by... a financial institution, by means of false or fraudulent pretenses, representations, or promises".

According to financial analysts, the possibility of a bank fraud charge being brought against Cohen hinged on what he told the bank he was doing with the loan. If Cohen explicitly lied about the purpose of the loan, this could be considered bank fraud. However, some banks don't ask borrowers what they intend to do with the loan proceeds, and others will accept a broad designation such as "personal expenses".

In addition to bank fraud, Cohen was also convicted of tax evasion and campaign finance violations.

Lying to a federally-insured bank

Michael Cohen, former lawyer to Donald Trump, pleaded guilty to eight charges in 2018, including making false statements to a federally-insured bank. This was in addition to charges of tax evasion and campaign finance violations. Cohen was sentenced to three years in prison.

Cohen's false statements to a federally-insured bank related to a $500,000 home equity loan he obtained. In 2010, Cohen took out a $6.4 million promissory note with a bank, collateralised by his taxi medallions, and personally guaranteed by Cohen. By 2013, Cohen had increased the line of credit to $14 million, giving him $20 million in personal medallion liabilities with the bank.

In 2014, Cohen refinanced his medallion debt with another bank and a New York-based credit union. However, when applying for a mortgage for a Park Avenue condominium in 2013, and later for financing to purchase a summer home in 2015, Cohen concealed the $14 million line of credit. When the bank questioned Cohen about the line of credit, he lied, stating that it had been closed.

In 2015, Cohen applied for a home equity line of credit, again understating his medallion debt and monthly expenses. By concealing his true financial condition, Cohen obtained a $500,000 home equity line of credit that the bank would otherwise not have approved.

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