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Officially confirmed but still unseen, the historic indictment of Donald Trump inspired extensive speculation about the charges, even though not a single one of the reported 34 counts has been revealed.
The most common legal explainer for the hush money case holds that Manhattan District Attorney Alvin Bragg is launching a hybrid prosecution, which uses New York state law on falsifying business records as a misdemeanor springboard to pursue a federal campaign finance felony.
One of Bragg’s former rivals in the DA’s race, however, suspects that another approach might be at play.
“While that could be one theory and could even be one count of an indictment, I think in another theory that for some reason has been glossed over is that the underlying crime is not a federal charge,” said attorney Diana Florence, who spent decades in the Manhattan DA’s office before her unsuccessful run for Bragg’s position.
That approach, she notes, could be “incredibly hard to prove.” The Department of Justice passed on pursuing such a case, and so did Bragg’s predecessor Cyrus Vance. Even attorneys who formerly worked on the DA’s case told The Daily Beast that a campaign-finance theory would be weak.
Florence believes that these attorneys and commentators could be barking up the wrong tree because Manhattan prosecutors could have a ready alternative with a law already in Empire State’s books: tax fraud.
Here is how Florence, who pursued scores of tax cases during her nearly 25-year tenure, says such a case would work.
Trump’s ex-fixer Michael Cohen engineered a complicated system for funneling $130,000 to pornographic film actress Stormy Daniels to silence her alleged affair with Trump. Cohen did so by taking out a home equity line of credit (HELOC) from First Republic Bank and steering it through the shell company Essential Consultants, which paid Daniels’ then-lawyer, Keith Davidson. That payment was marked as a “retainer.” In return, Cohen received $420,000 in reimbursements paid off in $35,000 increments and marked “legal fees,” according to federal court records. Cohen shared checks bearing Trump’s signature with Congress.
If the Trump Organization made the former president whole for those reimbursements, Florence says that’s “income.”
“It’s personal income, and if he didn’t report it as such on his personal tax returns filed with New York State and the feds as well — but, again, we’re talking about a state crime — then, that would be tax fraud,” she added.
The “grossing up” of the $130,000 hush-money payment to a $420,000 reimbursement bears some explanation. Cohen claimed $60,000 in campaign-related “tech services” and an equivalent bonus. The difference accounted for any taxes or interest Cohen would have had to pay to recoup the original HELOC.
After CNN first reported that the indictment has 34 charges, Florence argued that the multiplicity of offenses is consistent with a tax fraud theory on a hush-money case.
“Falsifying business records or offering a false instrument for filing can’t be an ongoing crime,” Florence notes, comparing it to pilfering $5 from a person’s bank account for 30 years.
That would add up to $1,800, which would be an “ongoing crime” that crosses the felony threshold. Each false entry, however, would be its own count.
“So that’s why it can kind of balloon out pretty quickly,” Florence said. “Again, if I’m right about taxes, then, every time that there’s a falsifying business records there’s going to be an offering a false instrument for filing.”
Trump’s attorney Joe Tacopina told Law&Crime that no tax offense occurred “[b]ecause he didn’t take a tax deduction for it.”
Florence says that wouldn’t matter because “it still has to be reported as income.”
“If you receive untaxed income, that is a benefit,” she said.
Tacopina didn’t immediately respond when asked if Trump reported any compensation for reimbursing the hush money payments as income.
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