Trump Has Really Stepped in It Now
Featured Story, The Latest News

Trump Has Really Stepped in It Now

The $130,000 Hush Money Paid to the Porn Actress Opens Up Legal and Tax Issues for Him, His Lawyer and Her

David Cay Johnston

Donald Trump and his enablers may face numerous legal problems over $130,000 of hush money paid to porn star Stormy Daniels, one of two women known so far to have taken money in return for promising to keep silent about illicit sexual relationships with Trump after his 2005 marriage to Melania Knaus.

We don’t know how Daniels was paid—in cash installments, a single check or some other device. How hush money is paid has implications for federal banking and tax laws, as three major politicians learned the hard way in this century.

Indictable offenses are possible for campaign finance law violations, banking law violations and tax law violations. Of course, since Trump is president he may be able to cajole, persuade or threaten administration officials into taking no action.

There is an alternative explanation, a lurid one for sure, for why Trump would want to keep porn actress Daniels from speaking about their sexual encounter. That reason may, or may not, have been campaign related, as we shall see below.

Stormy Daniels in Penthouse magazine

For now, the best forum to learn how many other Stormy Daniels were paid off, and who bore the cost, would be Congress. So far Congress has mostly refused to do its duty under our Constitution’s system of checks and balances on the exercise, and abuse, of executive power.

Congress could hold public hearings, after investigators armed with subpoenas obtain financial records and compel testimony, about all hush money payments since Trump announced his presidential bid in June 2015. If the facts warrant, going back further in time could reveal significant facts Trump has hidden that go to his fitness to hold any public office.

Trump has a long history of demanding absolute silence from those around him, sometimes using structured payments to ensure that silence endures for years or decades, as we shall see below.

Campaign staffers had to sign nondisclosure agreements.

Trump even required some campaign volunteers to sign nondisclosure agreements.

Because of his extensive use of hush money and nondisclosure agreements much of Trump’s unsavory conduct has been hidden from public view. Trump and his lawyers are quick to make sure anyone who has an agreement requiring them to keep quiet follows it to the letter, as we shall see below.

The $130,000 paid to Daniels, whose legal name is Stephanie Clifford, was agreed to just before the November 2016 election. Daniels has had sex on camera with men and women in more than 100 porn videos. She has implied in an interview with a magazine with a delightfully relevant title, In Touch Weekly, that Trump also romped with Jenna Jameson, who is believed to be the biggest grossing porn star in the world.

The timing of the Daniels hush money is significant. It was paid just before voters went to the polls in November 2016.

Lawyer Michael Cohen

The hush money clearly was paid to keep the bosomy performer from becoming Trump’s Gennifer Flowers, which might have cost Trump the White House. Flowers is a cabaret singer and one-time Arkansas State employee who went public about a long-running affair with Bill Clinton, nearly derailing the Democrat’s 1992 presidential campaign.

The official line on the porn actress payoff is classic Trump: Nothing here folks, so move along.

Michael Cohen, a long-time Trump lawyer, gave a Feb. 13 statement to The New York Times that is designed to create the impression that he paid the hush money out of the kindness of his heart:

“Neither the Trump Organization nor the Trump campaign was a party to the transaction with Ms. Clifford, and neither reimbursed me for the payment, either directly or indirectly. The payment to Ms. Clifford was lawful, and was not a campaign contribution or a campaign expenditure by anyone.”

Notably missing from the artfully worded denial is Trump himself. The statement would also exclude any business entity Trump owns that is not under the umbrella of the Trump organization.

Only an audit of Cohen’s billings to Trump, Trump-related entities and other sources of money he received could establish whether the statement given to The Times is true, false or misleading. And only a thorough review of money that changed hands between Trump and Cohen could resolve the issue of why Trump is notably unmentioned in the Cohen statement and why the statement refers only to Trump entities that are considered part of the Trump organization.

Cohen can assert whatever he wants about the hush money having no connection to the Trump campaign. However, he doesn’t get to decide that. The Federal Election Commission, and, potentially, jurors in a criminal trial, get to determine whether the Daniels payoff was a disguised campaign contribution.

Individual donors legally can give no more than $2,700 to a presidential candidate. The Daniels payoff was more than 48 times that limit.

The Federal Election Commission’s guide for citizens notes that contributions can be made in many forms.

“Most people think of contributions as donations of money in the form of checks or currency. While these are common ways of making a contribution, anything of value given to influence a Federal election is considered a contribution,” the FEC guide explains. “All the contributions you make—whatever their form—count against your per committee limits.”

Paying a porn actress to keep silent about an illicit affair just days before an election would seem to qualify as “anything of value” to aid a presidential campaign.

On the other hand, if indeed Cohen paid off Daniels as a self-motivated act of kindness and this has absolutely nothing to do with the election—a far-fetched interpretation, for sure — then the IRS should be asking questions.

Congress allows individuals to make gifts worth no more than $15,000 per person to anyone else. Larger gifts must be reported on Form 709 and are subject to the gift tax. If Cohen filed a gift tax return, he could just make it public.

The gift tax and hush money became an issue for former Senator John Edwards when he sought the Democratic party nomination for president in 2008 after being John Kerry’s running mate in 2004.

Edwards was indicted over hush money he paid to Rielle Hunter (who was also known by four other names). Hunter became the former senator’s mistress in 2006 and had a love child with him. Edwards lied about and denied the affair and the child until 2010, when he came clean.

Hunter was paid about $1 million to keep quiet, some of which prosecutors charged was connected to the campaign, which would violate federal election law. Prosecutors said $700,000 of the money came from a Mellon banking and oil heiress, then 100 years old. However, the heiress had filed a gift tax return, which made the gift proper as a matter of tax law. Edwards was free to use the money any way he chose.

In 2012, Edwards was acquitted on one count and a mistrial was declared on the other five. The Justice Department declined to try the five remaining charges a second time.

A related tax question is whether Trump or Cohen took the $130,000 as a tax deduction. Hush money payments for sexual misconduct can, in many cases, be tax deductible. That means you and other taxpayers share in the cost of payoffs to hide indiscretions.

How the payments were made is also important.

The highest-ranking elected official to go to prison is former House Speaker Dennis Hastert.

The Illinois Republican and former high school wrestling coach confessed in 2016 of violating banking laws by structuring $1.7 million in hush money to avoid filing cash transaction reports. These reports are used to reduce tax cheating, track drug trafficker money as well as spot terrorist cash flows.

Hastert, after initial denials, confessed to abusing several boys including a 14-year-old wrestler, who as an adult was paid to keep silent. Hastert served 13 months in prison. He is now suing to get his victim to get back the $1.7 million.

Similarly, the IRS Criminal Investigation Division looked into payments arranged by Eliot Spitzer, then governor of New York, to prostitution services. Spitzer, a wealthy Democrat, paid at least $80,000 for sex, using wire transfers, some of them for $4,000.

While Spitzer escaped prosecution, he had to resign in disgrace as governor of New York in March 2008 after The New York Times exposed the corruption. Four people were indicted in the Emperor’s Club V.I.P. prostitution ring which employed 50 working women in New York Washington and as far away as London and Paris.

Among those who could reveal much about Trump’s conduct are his ex-wives, Ivana and Marla. However, if either woman spoke up it would put them in financial and legal jeopardy because their divorce decrees require them to never speak about Trump without his explicit permission.

Ivana, for example, is covered by this language, approved by a New York family court judge:

“Without obtaining (Trump’s) written consent in advance, [Ivana] shall not directly or indirectly publish, or cause to be published, any diary, memoir, letter, story, photograph, interview, article, essay, account, or description or depiction of any kind whatsoever, whether fictionalized or not, concerning her marriage to [Trump] or any other aspect of [Trump’s] personal, business or financial affairs, or assist or provide information to others in connection with the publication or dissemination of any such material or excerpts thereof.”

Trump has publicly warned Marla Maples to keep her mouth shut.

In 1999, when Trump made a failed bid to win the presidential nomination of a fringe organization, the Reform Party, Trump told Neil Cavuto of Fox News that Marla Maples would not be making any more unflattering comments about him in public after she said she would not be silent if he was on the road to the White House.

“We have a confidentiality agreement, and I’m sure that she’ll abide by it now,” Trump told Cavuto on Oct. 20, 1999.

“You have a confidentiality—you’re not allowed to talk!” Trump continued. “And she [Maples] goes out and says I wouldn’t this, I wouldn’t that. So, I say why am I paying money to somebody that’s violated an agreement? But we’ll see what happens in the future. And if in the future she continues, I guess I’ll have to take very strong measures.”

New York State, where the cash-for-silence payments were arranged, has a 1991 law against secret agreements in court-approved settlements. That law is incredibly weak, however, allowing judges to seal records for “good cause.”

The alternative explanation for the payoff to porn actress Daniels relates to some creepy details and to how Trump has used repeatedly Rupert Murdoch’s New York Post to create the impression that he is a great Don Juan. Among other puff pieces, The Post ran a cover with his smiling face and the headline “best sex ever.”

Maples, playing herself on the sitcom Designing Women after the couple divorced in 1999, looked into a camera and declared she never said that.

Daniels gave numerous interviews about her fling with Trump in 2011, including to In Touch Weekly, which included a put down of Trump the self-imagined great lover.

She said described sex with Trump as “textbook generic. It wasn’t like, ‘Oh my God, I love you.’ He wasn’t like Fabio or anything. He wasn’t trying to have, like, porn sex…. It was one position, what you would expect someone his age to do. It wasn’t bad.”

Those comments and others she made about another porn star, Jenna Jameson, raise the prospect that Trump and Cohen were alarmed about how revelations that he was nothing special in the sack would devastate Trump’s ego. During the campaign, Trump made self-praising references to the size of his genitals, including during a debate with other candidates from the party of family values.

As a result of these anxieties, also expressed with the way Trump wears his trademark neckties long below the belt line that is standard fashion, the possibility that’s sexual panic rather than fear of losing the election motivated the hush money payment has to be considered.

And, of course, the hush could have been paid for both reasons—fear of losing an election and fear of becoming known for coming up short in the bedroom.

Featured photo: Trump with Stormy Daniels (MySpace)

February 14, 2018