Trump, Roosevelt, and Secret Campaign Funds

In the 1904 presidential election, a number of major American corporations secretly contributed $1.5 million to Theodore Roosevelt’s reelection campaign. George Cortelyou, the GOP chairman and Roosevelt’s de facto campaign manager, aggressively solicited the corporate donations even as Roosevelt himself publicly denied that his campaign relied on corporate support. When the true story of Roosevelt’s campaign tactics began to emerge after the election, the president sanctimoniously reversed course, calling for a ban on corporate donations to federal election campaigns. In 1907 a reluctant Congress enacted the ban and it has remained in effect ever since.

On Tuesday we learned that Donald Trump’s 2016 presidential campaign likely violated the century-old prohibition on corporate campaign contributions. The facts as currently known, however, suggest the campaign’s real motivation had to do with preserving secrecy, not amassing corporate cash.

The Campaign Finance Conspiracy

In a plea deal with federal prosecutors, former Trump attorney Michael Cohen revealed the existence of a secret plan to buy and then suppress politically-damaging stories about then-candidate Trump’s personal life during the 2016 campaign. Cohen alleges the parties to the agreement included Donald Trump, David Pecker—the Chairman of American Media Inc. (parent company of The National Enquirer tabloid)—several unidentified individuals in the Trump Organization and Trump campaign, and Cohen himself.  

The plan itself was not inherently illegal. Confidentiality agreements are a routine feature of the American legal landscape. But what was illegal in this case was the amount, source, and purpose of the payments to the women in question. In August 2016, AMI—Pecker’s corporation—paid $150,000 to Karen McDougal, a former Playboy model, for the exclusive rights to the story of her affair with Trump. Then in October 2016, two weeks before the presidential election, Cohen paid $130,000 to Stephanie Clifford, an adult film star, for the exclusive rights to her Trump story. The McDougal and Clifford stories did not see the light of day until after the November 6 election, which Trump won by the incredibly narrow margin of 80,000 votes in three states. In light of the razor thin outcome, the pre-election publication of the McDougal and Clifford stories might have been enough to tip the election to Hillary Clinton. For the Trump campaign, therefore, it was money well spent.

Indeed, Cohen admitted that the payments were made “in coordination with and at the direction of a candidate for federal office”—i.e. Donald Trump—and “for the principal purpose of influencing the election.” Consequently, of the 8 counts Cohen pleaded guilty to on Tuesday, 2 involved campaign finance violations: facilitating an illegal corporate contribution (AMI’s $150,000 payment to McDougal) and making an in-kind contribution in excess of the $2,700 federal contribution limit (Cohen’s $130,000 payment to Clifford). The involvement of the Trump Organization—a limited liability company—in reimbursing Cohen after the election could potentially give rise to additional campaign finance charges. Following Cohen’s guilty plea, the Deputy U.S. Attorney for the Southern District of New York warned: “We will not fear prosecuting additional campaign finance cases.” 

The Mystery

Ironically, the whole mess could have been avoided if Trump had simply used his own funds to pay the hush money. 

The ban on corporate contributions does not extend to a business executive’s personal bank account, and contribution limits do not apply to a candidate’s use of his or her own money for campaign purposes. Indeed, Trump lawfully spent $66.1 million of his personal fortune during the 2016 race. The key point is neither of the campaign finance charges against Cohen would have been available to prosecutors if Trump had paid McDougal and Clifford with his own personal funds. 

So why didn’t he just use his own money to pay them? After all, he put $66 million into his campaign. Why not another $280,000?

The Likely Explanation

It is possible that Trump just got bad legal advice. Yesterday he tweeted: “If anyone is looking for a good lawyer, I would strongly suggest that you don’t retain the services of Michael Cohen!”     

But the more likely reason for the convoluted scheme is the Federal Election Campaign Act’s mandatory reporting and disclosure provisions. If Trump had paid McDougal and Clifford using his own personal funds, he would have been required to report the campaign-related expenditures to the Federal Election Commission. The FEC would then have posted the identity of the disbursement recipients on its website. 

Public disclosure would obviously have undermined the whole point of the payments. In the fall of 2016, the last thing Trump wanted voters to know was that he was paying hush money to Playboy models and adult film stars.

But Trump’s effort to avoid disclosure laws has backfired disastrously, leading directly to Cohen’s conviction, Pecker’s immunity deal with federal prosecutors, and a rapidly expanding scandal that poses a serious threat to the Trump presidency, which was already under siege from the Russia investigation.

Protections Against Corruption

Although we still do not know the full story of what happened during the 2016 election, more details are coming into focus. With Cohen and Pecker cooperating fully, federal prosecutors should learn much more about the internal operations of the Trump campaign. Recent developments would also suggest that former Trump campaign manager Paul Manafort may finally be ready to tell prosecutors his own—undoubtedly quite interesting—story. 

In the meantime, the events of the past 48 hours should dispel whatever doubts may still exist about the value of mandatory reporting laws. As Chief Justice Roberts observed in McCutcheon v. FEC, mandatory disclosure of contributions and expenditures provides “robust protections against corruption.”

Candidates with financial secrets, like Roosevelt in 1904 and Trump in 2016, will always want to avoid public disclosure of their campaign finance activities. But that is all the more reason to enforce disclosure laws vigorously. The voting public has every right to know what the George Cortelyous and Michael Cohens of the world are up to. 

Comments

[anon]

"On Tuesday we learned that Donald Trump’s 2016 presidential campaign likely violated the century-old prohibition on corporate campaign contributions."

SO, are you basing this iron clad legal conclusion on the plea agreement, to which you link?

You state:

"In a plea deal with federal prosecutors, former Trump attorney Michael Cohen revealed the existence of a secret plan to buy and then suppress politically-damaging stories about then-candidate Trump’s personal life during the 2016 campaign. Cohen alleges the parties to the agreement included Donald Trump, David Pecker—the Chairman of American Media Inc. (parent company of The National Enquirer tabloid)—several unidentified individuals in the Trump Organization and Trump campaign, and Cohen himself."

On what page of the plea agreement does this appear?

Then, you switch, seemingly, to the allocution:

"Indeed, Cohen admitted that the payments were made “in coordination with and at the direction of a candidate for federal office”—i.e. Donald Trump—and “for the principal purpose of influencing the election."

Do you base your conclusion that either T or the T campaign is "guilty" of anything based on the plea agreement and the Cohen allocution? If so, cite the authority, please. (State: do you think this is a clear, cut and dried issue?)

You then jump to this whopper:

"If Trump had paid McDougal and Clifford using his own personal funds, he would have been required to report the campaign-related expenditures to the Federal Election Commission."

Really? Have you adjudicated this issue? Do you contend that the settlement of any suit, while running for office, is a reportable event, because it might influence the election? Again, authority please. (State: do you think this is a clear, cut and dried issue?)

"Trump’s effort to avoid disclosure laws has backfired disastrously, leading directly to Cohen’s conviction, Pecker’s immunity deal with federal prosecutors, and a rapidly expanding scandal that poses a serious threat to the Trump presidency, which was already under siege from the Russia investigation."

And then, and then (breath) and then ... relax. The salivating tone of this conclusion is really unseemly and completely unjustified. Just stringing together unproved inferences based, basically, on nothing. Any scholar of the law wouldn't state legal conclusions of criminal guilt based on such flimsy grounds. You basically don't know very much about any of these transactions, and you are believing, without any scrutiny, shreds of "evidence" that isn't evidence (again, read the law, please) and lumping inference upon inference, always leaning in one direction. In this, IMHO, you do a disservice to legal scholarship, and turn it into yet another tabloid effort to smear others with whom you disagree on political grounds.

If the evidence comes in, T is impeached, tried and convicted, then you will be validated. But, if not, then this post should be remembered as a sort of sleazy piling on an already very stinky heap of dung (on both sides, btw). You cheapen the enterprise of legal scholarship and objective thought with these partisan, slanted and imprudent posts. YOu should at least try to model propriety and restraint.

[Scott Pruitt Edndowed Chair in Environmental Justice]

Gag me with a spoon. Trump and Roosevelt do not belong in the same sentence.

[Doug Richmond]

[A]non: Instead of demanding that Prof. Gaughan provide authority for his positions, why don't you provide some authority of your own? Oh, that's right--you don't have any. It sure is easy to be accusatory, angry, and demanding when you are a serial coward who won't post under your own name.

[anon]

Doug

As usual, you are wrong. Especially, "Oh, that's right--you don't have any."

First, like the author above, you apparently haven't read the plea agreement and distinguished it from the allocution. That authority is very important in assessing the reliability of the post above.

Second, see, e.g., US v. Aguilar (2002) regarding the evidentiary use of guilty pleas (and an allocution) against alleged co-conspirators:

"Finally, we note the district court carefully instructed the jury that the codefendants' guilty pleas were evidence only of the existence of a drug conspiracy, and not of Aguilar's participation therein.   Similar limiting jury instructions were used in Gallego, Moskowitz, and Centracchio, and are certainly necessary to guard against the possible misuse of evidence by the jury.   See United States v. Halbert, 640 F.2d 1000, 1006 (9th Cir.1981) (per curiam) (holding that “[e]vidence of [codefendants'] guilty pleas is amenable to misuse,” a danger that “may be averted only by adequate cautionary instructions”).   Indeed, we have observed that “[e]ven where the government's use of a codefendant's guilty plea is permissible, ․ the jury should be told in unequivocal language that the plea may not be considered as evidence of a defendant's guilt.”  United States v. Smith, 790 F.2d 789, 793 (9th Cir.1986) (internal quotation omitted)."

Others may want to follow that authority to more recent cases, if necessary, but, at minimum, the clear rule here undercuts much of the commentary about the Cohen plea.

Third, you were very very wrong that Cohen's guilty plea established that the campaign financing charges against him were "proved correct." Factually or legally innocent defendants plead guilty, every day, for a variety of reasons. It is incredible, and telling, that you stated otherwise. If you believe that courts do not permit innocent accused to plead guilty, or that one judge's opinion of the merit of a charge is determinative, say so.

Fourth, regarding the merits of any charge of campaign financing violations, it is simply false to portray that case as established against anyone other than Cohen, or even to say, as stated above, that "If Trump had paid McDougal and Clifford using his own personal funds, he would have been required to report the campaign-related expenditures to the Federal Election Commission." (Not to say that a reporting violation would be unusual for prior campaigns, btw.)

See, John Edwards. As reported by Politico:

"A grand jury indicted the Democrat and two-time presidential candidate last year on charges that he illegally received campaign donations from his 2008 finance chairman Fred Baron and wealthy heiress Rachel “Bunny” Mellon. The funds, spent on private jet travel, luxury hotels and housing for Edwards’s mistress, Rielle Hunter, never passed through campaign accounts. However, prosecutors said they amounted to donations to Edwards’s campaign because they were intended to prevent damage to his presidential bid by hiding the extramarital affair from the media."

Suffice it to say, the government lost. The justice departmet could have retried hung charges; it didn't. Again, as reported by Politico:

"The ... prosecution ... sparked significant criticism of the Justice Department by campaign finance lawyers who deemed the case legally flawed and by Democratic activists who considered it a form of political payback from a Republican prosecutor in North Carolina."

This case is far different, in ways that make prosecution of T for campaign finance violations even less clear cut.

Finally, as you have done in the past when enraged, you lash out and call anyone who doesn't "post under your own name" a "coward."

Again, Doug, you are ignoring the rules of this blog. If you have an issue with posting anonymously (given the level of your outburst, readers will hopefully see the reason for it) you need to take that up with the blog proprietors. But, more importantly, you are insulting all those who comment here anonymously, as "cowards." You should rethink that, sir.

[Enrique Guerra Pujol (priorprobability.com)]

#ShitholePresident

[Doug Richmond]

[A]non: I have not called all people who post anonymously cowards--only you. The fact that the proprietors of this blog allow people to comment anonymously doesn't make an anonymous commentator like you any less a coward--it means only that the blog proprietors permit your behavior. Your posts are always attacking and venomous; you are apparently incapable of respectful disagreement or reasoned argument. Maybe you communicate the same way in the company of people who know you. If so, we can only hope that you're not employed in some capacity in higher education. Long story short, anon, I am not the person who needs to be rethinking things.

[anon]

"you are apparently incapable of respectful disagreement or reasoned argument"

Because I belive the precise opposite to be demonstrably true, I will respond in this comment and no further to your personal attacks.

I would invite you to read the thread above. Have you responded or addressed the authorities cited (after demanding same, and after claiming, falsely, there were none underlying the assertions made)? Perhaps if you could calm down and stop repeating "you are a coward" you would be able to address those authorities that you demanded, rather than just keeping up personal attack.

You might at least clarify whether you asserted that Cohen's guilty plea "proved correct" the government's charges.

Contrary to your assertion that labeling an anonymous commenter a "coward" applies to only one person, you can't so limit that smear. Moreover, your intemperate and false claim that "Your posts are always attacking and venomous" demonstrates that you are making wild charges, and are smearing commenters broadly and indiscriminately. Your insistence on limiting your comments to personal attacks, rather than the "reasoned argument" you say you are seeking, is revealing.

Most telling? You keep saying that I am the one who is angry.

[anon]

Because there is no other forum on this blog to discuss anonymous posting (perhaps there should be, so that this issue can be discussed), this comment addresses that issue.

Imagine a professor who states at the end of the term: You may evaluate me anonymously, but only if you are polite and don't find fault with me. If you find fault with me and you if engage in what I believe to be an inappropriate "attack" on me (especially my political choices), and you don't put your name on your evaluation, then you are a coward. If you wish to find fault with me, you must come to my office and confront me directly and in person.

I don't think that most professors would agree that honest comments would result from this policy, and that most would therefore retain anonymity in the evaluation process even at the expense of the occasional "insulting" comment.

On this blog, IMHO, the professors posting have chosen to cherry pick stories that they believe will denigrate republicans. Typically, a story is simply plucked from news reports, and no analysis beneath the surface is offered. The story often will be tied, loosely, to some point of legal or political history, but then quickly becomes a version of the news, presented as absolute truth, and in a manner that spins every story in the way that most undermines republicans. To say there is no political slant to these stories would be false. Objectivity is rarely seen: condemnation of conduct by republicans is rarely accompanied by examples of identical conduct by democratic or left leaning political leaders.

Many object to pointing this out. Many object to any push back at all. But, again, let's do a thought experiment.

Suppose someone on this blog consistently attacked President Obama: everything done by him or any member of his administration or anyone he once associated with, or any fringe person anywhere in the country, etc. I suspect that the reaction would be that this is blog is becoming like "Fox News," and the readers would be angry and outraged about it.

To be sure, this is a blog for those who lean left. So, should this blog be kept separate, so that professors who lean left can be left in peace to spin the news as they choose?

Forgive this reader for believing that is not what this blog has been about. From the heated discussions about legal education, to now heated discussions about politics, comments on this blog has sometimes been quite nasty in tone. I have played a part in SOME of these exchanges.

If this blog is to be a "Fox News" for the left, absent such push back, then so be it. For me and I believe many others, the anger provoked when the left is challenged is too palpable to ignore, and therefore, I expect that if a "only signed comments policy" is adopted, the the comments will become a chorus of "me too"!

It would be no answer to say, "if you weren't so nasty, then there wouldn't be any need for any of this." I believe that reading the thread above, the anger was not mine and that any reasonable person would avoid confronting a person so angry directly. Again, think of a student facing that sort of rage over a negative, anonymous evaluation. It just won't happen.

Someone will say: yes, we can disagree, but only politely and with mutual respect. Some, like Professor Brody, could indeed so state. But, the nature of the political choices made by some on this blog invite, again, IMHO, some stern analysis, and the anger on the left doesn't justify silencing anyone who disagrees based on these persons taking putative "offense."

This commentator stated above: "[by spin and legally unmerited conclusions based on news reports] you do a disservice to legal scholarship, and turn it into yet another tabloid effort to smear others with whom you disagree on political grounds."

Fair comment, but one commenter above would likely, shall we say, "politely disagree."

[Scott Pruitt Edndowed Chair in Environmental Justice]

Since this is a "law and culture blog," many of us are attorneys and post anonymously due to professional considerations. It's not a negative, its following a code of responsibility to protect clients. Plus, Judges only think I am a wack a doo. Don't want "em to know it...