Mr. Trump, a retainer is not a reimburesment

Published on Friday, 4 May 2018 19:16
Written by Noah Feldman

There’s something extremely fishy about President Donald Trump’s tweets on Thursday morning about the source of the money his lawyer Michael Cohen paid to Stormy Daniels as part of a nondisclosure agreement.

Trump, echoing what his lawyer Rudy Giuliani said Wednesday night on Fox News, seems to be claiming that a $35,000 retainer he paid to Cohen on a monthly basis should be considered reimbursement. But a retainer isn’t reimbursement. A retainer is a fee for services. And a fee paid to a lawyer isn’t normally reimbursement unless there is some agreement saying it is.

To make matters worse, Trump seems to be trying to help Cohen out of hot water in the hopes that Cohen won’t flip against him. If Trump reimbursed Cohen, goes the thinking, then Cohen didn’t violate federal election law by making the payment out of his own money and failing to report that to federal authorities.

The upshot is that Trump’s tweets seem like they are misleading at best, driven by a new theory cooked up by Giuliani - and designed to reduce his exposure to Cohen.

Remember that Trump previously said he didn’t reimburse Cohen. It’s possible that was a lie intended to protect Trump from admitting any connection to Daniels, a pornographic film actor who says she had an affair with Trump. It’s also possible Trump’s earlier statement was true.

According to what Giuliani said on the “Hannity” show, Giuliani somehow realized what was really going on: Trump was actually reimbursing Cohen through payments “funneled” through Cohen’s law firm. “I said, ‘That’s how he’s repaying it,’ “ Giuliani told Sean Hannity.

The “I said” sounds like the triumphant observation of a lawyer coming up with a new theory in real time. Notice that Giuliani didn’t say that Trump told him that he had been reimbursing Cohen via the retainer payments. Giuliani claimed he figured it out for himself.

According to this theory, Trump reimbursed Cohen by putting him on a “retainer of $35,000 when he was doing no work for the president.”

Presumably to explain how Trump himself didn’t know he was reimbursing Cohen, Giuliani also wants to insist that Trump didn’t know about the Daniels payment, only that Cohen had incurred unspecified “expenses.”

Now parse Trump’s tweet carefully. Trump wrote that Cohen “received a monthly retainer, not from the campaign and having nothing to do with the campaign, from which he entered into, through reimbursement, a private contract between two parties, known as a non-disclosure agreement.”

The statement has three parts: that Cohen was on a personal retainer from Trump, that he entered the nondisclosure agreement “from” the retainer, and that this occurred “through reimbursement.”

The syntax is tortured, to be sure. But it seems to mean that Cohen used money from Trump’s retainer payment to him to pay Daniels. Then Trump’s tweet seems to be asserting that this action in effect amounted to reimbursement.

All this makes no sense, in law or in economic logic. A lawyer’s retainer payment isn’t anything like a reimbursement payment for expenses. It’s a fee paid by a client to a lawyer to be available for legal services.

It’s also taxable income for the lawyer - which would not be true of a reimbursement for expenses like a settlement payment. If Cohen reported the retainer as income and paid taxes on it, that would be strong evidence that it was compensation, not reimbursement.

The new Trump-Giuliani legal theory would not necessarily hold up in court. Prosecutors in a trial of Cohen for violating federal election law could prove that the retainer payments weren’t reimbursement by showing a pattern of payment and evidence that Cohen declared them as income. (If Cohen didn’t report the retainer as income, that’s another story; he could potentially be liable for federal income tax fraud.)

As for the “documentary evidence” that Giuliani has promised to provide, he’s presumably just referring to Trump’s retainer payments - which aren’t themselves proof of the reimbursement theory.

It’s also conceivable that even if Trump and Cohen really were hiding the reimbursement by dressing it up as retainer payments and “funneling” it through Cohen’s firm, they might have been guilty of some other crime connected to the structuring of transactions, the tax code or even campaign finance law. That would require more facts and legal research to discern.

So why is Trump now contradicting himself and saying he reimbursed Cohen? The most reasonable answer is that Trump wants to signal to Cohen that he is trying to help him avoid criminal liability. It certainly would help Cohen defend himself against the criminal charge that he made an unreported campaign contribution if he can cite the president as saying that it wasn’t Cohen’s money in the first place.

Trump may also be protecting himself against a possible charge of conspiracy to commit election fraud derived from Cohen’s underlying crime of the unreported contribution. If Cohen never made an unreported contribution, there could be no overt criminal act in the conspiracy - and so no conspiracy at all.

It remains to be seen how all this will play out. But Giuliani’s influence is already very visible in the Cohen case. Stay tuned.

Noah Feldman is a Bloomberg View columnist.

Posted in New Britain Herald, Editorials on Friday, 4 May 2018 19:16. Updated: Friday, 4 May 2018 19:18.