Friday, May 4, 2018

Everybody's Favorite Bagman

Sorry that I've been silent lately—I've been busy hunting for programming gigs and picking up some new skills in service of that.  I promise I'll get back to the guns series I started, and soon.

But I thought I might break my silence to explain the significance of Rudy Giuliani's revelation the other night, confirmed by a Stable Genius tweet the following morning, that Donald Trump reimbursed Michael Cohen for the $130,000 payment to Stormy Daniels by paying him a retainer.

Let's leave aside all the lying that Trump has done around this event. I mean, we all knew he was lying, and he's almost certainly continuing to lie. (I rate the chances that he didn't sleep with the porn star at somewhere between nil and zilch.)

Let's focus instead on the arrangement that Trump has now admitted that he had with Cohen:  Cohen was Trump's "bagman."

For the uninitiated, a bagman is a paymaster for illicit conduct.  Let's say you're in the "waste disposal business" in New Jersey. That business leaves you with some free time, so you go down to, say, your local sporting goods store or restaurant or whatever, and you inform the owner that there are some bad things that might happen to his establishment.  Since you're very good at protecting your own business from these kinds of bad things, you offer to protect the owner—for a small fee, of course.  Every week, a gentleman comes around to the businesses you're "protecting" and collects that fee, in cash, on your behalf.  He then uses that money to pay obligations that you might have, like the salaries of the people you hired to do bad things to businesses that don't pay you for protection.

That guy is a bagman.*

* - Fans of Law & Order might recognize that the title of this entry shares a name with the pilot episode of the original series. "Everybody's Favorite Bagman" was produced for CBS in 1988, but they didn't pick L&O up to series.  After NBC picked it up instead, two years later, this episode was aired as the sixth episode of season 1, and it featured a different district attorney (Steven Hill was the "original" D.A. with whom people are most familiar).  The plot involved an assault and robbery of a city councilman, which led to the discovery that the politician had once been a bagman for bribes related to parking fines.  The episode was inspired by a real scandal in the New York parking enforcement bureau in the early 1970s, and was an early example of the "ripped from the headlines" storytelling that the series became famous for.  Law & Order ran for 20 seasons on NBC and spawned several major spin-offs, including Law & Order:SVU, which will likely be renewed for its own 20th season soon.

Of course, what I'm describing is a criminal protection racket, which is the sort of thing that the Racketeering Influenced & Corrupt Organizations (RICO) Act was developed to combat.**  In fact, the reason why you don't collect the money yourself, but hire a bagman to do it, is precisely to provide yourself with some cover in the event the FBI happens to surveil you.  And if this sounds like it came from an episode of the Sopranos, that's because it sort of did.  That's how the Mafia does business.

** - Side note:  I once had the privilege of working on a case with G. Robert Blakey, now a law professor emeritus at the University of Notre Dame, who authored the original RICO Act in 1968 while acting as an adviser to the Senate Governmental Operations Committee under the supervision of Sen. John McClellan, D-Ark, the chair of the committee at the time. Just to close the loop, McClellan was born in my hometown, Sheridan, Ark.

Now, where does Trump come in to this? Well, I'm not saying that Trump is a mafioso. (I'm also not saying he's not, in his own way.) But in his hugely unsuccessful business as a real estate developer, he has occasionally had the need to make sure that certain people get paid while needing not to make the payments himself.

See, one of Trump's frequent brags is about his ability to "cut through red tape" to get real estate deals done where others can't.  What he doesn't say, but what is almost certainly true, is that he pays bribes to accomplish that.  Bribing a public official to gain some favorable treatment is a crime--a serious felony, in fact--so Trump can't possibly do that himself.  So here's how he does it:

1. He pays his "lawyer" a "retainer," ostensibly for legal services.
2. The lawyer pays the bribe to the public official, using the proceeds from the "retainer," which is large enough to cover the bribe, a fee for the lawyer's services, and whatever the lawyer might have to pay in income taxes on the bribe (since bribes aren't tax-deductible).

That makes the lawyer the bagman.

And here's why you use a lawyer for that purpose:  The money you pay your lawyer is a business deduction, as long as it was an "ordinary and necessary" business expense.  If you get audited, the IRS won't look at the details of the lawyer's bills, since that's ordinarily a privileged communication. Under normal operating conditions, the use of a lawyer provides an "air gap" between yourself and the bribes you want to pay.

The key phrase there is "under normal operating conditions."  Most people understand that communications between attorney and client are normally privileged from disclosure.  That is, the attorney can't disclose them to others except with the client's permission, and authorities and litigants are forbidden to inquire into them.

But what many people don't understand is that this general rule has many exceptions.  For example, in cases where the client is using the attorney in furtherance of an ongoing or planned crime or fraud, the privilege does not apply.  Moreover, secrecy is required.  Disclosures by the client of the content of the communications defeats the privilege.

So even using an attorney as a bagman carries its risks, because working as a bagman generally involves criminal activities and almost always involves fraud of some sort.  (If it didn't involve crimes or fraud, there would be no point.)  If your bagman attorney's activities are discovered, the privilege won't save you.

What makes Rudy 9/11's disclosure particularly troubling for Trump is that it gives investigators a pattern to follow.  Cohen was operating as Trump's bagman in the effort to silence Stormy Daniels just before the election.  Trump needed someone to be paid off, so Cohen took care of it and paid the bribe out of the money Trump pays him to be an attorney.  Does that sound familiar?

Now, ordinarily that wouldn't be enough to roll up the client. After all, insofar as I am aware, paying someone not to disclose information of this nature is just distasteful, not criminal or fraudulent.  But it points to a method of resolving problems that is very much in the nature of using a bagman.

And here's where it gets interesting.  A few weeks ago, Cohen's home, office, and hotel room were raided with a no-knock warrant.  Yesterday we learned that the FBI had a warrant for a "pen register" on Cohen's phones.***  And we know from various other sources that the FBI has accumulated a vast amount of information about Cohen's activities. 

*** - It was originally reported that the FBI had wiretapped Cohen's phones, but this was later corrected by NBC News, the outlet that broke the story.  A pen register used to be a device that recorded the numbers that the target phone called and, in some cases, the numbers that called it.  I believe that these days it's all done electronically at the carrier level. A pen register only identifies the number called, not the content of the call, which makes it somewhat less intrusive than a wiretap.

Now that we know that Trump used Cohen as a bagman for the Stormy Daniels affair, it's not difficult to follow Cohen's records to find other, perhaps criminal, offenses in which Trump was a participant.

I have known a few FBI agents over the years. They are almost always very conscientious, very methodical, and very busy. They know that they can bring to bear an enormous amount of scrutiny.  Before they do so, they generally need to have some indication that there is something to learn by it.  And the Stormy Daniels pattern provides that indication.

That's a big part of the reason why Team Trump has ramped up its efforts to discredit the FBI's investigation, including by rolling out Rudy 9/11.

Cohen's in trouble. And if I were Trump, I'd be very, very nervous right now.

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