No loopholes left, disclose Stormy debt
It’s time for Trump to come clean on finances
President Trump has a big decision to make. Unless he requests an extension, his personal financial disclosure report is due today.
Under the Ethics in Government Act, he has to disclose all liabilities that exceeded $10,000 at any time during 2017, even if he repaid them later that year. That includes his debt to Michael Cohen for the $130,000 payment Cohen made in October 2016 to adult film star Stormy Daniels. The question is whether Trump will disclose that debt, as well as any others he might have omitted.
The answer should be easy, but the president is in a difficult position. He left out the Daniels-related debt in the financial disclosure report he filed on June 14. Disclosing it now means acknowledging that he should have disclosed it last year. Disclosure may also lead to damaging revelations if he omitted other liabilities from any past financial disclosure reports or incurred new ones since June. As a result, the president’s team could be looking for a way to justify the omission.
Rudy Giuliani, Trump’s personal lawyer, seemed to be trying out a loophole when he called the payment to Daniels an “expense.” Giuliani questioned the applicability of the Ethics in Government Act to the reimbursement of expenses. Even ignoring the disingenuousness of calling the payment an expense, however, there is no exception for expenses.
Both Giuliani and his client seemed to work a related angle by characterizing Trump’s payments to Cohen as a “retainer.” Giuliani claimed Trump started making installment payments to Cohen in early 2017 to reimburse the Daniels payment and other items, with the understanding that Cohen could keep any excess as “profit.”
Giuliani might have hoped the president could avoid the requirement to report his debt by blurring the line between the Daniels payment and fees for Cohen’s services. But the Daniels payment remains a reportable liability regardless of the billing arrangement.
The search for loopholes might lead to the exception for campaign expenditures, which Trump does not have to include in his Office of Government Ethics (OGE) financial disclosure report. But Giuliani foreclosed that option when he denied that the Daniels payment was campaign-related.
If it had been campaign-related, the Trump campaign would have had a duty to report both the Cohen reimbursement and the underlying Daniels payment to the Federal Election Commission. The Trump campaign filed no such report, and a knowing failure to report that kind of campaign-related payment would be a criminal offense.
Another dead end in the search for loopholes is the OGE’s exception for debts owed by a business. This doesn’t work, either. The president would have to claim that paying hush money to adult film stars relates to Trump Organization operations. Cohen has denied that the Trump Organization reimbursed him. If prosecutors believed that the Trump Organization was trying to help elect Trump and coordinated the payment with him, that could lead to criminal prosecution under a century-old law banning corporate contributions to federal candidates.
Lacking a suitable loophole, Trump should cut his losses. He may already be in trouble for omitting his debt to Cohen from last year’s report. If that omission was knowing and willful, the president might have violated a law that comes with civil and criminal penalties — more than one law in fact.
There is room to wonder whether the omission was knowing and willful. Giuliani asserts that the president was unaware of the debt when he filed his June report but that he began repaying the debt months earlier. That is inconsistent and seems implausible.
The Justice Department should investigate last year’s omission. For his part, Trump should avoid giving Justice another potential violation to investigate when he files his next financial disclosure report.
Walter Shaub, senior director of ethics at Campaign Legal Center, is the former director of the U.S. Office of Government Ethics. Adav Noti, senior director of trial litigation at CLC, is the former associate general counsel at the Federal Election Commission.