Trump’s lawyer claims that he personally sent $130,000 to porn star, Stephanie Clifford, who states that she had an affair with President Trump prior to his election. The lawyer, Michael Cohen, claims the payment was legal, but was it ethical?
A recent New York Times article discusses some of the potential ethics violations. For example, Rule 1.8(e) of the New York Rules of Professional Conduct states: “While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to the client . . . .” So, if Ms. Clifford contemplating some type of litigation against Mr. Trump, then his payment for Mr. Trump’s benefit would trigger a violation of this ethics rule.
But what if Ms. Clifford was not threatening litigation but simply that she was going to make the affair public? If the payment was to buy Ms. Clifford’s silence prior to the election, it could trigger a violation of Rule 1.8(a) if it was a loan and if Mr. Cohen did not have a written loan agreement with Mr. Trump. If Mr. Cohen has a written loan agreement and followed other aspects of Rule 1.8(a), which include that the loan terms are fair and reasonable and that Mr. Trump was advised in writing about seeking out independent legal counsel on the matter, then Mr. Cohen would be in the clear on this front.
Assuming Mr. Cohen did not violate any provision of Rule 1.8, he could still be in hot water if he lied about the payment. Mr. Cohen has said that “I used my own personal funds to facilitate a payment of $130,000 to Ms. Stephanie Clifford. 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.” Another New York Ethics Rule, Rule 8.4, prohibits a lawyer from “engag[ing] in conduct involving dishonesty, fraud, deceit or misrepresentation.” If any part of this explanation is a lie, for example someone else has repaid him on behalf of Mr. Trump, then that would be Mr. Cohen engaging in dishonesty, deceit or misrepresentation.
Finally, let’s say Mr. Cohen hasn’t lied, simply used his own money, has not been reimbursed, litigation was not be threatened, it wasn’t a loan, and it was simply a gift. Mr. Cohen would seem to be in the clear ethically, but there may still be one nagging legal issue – did he file a Form 709 with the IRS? The IRS requires that anyone making gifts totaling more than $14,000 to anyone other than your spouse usually must filed a Form 709. The other types of gifts not subject to reporting to the IRS are donations to political organizations, transfers to some tax exempt organizations, and payments that qualify under educational or medical exclusions.
It will be interesting to see if and how we learn if Mr. Cohen is completely in the clear.