Cohen Pleads Guilty To Tax Evasion, Bank Fraud & Campaign Finance Law Violations

(Forbes) -- President Trump’s former personal lawyer, Michael Cohen, pleaded guilty today to a total of eight counts of tax evasion, making false statements, and campaign finance violations. Here’s a look at the charges, and how they evolved.

Counts 1-5 are violations of 26 U.S.C. §7201(1), one count for each of the years 2012 through 2016. The statute isn’t complicated (you can read it here): It’s simply an "attempt to evade or defeat tax."

According to the plea, Cohen failed to report more than $4 million in income to the Internal Revenue Service (IRS). That income was largely related to Cohen’s work with various taxicab companies, many of which had previously been linked to tax trouble. New York's so-called "Taxi King," Evgeny Freidman, pleaded guilty to tax fraud in May; Freidman had reportedly been Cohen’s partner in the taxi business for years.

Cohen had also failed to report hundreds of thousands of dollars’ worth of income for other activities, including consulting and income from brokering sales of real estate and a Birkin As part of the plea agreement, Cohen must file amended tax returns with the IRS. He has also agreed to pay restitution, including back taxes, penalty, and interest. The amount of past taxes due currently stands at $1,495,305.

Count 6 is a violation of 18 U.S.C. §1014. Title 18 isn’t part of the Tax Code; it’s more commonly known as the federal Criminal Code. The charge involves the making of false statements "for the purpose of influencing in any way the action of the enumerated agencies and organizations" (you can read the statute here). In plain terms, he lied to a financial institution to get credit: It's bank fraud.

The fraud’s roots began in 2010 when Cohen took out a bank loan worth $6.4 million, using his taxi medallions as collateral. A year later, he obtained an additional $6 million line of credit, again using the medallions as collateral. He later increased the line of credit to $14 million, bringing the total amount of loans to $20 million. That same year, he sought a mortgage on his Park Avenue condo, but only disclosed the smaller $6.4 million loan on his application.

When Cohen attempted to get another mortgage - this one for a summer home worth $8.5 million - the loans began to catch up with him. During the mortgage application process, the bank found out about the original $14 million line of credit that Cohen had not disclosed. Caught, Cohen lied, saying that he had not used the line of credit and that he would close it immediately. Instead, he had already rolled the line of credit into another loan.

At the end of 2015, Cohen went back to the bank that had given him the mortgage on his condo - and had lied to about his available credit - and asked for a home equity line of credit. He again understated his debt so that the bank would give him the loan. Lying on a bank application - even once - is against the law.

Count 7 and Count 8 are violations of statutes found in Title 52, Voting and Elections. The relevant language focuses on two campaign contribution laws (you can read those here and here). Specifically, it's illegal to be the "willful cause" of an unlawful corporate contribution since corporations are barred from making contributions directly to presidential candidates; it is also against the law to make an excessive campaign contribution.

According to the plea, in 2015, Cohen worked with a campaign for a presidential candidate. As part of the campaign strategy, Cohen worked with an individual who owned a magazine to "help deal with negative stories" about the candidate’s relationships with women. Among other things, Cohen admitted that he assisted the campaign in identifying the stories "so they could be purchased and their publication avoided."

Payments were disguised using a series of entities. In court, Cohen told the judge that the payments were made "in coordination with and at the direction of a candidate for federal office." That echoes the statements in the plea agreement which detailed that payments were made "in order to influence the 2016 presidential election."

While the candidate and the campaign are not specifically named in the plea agreement, the candidate is widely believed to be Trump. Cohen had a prior close relationship with the President, even once saying he would take a bullet for him. However, after the plea, Trump’s current lawyer, Rudolph W. Giuliani, said in a statement, "There is no allegation of any wrongdoing against the president in the government’s charges against Mr. Cohen."

Cohen, who will turn 52 in four days, formally agreed to the plea just after 4:00 p.m. today in a Manhattan federal court. He was accompanied by his attorney, Guy Petrillo.

In court, Cohen was asked whether he had consumed any alcohol or drugs before accepting the plea agreement. Cohen acknowledged that he had a single glass of 12-year-old Glenlivet (single-malt scotch) on the rocks with dinner the night before, but was sober at the time of the plea. Cohen went on to confirm his understanding of the charges against him.

It was a stark change from a few months ago when Cohen fought back against allegations that he had done anything improper. In April, the Federal Bureau of Investigations (FBI) seized documents, phones and computers from Cohen’s offices, home and hotel room. Cohen and Trump argued that any documents would be subject to attorney-client privilege and could not be used in court. However, a special master found that most of the materials were not subject to the privilege.

Following the hearing, Cohen was released on $500,000 bail. Sentencing is scheduled for December 12. Cohen, who has already agreed to make restitution for his crimes, faces a maximum sentence of 65 years in prison. He will likely receive a sentence of between four and five years. While Cohen has not agreed to cooperate in special counsel Robert Mueller's investigation into Russian involvement in the 2016 presidential election, the plea does not bar him from doing so. If Cohen were to cooperate, Mueller could recommend a reduction in his sentence.


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