Tax Return Fight Indicates Trump May Face State Criminal Charges

Manhattan District Attorney Cyrus Vance, Jr. appears close to obtaining president Trump’s tax records. Vance first subpoenaed the records about a year ago. Last month the U.S. Supreme Court rejected Trump’s claim that the subpoena should be rejected because the president is absolutely immune from state criminal investigations. Trump’s attorneys then filed a new complaint once again challenging the subpoena, claiming it is overbroad and was issued in bad faith. Vance has now moved to dismiss that complaint. The DA seems likely to prevail and ultimately get the records. And although it’s unlikely that anything contained in the returns will be made public before the election, Vance’s pleading filed last Monday suggests that Trump could be facing a range of New York state criminal charges if he leaves office in 2021.

Manhattan DA Cyrus Vance Jr.
Manhattan DA Cyrus Vance, Jr.

The Vance Subpoena and Trump’s Lawsuit

Vance’s office opened an investigation in the summer of 2018 into unspecified financial crimes by New York businesses and individuals. Initially, at least, it appeared the investigation was prompted by reports of “hush money” payments by Trump and/or his campaign to two women, Karen McDougal and Stormy Daniels, shortly before the 2016 presidential election. In August of 2018 Trump’s personal attorney, Michael Cohen, pleaded guilty to a campaign finance crime related to those payments. During his plea Cohen said he had made the payments at the direction of candidate Trump himself. Vance’s office apparently began an investigation into whether the payments, and how they were documented in corporate records, may have violated New York law.

In August of 2019 the prosecutors, acting on behalf of a grand jury, issued a subpoena for documents to Mazars USA, LLP, Trump’s personal accounting firm. The subpoena directed Mazars to produce financial records relating to Trump and his businesses, including copies of the president’s tax returns for the past eight years.

In September 2019 the president filed a lawsuit in federal district court in New York, seeking an injunction against Vance and Mazars to prevent enforcement of the subpoena. Trump claimed that under the U.S. Constitution a sitting president is absolutely immune from state criminal process. He also argued the subpoena was overbroad and that Vance was acting in bad faith and for political reasons. (Throughout the litigation Mazars has taken the position that the fight is between Vance and Trump and that Mazars stands ready to honor the subpoena if that’s how the courts rule.)

The district court judge rejected the president’s arguments. The judge found there was no basis for the president’s sweeping claim of immunity and that Mazars complying with the subpoena would not impair the president’s ability to fulfill his constitutional duties. The judge also rejected the president’s claims of overbreadth and bad faith.

The Second Circuit Court of Appeals affirmed the trial judge, finding that immunity was not constitutionally required. It noted that Trump had failed to identify any constitutional harm or interference with his duties because the subpoena, directed to Mazars, did not “require the President to do anything at all.” An appeal from the Second Circuit decision was fast-tracked to the U.S. Supreme Court.

Image of US Supreme Court

The Supreme Court Decision

On July 9, 2020, the U.S. Supreme Court, in an opinion by Chief Justice Roberts, also rejected Trump’s claims. Reaching back to an early dispute involving Aaron Burr and president Thomas Jefferson, the Court traced a long history of cases finding that presidents, like other citizens, are not above the law and may be subpoenaed to provide testimony or evidence. Although this was the first time the Court had confronted the question in the context of a state proceeding rather than a federal one, the Court concluded that did not compel a different result.

The Court was unanimous in rejecting Trump’s claim of absolute immunity. Trump argued that immunity was required because complying with such a subpoena would impermissibly distract him from fulfilling his constitutional duties. But the Court noted that it had already rejected immunity based on purported presidential distraction, most notably in the unanimous 1997 decision in Clinton v Jones that president Clinton was not immune from a civil suit based on actions before he took office. Similarly, the Court concluded, “two centuries of experience confirm that a properly tailored criminal subpoena will not normally hamper the performance of the President’s constitutional duties.” The Court also rejected Trump’s claims that immunity was required in order to avoid the “stigma” of being under investigation and to prevent presidential harassment by state prosecutors.

The majority also rejected the alternative argument, advanced by the U.S. Solicitor General, that a subpoena directed at a sitting president should have to meet a higher standard of justification before it can be enforced. The Court noted these arguments were based primarily on cases involving Executive privilege. But such cases were not relevant here because this subpoena was directed at the president’s personal records. Requiring a higher standard, the Court held, would improperly “extend protection designed for official documents to the President’s private papers.”

Although the Court rejected the president’s claims, it did not leave Trump with no possible remedy. Given his constitutional position, the Court held, a president may challenge a particular subpoena as an improper attempt to influence or impede his performance of his official duties. And the president also has the remedies available to any person to challenge a grand jury subpoena, including arguing that the subpoena is unduly burdensome, overly broad, or based on bad faith. But any such claims were not part of the appeal to the Supreme Court.

The Court concluded:

Two hundred years ago, a great jurist of our Court established that no citizen, not even the President, is categorically above the common duty to produce evidence when called upon in a criminal proceeding. We reaffirm that principle today and hold that the President is neither absolutely immune from state criminal subpoenas seeking his private papers nor entitled to a heightened standard of need.

The President’s New Complaint

The Supreme Court’s decision did not end the matter. With the case back in the trial court, the president quickly moved to bring some of the other challenges the Supreme Court said were still available. On July 27 the president filed a Second Amended Complaint, seeking once again to enjoin compliance with the subpoena. That complaint alleges, once again, that the subpoena is overbroad and that Vance is acting in bad faith.  Notably, the complaint does not raise any of the potential claims unique to the president that were identified by the Supreme Court; for example, that complying with this particular subpoena would influence or impede Trump’s performance of his presidential duties. Presumably the president’s attorney concluded such an argument would be futile because, as the Second Circuit noted, the subpoena to Mazars actually doesn’t require the president to do anything at all.

Vance’s Motion to Dismiss

This past Monday, Vance filed a motion to dismiss the Second Amended Complaint, arguing that the complaint does not state any grounds for relief. It claims the subpoena is overbroad or was brought in bad faith, but as Vance notes, the trial judge has already rejected those same arguments in the earlier proceedings. In short, according to Vance: nothing new here.

One section of Vance’s pleading attracted considerable attention. Concerning the claim that the subpoena is overbroad, Vance notes this claim depends on the assumption that the investigation is limited to the so-called “hush money” payments in 2016. But Vance says this is incorrect: “at the time the Mazars Subpoena was issued, there were public allegations of possible criminal activity at Plaintiff’s New York County-based Trump Organization dating back over a decade.” Vance notes that his office earlier filed a redacted declaration describing the full scope of the investigation, and that based on that declaration the court had already ruled the subpoena is not overbroad.

Vance’s pleading cites newspaper articles referring to allegations by Michael Cohen and others that Trump may have manipulated the values of his holdings when dealing with banks and insurance companies and may have engaged in other questionable financial practices. These allegations could potentially lead to New York state criminal charges for crimes such as bank fraud, insurance fraud, or tax fraud. That is why the subpoenaed records are relevant, even though they extend back much further than 2016.

The Standard for Challenging a Grand Jury Subpoena

The president is facing an uphill battle in challenging the grand jury subpoena. A properly issued grand jury subpoena is presumed to be reasonable. Because it is an investigative body, a grand jury is allowed to cast a wide net when gathering information about possible crimes. It may investigate based on news reports, anonymous tips, or other investigative leads that fall far short of establishing probable cause or actual criminality. As the Supreme Court held in the leading case of United States v. R. Enterprises, the government cannot be required to establish probable cause to justify a grand jury subpoena because the very purpose of the grand jury investigation is to determine, at the conclusion of that investigation, whether probable cause exists.

In his dissent in the Supreme Court case, Justice Alito noted how difficult it would be for the president to establish that Vance’s subpoena is improper: “In New York, a grand jury subpoena need not be supported by probable cause . . . and a party seeking to quash a subpoena must show that the documents sought ‘can have no conceivable relevance to any legitimate object of investigation.’” (citations omitted). But this standard is not unique to New York; in fact, this is the general law governing all grand jury subpoenas and basically mirrors the Supreme Court’s holding in R. Enterprises.

Grand jury secrecy makes it tough for any litigant to successfully argue that information sought by a subpoena could not possibly be relevant to the grand jury’s work. As Vance argues, the president can’t plausibly claim the subpoenaed materials are outside the scope of the grand jury’s investigation because he doesn’t know what the full scope of that investigation is – and isn’t entitled to know.

It’s possible that after reviewing the documents the grand jury will conclude that no charges are appropriate, or that it does not have jurisdiction over certain offenses, or that certain crimes are time-barred. But the recipient of a subpoena – including the president – generally cannot prevent the grand jury from even examining the documents it needs in order to reach such conclusions.

Under the law governing grand jury subpoenas, Vance should prevail and ultimately get the documents. How quickly that will happen depends on the almost certain further appeals by the president and how long it takes to get those resolved. If the trial judge rules in Vance’s favor, the court of appeals may be reluctant to grant a stay, which would mean Mazars would be free to comply and turn over the documents. That could potentially happen within the next month or so.

Stalling for Time

It seems pretty clear at this point that the primary purpose of this litigation by the president is to stall for time. As Vance notes, the president has already succeeded in delaying compliance with the subpoena for nearly a year. This has prevented the grand jury from potentially completing its work prior to the upcoming presidential election. Perhaps more significantly, delay creates the risk that the statute of limitations will expire as to some charges. As Vance argues: 

Every day that goes by is another day Plaintiff effectively achieves the ‘temporary absolute immunity’ that was rejected by this Court, the Court of Appeals, and the Supreme Court. Every such day also increases the prospect of a loss of evidence or expiration of limitations periods – the precise concerns that that the Supreme Court observed justified its rejection of Plaintiff’s immunity claim in the first place.  

When it comes to statutes of limitations, Vance may have some options. If he finds an ongoing conspiracy or other continuing offense, for example, then the statute of limitations will not start to run until the most recent act in furtherance of the conspiracy, even if other criminal acts involved are too old to be charged. But it’s undeniably true that delay hurts his investigation and that potential charges could be foreclosed.

What Happens When Vance Gets the Documents?

Assuming Vance prevails and gets the documents, the public shouldn’t expect to see the tax records any time soon, if at all. They will be protected by grand jury secrecy, and as the Supreme Court noted, improper disclosure of grand jury materials is punishable as a felony in New York. During the Supreme Court arguments Justice Alito suggested he believes there is some kind of a pipeline between the DA’s office and the New York Times and that a leak is virtually inevitable, but I don’t think we should expect that to happen. If there ultimately are indictments, then depending on the nature of the charges some of the information contained in the tax records could end up being revealed.

As far as timing, many have assumed that Vance, a Democrat, is politically motivated and will try to bring a case prior to the election in order to damage Trump. But even if that were his goal, things would have to move awfully fast. Vance’s office would have to complete all court battles over the subpoena, get the documents (which are undoubtedly voluminous), review them, complete any additional required investigation, and obtain indictments in just three months. That seems very unlikely to me.

Practicality aside, it would of course be improper for Vance to act based on political motives. And if he actually has a case, he’d be much better off waiting until after the election.  Any “October surprise” indictments, regardless of their merits, would be attacked and discredited as politically motivated. And if Trump leaves office in 2021, Vance could act at that time without facing any of the constitutional issues that would arise from a state prosecution of a sitting president. If a statute of limitations expiring before November is a concern, Vance could obtain sealed indictments and then wait to reveal them until after the election. He could even seek a waiver of the statute of limitations by the president, as is sometimes done during lengthy investigations.

The real significance of this subpoena battle lies not in how it might affect the election but in what happens after November if Trump is defeated. Vance’s filing demonstrates that Trump and his organization are in some real criminal peril. And even if Trump were to try pardoning himself for any crimes on the way out the door of the White House — as many expect — presidents cannot grant pardons of state charges. New York would remain free to act.

This all suggests a real possibility of yet another unprecedented event: a new president being sworn in, and the former president facing state criminal prosecution shortly thereafter.

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Roger Stone Gets His Reward

Last Friday, a few days before Roger Stone was due to report to prison, president Trump commuted his sentence. Stone remains a convicted felon (for now) but will not have to serve his forty-month prison term. Trump’s move was not a surprise; he’s hinted at pardoning Stone for months and it always seemed unlikely he would allow his friend and confidant to actually serve time. But although expected, Trump’s action to reward Stone for his criminal cover-up on Trump’s behalf is still profoundly corrupt. The only consolation is that Trump was forced to act before the November election so voters can respond accordingly.

Roger Stone

Background on Stone’s Conviction

In 2016 Russian hackers stole tens of thousands of emails and documents from the Hillary Clinton campaign and Democratic party sources. In the months leading up to the presidential election, they gradually released those documents via Wikileaks, in an effort to boost the Trump campaign and harm Clinton. Special Counsel Robert Mueller’s team ultimately indicted twelve Russian intelligence officials for taking part in that hacking. Although they documented multiple contacts between Russians and the Trump campaign, Mueller’s investigators did not conclude that anyone in the campaign had actively conspired – or “colluded” – with the Russians concerning the hacking and release of the emails. Mueller did conclude that the Russians perceived they would benefit from a Trump victory and worked to make that happen, and that the Trump campaign perceived that it would benefit from Russia’s actions.

Stone is a long-time Republican operative and advisor to Trump and his campaign. During the fall of 2016, he acted as an intermediary between the Trump campaign and Wikileaks, gathering information about what stolen documents might be released and when. He made repeated public statements claiming inside knowledge of what Wikileaks was doing and claiming to be in touch with Wikileaks founder Julian Assange. The Mueller report documented multiple contacts between Stone and the campaign concerning the Wikileaks releases, as well as Trump’s own knowledge and encouragement of Stone’s efforts.

In 2017, Stone was called to testify before a Congressional committee investigating Russia’s interference in the election and possible connections to the Trump campaign. During his Congressional testimony he repeatedly lied about his role as an intermediary between the campaign and Wikileaks and his contacts with others in the campaign. Over a period of several months he also repeatedly threatened another witness, Randy Credico, trying to persuade him not to testify or to lie to investigators.

Mueller’s prosecutors ultimately indicted Stone for seven felony counts of obstruction of justice, lying to Congress, and witness tampering. A jury in the District of Columbia found him guilty of all charges in November of 2019. The sentencing guidelines in his case called for sentence of about 7 to 9 years. But after prosecutors had filed papers arguing for a guidelines sentence, Attorney General Barr, in an extraordinary personal intervention, ordered the U.S. attorney to disavow that position and seek a more lenient sentence – resulting in all of the career prosecutors withdrawing from the case. Judge Amy Berman Jackson ultimately sentenced Stone to forty months in prison, noting during the sentencing hearing that Stone had been “prosecuted for covering up for the president.”

Stone sought to postpone serving his sentence, citing concerns about his age and Covid-19. Judge Jackson denied his request to delay his report date until September, noting that there were no Covid outbreaks in Stone’s designated prison. Stone was due to report to prison today, Tuesday, July 14. But late last Friday evening, president Trump announced he was commuting Stone’s sentence.

White House Press Secretary Kayleigh McEnany

The White House Statement on Clemency

The official White House statement on this grant of “executive clemency” is, quite frankly, an embarrassment. It reads like a Trump Tweet. It alleges that, “Roger Stone is a victim of the Russia Hoax that the Left and its allies in the media perpetuated for years in an attempt to undermine the Trump Presidency.” It claims that frustrated prosecutors, unable to prove collusion, resorted to “process based charges” borne of “frustration and malice” and a desire for “splashy headlines.” It further claims that, “The simple fact is that if the Special Counsel had not been pursuing an absolutely baseless investigation, Mr. Stone would not be facing time in prison.” And it concludes with one of Trump’s trademark exclamation points: “Roger Stone is now a free man!” (Interestingly enough, though, the statement never denies that Stone committed the crimes for which he was convicted.)

Where to begin? The “Russia Hoax,” of course, was never a hoax. It was a serious investigation into Russian interference in the election and the possible involvement of those in the Trump campaign. Mueller indicted about two dozen Russians for that interference, and documented scores of contacts between Russian individuals and those associated with the Trump campaign.

This should go without saying, but the fact that no campaign officials were charged with conspiring with Russia does not render the investigation itself a hoax. Often the purpose of such a white collar investigation is to determine whether a crime has been committed, when that may be unclear at the outset. There was a more than sufficient reason to investigate, as recognized not only by the Department of Justice but also by both parties on Capitol Hill, who conducted their own probes.

What’s more, as Mueller noted, the fact that witnesses including Stone and the president himself lied to investigators or refused to cooperate impeded the ability to find the whole truth about the Trump campaign’s contacts with Russia. Even if those contacts were not ultimately criminal, Stone’s obstruction kept investigators and the public from learning the full details and the extent to which the Trump campaign encouraged foreign interference in the election. Truthful testimony from Stone also may have indicated that Trump himself lied in his written answers to Mueller, when he denied any recollection of Stone’s involvement with the Wikileaks document dumps. Stone’s stonewalling kept all that information concealed and protected the president.

By the way, speaking of Congressional investigations, contrary to the White House statement’s implications, Stone was not convicted of lying to Mueller’s investigators. He was convicted of lying to a Congressional committee — one that, at the time, was led by Republicans. You might think some of those Republican members of Congress would be concerned about the president granting clemency to a defendant convicted of lying to them and obstructing their investigation. But so far – crickets.

The idea that Mueller was seeking “splashy headlines” is also pretty comical. Mueller was notoriously tight-lipped during the investigation, refusing to speak out even after the investigation was concluded and Attorney General Barr had distorted his findings. In fact, he only now broke his silence in the wake of the Stone commutation, writing an extraordinary op-ed in the Washington Post defending the prosecution and his team from the attacks by the White House. Mueller never sought headlines during his investigation, but Trump’s actions concerning Stone were finally enough to push him over the line.

Attorney General William Barr

Better Ask Barr

The White House might have checked with Trump’s own Attorney General before releasing the statement trashing the Stone prosecution. Attorney General William Barr has shown himself willing to go very far to protect Trump and the presidency, resulting in multiple calls for his own resignation and impeachment. And he did personally intervene in the Stone case, undermining his own career prosecutors to call for a sentence below that recommended by the sentencing guidelines.

But apparently commuting Stone’s sentence was too much even for Barr. He recently said that he thought Stone’s prosecution was “righteous” and that his (reduced) sentence was appropriate. According to news reports, he counseled Trump against commuting Stone’s sentence. It’s hard to know whether such reports are credible or whether Barr is just trying to save face. But regardless, I won’t be holding my breath waiting for Barr to resign in protest.

Roger Stone
Roger Stone

Stone Gets His Reward

Throughout Mueller’s investigation and his own trial, Stone repeatedly and proudly proclaimed that he would never testify against the president. Trump regularly praised Stone for keeping his mouth shut, with Tweets like this:

Just last week, as if to remind the president that he’s been a stand-up guy, Stone said in an interview with journalist Howard Fineman: “He [Trump] knows I was under enormous pressure to turn on him. It would have eased my situation considerably. But I didn’t.  They wanted me to play Judas. I refused.” And now, with the grant of clemency, Stone has been rewarded for his loyalty.

To see how Trump operates, all you have to do is look at how different witnesses from his inner circle were treated. Cohen and former campaign manager Paul Manafort, who ultimately cooperated with investigators, have gone to jail and received no clemency. Cohen was publicly derided by Trump as a “rat.” But Stone, who stood fast and took the rap, found favor with the boss and will never see the inside of a jail cell. The whole thing sounds like the script from a mob movie.

The Potential Crimes in the Commutation

Other presidents have issued controversial pardons and commutations. But Trump’s clemency for Stone is unique in that it so clearly appears to be part of a personal quid pro quo, a reward for Stone’s refusal to cooperate in a case potentially implicating the president himself. This makes Trump’s clemency for Stone not merely unseemly, but potentially criminal itself. Indeed, Barr himself acknowledged during his confirmation hearing that it would be a crime for a president to pardon a witness in exchange for a promise not to testify against him.

As I wrote in this post, one potential crime is bribery. A president who grants clemency in exchange for a witness refusing to cooperate against the president could be guilty of bribery of a witness, in violation of 18 U.S.C. 201(b)(3). The president is providing a thing of value – the grant of clemency – to Stone in exchange for Stone’s agreement not to testify against him. It doesn’t matter that the actual refusal to testify took place some time ago. The crime is the corrupt deal; the president is now simply consummating that earlier, understood agreement.

Another possibility is that Trump and Stone’s actions could be seen as steps in a conspiracy to obstruct justice. It’s the culmination of an ongoing corrupt endeavor to prevent the Mueller investigation and various Congressional committees from learning the truth. Although those investigations are largely concluded, the commutation could be considered an overt act in furtherance of an ongoing conspiracy, lasting several years, to obstruct those investigations.

If Trump loses in the fall, a new Department of Justice could potentially investigate such charges. It’s unclear whether there will be any appetite to do so. The country may just be ready to move on. And of course, Trump may grant a flurry of new pardons after the election – including potentially trying to pardon himself – that could complicate any such efforts.

The Silver Lining – Sort Of

It was inevitable that Trump would spare Stone from prison. If there is a silver lining, it’s that he was forced to do so prior to the election. Trump has been pretty successful at stonewalling and running out the clock on a number of potentially damaging controversies. Although the Supreme Court decided in a pair of cases last week that he does not have absolute immunity from turning over his tax returns to investigators, it looks like he will be able to tie those subpoenas up with further litigation until after the election. Various White House officials, such as former White House counsel Don McGahn, have refused to testify before Congress and those claims are still tied up in court. Lawsuits pending for several years about Trump enriching himself in violation of the Emoluments Clause have yet to produce any significant public information. And although it seems extremely likely that Trump will ultimately pardon his former national security advisor Michael Flynn, that case too continues to slog through the courts and Trump may be able to avoid acting until after the election.

But when it came to Stone, Trump ran out of time. He may still decide to grant Stone a full pardon once the election is over. But for now, he either had to act or let Stone go to prison. Many details about Trump administration corruption and Trump’s personal finances remain hidden, but at least this latest episode of corruption is out there for the voters to see. Trump has to own this one. And in a long litany of corrupt acts and perversions of the justice system by this administration, rewarding Stone for his refusal to “rat out” the president deserves a place near the top of the list.  

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