With the number of legal proceedings and investigations swirling around president Trump, it’s easy to lose track of developments. But last week saw an extraordinary string of bad news for the president on several different fronts. The president should be riding high this week, with the Republican party nominating him for a second term. But last week was pretty rough.
1. The New York District Attorney Case
As I wrote in my most recent post, Manhattan District Attorney Cyrus Vance, Jr. has been engaged in a year-long battle to obtain president Trump’s tax returns and other financial records. Vance’s office is overseeing a New York state grand jury investigation into potential financial crimes by the Trump Organization and unidentified individuals, likely including Trump himself.
As part of the grand jury investigation, in August of 2019 Vance subpoenaed the president’s tax returns and other financial records from his personal accountant, Mazars LLP. Although this is a state grand jury proceeding, in September 2019 the president filed a lawsuit in federal district court arguing that he was absolutely immune from state criminal process while in office. The U.S. Supreme Court rejected that claim last month. Trump then filed a new complaint, alleging that the grand jury subpoena is overbroad and was issued in bad faith. Vance moved to dismiss that complaint.
The lawsuit by Trump seeks to do an end run around the secrecy protections that surround grand jury proceedings. In an ordinary case, the recipient of a grand jury subpoena is not entitled to go to court and demand details about the scope of the investigation. He may argue the subpoena is overbroad, unduly burdensome, or is otherwise improper. But he may not demand to know the inner workings of the grand jury and the details of what it is investigating. Trump was essentially using his civil lawsuit to seek discovery about the investigation and circumvent these rules.
Trump’s Complaint is Dismissed
In my earlier post, I noted the uphill battle Trump faced and argued Vance was likely to prevail. And last week, the court granted Vance’s motion to dismiss and threw out Trump’s complaint. In a 103-page opinion, Judge Victor Marrero noted that the lesson from the recent Supreme Court decision is clear:
Absent evidence that compliance with a grand jury subpoena would improperly influence or impede the executive branch’s performance of constitutional duties, the President is entitled to claim no greater shield from judicial process than any other person.
The president had not even attempted to argue that the subpoena – directed to an outside third party, not to him – would improperly interfere with his official duties. And because the judge found the subpoena was not overbroad or issued in bad faith, he ruled the president was not entitled to relief and that the grand jury investigation should be allowed to proceed.
Trump has appealed the decision. As of this writing, the district court has denied the president’s request for a stay pending appeal, and the Second Circuit Court of Appeals will hear arguments on Trump’s motion for a stay on September 1. If the Second Circuit denies the stay, Trump could seek intervention by the U.S. Supreme Court. But grant of a stay by any court seems very unlikely. And in the absence of a stay, Mazars has indicated it will comply with the subpoena. [Update: on September 1 the Second Circuit, in blatant disregard of my prediction, did grant a stay. Arguments on the merits will be heard on September 25.]
In sum, Trump is nearly out of legal options here. He’s managed to delay things for a year, but the New York state grand jury should have his tax returns before long. Grand jury secrecy means they will not necessarily be made public any time soon, if at all. But the possibility of state criminal charges poses a unique threat to Trump: although Attorney General William Barr has shown a remarkably corrupt willingness to protect the president, Barr has no control over a state prosecutor. And even if Trump could pardon himself on his way out of office (an unsettled question), no president can issue a pardon for state charges. This is an area where Trump’s willingness to abuse the power of his office cannot help him.
2. The Steve Bannon Indictment
On the same day the judge dismissed Trump’s lawsuit over the Vance subpoena, there was another major legal development with potential implications for the president: federal prosecutors in the Southern District of New York indicted Steve Bannon, Trump’s former campaign CEO and Senior White House advisor, and three other men for fraud and money laundering. The indictment doesn’t implicate Trump directly. But it adds to a long list of people formerly in the president’s inner circle – including former campaign chair Paul Manafort, deputy campaign chair Rick Gates, national security advisor Michael Flynn, and political advisor Roger Stone – who have faced criminal charges. For a president who claims to hire “only the best people,” it is, at a minimum, not a good look.
The Bannon indictment lays out a relatively straightforward fraud scheme. It was spearheaded by Brian Kolfage, an Air Force veteran and Arizona border wall activist. According to the indictment, in December 2018 Kolfage launched an online fundraising campaign called “We the People Build the Wall.” The claimed purpose was to raise money to donate to the U.S. government to help fund the construction of a border wall between the United States and Mexico. The initiative apparently arose after Kolfage was frustrated by the Trump administration’s inability to get significant funding for the wall from Congress. His solution: raise the money from individual donors and give it to the government. Kolfage allegedly promised donors that 100% of the donations would go towards building the wall, and that the money would be returned if that was not possible.
The fundraising campaign was a huge success and quickly raised about $20 million. The online fundraising platform then began raising questions about the campaign and whether the money could actually be donated to the U.S. government as promised. The platform told Kolfage that he had to identify a legitimate, nonprofit organization to receive the funds, or else they would be returned to the donors.
That’s where Steve Bannon allegedly came in. Shortly after he was contacted by Kolfage and became involved, Bannon and the other defendants created a new tax-exempt organization, “We Build the Wall, Inc.”, to receive the donated funds. They then allegedly set about persuading the online site, and the original donors, that the funds should be transferred to this new nonprofit. Among other things, they repeatedly claimed that 100% of the funds would go towards the building the wall and that Kolfage would not earn a penny. They also claimed the new nonprofit had guidelines and oversight in place that would prevent any of the funds from being misappropriated. In reliance on those representations, most donors agreed that their original donations could be transferred to the new nonprofit. The defendants solicited new donations as well, in the end raising a total of more than $25 million.
The indictment alleges that the defendants misappropriated hundreds of thousands of dollars of the donated funds to their own use. Kolfage allegedly received more than $350,000 from the organization, including a $20,000 a month salary despite repeated promises that he would take no salary from the venture. Bannon allegedly received more than $1 million. The indictment charges that the defendants disguised these payments by running them through various other nonprofit organizations and shell companies, and by falsely characterizing them as payments to vendors. Kolfage allegedly used the misappropriated funds for personal expenses such as a boat, home renovations, a luxury SUV, plastic surgery, and personal tax payments. Bannon and the other defendants allegedly used the money for travel, hotels, consumer goods, and personal credit card payments.
The indictment charges the defendants with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. Both of those crimes carry a maximum penalty of twenty years in prison. If the allegations of the indictment are true, there are no obvious defenses and it looks like a pretty tough case for Bannon and the other defendants.
Why Did Barr Let It Happen?
One interesting aspect of this case is that William Barr’s Justice Department allowed it to proceed. Barr has shown little reluctance about intervening in cases that land close to the White House, including the prosecutions of Roger Stone and Michael Flynn. So why would he green light a prosecution so clearly embarrassing to the president shortly before the election?
There are a few different possibilities. One is that the Southern District of New York “went rogue” and brought the case without informing Barr. This is not impossible – there’s no law that requires the U.S. Attorney to notify the Attorney General about such a case. And the SDNY is famously independent – hence its nickname, the “Sovereign District of New York.” The fact that United States Postal Inspectors were the lead investigative agents on the case, not the FBI (which is part of Barr’s DOJ), might lend some credence to the idea that SDNY was keeping the case under wraps to avoid any interference. But on balance I find this a little hard to believe.
Another possible explanation is that Barr’s efforts to tamp down the case simply failed. When the indictment came down, many people recalled Barr’s recent effort to fire the U.S. Attorney for the Southern District of New York, Geoff Berman. You may recall the odd episode where Barr issued a press release saying Berman was stepping down, which Berman promptly denied. When he did so, Berman expressed concern about ensuring the integrity of ongoing investigations within his office.
Barr had planned to replace Berman temporarily with the New Jersey U.S. Attorney, who is close to Barr, and ultimately with Jay Clayton, the head of the SEC. They are Trump loyalists who probably could have been counted on to at least slow-walk the Bannon case until after the election, if not kill it entirely. But Berman’s refusal to go quietly ultimately ended in a deal where Barr agreed that Berman’s chief deputy, Audrey Strauss, would step in as the acting U.S. Attorney if Berman left. And Strauss, a respected career prosecutor, is not on team Trump.
It’s true that Barr still had the power to kill the case. But it’s pretty difficult to do that against the recommendation of an independent, career U.S. attorney. Barr’s intervention would almost certainly have leaked, and that could have ended up looking even worse for the president than the indictment. At least Trump can distance himself from Bannon’s fraud; he could not have readily distanced himself from Barr’s torpedoing the case. In short, perhaps after Barr’s attempt to install “his guy” at the SDNY failed, allowing this indictment to go forward ended up being his best option.
In fairness I should mention a third possibility: perhaps Barr was just playing it straight, not interfering, and letting the chips fall where they may. Perhaps – but his track record does not entitle him to the benefit of the doubt. And there has never been a satisfactory explanation for the immediate need to remove Berman, rather than waiting for his replacement to be confirmed.
What Does the Bannon Case Mean for Trump?
As I mentioned, the case against Bannon does not directly implicate the president. But Bannon was part of Trump’s inner circle for some time. It’s possible he has information relevant to other ongoing investigations – some of which are not public and may be located in the SDNY. If so, Bannon could agree to turn on Trump and cooperate in exchange for leniency. It’s also possible, of course, that Trump could pardon Bannon – particularly after the election – in the hope that Bannon would then keep his mouth shut out of gratitude. But at this point we can only speculate.
In any event, the developments in Bannon’s case should be interesting. Absent a pardon, some kind of cooperation, or other unexpected development, it looks like there is a good chance he will be going to jail.
3. The Senate Intelligence Committee Report
Also last week, the Senate Intelligence Committee released Volume 5 of its report of its investigation into Russian interference in the 2016 election. The report is notable not so much for any startling new revelations but because it was issued by a Senate Committee on a bipartisan basis – and that Committee is controlled by Republicans.
The Senate report confirms much of what was already in the Mueller report, although it goes into far greater detail, weighing in at nearly 1000 pages. It devotes more than 100 pages just to discussing Paul Manafort and his ties to various Russian actors, including Russian intelligence officers. Another 100+ pages are devoted to discussing the infamous Trump Tower meeting in June 2016 between members of the Trump campaign and Russians who had promised damaging information about candidate Hillary Clinton. Other people and incidents, including George Papadopoulos, Carter Page, Roger Stone, and Trump’s concealment of his efforts to build a tower in Moscow, also receive extensive discussion.
The detailed information about Manafort and his Russian ties is perhaps the most damning, although again most of it is not new. The report details Manafort’s long-time ties to Konstantin Kilimnik, who is described as a Russian intelligence officer. Among other things, while he was Trump’s campaign chairman, Manafort met with Kilimnik and shared confidential internal Trump campaign polling data. The Committee, like Mueller, could not determine exactly why Manafort shared this information. But Kilimnik was with Russian intelligence and this took place at the same time Russia intelligence officers were actively engaged in a social media campaign to influence the election. Such internal polling data would undoubtedly be extremely useful in determining where to target such social media efforts.
Two conclusions in the report deserve to be highlighted. First, when it comes to Manafort:
The Committee found that Manafort’s presence on the Campaign and proximity to Trump created opportunities for Russian intelligence services to exert influence over, and acquire confidential information on, the Trump Campaign. Taken as a whole, Manafort’s high level access and willingness to share information with individuals closely affiliated with the Russian intelligence services . . . represented a grave counterintelligence threat.
Second, when it came to the Committee’s ability to investigate and obtain information from the White House, it noted that the president had made expansive, unwarranted assertions of executive privilege:
The Committee did not anticipate . . . the multitude of novel and unprecedented potential executive privilege claims from the [White House Counsel’s Office] on behalf of members of President-elect Trump’s Transition Team and the Transition itself, for communications before Trump took office. The Committee was surprised by these assertions because they were made inconsistently and because they have no basis in law.
In short, the Republican-led committee agrees the Russia investigation was not a “hoax;” actions of the Trump campaign represented a “grave counterintelligence threat.” And the White House, following a pattern it has exhibited in many other investigations (including the Mueller investigation and the impeachment proceedings) essentially stonewalled the investigation, making it impossible fully to determine what had happened.
But Was it Collusion?
After 900-plus pages of bipartisan factual analysis, the report concludes with brief statements of “additional views” by groups of Republican and Democratic Senators. The Republicans stated (in bold italics, to make sure you don’t miss it), “the Committee found no evidence that then-candidate Donald Trump or his campaign colluded with the Russian government in its efforts to meddle in the election.” The Democratic Senators disagreed, concluding that “this is what collusion looks like.” In other words, the two political parties largely agree on the facts, but disagree over whether they prove “collusion.”
This is a silly, semantic debate. As I’ve argued elsewhere, and as Mueller also noted in his report, collusion is not a legal term. You can define it however you like. If you equate the term collusion with a criminal conspiracy, then it’s true that Mueller – and the Committee – did not find sufficient evidence to prove such a conspiracy beyond a reasonable doubt. On the other hand, if you define collusion as working cooperatively to achieve a common goal, then there is evidence of collusion all over the place. As the Democrats noted in their separate statement:
The Committee’s Report clearly shows that Trump and his Campaign were not mere bystanders in this attack – they were active participants. They coordinated their activities with the releases of the hacked Russian data, magnified the effects of a known Russian campaign, and welcomed the mutual benefit from the Russian activity.
The bottom line is that a Republican-led Senate Committee has found that the Trump campaign had extensive contacts with Russian individuals including Russian intelligence officers, shared confidential information with them, welcomed Russian efforts to help Trump win the election, built a campaign and messaging strategy around the release of the Democratic emails stolen by Russia, and then failed to cooperate fully in the Senate investigation of those activities.
That should be – or should have been — a major scandal. But again, none of it is really new, and most of it was discussed in Volume I of the Mueller report. The addition of this Senate report is unlikely to have much of an impact on a public that has already largely absorbed these facts and formed its opinions.
But if nothing else, perhaps the bipartisan report will help to undermine Trump’s constant refrain about the “Russia hoax” and the deep state “witch hunt.” Even his own party agrees that the Russia allegations were not a hoax; there was extensive evidence of the Trump campaign’s ties to Russia and that those ties posed a grave threat. There was a more than sufficient basis for the FBI to investigate. The fact that no provable criminal charges resulted does not mean the investigation itself was unwarranted – particularly considering how difficult the White House and others made it for investigators to get the full story. And the fact that the Trump campaign’s conduct ultimately may not have been criminal does not mean that it was okay.
Postscript: More Stormy Weather
I’d be remiss if I didn’t mention a final legal development last week: we learned on Friday that Trump was recently ordered to pay more than $44,000 in legal fees to adult-film actress Stephanie Clifford, known as Stormy Daniels. The fees were from a lawsuit she filed over a non-disclosure agreement with Trump. She signed the agreement in 2016, accepting $130,000 in exchange for her promise not to discuss an affair she had with Trump from 2006-2007. A California judge agreed that Daniels had prevailed in her lawsuit to void the agreement, and ordered Trump to pay her attorney’s fees.
One of the charges that Trump’s personal attorney Michael Cohen pleaded guilty to was a campaign finance charge related to this “hush money” payment to Clifford, which he said he made at Trump’s direction. Possible state financial crimes related to this hush money payment were part of the original basis for Vance’s grand jury investigation in New York. Thus, in the span of a few days last week, Trump’s legal problems came full circle.
All in all, a really bad week.
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