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Paper Cuts: Cashing in on Connections

Businesspeople shake hands with money
(Illustration by POGO)

There has been relentless news coverage of the “consulting” (aka shadow lobbying) by President Trump’s longtime personal and corporate lawyer, Michael D. Cohen, since his side business was revealed last week. Even so, there are still some fascinating details revealed in the original seven-page memo, dubbed “Project Sunlight,” prepared by attorney Michael Avenatti’s law firm. The revelations of blue chip corporations, foreign governments, and political operatives wiring fees for loosely defined services from a presidential confidant paint a shocking picture of the swamp.

Paper Cuts is an occasional POGO feature examining and explaining primary sources relevant to current events connected to the federal government.

Here at POGO we care a lot about documents.

To properly monitor elected and career federal government leaders for fraudulent behavior, wasted tax money or abuse of privilege, POGO studies a lot of paper records.

Although it’s true that every picture tells a story, at POGO, every document tells a backstory.

Last week’s bombshell “Preliminary Report of Findings” details Cohen’s attempt to cash in on his connections to the newly inaugurated President Trump, and which prominent companies—including a foreign defense contractor in the running for a $16 billion Pentagon deal—paid him for those connections. Many of the key allegations were quickly confirmed in on-the-record statements by corporations identified in the report.

What may be most shocking of all is, current laws regulating lobbying are so painfully weak that Cohen’s potential influence-peddling may have been legal.

Avenatti is representing Stephanie Clifford (aka Stormy Daniels) in her effort to fight a non-disclosure agreement drafted by Cohen less than two weeks before the 2016 election and reviewed by Clifford’s then-attorney, Keith Davidson. The same day she signed the agreement, Cohen transferred $130,000 into Davidson’s trust account from Essential Consultants, Cohen’s newly minted limited liability corporation, through his account at First Republic Bank.

Much was immediately made of transactions suggesting a connection between Cohen’s corporation and sanctioned Russian oligarch Viktor Vekselberg, detailed on pages 3-4 of the document, and other deposits, on page 5, by the former National Finance Chairman for the Republican National Committee, Elliott Broidy (who recently resigned from the RNC over Cohen’s involvement in a related matter).

Other troubling financial transactions listed on pages 4-5 include $399,920 the drug company Novartis wired to Essential in four installments during 2017 and early 2018, and $200,000 from AT&T, paid in four installments over the same time period. Both corporations have ongoing business matters before the government that could have benefited greatly from a good word from Cohen’s number-one client.

AT&T confirmed its relationship with Essential Consultants in a statement (CNBC reports it paid him triple the amount originally disclosed), but insists Cohen’s company “did no legal or lobbying work for us, and the contract ended in December 2017." AT&T described Essential Consulting as "one of several firms we engaged in early 2017 to provide insights into understanding the new administration." The Justice Department is blocking AT&T’s proposed merger with Time Warner.

Novartis, it turns out, was also on the hook to Cohen for far more than the $400,000 originally reported. The Swiss drug company confirmed within hours of the document’s release it had entered into a yearlong contract beginning shortly after the inauguration to remit $1.2 million to Cohen for advice on “how the Trump administration might approach certain U.S. health-care policy matters, including the Affordable Care Act.” A Novartis employee told STAT News, “Cohen promised access to not just Trump, but also the circle around him. It was almost as if we were hiring him as a lobbyist.”

The document also lists a $150,000 payment last November to Essential Consulting from Korean Aerospace Industries (KAI), which is currently vying for a U.S. Air Force contract worth $16 billion. KAI’s biggest shareholder is the South Korean Export-Import Bank. A KAI spokesman claimed the money to Essential Consulting was for “legal consulting concerning accounting standards on production costs.”

While acknowledging many of the transactions in the report indeed occurred, Cohen’s attorney, Stephen Ryan, is nevertheless pushing back.

The lawyer’s lawyer claims Avenatti “is apparently in possession of and has published information from some of Mr. Cohen’s actual bank records.” In a letter to Kimba Wood, the district court judge presiding over Cohen’s efforts to prevent the FBI from reviewing documents it seized from him in raids last month, Ryan asks that Avenatti “be required to explain to this Court how he came to possess and release this information.” In his letter to Judge Wood, Ryan also cited “blatantly incorrect statements” in the report, noting that certain financial activities listed on page 7 were in fact those of different Michael Cohens.

The provenance of this information has recently become clearer. On Wednesday, Ronan Farrow published an interview in the New Yorker with an unidentified “law-enforcement official” who claimed to have leaked a suspicious activity report, or SAR, about Cohen’s financial transactions. Banks are required to file SARs with the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, for review by the IRS Criminal Investigation unit. The official “had grown alarmed after being unable to find two important reports on Cohen’s financial activity in the government database” of SARs. (The Wall Street Journal reported in April that First Republic Bank had belatedly sent a SAR to FinCEN about Cohen’s 2016 wire transfer to Davidson, Stephanie Clifford’s previous attorney.) Soon after the Cohen revelations, the Treasury Department’s Inspector General announced it had launched a probe into the possible leak of SARs related to Cohen.

The revelation of these types of banking details is extraordinarily unusual, and is prohibited by the Bank Secrecy Act. Disclosure of this information to the public is not protected by federal whistleblower law. The law enforcement official who released the suspicious activity reports was aware of the risks, telling Farrow, “To say that I am terrified right now would be an understatement.”

The phenomenon of close associates of Presidents trying to make money off of their ties to an administration, on the other hand, is all too familiar in Washington. For instance, as Politico has noted, former White House Deputy Chief of Staff Jim Messina opened a lucrative consulting firm after managing President Obama’s 2012 campaign.

As POGO has long argued, existing laws regulating lobbying need to be strengthened. During the campaign, President Trump called for expanding the definition of lobbyist to include "consultants and advisors" because "we all know they are lobbyists." Such activities generally do not violate current lobbying bans or other revolving door laws that are intended to prevent swampy behavior. Meanwhile, loopholes in both the foreign and domestic lobbying laws could allow people who are influencing policy on behalf of foreign entities to forgo disclosure altogether. The revelations in the report give new urgency to our calls for Congress to close loopholes in the Foreign Agent Registration Act and the Lobbying Disclosure Act, and to codify best practices to limit undue influence by moneyed interests.

By: Bonnie Goldstein
Volunteer Investigative Advisor, POGO

Bonnie Goldstein is an investigative advisor with the Project On Government Oversight.

Topics: Government Accountability

Related Content: Ethics, Improper Influence, Lobbying, Conflicts of Interest, Undue Influence

Authors: Bonnie Goldstein

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