Political & Election Law: Giuliani Speaks About Stormy Daniels Payment: “It’s not campaign money, no campaign finance violation.”

Friday, May 4, 2018

During a May 2 appearance on the Fox News program, Hannity, Rudy Giuliani offered his succinct interpretation of the legal questions swirling during the Stormy Daniels matter involving President Trump’s longtime attorney, Michael Cohen: “It’s not campaign money, no campaign finance violation.” And while “America’s Mayor” is a regularly featured pundit on Fox News, this appearance was quite different because he is currently acting as one of President Trump’s attorneys in this matter. And, unfortunately for President Trump, Mr. Giuliani’s comments likely created more questions than he answered.

What is known—despite an ever-evolving narrative—is that Cohen took action when confronted with allegations of an illicit relationship between the then-candidate for president and Stephanie Clifford, the adult film actress known as Stormy Daniels. Just prior to the 2016 presidential general election, Cohen, in his words, “facilitated” the payment of $130,000 to Clifford in exchange for her signing a non-disclosure agreement regarding her alleged relationship with Trump. When news of the payment initially surfaced, Cohen said he used a home equity loan to finance the payment. Trump, for his part, told reporters a few weeks ago that he did not know about the $130,000 payment.

Non-disclosure agreements are signed all the time for reasons not connected to politics, and they have been used extensively by Trump and his legal representatives to protect details of his personal life and business dealings. Despite their regularity, such agreements can occasionally trigger important aspects of campaign finance law when payments are involved. For example, federal campaign-finance law defines a “contribution” to a candidate as “anything of value,” including cash, goods, services, loans, and advances (and the Federal Election Commission’s rules specifically cite third-party payments as one form of an in-kind contribution). Of course, if Cohen’s $130,000 payment was a contribution to the Trump campaign, it would have been an impermissible one that exceeded the $2,700 contribution limit. And there would be additional issue if Cohen used corporate resources to make the payment.

So what should we make about Giuliani’s insistence that the $130,000 was repaid by President Trump as part of his regular business relationship with Cohen? Because loans and advances are considered contributions as long as any balance on the loan or advance remains unpaid, this fact does little to cure the alleged violation. If Cohen’s $130,000 payment was a contribution to the Trump campaign, federal campaign-finance laws really don’t care that Cohen was ultimately repaid.

The key question is whether the “thing of value” is given for the purpose of influencing the outcome a federal election. When considering the timing of Cohen’s payment to Clifford, it may look a lot like a third-party payment that is considered a loan or advance (i.e., a contribution) to the Trump campaign. But is it?

Again, the critical inquiry is whether the payment was made for the purpose of influencing the outcome of a federal election, or what we will summarize as “campaign-related.” Thus, to prove that Cohen’s $130,000 payment was a contribution to Trump’s campaign, there must be a finding that Cohen would not have made that payment but for the fact that Donald Trump was running for President of the United States. As President Trump alluded to in his own tweets, “people of wealth” enter into non-disclosure agreements for many reasons, and he is well-known for requiring non-disclosure agreements to protect details of his personal life and business dealings. Trump’s history and consistency in this regard is extremely helpful to his defense; therefore, despite the knee-jerk reactions of several purported experts, proving this element of campaign-finance law may be harder than they realize.

Indeed, a recent criminal case involving former U.S. Senator John Edwards may hold the key to President Trump’s defense strategy. In that case, federal prosecutors tried to prove that Edwards conspired with wealthy donors and his close aide to conceal (during his presidential campaign) an affair with a videographer. Confronted with having to prove the alleged conspirators’ actual state of mind (a subjective test, no less) with evidence that the payments were made for the purpose of influencing the election, the prosecutors were hampered by a lack of witnesses who could say that Edwards had the intent to violate campaign-finance laws. The jury ultimately returned one verdict in Edwards’ favor and deadlocked on the remaining charges. Without additional evidence and witnesses, prosecutors likely won’t have any more luck going after President Trump on this issue.

Not everyone will be convinced by our analysis because it appears objectively reasonable to conclude that Cohen wanted to prevent the Clifford allegations from seeing airtime near the general election; however, these skeptics are missing the fact that this objective belief, in and of itself, is not be enough to conclude that the $130,000 was an impermissible contribution to the Trump campaign. To be clear, evidence will have to be presented to demonstrate affirmatively that Cohen—and likely Trump—created the payment arrangement for the express purpose of influencing the election. That’s a high hurdle.