The Trump Hush Money Case is a Legal House of Cards
The Trump hush money trial in New York is about whether Trump made a false entry in a business record of an enterprise “with intent to defraud.” That is a misdemeanor. NY Penal Law § 175.15. The crime becomes a felony where the “intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.” NY Penal Law § 175.10. If the trial fails to establish that Trump falsified the records to commit another crime or conceal it, the felony, it will also fail to establish a misdemeanor. The “intent to defraud” the DA seeks to prove is based exclusively on Trump’s effort to violate federal and state election laws, and possibly state tax laws. It’s felony or nothing.
The DA has not charged Trump with any of the “other crimes” that predicate the felony false business records charges. None are even specified in the indictment. But in responding to Trump’s motion to dismiss, the DA pointed to a set of federal and state crimes that could serve as predicates. The DA did not commit to any theory, even though the intent to violate those laws is the only thing here that makes falsifying the business records a crime. It’s like putting a defendant on trial for five potential crimes, none of which are specified in the indictment, and allowing the jury to pick and choose from a grab-bag at the end. This approach raises serious questions. Will the jury be instructed on the elements of the various potential predicate crimes? Must the jury agree on which crimes Trump intended to violate? For anyone concerned about fairness, it gets worse because the business records offense requires only an “intent” to commit these unspecified crimes. It does not require an actual violation, attempt, or conspiracy. Apparently, if a defendant falsifies a business record, planning to commit a crime, then thinks better of it and changes his mind, that’s still a felony. It’s like a conspiracy of one person, a pure thought crime.
This is all the unfortunate result of the Southern District of New York, apparently at Attorney General Barr’s insistence, dropping the federal investigation into Trump’s payments. The testimony of David Pecker in the opening week of the trial has provided powerful evidence of a clear and blatant violation of established federal campaign finance disclosure laws. That would have been a straightforward case, raising none of the problems here. That testimony reveals Barr’s cynicism. He killed the federal investigation and then went on to refer to the DA’s case against Trump as a “drive by.” The DA’s charges are weak because he was compelled to use imperfect state law to fill a clear abdication of federal responsibility by Barr himself.
Unfortunately, there are lots of problems with the DA’s charges. If Trump is convicted, the risk on appeal will be overwhelming.
A Conviction Based on an Intent to Violate Federal Campaign Finance Laws is Highly Likely to Get Overturned
The DA has argued that “an intent to commit another crime,” as required for the business records felony, can include an intent to violate federal campaign contribution reporting requirements. Rejecting Trump’s motion to dismiss, the trial court agreed. But that reading is inconsistent with the plain language in the penal code.
The code defines a “crime” as a misdemeanor or felony “offense.” In turn, it defines an “offense” as
conduct for which a sentence to a term of imprisonment or to a fine is provided [1] by any law of this state or [2] by any law, local law or ordinance of a political subdivision of this state, or [3] by any order, rule or regulation of any governmental instrumentality authorized by law to adopt the same.
NY Penal Law § 10.1. A federal law is obviously not (1) “any law of this state” or (2) “any law, local law or ordinance of a political subdivision of this state.” The question, therefore, is whether a federal law is (3) an “order, rule or regulation of any governmental instrumentality authorized by law to adopt the same.” The trial court agreed with the DA that the definition includes federal law but did not analyze the language. The language contradicts that conclusion.
The Federal Election Campaign Act is not an “order, rule or regulation,” it is a “law,” just as state law is “law.” It is nonsensical to refer to a federal statute as an “order, rule or regulation.” Nor is the federal government a “governmental instrumentality,” it is the federal government. A governmental instrumentality, by contrast, is a component of a government, such as a department or agency in the executive branch of a government. Such agencies issue “order[s], rule[s] or regulation[s].” That is why the definition refers to an “order, rule or regulation of any governmental instrumentality.” In other words, this part of the definition is addressing New York governmental instrumentalities, including New York administrative agencies. This is confirmed by the fact that the code provides that an “offense” includes a “violation,” which is the type of offense that an administrative agency can impose by order, rule or regulation. Such violations involve fines, not jail time. Without this language, the definition of an “offense” would not include violations of orders, rules and regulations of state agencies, which would be a major omission.
Applying the common meaning of this language is dispositive. There is no need to go further. But if there were any doubt, basic principles of interpretation would bolster the conclusion that a “governmental instrumentality” is limited to New York state agencies. The text of the entire provision must be read as a whole. The clause addressing governmental instrumentalities immediately follows references to New York state law, then local law. The other source of law is New York state administrative law. These references comprise one comprehensive list of the various sources of law that can establish offenses in New York. That conclusion is further supported by the fact that the purpose of this definition is to define the meaning of these terms in New York’s criminal code. There is no reason for the terms to include federal law or the law of any other jurisdiction.
As the final nail in the coffin, a court would likely require a clear statement before construing state law as adopting by reference elements of federal law. The DA’s case illustrates this problem. The tail wags the dog. The DA seeks to prove in state court a significant uncharged federal crime, that federal prosecutors did not pursue, as an element in a relatively minor state business records offense. Even if such a state law is not preempted by federal law, federalism principles bolster the view that a “crime” under the statute does not include a federal crime. Otherwise, nearly the entire case would turn on a state trial of a federal offense, which would be highly unusual. What would happen if a defendant were convicted of a felony business records offense, based on an intent to violate federal law, where the scope of the federal law is unsettled and subject to conflicting federal precedent? Would that be irrelevant because the state law simply incorporates the federal law? Or because the state offense requires only an “intent” to violate federal law, not an actual violation? Whatever one thinks of Trump and his conduct, relying on federal law would raise significant questions about fairness, state versus federal jurisdiction, and the proper limitations on state trials of federal offenses.
Relying On State Election Law as the Crime Raises Significant Preemption Problems
The DA also relies on a provision of New York election law as the “other crime” that Trump intended to violate in falsifying business records. NYEL § 17-152 makes it a misdemeanor to conspire to “promote or prevent the election of any person to a public office by unlawful means” if at least one conspirator acts upon the conspiracy. Putting aside the questionable policy logic of a state crime that makes it a felony to falsify a business record to commit a misdemeanor, relying on § 17-152 as the predicate crime raises significant preemption problems.
To be sure, a federal district court rejected Trump’s argument that federal law (namely, FECA) preempts using § 17-152 as the basis for the false business records felony. The court reasoned that FECA does not displace state law “entirely” and “does not affect the States’ rights to pass laws generally concerning other areas of federal elections, such as voter fraud and ballot theft.” People v. Trump, No. 23-CIV-3773 (AKH), at 23 (S.D.N.Y. July 19, 2023) (internal citations and quotations omitted). As the court observed, federal election law does not prevent states from enforcing their own laws, such as § 17-152, that do not conflict with federal law and do not address specific areas of federal election regulation that are expressly preempted, such as campaign finance regulation. The problem for the DA is that the district court addressed this issue in the abstract, not according to how the DA intends to rely on § 17-152 in this case. The district court decision addressed preemption in the context of a meritless effort by Trump to “remove” the whole case to federal court, where removal of a state action against a federal official requires establishing a colorable “federal defense.” There are many ways the DA could, hypothetically, use § 17-152 that do not implicate federal preemption. Accordingly, in the weak posture the Trump team presented the issue, the district court was right to reject Trump’s meritless removal argument.
But that abstract analysis will not help the DA if the “unlawful” conduct the DA seeks to prove under § 17-152 is conduct directly regulated by federal law, as to which state law is preempted. And that is exactly what the DA seeks to prove. As noted above, the DA cannot rely on FECA directly because a “crime” under the false business records offense must be a New York state or local crime. And based on preemption, the DA cannot rely on FECA indirectly as the predicate through § 17-152. Nor can the DA relabel state campaign finance violations that are squarely within the scope of FECA and expressly preempted. Indeed, the district court ‘s reasoning would cut against the DA. Based on the fact that § 17-152 applies broadly to any “unlawful” conduct involving promoting a candidate, the court correctly distinguished § 17-152 “from other provisions of New York’s election law that directly target campaign contributions and expenditures, and which, therefore, are preempted.” Trump, at 23. But that just means § 17-152 can be used in ways that do not reach what federal law preempts. Conversely, relying on § 17-152 to establish “unlawful" conduct that involves violations of state laws that “directly target campaign contributions” would be preempted.
The Throwaway Tax Violation Predicates are Weak
The DA also apparently intends to rely on an intent to violate New York tax law as the predicate crime for the false business records felony. It is possible that the DA might also rely on that as the “unlawful” conduct for the state election violation predicate under § 17-152, which would avoid the preemption problems noted above. That would be a daisy chain of a criminal charge: creating a false business record with the intent to engage in a conspiracy to violate election law based on the intent to violate a tax law. That’s at least three levels of inchoate criminal conduct. And the fact that the defense is left guessing, as the trial is underway, about whether and how such allegations may factor in is highly unusual.
The foundation for the criminal tax predicate is unclear. The charge relies on evidence that Trump’s attorney Michael Cohen was paid $420,000 for his role in making the $130,000 hush money payment to Stormy Daniels, the purpose of which he concealed by falsifying business records. Part of the $420,000 included a “grossed up” amount to cover the tax obligations on Cohen, since the $130,000 falsely would appear as income to Cohen for legal services. Trump sought to dismiss that predicate offense because the Cohen tax returns were not presented to the Grand Jury and, Trump contends, there is no evidence that he was aware of the “grossing up” arrangement. The trial court rejected the argument based on evidence before the Grand Jury that Trump was aware that the $130,000 paid to Cohen was not for legal services, but to pay off Daniels, and that Trump likely knew about the arrangement to cover Cohen’s tax liability.
But how does any of that establish a tax offense, particularly on the part of Trump? He was concerned about concealing the purpose of the payments to Daniels, not Cohen’s tax payments. Indeed, this arrangement caused Cohen to pay more taxes, because it falsely represented a reimbursement as income. Notably, the extensive federal charges against Cohen—which included federal tax fraud charges arising out of concealing income from his various businesses, including taxis—did not charge this conduct. Maybe New York law requires disclosing details about the payments, even if the omission does not involve cheating the state out of income tax payments. But this is a weak predicate, particularly since it is so tangential to Trump’s scheme. Tax law reporting requirements have nothing to do with facilitating public disclosure of Trump’s election-related machinations. It is hard to imagine this predicate sustaining the business records felony on appeal if the core predicate offenses—the failure to report campaign expenditures—do not survive.
Conclusion
This is all very unfortunate. The evidence appears indisputable that Trump engaged in a criminal conspiracy with Cohen and Pecker to violate federal campaign finance laws. According to Pecker’s testimony, he hoped Trump would get elected because he knew what he was doing was illegal and the conspirators could all get pardoned. But thanks to Bill Barr, here we are.