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Intent to defraud. Remember this sentence. You will probably hear it a lot.
Here’s why. Even some of Manhattan District Attorney Alvin Bragg’s strongest critics of the lawsuit, former President Donald Trump assumed that, technically, he was guilty of a minor offense – the New York misdemeanor of falsifying business records.
Bragg’s critics argue that this is an outrageous accusation, not because Trump is innocent of falsifying records, but because Bragg would never bring a ridiculous accusation against anyone but Trump. Bragg is a Democrat elected in the radical mold of the “progressive prosecutor”; his default setting is anti-law enforcement, and he campaigned in the Manhattan blue vowing to harness the power of the prosecutor’s office against Trump.
In the Caper by Stormy Daniels, Trump ‘fixer’ Michael Cohen paid $130,000 to get the porn star (whose real name is Stephanie Clifford) to agree to keep quiet about an affair she allegedly had with Trump in 2006. There is nothing illegal in such a matter. non-disclosure agreement; indeed, NDAs are a staple of civil litigation settlements and similar private arrangements.
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Nonetheless, companies that do business and pay taxes in New York, like the Trump Organization, are required to keep accurate books and records, so if an NDA relates to the company, it must be accounted for accurately. Here, Cohen asked for the refund from the Trump Organization, where he worked when he filed the NDA with Daniels days before the 2016 election. It was agreed that Cohen would be reimbursed. (I’m using the passive voice here because, while it’s undisputed that Trump reimbursed Cohen, the extent to which he was involved in the structure and details of the reimbursement will certainly be disputed.)
It seems obvious that the resulting trade documents are fake: in reality, Trump paid a debt he owed Cohen; but in the records it was revealed that Cohen, an attorney, was paid fees for ongoing legal representation.
In sum, the $130,000 Trump owed Cohen was doubled to $260,000 to ensure Cohen would not be hit by taxes. (Legal fees are taxable income; paying a debt is not.) Then Cohen had to submit a monthly bill throughout 2017 and was paid by check in monthly installments — the first checks drawn. to Trump’s revocable trust account and signed by the trustees (Donald Trump Jr. and the Trump Organization’s CFO Allen Weisselberg), the others signed by President Trump himself and drawn from his personal bank account.
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(The above is a simplified explanation. Other monies were owed to Cohen for campaign polls and he also received a bonus; these were thrown into the mix with the NDA-related $260,000 and taken into account.) account both in the invoices submitted by Cohen and the checks he received in payment.)
Since the record entries that make a loan repayment look like a payment for legal fees are false, shouldn’t Trump be guilty of the misdemeanor of falsifying business records? Not necessarily.
In an interview Sunday by Fox News’ Shannon Bream, former Attorney General Bill Barr opined that Bragg’s case lacks a legal basis. After pointing out that NDAs are legal, Barr asserted that Bragg’s prosecutors “say he tampered with the company’s record. But for that, even to be a misdemeanor, you have to try to defraud someone, and it’s unclear who exactly was defrauded. It’s his own business.”
The former AG makes an important point.
The New York Criminal Law codifying the tort of falsification of business records is Section 175.05. In relevant part it states: “A person is guilty of falsifying business records…when, with intent to defraudhe … makes or causes a false entry in the commercial records of a company” (emphasis added).
As Barr points out, it is not enough for prosecutors to show that a defendant made a false entry in the business records. Section 175.05 explicitly adds the distinct and essential element of proving that the defendant acted with intent to defraud.
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It would be understandable, especially for non-lawyers, to ask, “What could be more indicative of fraudulent intent than making a false entry?” But that is not how the laws are interpreted, especially in criminal law, where the accused are presumed innocent and given the benefit of any doubt.
In statutory interpretation, we indulge in a presumption against what is called “excess”. This means that we assume that legislatures do not add terms to a law for no reason. Applying this principle here, we must conclude that if the mere fact of making a false entry was enough to prove guilt, there would have been no reason for New York lawmakers to add that the forgery must be made “with the ‘intention to defraud’ – those words would just be a useless surplus. Thus, “intent to defraud” must mean something distinct and in addition to tampering.
This is similar to federal misrepresentation cases. We refer to the crime as making a “false statement”. But not all false statements are prosecutable; federal law adds that the forgery must be material – it had to be material to the matter under investigation. In New York law, “intent to defraud” serves the same function: it ensures that the law does not criminalize insignificant false entries that do no harm to anyone.
There is a dispute in the law over what “intent to defraud” means. Prosecutors still want it defined broadly, so that the law reaches into any deceptive action – as if “intent to defraud” were a surplus. The defendants want the phrase reduced to its common meaning: trying to obtain money or property under false pretenses.
Expect Trump’s lawyers to push hard for this second interpretation. We haven’t seen the indictment yet, but so far there’s no indication that New York State or anyone else has been harmed in the slightest, let alone financially, through the falsification of records.
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Trump will plausibly argue that his only intention was to cover up a silent financial deal with a porn star, not to scam anyone. And so far, no one has alleged that the Trump Organization’s booking of the NDA refund amounted to financial fraud or tax evasion — even though Bragg’s office has sued the Trump Organization and its principal. financially liable for minor tax offences.
Rest assured: If there had been evidence that victims were defrauded because Trump defrauded them, the federal authorities who originally had this investigation would never have dropped it.