It’s Not Fraud on the Voters to Lie to Your Own Checkbook

L ast Thursday, Justice Juan Merchan issued a decision denying Donald Trump’s motion to dismiss the indictment brought by Manhattan district attorney Alvin Bragg against Trump, and set a March 25 trial date. Merchan, who has previously presided over the criminal trials of the Trump Organization and its CFO Allen Weisselberg, occupies an unusual spot on the bench: He was neither elected to that role nor appointed to it by an elected official. He is designated only as an “acting” justice of the supreme court (the main trial court in New York), but he’s been an acting justice since 2009. His actual appointment, by then-governor David Paterson, was to the Court of Claims, which is not a criminal court (he was previously appointed by then-mayor Mike Bloomberg as a family-court judge). That’s due to a state-constitutional cap on the number of justices on the New York supreme court, which the governor and state legislature have for some time been evading by appointing judges to lesser courts and reassigning them.

Before becoming a judge, Merchan served in the office Bragg now runs, and then joined the New York attorney general’s office in 1999, when Eliot Spitzer took it over. He worked there until Spitzer was leaving office in 2006 to run for governor. His opinion on Bragg’s charges reads like something straight from the Spitzer playbook for vague, standardless laws and rule by political vendetta.

Bragg’s indictment alleges, essentially, that Trump lied to his own checkbook in how he described payments to Michael Cohen that were actually reimbursements of hush money Cohen paid on Trump’s behalf to Stormy Daniels. For this, he has been indicted under New York Penal Law Section 175.10, which applies to anyone who “makes or causes a false entry in the business records of an enterprise” and does so “with intent to defraud.” As is generally true of the criminal charges against him, Trump has no substantial defense on the facts — he almost certainly did everything he stands accused of doing — but it wasn’t against the law.

Or, rather, it wasn’t against the law unless you apply Trumplaw: a method for reading the law to reach novel and unprecedented applications, at odds with prior case law, and read the words of the law in ways that abuse common sense and are inconsistent with the basic traditions of Anglo-American jurisprudence. That’s how Trumplaw has worked in one area after another.

There’s a battery of legal problems with this indictment, as I detailed in a prior series, and which I further covered here when Bragg supplemented his indictment with a deficient bill of particulars. Merchan brushes all of these deficiencies aside. I’ll deal today just with the central problem: There’s no fraud, and no plan for a fraud. You can’t have an intent-to-defraud charge without one.

As I have previously explained here, with a detailed discussion of the New York cases here:

There still has to be fraud. That means that Bragg needs to prove some sort of plan to use the false documents to deceive the reader of them out of something. New York cases have rejected theories of prosecution where the falsehoods were sent only to people who would not care about them, or where they were sent only after all the important decisions had been made. A number of these cases have been decided on the basis of the materiality requirement, which is another traditional element of fraud imported into the statute from the common law — the rule that falsehoods aren’t fraud unless they have the capacity to change somebody’s mind about something important that they don’t already know. . . .

What’s crucially missing from [the charges] is any sign that Trump and Cohen planned to use the checks, invoices, and entries on the internal ledger of the Trump Organization to deceive anybody. Of the 34 felony counts, eleven are invoices from Cohen to Trump, and ten are checks from Trump to Cohen. Among the 13 counts that involve general-ledger entries, nine are for “the Detail General Ledger for Donald J. Trump,” and four are for “the Detail General Ledger for the Donald J. Trump Revocable Trust” — in other words, records of the portions of the Trump Organization that held the money Trump made from the business, rather than the operating arms of the business.

Presumably, Trump and Cohen lied in their checkbooks and invoices because they were involved in a dirty and embarrassing business they wanted to hide from the voters, the press, and, probably, from Melania Trump. But just because you conceal the truth in a private record out of an excess of secrecy does not mean you plan to use those private records to persuade anybody of anything.

Does Merchan think the fraud law doesn’t require fraud? He doesn’t cite a single case that would support such a charge. His discussion of the intent-to-defraud requirement — which runs barely more than a page — cites only one case that I didn’t discuss in my prior write-up, People v. Dallas (First Department 2007). He cites Dallas only for the general proposition that you can have an intent to defraud without identifying a specific victim. But Dallas involved a defendant caught red-handed with twelve counterfeit identity documents. The First Department (the intermediate state appeals court directly above Justice Merchan) in Dallas found ample evidence of the precise thing that is missing in Trump’s case:

The only conceivable purpose for these items, including a set of documents creating two different identities for the same person, was that they would be passed off as the genuine articles in order to deceive or defraud anyone to whom they were presented, and there would be no reason for anyone to buy them without planning to use them in that manner. Thus it could be inferred not only that defendant expected or believed it likely that the documents would be used for fraudulent purposes, but also that by intending to sell the documents, defendant additionally intended what he knew to be the inevitable consequences of such sales. Furthermore, as a merchant of false documents, defendant had an interest in having his customers successfully use his products for their intended purpose. [Emphasis added]

By contrast, why would Trump and Cohen exchange checks and invoices, and record them on the Trump Organization books? Because that’s how you transfer money. None of these documents were designed for public disclosure. The Trump Organization is a privately held business, and as the civil-fraud suit against it has reminded us, its auditors were not exactly the most skeptical reviewers of its records. Cohen didn’t anticipate that his checks and invoices would end up in the newspapers. Sure, they didn’t want to write down what they were actually doing, but the felony false-business-records law doesn’t require any particular disclosures; it just criminalizes false records that were intended for active use in a fraud.

Bragg advances a theory that a separate payment made by American Media, Inc. (“AMI,” the publisher of National Enquirer) to Karen MacDougal (another woman with whom Trump allegedly had an affair) was part of a broader scheme on Trump’s part, and that Trump knew that AMI was making its own false entries on its own records. But so what? There’s just nothing alleged here, and nothing cited by Merchan in the evidence presented to the grand jury, to show that Trump’s or Cohen’s accounting for payments to Cohen and Daniels in any way furthered or concealed AMI’s payments to McDougal. Who would be expected to review Trump’s or Cohen’s private business records in order to test the veracity of AMI’s accounting? Bragg doesn’t have a theory for that, and neither does Merchan.

Before we get to how Merchan describes the theory of fraud that he thinks satisfies the statute, it should be noted that he first had to strain to conclude that the checks and invoices were “business records” at all. There’s an arguable case for that, based upon the fact that Trump (careless as he characteristically is about rules and procedures) sometimes paid business expenses of the Trump Organization (such as Weisselberg’s salary) out of these accounts. But as I’ve noted before in another Trumplaw context, when you’re already applying an aggressive reading of one element of a statute, it’s all the more reason not to compound that with an even more creative reading of a related element. And it’s particularly dangerous for prosecutors to define a crime in a way that sands down every element other than intent, because it is easy for people to project onto political opponents a bad intent. “Intent to defraud” has to be anchored to provable, concrete facts — which the New York courts have found in the past from the nature of the false records and who would be expected to see them.

So, here is how Merchan defines Trump’s “intent to defraud”:

The People submit that Defendant’s “intent to defraud” was established in the Grand Jury by evidence that Defendant sought to suppress disclosure of information that could have negatively impacted his campaign for President of the United States and that he made “false entries in the relevant business records in order to prevent public disclosure of both the scheme and the underlying information. In substance, the People argue the Defendant’s intent to influence the 2016 presidential election by violating [federal and state election laws and state tax laws] satisfies the “intent to defraud” prong. . . .

Evidence presented to the Grant Jury demonstrated that Defendant, starting in 2015, intended to pay Daniel and MacDougal a sum of money to prevent the publication of information that could have adversely affected his presidential aspirations. [Emphasis added]

This is remarkable. According to Merchan, the intended defrauded party here is the national electorate. In other words, this is — in the view of the trial judge! — fundamentally a prosecution for political-campaign speech by a candidate for office. Need I remind the reader that it’s not illegal for a political candidate to try to influence the election in which he’s running for office. Nor, under our First Amendment, is it illegal for candidates to conceal things from the voters or even lie to the voters.

This is America. We’re not supposed to use the criminal law to prosecute political candidates for what they say or don’t say during elections. But the judge just said out loud that this is what Alvin Bragg is doing, and he’ll let it happen.

Yet, the only fraud alleged here is concealing an affair from the voters. And the judge still has no theory for how exactly these particular private records — all of them created after the election — were supposed to deceive the American public.

A major part of the confusion here is that the false-records statute is a misdemeanor that can be elevated to a felony if the prosecution proves that the defendant’s “intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.” Note the word “includes.” As my prior series noted:

McKinney’s Practice Commentary, the standard treatise on New York laws, notes that “for the first-degree crime there must be two separate intents in that the ‘intent to defraud’ must include ‘an intent to commit another crime or to aid or conceal the commission thereof.’ The first degree, for example, is not committed when there is an ‘intent to . . . conceal the commission’ of a crime but no ‘intend to defraud.’”

The prosecution’s theory that Trump intended to violate the federal and state campaign-finance laws and the state’s tax laws are flimsy for their own reasons, but that’s another day’s discussion. The important point here is that even having an intent to conceal regulatory violations is not a substitute for an intent to defraud — not without some theory of who was entitled or expected to review these records in order to detect those violations.

The most essential element of the crime hasn’t been alleged here, and there’s nothing in the public record to suggest that evidence of that element was presented to the grand jury. Yet, the judge will let the case go to trial without even a legal theory of how that element can be satisfied. That’s a mockery of the rule of law.