New Yorkers are betting big on the divorce custody case......
Michael Cohen leaving federal court in New York on Tuesday. JASON SZENES/EPA/SHUTTERSTOCK
Michael Cohen had many reasons to play ball last weekend when his legal team sat down to talk to federal prosecutors.
The Manhattan U.S. Attorney’s office had testimony from Mr. Cohen’s accountant and business partners, along with bank records, tax filings and loan applications that implicated not only Mr. Cohen in potential criminal activity, but also his wife, who filed taxes jointly with her husband. Prosecutors signaled Mr. Cohen would face nearly 20 criminal counts, potentially carrying a lengthy prison sentence and staggering financial penalties.
JOEL EASTWOOD FOR THE WALL STREET JOURNAL
Adding to the pressure, David Pecker, the chairman of American Media Inc., which publishes the National Enquirer, provided prosecutors with details about payments Mr. Cohen arranged with women who alleged sexual encounters with President Trump, including Mr. Trump’s knowledge of the deals.
This account of how Mr. Cohen went from a pugnacious defender of the president to turning on Mr. Trump is based on details provided by people close to Mr. Cohen and others briefed on the discussions with prosecutors.
For weeks, the president had been distancing himself from Mr. Cohen, including by stopping paying his longtime attorney’s legal fees, making clear amid the pressure that he was on his own.
Under oath on Tuesday, before a packed courtroom, Mr. Cohen created a spectacular moment without parallel in American history when he confessed to two crimes that he said he committed at the behest of the man who would become president.
Mr. Cohen pleaded guilty to eight federal crimes, including tax evasion and making false statements to a bank, capping a monthslong investigation into his business dealings and work as Mr. Trump’s personal lawyer. For the president, it opens up a perilous new legal front.
In a courtroom drawing, Michael Cohen stands to plead guilty in federal court in New York on Tuesday. PHOTO: ELIZABETH WILLIAMS/ASSOCIATED PRESS
Mr. Cohen in court said Mr. Trump directed him to arrange payments during the 2016 campaign to two women who alleged they had sexual encounters with Mr. Trump. The payments violated caps on campaign contributions and a ban on corporate contributions, prosecutors said.
On Wednesday, Mr. Trump denied he directed Mr. Cohen to buy the women’s silence. Contradicting earlier statements, the president said he became aware of the payments to the women “later on” and said Mr. Cohen was reimbursed from his personal funds, not his 2016 campaign coffers.
The investigation is continuing, according to a person familiar with the matter.
Although the plea deal doesn’t require Mr. Cohen’s cooperation, it leaves the door open for him to talk with both the Southern District of New York and special counsel Robert Mueller. The court restricted Mr. Cohen’s travel to New York City; Chicago, where he owns taxi medallions; South Florida, where his parents live; and Washington, D.C., where the special counsel is based.
The deal doesn’t preclude further prosecutions, including other charges against Mr. Cohen.
Robert Khuzami, deputy U.S. Attorney for the Southern District of New York, spoke to the press on Tuesday after Mr. Cohen pleaded guilty. PHOTO: VICTOR J. BLUE/BLOOMBERG NEWS
Prosecutors built their case partly by using materials seized in April 9 raids of Mr. Cohen’s home, office and hotel, including recordings and other items that provided evidence of campaign-finance violations.
Investigators quickly zeroed in on Mr. Cohen’s relationship with American Media, including its role brokering deals on behalf of Mr. Trump. Mr. Pecker had been an open supporter of Mr. Trump’s candidacy. Prosecutors say Mr. Pecker offered to help keep quiet negative stories about Mr. Trump that might come to the National Enquirer, a practice in the business known as “catch and kill.”
American Media executives were involved in both hush-money deals that formed the basis of Mr. Cohen’s guilty plea to campaign-finance violations, prosecutors said on Tuesday. One was a $130,000 payment to Stephanie Clifford—a former porn star who goes professionally by Stormy Daniels—as part of an agreement to keep her from publicly discussing an alleged affair with Mr. Trump. The payment was first reported by The Wall Street Journal in January.
The second was a $150,000 payment to former Playboy model Karen McDougal for her exclusive story of an alleged extramarital affair with Mr. Trump, a story that was purchased by American Media in August 2016 at Mr. Cohen’s urging, and then never published. The payment was first reported by the Journal in November 2016.
On April 5, days before the raids, Mr. Trump told reporters on Air Force One he didn’t know about the payment to Ms. Clifford, and referred questions about the matter to Mr. Cohen. “You’ll have to ask Michael Cohen,” Mr. Trump said. “Michael is my attorney.”
How Cohen’s Guilty Plea Could Impact President Trump
President Trump’s former personal attorney Michael Cohen pleaded guilty to eight criminal charges on Tuesday. WSJ’s Shelby Holliday explains how Cohen’s plea agreement could impact the president. Photo: Associated Press
Mr. Cohen, who that night was staying aboard the yacht of Trump donor Franklin Haney, which was docked in Miami, grew irate on the ship soon after Mr. Trump made his remarks distancing himself from the Clifford payment, according to a person familiar with the episode. Mr. Cohen was swearing loudly as others on the boat were sipping their drinks, the person said.
The search warrant executed on April 9 sought materials and information related to a wide range of communications, including ones related to the payments to Ms. Clifford and Ms. McDougal. At the same time, investigators subpoenaed Mr. Pecker, American Media and the Trump Organization, Mr. Trump’s business.
Prosecutors had reason to be concerned that without raiding Mr. Cohen’s office, “records could have been deleted without record and without recourse for law enforcement,” according to a court filing.
Prosecutors in the Southern District said the investigation into Mr. Cohen was, in part, a referral from the special counsel’s office. It isn’t clear when the referral took place, or if the office was already investigating Mr. Cohen when the referral came through.
The special counsel’s office was examining Mr. Cohen’s finances since at least October 2017, according to a person familiar with the matter.
Prior to the raids, investigators had already obtained covert search warrants on multiple email accounts used by Mr. Cohen, prosecutors said in a court filing. Early this year, they also had subpoenaed Mr. Cohen’s former accountant, Jeffrey A. Getzel, who handled Mr. Cohen’s personal and business tax returns.
In May, Michael Avenatti, a lawyer for Ms. Clifford, released a memo detailing payments made to Mr. Cohen from companies including AT&T Inc. and Novartis AG, as well as an investment firm linked to a Russian oligarch. Federal agents investigated whether Mr. Cohen lobbied Trump administration officials on the companies’ behalf without registering as a lobbyist, the Journal previously reported.
Initially, Mr. Cohen seemed unlikely to turn on the president. Although their relationship was at times turbulent, Mr. Trump appreciated Mr. Cohen’s absolute loyalty. On the day of the raids, Mr. Trump called the move a “disgrace” and a “witch hunt.”
Soon after the April raids, Mr. Cohen’s relationship with Mr. Trump began to deteriorate.
The estrangement began over legal bills, said a person who has spoken with Mr. Cohen about the matter. The Trump family covered part of Mr. Cohen’s legal fees after the raids, but then stopped paying.
Mr. Cohen felt exposed. Public comments by Rudy Giuliani, Mr. Trump’s lawyer, put distance between the president and Mr. Cohen and further alienated the attorney, the person said.
President Trump spoke to reporters on Air Force One on April 5. PHOTO: NICHOLAS KAMM/AGENCE FRANCE-PRESSE/GETTY IMAGES
Mr. Cohen told associates and friends he felt Mr. Trump didn’t have his back and vented that the president hadn’t personally offered to pay his legal bills in the Manhattan investigation, which he said were “bankrupting” him.
Mr. Cohen’s troubles increased in May, when Evgeny “Gene” Freidman, a New York City taxi mogul who managed taxi medallions owned by Mr. Cohen and his relatives, pleaded guilty to state criminal tax fraud and agreed to cooperate with federal prosecutors in their probe of Mr. Cohen.
By then, prosecutors and the Internal Revenue Service had focused on Mr. Cohen’s personal income taxes. In conversations with a potential witness in June and July, investigators asked “very pointed” questions about various tax filings, according to a person familiar with the conversations.
“They knew what they wanted, they knew what they had, and they went after it,” the person said.
In late June, Mr. Cohen openly broke with Mr. Trump.
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A personal turning point for Mr. Cohen was a conversation with his father, Maurice Cohen, a Holocaust survivor.
Mr. Cohen’s father urged him not to protect the president, saying he didn’t survive the Holocaust to have his name sullied by Mr. Trump, according to a person who was told about the conversation. The elder Mr. Cohen couldn’t be reached for comment.
On June 20, Mr. Cohen stepped down from his position as the Republican National Committee’s deputy finance chairman and tweeted his first public criticism of his former boss: “As the son of a Polish holocaust survivor, the images and sounds of this family separation policy [are] heart wrenching.” The tweet no longer appears on Mr. Cohen’s Twitter account.
By then, Mr. Cohen had hired New York lawyer Guy Petrillo to represent him in the Manhattan U.S. attorney’s probe. The choice of Mr. Petrillo, who had once served as the chief of the office’s criminal division, was seen as a sign that Mr. Cohen hoped to cooperate. Mr. Petrillo began to signal this intent to prosecutors.
Shortly after Mr. Petrillo’s hiring, Mr. Cohen told ABC News in an interview that his first loyalty was to his family and country, not to the president.
In July, a recording became public that Mr. Cohen surreptitiously made of a conversation he had with Mr. Trump in September 2016 about buying the rights to Ms. McDougal’s story. The president has denied the affair.
The president’s legal team had waived attorney-client privilege on the recording, which had been seized in the April 9 raids.
The week of the recording’s release, the investigation appeared to accelerate, people familiar with the investigation said.
Federal prosecutors faced an early September deadline to charge Mr. Cohen. After that, they would have to wait until after the midterm elections, under Department of Justice guidelines, or risk criticism of potentially affecting the election’s outcome. They had follow-up witness interviews scheduled as recently as this week, a person familiar with the investigation said, but canceled them as the plea agreement came together over the weekend.
Given the Justice Department’s policy of not indicting sitting presidents, a guilty plea from Mr. Cohen and his public implication of Mr. Trump were among the strongest outcomes prosecutors could have hoped for, according to former federal prosecutors. For prosecutors, the guilty plea meant they could avoid a contentious trial and free up resources to pursue other investigations.
On Monday, Manhattan federal prosecutors filed a court document, in a case then labeled as U.S. v. John Doe, indicating a guilty plea was forthcoming.
By Tuesday night, hours after Mr. Cohen implicated Mr. Trump in a possible crime, one of Mr. Cohen’s lawyers, Lanny Davis, appeared on cable news shows to say Mr. Cohen wouldn’t accept a pardon from Mr. Trump and “is more than happy to tell the special counsel all that he knows.”
—Michael Rothfeld contributed to this article.
Write to Rebecca Davis O’Brien at Rebecca.OBrien@wsj.com, Nicole Hong at nicole.hong@wsj.com and Joe Palazzolo at joe.palazzolo@wsj.com
Appeared in the August 23, 2018, print edition as 'Pressure, Pique Led Cohen to Talk.'
