New In Just Security: The Untold Strength Of Tax Crimes In Manhattan DA’s Case Against Former President Trump
“Pursuing an approach based upon state tax violations is wise and well grounded.”
Last month, former President Donald Trump was arraigned in New York on an indictment for 34 felony false books and records charges. Manhattan District Attorney Alvin Bragg’s suggestion at the time that tax violations may serve as a felony ‘bump up” came as a surprise, according to a new analysis published today in Just Security.
Last week, in response to Trump’s request for a bill of particulars, Bragg confirmed that tax crimes are among the possible crimes Bragg will pursue as a predicate to bump up the charges against former President Trump.
“Bragg was wise to strengthen the case by also predicating the felony charges against Trump based on his intent to commit (or aid or conceal) crimes involving false statements to tax authorities,” Paula Junghans, Amb. Norman Eisen (ret.), Siven Watt, Joshua Stanton, and Democracy 21 Education Fund President Fred Wertheimer write in their deep dive analysis.
“Perhaps the strongest case would involve statements to tax authorities falsely characterizing the payments to Michael Cohen as ‘legal fees,’ rather than the payments’ true nature: a series of simple reimbursements for a hush money payment,” the authors write. “Doing so caused the payments to be treated as income to Cohen, which in turn precipitated a tax gross-up so that Cohen would be relieved of any tax burden associated with the mischaracterization. Note that the DA would not have to prove that the tax crimes were actually committed, just that the parties intended them and falsified the business records with that initial intention.”
In their analysis, the authors assess what potential tax-related crimes may be implicated by Trump’s alleged mischaracterization of the payments. “While the campaign finance bases for the charges may well be sufficient, adding tax bases is important and offers advantages for the prosecutors,” they write. “Tax-related charges could sidestep potential legal challenges related to campaign finance violations including, for example, issues of federal preemption and state statutory interpretation.”
The authors document the main facts of the case against former President Trump and the district attorney’s office statements regarding the tax scheme.
“Because Bragg’s response to the request for a bill of particulars leaves open the door that other offenses than those listed might also serve as the ‘bump-up’ predicates to the falsifying business records charges, in addition to New York state tax statutes, we also consider the possibility that prosecutors will attempt to leverage federal tax offenses for this purpose,” the authors write.
Two statutes appear most relevant, they note: Declaration under Penalties of Perjury and Willful Assistance in Preparation of False or Fraudulent Tax Documents.
“While New York State tax law is distinct from federal tax law, the two bodies of law, especially in respect of false filing statutes, share similar principles and concepts,” the authors note.
The analysis sets out the elements of each offense, which are very similar, and addresses the elements of falsity, materiality, and intent.
The authors note that even if the mischaracterization of the payments to Cohen resulted in an overpayment of taxes by Cohen, it would still be a material misstatement in violation of the law.
“If Cohen erroneously claimed the repayments as part of his income in submitting tax returns, he would have effectively overstated his income, thus triggering an overpayment of tax,” they write. “How, then, could Cohen’s tax returns form the basis of a tax violation? Indeed, some may argue that the statement was not material if it did not cause any financial loss. But the law does not require such a loss. It is a crime to submit intentionally false statements to tax authorities, even if the statement does not involve evasion of tax.”
The analysis also briefly discusses other tax-related statutes that may be applicable depending on how the facts develop.
“[P]ursuing an approach based upon state tax violations is wise and well grounded,” the authors conclude. “The strongest case involves statements to tax authorities falsely characterizing the payments to Michael Cohen as ‘legal fees,’ rather than their true nature (reimbursements for a hush money payment). A strong case could also involve other variations on state criminal tax violations, as well as possible federal ones. The DA has not precluded asserting additional tax or other bases for the bump up. His response to the defendant’s request for a bill of particulars notably includes (but is not limited to) a set of specified offenses.”
The authors of the Just Security analysis are:
Paula Junghans served as Deputy Assistant Attorney General and Acting Assistant Attorney General of the Tax Division of the Justice Dept (1998-2001); in private practice she has litigated criminal and civil tax cases in the federal district courts and courts of appeal, as well as in the U.S. Tax Court and Court of Federal Claims.
Ambassador Norman Eisen (ret.) served in the White House as special counsel and special assistant to the President for ethics and government reform and as ambassador to the Czech Republic under President Barack Obama, as well as special counsel to the House Judiciary Committee (2019-2020), including for the first impeachment and trial of President Trump.
Siven Watt is a Legal Fellow at Just Security.
Joshua Stanton is Of Counsel at Perry Guha LLP. He previously served as co-director of the Criminal Practice Clinic at Vanderbilt Law and as a public defender in Memphis, Tennessee.
Fred Wertheimer is the Founder and President of Democracy 21 and Democracy 21 Education Fund, nonpartisan, nonprofit organizations that work to strengthen our democracy.
Read the Just Security analysis here.
