Missing Files Motivated the Leak of Michael Cohen's Financial Records
Last week, several news outlets obtained financial records showing that Michael Cohen, President Trumpâs personal attorney, had used a shell company to receive payments from various firms with business before the Trump Administration. In the days since, there has been much speculation about who leaked the confidential documents, and the Treasury Departmentâs inspector general has launched a probe to find the source. That source, a law-enforcement official, is speaking publicly for the first time, to The New Yorker, to explain the motivation: the official had grown alarmed after being unable to find two important reports on Cohenâs financial activity in a government database. The official, worried that the information was being withheld from law enforcement, released the remaining documents.
The payments to Cohen that have emerged in the past week come primarily from a single document, a âsuspicious-activity reportâ filed by First Republic Bank, where Cohenâs shell company, Essential Consultants, L.L.C., maintained an account. The document detailed sums in the hundreds of thousands of dollars paid to Cohen by the pharmaceutical company Novartis, the telecommunications giant A.T. & T., and an investment firm with ties to the Russian oligarch Viktor Vekselberg.
The report also refers to two previous suspicious-activity reports, or SARs, that the bank had filed, which documented even larger flows of questionable money into Cohenâs account. Those two reports detail more than three million dollars in additional transactionsâ"triple the amount in the report released last week. Which individuals or corporations were involved remains a mystery. But, according to the official who leaked the report, these SARs were absent from the database maintained by the Treasury Departmentâs Financial Crimes Enforcement Network, or FinCEN. The official, who has spent a career in law enforcement, told me, âI have never seen something pulled off the system. . . . That system is a safeguard for the bank. Itâs a stockpile of information. When somethingâs not there that should be, I immediately became concerned.â The official added, âThatâs why I came forward.â
Seven former government officials and other experts familiar with the Treasury Departmentâs FinCEN database expressed varying levels of concern about the missing reports. Some speculated that FinCEN may have restricted access to the reports due to the sensitivity of their content, which they said would be nearly unprecedented. One called the possibility âexplosive.â A record-retention policy on FinCENâs Web site notes that false documents or those âdeemed highly sensitiveâ and ârequiring strict limitations on accessâ may be transferred out of its master file. Nevertheless, a former p rosecutor who spent years working with the FinCEN database said that she knew of no mechanism for restricting access to SARs. She speculated that FinCEN may have taken the extraordinary step of restricting access âbecause of the highly sensitive nature of a potential investigation. It may be that someone reached out to FinCEN to ask to limit disclosure of certain SARs related to an investigation, whether it was the special counsel or the Southern District of New York.â (The special counsel, Robert Mueller, is investigating Russian interference in the 2016 Presidential election. The Southern District is investigating Cohen, and the F.B.I. raided his office and hotel room last month.)
Whatever the explanation for the missing reports, the appearance that some, but not all, had been removed or restricted troubled the official who released the report last week. âWhy just those two missing?â the official, who feared that the conte nts of those two reports might be permanently withheld, said. âThatâs what alarms me the most.â
FinCEN said in a statement that it protects the confidentiality of SARs âin order to protect both filers and potentially named individuals.â The statement added, âFinCEN neither confirms nor denies the existence of purported SARs.â Spokespeople for the special counselâs office and the Southern District of New York declined to comment. Michael Cohen and his lawyer did not respond to requests for comment.
Banks are legally mandated to file suspicious-activity reports with the government in order to call attention to activity that resembles money laundering, fraud, and other criminal conduct. These reports are routed to a permanent database maintained by FinCEN, which can be searched by tens of thousands of law-enforcement and other federal government personnel. The reports are a routine response to any financial activity that appears su spicious. They are not proof of criminal activity, and often do not result in criminal charges, though the information in them can be used in law-enforcement proceedings. âThis is a permanent record. They should be there,â the official, who described an exhaustive search for the reports, said. âAnd there is nothing there.â
Cohen set up the First Republic account for Essential Consultants in October, 2016, shortly before the Presidential election, in order to pay the adult-film actress Stephanie Clifford, who performs under the name Stormy Daniels, a hundred and thirty thousand dollars in return for signing a nondisclosure agreement about her alleged affair with Donald Trump. First Republicâs compliance officers later began flagging Cohenâs transactions in the account as possible signs of money laundering. Among other potential violations, the documents cite âsuspicion concerning the source of funds,â âsuspicious EFT/ wire transfers,â âsuspicious use of mu ltiple accounts,â and âtransaction with no apparent economic, business, or lawful purpose.â (A spokesperson for First Republic Bank declined to comment.)
By January of this year, First Republic had filed the three suspicious-activity reports about Cohenâs account. The most recent reportâ"the only one made public so farâ"examined Cohenâs transactions from September of 2017 to January of 2018, and included activity totalling almost a million dollars. It alludes to the two previous reports that the official could not find in the FinCEN database. The first report that the official was unable to locate, which covered almost seven months, appears to have listed a little over a million dollars in activity. The second report that the official was unable to locate, which investigated a three-month period between June and September of 2017, found suspect transfers totalling more than two million dollars.
A substantial portion of this money seems to have ended up in Cohenâs personal accounts. Morgan Stanley Smith Barney filed a separate SAR showing that, during that same three-month period, Cohen set up two accounts with the firm, into which he deposited three checks from his Essential Consultants account, two in the amount of two hundred and fifty thousand dollars and one in the amount of five hundred and five thousand dollars. Morgan Stanley Smith Barney marked those transactions, which added up to more than a million dollars, as possible signs of âbribery or gratuityâ and âsuspicious use of third-party transactors (straw-man).â
Cohen appears to have misled First Republic repeatedly regarding the purpose of the Essential Consultants account. In paperwork filed with the bank, he said that the company would be devoted to using âhis experience in real estate to consult on commercial and residentialâ deals. Cohen told the bank that his transactions would be modest, and based within the United States. In fact, th e compliance officers wrote, âa significant portion of the target account deposits continue to originate from entities that have no apparent connection to real estate or apparent need to engage Cohen as a real estate consultant.â Likewise, âa significant portion of the deposits continues to be derived from foreign entities.â David Murray, a former Treasury official focussed on illicit finance, told me, âThere are a ton of red flags here. The pattern of activity has indicators that are inherently suspicious, and the volume and source of funds do not match the account profile that was built when the account was opened.â
The report released last week highlights a payment from Cohenâs account to Demeter Direct, Inc. In publicly filed paperwork, Demeter Direct represents itself as a Korean food company. However, a Web site, since taken down, suggested that it was a global consulting firm. After the press began scrutinizing Cohenâs accounts, a man listed as Demeter D irectâs C.E.O., Mark Ko, told CNN that he served as an intermediary and translator in Cohenâs dealings with an aviation firm, majority-owned by South Koreaâs government, called Korea Aerospace Industries. According to the First Republic report, the aerospace company paid Cohen a hundred and fifty thousand dollars in November of 2017, the same month President Trump visited South Korea. At the time, the company was lobbying for a controversial multibillion-dollar contract with the U.S. Air Force.
The report also shows how Cohen apparently used the Essential Consultants account for personal expenses. He seems to have used it to pay his American Express, A.T. & T., and Mercedes Benz bills, marking account numbers on the memo lines of his checks. He paid initiation fees and dues to the Core Club, a social club that the Times once described as a âportal to power.â He also cut himself multiple personal checks from Essential Consultants, amounting to more than a hundred thousand dollars, on top of the million he had already deposited into his Morgan Stanley accounts.
In many cases, the suspicious-activity reports highlight activity of potential interest to ongoing investigations, including that of the special counsel, Robert Mueller. Bank compliance officers noted eight payments from a company called Columbus Nova to Cohenâs account between January and August of 2017, totalling five hundred thousand dollars. The investigators wrote that Columbus Novaâs biggest client is a company controlled by Viktor Vekselberg, whom they described as âreputed to be a longtime ally of Russian President Vladimir Putin.â The report also points out that Andrew Intrater, Vekselbergâs relative and the C.E.O. of Columbus Nova, donated more than three hundred thousand dollars to Trump-related causes. The report flagged the activity as suspicious âbecause the CEOâs company transferred substantial funds to the personal attorney of Trump at the s ame time the CEO reportedly donated substantial funds to Trumpâs inauguration fund and joint fundraising committee for Trumpâs reelection and the Republican National Committee.â
Other banks also noticed Cohenâs suspicious transactions and filed their own SARs about his activity. Some of those show the banks piecing together the reasons for the transactions from news reports, citing articles from publications including the Wall Street Journal and Vanity Fair about Trump, Russia, and secret election-season payments, including the payment to Clifford. One, filed by City National Bank, follows money paid to Cohen by Elliott Broidy, at the time the deputy finance chairman for the Republican National Committee. The report notes, âBroidy also owns a private security company, Circinus, which provides services to the U.S. and other governments. The company has hundreds of millions of dollars in contracts with the U.A.E.â Broidy has said that Cohen and another lawyer, Keith Davidson, worked out a deal in which Broidy would pay $1.6 million to a former Playboy model he had impregnated. Broidy appears to have paid both lawyers for arranging the deal. The City National report shows that Broidy funnelled the payments through Real Estate Attorneysâ Group, a legal corporation. Broidy seems to have paid Davidson two hundred thousand dollars, and to have sent three payments, of $62,500 each, to Cohenâ"one to the Essential Consultants account and two to the account of Michael D. Cohen and Associates.
A representative for Broidy said that this description of the payments was ânot correct,â and that âMr. Broidy is not going to detail his payments for legal services to Mr. Cohen.â The representative added, âMr. Broidy did not pay Mr. Davidson.â However, the City National report shows that on November 30, 2017, a wire of two hundred thousand dollars was received by the Real Estate Attorneysâ Group from Broi dy. Then, on December 5, 2017, two hundred thousand dollars were transferred from Real Estate Attorneysâ Group to an account belonging to Keith M. Davidson and Associates.
Michael Avenatti, an attorney representing Clifford, who has released summaries of Cohenâs transactions on social media, said, âThe Treasury Department should release all of the SARs immediately to the American public.â
Suspicious-activity reports are kept strictly confidential, as a matter of law. âSARs are secret, to protect the government and to protect financial institutions,â the former prosecutor told me. âI donât think thereâs a safe harbor for somebody who discloses it.â According to FinCEN, disclosing a SAR is a federal offense, carrying penalties including fines of up to two hundred and fifty thousand dollars and imprisonment for up to five years. The official who released the suspicious-activity reports was aware of the risks, but said fears that the missing reports might be suppressed compelled the disclosure. âWeâve accepted this as normal, and this is not normal,â the official said. âThings that stand out as abnormal, like documents being removed from a system, are of grave concern to me.â Of the potential for legal consequences, the official said, âTo say that I am terrified right now would be an understatement.â But, referring to the released report, as well as the potential contents of the missing reports, the official also added, âThis is a terrifying time to be an American, to be in this situation, and to watch all of this unfold.âSource: Google News