In what is now the most famous non-disclosure agreement in history, Cohen sought to silence Daniels with a $130,000 payment just days before the election. He drafted a flawed agreement that magnified the problems for his client. The agreement is entitled “Confidential Settlement Agreement and Mutual Release; Assignment of Copyright and Non-Disparagment (sic) Agreement.” If Cohen hoped to avoid “disparagment,” he could not have gone about it more ham-handedly. Cohen created the shield company Essential Consultants LLC and used anonymous identities for Daniels (“Peggy Peterson”) and Trump (“David Dennison”). However, Trump never signed. Instead, Cohen signed as EC LLC, which appears to be simply Cohen.
The agreement is fraught with errors, including the fact that the arbitration provision seems to be an option for Trump rather than EC LCC. Nevertheless, Cohen (aka EC LLC) filed for arbitration and demanded $20 million in damages (as part of an excessive damages provision allowing for $1 million for every disclosure or even threatened disclosure by Daniels).
Now that Cohen’s counsel has confirmed the lack of knowledge or consent by Trump, the potential fallout from this agreement has become even more apparent and more serious.
Michael Cohen
When this agreement first came to light, I wrote that Cohen would face very serious ethical questions over his conduct. First there was the fact that Cohen paid for the $130,000 out of his own pocket – a highly usual and troubling mixing of his personal and professional interests. Second, if Trump was not aware of the agreement, Cohen could be alleged to have made false representations to an opposing party as well as failing to meet his duty of conferral with a client.
Cohen and Schwartz have been cagey about Trump’s knowledge and whether he is a party to the agreement. Charles Harder, Donald Trump’s new personal attorney, recently joined Cohen in seeking to move the matter to federal court. However, Schwartz has now declared to CNN that Trump never agreed to the agreement:
“The president was not aware of the agreement. At least, Michael Cohen never told him about the agreement. Michael Cohen left the option open. That’s why he left that signature line, the option open to go to him. He chose not to. He chose to bind the LLC, EC LLC and Stormy Daniels into the contract.”
In just 56 words, Schwartz may have sent both Cohen and Trump over the side of a legal abyss.
If Trump had no knowledge and did not agree to the agreement, Cohen is in serious ethical trouble. More importantly, it is hard to see how Daniels is bound by an agreement that Trump never agreed to. The agreement has obligations running both ways and Trump apparently not only did not pay the money but did not agree to the conditions. Indeed, it is hard to see why Harder is intervening in a case over an agreement that Trump does not appear to be a party to.
What is left is litigation without a purpose for Trump. Cohen has said that he wants to tag Daniels for millions and take a vacation on the proceeds. However, that is hardly in the interest of his client. Trump could well be pulled into depositions under the discovery provision of the agreement. Furthermore, with the story out in the public, Trump has little to gain and much to lose from continued litigation. Cohen could be accused of using a client (who did not agree to the agreement) to seek a financial windfall in a legal holdup. The New York bar is unlikely to look kindly on that role – or Schwartz’s repeated (and baffling) defense that Cohen’s role is hard to define as friend, fixer, and lawyer. Having an ambiguous or unclear relationship with a client is not the basis for a defense but the basis for a charge under ethical codes.
Donald Trump
On one level, the denial of any knowledge of the agreement would seem to protect Trump from the demand of Daniels’ lawyer for a deposition. If it gets that far, Trump could offer written answers and stipulations to avoid such an embarrassing step based on his lack of knowledge. However, shielding Trump from discovery could leave him more exposed in other areas, including the Special Counsel investigation.
While I have been skeptical of the case for criminal charges against Trump for collusion with the Russians, I stated from the outset that the Daniels scandal could present a serious threat for Trump. The $130,000 looks a lot like the type of “in-kind” campaign contribution that led to the indictment of former Democratic Presidential candidate John Edwards. In that case, third parties paid money to Edwards’ mistress in the midst of the presidential campaign.
Here is the problem with Schwartz’ statement. If Trump did not agree to a payment to Daniels, the $130,000 looks more and more like an in-kind contribution from a supporter as opposed to a litigation payment from a lawyer. That could force both Cohen and Trump into an interview with Mueller who has already indicted people like Trump’s former campaign chair, Paul Manafort, for crimes totally unrelated to the campaign.
Worse yet, Mueller is famous for flipping witnesses who are exposed legally. If Cohen is facing possible criminal charges for campaign finance violations or false statements, he would be a nightmare for the Trump team as a cooperative witness. The last guy you want to see behind the prosecution table is your fix it man.
What is clear is that this is only going to get more difficult for Trump’s legal team in the wake of comments by Cohen and Schwartz. As Blanche advised Stanley before he spoke with his “lawyer acquaintance,” he might want to hand over any documents “with a box of aspirin tablets.”