Illegal Bookkeeping

Donald Trump, as is his wont, sucked all the air out of the news room tonight when he was found guilty of 34 felony counts by a Manhattan jury earlier today. (Mercury News early Friday edition front page, right.) If you need a summary, dear reader, here's a link to the Wall Street Journal.

Since everyone's pontificating on the story, your humble non-lawyer blogger will add a few observations.

Improper bookkeeping was the first crime on which the entire case hinges, and the Manhattan D.A. got to 34 felonies by counting individual checks as separate crimes all related to the same subject. From the D.A.'s summary: [bold added]

After winning the election, TRUMP reimbursed the Special Counsel [blogger's note: Michael Cohen] through a series of monthly checks, first from the Donald J. Trump Revocable Trust – created in New York to hold the Trump Organization’s assets during TRUMP’s presidency – and later from TRUMP’s bank account. In total, 11 checks were issued for a phony purpose. Nine of those checks were signed by TRUMP. Each check was processed by the Trump Organization and illegally disguised as a payment for legal services rendered pursuant to a non-existent retainer agreement. In total, 34 false entries were made in New York business records to conceal the initial covert $130,000 payment. Further, participants in the scheme took steps that mischaracterized, for tax purposes, the true nature of the reimbursements.

Were I a bookkeeper in the Trump organization I would have routinely classified all payments to lawyers as "legal expenses." That satisfies both accounting and tax requirements, while protecting my employer because the payments, the invoices, and supporting documents would fall under attorney-client privilege. So far there's been no assertion by anyone that a Trump accountant below the level of CFO would know that this was wrong.

The Manhattan D.A. asserted that the CEO (Donald Trump) and the CFO (Allen Weisselberg) knew that the payments to Michael Cohen should have been called "campaign contributions" but purposefully misclassified (or let the accounting system misclassify) them as legal expenses. This is the first crime that led to another unspecified crime (there had to be two crimes in order to make this a felony, else the purported legal-expense misclassification was at worst a misdemeanor on which the statute of limitations ran out years ago).

I'm a humble retired accountant who thinks it's crazy that an alleged accounting mistake on $130,000 could cause me to be thrown in prison seven years later, but again I'm no lawyer.

Sentencing is on July 11th, so this story will recede in a few days, then come back in early July. Meanwhlle we have a debate to look forward to, and possibly the naming of Donald Trump's running mate.