What Michael Cohen learnt from Trump before turning on him

When Michael Cohen told a New York court that he arranged secret payments for Donald Trump's mistresses to squelch their stories in the days running up to the 2016 election, he made his break with the US president complete.

Yet in doing so, Cohen also paid an odd tribute to his mentor, having followed two of his former boss’s longstanding business principles: never use your own money if you can avoid it, and bend the tabloid media to your purposes.

Trump touched on both practices in his 1987 tome, The Art of the Deal, recounting how he would routinely recruit banks and business partners, beginning with his earliest property forays, in order to reduce his own exposure and then use a hungry tabloid media for free marketing.

In arranging hush money for a porn actor and a Playboy model who claimed to have had sexual relationships with Trump – which the president denies – Cohen proved himself a diligent student, according to details set out in a charging document released by the US attorney for the Southern District of New York.

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It notes that the $130,000 payment Cohen made in late October 2016 to the attorney representing “Woman-2” did not come out of his own pocket. Rather, it derived from a fraudulently obtained home equity loan.

Cohen, who described himself as Trump’s personal attorney, applied for the credit line in late 2015. Yet in an application for the loan he misrepresented his net worth – claiming it was more than $40 million while failing to disclose $14 million in loans he had taken from two other banks earlier that year.

Shell company

The payment was made through a shell company established by Cohen, and was triggered, according to prosecutors, after an attorney for "Woman-2" – believed to be Stephanie Clifford, an adult actor who goes by the name of Stormy Daniels – warned that she was preparing to go public with her story.

The warning was sounded by an editor at a popular tabloid magazine, believed to be the National Enquirer. "We have to co-ordinate something on the matter [Attorney-1 is] calling you about or it could look awfully bad for everyone," the editor texted Cohen, according to prosecutors.

“[Cohen] caused and made the payments described herein in order to influence the 2016 presidential election. In so doing, he co-ordinated with one or more members of the campaign, including through meetings and phone calls,” the document states.

In making the payment, Cohen also appears to have profited personally. He billed "the Company" – believed to be the Trump Organisation – an additional $50,000 for "tech services" and a $35 wire fee, according to prosecutors. The company then "grossed up" the sum to $360,000 for tax purposes and added a $60,000 bonus, bringing the total to $420,000.

It was paid to Cohen in $35,000 instalments over 12 months, and recorded as “legal expenses”, according to prosecutors.

The document substantiates the Trump campaign's close relationship with the Enquirer, one of the most popular US tabloids, and its publisher, David Pecker, a longtime friend and admirer of the president.

‘Negative stories’

According to prosecutors, Cohen struck a deal around August 2015 with the chairman and chief executive of “Corporation-1” – believed to be Mr Pecker – “to help deal with negative stories about . . . relationships with women by, among other things, assisting the campaign in identifying such stories so they could be purchased and their publication avoided.”

Throughout the presidential campaign, the Enquirer was a boisterous supporter of Trump

In addition to the payment to Clifford, another was arranged for a second woman – believed to be Karen McDougal, a former Playboy model – for $150,000 and a commitment to feature her on two magazine covers. That payment was for “limited life rights” to the story of her relationship “with any then-married man”.

Pecker, the socialite son of a bricklayer who became an accountant and then climbed the publishing ranks, has a long history with Trump. A division of publisher Hachette, which he ran, once produced the now-defunct Trump Style magazine that celebrated the developer's gilded life.

Throughout the presidential campaign, the Enquirer was a boisterous supporter of Trump. In addition to a paid circulation of about 400,000, the tabloid and its blaring headlines command prime position at supermarket checkout lines across the country.

– Copyright The Financial Times Limited 2018