Trump Did Not Repay Cohen By “Retainer” Fees.
A Retainer Explainer.
In the bizarre story of the President’s Hush Agreement with a porn star (that he continues to attempt to enforce), perhaps the most bizarre elements are the conflicting stories as to how and who ultimately paid for the payola to the porn star.
Story 1: Cohen Was Never Repaid.
All agree the direct payment to Stormy Daniels was by Trump’s very personal attorney, and self anointed “fixer” Michael Cohen (indictments pending). Cohen claimed (and still claims) that he was never paid back. This explanation was echoed by Trump himself on April 5th. On Air Force One Trump denied any knowledge of the payment to Stormy Daniels saying he didn’t even know about the payment to her and that he didn’t know where Cohen got the money to pay Daniels. White House Press Secretary Sarah Sanders echoed this position on April 7th stating “there was no knowledge of any payments from the president.”
This position created a legal concern because it would render Cohen’s payments to Daniels an in-kind campaign contribution in excess of legal limits. A way had to be found to claim Cohen had been repaid, and not out of campaign funds, because that would also be an illegal use of campaign funds.
Story 2: Cohen Was Repaid Via Retainer Fees.
The solution was to shamelessly change the story. On May 2nd Trump’s new very personal attorney de jour, Rudy Giuliani, directly told a shocked Sean Hannity that “the President repaid it.” Giuliani indicated he had just figured out the President repaid it through retainer payments to Cohen:
“When I heard Cohen’s retainer of $35,000, when he was doing no work for the president, I said that’s how he’s repaying it, with a little profit and a little margin for paying taxes for Michael.”
In other words, the retainer was not originally established to repay Cohen, they just decided after the fact that the retainer repaid Cohen. If this post hoc figuring out of the purpose for the retainer payments sounds like it doesn’t make sense, that’s because it doesn’t make sense. You can’t decide later what the retainer was for. The retainer payments were for whatever the parties understood them to be at the time of the retainer agreement.
A Retainer Fee Cannot Be Used To Pay Past Debts.
All of which brings us to what a retainer is, and is not. Investopedia defines a retainer as:
“an advance payment that’s made by a client, usually to a lawyer, that is considered a down payment on the future services rendered by the lawyer. Regardless of occupation, the retainer fee funds the initial expenses of the working relationship.”
Likewise, Wikipedia states that a retainer’s
“distinguishing feature is that the client or customer pays in advance for professional work to be specified later. The purpose of a retainer fee is to ensure payment for future services or work to be rendered.”
The essential point here is that a retainer payment is an advance to a lawyer for future legal services. By definition it is not a repayment to a lawyer for a debt the client owes the attorney, but rather an advance payment to a lawyer for future costs or services. Giuliani’s argument simply takes what a retainer is and turns around completely backwards.
This definition is not arbitrary. One reason a retainer can’t be a client repaying a debt is that it is unethical for attorneys to make their clients indebted to them. Rule 1.8 of American Bar Association’s Model Rules for lawyer ethics prohibits a lawyer from providing financial assistance or advancing a client money. Advancing your client money, so that the client must pay you back, is considered a conflict of interest for attorneys. For a retainer agreement to provide for a client to repay money advanced by the attorney to the client would be to put in writing a breach of attorney ethics.
Giuliani claims that because Trump, out of his personal funds, repaid Cohen via this “retainer,” no campaign violations occurred. First, that’s not true. It merely converts Cohen’s illegal campaign contribution to an illegal campaign loan. Second, Giuliani’s claim defies the definition of “retainer” and throws Cohen under an ethics breach bus that could cause him to lose his law license. Admittedly, that ethics rule breach may be the least of Cohen’s legal concerns now, but that’s not the point. The point is that a retainer agreement for the purpose claimed by Giuliani and Trump would be void for violating public policy.
So what was the retainer agreement for and what did Trump get out of it if not repaying Cohen for the hush payola to Stormy Daniels? Whatever it is, it has to be for future services, not repaying past debt.
Typically such general retainer agreements provide for the lawyer’s availability if the client wants to seek his legal advice. That Trump may not have sought Cohen’s legal advice for a few months does not convert the retainer fees to repayments for Trump’s hush money debt to Cohen. Cohen provided the consideration of being available, which included avoiding entering into any representations that might conflict with his ongoing retained representation of Trump.
That Cohen’s payment to Daniels could not have been repaid through this retainer is significant. In Mid-May Trump filed a campaign disclosure form asserting that any potential loan to the campaign by Cohen had been repaid from Trump’s personal funds. As discussed above not only would this not eliminate the campaign contribution law violation, but it also is simply not true. The retainer fees were not a repayment to Cohen for his expense of paying off the porn star. They simply could not be for that purpose. Trump just filed a fraudulent campaign disclosure.
The most recent Trump story in this regard is yet another ridiculous lie. Giuliani’s belated realization of what the retainer fee was for is not credible and neither is Giuliani. Any lawyer pushing this legal snake oil argument is a buffoon. Any client accepting this snake oil is an idiot.