Missing Files Motivated the Leak of Michael Cohen’s Financial Records

Last week, several news outlets obtained financial records showing that Michael Cohen, President Trump’s 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 Department’s 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 Cohen’s 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 “suspicious-activity report” filed by First Republic Bank, where Cohen’s 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 Cohen’s account. Those two reports detail more than three million dollars in additional transactions—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 Department’s Financial Crimes Enforcement Network, or FinCEN. The official, who has spent a career in law enforcement, told me, “I have never seen something pulled off the system. . . . That system is a safeguard for the bank. It’s a stockpile of information. When something’s not there that should be, I immediately became concerned.” The official added, “That’s why I came forward.”

Seven former government officials and other experts familiar with the Treasury Department’s 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 “explosive.” A record-retention policy on FinCEN’s Web site notes that false documents or those “deemed highly sensitive” and “requiring strict limitations on access” may be transferred out of its master file. Nevertheless, a former prosecutor 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 “because 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.” (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. “Why just those two missing?” the official, who feared that the contents of those two reports might be permanently withheld, said. “That’s what alarms me the most.”

FinCEN said in a statement that it protects the confidentiality of SARs “in order to protect both filers and potentially named individuals.” The statement added, “FinCEN neither confirms nor denies the existence of purported SARs.” Spokespeople for the special counsel’s office and the Southern District of New York declined to comment.  and his lawyer did not respond to requests for comment.

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 suspicious. 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. “This is a permanent record. They should be there,” the official, who described an exhaustive search for the reports, said. “And there is nothing there.”

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 , a hundred and thirty thousand dollars in return for signing a nondisclosure agreement about her alleged affair with Donald Trump. First Republic’s compliance officers later began flagging Cohen’s transactions in the account as possible signs of money laundering. Among other potential violations, the documents cite “suspicion concerning the source of funds,” “suspicious EFT/ wire transfers,” “suspicious use of multiple accounts,” and “transaction with no apparent economic, business, or lawful purpose.” (A spokesperson for First Republic Bank declined to comment.)

By January of this year, First Republic had filed the three suspicious-activity reports about Cohen’s account. The most recent report—the only one made public so far—examined Cohen’s 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 Cohen’s 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 “bribery or gratuity” and “suspicious use of third-party transactors (straw-man).”

 

 

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