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Misdirection by Indictment?

By: John C. Eastman
November 3, 2017

here is something particularly odd about Robert Mueller’s indictment of Paul Manafort. Beyond the obvious oddity that conspiracy and money laundering counts have been crafted onto rather low-level failures to file a Foreign Agent Registration Act form and a Foreign Bank Account Report—or the oddity that the press has portrayed the indictment as proof of a Russian conspiracy with the Trump presidential campaign despite the fact that the conduct alleged in the indictment all occurred well before the campaign even existed—there is also an oddity of the “dog that didn’t bark” sort.

Manafort was allegedly paid millions of dollars by the Ukranian government or people connected with the Ukranian government to lobby on behalf of the Ukranian government. Although it is illegal to lobby on behalf of a foreign government without registering as a foreign agent, a foreign government’s hiring of lobbyists is not itself an illegal activity. The payments allegedly made to Manafort were therefore not “dirty money” that needed to be “laundered” in order to become clean money. Rather, the key money laundering section of Title 18 makes it unlawful to use “the proceeds of some form of unlawful activity” in a financial transaction “with the intent to promote the carrying on of a specified unlawful activity” or “with intent to” evade income taxes. In other word, money laundering requires that the initial money be the result of unlawful activity.

And here’s where the “dog that didn’t bark” aspect of the indictment comes in. If the complicated financial transactions Manafort engaged in were designed to hide his income from the IRS and thereby evade income taxes on that income, as repeatedly alleged in the indictment, why is there no count in the indictment for tax evasion? Section 7201 of Title 26, which is allegedly one of the statutes that Manafort “laundered” money to violate, makes it a felony punishable by fine of $100,000, imprisonment of up to five years, or both, for willfully attempting to evade income taxes. Indeed, the entire indictment reads as though the purpose of the underlying conduct was a massive scheme of tax evasion. So why no tax evasion count?

The answer may lie in the tax code. Section 7401 of Title 26 provides that “No civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Secretary [of the Treasury] authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced.” In other words, Mueller could not bring the tax evasion count without sign-off from the IRS itself, through the secretary of the Treasury. And I’m told that those wheels move slowly.

Yet, if tax evasion is really the key crime that Manafort is alleged to have committed, why not wait for the IRS sign-off? Why stretch the law to charge “conspiracy” and “money-laundering” crimes that seem ill-suited to the underlying allegations? Two explanations seem quite plausible, and both are deeply troubling.

First, by using words such as “conspiracy” for conduct arising out of what is otherwise a perfectly lawful (if a bit distasteful) business relationship between Manafort and Ukranian interests aligned with Russian interests, Mueller’s indictment appears calculated to reinvigorate a “Russian collusion in the election” story that was starting to fade for lack of evidence.

Second, and even more troubling, the illegal leak on a Friday evening that there would be an indictment on Monday appears timed to occupy the weekend news cycle — a news cycle that was otherwise going to be dominated by another Russia collusion story, one that implicated the Hillary Clinton campaign rather than the Donald Trump campaign.

What did we learn about that collusion story just last week? The Clinton campaign and the Democrat National Committee each paid the Perkins Coie law firm more than $5 million in 2016, and the carryover Obama campaign paid the firm nearly another million. All of those payments were listed on campaign finance reports as payments for “legal services,” but we now know that Perkins Coie was the conduit for millions of dollars in payments to Fusion GPS, which commissioned the scandalous and unverified bit of opposition research known as the Trump dossier, a dossier that was prepared by a former British intelligence agent in collusion with — you guessed it — Russian operatives. The same dossier that, apparently, served as the foundation for FISA warrants that allowed the Obama administration to conduct surveillance of Trump campaign officials. Just how much the Clinton campaign’s law firm front funneled to Fusion GPS was the subject of a bank records subpoena issued by the House Intelligence Committee, the response to which was originally due Oct. 24, but which had been extended until Oct. 27 by court order.

The number of laws that appear to have been broken by that scandal make the Manafort indictment pale in comparison. First, federal election law requires that political campaigns report each person to whom an expenditure of more than $200 was made, “together with the date, amount, and purpose of such operating expenditure.” It is illegal to mask expenditures by funneling money to a law firm, claiming it is for “legal services,” when in fact the funds were for other purposes.

Second, Clinton campaign chairman John Podesta and former DNC chairwoman Debbie Wasserman Schultz both denied to congressional investigators that they had any knowledge about an arrangement to pay GPS Fusion for opposition research on President Donald Trump, according to a CNN report that broke last Thursday. Knowingly and willfully making materially false statements to Congress is also a crime and, under Section 1001 of Title 18, punishable by fine and up to five years in federal prison. It is simply inconceivable that such high-ranking campaign officials would not be aware of such a multi-million dollar expenditure, especially when Podesta made those statements while seated next to his attorney, Marc Elias, the same Perkins Coie attorney who was apparently the conduit for the millions of dollars funneled through his firm to mask the Clinton campaign’s payments to Fusion GPS.

And then there is the surveillance component of the scandal, which rises to Nixonian proportions. Apparently—though the details on this are still to be ascertained with certainty—the FBI and the Department of Justice relied on the Clinton campaign-financed dossier to obtain a Foreign Intelligence Surveillance Act warrant that would allow the Obama administration to conduct surveillance of the opposition party’s candidate for president. FISA surveillance of American citizens is itself extremely problematic, but conducting such surveillance of one’s political opponents is even more so, particularly when the identity of those who were surveilled gets “unmasked” by political operatives in the administration, as was learned last May.

Instead of a weekend of news discussing that scandal—the violations of campaign finance laws, and the apparent abuse of law enforcement and intelligence agencies for partisan political ends—most of the major news outlets spent the weekend talking about Manafort and his horrendous alleged crimes of failing to file a Foreign Agent Registration Act form (and perhaps, though not yet charged, tax evasion). Whether that was the intent behind Friday’s leak of the indictment news or not, there is something amiss here, and it should deeply trouble us all.


This piece originally appeared in the Los Angeles and San Francisco Daily Journals.