Michael Cohen, once a close confidant and personal attorney to former President Donald Trump, found himself at the center of a legal storm that led to his imprisonment. His journey from a powerful lawyer to a convicted felon is a complex narrative involving tax evasion, false statements to a bank, and campaign finance violations. This article delves into the specifics of why Michael Cohen went to jail, breaking down the charges against him and the evidence that led to his guilty plea.
Cohen’s legal troubles stemmed from a series of financial improprieties and deceptive practices that unfolded over several years. The charges, brought forth by the U.S. Attorney’s Office for the Southern District of New York, paint a picture of a man who repeatedly broke the law for personal gain and to protect his client, then-candidate Donald Trump. Let’s examine each category of offenses that contributed to his downfall.
Tax Evasion: Hiding Millions from the IRS
A significant portion of Cohen’s legal woes originated from his deliberate evasion of federal income taxes. According to court documents, Cohen concealed over $4 million in personal income from the Internal Revenue Service (IRS) between 2012 and 2016. This scheme involved multiple tactics to hide earnings from various sources.
One primary source of hidden income was related to Cohen’s taxi medallion business. He owned medallions in New York City and Chicago, leasing them to operators. Instead of reporting all the income from these leases, Cohen devised a plan to divert funds and avoid tax obligations.
Specifically, Cohen failed to report over $2.4 million in income from loans he made to a Chicago taxi operator. He also concealed more than $1.3 million from a New York taxi operator. This included a substantial bonus payment and ongoing income from medallion operations. To further obscure these earnings, Cohen arranged to receive some income personally rather than through his medallion entities, which would have alerted his accountant to the funds.
Beyond the taxi medallion income, Cohen also hid other sources of revenue from his accountant and the IRS. These included:
- A $100,000 payment for brokering a property sale in Florida.
- Approximately $30,000 profit from brokering the sale of a rare Birkin Bag.
- Over $200,000 in consulting income from an assisted living company.
By concealing these various income streams, Cohen intentionally avoided paying over $1.4 million in taxes to the IRS. This systematic effort to defraud the government formed the basis for multiple counts of tax evasion against him.
False Statements to a Bank: Securing Loans Through Deception
Another critical aspect of Cohen’s criminal conduct involved making false statements to a federally insured bank. This charge stemmed from his efforts to secure loans and a home equity line of credit (HELOC) while misleading the bank about his financial liabilities.
In 2015 and 2016, Cohen engaged in a series of deceptive actions to obtain favorable financial terms from Bank-3. This involved concealing a significant $14 million line of credit he had with another bank (Bank-1).
In a 2013 mortgage application to Bank-3 for his Park Avenue condominium, Cohen only disclosed a $6.4 million medallion loan from Bank-1, omitting the larger $14 million line of credit. Then, in 2015, when seeking financing for a summer home, he again concealed the $14 million liability.
When Bank-3 questioned him about the $14 million line of credit based on a financial statement provided to Bank-2 during a refinancing process, Cohen falsely claimed in writing that the line of credit was undrawn and would be closed. In reality, he had already drawn on and effectively replaced that line of credit with a larger loan from Bank-2 and a credit union.
Later, in December 2015, when applying for a $500,000 HELOC from Bank-3, Cohen again understated his debt, omitting the $14 million medallion debt. He also significantly understated his monthly expenses by failing to disclose at least $70,000 in monthly interest payments on his true medallion debt.
As a result of these fraudulent misrepresentations, Bank-3 approved Cohen for a $500,000 HELOC that they would not have approved had they known the truth about his financial condition. Making false statements to a bank is a serious federal offense, and this conduct contributed to Cohen’s legal predicament.
Campaign Finance Violations: Hush Money Payments and Election Influence
Perhaps the most politically charged aspect of Cohen’s offenses involved campaign finance violations. These charges related to payments made to silence two women, Stormy Daniels (Woman-2) and Karen McDougal (Woman-1), who claimed to have had affairs with Donald Trump before his presidential campaign.
Federal election law places limits on campaign contributions and prohibits corporate contributions to presidential candidates. The prosecution argued, and Cohen admitted, that the payments made to Daniels and McDougal were effectively illegal campaign contributions because they were intended to influence the 2016 presidential election by preventing negative stories about then-candidate Trump from becoming public.
In the case of Karen McDougal, in 2016, the Chairman of the National Enquirer’s parent company, American Media Inc. (AMI), David Pecker, offered to help the Trump campaign by suppressing negative stories. AMI, through a coordinated effort with Cohen, purchased McDougal’s story for $150,000 with the intention of burying it, not publishing it. While AMI initially made the payment, Cohen later agreed to reimburse AMI. This arrangement was considered an illegal corporate contribution because it was coordinated with the campaign and intended to benefit the candidate.
The payment to Stormy Daniels involved a more direct route through Cohen. Days before the 2016 election, Cohen paid Daniels $130,000 to secure her silence about her alleged affair with Trump. Cohen used a shell corporation, Essential Consultants LLC, and a fraudulently obtained HELOC to make this payment. He falsely documented the purpose of the wire transfer as a “retainer.”
Furthermore, Cohen sought reimbursement from the Trump Organization for these expenses. He submitted invoices disguised as payments for legal services under a fictitious “retainer agreement.” The Trump Organization then reimbursed Cohen a total of $420,000, which included not only the $130,000 Daniels payment and the McDougal reimbursement, but also an additional disguised payment. These reimbursements were also considered illegal campaign contributions because they exceeded individual contribution limits and were intended to cover campaign-related expenses.
Cohen admitted that he made these payments in coordination with the Trump campaign to influence the election. These actions constituted violations of campaign finance law and added to the severity of his legal situation.
The Guilty Plea and Sentencing
Faced with mounting evidence and these serious charges, Michael Cohen ultimately pleaded guilty to all eight counts against him in August 2018. These counts included five counts of tax evasion, one count of making false statements to a bank, one count of causing an unlawful corporate contribution, and one count of making an excessive campaign contribution.
In December 2018, Cohen was sentenced to three years in federal prison. Judge William H. Pauley III handed down the sentence, emphasizing the seriousness of Cohen’s crimes and the need for accountability. Cohen was also ordered to pay millions of dollars in restitution and fines.
While Cohen initially cooperated with investigators, his relationship with the authorities became more complex over time. He eventually became a vocal critic of Donald Trump and testified before Congress, further solidifying his break from his former client.
Michael Cohen’s imprisonment serves as a stark reminder that even those in positions of power and privilege are not above the law. His case highlights the consequences of tax evasion, financial fraud, and campaign finance violations. The reasons for his jail time are multifaceted, rooted in a pattern of illegal behavior that ultimately caught up with him, leading to his conviction and incarceration.
