Michael Cohen, the attorney-client privilege, and the crime-fraud exception

Republican president-elect Donald Trump's Trump Tower is seen in the Manhattan borough of New York, U.S., November 27, 2016. REUTERS/Darren Ornitz
Editor's note:

This piece was originally published on Lawfare.

The world is awash in “hot takes” on the news that President Trump’s personal attorney, Michael Cohen, is under criminal investigation. On Monday, the FBI executed a search warrant at his home, his office, and a hotel room that he rented. Claims are already resonating that the search violated Trump’s attorney-client privilege and reflect more excess from Mueller. (Trump himself called the search a “disgrace” and again threatened to fire Mueller.) I want to take a step back and offer a few more thoughts that, perhaps, shed a little light on the attorney-client issue.

(As an aside, before doing so, I wanted to note the absurdity of Trump blaming Mueller for the search. As many others have pointed out, Mueller referred the matter to the Justice Department, where they assigned the investigation to the U.S. Attorney’s Office for the Southern District of New York. That office (run by a Trump appointee) then procured the warrant—with the approval of a magistrate judge—and worked with the FBI to conduct the search. In this regard, the special counsel’s actions, and the Justice Department referral are completely unlike the Starr investigation on which I worked many years ago. There, Attorney General Janet Reno kept expanding the Starr investigation into new areas—mostly, I think, as a matter of convenience. Here, the department seems intent on cabining the Mueller investigation to the scope it was originally initiated for—and to also be willing to spin-off unrelated matters to the relevant local U.S. attorney’s office. That’s a good example of the system functioning as it should—and it certainly is no “disgrace.”)

Let’s begin with a seemingly obvious question: Why do we have an attorney-client privilege in the first place? After all, the privilege is nothing more, nor less, than permission for an attorney to withhold truthful information from investigating authorities. There aren’t many other situations in which we say “you know the truth but you don’t have to tell us.” Quite to the contrary, the general rule is that federal grand jury investigations are entitled to “every man’s evidence.” (Apologies for the traditional, gendered phrase.) As the Supreme Court has put it, the exceptions to this general rule are: “not lightly created nor expansively construed, for they are in derogation of the search for truth.”

The attorney-client privilege is one such exception, and it has been around for a long while. It is generally thought to have two important grounds. First and foremost, the privilege encourages clients to be truthful with their lawyers. If a defendant thought that his attorney could be compelled to turn around and repeat what he had said, the defendant would, in turn, be most unlikely to tell his lawyer the unvarnished version of what happened. To be sure, this is already often the case (as anyone who has ever practiced criminal-defense law will tell you) but it would be even more the case if the privilege didn’t exist. And so, we think of the attorney-client privilege as actually fostering the truth-finding function of the courts in a second-order way. If defense attorneys, for example, know more about what has happened, then they will be able to make the testing function of a trial function more effectively. Short term, we lose the ability to get attorney’s to rat out their clients; long term, we gain a better functioning justice system. (I should add that though I’ve talked here about the criminal law, the same rationale applies in the civil context as well.) You may or may not think this judgment is empirically correct—but it isn’t nonsensical.

The second reason is closely related, but it applies only to the criminal side of an investigation—namely that the privilege is an important adjunct to the Fifth Amendment privilege against self-incrimination. If a defendant cannot be compelled to testify against himself, the privilege would be strongly weakened if his attorney could be compelled to say what he had said. This rationale is less about fostering attorney-client transparency and more about protecting criminal rights, but it gets to the same place.

So, as an initial matter, let’s begin by acknowledging that there is real social value in the attorney-client privilege. And that is just as true for the relationship between President Trump and his attorney as it is for you and me. As I’ve noted before, we don’t defend norms by breaking them. And that is precisely why, as many have noted, the U.S. Attorney’s Manual has an entire section that limits how and when the offices of an attorney may be searched. Realizing full well that such searches are in derogation of the value of the privilege the manual requires high level approvals, the exhaustion of other investigative avenues, and specifies procedures that are to be followed to limit the intrusion on privileged documents.

That having been said, there are a number of factors that need to be considered that seem to make this search a little different.

First, for the attorney-client privilege to exist, there must actually be an attorney-client relationship regarding a specific matter. I, for instance, have to hire you to help me resolve a tax dispute with the IRS. The representation is limited to that matter and so is the privilege. Other things I may have told you in passing (for example, about the fight I am having with my wife and how I beat her—this is a hypothetical!) are outside the scope of the representation and not privileged. The law is clear that as a general matter a person cannot claim to have an attorney for “all matters” that might arise. (As an aside, one reason for this rule is that it would frustrate legitimate investigation—as was the case when John Gotti, the famous Mafia don, suggested that his attorney, Bruce Cutler, represented him in everything—thereby attempting to make it unlawful for the government to wiretap or use an undercover agent to speak to him about new matters.) Indeed, the cases are legion for the proposition that representation of a defendant in connection with one criminal matter does not encompass representation in connection with a separate (and even arguably related) criminal matter. (For one example, see Illinois v. Perkins, 496 U.S. 292, 299 (1990), which says a defendant charged with aggravated battery may be contacted undercover in a murder investigation.)

Why is this relevant? Because President Trump has said quite publicly that he did not know what Cohen was doing with respect to the alleged payments to Stormy Daniels—payments that appear to be at the core of the SDNY investigation. He has said he was unaware of the payments and did not know why they were made (suggesting that the press had to “ask Michael” about them). If this is true, then it seems that Trump could not have had an attorney-client relationship with Cohen regarding the Daniels payment in the first instance—one hallmark of an attorney-client relationship is agreement as to its scope and the attorney’s obligation to keep the client advised as to all significant material matters (of which settlement would surely be one). Thus, by his own testimony, it seems that the Daniels matter is outside the scope of matters in which Cohen has represented Trump—and thus there is no attorney-client privilege in the first instance.

But let’s assume the contrary—let’s assume that Trump and Cohen did have an agreement (and thus that Trump is not being candid about what he knew—which is another kettle of fish altogether). If that is the case then clearly the discussions between Trump and Cohen would fall within the attorney-client privilege. Trump might have told Cohen about his version of what really happened; might have asked Cohen to make sure his wife did not find out; and might have promised Cohen to pay him back for the settlement funds. All of these (again hypotheticals, since we don’t know) are the sorts of confidential communications that are presumptively protected by the privilege. And the privilege applies whether these communications happened orally or in writing.

What then could be the basis for the SDNY search and review of these materials? Materials that, at least facially, would be protected.

That question brings us to something known as the crime-fraud exception to the attorney-client privilege. It is, if you will, an exception to an exception that allows the government to read, review, compel production of and compel testimony of an attorney and his or her records. It arises if, and only if, the client uses the attorney’s services to commit a crime. (So, to be clear, it does not apply retrospectively, as when I tell you about a crime I have already committed.) An example of this—an easy one—would be if I use an attorney to help me draft an affidavit that I am going to submit to a court, and the affidavit is false. I have used the attorney’s help to commit a crime. The lawyer may not (indeed usually does not—since, notwithstanding the public derision, most attorneys would not knowingly assist a client in committing a crime) know that the crime is afoot—he may be completely ignorant. But if the government can show a court that there is a basis for thinking that the crime has occurred (here, in my example, that the affidavit is a lie) then the attorney can be and will be required to testify as to the nature of his interaction with the client. “What did the client tell you?” is a completely impermissible question generally—but it is a lawful question when there is reason to think that the answer is “X happened,” and the lawyer took that answer and put it in an affidavit that was submitted to a court and it turns out that the statement that “X happened” is a bald-faced lie.

You can readily imagine other examples of when and how a lawyer’s services might be used to commit a crime. The lawyer helps set up a shell corporation (perfectly legal generally) and the corporation is used to foster a Ponzi scheme. The lawyer is asked about how to secure insurance, but the insurance is then used to collect on an insurance fraud. And so on. In other words, the crime-fraud exception applies when an attorney’s advice is used to further the crime. Or, as the Supreme Court put it in Clark v. United States, 289 U.S. 1 (1933), “A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told.”

And that, one suspects, is where the rubber meets the road. It may well be that President Trump sought Cohen’s legal advice regarding the Daniels affair for an illegal purpose (e.g. to avoid federal campaign-finance laws or to conceal the true source of the funds with which she was paid or to threaten her). In that circumstance, it seems clear that the crime-fraud exception might apply—and it appears highly likely that the FBI and the lawyers in New York have made that showing to a federal magistrate. Or, as one observer put it: “Michael Cohen is in serious legal jeopardy.” President Trump may be as well.

Note: Paul Rosenzweig is the founder of Red Branch Consulting PLLC, a homeland security consulting company and a Senior Fellow at the R Street Institute. He is also a Senior Advisor to The Chertoff Group. Mr. Rosenzweig formerly served as Deputy Assistant Secretary for Policy in the Department of Homeland Security. He is a Professorial Lecturer in Law at George Washington University and an Adjunct Lecturer at Northwestern University.