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Criminal Case: Michael Cohen, Paul Manafort and the Art of the (plea) Deal

November 28, 2018

criminal-justice-bontOn Aug. 21, 2018, Michael Cohen pleaded guilty to fraud charges in the Southern District of New York moments before Paul Manafort was found guilty by a jury on multiple (but not all) fraud charges in the Eastern District of Virginia. Two weeks later, Paul Manafort resolved the outstanding charges against him through a plea agreement. Both of the plea agreements were widely publicized by the media. Imagine if you were able to review Amazon’s most recent settlement agreements. There is a tactical advantage to be found somewhere in these plea agreements, right?

Cohen’s deal

Michael Cohen pleaded guilty to an eight-count criminal information. This means that he was able to discuss the charges to which he would eventually plead with the prosecutors before he was actually charged. Cohen’s plea agreement includes an agreed sentencing guidelines calculation, which includes the various factors that drive a sentence upward. As you might expect, the factor that escalates a “fraud” sentence most dramatically is monetary loss. Finally, Cohen is given a carrot for his plea: a reduction for accepting responsibility and avoiding a trial. Based on these factors, Cohen and the government agreed on a sentencing guidelines range, but both sides expressly preserved the right to argue outside the guidelines for more or less time at Cohen’s sentencing hearing.

In addition to monetary loss, the financial terms of a plea are the sticking points of most white-collar negotiations. Cohen agreed to forfeit to the government “any property constituting or derived from, proceeds obtained” from making a false statement to procure a loan. (Count 6 of the Cohen Information indicates he received a $500,000 home equity line of credit, but it is unclear how much of that he tapped into, or for what purpose.) Additionally, Cohen agreed to pay any and all restitution (unpaid taxes) ordered by the court at sentencing. Cohen and the government agreed “based on current information” that the amount of past taxes that would be due and owing is $1,495,305. Cohen’s plea also includes an estimated fine range of $20,000-$1 million. So, Cohen’s financial exposure could approach $3 million.

Most significantly for Cohen, the United States government agreed not to bring future prosecution for any and all crimes “related” to the charging information (a very broad release under the circumstances).

Manafort’s deal

Paul Manafort had already been charged in an indictment and had been convicted on eight of 18 counts before he entered into a plea to a superseding two-count criminal information encompassing certain of the remaining counts that were declared a mistrial. So, even though he went to trial and was convicted on significant charges that will carry a separate sentencing burden of their own, Manafort at least had some ability to discuss the remaining charges to which he would plead. Manafort’s plea agreement requires complete cooperation and leaves the date of sentencing dependent upon whether his “efforts to cooperate have been completed.” Much like with the Cohen plea, Manafort and the government agreed to an applicable sentencing guidelines range for the judge to consider in fashioning a sentence. (Assume both agreements rely on similar factors, but Manafort’s criminal conduct is more egregious and his loss amount is higher.) Manafort received the same reductions for accepting responsibility and avoiding a trial as Cohen, but remember that Manafort has eight convictions to deal with separately. However, unlike Cohen, Manafort did not expressly preserve the right to argue for a sentence below the agreed guidelines range. Further, Manafort acknowledged in his plea that any sentence the judge imposes within the agreed guidelines range is reasonable. It is therefore likely that the only chance Manafort has for the judge to sentence below the parties’ calculated guidelines range is for the government to agree with Manafort at some future time that he provided “substantial assistance” to the government. This will include both his acquiescence to any interviews the government may request (without the presence of legal counsel) as well as histrial testimony.

As to financial terms, in stark contrast to the Cohen plea, Manafort and the government agreed that restitution was not mandatory and that Manafort could argue against the imposition of any fine. But where the government giveth, the government taketh away. Manafort’s forfeiture agreement cedes various New York properties with an estimated worth of $22 million to the government. (It has been reported that Manafort kept his Virginia property by forfeiting a New York apartment). Manfort also lost three bank accounts. (Again, there are reports that he was able to retain a bank account by giving up his apartment in Trump Tower). Also, Manafort’s forfeiture is both criminal and civil, meaning in the event he was to receive a pardon for his crimes at some future time, the government would still retain all of the forfeited assets. As a final knockout punch, Manafort waived his right to receive “compensation of any sort” for the public dissemination of the events surrounding his investigation and prosecution.

Manafort’s plea agreement does not really contain a release by the government. The government can pull the agreement at any time if he does not cooperate, they discover some additional offense, or the government believes “in good faith” that Manafort is not holding up his heavy end of the deal. Further, unlike the Cohen agreement (which includes a release from the Tax Division of the Department of Justice through which any tax charges contemplated by a U.S. Attorney’s Office would flow), Manafort did not get a release from prosecution by U.S. attorneys' offices outside of the Eastern District of Virginia.

Takeaway

Spoiler alert: nobody walks away from plea negotiations with the United States with a great deal. Over 95 percent of federal criminal charges are resolved by plea agreements, so there are not a lot of trials with which to weigh options, to say nothing of defense verdicts to balance the government’s bargaining position. In such an environment, you might expect to see boilerplate, inflexible agreements. However, this is not the case with Cohen and Manafort. Differences in criminal conduct aside, the agreements are an indication that a little horse trading can still take place when the United States is at the bargaining table.•

Jonathan Bont practices in the areas of criminal defense, business litigation and government compliance at Paganelli Law Group. Opinions expressed are those of the author.

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