Trump’s lawyers emphasize why Cohen payments were categorized as ‘legal expenses

Former President Donald Trump is on trial in New York for allegedly falsifying records of a hush money payment, but his defense attorneys made the case in court this week that the way the Trump Organization recorded the expense was aboveboard.

Jeffrey McConney, a former controller who oversaw accounting at Trump’s company, testified this week about the process of recording the $420,000 that Trump paid his ex-attorney Michael Cohen in 2017. The payment is now at the heart of Manhattan District Attorney Alvin Bragg’s charges against the former president.

McConney explained how the Trump Organization, like many companies, used a computer program to maintain its ledger of expenses and revenue. Entries on the ledger corresponded to various accounting categories, such as utility bills or real estate taxes, and users were limited to the choices available in the computer program.

“Legal expense” was one of these categories in the Trump Organization’s accounting system, according to evidence presented during the trial. McConney instructed an accountant to categorize the payments to Cohen as legal expenses “because we were paying a lawyer,” he testified.

“[Legal expense] was basically part of a dropdown menu?” Trump’s attorney Emil Bove asked during his cross-examination of McConney.

“Yes,” McConney replied.

“These categories, there was a level of rigidity to them, right?” Bove asked, observing how the accounting computer program was a product of the 1990s.

“Yes,” McConney said.

“If you are talking about payments to an attorney, legal expenses, that was the account [category] that was used, right?” Bove asked.

“Yes, sir,” McConney said.

McConney also explained how then-CFO Allen Weisselberg approached him in January 2017 about the plan to reimburse Cohen after Cohen paid porn star Stormy Daniels’s lawyer $130,000 to silence her days ahead of the 2016 election.

McConney testified that he was not aware of the reason for the reimbursement and only followed the payment structure Weisselberg presented to him. The plan involved paying Cohen back for the $130,000, as well as paying him for an unrelated technology service, a bonus payment, and enough to cover taxes on the payment.

The amount totaled $420,000, and it was paid in 11 installments to Cohen in 2017, according to evidence.

The payments began in 2017 at a chaotic transition time for Trump’s accounting team, as it had to adjust to Trump taking office in January of that year, McConney said. He also said Cohen had left the Trump Organization’s payroll at that time and was instead functioning as an independent vendor whom Trump used as a personal attorney. This changed how payments were directed to Cohen, McConney said, noting how the payments to Cohen could not be categorized as payroll expenses.

In 2017, Cohen submitted invoices to Trump’s company, McConney approved the payments, and an accountant categorized them in the computer program as “legal expenses” with a description that the expenses were for a retainer.

Bragg, an elected Democrat, alleged in a statement of facts that categorizing the payments as “legal expenses” was fraudulent and designed to avoid taxes.

“In truth, there was no retainer agreement, and [Cohen] was not being paid for legal services rendered in 2017,” Bragg wrote.

Bove made the point during his examination of McConney that retainers can be verbal agreements.

Bragg has argued that the payments made to Cohen did not reflect, as they should have, that they were covering an outstanding debt. Bragg has alleged that this would have changed how taxes were handled on the payment, though Cohen’s receipt of $420,000 was still reported to the IRS on 1099 forms, according to evidence.

It is unclear how Bragg would have categorized the payments in a computer system that is limited by a dropdown menu of ways users can categorize payments.

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Trump echoed Bove’s and McConney’s sentiments to reporters on Tuesday, doubling down on the validity of paying Cohen for legal expenses.

“We paid a lawyer expense payments,” Trump said. “We didn’t put it down as construction costs, the purchase of Sheetrock, the electrical cost. The legal expense that we paid was put down as ‘legal expense.’ There’s nothing else you could say.”