Grossing Up and Grossing Out

A day of receipts and lurid testimony in Trump’s criminal trial

Stormy Daniels on the witness stand. Image by Elizabeth Williams / AP

Trump’s Manhattan criminal trial was really something on Tuesday.

The day began with receipts. Specifically, within the accounting department of the Trump Organization, there were two pieces of evidence that proved fairly damning. Indeed, the paper trail left by those seeking to disguise Michael Cohen’s reimbursements as “legal fees” was a basic lesson in how not to crime.

Pro tip: If there’s a bank statement showing an illegal campaign contribution in the form of a hush money payment to a porn star, maybe don’t write detailed notes on it explaining, step-by-step, the illegal thing you’re about to do.

The day continued with some personal fireworks. The much-anticipated five hour testimony of Stephanie Clifford, a.k.a. Stormy Daniels, went into fine and often lurid details about her brief sexual encounter with Donald Trump. She delivered a mountain of testimony, including a shocking but unsubstantiated claim that she was approached in a parking lot and threatened by an unidentified man to keep quiet.

On cross-examination, she was punchy and didn’t let defense counsel land many hits, though she did admit that she has profited off of her story, while pointing out that it has also cost her a lot.

Let’s break this down a bit more.

Grossing Up

The central allegation in the indictment is that Trump helped falsify business records. He did this, the state claims, in order to cover up the fact that he was part of a catch and kill conspiracy to bury bad stories about him and illegally sway the election his way. 

Michael Cohen (who was Trump’s fixer) paid Keith Davidson (who was Stormy Daniels’s lawyer) $130,000 to buy her silence. Cohen used his own money to make the payment, tapping a home equity line and moving the funds through a shell company he controlled. 

The prosecution argues that Trump had his company reimburse Cohen for the $130,000 and disguised the return of the money as “legal fees.” But there was a problem: If Cohen actually received $130,000 in legal fees, as recorded in the books, he’d have to pay around half of that money in federal and state taxes.

So what did Cohen and Trump agree to do to make Cohen whole? Trump agreed to “gross up” the amount to twice $130,000 to cover Cohen’s tax liability. Trump also agreed to reimburse Cohen for a $50,000 expense Cohen paid to IT firm RedFinch Solutions for “Tech Services” related to the campaign, and to pay him a $60,000 bonus for his troubles.

Trump disputes that this ever happened. But then how does he explain Exhibit 35? That’s a bank statement for Cohen’s company showing that it made the $130,000 transfer to Keith Davidson. On the statement itself, Trump’s CFO Allen Weisselberg writes down the $130,000 reimbursement, adds the $50,000 reimbursement to RedFinch, and then “grosses up” that total to twice the amount to cover Cohen’s taxes, plus a bonus for doing this for his boss. It’s all right there.

If this weren’t enough, there’s also Exhibit 36. This note is in witness Jeff McConney’s handwriting. McConney was the Controller for the Trump Organization and worked for Weisselberg. (That’s how we know it was Weisselberg’s notes and handwriting on Exhibit 35, because McConney IDed it for the jury.)

Take a close look at what McConney scribbled down. You’ll see that it matches up with what Weisselberg wrote.

Importantly, McConney admitted on the stand that Cohen was receiving $360,000 back on a $180,000 expense. He also admitted he was unaware of any other instance where an expense reimbursement would be doubled to account for taxes. Here was the exchange with prosecutor Matthew Colangelo:

COLANGELO: Do these notes show that Mr Cohen was receiving $360,000 back on a $180,000 expense?

MCCONNEY: Yes.

COLANGELO: Are you aware of another instance where an expense reimbursement was doubled to account for taxes?

MCCONNEY: No.

McConney’s notes above confirm how the total was calculated, again by adding together the amount Cohen had fronted the campaign ($50,000 and $130,000 for a total of $180,000), doubling it for taxes, and adding a bonus of $60K. According to McConney’s notes, these repayments would begin $35,000 per month in January of 2017, with “Mike to invoice us.” And this is exactly what happened.

Trump is going to have to argue that he knew nothing about this arrangement, and that it was all done by his accounting department. But that was not department practice. Here, checks were sent to him at the White House personally to sign. And as legal analyst Joyce Vance discussed, in past instances, as McConney testified, where Trump had questions about the payments, he would refuse to sign the checks.

And here’s another fun fact: Earlier in the day, Trump’s publisher testified about statements made in books like Think Like A Billionaire, where Trump advised readers who wanted to be successful like him to micromanage everything. “Always look at the numbers yourself. If things turn grim, you’re the one left holding the checkbook,” Trump wrote.

Welp.

Grossing out

As discussed above, the first part of the day was spent reviewing accounting and bookkeeping, which can seem fairly boring but in fact is the heart of the case. 

The last part of the day was spent discussing Trump in his silk pajamas in a hotel room with Stormy Daniels for a one-night stand—an encounter Trump still denies to this day. The description likely left a bad taste in the jury’s mouth. But while the details of that are titillating and will draw headlines, for the jury the only real question is over Daniels’s credibility. Trump has called that into question, opening the door to this testimony.

The problem for the state and for Daniels is that, in a letter from 2018, she denied that the encounter even happened. She says now that she was scared at the time and believed she was required to sign the letter based on the non-disclosure agreement she had entered into earlier. She has since repudiated that denial, just as Cohen repudiated his earlier statements, and the defense is trying to make hay of it. In other words, was she lying then or is she lying now?

That’s why her description of what happened that day actually matters, even if not directly to the case in chief. If the jury believes her today, it makes Trump look even more like a liar that he continues to deny the encounter. (Those familiar with Trump’s denials may find a similarity between this and the lawsuit he just lost to E. Jean Carroll, whom he continues to defame by saying the sexual assault never happened and that he doesn’t know her.)

Despite her shortcomings as a witness, Daniels pretty much had to testify on the stand, or the jury would wonder why she wasn’t called to establish the very thing that got all of this going. But the danger was this: If Daniels went too far into the sordid details, she could wind up prejudicing the jury against Trump and triggering a mistrial.

Daniels, as expected, made for a garrulous witness who often went far beyond the question asked. She spoke so quickly that the court reporter on many occasions couldn’t keep up, and she had to be told to slow down. Judge Merchan was clearly unhappy about Daniels going off on long tangents and including so much unnecessary detail—everything from what kind of shampoo Trump had in his bathroom to how the sex actually unfolded and in what position. 

Daniels testified that Trump told her he and Melania Trump didn’t even sleep in the same room anymore. When he heard this, defendant Trump muttered an expletive loud enough for the jury to overhear. The judge had to admonish Trump’s counsel to control his client, warning that he wouldn’t tolerate other such outbursts going forward.

Daniels also testified that Trump told her she reminded him of his daughter Ivanka, which was bound to cause some indigestion both at the defense table and among jurors. She also said Trump referred to her as “honeybunch”—a nickname that his niece Mary Trump confirmed is her family’s preferred term of endearment.

In the end, the jury likely was left with the clear impression that Trump is a sexual predator, just as another jury recently found and as most sane people who read the news already understand. But to hear the story aloud was chilling. Here Trump was, a wealthy and powerful man, cajoling, lying and even trap-setting his way into Daniels’s pants. It wasn’t nonconsensual, but Daniels testified she was highly uncomfortable and blamed herself for winding up with a man twice her age on top of her in his hotel room.

The defense predictably made its motion for a mistrial, claiming the jury was now hopelessly prejudiced against Trump. But the judge denied the defense’s request, properly in my view, saying that while the witness was often difficult to control, the defense should have been up and objecting to more of it and bears some responsibility for her testimony going off the rails at times.

For candidate Trump, none of this looked very presidential. And while Daniels’s testimony isn’t likely to make much difference when it comes down to the actual charges, in the court of public opinion Trump’s image has taken another blow.

Daniels returns to the stand tomorrow.