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Home / US / Manafort, Cohen cases reveal weaknesses in the enforcement of tax and electoral laws

Manafort, Cohen cases reveal weaknesses in the enforcement of tax and electoral laws



Paul Manafort's multi-year tax fraud and Michael Cohen's ability to simply arrange campaign contributions as a hush money could have been intercepted earlier based on existing tax and electoral laws.

But decoupling policy and legislature decisions, particularly regulatory and deflationary investigations, through political pressure on the Internal Revenue Service, helped the behavior go unnoticed. On Tuesday, Manafort, President Trump's former campaign chairman, was convicted of eight taxes and bank fraud – the same day Cohen, Trump's former lawyer, pleaded guilty to tax fraud and campaigning financial offenses.

The crimes went through several agencies and were only dug up by prosecutors and journalists after they began to invade Trump's inner circle. Economic criminals believe that similar behavior is flourishing throughout the political system and that the yawning gaps in government control are exploited.

"Without their relationship with President Trump, these crimes would ultimately not have been exposed," said Eugene Soltes, an associate professor at Harvard Business School and an expert in white-collar crime.

Such concerns are coming amidst a steady, multi-year decline in the number of financial fraud cases that the government has prosecuted, erosions that began during the Obama administration's Republican Congressional control

The IRS, for example, led last year only 0.6 percent of tax returns through, the lowest level in 1

5 years. For revenues over $ 1 million, a category that Manafort could probably have included, the IRS audited only 4.4 percent of revenue, up from 12.5 percent in 2011.

Overall, the number of new criminal prosecution cases initiated by federal investigators has increased According to data from the Transactional Records Access Clearinghouse, Syracuse University has fallen to its lowest level in more than 20 years. It is expected that fewer than 6,000 of these trials will be prosecuted in 2018, more than 10,000 when it reached its peak in 2011.

Meanwhile, the Ministry of Justice imposed penalties on companies and their executives in 2016 of $ 51.5 billion, down $ 4.9 billion in Trump's first year in office, according to consumer advocate Public Citizen

The lawyers of Manafort said the IRS had never checked its taxes despite its complex financial relationships with Ukrainian government officials and transfers to Cyprus accounts flags for investigators. The prosecutors proved that he had avoided his full tax obligations for years.

IRS spokesman Matthew Leas declined to comment on whether the agency audited Manafort and said the agency was not allowed to discuss certain taxpayers.

Manafort is also accused of failing to inform the Department of Justice of its lobbying work for the Government of Ukraine required by the Foreign Agents Registration Act.

Manafort will be charged next month for violating FARA law, but a prior general inspection of the inspector has repeatedly ignored the FARA enforcement system in recent years by lobbyists, in part because officials from the FBI and the Department of Justice have differing ideas about it had how such cases should be prosecuted.

Marc Raimondi, spokesman for the Department of Justice, said the agency has spent "considerable effort" in the past year by turning to companies that they believe should register with FARA, "and We have made our resolve resolutions more extensive, which has led to a sharp increase in FARA filings, he said, with the number increasing more than 50 percent between 2016 and 2017. [CohenpleadedguiltytoeightcrimesincludingtwoactsofillegalcampaigningontwowomenclaimingtohavehadanaffairwithTrump

The Federal Election Commission has civil jurisdiction over violations of the campaign finance law, but it relies largely on campaigns to control its activities and whistleblowers to disclose unauthorized activity.

Cohen directed the payments two business units outside the scope of the FEC, making it even harder for officials to know what he was doing. Cohen was later reimbursed by "bill" bills charged to the Trump organization, prosecutors said.

Christian J. Hilland, an FEC spokesman, declined to comment on the Cohen case.

The use of obscure limited liability companies allows business criminals to mask how they move money, posing particular challenges for federal investigators, former federal officials said.

"Right now in the United States there is a big problem of anonymous companies," said Elizabeth Rosenberg, who served in the Treasury Department during the Obama administration's fight against terrorist financing and financial crime.

The Obama administration sought to increase transparency for these companies, and in 2016 proposed amendments to the federal law requiring the disclosure of "beneficial ownership." for limited liability companies. But Congress has not passed the bill.

"I think that now everything is set up so that it is possible to hide money, be it foreign money or money like [the Cohen case] and it's almost impossible to detect it," said Ann Ravel, a Democrat and former FEC chairman.

Trump last week did not dispel the idea that the acts committed by Manafort and Cohen are commonplace. The president told Fox News on Manafort that "some of the charges brought against him, any adviser, any lobbyist in Washington, probably apply." And Trump said Cohen's "campaign violations are not a big deal, frankly." [19659023IRS-SprecherLeassagtewährendersichnichtmitdenFällenManafortundCohenbefassedassdiekriminalpolizeilicheErmittlungsabteilungderBehörde"ausgefeilteDatenanalysewerkzeugeverwendetumBetrugaufzudeckenundkriminelleAktivitätenzuidentifizierenAberesistwichtigzubeachtendassdieseAnalysenalleinhäufignichtaufSteuerbetruganderOberflächehinweisendavieleSituationenaußerhalbdesBereichsunserernormalenProzesseliegenwiezBausländischeFinanzaktivitäten

The IRS ability to detect fraud alone has decreased, especially in the context of political figures. The IRS was under heavy pressure from the Republicans in Congress, to stay out of politically charged cases, while in Budget cuts were made in recent years.

Their budget fell from $ 13.1 billion in 2008 to $ 11.5 billion last year, and the White House has proposed more cuts. track the tax offenses may have dropped from 2,683 in 2007 to 2,157 in 2017, about the same as 50 years ago.

"Your systems have become so weak," said Paul Streckfus, a former tax lawyer at the IRS and editor of the EO Tax Journal, a newsletter that tracks the Agency's activities. "The IRS does not do much, law enforcement is far below."

The IRS's Chief Prosecutor recognized weaknesses in his most recent annual report.

"[R] Cause problems make it impossible to be involved in any investigation we should attend," wrote Don Fort. "We have the same number of special agents – about 2200 – as we did fifty years ago In fact, it has grown in the age of the Internet, international financial crime, and virtual currency. "

Republicans and the Trump administration have resisted demands from Democrats to trick the IRS into more fraud cases the reasoning that the agency is bloated and needs to be overhauled. Kevin Brady (R-Tex), Chairman of the Board of the House and Ways and Means Committee, said last year he wanted a "bust [of] of the IRS as it is today."

Sen. John Thune (RS.D.) said on Thursday that the agency had not come to Congress and was seeking more funding for investigations.

"If they feel that they do not have enough resources, they should let us know," Thune said. "We will of course deal with it accordingly."

He has proposed further cuts to the already shrinking budget of the IRS, and the Ministry of Finance has recently introduced a new policy that gives most non-profit groups with political intentions more control over donors. He said it would save money because the reporting requirement would be dropped.

The violations that Cohen has found guilty relate to restrictions on who can make monetary or in-kind contributions to a federal candidate and how much – rules that are monitored FEC

But there are structural and political obstacles, which would paralyze the FEC's ability to take aggressive enforcement action, and probably Cohen's activities were unavailable in the absence of news or complaint, financial experts said.

For about a decade, the FEC has been divided into party lines on whether it should prosecute enforcement more aggressively, and whether it should initiate investigations even if they are not prompted by formal grievances, experts said. The FEC usually initiates investigations only after a complaint has been made, and the law requires the approval of four of the six members of the Commission to initiate an investigation. Two of the FEC seats are vacant, making a lawsuit even less likely.

FEC spokesman Hilland said in a statement: "In exercising its regulatory and enforcement powers, the Commission uses a variety of methods to detect potential violations of electoral law, including the review of campaign reports, the conduct of financial audits by political committees and investigating complaints submitted to the agency by the public. "

After the Wall Street Journal reported payments to Daniels in January, Common Cause filed a complaint later this month requesting the FEC and the Ministry of Justice to investigate the payments.

"It's hard to imagine how these violations [by Cohen] would have attracted the attention of the FEC without the investigative journalism. That has brought these violations to the public, which has led to Common Cause filing our complaints," he said Paul S. Ryan, vice president of policy and litigation at Com Mon Cause

Trevor Potter, a former Republican FEC commissioner and founder of Campaign Financial Interest Group Campaign Legal Center, said the FEC could be a powerful deterrent if it did aggressive enforcement action and more potential criminal cases on the Ministry of Justice

"Every few years there is a sort of scandal involving criminal sanctions and people going to jail," said Potter. "This reminds campaigns and their attorneys and accountants that these are laws that have serious teeth, and that while the likelihood of discovery is low, the discovery of a criminal injury will ruin your life." [19659041] Seung Min Kim and Devlin Barrett have contributed to this report.


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