Hush money payments can be legal, but falsifying business records is illegal

On March 30, Donald Trump was indicted by a Manhattan grand jury, becoming the first former president to be indicted. 

On April 4, the district attorney in Manhattan charged Trump with 34 felony counts of falsifying business records. Trump pleaded not guilty to all counts.

The charges are related in part to payments made to Stormy Daniels during the 2016 presidential campaign. Daniels claimed she was paid hush money to keep quiet about an affair with Trump, and Trump’s former attorney Michael Cohen pleaded guilty to criminal charges and served jail time for making the payments. Trump has denied allegations of the affair.

In newsletters and campaign emails to supporters, Trump said he did not commit a crime. Several VERIFY viewers also asked us if it’s legal to make hush money payments. 

THE QUESTION

Are hush money payments legal?

THE SOURCES

• Paul Schiff Berman, law professor at The George Washington University
• Court records in the criminal case against Michael Cohen, Trump’s former attorney
• U.S. Department of Justice case against former presidential candidate John Edwards

THE ANSWER

There are no laws directly preventing someone from paying hush money – the act of paying someone to keep something secret. However, making or receiving a hush money payment in some situations can be illegal.

When it comes to the case involving Donald Trump, the former president isn’t being charged for making a hush money payment. He’s being charged for allegedly falsifying business records. 

WHAT WE FOUND

Hush money is defined as money paid so that someone will keep information secret. Just the act of making that kind of payment is in itself not illegal, but there are some specific circumstances in which hush money can be part of an illegal act. 

There are no laws directly preventing someone from paying hush money to someone else. An example of a hush money payment would be if someone pays money to keep something legal yet embarrassing or problematic, like an affair, quiet. 

If the payment is associated with a binding contract – like a legal non-disclosure or confidentiality agreement (commonly known as an NDA) – that is also typically legal. It is common when people are negotiating the terms of a non-disclosure agreement to include payment in the contract, Paul Schiff Berman, a law professor at The George Washington University, told VERIFY. 

Hush money can also be involved in illegal acts like extortion or blackmail. In those instances, the person receiving the hush money would have theoretically committed the crime.

Extortion is the practice of obtaining something, especially money, through force or threats, CriminalDefenseLawyer.com says. For example, if hush money was received by somebody through extortion, that would be considered illegal.

If someone receives money through blackmail –  the act of forcing a person to do or pay something by a threat to reveal a secret – that is also illegal. 

The person receiving the hush money has committed the crime in both those circumstances.

If someone covers up hush money payments, by doctoring financial records or disguising it as a different payment, that could also be considered illegal. For example, former North Carolina Senator John Edwards was charged by the Department of Justice for covering up hush money payments.

While Edwards was running for president from 2007 to 2008, the Department of Justice said Edwards broke federal campaign finance laws because two of his donors paid almost $1 million on his behalf in secret payments to hide his pregnant mistress. The DOJ dropped the case against Edwards in 2012. 

How a hush money payment led to an indictment for Trump

The charges against Trump are in part related to payments his former personal attorney Michael Cohen made to adult film star Stormy Daniels to keep Daniels quiet about an alleged affair. 

Cohen was authorized by Trump Organization executives to mark the payments as a legal expense in all organization records, court documents said. But, Cohen wasn’t acting in a legal capacity, which is how prosecutors were able to charge him with violations of New York business laws. Some of those payments were made in connection with Trump’s campaign, prosecutors said, which is why Cohen was also charged with violating campaign finance laws.

Cohen pleaded guilty to tax evasion, making false statements to a federally-insured bank and campaign finance violations in relation to the payment to Daniels. He was sentenced to three years in prison but was released early due to COVID-19 concerns. He was released in November 2021.

Trump is being charged with 34 felony counts of falsifying business records. Schiff Berman said falsification of business records is a misdemeanor unless the falsification was to conceal another crime, in which case it becomes a felony.

Schiff Berman also told VERIFY the falsification of business financial records is the sort of crime the Manhattan district attorney’s office routinely prosecutes because false financial reports undermine the integrity of the U.S. business and financial system. 

The Associated Press contributed to this report.