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Heads should roll over the AT&T and Novartis payments to Michael Cohen's slush fund

Heads should roll over the AT&T and Novartis payments to Michael Cohen's slush fund
Policy expert or cash funnel? Trump "fixer" Michael Cohen, seen in the pink tie, leaves a New York federal courthouse in April with his legal team as Michael Avenatti, Stormy Daniels' attorney, watches from a microphone bank, left. (Mary Altaffer / Associated Press)

Influence-peddling is an aspect of American politics that sends up a distinct odor. But what about the other side of the transaction: influence-buying?

That certainly seems to be what AT&T and Novartis were up to when they funneled hundreds of thousands of dollars to Michael Cohen, President Trump's "fixer," in 2017. At the time, the giant telecommunications company was desperate to head off an administration challenge to its proposed $85-billion takeover of Time Warner, and Novartis had all sorts of concerns about Trump's attitude toward the Affordable Care Act and prescription pricing.

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To hear AT&T tell the story, its $200,000 payout to Cohen's firm, Essential Consultants LLC, had nothing to do with currying favor with the new president. "Essential Consultants was one of several firms we engaged in early 2017 to provide insights into understanding the new administration," the company said in a statement Tuesday. "They did no legal or lobbying work for us, and the contract ended in December 2017."

It's hard to say who should be fired first in this affair: the PR flack who cooked up this fatuous statement, or the executives and directors who were in charge when the money was paid. (We'll go with the latter, as a start.)

Essential Consultants was one of several firms we engaged in early 2017 to provide insights into understanding the new administration.


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The AT&T and Novartis payouts were revealed Tuesday by Michael Avenatti, the lawyer for adult film actress Stephanie Clifford, a.k.a. Stormy Daniels, who needs no further introduction. In a seven-page document that may have been based on leaked suspicious activity reports filed by banks that were part of the payment stream, Avenatti laid out payments to Cohen made not only by AT&T and Switzerland-based Novartis, but a company connected with Russian oligarch Viktor Vekselberg.

As of Wednesday, all the payers have fessed up, though they've tried to place the payments in different contexts. The Vekselberg firm, Columbus Nova, says Vekselberg was not personally involved in the transactions.

Novartis, a publicly traded company, confesses that it got mercilessly mulcted by Cohen. In a statement issued Wednesday, it said it reached a one-year, $1.2-million agreement with Essential Consultants in February 2017 because it believed Cohen "could advise the company as to how the Trump administration might approach certain US healthcare policy matters, including the Affordable Care Act."

At its first meeting with Cohen one month later, Novartis realized that Cohen couldn't possibly live up to his end of the deal. But because "the contract unfortunately could only be terminated for cause," Novartis continued to make monthly $100,000 payments until the deal expired in February 2018.

Novartis had the audacity to express pique over reports that the deal was connected to a meeting its current CEO, Vas Narasimhan, had with Trump in January at the World Economic Forum in Davos, Switzerland. Narasimhan had no role in the Cohen contract, the company says, and "suggestions to the contrary … can only be intended to further personal or political agendas." The statement is silent on what the deal says about the level of brainpower in its corporate suite. Novartis also says it was questioned about its relationship with Cohen by special prosecutor Robert S. Mueller III last year.

The Novartis and AT&T explanations paint Cohen as possessing some unique insight into Trump administration policy. Who ever thought this was plausible? By early 2017, it should have been plain to even the dimmest corporate lobbyist that Cohen was destined to be on the outside of the White House looking in. No White House job was coming his way, even though he had expected to be rewarded for his sedulous loyalty to Trump during the campaign and over the years.

The only "insights into understanding the new administration" that AT&T could have gleaned from Cohen would be superficial at best; on policy issues, Trump was surrounded by ideologues and technocrats who were poised to do his bidding. In that light, it seems more plausible that what AT&T was seeking by paying Essential Consultants $200,000 or more were personal favors — not from Cohen, but from his patron.

There's nothing new about sub-rosa payments to political slush funds — if that's what these payments were — especially by corporations with important matters before an administration. Recall the relationship between Richard Nixon and International Telephone and Telegraph, or ITT, for instance. ITT wanted to make antitrust cases brought by the Department of Justice go away so it could complete a big merger. Nixon ordered the DOJ to "stay the hell out of … the ITT thing." The agency settled the case in 1971, and ITT promptly made a $400,000 contribution to the 1972 Republican National Convention.

The ironic aspect of AT&T's quest for "insights into understanding the new administration" is that it looks like it squandered its money, like Novartis. Trump railed against the pending AT&T-Time Warner deal on the stump, possibly because he was ticked off at CNN, a unit of Time Warner. Any efforts AT&T made to change his mind were unavailing — Trump's Justice Department filed suit to block the deal on Nov. 20. The trial of that case in federal court in Washington, D.C., ended May 2, with the judge expected to rule by mid-June.

As it happens, the merger is a terrible deal from the standpoint of the public interest, which means that Trump was right to have blocked it, even if he did so for the wrong reason.

That leaves the question of who bears responsibility for the payments by AT&T and Novartis to someone who appears to be no more than a financial intermediary. The current expert assessments of these payments are that they were not technically illegal, as influence-peddling and -purchasing appear to sit just on this side of the law.

But that doesn't mean they're right, or that they reflect responsible management of public corporations or of their resources. In fact, the Securities and Exchange Commission should be looking at what the real goal was, and who signed off.

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As a foreign-based company that trades on the New York Stock Exchange via American depositary receipts, Novartis may not fall entirely under SEC jurisdiction. Narasimhan and five of its 13 directors are Americans.

In AT&T's case, the spotlight should fall on CEO Randall Stephenson, who has bet his career on pulling off the Time Warner merger, and on the other 12 members of his board of directors, a couple of whom have been in place since the last century and all of whom were on the board when these payments were made. Either they were ignorant of the payments, or they knew about them and let them happen. It's hard to know which would be worse.

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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