Faced with a sprawling investigation by the special counsel in Washington, President Donald Trump must also contend with an independent-minded office of federal prosecutors in his hometown, New York, who are investigating his longtime personal lawyer and fixer, Michael Cohen.
Trump’s administration had fired the Obama-era leader of the U.S. attorney’s office for the Southern District of New York last year, after initially asking him to stay on. Earlier this year, the administration installed a Republican former prosecutor and party donor, Geoffrey Berman, after Trump made an unusual request to interview him personally.
Soon after assuming the Southern District post in January, Berman notified Justice Department officials in Washington of a possible appearance of conflict of interest in the then-undisclosed Cohen investigation, and officials concluded that he should be recused, according to people briefed on the matter.
The Justice Department has not specified the reason for the recusal, which left Berman’s hand-picked deputy, Robert Khuzami, in charge of the investigation. A former terrorism prosecutor, Khuzami was chief of enforcement at the Securities and Exchange Commission during the Obama administration but also spoke at the Republican National Convention in 2004, defending the Patriot Act and endorsing George W. Bush for president.
With potential campaign finance law violations under scrutiny, one person said, the Cohen investigation was assigned to career prosecutors in the office’s elite public corruption unit, which has a track record of convicting politicians on both sides of the aisle.
On Monday, the prosecutors in the case will be back in court as a federal judge weighs a request by Cohen to keep investigators from reviewing the materials they gathered during searches of his office, home and hotel room as part of the inquiry.
It is one the most consequential corruption inquiries in a generation, notable even by the standards of the Southern District office, which has never been shy about reaching far beyond Manhattan to find headline-grabbing cases. And the office’s long-standing reputation for non-partisanship and autonomy — it is jokingly referred to as the “Sovereign District” — could make it less vulnerable to attacks from either the president’s allies or his critics.
“The office has been historically known for its independence of the Justice Department,” said John Martin Jr., a former U.S. attorney in Manhattan and former federal judge. “That’s what makes it so powerful in this investigation, and such a danger to Donald Trump.”
The potential threat is not lost on the White House. Trump’s advisers now view the investigation into Cohen as more imminent a problem for the Trump presidency than the inquiry by the special counsel, Robert Mueller, The New York Times reported Friday.
Trump has called the FBI raid “a disgraceful situation” and a “total witch hunt.”
The materials seized from Cohen could open a window into the president’s relationship with a loyal aide who guided Trump through not only business dilemmas but personal and political ones as well. That includes Cohen’s role in helping to arrange payments during the campaign to women who claimed to have had affairs with Trump.
In federal court hearings in Manhattan on Friday, lawyers for Cohen and Trump argued that many of the records seized by the FBI were protected by attorney-client privilege. Cohen has asked for an order temporarily prohibiting prosecutors from reading the documents until the matter could be litigated.
Cohen’s lawyer, Stephen Ryan, has said the search was “completely inappropriate and unnecessary.” A spokesman for the U.S. attorney for the Southern District declined to comment.
Berman is not known to have any connection to Cohen. A former Southern District prosecutor, he is a registered Republican, donated $2,700 to the Trump campaign and did some part-time volunteer work for Trump’s transition team.
Although Berman had been law partners with former Mayor Rudy Giuliani, another former Southern District U.S. attorney and one of Trump’s most vocal supporters, that connection was not a factor in the recusal, according to the people briefed on the matter.
Also not a factor in the recusal, one person said, was the personal interview that Trump conducted with Berman last year as part of the selection process. Berman has not disclosed publicly details of any such meeting.
With Berman sidelined, Khuzami assumed responsibility for the Cohen investigation. Khuzami is in his second stint in the office, having made a name for himself as a terrorism and financial crimes prosecutor from 1990 to 2002.
He helped secure the conviction of Omar Abdel Rahman, who conspired to blow up New York City landmarks. As an outgrowth of that case, he worked on the investigation of Abdel Rahman’s lawyer, Lynne Stewart, who had her office and files searched by federal authorities.
After leaving the Southern District, Khuzami joined Deutsche Bank, where he ultimately became general counsel for the firm’s U.S. arm. But his role as a terrorism prosecutor arose again when he was asked to give the 2004 speech at the Republican National Convention, in which he staunchly defended the Patriot Act and credited Bush with having “the courage and the wisdom” to seek its passage.
Khuzami, who grew up in Rochester, New York, is registered as “nonpartisan.” His friends have teased him about his speech, expressing disbelief that he would participate in the convention even though he is not a Republican. Khuzami responded that he had actually edited out other comments in his speech praising Bush.
Khuzami made a donation to John McCain’s presidential campaign in 2007. He also donated to the campaign of John Anderson, who ran for president in 1980 as an independent against Ronald Reagan and Jimmy Carter.
“He’s apolitical, a consummate public servant who plays by the rules,” said Richard Walker, a partner at King & Spalding who was Khuzami’s boss at Deutsche Bank and is a former SEC enforcement chief himself.
Khuzami’s experience at Deutsche Bank, Trump’s largest lender on Wall Street, has generated some blowback from liberal commentators, but that could bolster his credibility with conservatives. Steven Cohen, a former Southern District prosecutor who later became the top aide to New York Gov. Andrew Cuomo, a Democrat, recalled watching Rachel Maddow, the MSNBC host, lament Berman’s and Khuzami’s ties to Deutsche Bank. Recalling the show, Cohen said it made him think: “Good lord, he has just been inoculated.”
And Trump’s advisers are not the only ones who recognize the potential dangers posed to the president by the Southern District’s independence. Andrew McCarthy, a former Southern District prosecutor who is now a conservative columnist with National Review and has been a harsh critic of Mueller, wrote a column Saturday titled “The Real Investigation.”
“President Donald Trump now has real legal peril” because of the Southern District inquiry, McCarthy declared. “Anyone potentially connected to it should be worried,” he added.
The investigation is not Khuzami’s first politically sensitive matter. While at the SEC in 2010, he approved an action against Steven Rattner, a well-connected financier who led the Obama administration’s auto industry overhaul.
And in the aftermath of the 2008 financial crisis, when the SEC was under fire for not detecting the Madoff scheme, Khuzami shook up the enforcement division and filed a record number of actions, many of them against companies at the center of the crisis, including Goldman Sachs.
“We handled lots of politically sensitive cases together at the SEC, and my experience is he’ll make the right decision based on the right standard for the right reason,” said Lorin Reisner, who was Khuzami’s deputy at the SEC and later became the head of the criminal division in the Southern District. “He’s an on-the-merits leader,” said Reisner, now a partner at Paul Weiss in New York.
But Khuzami also handed out awards to officials who spent years building potentially big cases that they then chose not to file for lack of evidence — sending a message that the agency should not bend to public and political pressure to punish unpopular figures on Wall Street, according to current and former officials. As a result, the agency faced criticism from the left for not charging top Wall Street executives after the crisis. Much to the dismay of critics of Wall Street and even the agency’s chairwoman at the time, Khuzami sided with investigators in New York who were opposed to charging top Lehman Brothers executives. Judge Jed Rakoff once called one of the agency’s settlements under Khuzami “pocket change.”
After leaving the SEC in early 2013, Khuzami became a partner at Kirkland & Ellis in Washington, which proved to be a lucrative role. He earned about $11 million over the last two years, a significant sum even by the standards of big law partnership shares.
As Khuzami leads the Cohen investigation, he is being counseled by two senior prosecutors: Audrey Strauss, a prominent New York lawyer whom Berman brought back to the office as senior counsel; and Lisa Zornberg, the chief of the criminal division.
Zornberg was named to lead the division in late 2016 by Preet Bharara, the U.S. attorney under President Barack Obama. Bharara was among 46 U.S. attorneys who were asked in March of last year to submit their resignations. While the directive itself was routine, Trump had initially asked Bharara to meet with him at Trump Tower and remain in his post.
The corruption unit prosecutor who spoke in court Friday was Thomas McKay, who previously helped prosecute Dean Skelos, the former Republican majority leader of the New York state Senate. Also in the courtroom were Tatiana Martins, who heads the corruption unit, and her deputy, Russell Capone.
Bharara, appearing on CNN on Sunday, called the members of the government team professionals “who do things by the book.”
The court hearings Friday also underscored the Southern District’s reputation for catapulting its alumni into powerful jobs in government and the defense bar.
Trump’s own lawyer at the hearings, Joanna Hendon, once worked as a Southern District prosecutor.