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Law360 Quotes Jeff Ifrah on John Edwards Indictment

By Hilary Russ
Law360, New York (June 3, 2011) — The salacious criminal indictment handed down Friday against two-time presidential hopeful John Edwards charts unexplored legal ground that could make the case tricky — but not impossible — for prosecutors to prove, experts say.

In particular, the case hinges on the novel idea that nearly $1 million in private gift money — allegedly used to hide the pro-family values candidate’s extramarital affair and love child during the 2008 presidential election cycle — actually amounted to campaign donations that should have been reported to the government.

“The case rises and falls on that issue,” Peter Henning, a professor at Wayne State University Law School, said. “If the jury says it’s not a campaign contribution, it’s dead.”

Normally, prosecutors cracking down on potential campaign finance violations look at money coming into and going out of the candidate’s fund. But here, they are examining how a candidate spent money that never even touched the official campaign coffers.

“They’re concerned about policing the expenditure side and letting candidates and federally elected officials know that they’re looking at both sides of the equation,” Henning said.

After a two-year investigation, a federal grand jury in North Carolina on Friday hit the former Democratic senator with a six-count indictment for conspiracy, illegal campaign contributions and submitting false statements to the Federal Election Commission.

Edwards is accused of secretly using at least $925,000 in donations from 100-year old Rachel “Bunny” Mellon, widow of a banking heir, and Fred Baron, the finance chair of Edwards’ campaign, who died in 2008, to conceal his affair with Rielle Hunter, who was a videographer on Edwards’ campaign.

In May 2007, Hunter became pregnant. News stories exposed the affair in October, and in December, Edwards asked aide Andrew Young to claim that he was the father — allegedly telling him that their efforts to win the presidency and “everything they had fought for” depended on it, according to the indictment.

Young publicly claimed paternity. But under intense media scrutiny, Edwards later admitted in January 2010, after his campaign was long over, that he was the father.

“Edwards knew that public revelation of the affair and pregnancy would destroy his candidacy,” prosecutors said in the indictment.

The revelation would also force his campaign “to divert personnel and resources away from other campaign activities to respond to criticism,” prosecutors said.

Edwards allegedly solicited and received $725,000 from Mellon and $200,000 from Baron, using the money to pay for Hunter’s rent, car, prenatal care and travel expenses so she could stay hidden from the public, according to the indictment.

Prosecutors say that Mellon made checks out to a friend of hers. In an attempt to hide that they were for Hunter, she allegedly listed items of furniture in the memo lines of the checks — “chairs” and “bookcase,” for example.

The friend then allegedly forwarded the checks to Young, whose wife endorsed them in her maiden name and deposited them into the couple’s checking accounts, from which Young then paid Hunter’s expenses, prosecutors say.

Edwards then failed to disclose the payments in campaign fund reports to the FEC, the indictment alleges.

The indictment does not name any parties except Edwards, but the personalities involved have been widely reported.

“It’s a well-crafted indictment,” Solomon Wisenberg, co-chair of the white collar crime defense practice group at Barnes & Thornburg LLP, said.

“This is a triable case,” he said. “[But] it’s by no means a cakewalk for the prosecution.”

Edwards’ defense attorney, Gregory Craig, the former White House counsel under Bill Clinton who is now a partner at Skadden Arps Slate Meagher & Flom LLP, signaled to reporters Friday that he would mount a two-pronged attack — seeking first to debunk the government’s theory the payments amount to campaign contributions, and then looking to trample the notion that Edwards knew he was breaking the law.

“Each and every one of the claims set forth in the indictment relies on the government’s … theory of the case that the payments at issue here were campaign contributions, should have been treated as campaign contributions,” Craig told reporters.

“In the history of the federal election campaign law, no one has ever been charged, either civilly or criminally, with the claims that have been brought against Sen. Edwards today,” he said. “This is an unprecedented prosecution.”

Some experts agreed, saying the aggressive prosecution theory could establish a dangerous precedent.

“It is a very slippery slope if gifts which do not directly benefit a campaign are deemed to violate the law simply because they have some indirect benefit,” Peter R. Zeidenberg of DLA Piper said.

While the indictment is far from frivolous, the novel legal theory that can equate some private expenses with contributions could be a tough hurdle for prosecutors to clear, attorneys said.

“That is going to be a challenge for the prosecutors,” said Evan Barr, a partner at Steptoe & Johnson LLP who was previously chief of the major crimes unit in the Southern District of New York.

But the case also revolves around the theory that Edwards willfully skirted campaign finance law — an idea at which Edwards’ attorney lashed out on Friday.

“No one would have known, or should have known, or could have been expected to know, that these payments would be treated, or should be considered as, campaign contributions,” Craig told reporters. “And there is no way that Sen. Edwards knew that fact either.”

Federal statutes, like the Federal Election Campaign Act of 1971 at issue in the case, are often not obvious on their face, according to Robert J. Anello, a principal at Morvillo Abramowitz Grand Iason Anello & Bohrer PC.

“Very often they do not make clear what is legal and what is not legal. It takes numerous cases. The statutes don’t define them,” he said. “They’re hitting areas that are not that well trodden, like this one, [so that] even an expert might not necessarily know what the law is.”

As if that were not enough, prosecutors are facing other obstacles. One of their potential witnesses is 100 years old, another is dead and a third has previously been caught lying to the public out of devotion to Edwards.

What’s more, juries might not be that receptive to the case, according to attorneys.

Kenneth B. Julian, a partner at Manatt Phelps & Phillips LLP, was the lead prosecutor in the California public corruption trial of former Orange County Sheriff Michael S. Carona, which exposed explicit details of Carona’s affair with a paramour, supposedly secret bank accounts and getaway trips.

Carona was convicted of attempting to thwart the grand jury’s investigation by tampering with a witness, and was sentenced in 2009 to 5 1/2 years in prison. But he was acquitted on all other counts, including conspiracy and mail fraud, in part because jurors were not outraged by the extramarital affair, the lying and the unreported hush money, according to Julian.

“John Edwards is in a very similar situation,” Julian said. “Prosecutors are going to have a very tough time at the end of the day getting a jury to bite off on that.”

And even though Edwards made himself unpopular by initially lying about the affair, “this case has little jury appeal,” according to Zeidenberg.

“It is hard to identify what the public harm is in this conduct,” Zeidenberg said. “This may well be viewed by a potential jury as piling on, and simply kicking a guy when he is down.”

Edwards’ lawyers are likely to try to get the case thrown out by a judge on a motion to dismiss, attorneys said.

But some of the facts of the case could still work in prosecutors’ favor, experts said.

The indictment provides hints about how prosecutors could be able to prove the players knew that what they were doing was questionable.

For example, in 2007 Young allegedly read to Edwards from a note that Mellon had sent after Edwards came under fire in the media for his expensive haircuts.

“[F]rom now on, all haircuts, etc., that are necessary and important for his campaign — please send the bills to me … It is a way to help our friend without government restrictions,” the note read, according to the indictment.

At another point, Baron allegedly handed Young an envelope with $1,000 cash in it and a note that said, “Old Chinese saying: use cash, not credit cards!”

Edwards also allegedly told a former employee — who was preparing a statement in which Edwards was to acknowledge that he was Hunter’s daughter’s father — that he knew that some money was used to cover up the affair, but that he specifically instructed the employee not to mention it for “legal and practical reasons.”

“It seems like the senator is going to have quite a battle on his hands explaining the detailed payments that were made to his former mistress,” A. Jeff Ifrah, founding partner of Ifrah PLLC, said.

“Even if there is some sort of explanation, I’m not sure I understand why someone of his ilk would take this chance, except that as a former seasoned trial attorney he’s seen worse cases,” Ifrah said.

Edwards pled not guilty at the arraignment.

Edwards is represented by Gregory Craig of Skadden Arps Slate Meagher & Flom LLP.

The case is being prosecuted by Assistant U.S. Attorneys Robert J. Higdon Jr. and Brian S. Meyers of the U.S. Attorney’s Office for the Eastern District of North Carolina. It is also being prosecuted by Deputy Chief Justin V. Shur and trial attorneys David V. Harbach II and Jeffrey E. Tsai of the public integrity section in the Criminal Division of the U.S. Department of Justice.

The case is USA v. Johnny Reid Edwards, case number 1:11-cr-00161, in the U.S. District Court for the Middle District of North Carolina.

–Editing by Jocelyn Allison and Eydie Cubarrubia.