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Thursday, October 29, 2015 4:11 PM

Dirty Secrets, Hush Money, Conviction of Former US House Speaker Dennis Hastert; Was Justice Served? Could Gold or Bitcoin Have Helped?

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Reuters reports Ex-House Speaker Hastert Pleads Guilty in Hush-Money Case.

Former U.S. House Speaker Dennis Hastert pleaded guilty on Wednesday to a federal financial crime in a hush-money case stemming from allegations of sexual misconduct, marking the dramatic downfall of a once powerful politician.

In exchange for the guilty plea, federal prosecutors recommended a sentence of zero to six months imprisonment, although the judge could sentence Hastert to up to five years in prison and fine him $250,000.

Hastert, 73, pleaded guilty to one count of "structuring" - withdrawing funds from bank accounts in amounts below $10,000 to evade bank reporting rules on large cash movements. Those rules exist to detect money laundering.

In the agreement, Hastert admitted to paying $1.7 million in cash to someone he had known for decades to buy that person's silence and compensate for past misconduct toward that individual.

Prosecutors did not spell out what the misconduct was, but unnamed law enforcement officials have told media that it was sexual and involved someone Hastert knew when he was a high school teacher and coach in his hometown of Yorkville, Illinois in the 1960s and 1970s.

In the plea agreement Hastert admitted that he reached an agreement in 2010 with the individual who was a victim of his misconduct, to pay a total of $3.5 million in hush money.

From 2010-2012 Hastert made 15 withdrawals of $50,000 each from a number of banks, meeting with the individual every few months to pay the person an installment.

In April 2012, bank employees asked Hastert for an explanation of the withdrawals and told him they had to report large transactions. After that, he started to withdraw in lower increments. From mid-2012 until late 2014 he made 106 withdrawals of amounts under $10,000 while he kept paying the unnamed individual every few months, according to the plea agreement.

If there were any sex abuse it would not lead to criminal charges because the statute of limitations ran out long ago.

"This is one more time where a person with power and authority gets to keep dirty secrets hidden," said Barbara Blaine, founder of SNAP, an advocacy group for survivors of clerical abuse.

Hastert was the longest-serving Republican speaker in the history of the House. He left Congress in 2007 and became a lobbyist and consultant.
Sleazebag Hypocrite

Dennis Hastert is without a doubt a sleazebag of disgustingly high magnitude. He is also a flaming hypocrite.

Hastert was among the Republican leaders who hounded Bill Clinton for his sexual misconduct in the White House. Hastert voted to impeach Clinton.

It is very tough to defend sleazebag hypocrites, but one still must ask the key question:

Was justice served?

MarkeyWatch author Brett Arends offers this opinion: Why Dennis Hastert’s Conviction is an Outrage.
If you aren’t outraged by what just happened to “disgraced” former House Speaker Dennis Hastert, you’re not paying attention. No, it doesn’t matter if you think he’s a raging hypocrite. No, it doesn’t matter even if you think he’s a personal or political sleazebag.

Dennis Hastert, now age 73, faces possible jail time after pleading guilty this week to making a series of illegal bank withdrawals and evading federal financial regulations. He denied a second charge of lying to federal investigators about it.

His crime? Withdrawing $1.7 million of his own money from his own bank accounts. His own money. His own bank accounts.

There are reports he was covering up an accusation of sexual misconduct with a former student dating from when he was a high school wrestling coach — about 30 years ago. The person demanding the payments may have been the student. The reports are unconfirmed and we don’t have more details.

Hastert is not facing jail time for the sexual conduct, if any. No charges have been brought or answered. He is facing jail because he took his own money out of his own bank accounts in order to pay what amounts to blackmail.

When did we start supporting blackmailers in this country? When did that become OK? Did I miss the memo?

Is it wrong for me to point out that so far not one Wall Street crook has faced a day of jail time for stealing the country’s money, but someone faces jail time for handling his own cash?

The $10,000 limit hasn’t been changed in decades. Once it was a lot of money. Now it’s not. Oh, and to make the law even more ridiculous, it’s actually also illegal for you to get around it by acting legally. No, I’m not kidding. If you avoid the $10,000 limits by withdrawing, say, lots of $5,000 installments, they can still send you to jail.

One of the ironies is that Hastert could have avoided all of this if he’d simply paid his blackmailer in gold coins instead of greenbacks.

Gold is just as anonymous as cash. But it is essentially exempt from these financial regulations. Hastert could have called up any reputable gold dealer and purchased $50,000 worth of gold Eagles or Buffaloes or Krugerrands at a time, and no one would have asked any questions. All he then had to do was give the coins to his blackmailer, who could then call up a gold dealer and sell them.

I’m highly skeptical of gold’s merit as an investment or an inflation hedge, but as a mechanism for avoiding Big Brother, it is hard to beat.

After all these years, someone would have to have mighty strong evidence to blackmail a person for $3.5 million.

In my opinion, a blackmail of such magnitude would require written evidence (ex. signed love notes to a student), and possibly an out-of-wedlock child.

That's just my speculation, albeit quite logical. But even if so, one can ask: Why are we going after people spending their own money, but not those engaged in illegal blackmail?

Could Gold or Bitcoin Have Helped?

Arends wrote "gold is essentially exempt from these financial regulations."

Well, not really. Arends is wrong.

There are gift laws and gift taxes. The IRS explains in Frequently Asked Questions on Gift Taxes.

What is considered a gift?

Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

Pay particular attention to the the notion of getting "one's money's worth in return".

The gift exclusion was $11,000 between 2002-2005, $12,000 between 2006-2008, $13,000 between 2009-2012, and $14,000 since 2013.

Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead.

Thus, even if those hush payments were considered a "gift", Hastert violated gift laws unless he could convince the court that by hushing someone up, he got his "money's worth".

If Hastert did indeed get his "money's worth" then it is the recipient, not Hastert who violated tax laws. 

There are a lot of questions here: Is blackmail a gift, or payment for services? Was justice served? If so, for the right reason? If blackmail is payment for services, why aren't they going after the recipient?

Finally, gold could have helped, not in a legal sense, but rather in the sense it likely would not have been caught.

Mike "Mish" Shedlock

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