The president personally refunded $130,000 paid by his attorney to cover up an alleged affair a decade earlier, the former New York mayor told Fox News, apparently contradicting Mr Trump’s claims he did not know about the hush money.
“He didn’t know about the specifics of it... but he did know about the general arrangement, that Michael would take care of things like this,” said Mr Giuliani, who recently joined the president’s legal team.
Mr Trump and the White House have repeatedly insisted the affair never happened and the president claimed last month that he did not know any payment was being made. Mr Cohen, whose offices and hotel room were recently raided by federal officials, has said that he made the payment with his own money.
The US Attorney’s office in Manhattan later indicated they raided Mr Cohen’s properties following months of investigation.
Mr Giuliani told Fox News’ Sean Hannity the payment to Stormy Daniels was “going to turn out to be perfectly legal” because “that money was not campaign money”.
Mr Hannity asked: “Because they funnelled it through the law firm?”
“Funnelled it through the law firm, and the president repaid him,” replied Mr Giuliani.
Asked if Mr Trump knew about the arrangement, the former New York mayor said: “He didn’t know about the specifics of it, as far as I know. But he did know about the general arrangement, that Michael would take care of things like this, like I take care of things like this for my clients.
“I don’t burden them with every single thing that comes along. These are busy people.”
Michael Avenatti, Daniels’ attorney, described the revelation was “stunning” and said the American people had been ”blatantly lied” to about the payment.
Asked aboard Air Force One last month whether he knew about the payment, Mr Trump said flatly: "No."
He has claimed he did not know why Mr Cohen made the payment or where he got the money.
The White House has said the president also denies having a relationship with Daniels, real name Stephanie Clifford, who claims she had a sexual encounter Mr Trump with in 2006 months after his third wife gave birth to his youngest child. She says she was paid to keep quiet as part of a non-disclosure agreement that she is now seeking to invalidate.
The payment to Daniels has raised numerous legal questions, including whether it was an illegal campaign contribution - or, now, an unreported loan.
"Mr. Trump evidently has participated in a felony and there must be serious consequences for his conduct and his lies and deception to the American people," Mr Avenatti said.
"If this is true then it looks like Cohen may have made an unreported loan to the campaign rather than a contribution," said Richard Hasen, an expert in election law at the University of California.
He said that might be better for Mr Cohen, but not for Mr Trump, because it undermines the argument that his lawyer was acting independently.
"The greatest significance is that it implicates the president directly," Mr Hasen said.
Andrew Herman, an specialist in campaign finance law at legal firm Miller and Chevalier, said Mr Giuliani's argument that the money was a private payment unrelated to the Trump campaign appeared to be "pretty far-fetched" given the timing weeks before the election. The payment to Daniels was also made as Mr Trump was under fire for his conduct towards women after a recording emerged in which he spoke of groping women without their consent.
Mr Giuliani joined Mr Trump’s legal team last month to deal with special counsel Robert Mueller’s investigation into Russian meddling in the 2016 election.
Since starting the role, the former New York City Mayor has outlined restrictions before Mr Trump will agree to be interviewed by Mr Mueller and his team. Those restrictions include keeping the interview to just a few hours, and keeping the line of questioning to a narrow set of questions.
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