Federal rules and Justice Department policy clearly provide for such cooperation and would even allow Mueller to share confidential grand jury information with Schneiderman's office with court approval. Beyond that, there is always a great deal of information not covered by grand jury secrecy that could be freely shared. But although certainly not unheard of, federal and state prosecutors cooperating in an investigation is relatively unusual, at least in a white-collar case.
It's unlikely that Mueller needs Schneiderman to charge crimes that Mueller otherwise couldn't reach. Given the breadth of federal white-collar statutes, if Manafort's financial dealings violated New York state law, they almost certainly could be charged under federal law as well. Federal charges such as mail and wire fraud, money laundering and RICO allow federal prosecutors to reach even transactions that took place entirely within one state.
The New York attorney general's office is very highly regarded and has a history of bringing complex financial crime cases. It has been reported that Schneiderman's office was already investigating Manafort for possible crimes related to his business dealings in New York. But the bottom line is that anything state prosecutors might be looking at, Mueller could also investigate on his own if he chose to do so. So why would Mueller join forces with Schneiderman?
One obvious reason is to pool resources. If Schneiderman's office has already done work relevant to Mueller's investigation, it makes sense to share that information rather than unearth it a second time. It's also important for Mueller's office to have access to things such as witness statements and testimony that the New York investigators may have already obtained.
But as others have noted, the second possible reason also explains why this news is so significant: It cuts the legs out from under any possible attempt by President Trump to use his pardon power to thwart the investigation.
Trump's recent pardon of former Maricopa County (Ariz.) sheriff Joe Arpaio raised concerns that it might be seen as a signal to potential witnesses against him. They could refuse to cooperate with Mueller's investigation and feel confident that Trump would pardon them if they ran into any legal trouble.
But the presidential pardon power extends only to federal crimes. Trump can't do anything about New York state charges, and he can't fire Schneiderman. The possibility of serious state charges gives Mueller's team critical potential leverage that the pardon power threatened to take away.
There's no reason to think this federal-state cooperation will be limited to Manafort. Given the Trump organization's base in New York, state law potentially could apply to any number of individuals whose actions might be scrutinized by the special counsel.
There is some downside risk to Mueller, politically if not legally. Schneiderman is an outspoken Democrat who has tangled with Trump in the past, most notably in bringing the successful fraud suit against Trump University. The partnership may provide ammunition to those trying to claim that Mueller is a partisan engaged in a "witch hunt."
But political attacks aside, this is a big deal. By teaming with Schneiderman, Mueller has deftly removed one of the biggest potential obstacles to his investigation. If any Trump associates were feeling comforted by the president's pardon power, things just got decidedly more uncomfortable.
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