1 00:00:03,200 --> 00:00:08,760 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:09,119 --> 00:00:12,880 Speaker 2: More than two years ago, members of Purdue Pharma's Sackler family, 3 00:00:13,119 --> 00:00:16,480 Speaker 2: who earned billions of dollars from the sale of oxyconton 4 00:00:16,560 --> 00:00:20,560 Speaker 2: and other opioids, were questioned in Congress about their company's 5 00:00:20,680 --> 00:00:24,840 Speaker 2: role in the deadly opioid epidemic. David and Kathy Sackler 6 00:00:24,960 --> 00:00:29,360 Speaker 2: expressed regret over the crisis, but did not admit any wrongdoing. 7 00:00:29,920 --> 00:00:33,159 Speaker 3: I want to express my family's deep sadness about the 8 00:00:33,200 --> 00:00:37,920 Speaker 3: opioid crisis. Oxyconton has a medicine that Purdue intended to 9 00:00:38,000 --> 00:00:38,640 Speaker 3: help people. 10 00:00:40,360 --> 00:00:43,240 Speaker 2: I know the loss of any family member or loved 11 00:00:43,280 --> 00:00:48,479 Speaker 2: one is terribly painful, and nothing is more tragic than 12 00:00:48,520 --> 00:00:51,479 Speaker 2: the loss of a child. And now the Second Circuit 13 00:00:51,520 --> 00:00:55,240 Speaker 2: Court of Appeals has found that the billionaire Sacklers can 14 00:00:55,280 --> 00:00:58,920 Speaker 2: be shielded against future opioid lawsuits as part of the 15 00:00:58,960 --> 00:01:03,440 Speaker 2: company's bankruptcy, even though they did not file for bankruptcy themselves. 16 00:01:04,000 --> 00:01:06,440 Speaker 2: This clears the way for a settlement of thousands of 17 00:01:06,520 --> 00:01:10,160 Speaker 2: legal claims, where the Sacklers will pay six billion dollars, 18 00:01:10,560 --> 00:01:14,480 Speaker 2: about half of their fortune, and give up ownership of Purdue, 19 00:01:15,000 --> 00:01:18,240 Speaker 2: joining me is John Coffee, a professor Columbia Law School 20 00:01:18,680 --> 00:01:21,959 Speaker 2: and a business law expert. Jack tell us about the 21 00:01:22,040 --> 00:01:25,240 Speaker 2: Second Circuit decision and some of the background. 22 00:01:25,880 --> 00:01:29,480 Speaker 1: What you should understand is, in the traditional bankruptcy case, 23 00:01:30,000 --> 00:01:34,039 Speaker 1: under something called Chapter eleven, only the claims of the 24 00:01:34,120 --> 00:01:37,880 Speaker 1: bankrupt debtor are resolved. No one else gets a release. 25 00:01:38,280 --> 00:01:41,440 Speaker 1: This is a case evolving a release to a third party, 26 00:01:41,840 --> 00:01:46,280 Speaker 1: the Sackler family. That did not normally happen in bankruptcy, 27 00:01:46,480 --> 00:01:49,400 Speaker 1: but there has been a very new trend. There is 28 00:01:49,480 --> 00:01:52,280 Speaker 1: a case involving the Boy Scouts that releases were given 29 00:01:52,320 --> 00:01:54,320 Speaker 1: to all the Boy Scout leaders as well as to 30 00:01:54,440 --> 00:01:57,400 Speaker 1: the Boy Scout entity which is bankrupt. The Boy Scouts 31 00:01:57,440 --> 00:02:03,200 Speaker 1: were also overwhelmed by thousands of involving sexual misconduct. Exceptions 32 00:02:03,240 --> 00:02:05,919 Speaker 1: have occurred, but they were pretty rare. Now, what happened 33 00:02:05,920 --> 00:02:09,520 Speaker 1: in this case is the bankruptcy judge, looking at an 34 00:02:09,720 --> 00:02:15,080 Speaker 1: unending lifetime of litigation with Purdue Pharma and its oxycotton climbs, 35 00:02:15,760 --> 00:02:19,040 Speaker 1: did approve a settlement that gave a release to all 36 00:02:19,160 --> 00:02:22,800 Speaker 1: the Sacklers. The district court then reversed him and said 37 00:02:22,880 --> 00:02:26,880 Speaker 1: there was no support under the bankruptcy laws for giving 38 00:02:26,919 --> 00:02:30,919 Speaker 1: this kind of release, all right, The second Circuit heard 39 00:02:30,960 --> 00:02:34,200 Speaker 1: the appeal, and now things get a little strange. The 40 00:02:34,240 --> 00:02:37,720 Speaker 1: Second Circuit sat on this for over a year after 41 00:02:37,760 --> 00:02:39,800 Speaker 1: it was argued in the Second Circuit, but usually be 42 00:02:39,840 --> 00:02:42,000 Speaker 1: out with the case in a couple of months. So 43 00:02:42,200 --> 00:02:45,280 Speaker 1: they obviously hit some difficulties with it. And there is 44 00:02:45,360 --> 00:02:49,120 Speaker 1: a concurring descending opinion that says this case is very 45 00:02:49,160 --> 00:02:53,200 Speaker 1: unusual and we shouldn't do this again. Unfortunately, it's very 46 00:02:53,320 --> 00:02:56,120 Speaker 1: likely that they will do it again, because everyone plans. 47 00:02:56,120 --> 00:02:59,040 Speaker 1: Some people who plan bankruptcies are now going to plan 48 00:02:59,360 --> 00:03:03,520 Speaker 1: to have a major contribution by the controlling shareholders and 49 00:03:03,600 --> 00:03:06,600 Speaker 1: give them third party releases. You see, in this kind 50 00:03:06,600 --> 00:03:10,399 Speaker 1: of case, you could sue not only the corporation Perdue Pharma, 51 00:03:10,520 --> 00:03:13,359 Speaker 1: but the Sackler family, which had made all the decisions 52 00:03:13,400 --> 00:03:17,120 Speaker 1: about how to market and sell oxy cotton effectively to 53 00:03:17,160 --> 00:03:19,600 Speaker 1: the masses and not just to a very limited audience. 54 00:03:20,280 --> 00:03:23,359 Speaker 1: So we have a problem with whether or not third 55 00:03:23,440 --> 00:03:27,440 Speaker 1: party releases will become common bankruptcies because the debtor and 56 00:03:27,520 --> 00:03:30,320 Speaker 1: its lawyers can plan these things in advance and will 57 00:03:30,360 --> 00:03:32,120 Speaker 1: try to maximize their releases. 58 00:03:32,520 --> 00:03:34,880 Speaker 2: Are courts too eager to get a settlement in a 59 00:03:34,920 --> 00:03:36,120 Speaker 2: bankruptcy proceeding. 60 00:03:36,520 --> 00:03:39,880 Speaker 1: Bankruptcy courts and bankruptcy law are having a particular problem 61 00:03:40,200 --> 00:03:44,400 Speaker 1: with mass torts. Purdue Pharma was oxy cotton. There's another 62 00:03:44,560 --> 00:03:46,680 Speaker 1: case it's in the courts a lot, getting a lot 63 00:03:46,720 --> 00:03:50,160 Speaker 1: of attention, which is Johnson and Johnson and its problem 64 00:03:50,200 --> 00:03:53,240 Speaker 1: with talcum powder. Billions of dollars of claims have been 65 00:03:53,320 --> 00:03:56,360 Speaker 1: raised on the grounds the talcum powder causes women to 66 00:03:56,400 --> 00:04:00,960 Speaker 1: get a variety of cancers. And that district court approved 67 00:04:01,000 --> 00:04:04,839 Speaker 1: such a settlement allowing Johnson and Johnson to take all 68 00:04:04,880 --> 00:04:08,120 Speaker 1: of their liabilities and all their subsidiaries, put it in 69 00:04:08,200 --> 00:04:11,880 Speaker 1: one subsidiary only, and then immediately put that subsidiary into bankruptcy. 70 00:04:12,040 --> 00:04:14,640 Speaker 1: District court allowed, that bankruptcy court allowed there, but the 71 00:04:14,680 --> 00:04:18,440 Speaker 1: Second Circuit has reversed it, and Don Johnson and Johnson 72 00:04:18,560 --> 00:04:21,440 Speaker 1: is suggesting they may go to the Supreme Court. I'm 73 00:04:21,480 --> 00:04:25,279 Speaker 1: just saying there's a general pattern here of bankruptcy courts 74 00:04:25,560 --> 00:04:27,839 Speaker 1: being very interested in getting a settlement because they don't 75 00:04:27,880 --> 00:04:30,039 Speaker 1: want to spend a lifetime on one case. And what 76 00:04:30,120 --> 00:04:33,400 Speaker 1: made the Sackler case so attractive to the bankruptcy court 77 00:04:33,520 --> 00:04:36,640 Speaker 1: and ultimately to the Second Circuit is that the Sackler 78 00:04:36,720 --> 00:04:40,680 Speaker 1: family ultimately sweetened the settlement by adding six billion of 79 00:04:40,720 --> 00:04:42,200 Speaker 1: their own money. Now, I have to tell you that 80 00:04:42,279 --> 00:04:44,640 Speaker 1: six billion of their own money was money they took 81 00:04:44,720 --> 00:04:47,200 Speaker 1: out of Purdue Farmer in the last days. For the 82 00:04:47,320 --> 00:04:51,040 Speaker 1: last ten years, Perdue Farmer was run basically recognizing that 83 00:04:51,080 --> 00:04:53,200 Speaker 1: it was going to fail, and the Sacklers try to 84 00:04:53,200 --> 00:04:54,880 Speaker 1: take all the money they could out of it. But 85 00:04:55,279 --> 00:04:59,000 Speaker 1: adding six billion to the pool was a tremendous difference, 86 00:04:59,279 --> 00:05:03,200 Speaker 1: and I think that had seduced the courts into accepting 87 00:05:03,240 --> 00:05:07,480 Speaker 1: an unusual provision, which, if it's generalized, is going to 88 00:05:07,800 --> 00:05:11,640 Speaker 1: work to the disadvantage of the creditors the claimants under 89 00:05:11,640 --> 00:05:12,360 Speaker 1: the long term. 90 00:05:12,720 --> 00:05:16,240 Speaker 2: I just want to clarify this. The family demanded they 91 00:05:16,240 --> 00:05:19,480 Speaker 2: get full immunity from all civil legal claims before they 92 00:05:19,520 --> 00:05:23,240 Speaker 2: would settle, even though Perdue had filed for bankruptcy and 93 00:05:23,279 --> 00:05:25,640 Speaker 2: the Sacklers as individuals had not. 94 00:05:26,480 --> 00:05:29,280 Speaker 1: That's exactly what is unusual. That is, if you want 95 00:05:29,279 --> 00:05:31,760 Speaker 1: to go into bankruptcy, all your athts are going to 96 00:05:31,760 --> 00:05:35,240 Speaker 1: go into the pool. And if you don't go too bankruptcy, 97 00:05:35,520 --> 00:05:39,839 Speaker 1: you can make a contribution and say this contribution is 98 00:05:39,880 --> 00:05:43,240 Speaker 1: contingent upon the court giving us a release. The difference 99 00:05:43,320 --> 00:05:45,920 Speaker 1: between mollmost one hundred percent of your assets being in 100 00:05:45,920 --> 00:05:49,640 Speaker 1: the bankruptcy pool and a settlement under which maybe a 101 00:05:49,680 --> 00:05:52,480 Speaker 1: thirty year assets are the six billion does not leave 102 00:05:52,520 --> 00:05:53,400 Speaker 1: the Sackler's poor. 103 00:05:53,839 --> 00:05:57,520 Speaker 2: Six billion. That's just a little over half of their wealth. 104 00:05:57,800 --> 00:06:00,479 Speaker 1: So it is nice to have happy. You know, the 105 00:06:00,520 --> 00:06:02,560 Speaker 1: first three billion that you own are the most important. 106 00:06:02,720 --> 00:06:07,160 Speaker 2: So they haven't admitted their role in fueling the opioid crisis, 107 00:06:07,640 --> 00:06:10,880 Speaker 2: and this just gives them a pass. So what's the sigmal? 108 00:06:11,800 --> 00:06:14,360 Speaker 1: I mean, look at it this way. The claimants for 109 00:06:14,480 --> 00:06:18,320 Speaker 1: getting nothing because Perdue Farmer didn't have much left. They 110 00:06:18,320 --> 00:06:20,720 Speaker 1: didn't file for bankruptcy too. They were down to their 111 00:06:20,800 --> 00:06:23,640 Speaker 1: last stages because they've been sued and suited and sued. 112 00:06:24,120 --> 00:06:27,320 Speaker 1: I think that the argument that E actually moved the 113 00:06:27,360 --> 00:06:30,679 Speaker 1: second Circuit judges, or moved two of them, was that 114 00:06:31,160 --> 00:06:34,039 Speaker 1: this settlement is never going to be resolved and the 115 00:06:34,080 --> 00:06:36,360 Speaker 1: claimants are not going to live forever, and we want 116 00:06:36,400 --> 00:06:39,320 Speaker 1: to get money to people during their lifetimes. And six billion, 117 00:06:39,480 --> 00:06:41,320 Speaker 1: that's a lot more money that was in the pool. 118 00:06:41,600 --> 00:06:44,480 Speaker 1: That's a multiple of the assets that Purdue Pharmer had 119 00:06:44,560 --> 00:06:47,719 Speaker 1: left but we did leave the Sacklers very well off, 120 00:06:48,000 --> 00:06:50,880 Speaker 1: just like yesterday's legislation. Neither side is happy. 121 00:06:51,160 --> 00:06:53,719 Speaker 2: Can this decision be appealed to the Supreme Court? 122 00:06:53,960 --> 00:06:56,000 Speaker 1: It can, but it probably won't be. What you have 123 00:06:56,120 --> 00:06:59,359 Speaker 1: to realize is that most of the claimants went along 124 00:06:59,400 --> 00:07:02,280 Speaker 1: with this. The waited so long. They were very happy 125 00:07:02,400 --> 00:07:05,159 Speaker 1: to get a six billion contribution that gave them something. 126 00:07:05,360 --> 00:07:08,440 Speaker 1: The only claimants that are really left are the Canadian claimants. 127 00:07:08,800 --> 00:07:11,960 Speaker 1: The betting is and I've seen this in several sources 128 00:07:12,280 --> 00:07:14,920 Speaker 1: that they probably won't appeal, but they might they could. 129 00:07:15,120 --> 00:07:20,600 Speaker 2: This doesn't protect the family members from any potential criminal charges, no, but. 130 00:07:20,600 --> 00:07:23,520 Speaker 1: The statue of limitations probably does. You've got to realize 131 00:07:23,520 --> 00:07:26,160 Speaker 1: that the high point of all this is the nineteen nineties. 132 00:07:26,280 --> 00:07:28,760 Speaker 1: Oxyconton took over the country and became the drug of 133 00:07:28,880 --> 00:07:32,880 Speaker 1: choice back in the nineteen nineties, and Flocks has been 134 00:07:32,920 --> 00:07:35,440 Speaker 1: replaced by much more powerful things like Bethanel. 135 00:07:35,760 --> 00:07:38,480 Speaker 2: I mean, this sounds like a good deal for the Sacklers. 136 00:07:38,720 --> 00:07:41,320 Speaker 1: Oh yes, well, they made this good deal and they 137 00:07:41,320 --> 00:07:44,840 Speaker 1: made a contention on the court approving And I got 138 00:07:44,880 --> 00:07:47,840 Speaker 1: to tell you that the bankruptcy court itself see is 139 00:07:47,880 --> 00:07:51,280 Speaker 1: a lifetime a career just hearing these claims, wants to 140 00:07:51,360 --> 00:07:54,400 Speaker 1: escape that and sees no money going to the claimants 141 00:07:54,400 --> 00:07:56,800 Speaker 1: who are running the court and complaining and screaming they 142 00:07:56,880 --> 00:08:01,160 Speaker 1: need money to survive. And six billion certainly made a difference, 143 00:08:01,600 --> 00:08:04,720 Speaker 1: But it does mean that bankruptcy law changes, and I'm 144 00:08:04,760 --> 00:08:06,920 Speaker 1: afraid we're going to see a lot more of these 145 00:08:06,960 --> 00:08:09,920 Speaker 1: settlements because now any bankruptcy in New York will be 146 00:08:09,960 --> 00:08:12,920 Speaker 1: governed by this. And there's a similar decision in the 147 00:08:13,000 --> 00:08:15,720 Speaker 1: Third Circuit. So I think in the Northeast you're going 148 00:08:15,760 --> 00:08:19,800 Speaker 1: to see a lot of third party claimants not filing 149 00:08:19,840 --> 00:08:23,760 Speaker 1: for bankruptcy, not subjecting all their assets to the bankruptcy court, 150 00:08:23,920 --> 00:08:27,280 Speaker 1: but making some kind of offer. There might be negotiations, 151 00:08:27,480 --> 00:08:29,360 Speaker 1: but some kind of offer that if we put in 152 00:08:29,440 --> 00:08:32,079 Speaker 1: this much money, we will get a release for all 153 00:08:32,160 --> 00:08:34,880 Speaker 1: civil liability. You don't get a release, as you quite 154 00:08:34,920 --> 00:08:38,240 Speaker 1: properly say, from criminal liability. But the statue of limitations 155 00:08:38,320 --> 00:08:41,319 Speaker 1: is now long wrong run on most of this. 156 00:08:41,920 --> 00:08:44,400 Speaker 2: As part of the settlement, they're going to give up 157 00:08:44,679 --> 00:08:45,960 Speaker 2: ownership of the company. 158 00:08:46,400 --> 00:08:49,480 Speaker 1: The company is being turned into a not for profit, 159 00:08:49,760 --> 00:08:51,920 Speaker 1: and the company was bankrupt, there was no great value 160 00:08:52,200 --> 00:08:56,840 Speaker 1: all it's going to do is produce addiction preventing drugs 161 00:08:57,160 --> 00:09:00,640 Speaker 1: and other drugs that will be sold on a cost bases. 162 00:09:00,679 --> 00:09:03,000 Speaker 1: They're not going to try to make any profit, and 163 00:09:03,080 --> 00:09:06,080 Speaker 1: all the money made by Perdue Pharma, which has a 164 00:09:06,080 --> 00:09:09,080 Speaker 1: new name now, will be given to charity if Secklers 165 00:09:09,080 --> 00:09:12,160 Speaker 1: will no longer own Perdue Pharma. But of course Perdue 166 00:09:12,200 --> 00:09:14,640 Speaker 1: Farmer was failing. You don't want to own something that's 167 00:09:14,679 --> 00:09:16,080 Speaker 1: losing money in bankruptcy. 168 00:09:16,600 --> 00:09:19,600 Speaker 2: So what struck me as kind of funny is that 169 00:09:19,679 --> 00:09:21,920 Speaker 2: the family is going to allow their name to be 170 00:09:21,960 --> 00:09:24,480 Speaker 2: removed from buildings and scholarships. 171 00:09:24,559 --> 00:09:27,680 Speaker 1: But that's already happened. I'm a Columbia. Columbia took the 172 00:09:27,679 --> 00:09:29,480 Speaker 1: Sacklers off many years ago. 173 00:09:29,520 --> 00:09:32,480 Speaker 2: But their name can't be disparaged. While that's happening. It 174 00:09:32,520 --> 00:09:35,439 Speaker 2: seems like they just got every which way whatever they want. 175 00:09:35,840 --> 00:09:40,280 Speaker 1: They got a lot. Now now disparagement, Well that's not unusual. 176 00:09:40,520 --> 00:09:43,559 Speaker 1: I think what that means is the university is taking 177 00:09:43,600 --> 00:09:46,360 Speaker 1: the name off. Can't say anything negative. They just say 178 00:09:46,400 --> 00:09:48,400 Speaker 1: we are removing the name and it will now be 179 00:09:48,520 --> 00:09:52,400 Speaker 1: known as the Anthropology Hall wherever it's called the Sackler 180 00:09:52,400 --> 00:09:53,240 Speaker 1: Anthropology Hall. 181 00:09:53,440 --> 00:09:55,200 Speaker 2: So now what's the next step. 182 00:09:55,480 --> 00:09:58,600 Speaker 1: Well, there could be an appeal. Few people think that 183 00:09:58,720 --> 00:10:01,800 Speaker 1: there will be appeals, And if there are appeals, it's 184 00:10:01,800 --> 00:10:03,840 Speaker 1: not at all clear the Supreme Court will take it. 185 00:10:04,160 --> 00:10:06,760 Speaker 1: The Supreme Court may not appeared in de ciding a 186 00:10:06,800 --> 00:10:09,760 Speaker 1: bankruptcy lay issue. Remember, the Supreme Court only takes about 187 00:10:09,760 --> 00:10:13,080 Speaker 1: five or six percent of the sotuary appeals brought to her. 188 00:10:13,200 --> 00:10:16,040 Speaker 1: And if they don't get sociary, the case is now final. 189 00:10:16,200 --> 00:10:19,000 Speaker 1: If they do get sotuary, I can't tell you what 190 00:10:19,040 --> 00:10:22,600 Speaker 1: the Supreme Court would do. I think it is less 191 00:10:22,640 --> 00:10:25,120 Speaker 1: than likely that the Supreme Court will take the case. 192 00:10:25,840 --> 00:10:28,360 Speaker 2: Thanks so much for being on the show. That's Professor 193 00:10:28,440 --> 00:10:30,440 Speaker 2: John Coffee of Columbia Law School. 194 00:10:31,520 --> 00:10:34,200 Speaker 1: There been one hundred and twenty twenty three days to 195 00:10:34,240 --> 00:10:36,160 Speaker 1: president non voting three absent. 196 00:10:36,960 --> 00:10:41,400 Speaker 2: The resolution is adopted and with that, Texas Attorney General 197 00:10:41,520 --> 00:10:45,760 Speaker 2: Ken Paxton, a champion of far right GOP legal fights 198 00:10:45,800 --> 00:10:50,720 Speaker 2: over guns, abortion, and immigration, was impeached in an extraordinary 199 00:10:50,800 --> 00:10:55,280 Speaker 2: vote by the state's Republican dominated House of Representatives, which 200 00:10:55,400 --> 00:10:59,960 Speaker 2: charge him with bribery, obstruction of justice, and eighteen other offenses. 201 00:11:00,120 --> 00:11:03,880 Speaker 2: Is Paxton lashed out at the impeachment proceedings. 202 00:11:04,679 --> 00:11:10,120 Speaker 3: Every politician who supports this deceitful impeachment attempt will then 203 00:11:10,320 --> 00:11:14,600 Speaker 3: flict lasting damage on the credibility of the Texas House 204 00:11:14,600 --> 00:11:15,400 Speaker 3: which I served in. 205 00:11:15,880 --> 00:11:18,959 Speaker 2: The proceedings are historic. There have been only two other 206 00:11:19,080 --> 00:11:22,960 Speaker 2: impeachments in Texas has nearly two hundred year history, and 207 00:11:23,080 --> 00:11:26,360 Speaker 2: now the political showdown is headed to the state Senate. 208 00:11:26,640 --> 00:11:31,319 Speaker 2: Joining me, as Madeline Meckelberg Bloomberg Texas Legal reporter, start 209 00:11:31,480 --> 00:11:37,880 Speaker 2: by telling us about Ken Paxton as a conservative agitator, 210 00:11:37,880 --> 00:11:42,199 Speaker 2: an election denier, bringing so many lawsuits against the Biden 211 00:11:42,400 --> 00:11:44,240 Speaker 2: and Obama administrations. 212 00:11:45,360 --> 00:11:48,559 Speaker 4: You hit on all of the headlines there for Paxton. 213 00:11:49,000 --> 00:11:53,520 Speaker 4: Paxton is a long time Republican elected official in Texas. 214 00:11:53,600 --> 00:11:57,079 Speaker 4: He's held office here for the past twenty years, most 215 00:11:57,080 --> 00:12:00,640 Speaker 4: recently at Attorney General, and in that role he really 216 00:12:00,720 --> 00:12:04,679 Speaker 4: has cultivated this national reputation of being a leading voice 217 00:12:04,720 --> 00:12:09,120 Speaker 4: on these hot button GOP political issues that includes abortion, 218 00:12:09,480 --> 00:12:13,400 Speaker 4: gun rights, immigration, the border is a big focus for him. 219 00:12:14,040 --> 00:12:17,200 Speaker 4: And then he really became a key ally of former 220 00:12:17,240 --> 00:12:20,640 Speaker 4: President Donald Trump. And you mentioned it already. He was 221 00:12:20,679 --> 00:12:23,960 Speaker 4: a leading voice when it came to denying the legitimacy 222 00:12:24,120 --> 00:12:28,719 Speaker 4: of the twenty twenty presidential election, he launched an unsuccessful 223 00:12:28,800 --> 00:12:31,920 Speaker 4: case before the US Supreme Court seeking to overturn those 224 00:12:31,960 --> 00:12:35,559 Speaker 4: election results. And he has just stayed in that lane, 225 00:12:35,679 --> 00:12:39,679 Speaker 4: known for being a conservative firebrand on every issue, and 226 00:12:40,280 --> 00:12:43,920 Speaker 4: really built his career as Attorney General on doing the 227 00:12:43,960 --> 00:12:47,640 Speaker 4: Obama administration and now doing the Biden administration. 228 00:12:48,280 --> 00:12:54,440 Speaker 2: Have allegations of criminal and ethical misconduct followed him through 229 00:12:54,880 --> 00:12:59,680 Speaker 2: his tenure as Attorney general, so since twenty fourteen, yes 230 00:12:59,800 --> 00:13:00,240 Speaker 2: they have. 231 00:13:00,920 --> 00:13:03,559 Speaker 4: He was elected to AG in twenty fourteen, as you said, 232 00:13:03,640 --> 00:13:06,520 Speaker 4: and then just a few months later he was actually 233 00:13:06,559 --> 00:13:11,080 Speaker 4: indicted on security spread charges. He was accused of persuading 234 00:13:11,080 --> 00:13:14,439 Speaker 4: investors to buy stock in this tech firm without disclosing 235 00:13:14,520 --> 00:13:18,120 Speaker 4: that he would be compensated for that. And ever since 236 00:13:18,160 --> 00:13:22,040 Speaker 4: then the allegations against him have grown in their scope 237 00:13:22,120 --> 00:13:25,120 Speaker 4: and they've really now shifted to be about his conduct 238 00:13:25,160 --> 00:13:28,719 Speaker 4: while in office. But ever since then, he has been 239 00:13:28,720 --> 00:13:34,800 Speaker 4: hounded by these different allegations, including bribery, including abusive office 240 00:13:35,080 --> 00:13:38,360 Speaker 4: and the like, and he's been under investigation by federal 241 00:13:38,360 --> 00:13:43,120 Speaker 4: authorities which is ongoing. He's part of multiple lawsuits around 242 00:13:43,160 --> 00:13:47,080 Speaker 4: this wrongdoing allegedly and the criminal case against him connected 243 00:13:47,080 --> 00:13:50,760 Speaker 4: to that initial indictment is still ongoing. It's yet to 244 00:13:50,800 --> 00:13:51,440 Speaker 4: be resolved. 245 00:13:51,800 --> 00:13:55,079 Speaker 2: So you just went through the litany of problems he's had. 246 00:13:55,320 --> 00:13:59,320 Speaker 2: What happened to lead to this impeachment? After all the 247 00:13:59,600 --> 00:14:02,640 Speaker 2: other inquiries, after all the stuff that's out there, he 248 00:14:02,720 --> 00:14:05,239 Speaker 2: was still reelected. What led to this impeachment? 249 00:14:06,040 --> 00:14:09,479 Speaker 4: That is the million dollar question right now in Texas. 250 00:14:09,679 --> 00:14:12,040 Speaker 4: I mean to say the news this week was shocking 251 00:14:12,280 --> 00:14:16,360 Speaker 4: is an understatement considering how much Paxton has weathered as 252 00:14:16,400 --> 00:14:19,600 Speaker 4: Attorney general. As you said, he was just re elected 253 00:14:19,640 --> 00:14:22,600 Speaker 4: to his third term in office, and these allegations have 254 00:14:22,720 --> 00:14:25,680 Speaker 4: been out in the open in the public. I can 255 00:14:25,720 --> 00:14:28,360 Speaker 4: take you back to the saga of this week, how 256 00:14:28,360 --> 00:14:32,000 Speaker 4: this impeachment unfolded over the span of just a few days, 257 00:14:32,320 --> 00:14:35,240 Speaker 4: and it started with Paxton coming out and issuing this 258 00:14:35,320 --> 00:14:40,120 Speaker 4: statement calling on House Speaker Dave Feelin to resign because 259 00:14:40,160 --> 00:14:42,640 Speaker 4: there was a video circulating of him on the internet 260 00:14:42,840 --> 00:14:46,200 Speaker 4: that people were speculating he appeared to be intoxicated while 261 00:14:46,240 --> 00:14:50,160 Speaker 4: presiding over the Texas House this week, and Paxton called 262 00:14:50,240 --> 00:14:53,840 Speaker 4: on a House Ethics committee to hold an investigation into 263 00:14:53,880 --> 00:14:58,080 Speaker 4: Feln's office. Later that day, that House Investigative Committee scheduled 264 00:14:58,080 --> 00:15:01,160 Speaker 4: a meeting, but the meeting was actually about them revealing 265 00:15:01,240 --> 00:15:04,880 Speaker 4: that they had been conducting a secret, month long investigation 266 00:15:05,240 --> 00:15:08,600 Speaker 4: into Paxton's conduct while in office, and they say that 267 00:15:08,680 --> 00:15:13,000 Speaker 4: this investigation was prompted by an ongoing whistle blower lawsuit 268 00:15:13,120 --> 00:15:17,160 Speaker 4: against Paxton that was brought by three high ranking officials 269 00:15:17,200 --> 00:15:21,000 Speaker 4: in his office who say they were terminated after reporting 270 00:15:21,120 --> 00:15:25,880 Speaker 4: Paxton's two federal authorities for bribery. Paxton reached a settlement 271 00:15:25,920 --> 00:15:30,440 Speaker 4: agreement with those whistleblowers that totaled three point three million dollars, 272 00:15:30,640 --> 00:15:33,480 Speaker 4: but since Paxton is a public official, that money had 273 00:15:33,520 --> 00:15:36,320 Speaker 4: to be taxpayer dollars and it had to be approved 274 00:15:36,320 --> 00:15:40,840 Speaker 4: by state lawmakers in the budget. Lawmakers rejected that request, 275 00:15:41,000 --> 00:15:44,160 Speaker 4: but they say that him asking for that money required 276 00:15:44,200 --> 00:15:48,200 Speaker 4: them to conduct an investigation into the conduct behind the lawsuit, 277 00:15:48,360 --> 00:15:50,440 Speaker 4: and that's how we got to where we are today, 278 00:15:50,480 --> 00:15:52,720 Speaker 4: which is him being impeached by the full House. 279 00:15:53,280 --> 00:15:57,320 Speaker 2: I thought it was unusual that the committee said that 280 00:15:57,400 --> 00:16:00,720 Speaker 2: if he hadn't requested that money, we wouldn't have been 281 00:16:00,720 --> 00:16:05,400 Speaker 2: this investigation. So tell us about the articles of impeachment. 282 00:16:06,040 --> 00:16:08,000 Speaker 4: Yes, I think that's such a great point that you 283 00:16:08,080 --> 00:16:10,680 Speaker 4: highlighted they really made a point of saying, like, we 284 00:16:10,680 --> 00:16:13,400 Speaker 4: wouldn't be doing this if you hadn't asked us for 285 00:16:13,480 --> 00:16:15,800 Speaker 4: this money. And so it's interesting that that was a 286 00:16:15,920 --> 00:16:18,960 Speaker 4: tipping point for them after all these years. But yes, 287 00:16:19,240 --> 00:16:23,680 Speaker 4: they conducted an investigation and they presented these twenty articles 288 00:16:23,680 --> 00:16:28,920 Speaker 4: of impeachment that the full Republican dominated Texas House decided 289 00:16:28,920 --> 00:16:32,520 Speaker 4: to vote and adopt over this past Memorial Day weekend. 290 00:16:33,040 --> 00:16:36,880 Speaker 4: And they're twenty articles that kind of spanned the years 291 00:16:36,880 --> 00:16:39,960 Speaker 4: of allegations against him that we were talking about earlier, 292 00:16:40,320 --> 00:16:44,560 Speaker 4: but they include things like bribery, obstruction of justice, abuse 293 00:16:44,640 --> 00:16:48,520 Speaker 4: of public trust, and things under that umbrella, and the 294 00:16:48,560 --> 00:16:52,160 Speaker 4: bulk of them are around the allegations that were part 295 00:16:52,160 --> 00:16:55,280 Speaker 4: of this whistleblower lawsuit that these employees say they were 296 00:16:55,280 --> 00:16:59,280 Speaker 4: fired for reporting this bribery. Paxton has been accused of 297 00:16:59,400 --> 00:17:02,880 Speaker 4: using his own office to aid a wealthy donor, Austin 298 00:17:02,960 --> 00:17:06,720 Speaker 4: real estate developer Meet Paul, who's got his own hosts 299 00:17:06,760 --> 00:17:11,560 Speaker 4: of legal problems and investigations into his business feelings. And 300 00:17:11,920 --> 00:17:14,760 Speaker 4: they say that Paxton was using his office to help 301 00:17:14,840 --> 00:17:18,520 Speaker 4: him and to conceal information from law enforcement, and he 302 00:17:18,640 --> 00:17:23,600 Speaker 4: was potentially giving confidential information to meet Paul about this 303 00:17:23,800 --> 00:17:27,040 Speaker 4: investigation into him, and that's where the bulk of these 304 00:17:27,119 --> 00:17:30,000 Speaker 4: charges come from. They point to really specific actions that 305 00:17:30,080 --> 00:17:33,320 Speaker 4: they say Paxton took while in office in order to 306 00:17:33,400 --> 00:17:34,000 Speaker 4: help Paul. 307 00:17:34,920 --> 00:17:39,919 Speaker 2: Were people in Texas or a legislator stunned by the 308 00:17:40,119 --> 00:17:43,440 Speaker 2: overwhelming majority voting to impeach him. 309 00:17:43,960 --> 00:17:47,119 Speaker 4: Absolutely, I don't think I spoke to a single person 310 00:17:47,200 --> 00:17:51,119 Speaker 4: who predicted that there would be an impeachment vote and 311 00:17:51,280 --> 00:17:54,160 Speaker 4: that it would pass with such strong support in the House. 312 00:17:54,600 --> 00:17:57,440 Speaker 4: The final vote was one hundred and twenty one lawmakers 313 00:17:57,520 --> 00:18:01,720 Speaker 4: voting in favor and just twenty three voting against impeaching Paxson, 314 00:18:02,080 --> 00:18:06,280 Speaker 4: and that includes sixty of his Republican colleagues in the House. 315 00:18:06,359 --> 00:18:09,000 Speaker 4: But the matter's not settled with the impeachment is just 316 00:18:09,160 --> 00:18:11,919 Speaker 4: the charges. He hasn't been convicted of anything. Now the 317 00:18:11,960 --> 00:18:13,720 Speaker 4: matter is going to turn over to the Senate, and 318 00:18:13,760 --> 00:18:17,680 Speaker 4: I think there's equal confusion about what might happen there. 319 00:18:18,160 --> 00:18:21,320 Speaker 4: But yes, I mean during the debate on the House floor, 320 00:18:21,800 --> 00:18:23,800 Speaker 4: it was hard to know exactly how the vote was 321 00:18:23,840 --> 00:18:26,800 Speaker 4: going to go. We had a Democrat stand up and say, 322 00:18:27,280 --> 00:18:29,000 Speaker 4: you know, I don't think I can vote in favor 323 00:18:29,000 --> 00:18:31,440 Speaker 4: of impeachment. I don't think we have enough information here, 324 00:18:31,640 --> 00:18:34,000 Speaker 4: and then we had Republicans come up and speak in 325 00:18:34,080 --> 00:18:36,760 Speaker 4: favor of impeachment, and so for a while it was 326 00:18:36,800 --> 00:18:39,160 Speaker 4: hard to know exactly how the final vote was going 327 00:18:39,200 --> 00:18:39,439 Speaker 4: to go. 328 00:18:40,119 --> 00:18:42,840 Speaker 2: Is there any clue as to what his defense. 329 00:18:42,480 --> 00:18:45,320 Speaker 4: Will be, It's hard to say. We haven't heard him 330 00:18:45,440 --> 00:18:49,320 Speaker 4: address the specific charges yet. So far, he's issued a 331 00:18:49,359 --> 00:18:53,199 Speaker 4: few public statements responding to this, and he calls the 332 00:18:53,200 --> 00:18:57,520 Speaker 4: whole thing an illegal investigation and illegal impeachment. He says 333 00:18:57,600 --> 00:19:01,080 Speaker 4: that Republicans who run the Texas govern here have been 334 00:19:01,200 --> 00:19:04,840 Speaker 4: taken by Democrats and they're in Joe Biden's pocket. But 335 00:19:04,880 --> 00:19:08,399 Speaker 4: we haven't heard him speak to this specific charges. His 336 00:19:08,520 --> 00:19:12,280 Speaker 4: office has issued a report that they say disput all 337 00:19:12,320 --> 00:19:15,080 Speaker 4: of the allegations against him. It's not something they produced 338 00:19:15,080 --> 00:19:18,280 Speaker 4: in connection to the impeachment. It's something they had produced prior. 339 00:19:18,920 --> 00:19:22,399 Speaker 4: But the investigators who helped to draft these articles of 340 00:19:22,400 --> 00:19:25,959 Speaker 4: impeachment for the House Committee, they've said that that report 341 00:19:26,080 --> 00:19:29,159 Speaker 4: is full of inaccuracies and wrongdoing at this point, so 342 00:19:29,720 --> 00:19:32,400 Speaker 4: it's really hard to say what we can expect from 343 00:19:32,440 --> 00:19:35,720 Speaker 4: him when this fully goes to trial, and that includes 344 00:19:36,000 --> 00:19:38,440 Speaker 4: what we've been able to learn from these other lossuits 345 00:19:38,560 --> 00:19:41,240 Speaker 4: that I mentioned, none of these cases have really gotten 346 00:19:41,240 --> 00:19:43,760 Speaker 4: to a point where we've had to hear Paxton respond 347 00:19:43,920 --> 00:19:47,080 Speaker 4: specifically to the allegations against him. And that's going to 348 00:19:47,160 --> 00:19:47,680 Speaker 4: change now. 349 00:19:49,000 --> 00:19:52,879 Speaker 2: And I understand his wife is a state senator. Is 350 00:19:52,920 --> 00:19:55,480 Speaker 2: it known yet whether she's going to recuse herself. 351 00:19:56,040 --> 00:19:58,480 Speaker 4: No, that's a huge question. The debate in the Senate 352 00:19:58,640 --> 00:20:01,000 Speaker 4: is going to open up all of these different political 353 00:20:01,119 --> 00:20:04,560 Speaker 4: questions because Paxton himself is a former state senator and 354 00:20:04,600 --> 00:20:07,000 Speaker 4: so he served in that chamber with many of the 355 00:20:07,040 --> 00:20:10,119 Speaker 4: members that are still there to this day. Those, of course, 356 00:20:10,240 --> 00:20:13,840 Speaker 4: are lesser conflicts of interest potentially than his own wife 357 00:20:13,880 --> 00:20:16,600 Speaker 4: being asked to vote on whether he should be convicted 358 00:20:16,640 --> 00:20:20,000 Speaker 4: of these charges. People have called for her to accuse herself, 359 00:20:20,040 --> 00:20:23,520 Speaker 4: but she hasn't said anything. With TenneT Governor Dan Patrick 360 00:20:23,680 --> 00:20:26,560 Speaker 4: is who presides over the Senate in Texas, and he 361 00:20:26,640 --> 00:20:29,720 Speaker 4: is also a Pakistan ally in that he is a 362 00:20:29,960 --> 00:20:33,280 Speaker 4: Trump ally. They've been on the campaign stage with Trump 363 00:20:33,359 --> 00:20:36,280 Speaker 4: when he comes to Texas and they express a lot 364 00:20:36,320 --> 00:20:38,840 Speaker 4: of the same interests. But we've heard Patrick come out 365 00:20:38,840 --> 00:20:41,359 Speaker 4: and say, I want to conduct a really fair trial 366 00:20:41,520 --> 00:20:44,800 Speaker 4: in the Senate. Don't know what that means exactly. That 367 00:20:44,840 --> 00:20:47,439 Speaker 4: remains to be seen. He said that he's planning to 368 00:20:47,480 --> 00:20:51,080 Speaker 4: set a date by no later than the end of August, 369 00:20:51,280 --> 00:20:53,520 Speaker 4: so we're expecting to see some kind of action on 370 00:20:53,600 --> 00:20:55,720 Speaker 4: this this summer. But yeah, we don't really know any 371 00:20:55,760 --> 00:20:59,160 Speaker 4: of the specifics yet. And yes, his wife, Senator Angela Paxton, 372 00:20:59,240 --> 00:21:02,360 Speaker 4: has not said what her role may or may not 373 00:21:02,440 --> 00:21:04,000 Speaker 4: be when that time comes. 374 00:21:04,760 --> 00:21:10,879 Speaker 2: And were there allegations that Paxton threatened several Republican lawmakers 375 00:21:10,960 --> 00:21:15,000 Speaker 2: with political consequences in their next election if they voted 376 00:21:15,040 --> 00:21:15,800 Speaker 2: for impeachment. 377 00:21:16,440 --> 00:21:18,960 Speaker 4: Yeah, that was something that came out during debate on 378 00:21:19,119 --> 00:21:22,280 Speaker 4: the Texas House floor on the articles of impeachment. State 379 00:21:22,320 --> 00:21:26,080 Speaker 4: Representative Charlie Garan got up and said, I'm voting in 380 00:21:26,119 --> 00:21:30,000 Speaker 4: favor of this. I note that within the time since 381 00:21:30,040 --> 00:21:33,440 Speaker 4: these articles have been announced, Attorney General Paxton has been 382 00:21:33,480 --> 00:21:36,280 Speaker 4: calling different lawmakers on the floor and telling them to 383 00:21:36,359 --> 00:21:39,480 Speaker 4: vote against these articles of impeachment or they could face 384 00:21:39,560 --> 00:21:43,240 Speaker 4: political retribution in the next election. We haven't seen any 385 00:21:43,320 --> 00:21:46,119 Speaker 4: lawmakers come forward and say that, yes, that was me. 386 00:21:46,280 --> 00:21:49,520 Speaker 4: I got the call from General Paxton. But that's definitely 387 00:21:49,520 --> 00:21:52,919 Speaker 4: an allegation that's been circulating. People are saying in the 388 00:21:52,960 --> 00:21:57,880 Speaker 4: Senate that he's distributed packets of information to senators defending 389 00:21:57,960 --> 00:22:02,919 Speaker 4: himself from these allegations. So he's definitely doing whatever he 390 00:22:03,160 --> 00:22:06,280 Speaker 4: can to defend himself at this point before court is 391 00:22:06,320 --> 00:22:09,120 Speaker 4: in session, so to speak, and tell. 392 00:22:08,960 --> 00:22:13,399 Speaker 2: Us just how unusual this impeachment is in Texas and 393 00:22:13,440 --> 00:22:15,920 Speaker 2: a fact, across the country, this is. 394 00:22:16,240 --> 00:22:18,439 Speaker 4: Very rare, and so that's why I think there's a 395 00:22:18,480 --> 00:22:21,760 Speaker 4: lot of confusion speculation about what might happen in terms 396 00:22:21,760 --> 00:22:24,280 Speaker 4: of the rules and who can vote, how it's going 397 00:22:24,359 --> 00:22:27,119 Speaker 4: to play out across the whole country. It looks like 398 00:22:27,160 --> 00:22:30,040 Speaker 4: he might be the fourth state attorney general ever to 399 00:22:30,080 --> 00:22:34,320 Speaker 4: be impeached. Most recently, the attorney general in South Dakota 400 00:22:34,560 --> 00:22:37,600 Speaker 4: was impeached and removed from office in twenty twenty two 401 00:22:37,840 --> 00:22:41,159 Speaker 4: after he struck and killed a pedestrian while driving. So 402 00:22:41,320 --> 00:22:43,879 Speaker 4: a really different set of circumstances than what we're looking 403 00:22:43,920 --> 00:22:48,320 Speaker 4: at now, But even within Texas history, it's incredibly rare. 404 00:22:48,400 --> 00:22:52,040 Speaker 4: Texas has impeached only two elected officials ever, and the 405 00:22:52,119 --> 00:22:55,040 Speaker 4: most recent one of those was a district judge in 406 00:22:55,160 --> 00:22:58,960 Speaker 4: nineteen seventy five, and before that it was a governor 407 00:22:59,040 --> 00:23:02,919 Speaker 4: in nineteen seven seventeen. Actually, a few of the current 408 00:23:03,040 --> 00:23:06,159 Speaker 4: members of the Texas House of Representatives were serving in 409 00:23:06,240 --> 00:23:08,800 Speaker 4: the House in nineteen seventy five, so they have been 410 00:23:08,840 --> 00:23:12,720 Speaker 4: part of two historic impeachment votes. But that's just two 411 00:23:12,760 --> 00:23:14,600 Speaker 4: members as far as I can tell. But yes, this 412 00:23:14,680 --> 00:23:18,120 Speaker 4: is incredibly rare process, both in Texas and nationally. 413 00:23:18,800 --> 00:23:22,480 Speaker 2: A few major Republican names are coming to his defense, 414 00:23:22,760 --> 00:23:28,159 Speaker 2: like former President Donald Trump, Texas Senator Ted Cruz, Congresswoman 415 00:23:28,440 --> 00:23:32,280 Speaker 2: Marjorie Taylor Green. But does it seem like a lot 416 00:23:32,440 --> 00:23:33,359 Speaker 2: are holding back. 417 00:23:34,080 --> 00:23:36,280 Speaker 4: I think there's a lot that are holding back. I mean, 418 00:23:36,400 --> 00:23:39,120 Speaker 4: I think those would be expected people to come out 419 00:23:39,160 --> 00:23:42,840 Speaker 4: and speak in favor of Paxton. Their views are really aligned, 420 00:23:43,160 --> 00:23:45,280 Speaker 4: and like we said, he's really gone to back for 421 00:23:45,440 --> 00:23:48,879 Speaker 4: Trump time and time again. And I think what's really 422 00:23:48,920 --> 00:23:53,239 Speaker 4: significant about this impeachment, besides the historical context and the 423 00:23:53,280 --> 00:23:57,119 Speaker 4: context of it within Paxton's career, is that this is 424 00:23:57,160 --> 00:24:00,880 Speaker 4: the first time that Republicans in Texas have really been 425 00:24:00,960 --> 00:24:04,679 Speaker 4: forced to say anything about this impeachment. A lot of 426 00:24:04,720 --> 00:24:08,640 Speaker 4: times there's been conversations going into elections about whether Paxton 427 00:24:08,720 --> 00:24:11,640 Speaker 4: will be a drag on the Republican ticket, given these 428 00:24:11,680 --> 00:24:15,120 Speaker 4: allegations against him, but somehow to this point, like high 429 00:24:15,200 --> 00:24:18,480 Speaker 4: ranking Republicans in Texas has been able to avoid speaking 430 00:24:18,520 --> 00:24:21,280 Speaker 4: on this because they've been able to defer to the 431 00:24:21,320 --> 00:24:23,680 Speaker 4: ongoing legal proceedings. You know, they're like, I don't want 432 00:24:23,680 --> 00:24:27,040 Speaker 4: to cast any judgment until a judge says what happens here. 433 00:24:27,640 --> 00:24:30,320 Speaker 4: And so the fact that this many Republicans voted in 434 00:24:30,359 --> 00:24:33,160 Speaker 4: favor of impeachment, I would have expected maybe a bit 435 00:24:33,200 --> 00:24:35,880 Speaker 4: more bull throated support of Pakiston from some of those 436 00:24:35,960 --> 00:24:38,639 Speaker 4: national figures, but I think it's significant that we're not 437 00:24:38,720 --> 00:24:41,800 Speaker 4: really seeing that from any of his allies here at 438 00:24:41,800 --> 00:24:42,800 Speaker 4: home in Texas. 439 00:24:43,040 --> 00:24:45,760 Speaker 2: I know you're going to be watching this carefully. Thanks Madlin. 440 00:24:46,280 --> 00:24:50,199 Speaker 2: That's Madeline Meckelberg, Bloomberg Texas Legal Reporter. And that's it 441 00:24:50,240 --> 00:24:52,840 Speaker 2: for this edition of The Bloomberg Law Show. Remember you 442 00:24:52,880 --> 00:24:55,320 Speaker 2: can always get the latest legal news on our Bloomberg 443 00:24:55,400 --> 00:24:59,040 Speaker 2: Law Podcast. You can find them on Apple Podcasts, Spotify, 444 00:24:59,240 --> 00:25:04,280 Speaker 2: and at WHW dot Bloomberg dot com, slash podcast Slash Law, 445 00:25:04,680 --> 00:25:07,240 Speaker 2: And remember to tune into The Bloomberg Law Show every 446 00:25:07,320 --> 00:25:11,200 Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso 447 00:25:11,359 --> 00:25:12,960 Speaker 2: and you're listening to Bloomberg