1 00:00:00,080 --> 00:00:03,119 Speaker 1: It's an insider trading case playing out like a movie, 2 00:00:03,320 --> 00:00:07,320 Speaker 1: and the trial hasn't even begun. There's the legendary sports gambler, 3 00:00:07,400 --> 00:00:11,400 Speaker 1: the champion golfer, the former chairman of a company worth billions. 4 00:00:11,440 --> 00:00:14,160 Speaker 1: There are the burner phones allegedly used to pass along 5 00:00:14,240 --> 00:00:18,200 Speaker 1: stock tips, the secret codes, the wire taps, the gambling debts, 6 00:00:18,200 --> 00:00:20,720 Speaker 1: and the leaks to the media by an FBI agent 7 00:00:20,800 --> 00:00:25,439 Speaker 1: now under investigation. Federal prosecutors alleged Las Vegas gambler Billy 8 00:00:25,520 --> 00:00:28,960 Speaker 1: Walter has made forty three million dollars on inside tips 9 00:00:29,000 --> 00:00:32,840 Speaker 1: from Tom Davis, the former chairman of Dean Foods. Walters 10 00:00:32,880 --> 00:00:35,960 Speaker 1: allegedly passed on those tips to Phil Mickelson, a three 11 00:00:35,960 --> 00:00:39,879 Speaker 1: time Masters tournament winner. Here's how former Manhattan US Attorney 12 00:00:39,920 --> 00:00:43,440 Speaker 1: Prett Barrara described the case. When the board member of 13 00:00:43,440 --> 00:00:48,600 Speaker 1: a fortune company feeds inside information to a professional gambler 14 00:00:48,640 --> 00:00:51,559 Speaker 1: who makes a killing on well timed trades in that 15 00:00:51,800 --> 00:00:55,480 Speaker 1: very company stock, that is a form of corruption, corruption 16 00:00:55,520 --> 00:00:59,240 Speaker 1: of our markets. Nicholson was not charged, but paid back 17 00:00:59,280 --> 00:01:02,600 Speaker 1: the almost one million dollars he made on Dean Food trades. 18 00:01:03,200 --> 00:01:06,720 Speaker 1: Our guests are John Coffee, Professor, Columbia University, Law School 19 00:01:06,760 --> 00:01:09,880 Speaker 1: and Adam Pritchard, Professor at the University of Michigan Law School. 20 00:01:10,600 --> 00:01:13,720 Speaker 1: John Tom Javis has pleaded guilty and is expected to 21 00:01:13,720 --> 00:01:16,679 Speaker 1: be the prosecution star witness. And this is a pretty 22 00:01:16,760 --> 00:01:21,280 Speaker 1: straight case tipper to tippy with no middleman. How strong 23 00:01:21,480 --> 00:01:25,520 Speaker 1: is the prosecution's case, Oh, I think comparatively it's very strong, 24 00:01:25,600 --> 00:01:28,000 Speaker 1: for for three reasons. First of all, you've got the 25 00:01:28,080 --> 00:01:32,679 Speaker 1: direct testimony of the tipper implicating the tippy. In many 26 00:01:32,720 --> 00:01:36,880 Speaker 1: of these cases, the government only has circumstantial evidence. For example, 27 00:01:36,880 --> 00:01:40,480 Speaker 1: in the famous case involving the Goldman Sacks director Mr Gupta, 28 00:01:40,840 --> 00:01:42,640 Speaker 1: all they knew is that there was a phone call 29 00:01:42,720 --> 00:01:45,600 Speaker 1: between the tipper and the tippy. They were close friends, 30 00:01:45,840 --> 00:01:49,880 Speaker 1: and the tippy traded seconds later. That's circumstantial. Here you 31 00:01:49,960 --> 00:01:53,360 Speaker 1: got this is the second point, that the tipper didn't 32 00:01:53,360 --> 00:01:56,720 Speaker 1: trade himself. He's pled guilty to a found it. The 33 00:01:56,800 --> 00:01:58,800 Speaker 1: only reason he would have to do that is that 34 00:01:58,880 --> 00:02:02,640 Speaker 1: there was illi al least surrounding his tip to Mr 35 00:02:02,720 --> 00:02:06,000 Speaker 1: waller Um if he didn't think that was guilty. This 36 00:02:06,040 --> 00:02:07,800 Speaker 1: is not like a case where he's committed a half 37 00:02:07,880 --> 00:02:10,840 Speaker 1: dozen defenses offenses and is trying to find one to 38 00:02:10,880 --> 00:02:15,520 Speaker 1: settle on. Finally, Mr Waller is a professional gambler. If 39 00:02:15,560 --> 00:02:18,240 Speaker 1: the jury learns that, I think the jury is likely 40 00:02:18,320 --> 00:02:22,440 Speaker 1: to believe this guy is very comfortable taking risk, and here, 41 00:02:22,480 --> 00:02:25,440 Speaker 1: at this time he took a legal risk. Okay, that 42 00:02:25,520 --> 00:02:28,440 Speaker 1: sums it all up. Plus the fact that the US government, 43 00:02:28,800 --> 00:02:32,280 Speaker 1: the Department Justice, has not lost an insider trading trial 44 00:02:32,800 --> 00:02:36,040 Speaker 1: in the Southern District in modern memory, they're very good 45 00:02:36,080 --> 00:02:39,600 Speaker 1: at commencing juries, at least in Manhattan, that insider traders 46 00:02:39,639 --> 00:02:43,120 Speaker 1: broke the law. Adam, do you agree that the prosecution 47 00:02:43,160 --> 00:02:46,600 Speaker 1: has an especially strong case here, and if so, does 48 00:02:46,639 --> 00:02:49,320 Speaker 1: that mean that Billy Walters probably has to testify in 49 00:02:49,360 --> 00:02:52,239 Speaker 1: his own defense in order to have a fighting chance. 50 00:02:53,440 --> 00:02:59,000 Speaker 1: So this is a classic insider trading scenario. H Davis 51 00:02:59,040 --> 00:03:03,040 Speaker 1: and Walters are are golfing buddies and Davis was passing 52 00:03:03,040 --> 00:03:06,160 Speaker 1: on the information. I agree with Jack that having the 53 00:03:06,240 --> 00:03:12,040 Speaker 1: testimony of the the tipper makes the government's case very strong. 54 00:03:12,800 --> 00:03:16,639 Speaker 1: I expect that the defense lawyers are going to try 55 00:03:16,720 --> 00:03:20,320 Speaker 1: and uh muddy the waters, try and beat up Davis 56 00:03:20,320 --> 00:03:24,120 Speaker 1: on the stand for having taken a plea uh in 57 00:03:24,200 --> 00:03:27,520 Speaker 1: exchange for his testimony, and they're going to make an 58 00:03:27,560 --> 00:03:33,600 Speaker 1: assessment of how credible Davis is on the stand before 59 00:03:33,639 --> 00:03:36,360 Speaker 1: making the decision about whether or not they're going to 60 00:03:36,480 --> 00:03:42,520 Speaker 1: let their client testify. Uh. He has a history of 61 00:03:43,240 --> 00:03:47,240 Speaker 1: running a foul the law on occasion, and the history 62 00:03:47,280 --> 00:03:50,960 Speaker 1: of being a gambler suggests that he is a risk taker. 63 00:03:51,840 --> 00:03:54,960 Speaker 1: Maybe the defense would prefer to keep him off the 64 00:03:55,040 --> 00:03:59,560 Speaker 1: stand if they can, but they may have to uh 65 00:03:59,720 --> 00:04:02,520 Speaker 1: throw hail Mary if Davis comes off as a credible 66 00:04:02,560 --> 00:04:07,720 Speaker 1: witness Jack. How often do defendants actually help themselves when 67 00:04:07,760 --> 00:04:14,640 Speaker 1: they testify, Well, we've seen very few defendants succeed at 68 00:04:14,680 --> 00:04:17,760 Speaker 1: trials recently. The one case I can think of, which 69 00:04:17,800 --> 00:04:22,560 Speaker 1: was a civil case, involved a famous basketball owner out there, 70 00:04:22,720 --> 00:04:25,520 Speaker 1: Mr Cuban, out there in Texas, and there I think 71 00:04:25,560 --> 00:04:28,280 Speaker 1: the jury was very sympathetic to him because he was 72 00:04:28,320 --> 00:04:31,800 Speaker 1: a local hero a ler. Than that, the norm is 73 00:04:31,920 --> 00:04:35,479 Speaker 1: the defendant doesn't take the stand because not only does 74 00:04:35,520 --> 00:04:38,920 Speaker 1: he possibly get committed inside of trading, but there could 75 00:04:38,960 --> 00:04:42,640 Speaker 1: be a follow up prosecution for perjury, and many judges 76 00:04:42,680 --> 00:04:45,320 Speaker 1: will add to the sins if they think the defendant 77 00:04:45,400 --> 00:04:50,440 Speaker 1: log Adam, do you mentioned earlier that there are allegations 78 00:04:50,440 --> 00:04:53,640 Speaker 1: of FBI misconduct here? The trial judges said, the defense 79 00:04:53,680 --> 00:04:58,880 Speaker 1: may ask about FBI leaks about the investigation to two newspapers, 80 00:04:59,400 --> 00:05:02,279 Speaker 1: how often all would you see that affecting the case? 81 00:05:03,520 --> 00:05:07,680 Speaker 1: So the defense strategy has to be that they want 82 00:05:07,760 --> 00:05:11,240 Speaker 1: to show that this is a case of government overreaching 83 00:05:11,560 --> 00:05:16,239 Speaker 1: and that the government was trying to try its case 84 00:05:16,480 --> 00:05:22,480 Speaker 1: through the news. And if the goal is to muddy 85 00:05:22,520 --> 00:05:28,480 Speaker 1: the waters, then showing misconduct by the FBI agent is 86 00:05:29,680 --> 00:05:32,760 Speaker 1: a strategy that has a good deal of appeal. That 87 00:05:32,800 --> 00:05:35,919 Speaker 1: doesn't involve putting Walters on the stand. It's putting the 88 00:05:35,960 --> 00:05:41,000 Speaker 1: government on the stand to some extent, showing that they 89 00:05:41,080 --> 00:05:45,800 Speaker 1: were pushing the boundaries. Jack about a minute. Here, there 90 00:05:45,800 --> 00:05:49,479 Speaker 1: are some clues in the defense papers that they may 91 00:05:49,600 --> 00:05:54,000 Speaker 1: use the argument that Walters did the research into his 92 00:05:54,080 --> 00:05:56,200 Speaker 1: stock picks and he was very good at it. How 93 00:05:56,279 --> 00:06:01,720 Speaker 1: convincing is that usually? Um, it could possibly work in 94 00:06:01,800 --> 00:06:04,800 Speaker 1: some cases. But here, if you know he's speaking to 95 00:06:04,839 --> 00:06:07,640 Speaker 1: the chairman, why do you want to do fundamental research 96 00:06:07,680 --> 00:06:10,600 Speaker 1: into the company's financial statements? If the chairman is telling 97 00:06:10,600 --> 00:06:12,640 Speaker 1: you where the stocks going the next couple of days, 98 00:06:13,000 --> 00:06:15,520 Speaker 1: and he traded frequently between two thousand and eight and 99 00:06:15,560 --> 00:06:19,000 Speaker 1: two thousand and fourteen, If he was just a fundamental trader, 100 00:06:19,080 --> 00:06:21,479 Speaker 1: would be a buy and whole trader. He doesn't seem 101 00:06:21,520 --> 00:06:23,480 Speaker 1: to have been there. We've been talking about the highest 102 00:06:23,520 --> 00:06:28,320 Speaker 1: profile insider trading case in years. Yesterday, jury selection started 103 00:06:28,320 --> 00:06:32,159 Speaker 1: in the trial of Las Vegas legend as a legendary 104 00:06:32,200 --> 00:06:35,520 Speaker 1: sports gambler, Billy Walters, who was accused of making forty 105 00:06:35,560 --> 00:06:38,760 Speaker 1: three million dollars on inside tips from Tom Davis, the 106 00:06:38,800 --> 00:06:41,960 Speaker 1: former chairman of Dean Foods. And we've been speaking with 107 00:06:42,040 --> 00:06:45,679 Speaker 1: John Coffey, professor at Columbia University Law School, and Adam Pritchard, 108 00:06:45,720 --> 00:06:49,440 Speaker 1: professor at the University of Michigan Law School, Jack Golfer, 109 00:06:49,440 --> 00:06:52,040 Speaker 1: Phil Mickelson's name is on the list of about fifty 110 00:06:52,120 --> 00:06:56,760 Speaker 1: potential witnesses, and the judge yesterday question the jurors to 111 00:06:56,760 --> 00:06:59,359 Speaker 1: see if they would be star struck, and he dismissed 112 00:06:59,400 --> 00:07:02,279 Speaker 1: a female. You were saying, the look of rapture on 113 00:07:02,320 --> 00:07:04,360 Speaker 1: her face at the mention of his name and her 114 00:07:04,400 --> 00:07:07,760 Speaker 1: repeatedly saying it wouldn't influence her is enough for me. 115 00:07:08,640 --> 00:07:12,480 Speaker 1: Tell us how a judge makes a decision to dismiss 116 00:07:12,480 --> 00:07:15,840 Speaker 1: a jury. Is it a gut feeling? Oh? I think 117 00:07:15,880 --> 00:07:19,480 Speaker 1: it is a somewhat intuitive feeling the judge wants to 118 00:07:19,520 --> 00:07:21,760 Speaker 1: see the jury. They managed to see the jury, Yester, 119 00:07:21,840 --> 00:07:24,520 Speaker 1: he didn't take long and he just felt that one 120 00:07:24,600 --> 00:07:28,040 Speaker 1: person might be a little too close and beholding to 121 00:07:28,200 --> 00:07:32,400 Speaker 1: a possible star witness. If Mr Michelson does testify, it 122 00:07:32,480 --> 00:07:36,280 Speaker 1: will be devastating and all likelihood for Mr Waller because 123 00:07:36,320 --> 00:07:39,560 Speaker 1: now they'll have him straddle at both ends with cooperating 124 00:07:39,560 --> 00:07:42,880 Speaker 1: witnesses saying that the information came from Davis and that 125 00:07:43,080 --> 00:07:46,200 Speaker 1: Davis passed on to Michelson, and that's going to be 126 00:07:46,280 --> 00:07:49,720 Speaker 1: a very strong impact with a jury. Adam, this is 127 00:07:49,760 --> 00:07:52,960 Speaker 1: a case that was brought under preperaum in the Southern 128 00:07:53,040 --> 00:07:56,040 Speaker 1: District of New York. Um. He's now now out of 129 00:07:56,040 --> 00:07:58,160 Speaker 1: a job there. Do you think that's going to affect 130 00:07:58,160 --> 00:07:59,520 Speaker 1: this case at all or is it something that the 131 00:07:59,640 --> 00:08:03,600 Speaker 1: career prosecutors can just handle on their own. Barra was 132 00:08:03,640 --> 00:08:07,320 Speaker 1: not going to be in the courtroom presenting witnesses or 133 00:08:07,960 --> 00:08:12,640 Speaker 1: providing the argument. This is something that the line prosecutors 134 00:08:12,680 --> 00:08:17,360 Speaker 1: would have been responsible before four and will be responsible 135 00:08:17,400 --> 00:08:22,400 Speaker 1: for as the trial unfold. So very strong commitment to 136 00:08:22,480 --> 00:08:26,600 Speaker 1: professionalism among the prosecutors who work in the Southern District 137 00:08:26,640 --> 00:08:29,680 Speaker 1: of New York, and I'm sure that they're going to 138 00:08:29,760 --> 00:08:32,600 Speaker 1: be ready to try this case, and I would be 139 00:08:32,720 --> 00:08:39,120 Speaker 1: very surprised if Berra's firing had any effect on the outcome. Jack. 140 00:08:39,200 --> 00:08:42,400 Speaker 1: So the jury was picked. It was seven women and 141 00:08:42,440 --> 00:08:44,679 Speaker 1: five men. They're going to return tomorrow morning to pick 142 00:08:44,880 --> 00:08:49,920 Speaker 1: the alternates and then the trial will begin. Some lawyers 143 00:08:50,040 --> 00:08:54,400 Speaker 1: say that cases one or lost in jury selection. Do 144 00:08:54,440 --> 00:08:57,520 Speaker 1: you agree with that, and especially in this case, I 145 00:08:57,559 --> 00:09:00,480 Speaker 1: think it can be lost. But remember, we've seen an 146 00:09:00,520 --> 00:09:03,880 Speaker 1: awful lot of insider trading trials in the Southern District 147 00:09:03,960 --> 00:09:06,920 Speaker 1: of New York and the government hasn't lost warm. So 148 00:09:07,000 --> 00:09:09,360 Speaker 1: it's not that hard to win this kind of case, 149 00:09:09,400 --> 00:09:13,559 Speaker 1: and they're stronger than normal evidence here, Adam. One name 150 00:09:13,600 --> 00:09:17,439 Speaker 1: we we haven't talked about is Carl Icon, who UH 151 00:09:17,880 --> 00:09:20,680 Speaker 1: is also a potential witness in the case. Can you 152 00:09:20,720 --> 00:09:23,439 Speaker 1: just tell us a little bit about his potential connection 153 00:09:23,520 --> 00:09:28,960 Speaker 1: to this trial. So the Icon connection is based on 154 00:09:30,240 --> 00:09:36,680 Speaker 1: trading that Walters had in Clorox, which apparently prompted the 155 00:09:36,880 --> 00:09:42,040 Speaker 1: investigation into UH Walters, and the information would have been 156 00:09:42,080 --> 00:09:48,000 Speaker 1: conveyed through UH Davis. But the main allegations are relating 157 00:09:48,000 --> 00:09:51,240 Speaker 1: to Dean Foods, the company for which Tom Davis was 158 00:09:51,360 --> 00:09:56,600 Speaker 1: the chairman, and Darden Restaurants, where he was involved with 159 00:09:56,640 --> 00:10:00,760 Speaker 1: an investor group that was uh contemp lading, mounting an 160 00:10:00,760 --> 00:10:05,720 Speaker 1: activist campaign. So Icon's connection to the case that's going 161 00:10:05,760 --> 00:10:11,720 Speaker 1: to be presented, uh seems pretty peripheral. And yeah, we 162 00:10:11,760 --> 00:10:15,000 Speaker 1: have again we have about a minute Jack. How important 163 00:10:15,000 --> 00:10:20,040 Speaker 1: are these insider trading cases? Was it pre Barra's emphasis 164 00:10:20,160 --> 00:10:23,240 Speaker 1: on them that that lad to have so many in 165 00:10:23,679 --> 00:10:27,400 Speaker 1: New York? Or are they important enough? And well, of 166 00:10:27,440 --> 00:10:30,200 Speaker 1: course he has jurisdiction over Wall Street and over the 167 00:10:30,200 --> 00:10:32,640 Speaker 1: trading firms, and any trade that goes across the New 168 00:10:32,720 --> 00:10:36,319 Speaker 1: York's doctors change is within his jurisdiction. I think we 169 00:10:36,360 --> 00:10:38,440 Speaker 1: had a lot of them because he found networks and 170 00:10:38,520 --> 00:10:42,640 Speaker 1: he very rigorously and systematically followed the network. It's like 171 00:10:42,679 --> 00:10:45,640 Speaker 1: pulling on a PC yarn and eventually the whole sweater 172 00:10:45,760 --> 00:10:49,160 Speaker 1: unravels and he got all of those people. This case 173 00:10:49,280 --> 00:10:51,760 Speaker 1: is important for a number of reasons. It's actually going 174 00:10:51,800 --> 00:10:56,360 Speaker 1: to significantly change FBI and prosecutorial behavior because the judge 175 00:10:56,480 --> 00:10:59,520 Speaker 1: was very upset, very angry with the leaking that the 176 00:10:59,600 --> 00:11:02,920 Speaker 1: FBI agents did to the major media, including the Times, 177 00:11:02,960 --> 00:11:05,400 Speaker 1: in the Wall Street Journal, and until two weeks ago, 178 00:11:05,679 --> 00:11:07,400 Speaker 1: we didn't know what he was going to dismiss the 179 00:11:07,440 --> 00:11:11,480 Speaker 1: case because of that misconduct. He has instead ruled that 180 00:11:11,600 --> 00:11:15,200 Speaker 1: the government should pursue and investigate and possibly prosecute the 181 00:11:15,280 --> 00:11:17,880 Speaker 1: FBI agent. And I think that means for the future, 182 00:11:18,280 --> 00:11:20,360 Speaker 1: the FBI isn't going to be quite as free and 183 00:11:20,400 --> 00:11:24,160 Speaker 1: easy sharing their files with the major media. So that's 184 00:11:24,160 --> 00:11:27,840 Speaker 1: a change right there. Well, we look forward to talking 185 00:11:27,840 --> 00:11:31,800 Speaker 1: to you both again as this trial progresses. That's John Coffee, 186 00:11:31,840 --> 00:11:35,559 Speaker 1: Professor Columbia University Law School and Adam Pritchard, Professor of 187 00:11:35,640 --> 00:11:37,920 Speaker 1: the University of Michigan Law School.