1 00:00:00,120 --> 00:00:02,320 Speaker 1: Masters in Business is brought to you by the American 2 00:00:02,400 --> 00:00:07,160 Speaker 1: Arbitration Association. Business disputes are inevitable, resolve faster with the 3 00:00:07,200 --> 00:00:12,240 Speaker 1: American Arbitration Association, the global leader in alternative dispute resolution 4 00:00:12,360 --> 00:00:15,800 Speaker 1: for over ninety years. Learn more at a d R 5 00:00:16,160 --> 00:00:22,840 Speaker 1: dot org. This is Masters in Business with Barry Ridholtz 6 00:00:22,960 --> 00:00:28,280 Speaker 1: on Boomberg Radio. This week on the podcast, I bring 7 00:00:28,320 --> 00:00:31,600 Speaker 1: an old friend into the studio. His name is Jesse Eisinger. 8 00:00:31,640 --> 00:00:35,279 Speaker 1: He has worked pretty much everywhere in the world of 9 00:00:35,840 --> 00:00:40,760 Speaker 1: financial journalism. If you are at all curious as to why, 10 00:00:41,120 --> 00:00:46,159 Speaker 1: during the worst financial crisis since the Great Depression, effectively 11 00:00:46,320 --> 00:00:50,880 Speaker 1: nobody was sent to jail, at least nobody of any importance. 12 00:00:50,920 --> 00:00:55,080 Speaker 1: A couple of Burger flippers who were hired to fabricate 13 00:00:55,720 --> 00:01:01,440 Speaker 1: mortgage documents were threatened with prosecution. Handful of mid level 14 00:01:02,320 --> 00:01:06,480 Speaker 1: traders the fabulous fab got finger wagged at him and 15 00:01:06,520 --> 00:01:10,840 Speaker 1: paid a fine. But all of the people responsible for 16 00:01:10,959 --> 00:01:15,360 Speaker 1: an epic collapse in the financial markets and the credit 17 00:01:15,400 --> 00:01:19,759 Speaker 1: markets escaped unscathed. If you're curious as to how that 18 00:01:19,840 --> 00:01:24,160 Speaker 1: came about, then you need to hear Jesse Eisinger's story. 19 00:01:24,640 --> 00:01:30,120 Speaker 1: He is a very thoughtful investigative journalist has won numerous prizes, 20 00:01:30,160 --> 00:01:34,039 Speaker 1: including the Pulitzer. Uh I don't find a whole lot 21 00:01:34,080 --> 00:01:37,039 Speaker 1: to disagree with in his new book, whose title I 22 00:01:37,040 --> 00:01:40,160 Speaker 1: cannot say on the radio, but I can say in 23 00:01:40,160 --> 00:01:43,360 Speaker 1: the podcast, So you get to hear me cuss there 24 00:01:43,440 --> 00:01:47,920 Speaker 1: with no further ado. Here is my conversation with Jesse Eisener. 25 00:01:51,840 --> 00:01:55,080 Speaker 1: My special guest this week is Jesse Eisinger. He is 26 00:01:55,200 --> 00:01:59,200 Speaker 1: currently a reporter for Pro Publica. He began his career 27 00:01:59,320 --> 00:02:03,720 Speaker 1: at the South Pacific Mail in Santiago, Chile. Spent years 28 00:02:03,720 --> 00:02:06,080 Speaker 1: at the Wall Street Journal, where he helped to create 29 00:02:06,560 --> 00:02:09,000 Speaker 1: the Ahead of the Tape column and the Long and 30 00:02:09,080 --> 00:02:12,280 Speaker 1: Short column. I originally know him from his work at 31 00:02:12,320 --> 00:02:15,320 Speaker 1: the Street dot com. He has written for The New 32 00:02:15,400 --> 00:02:18,200 Speaker 1: York Times, Deal Book, The New Yorker, The Atlantic. He 33 00:02:18,360 --> 00:02:22,320 Speaker 1: was the Wall Street editor at Conde nast In He 34 00:02:22,400 --> 00:02:25,960 Speaker 1: won the Lobe Award and he in two thousand eleven 35 00:02:26,000 --> 00:02:30,079 Speaker 1: he won the Pulitzer Prize for national reporting on Questionable 36 00:02:30,120 --> 00:02:33,200 Speaker 1: Wall Street practices. It was notable because it was the 37 00:02:33,240 --> 00:02:39,000 Speaker 1: first ever Pulitzer given for online journalism. He is also 38 00:02:39,120 --> 00:02:42,840 Speaker 1: the author of a book whose name I actually can't say, 39 00:02:42,840 --> 00:02:45,560 Speaker 1: on the air. But we'll give it a we'll give 40 00:02:45,560 --> 00:02:49,240 Speaker 1: it a loose I'll leave one word out, and it's 41 00:02:49,280 --> 00:02:53,560 Speaker 1: called the Chicken Club. Why the Justice Department fails to 42 00:02:53,680 --> 00:02:58,120 Speaker 1: prosecute executives? Jesse Eisinger, Welcome to Bloomberg. Thank you so 43 00:02:58,200 --> 00:03:00,760 Speaker 1: much for having me. I know Jesse for a long time. 44 00:03:00,800 --> 00:03:03,520 Speaker 1: I'm a fan of his work. And there's so many 45 00:03:03,520 --> 00:03:07,040 Speaker 1: fascinating things in this book, which is written pretty much 46 00:03:07,080 --> 00:03:11,359 Speaker 1: in the sweet spot of the world. I inhabit finance, 47 00:03:11,760 --> 00:03:16,000 Speaker 1: legal and bad behavior. Those three then diagrams overlap, and 48 00:03:16,080 --> 00:03:18,960 Speaker 1: this is the book that's the result of it. Let's 49 00:03:19,040 --> 00:03:22,960 Speaker 1: begin where the book pretty much starts out, uh with 50 00:03:23,360 --> 00:03:28,279 Speaker 1: Enron and Arthur Anderson. How significant were those two companies 51 00:03:28,880 --> 00:03:33,040 Speaker 1: to the future lack of prosecution by the SEC and 52 00:03:33,080 --> 00:03:36,680 Speaker 1: the Justice Department? They were crucial, is what my argument is. 53 00:03:36,720 --> 00:03:39,040 Speaker 1: And you know, so I started this book with this puzzle, 54 00:03:39,120 --> 00:03:42,680 Speaker 1: why don't we prosecute top corporate executives anymore? And I 55 00:03:42,720 --> 00:03:45,119 Speaker 1: think it goes beyond just the financial crisis. Of course, 56 00:03:45,160 --> 00:03:47,840 Speaker 1: we all know that no top bankers were put in 57 00:03:47,880 --> 00:03:51,080 Speaker 1: prison for the financial crisis, But I think it started beforehand. 58 00:03:51,120 --> 00:03:55,920 Speaker 1: This problem at the Justice Department, and it persists to today, 59 00:03:55,960 --> 00:04:00,560 Speaker 1: and it goes beyond the banks to industrial companies, retailers, company's, 60 00:04:00,600 --> 00:04:03,800 Speaker 1: pharmaceuticals UM. And so I was trying to figure out 61 00:04:03,800 --> 00:04:08,080 Speaker 1: this puzzle, and I started with Enron because if you remember, 62 00:04:08,120 --> 00:04:10,120 Speaker 1: and of course you do, we were talking at the 63 00:04:10,160 --> 00:04:14,160 Speaker 1: time UM and after the bubble burst, an Aztec bubble burst, 64 00:04:14,600 --> 00:04:17,160 Speaker 1: there were a wave of prosecutions, not just Enron, but 65 00:04:17,279 --> 00:04:22,520 Speaker 1: World Comma, Delphia, Tycho, Global Crossing. Lots of executives did 66 00:04:22,680 --> 00:04:26,280 Speaker 1: some time in the Great Bar, hard exactly, hard time 67 00:04:26,760 --> 00:04:30,120 Speaker 1: in the pokey and so what changed, and really I 68 00:04:30,200 --> 00:04:34,720 Speaker 1: locate this is the beginning the backlash and the problem 69 00:04:35,160 --> 00:04:39,640 Speaker 1: started then in the kind of lobbying effort, a corporate 70 00:04:39,640 --> 00:04:43,080 Speaker 1: and white collar defense bar lobbying effort against what they 71 00:04:43,120 --> 00:04:47,800 Speaker 1: saw as overly zealous prosecutions of Enron and particularly Arthur Anderson. 72 00:04:47,920 --> 00:04:51,800 Speaker 1: They were lobbying Congress, they were lobbying the Bar Association, 73 00:04:51,839 --> 00:04:55,440 Speaker 1: they were lobbying the Judges Association. They pretty much were 74 00:04:55,480 --> 00:04:58,600 Speaker 1: pulling every lever of power the defense bar I'm refined 75 00:04:58,640 --> 00:05:02,160 Speaker 1: to that was possible exactly. And what they were arguing 76 00:05:02,560 --> 00:05:06,320 Speaker 1: was that the prosecutors were overly aggressive, that they had 77 00:05:06,960 --> 00:05:11,279 Speaker 1: um overcharged the executives, particularly of Enron, and I focus 78 00:05:11,320 --> 00:05:14,680 Speaker 1: on en Ron UM and then Arthur Anderson, which was 79 00:05:14,720 --> 00:05:18,200 Speaker 1: the kind of seminal corporate prosecution. So let's talk about 80 00:05:18,400 --> 00:05:22,039 Speaker 1: Anderson a little bit because I find people have consistently 81 00:05:22,120 --> 00:05:27,960 Speaker 1: mischaracterized that period. Let me ask you what killed Arthur Anderson. 82 00:05:28,360 --> 00:05:31,000 Speaker 1: Arthur Anderson killed Arthur Anderson, UM, and we should be 83 00:05:31,080 --> 00:05:34,440 Speaker 1: very clear about that. And UM. One of the big 84 00:05:34,480 --> 00:05:36,760 Speaker 1: goals that I have in the book is to rehabilitate 85 00:05:37,240 --> 00:05:41,520 Speaker 1: the prosecution of Arthur Anderson, because occasionally you do have 86 00:05:41,640 --> 00:05:45,000 Speaker 1: to prosecute companies and put them out of business when 87 00:05:45,040 --> 00:05:49,480 Speaker 1: they are rife with UH fraud, when they are serial 88 00:05:50,440 --> 00:05:55,080 Speaker 1: abusers of the laws, the corporate laws, as what Anderson was. UH. Now, 89 00:05:55,080 --> 00:05:59,880 Speaker 1: what happened with Anderson is that they they destroyed doc 90 00:06:00,040 --> 00:06:03,360 Speaker 1: ms in the Enron We'll back up before we get 91 00:06:03,400 --> 00:06:08,400 Speaker 1: to that. They had gone through a series of snaffos 92 00:06:08,480 --> 00:06:11,919 Speaker 1: where as auditors, they did a terrible job. Companies in 93 00:06:11,920 --> 00:06:15,360 Speaker 1: their charge got away with lots of fraud, and they 94 00:06:15,440 --> 00:06:19,920 Speaker 1: engaged in all these consent decrees where they said, okay, 95 00:06:19,960 --> 00:06:22,840 Speaker 1: you caught us, we promised to do better this time. 96 00:06:22,839 --> 00:06:24,600 Speaker 1: We mean it, We're really not going to do much 97 00:06:24,640 --> 00:06:29,000 Speaker 1: more fraud. And then as soon as Enron went down, 98 00:06:29,640 --> 00:06:33,880 Speaker 1: they began this aggressive policy of hey, we haven't been 99 00:06:33,920 --> 00:06:38,640 Speaker 1: subpoenaed yet. Shread everything exactly. And as Michael Chertoff, who 100 00:06:38,680 --> 00:06:40,440 Speaker 1: was the head of the criminal division at the time, 101 00:06:40,720 --> 00:06:43,599 Speaker 1: says in my book, this wasn't an ice cream company 102 00:06:43,600 --> 00:06:45,919 Speaker 1: that was destroying documents. This is a company that was 103 00:06:46,800 --> 00:06:51,080 Speaker 1: part of its business was legal advice for investigations. Uh. 104 00:06:51,120 --> 00:06:55,040 Speaker 1: And so arguably preserving doctor and right and that means 105 00:06:55,160 --> 00:06:59,040 Speaker 1: not destroying documents and not destroying evidence. What um they 106 00:06:59,040 --> 00:07:01,120 Speaker 1: went on an orgy. You have tons and tons of 107 00:07:01,160 --> 00:07:06,760 Speaker 1: document destruction, but email destruction, and email multiple cities, not 108 00:07:06,920 --> 00:07:10,000 Speaker 1: just one person. Um. So this was a kind of 109 00:07:10,000 --> 00:07:13,000 Speaker 1: system wide thing. But two, in the lead up to 110 00:07:13,320 --> 00:07:17,520 Speaker 1: the crash, the NASDAT crash, there was a pandemic of 111 00:07:17,720 --> 00:07:23,520 Speaker 1: accounting mouthfeasance at in corporate America. And chances are all 112 00:07:23,640 --> 00:07:27,040 Speaker 1: the all the big auditors at the time were guilty. 113 00:07:27,120 --> 00:07:30,160 Speaker 1: But chances were, if you were one of the bigger 114 00:07:30,680 --> 00:07:33,760 Speaker 1: accounting frauds of the era, you were being audited by 115 00:07:33,880 --> 00:07:36,320 Speaker 1: Arthur Anderson. And and to put a little flesh on that, 116 00:07:36,440 --> 00:07:40,840 Speaker 1: people always blame the indictment. But weeks before the indictment, 117 00:07:41,040 --> 00:07:45,600 Speaker 1: lots of but post end Ron bankruptcy, lots of big 118 00:07:45,640 --> 00:07:49,400 Speaker 1: clients were fleeing Arthur Anderson. And then two weeks after 119 00:07:49,480 --> 00:07:53,840 Speaker 1: the indictment, World Calm goes belly up more accounting fraud 120 00:07:53,840 --> 00:07:56,880 Speaker 1: and guess who their auditor was, Exactly just like Enron, 121 00:07:57,040 --> 00:08:00,880 Speaker 1: Arthur Anderson was the auditor for world Com. And so 122 00:08:01,440 --> 00:08:04,920 Speaker 1: I argue that Anderson was going down, and not only that, 123 00:08:05,040 --> 00:08:08,000 Speaker 1: I argue that the partners wanted it to go down, 124 00:08:08,120 --> 00:08:10,560 Speaker 1: wanted it to unwind. Now, this wasn't a corporation, it 125 00:08:10,600 --> 00:08:13,880 Speaker 1: wasn't publicly traded. It was a partnership. And to avoid 126 00:08:14,000 --> 00:08:18,600 Speaker 1: the liability from all the lawsuits, they literally had dozens 127 00:08:18,600 --> 00:08:21,680 Speaker 1: and dozens, maybe over a hundred lawsuits that they were facing, 128 00:08:21,760 --> 00:08:23,960 Speaker 1: and they were going to face more with Arthur with 129 00:08:24,040 --> 00:08:26,800 Speaker 1: World Calm. Um, you know that was it was a 130 00:08:26,800 --> 00:08:31,720 Speaker 1: convenient excuse to say that the indictment caused the uh 131 00:08:31,800 --> 00:08:34,840 Speaker 1: failure of the company. Of course it didn't help um, 132 00:08:34,880 --> 00:08:38,960 Speaker 1: but but you know what my argument is that sometimes 133 00:08:39,080 --> 00:08:43,240 Speaker 1: prosecutors can't worry about that uh that their jobs are 134 00:08:43,240 --> 00:08:46,320 Speaker 1: to do justice. Their jobs are not to cushion the 135 00:08:46,320 --> 00:08:51,160 Speaker 1: blow for failing companies. You write in the book, Today's 136 00:08:51,280 --> 00:08:55,880 Speaker 1: Justice Department has lost the will and indeed the ability 137 00:08:56,360 --> 00:09:02,559 Speaker 1: to go after the highest ranking corporate wrongdoers. Discuss. So 138 00:09:02,679 --> 00:09:06,319 Speaker 1: it has been building since the backlash to Arthur Anderson. 139 00:09:06,559 --> 00:09:09,839 Speaker 1: And what I argue now is that after Anderson, they 140 00:09:09,960 --> 00:09:14,480 Speaker 1: turned to corporate settlements. Uh, and in doing corporate settlements 141 00:09:14,520 --> 00:09:18,960 Speaker 1: deferred prosecution agreements non prosecution agreements. Now, let me stop 142 00:09:18,960 --> 00:09:21,959 Speaker 1: you right there. Deferred prosecution agreement is here's the deal. 143 00:09:22,120 --> 00:09:25,200 Speaker 1: We're gonna have you signed these documentations, and we're not 144 00:09:25,200 --> 00:09:27,360 Speaker 1: going to throw the case out, but we're gonna hold 145 00:09:27,360 --> 00:09:28,760 Speaker 1: it in a byance and if you could be good 146 00:09:28,800 --> 00:09:31,480 Speaker 1: little boys for a year, a year from now, we'll 147 00:09:31,679 --> 00:09:34,520 Speaker 1: we'll toss this out exactly X number of years. We're 148 00:09:34,520 --> 00:09:37,679 Speaker 1: gonna Uh, we we've indicted you, and we can prove 149 00:09:37,679 --> 00:09:40,000 Speaker 1: it in a court of law, they say, but we're 150 00:09:40,040 --> 00:09:43,680 Speaker 1: just gonna put this aside for now, and uh, try 151 00:09:43,760 --> 00:09:47,480 Speaker 1: not to do anything again. Now. Um, there are many 152 00:09:47,520 --> 00:09:50,080 Speaker 1: problems with this. One is that there's no enforcement mechanism. 153 00:09:50,160 --> 00:09:53,679 Speaker 1: Nobody really looks at it. Sometimes they install corporate monitors. 154 00:09:53,720 --> 00:09:57,800 Speaker 1: That's a problem. Problematic solution. Why is that problematic, Well, 155 00:09:58,120 --> 00:10:02,520 Speaker 1: it's problematic because this has become a giant racket for 156 00:10:03,240 --> 00:10:09,000 Speaker 1: big law. UM and big law both likes the settlements. 157 00:10:09,120 --> 00:10:12,160 Speaker 1: They that provides a lot of work for them to 158 00:10:13,000 --> 00:10:19,880 Speaker 1: investigate the corporations. The big law firms like Paul Wise, Deba, Boys, Covington, 159 00:10:19,960 --> 00:10:23,720 Speaker 1: and Burling do these investigations for these companies for their 160 00:10:23,760 --> 00:10:27,520 Speaker 1: corporate clients, um, and then they deliver the results to 161 00:10:27,600 --> 00:10:31,160 Speaker 1: the Department of Justice. The Department of Justice essentially reviews 162 00:10:31,200 --> 00:10:36,559 Speaker 1: it without really looking at um, the conducting the investigation 163 00:10:36,600 --> 00:10:39,560 Speaker 1: in and of itself. You're saying, the d J outsources 164 00:10:39,600 --> 00:10:44,360 Speaker 1: the investigation to the defendants lawyers. Dirty secret of American 165 00:10:44,480 --> 00:10:49,200 Speaker 1: corporate jurisprudence is that we have privatized and outsourced in 166 00:10:49,400 --> 00:10:53,440 Speaker 1: corporate criminal investigations. That's astonished. And not only have we 167 00:10:53,480 --> 00:10:56,360 Speaker 1: done it, we have private privatized and outsourced it to 168 00:10:56,640 --> 00:11:01,560 Speaker 1: the criminals themselves to conduct investigates of themselves, alleged criminal 169 00:11:01,640 --> 00:11:06,319 Speaker 1: alleged criminals, they hire their own attorneys. Their own attorneys 170 00:11:06,360 --> 00:11:10,720 Speaker 1: conduct their investigations. These private law firms then deliver the 171 00:11:10,800 --> 00:11:13,560 Speaker 1: results to the Department of Justice, which reviews them and 172 00:11:13,600 --> 00:11:17,720 Speaker 1: it gets worse because the prosecutors who are reviewing them 173 00:11:18,200 --> 00:11:23,120 Speaker 1: are tend to be people who are job candidates for 174 00:11:23,160 --> 00:11:26,319 Speaker 1: the very law firms that I was about. The investors 175 00:11:26,320 --> 00:11:29,400 Speaker 1: have to ask you, didn't we see after you know, 176 00:11:29,440 --> 00:11:33,400 Speaker 1: the early two thousands, these life for prosecutors who have 177 00:11:33,520 --> 00:11:36,959 Speaker 1: been in d O J and sec and the second Circuit. 178 00:11:37,120 --> 00:11:41,400 Speaker 1: They all end up going when when, to be fair, 179 00:11:41,840 --> 00:11:44,400 Speaker 1: the departments are changing and it's no longer the job 180 00:11:44,480 --> 00:11:47,560 Speaker 1: they loved, but they set a path and they end 181 00:11:47,640 --> 00:11:51,120 Speaker 1: up working at these big firms are very well compensated, 182 00:11:51,679 --> 00:11:56,640 Speaker 1: and that now that path is will trod from from 183 00:11:56,640 --> 00:11:59,960 Speaker 1: the prosecution exactly. The most prestigious offices in the Department 184 00:12:00,080 --> 00:12:02,960 Speaker 1: of Justice, the Southern District of New York, which does 185 00:12:03,360 --> 00:12:06,800 Speaker 1: most of the Wall Street prosecutions and many corporate prosecutions, 186 00:12:06,840 --> 00:12:10,120 Speaker 1: and main Justice down in d c UM those are 187 00:12:10,240 --> 00:12:18,319 Speaker 1: now effectively like post uh juris doctoral um let me 188 00:12:18,320 --> 00:12:24,120 Speaker 1: each other. Those are essentially post doc um. Employment for 189 00:12:24,960 --> 00:12:29,000 Speaker 1: lawyers who are training to become white collar defense work 190 00:12:29,400 --> 00:12:31,800 Speaker 1: wasn't always They're not it is never. It has not 191 00:12:31,920 --> 00:12:35,199 Speaker 1: always been that way. In fact, in the nineteen sixties 192 00:12:35,760 --> 00:12:39,199 Speaker 1: it wasn't that way at all, Uh, these prosecutors did 193 00:12:39,240 --> 00:12:41,800 Speaker 1: not go to these white shoe firms. White shoe firms 194 00:12:41,800 --> 00:12:46,319 Speaker 1: didn't really have this big corporate criminal litigation business. They 195 00:12:46,360 --> 00:12:51,040 Speaker 1: looked down on criminal defense, even white collar criminal defense exactly, 196 00:12:51,200 --> 00:12:53,560 Speaker 1: and so they some of them went into kind of 197 00:12:53,559 --> 00:12:57,439 Speaker 1: transactional work um, which was very different. Um. White collar 198 00:12:57,480 --> 00:13:01,160 Speaker 1: criminal defense was conducted by boutiques. The Department of Justice 199 00:13:01,160 --> 00:13:06,320 Speaker 1: focused on individuals, not on corporate non incorporations, um. And 200 00:13:06,400 --> 00:13:09,920 Speaker 1: so there's been a complete transformation. And what I argue 201 00:13:09,960 --> 00:13:14,640 Speaker 1: in the book is that big Laws approach to how 202 00:13:15,160 --> 00:13:20,760 Speaker 1: it defends corporations has developed alongside and in symbiosis with 203 00:13:20,880 --> 00:13:26,120 Speaker 1: the Department of Justices way that it approaches corporate prosecutions, 204 00:13:26,200 --> 00:13:29,360 Speaker 1: investigations and prosecutions, and they've all sort of influenced each other, 205 00:13:29,360 --> 00:13:31,880 Speaker 1: and there's been this cross pollination. And then they go 206 00:13:31,960 --> 00:13:34,760 Speaker 1: back and forth from the government to the private sector 207 00:13:34,800 --> 00:13:36,600 Speaker 1: and back to the government and back to the private 208 00:13:36,640 --> 00:13:39,360 Speaker 1: sector again. And now it's almost like you know that 209 00:13:39,440 --> 00:13:43,200 Speaker 1: line at the end of Animal Farm where you could 210 00:13:43,200 --> 00:13:46,360 Speaker 1: no longer tell who the government people are and who 211 00:13:46,400 --> 00:13:49,360 Speaker 1: the defense people are, who the pigs are on the 212 00:13:49,360 --> 00:13:51,319 Speaker 1: one side, and who the pigs are on the other side, 213 00:13:51,400 --> 00:13:54,959 Speaker 1: and it's a it's a deeply profoundly troubling and corrupt 214 00:13:54,960 --> 00:13:59,360 Speaker 1: system when it allows corporate malefactors individuals to get off. 215 00:13:59,679 --> 00:14:04,199 Speaker 1: So you you describe in the book how the Department 216 00:14:04,200 --> 00:14:09,959 Speaker 1: of Justice loses the ability to prosecute criminal litigation against 217 00:14:10,040 --> 00:14:14,720 Speaker 1: corporate wrongdoers. Explain that, So what happens is they find 218 00:14:14,760 --> 00:14:17,720 Speaker 1: that these settlements are much easier to reach because they 219 00:14:17,880 --> 00:14:20,200 Speaker 1: the company has to come to the table and negotiate. 220 00:14:20,520 --> 00:14:23,440 Speaker 1: The company says, well, we're just being extorted. We we 221 00:14:23,520 --> 00:14:26,280 Speaker 1: have to pay a fine because, um, the cloud of 222 00:14:26,280 --> 00:14:29,080 Speaker 1: a government investigation is so great, we must resolve this. 223 00:14:29,400 --> 00:14:32,200 Speaker 1: The prosecutor that works and you know there's some validity 224 00:14:32,240 --> 00:14:37,000 Speaker 1: to that, um, And the prosecutor uh then says, well, 225 00:14:37,040 --> 00:14:39,800 Speaker 1: we're gonna find you an enormous amount of money. What 226 00:14:39,920 --> 00:14:44,720 Speaker 1: the prosecutors don't really do anymore is and look at individuals. 227 00:14:44,720 --> 00:14:47,400 Speaker 1: And the point of the Enron investigation, at the point 228 00:14:47,440 --> 00:14:49,880 Speaker 1: of starting the book with the Enron narrative, is that 229 00:14:50,160 --> 00:14:53,720 Speaker 1: they put enormous amount of resources. They devoted an entire 230 00:14:53,840 --> 00:14:57,920 Speaker 1: team to do the that one prosecution individual the Enron 231 00:14:58,000 --> 00:15:00,920 Speaker 1: Task Force, and they essentially lock them in a room 232 00:15:01,280 --> 00:15:04,120 Speaker 1: and made them study the company from the bottom up 233 00:15:04,320 --> 00:15:07,720 Speaker 1: and start indicting lower level people to get to the top, 234 00:15:07,800 --> 00:15:11,160 Speaker 1: just the way you do with a mob family. Um, 235 00:15:11,200 --> 00:15:13,680 Speaker 1: you have to roll the soldiers to get to the 236 00:15:13,720 --> 00:15:17,320 Speaker 1: compos um. That art has really been lost over the 237 00:15:17,400 --> 00:15:20,320 Speaker 1: last fifteen years, and the Department of Justice just does 238 00:15:20,400 --> 00:15:24,160 Speaker 1: not do that anymore. They essentially stop at the middle 239 00:15:24,200 --> 00:15:27,080 Speaker 1: when they prosecuted individuals, and occasionally they do at a 240 00:15:27,120 --> 00:15:32,320 Speaker 1: big bank, they're essentially stopping at the trader who was responsible. 241 00:15:32,360 --> 00:15:34,760 Speaker 1: Sometimes they do a low level trader, sometimes they do 242 00:15:35,120 --> 00:15:37,720 Speaker 1: his or her boss, but they rarely get higher to 243 00:15:37,720 --> 00:15:40,200 Speaker 1: the executive level. You're at the journal for a long time, 244 00:15:40,240 --> 00:15:43,160 Speaker 1: weren't you? Almost seven years you and in fact you 245 00:15:43,280 --> 00:15:46,680 Speaker 1: helped to create the Ahead of the Tape column, which 246 00:15:46,800 --> 00:15:50,560 Speaker 1: just ended. What is that like, a fifteen year run? Yes, 247 00:15:50,720 --> 00:15:53,760 Speaker 1: I was really sad to see a daily column that 248 00:15:53,800 --> 00:15:56,760 Speaker 1: was You went from daily to the Long and Short 249 00:15:57,160 --> 00:16:01,400 Speaker 1: was a weekly. I have written every column, uh known 250 00:16:01,520 --> 00:16:04,160 Speaker 1: to man. I've written a daily, I've written a weekly 251 00:16:04,240 --> 00:16:06,200 Speaker 1: times a week. I've read a weekly, and you went 252 00:16:06,240 --> 00:16:09,240 Speaker 1: to monthly a portfolio. If I do one to decade, 253 00:16:09,320 --> 00:16:12,800 Speaker 1: then then you moved to to pro publico where it's quarterly, 254 00:16:13,400 --> 00:16:15,520 Speaker 1: and now the book is out after a year, so 255 00:16:15,600 --> 00:16:19,560 Speaker 1: it's annual, and soon soon it will be a decile publication. 256 00:16:19,560 --> 00:16:24,760 Speaker 1: I'm trying to convince my edit decade. So so I 257 00:16:24,760 --> 00:16:28,880 Speaker 1: I often ask authors, Hey, what's the inspiration behind the book? 258 00:16:29,320 --> 00:16:32,280 Speaker 1: But with you, I know what the inspiration is because 259 00:16:32,320 --> 00:16:36,440 Speaker 1: the lack of prosecution has been infuriating to all of us, 260 00:16:36,480 --> 00:16:41,160 Speaker 1: either on Wall Street, in finance, in journalism. What was 261 00:16:41,240 --> 00:16:44,840 Speaker 1: the last straw that made you say I really have 262 00:16:44,960 --> 00:16:47,760 Speaker 1: to write a book about this? Well, you know, Uh, 263 00:16:47,880 --> 00:16:50,960 Speaker 1: we wrote about c d O s and the Magnetar 264 00:16:51,040 --> 00:16:57,080 Speaker 1: trade betting against CDOs for your own account all received series. 265 00:16:57,760 --> 00:17:00,600 Speaker 1: That's the series that won the Pultzer, which we were 266 00:17:00,640 --> 00:17:05,399 Speaker 1: really grateful and lucky for. And um, after that, my 267 00:17:05,480 --> 00:17:09,080 Speaker 1: colleagues and I sat around expecting to see some criminal 268 00:17:09,119 --> 00:17:13,280 Speaker 1: investigation and nothing happened. And then we watched that nothing 269 00:17:13,320 --> 00:17:16,960 Speaker 1: happened with Lehman Brothers or a I G Or Bank 270 00:17:17,000 --> 00:17:21,520 Speaker 1: of America or city you know, um, and you know, 271 00:17:21,600 --> 00:17:26,640 Speaker 1: countrywide and it was utterly baffling and an enormous scandal. 272 00:17:26,680 --> 00:17:29,800 Speaker 1: And and this has been plaguing me since then. And 273 00:17:30,600 --> 00:17:33,600 Speaker 1: the economy and our entire body politics, I think so, 274 00:17:33,720 --> 00:17:36,280 Speaker 1: I think it contributed to Trump. It's certainly contributed to 275 00:17:36,320 --> 00:17:39,639 Speaker 1: the rise of the two most potent movements on the 276 00:17:39,720 --> 00:17:42,080 Speaker 1: left and the right, Occupy Wall Street and the Tea Party. 277 00:17:42,720 --> 00:17:45,159 Speaker 1: I think it it undergirds the anger at Trump, and 278 00:17:45,160 --> 00:17:48,840 Speaker 1: it undermined Hillary Clinton and Obama because I think people 279 00:17:48,960 --> 00:17:51,080 Speaker 1: mistrusted them because they thought they were in the pocket 280 00:17:51,080 --> 00:17:56,240 Speaker 1: of Wall Street. Uh for this reason as paramount. So, 281 00:17:56,680 --> 00:17:58,760 Speaker 1: I thought it was one of the great scandals of 282 00:17:58,800 --> 00:18:02,320 Speaker 1: our time, and I thought it really deserved some kind 283 00:18:02,320 --> 00:18:07,240 Speaker 1: of serious accounting that tried to get at the deep, 284 00:18:07,680 --> 00:18:11,800 Speaker 1: fundamental and corrosive aspects um in society. This is not 285 00:18:11,920 --> 00:18:15,320 Speaker 1: an easy problem, and it's not an easy solution, and 286 00:18:15,359 --> 00:18:18,200 Speaker 1: there's not It's not a conspiracy. You know, Tim Geitner 287 00:18:18,280 --> 00:18:21,439 Speaker 1: did not call up Eric Holder and say lay off. 288 00:18:21,480 --> 00:18:25,959 Speaker 1: It's something more troubling, because it's something more pernicious and 289 00:18:26,200 --> 00:18:32,119 Speaker 1: more fundamental. So I have not not so much a conspiracy, 290 00:18:32,160 --> 00:18:39,320 Speaker 1: but I have argued that the greatest innovation of Wall 291 00:18:39,359 --> 00:18:43,920 Speaker 1: Street has not been the A T M or securitization, 292 00:18:44,000 --> 00:18:48,080 Speaker 1: but that it's been convincing the Department of Justice in 293 00:18:48,119 --> 00:18:52,160 Speaker 1: the sec that if you prosecute us, the entire economy 294 00:18:52,240 --> 00:18:56,160 Speaker 1: is coming down, right, all right? So how First of all, 295 00:18:56,520 --> 00:18:59,240 Speaker 1: I have yet to find anything that demonstrates that that's wrong. 296 00:18:59,600 --> 00:19:03,440 Speaker 1: And second you're you're really saying that it's much more 297 00:19:03,600 --> 00:19:07,600 Speaker 1: systemic than that moment. This is something that's taken place 298 00:19:07,960 --> 00:19:10,280 Speaker 1: over a long arc of time. You know, we saw 299 00:19:10,320 --> 00:19:14,240 Speaker 1: it in the financial crisis, most prominently UM. That's when 300 00:19:14,280 --> 00:19:17,480 Speaker 1: it became clear that this was a big problem, but 301 00:19:17,520 --> 00:19:20,720 Speaker 1: it really was building before then. There was no prosecution 302 00:19:20,800 --> 00:19:24,920 Speaker 1: of the backstock option backdating scandal, which was which was huge, 303 00:19:24,960 --> 00:19:27,880 Speaker 1: tremendous paper trail, should have been easy to process, should 304 00:19:27,920 --> 00:19:30,120 Speaker 1: have been much easier to prosecute than it was, which 305 00:19:30,200 --> 00:19:32,640 Speaker 1: raises a question of whether the skill set is there, 306 00:19:32,760 --> 00:19:36,600 Speaker 1: whether the will is there, whether they devote enough resources 307 00:19:36,600 --> 00:19:38,879 Speaker 1: to it. And I don't think that the answer is 308 00:19:39,160 --> 00:19:42,760 Speaker 1: yes to any of those questions and the UM but 309 00:19:42,880 --> 00:19:45,000 Speaker 1: you know it wasn't It's not just the banks. That 310 00:19:45,040 --> 00:19:47,040 Speaker 1: was a wonderful innovation that the bank said were too 311 00:19:47,080 --> 00:19:49,760 Speaker 1: big to jail, too big to fail, and too big 312 00:19:49,800 --> 00:19:53,440 Speaker 1: to jail. But you're seeing this with recidivist pharmaceutical companies. 313 00:19:53,520 --> 00:19:58,320 Speaker 1: Fiser has had has um subsidiary plead guilty to one 314 00:19:58,359 --> 00:20:01,399 Speaker 1: problem and has ad uh A d p A as 315 00:20:01,440 --> 00:20:04,680 Speaker 1: an NP NBA. They'd say, on and on and on. 316 00:20:04,960 --> 00:20:08,199 Speaker 1: You see Walmart getting away with bribery in Mexico that 317 00:20:08,560 --> 00:20:10,280 Speaker 1: the New York Times had them dead to rights with 318 00:20:10,280 --> 00:20:13,960 Speaker 1: all the internal documents. UM we are seeing this across 319 00:20:14,080 --> 00:20:17,760 Speaker 1: the economy and UM so this is impunity at the 320 00:20:17,840 --> 00:20:21,520 Speaker 1: highest level of corporate America. What they do instead is 321 00:20:21,680 --> 00:20:27,080 Speaker 1: prosecute CEOs of smaller companies or that head of a 322 00:20:27,160 --> 00:20:31,160 Speaker 1: hedge fund, raj Rajer Rottenham can be prosecuted because he's 323 00:20:31,200 --> 00:20:35,800 Speaker 1: committed a crime that the prosecutors are comfortable prosecuting, insider trading. 324 00:20:35,840 --> 00:20:38,159 Speaker 1: It's an easy thing to sell to the jury. And 325 00:20:38,240 --> 00:20:41,639 Speaker 1: when UM Galleon goes out of business, it only puts 326 00:20:42,080 --> 00:20:44,840 Speaker 1: five or six or ten or twenty people out of business. 327 00:20:44,920 --> 00:20:48,760 Speaker 1: It's not putting the entire UH thousands, tens of thousands 328 00:20:48,800 --> 00:20:51,919 Speaker 1: of people out of work, and they're terrified. My special 329 00:20:51,960 --> 00:20:55,359 Speaker 1: guest today is Jesse Eisener. He has written for such 330 00:20:55,400 --> 00:20:59,920 Speaker 1: August publications as The Wall Street Journal, The Atlantic, New York, 331 00:21:00,119 --> 00:21:03,560 Speaker 1: The New York Times, etcetera, etcetera. He is currently the 332 00:21:03,600 --> 00:21:07,080 Speaker 1: author of a book whose title I cannot say, but 333 00:21:07,720 --> 00:21:11,680 Speaker 1: we can at least talk about where the title came from. 334 00:21:11,760 --> 00:21:16,760 Speaker 1: So the actual title is the Chicken Blank Club, the 335 00:21:16,880 --> 00:21:20,360 Speaker 1: Justice Department and the failure to prosecute white collar criminal 336 00:21:20,880 --> 00:21:25,000 Speaker 1: blank being a word that George Carlin would appreciate as 337 00:21:25,000 --> 00:21:26,800 Speaker 1: one of the seven words you can't say on TV. 338 00:21:27,640 --> 00:21:30,520 Speaker 1: Tell us about the derivation of the title. Sure, my 339 00:21:30,600 --> 00:21:33,119 Speaker 1: children love the title, which makes my wife really not 340 00:21:33,240 --> 00:21:36,919 Speaker 1: like the title. Um. But and I'm so glad that 341 00:21:36,960 --> 00:21:40,560 Speaker 1: Simon and Schuster went with it. Um. I think they 342 00:21:40,560 --> 00:21:43,439 Speaker 1: went with it because it is actually organic. It is 343 00:21:43,480 --> 00:21:48,320 Speaker 1: a real statement that came from, of all people, Jim Comey, 344 00:21:48,640 --> 00:21:53,119 Speaker 1: who you may remember from such things as the testifying 345 00:21:53,160 --> 00:21:55,240 Speaker 1: in front of the Senate after being fired for being 346 00:21:55,359 --> 00:21:59,680 Speaker 1: FBI director, But fifteen years ago he was the US 347 00:21:59,720 --> 00:22:02,320 Speaker 1: at turn for the Southern District of New York and 348 00:22:02,400 --> 00:22:04,840 Speaker 1: he had just replaced Mary Joe White, and Mary Joe 349 00:22:04,880 --> 00:22:07,960 Speaker 1: White was a legend. Um. And he comes in and 350 00:22:08,040 --> 00:22:12,240 Speaker 1: he gathers everybody together, and uh, they're a little trepidacious 351 00:22:12,240 --> 00:22:15,200 Speaker 1: about him. Um. And they gathers all the criminal prosecutors 352 00:22:15,200 --> 00:22:17,440 Speaker 1: and these guys you have to understand, are the best 353 00:22:17,480 --> 00:22:19,199 Speaker 1: of the best of the best. They've gone to the 354 00:22:19,240 --> 00:22:21,679 Speaker 1: best high schools, to go to the best colleges, to 355 00:22:21,720 --> 00:22:24,280 Speaker 1: get into the best law schools, to perform the best, 356 00:22:24,320 --> 00:22:26,119 Speaker 1: to get to the best clerkships, and then they go 357 00:22:26,400 --> 00:22:30,000 Speaker 1: to the southern district. These are talented and brilliant people, um. 358 00:22:30,480 --> 00:22:33,359 Speaker 1: And they all think of themselves as towns a billion 359 00:22:33,400 --> 00:22:37,240 Speaker 1: people um. And so he gathers them all and he says, 360 00:22:37,320 --> 00:22:40,800 Speaker 1: how many of you have never lost a case? And 361 00:22:41,119 --> 00:22:43,520 Speaker 1: a bunch of hands shoot out very proudly there, you know, 362 00:22:43,640 --> 00:22:46,280 Speaker 1: chest stuff out and he says, so, me and my 363 00:22:46,320 --> 00:22:49,080 Speaker 1: buddies have a name for you. You guys are the 364 00:22:49,160 --> 00:22:53,600 Speaker 1: Chicken expletive Club. And the hands go back down and 365 00:22:53,920 --> 00:22:58,159 Speaker 1: they're sort of sheepish, meaning there's a point here, exactly. 366 00:22:58,240 --> 00:23:02,000 Speaker 1: And the point was you aren't taking ambitious enough cases. 367 00:23:02,119 --> 00:23:06,040 Speaker 1: If you never lose, it means you're only taking easy cases, exactly. 368 00:23:06,080 --> 00:23:09,400 Speaker 1: You're taking the low hanging fruit. And that's not justice. 369 00:23:09,680 --> 00:23:12,439 Speaker 1: You're trying to protect a record. But being a prosecutor 370 00:23:12,680 --> 00:23:15,720 Speaker 1: for the government is not about protecting a record. It's 371 00:23:15,760 --> 00:23:20,280 Speaker 1: not about going when um, you know, going under it. 372 00:23:20,280 --> 00:23:24,159 Speaker 1: It is about doing justice and sometimes doing justice means 373 00:23:24,200 --> 00:23:28,440 Speaker 1: that you take a hard case and present your evidence 374 00:23:28,440 --> 00:23:31,800 Speaker 1: to a jury and then juries are unpredictable, and sometimes 375 00:23:32,000 --> 00:23:34,680 Speaker 1: they go with you and sometimes they don't. But justice 376 00:23:34,680 --> 00:23:40,760 Speaker 1: has been served. That's a really insightful position from someone 377 00:23:40,800 --> 00:23:44,480 Speaker 1: who's the head of a department of prosecutors. Like, we 378 00:23:44,520 --> 00:23:47,480 Speaker 1: don't really know a lot about come me, other than 379 00:23:47,560 --> 00:23:53,200 Speaker 1: the recent news flow, which has been insane. In other words, 380 00:23:53,280 --> 00:23:56,440 Speaker 1: he's a principled guy who's telling them, hey, the hell 381 00:23:56,520 --> 00:24:00,720 Speaker 1: with your record, you have to do justice. Me is principal. 382 00:24:01,080 --> 00:24:03,879 Speaker 1: I agree. I mean he's got um, he's imperfect. I 383 00:24:04,200 --> 00:24:06,639 Speaker 1: have another episode where he really blinks on a corporate 384 00:24:06,640 --> 00:24:10,159 Speaker 1: prosecution of the book about kpmg UM and you know, 385 00:24:10,280 --> 00:24:13,959 Speaker 1: he is a guy who thinks a great deal of himself. Um. 386 00:24:14,000 --> 00:24:17,159 Speaker 1: But it is very it's a very important concept. And 387 00:24:17,200 --> 00:24:21,520 Speaker 1: you don't see leaders of these organizations, um without a 388 00:24:21,560 --> 00:24:24,560 Speaker 1: fear of losing. They're terrified of losing, and they're terrified 389 00:24:24,600 --> 00:24:27,320 Speaker 1: of the humiliation of losing a trial. And you saw 390 00:24:27,359 --> 00:24:30,920 Speaker 1: that with Pre Barrara, who has a great reputation as 391 00:24:30,920 --> 00:24:34,240 Speaker 1: a crusader, especially as the supposed Sheriff of Wall Street. 392 00:24:34,280 --> 00:24:38,480 Speaker 1: But in fact, I think blinked on investigations and prosecutions 393 00:24:38,520 --> 00:24:40,600 Speaker 1: of Wall Street banks and didn't want to take the 394 00:24:40,680 --> 00:24:43,040 Speaker 1: chance he might lose and and damages. He didn't want 395 00:24:43,080 --> 00:24:46,240 Speaker 1: to take the difficult course of doing the tough investigations 396 00:24:46,560 --> 00:24:50,199 Speaker 1: and then didn't want to lose his pristine record and 397 00:24:50,280 --> 00:24:54,840 Speaker 1: to take on, for instance, Stevie Cohene at S A C. Capital, didn't, 398 00:24:54,880 --> 00:24:57,320 Speaker 1: you know, didn't want to take him to trial because 399 00:24:57,560 --> 00:25:00,679 Speaker 1: he was worried he might lose, and that which was tough. Also, 400 00:25:00,840 --> 00:25:02,639 Speaker 1: it was a tough case. But at some point I 401 00:25:03,560 --> 00:25:08,280 Speaker 1: do anything, I think justice requires that you take Stevie 402 00:25:08,320 --> 00:25:10,399 Speaker 1: Cone to trial, and the hard cases, you know, you 403 00:25:10,440 --> 00:25:12,720 Speaker 1: take somebody like Stevie Cone to trial, You present the 404 00:25:12,760 --> 00:25:15,560 Speaker 1: evidence in public, you present the evidence of the jury, 405 00:25:15,600 --> 00:25:20,240 Speaker 1: and if the jury disagrees with you, it's not necessarily humiliation. 406 00:25:20,320 --> 00:25:23,560 Speaker 1: You have been exonerated. And um that is that is 407 00:25:23,920 --> 00:25:25,919 Speaker 1: a bad day at the office. But it should not 408 00:25:26,040 --> 00:25:28,720 Speaker 1: be the overarching goal of the government should not beat 409 00:25:28,760 --> 00:25:31,800 Speaker 1: to win the At the very least, there's a failure 410 00:25:31,880 --> 00:25:35,360 Speaker 1: to supervise case. Although that's more civil than criminal if 411 00:25:35,359 --> 00:25:39,760 Speaker 1: you're talking about capital or just look at what's happened now, 412 00:25:39,880 --> 00:25:42,840 Speaker 1: is they pay a big fine and Stevie Cone continues 413 00:25:42,840 --> 00:25:45,000 Speaker 1: to operate and then you know he's soon going to 414 00:25:45,000 --> 00:25:46,919 Speaker 1: be back in the hedge fund business. Called kind of 415 00:25:47,040 --> 00:25:52,080 Speaker 1: message does this send to him, to any of his employees, 416 00:25:52,119 --> 00:25:55,439 Speaker 1: to any other wrongdo or anybody contemplating a life of 417 00:25:55,440 --> 00:25:58,360 Speaker 1: crime on Wall Street of which there are way too many. Um, 418 00:25:58,480 --> 00:26:01,280 Speaker 1: you know, it sends a terribleness. So you reference KPMG. 419 00:26:01,440 --> 00:26:03,679 Speaker 1: Let's talk about that, because I find that to be 420 00:26:03,720 --> 00:26:09,439 Speaker 1: a fascinating judicial decision, a fascinating case. First tell us 421 00:26:09,440 --> 00:26:12,280 Speaker 1: a little bit about what was going on with KPMG 422 00:26:12,480 --> 00:26:15,960 Speaker 1: that it led to a prosecution. So soon after this 423 00:26:16,080 --> 00:26:19,320 Speaker 1: Arthur Anderson case, as we were talking about, uh, there's 424 00:26:19,440 --> 00:26:22,200 Speaker 1: an investigation at the Southern District of New York into 425 00:26:22,280 --> 00:26:26,400 Speaker 1: KPMG and this was another major auditor and they were 426 00:26:26,440 --> 00:26:31,680 Speaker 1: selling illegal tax shelters to wealthy individuals to help them 427 00:26:31,680 --> 00:26:35,159 Speaker 1: avoid taxes. I R S is the people who refer 428 00:26:35,280 --> 00:26:40,320 Speaker 1: this to arrest, refers to reverse it. There's red um. Yeah, 429 00:26:40,359 --> 00:26:44,840 Speaker 1: there's a big Senate investigation from Carl Levin's group by 430 00:26:44,920 --> 00:26:50,720 Speaker 1: partisan exposing enormous amount of um deeply questionable dealings. This 431 00:26:50,800 --> 00:26:54,640 Speaker 1: should have been there, should have been a relatively easy prosecuted, 432 00:26:54,680 --> 00:27:01,400 Speaker 1: well complicated, but complicated tax stuff but um really serious 433 00:27:01,840 --> 00:27:06,520 Speaker 1: amount billions and billions of dollars in alleged fraud here 434 00:27:06,960 --> 00:27:11,480 Speaker 1: um and lots and lots of paper trail and named partners, 435 00:27:11,600 --> 00:27:16,400 Speaker 1: named individuals, and the Southern District names over a dozen individuals, 436 00:27:16,480 --> 00:27:22,240 Speaker 1: mostly KPMG executives, um. And then what happens is KPMG 437 00:27:22,920 --> 00:27:28,080 Speaker 1: cuts off there um paying for their defense. Now that 438 00:27:28,160 --> 00:27:32,320 Speaker 1: wasn't sue sponsor that was at the urging, Well, it's 439 00:27:32,359 --> 00:27:37,879 Speaker 1: incredibly controversial and um. What later happens, to cut a 440 00:27:37,920 --> 00:27:41,040 Speaker 1: long story short, is that the federal judge and the 441 00:27:41,240 --> 00:27:46,080 Speaker 1: overseeing the case determines that the prosecutors the government has 442 00:27:46,200 --> 00:27:50,600 Speaker 1: forced KPMG to cut off the funding for their these 443 00:27:50,640 --> 00:27:55,160 Speaker 1: executives defense, and he throws out the cases against all 444 00:27:55,160 --> 00:27:59,040 Speaker 1: the individual executives. And he essentially creates out of whole 445 00:27:59,119 --> 00:28:03,800 Speaker 1: cloth a new constitutional right, the right to have the 446 00:28:03,840 --> 00:28:08,080 Speaker 1: best attorney money can buy. If you can afford it, 447 00:28:08,200 --> 00:28:10,840 Speaker 1: or rather, if your company can afford it, then you 448 00:28:10,880 --> 00:28:15,119 Speaker 1: are allowed to have, um, the most expensive attorney in 449 00:28:15,119 --> 00:28:17,840 Speaker 1: the land. Now, I just goes without saying that street 450 00:28:17,880 --> 00:28:21,359 Speaker 1: criminals and public defenders don't have this. Well, hold hold 451 00:28:21,359 --> 00:28:23,359 Speaker 1: that thought a second. So this is Judge Kaplan in 452 00:28:23,400 --> 00:28:25,800 Speaker 1: the Eastern district or the Southern district. Is the Southern 453 00:28:25,800 --> 00:28:28,919 Speaker 1: district still sitting? Yeah, still sitting, as is Raykoff and 454 00:28:28,920 --> 00:28:31,320 Speaker 1: a couple of other judges who are referenced in the 455 00:28:31,359 --> 00:28:38,360 Speaker 1: book giants of of securities litigation and all sorts of Rakoff. 456 00:28:38,480 --> 00:28:43,160 Speaker 1: Certainly right, and and Kaplan himself is well regarded a 457 00:28:43,200 --> 00:28:47,760 Speaker 1: democratic appointee. Um, but came from the world of corporate law. 458 00:28:47,840 --> 00:28:50,360 Speaker 1: But but here's the thing that's so fascinating. And you 459 00:28:50,400 --> 00:28:56,280 Speaker 1: were alleging that there is no right to a near 460 00:28:56,360 --> 00:29:00,600 Speaker 1: infinite set of resources to hire the most expensive attorneys 461 00:29:00,920 --> 00:29:04,000 Speaker 1: in the land, even if you're a corporate executive, even 462 00:29:04,000 --> 00:29:06,240 Speaker 1: though if you've been paid millions of dollars in salary 463 00:29:06,280 --> 00:29:10,360 Speaker 1: and stock options. Why wouldd anyone imagine that you have 464 00:29:10,520 --> 00:29:13,840 Speaker 1: the right to the most expensive council in the world. 465 00:29:14,160 --> 00:29:18,960 Speaker 1: In the book, you show examples that are insane, how criminals, 466 00:29:19,000 --> 00:29:23,360 Speaker 1: how blue collar criminals are routinely denied the right to counsel, 467 00:29:23,840 --> 00:29:27,160 Speaker 1: including a lawyer arrested for dee we on the way 468 00:29:27,200 --> 00:29:30,640 Speaker 1: to trial and the court said no, he's he's fine, 469 00:29:30,880 --> 00:29:34,360 Speaker 1: there was no ineffective assistance counsel just because he's arrested. 470 00:29:34,800 --> 00:29:37,400 Speaker 1: But that was just the most agreed just But there 471 00:29:37,440 --> 00:29:41,720 Speaker 1: are hundreds of examples of non white collar criminals who 472 00:29:41,800 --> 00:29:46,120 Speaker 1: are really prevented the right to UH lawyer, and the 473 00:29:46,160 --> 00:29:49,600 Speaker 1: Supreme Court seems okay with it. Yeah, this is an undercurrent. 474 00:29:49,720 --> 00:29:53,040 Speaker 1: Is just the terrible double standard here between street criminals 475 00:29:53,120 --> 00:29:56,920 Speaker 1: and white collar criminals in in the American jurisprudence. UM. 476 00:29:56,960 --> 00:30:00,720 Speaker 1: But you know, even if you argue you that it 477 00:30:00,840 --> 00:30:04,240 Speaker 1: is UH, it does not sit well with us for 478 00:30:04,440 --> 00:30:08,400 Speaker 1: an employer to cut off the legal defense for wrongdoing, 479 00:30:08,640 --> 00:30:11,360 Speaker 1: especially in the course of doing your job as a journalist. 480 00:30:11,360 --> 00:30:13,840 Speaker 1: I want Pro Publica to pay for my legal defense 481 00:30:13,880 --> 00:30:17,200 Speaker 1: if I'm accused of libel um. Even if we think 482 00:30:17,280 --> 00:30:21,080 Speaker 1: that that was UM questionable and debatable. And I go 483 00:30:21,200 --> 00:30:24,280 Speaker 1: back and forth on the the actual merits of the case. 484 00:30:25,160 --> 00:30:27,760 Speaker 1: One thing is I don't think that the cases needed 485 00:30:27,800 --> 00:30:30,040 Speaker 1: to be thrown out. I think the prosecutions could have 486 00:30:30,080 --> 00:30:34,480 Speaker 1: gone forward against the executives. The second thing is that 487 00:30:34,520 --> 00:30:38,040 Speaker 1: it had had an enormous effect on these guys. The 488 00:30:38,120 --> 00:30:42,240 Speaker 1: prosecutors reluctance to charge individuals So you have Anderson where 489 00:30:42,240 --> 00:30:45,959 Speaker 1: they don't want to indict um any companies. Then you 490 00:30:46,000 --> 00:30:49,240 Speaker 1: have KPMG where after that they're very reluctant to prosecute 491 00:30:49,240 --> 00:30:52,720 Speaker 1: top executives. So what are they left with its settlements 492 00:30:52,920 --> 00:30:55,640 Speaker 1: and these companies get away with paying, writing a check 493 00:30:55,960 --> 00:30:59,240 Speaker 1: and um wiping the slate. To be fair, you can't 494 00:30:59,240 --> 00:31:03,040 Speaker 1: really expect to sitting judge to understand the concept of 495 00:31:03,640 --> 00:31:07,760 Speaker 1: judicial precedent when decision. I mean, he would actually have 496 00:31:07,920 --> 00:31:10,360 Speaker 1: to be oh eight, he was a sitting judge. Isn't 497 00:31:10,360 --> 00:31:13,200 Speaker 1: that what he Isn't that what case law? He was 498 00:31:13,320 --> 00:31:16,200 Speaker 1: very proud. He had his wife come to that to 499 00:31:16,280 --> 00:31:18,320 Speaker 1: watch when he read the ruling. I mean, this is 500 00:31:18,360 --> 00:31:21,320 Speaker 1: one of what he viewsed as one of his crowning achievements. 501 00:31:21,640 --> 00:31:24,560 Speaker 1: We have been speaking with Jesse Eiinger. He is the 502 00:31:24,640 --> 00:31:27,440 Speaker 1: author of the new book The Let's Call It the 503 00:31:27,520 --> 00:31:31,960 Speaker 1: Chicken Club, about the Justice Department's failue to prosecute white 504 00:31:31,960 --> 00:31:35,080 Speaker 1: collar criminals. Check out my daily column. You can find 505 00:31:35,080 --> 00:31:38,560 Speaker 1: that on Bloomberg view dot com. Follow me on Twitter 506 00:31:39,000 --> 00:31:42,920 Speaker 1: at rid Halts. We love your comments, feedback and suggestions 507 00:31:43,520 --> 00:31:46,920 Speaker 1: right to us at m IB podcast at Bloomberg dot net. 508 00:31:47,440 --> 00:31:50,080 Speaker 1: I'm Barry rid Halts. You've been listening to Masters in 509 00:31:50,120 --> 00:32:05,240 Speaker 1: Business on Bloomberg Radio. If you're having a business dispute, 510 00:32:05,280 --> 00:32:08,400 Speaker 1: the process can be slow and drawn out, especially if 511 00:32:08,400 --> 00:32:11,080 Speaker 1: you rely on litigation in the courts. You can wait 512 00:32:11,080 --> 00:32:13,760 Speaker 1: for years before your case is resolved, and the longer 513 00:32:13,800 --> 00:32:17,280 Speaker 1: your case proceeds, the more your case can cost. Not 514 00:32:17,360 --> 00:32:21,680 Speaker 1: with the American Arbitration Association. Arbitration or mediation with the 515 00:32:21,720 --> 00:32:26,160 Speaker 1: American Arbitration Association is faster. In fact, nearly fifty of 516 00:32:26,160 --> 00:32:29,520 Speaker 1: our cases settled prior to hearings. A d r dot 517 00:32:29,640 --> 00:32:37,120 Speaker 1: org resolve faster. Welcome to the podcast, Jesse. Thank you 518 00:32:37,160 --> 00:32:39,120 Speaker 1: so much for doing this. I've been looking forward to this, 519 00:32:39,320 --> 00:32:42,360 Speaker 1: I have to This has been great. Like eighty pages 520 00:32:42,440 --> 00:32:44,520 Speaker 1: left in the book. I was plowing through it the 521 00:32:44,560 --> 00:32:47,760 Speaker 1: past week and there are there are things in it 522 00:32:47,880 --> 00:32:51,480 Speaker 1: that are just infuriating. Good. You're good. I don't know 523 00:32:51,520 --> 00:32:56,240 Speaker 1: if that was your Absolutely indeed, is to make people 524 00:32:56,240 --> 00:33:00,920 Speaker 1: outread the The assistance of council stuff is just insane. 525 00:33:01,440 --> 00:33:05,080 Speaker 1: That it's more than a double standard. It's if you're 526 00:33:05,240 --> 00:33:11,360 Speaker 1: poor and probably of color or lower income, lower economic strata. Hey, 527 00:33:11,400 --> 00:33:13,560 Speaker 1: you should have thought about that. Before you committed the crime. 528 00:33:13,640 --> 00:33:16,920 Speaker 1: You know the lawyer got a plan ahead. But if 529 00:33:16,920 --> 00:33:19,240 Speaker 1: you're wealthy, if you're a white collar criminal, well you 530 00:33:19,320 --> 00:33:21,720 Speaker 1: planned ahead and you worked for a big company, and 531 00:33:21,800 --> 00:33:25,880 Speaker 1: they could certainly pay for your your lawyer no matter 532 00:33:25,920 --> 00:33:30,040 Speaker 1: what it costs. That's what the constitution guarantees. Not only that, 533 00:33:30,080 --> 00:33:33,400 Speaker 1: but the courtesy afforded these lawyers. So what happens is 534 00:33:33,920 --> 00:33:37,600 Speaker 1: you get Um, if you're the subject of an investigation, 535 00:33:37,680 --> 00:33:40,800 Speaker 1: the target of an investigation, you never see a prosecutor. 536 00:33:40,920 --> 00:33:45,360 Speaker 1: You They bring your lawyer in for a light series 537 00:33:45,400 --> 00:33:49,480 Speaker 1: of conversations about what their evidence is, what your defense 538 00:33:49,600 --> 00:33:54,000 Speaker 1: might be. Um, there's an enormous number of uh fights 539 00:33:54,160 --> 00:33:57,840 Speaker 1: over what you have to produce in discovery. The public 540 00:33:57,920 --> 00:34:01,600 Speaker 1: never sees any of this. Uh. You are treated with 541 00:34:01,800 --> 00:34:07,640 Speaker 1: the utmost grace and respect and polly tests. UM. Suffice 542 00:34:07,640 --> 00:34:10,560 Speaker 1: it to say, street criminals don't quite get now. Didn't 543 00:34:10,600 --> 00:34:14,480 Speaker 1: people like Spitzer and Giuliani start the frog march? They 544 00:34:14,520 --> 00:34:18,680 Speaker 1: would walk into a place, blue jackets with the windbreakers 545 00:34:18,680 --> 00:34:21,480 Speaker 1: with FBI or d e A or whatever on the back, 546 00:34:21,520 --> 00:34:25,040 Speaker 1: and they would grab whoever, put him in handcuffs and 547 00:34:25,239 --> 00:34:28,200 Speaker 1: march him out with what a coincidence. There's all the 548 00:34:28,239 --> 00:34:31,279 Speaker 1: media waiting with TV and and so occasionally you get 549 00:34:31,320 --> 00:34:35,799 Speaker 1: a prosecutor with UM ambitions not to go into big 550 00:34:35,840 --> 00:34:39,319 Speaker 1: white whoo firms UM, and so they you know, they 551 00:34:39,640 --> 00:34:42,359 Speaker 1: rea havoc UM and they kind of do their jobs. 552 00:34:42,400 --> 00:34:46,480 Speaker 1: I think Giuliani, after before being a kind of UM 553 00:34:46,520 --> 00:34:52,840 Speaker 1: overly uh cruel and not particularly competent mayor was UM 554 00:34:53,280 --> 00:34:56,680 Speaker 1: was an aggressive prosecutor, but there was an enormous backlash 555 00:34:56,719 --> 00:35:00,799 Speaker 1: after him. UM. The courts then, odd enough, kind of 556 00:35:00,880 --> 00:35:03,719 Speaker 1: take it on themselves. They see their role as to 557 00:35:03,840 --> 00:35:08,279 Speaker 1: correct overly zealous prosecutors. UM. Not in street criminals, where 558 00:35:08,280 --> 00:35:11,319 Speaker 1: they're often affirming them, but in corporate arena and white 559 00:35:11,320 --> 00:35:14,680 Speaker 1: college criminals they can get their backs up exactly. You know. 560 00:35:14,840 --> 00:35:16,920 Speaker 1: It's it's you don't relate to the crackhead, you don't 561 00:35:16,960 --> 00:35:20,040 Speaker 1: relate to the guy stealing whatever ten bucks. If you're 562 00:35:20,040 --> 00:35:23,120 Speaker 1: a judge who's gone to college law school and you 563 00:35:23,160 --> 00:35:25,400 Speaker 1: live in suburban I mean there is a lot of 564 00:35:25,760 --> 00:35:30,320 Speaker 1: elite affinity. I think, UM that kind of undergirds both 565 00:35:30,360 --> 00:35:34,040 Speaker 1: the prosecutions. The prosecutors are from the same schools, and 566 00:35:34,080 --> 00:35:37,719 Speaker 1: they when they're prosecuting these people they're either prosecuting their 567 00:35:37,840 --> 00:35:40,319 Speaker 1: um their peers or their parents and their peers, and 568 00:35:40,400 --> 00:35:43,200 Speaker 1: they're the parents of their peers are being defended by 569 00:35:43,280 --> 00:35:47,000 Speaker 1: their boss's former boss. Um. This is just this whole 570 00:35:47,040 --> 00:35:49,440 Speaker 1: milieu that they're in. The judges come from it. If 571 00:35:49,480 --> 00:35:52,400 Speaker 1: we talked about Louis Kaplan in the Southern District earlier, 572 00:35:52,560 --> 00:35:55,680 Speaker 1: he was a Paul Weiss partner UM. And so you 573 00:35:55,719 --> 00:35:59,440 Speaker 1: know when he says he's looking at um the prosecutors 574 00:35:59,480 --> 00:36:03,600 Speaker 1: cutting off the defense funding from top law firms and 575 00:36:03,680 --> 00:36:07,600 Speaker 1: top lawyers, yea, he thinks, like, you guys, this is 576 00:36:07,640 --> 00:36:10,040 Speaker 1: just not done or I don't know what he's thinking, 577 00:36:10,080 --> 00:36:12,719 Speaker 1: but you know this, it's you can read into that 578 00:36:13,080 --> 00:36:16,080 Speaker 1: this is improper. He says, we do not do this 579 00:36:16,160 --> 00:36:19,320 Speaker 1: in this country. You use the example of Bill Bennett, 580 00:36:19,880 --> 00:36:22,319 Speaker 1: who was came out of was it the Bush or 581 00:36:22,320 --> 00:36:25,840 Speaker 1: the Reagan White House? Bob Bennett, Yeah, yeah, Bob Bennett, 582 00:36:25,920 --> 00:36:31,719 Speaker 1: the who brother William Bennett, who was the he is um. Uh. 583 00:36:31,800 --> 00:36:35,239 Speaker 1: You know, he's President Clinton's personal lawyer, UM, and he 584 00:36:35,320 --> 00:36:39,240 Speaker 1: negotiates on behalf of KPMG. They get a power lawyer 585 00:36:39,280 --> 00:36:43,799 Speaker 1: and he's incredibly savvage and he's not just a courtroom litigator. 586 00:36:43,920 --> 00:36:46,960 Speaker 1: He's a guy in the holes of power in the 587 00:36:46,960 --> 00:36:50,439 Speaker 1: White House. In Congress, he is they're mixing it up 588 00:36:51,040 --> 00:36:54,560 Speaker 1: with oh, with the head of the Appropriations Committee who 589 00:36:54,640 --> 00:36:56,959 Speaker 1: calls the Justice Department and says, we're having a little 590 00:36:56,960 --> 00:37:00,960 Speaker 1: bit of problem funding your agents exactly. And what he 591 00:37:01,040 --> 00:37:04,760 Speaker 1: what he does Southern District. Well, when the Southern District 592 00:37:04,920 --> 00:37:09,320 Speaker 1: is prosecuting KPMG, they keep issuing ultimatums to him, and 593 00:37:09,360 --> 00:37:12,120 Speaker 1: he keeps saying, okay, okay. What what he's really doing 594 00:37:12,280 --> 00:37:15,200 Speaker 1: is he's gone right to the top of the Bush 595 00:37:15,239 --> 00:37:19,319 Speaker 1: administration Department of Justice, right to the Attorney General, and 596 00:37:19,400 --> 00:37:22,000 Speaker 1: right to the Deputy Attorney General, who by this time 597 00:37:22,239 --> 00:37:26,960 Speaker 1: is none other than Jim Comey. And Jim Comey calls 598 00:37:27,400 --> 00:37:30,080 Speaker 1: down to the calls up to the Southern District U S. 599 00:37:30,120 --> 00:37:33,640 Speaker 1: Attorney at the time and says, you guys have to 600 00:37:33,800 --> 00:37:37,640 Speaker 1: you can indict KPMG. You have to post try to 601 00:37:37,680 --> 00:37:40,960 Speaker 1: post Arthur Anderson, um, you know. And it's unsaid that 602 00:37:41,040 --> 00:37:43,760 Speaker 1: we don't want this. It's unsaid that we are worried 603 00:37:43,760 --> 00:37:46,520 Speaker 1: about what having another Anderson on our did he say 604 00:37:46,800 --> 00:37:50,520 Speaker 1: you have to lay off this Russia investigation effectively what 605 00:37:50,640 --> 00:37:53,600 Speaker 1: he says the cloud. Um, no, he's found a spine 606 00:37:53,840 --> 00:37:57,279 Speaker 1: uh in this administration. Exactly. When it comes to that 607 00:37:57,360 --> 00:38:00,360 Speaker 1: kind of thing, they do better than corporate press ecusions. 608 00:38:00,360 --> 00:38:03,160 Speaker 1: I gotta say, Um, well, you know, I think that 609 00:38:03,440 --> 00:38:06,279 Speaker 1: this elite affinity does not plague them when it comes 610 00:38:06,320 --> 00:38:10,520 Speaker 1: to corrupt politicians. They look at somebody like look at Preparara. 611 00:38:10,800 --> 00:38:14,399 Speaker 1: When he looks at Sheldon Silver or Dean Skelos, these 612 00:38:14,480 --> 00:38:20,200 Speaker 1: top New York State politicians, he sees them as scummy. 613 00:38:20,400 --> 00:38:22,719 Speaker 1: And I weren't afraid to go and I didn't go, 614 00:38:23,080 --> 00:38:25,480 Speaker 1: you know, And I think it helps that you know 615 00:38:25,600 --> 00:38:28,640 Speaker 1: that it outrages them. I think that these people are moral. Um, 616 00:38:28,680 --> 00:38:31,720 Speaker 1: but you know that they didn't go to the same schools, 617 00:38:31,760 --> 00:38:34,319 Speaker 1: and they didn't aren't at the same law firms. You know, 618 00:38:34,600 --> 00:38:38,440 Speaker 1: Sheldon Silver was a kind of two bit plaintiff's lawyer 619 00:38:38,840 --> 00:38:42,560 Speaker 1: and so Um. They have a very different attitude to 620 00:38:42,640 --> 00:38:46,279 Speaker 1: those people than they do to a Lloyd Blankfind or 621 00:38:46,280 --> 00:38:50,160 Speaker 1: a Jamie Diamond. Um, they treat them with much greater respect. 622 00:38:50,560 --> 00:38:53,160 Speaker 1: And to be fair, Lad Blankfind and Jamie Diamond have 623 00:38:53,239 --> 00:38:57,520 Speaker 1: not been accused of any undoing, any wrongdoing. Yeah, exactly, 624 00:38:57,560 --> 00:39:00,560 Speaker 1: I'm just saying that they in this kind treat get 625 00:39:00,600 --> 00:39:05,160 Speaker 1: the kind of respectful treatment Steve Jobs got enormously respectful. 626 00:39:06,960 --> 00:39:09,560 Speaker 1: Do you despite the stock option back dating, but despite 627 00:39:10,120 --> 00:39:15,239 Speaker 1: being dead to rights on a collusion over engineer salaries? 628 00:39:15,320 --> 00:39:19,480 Speaker 1: Do you remember that Google things that people have gone 629 00:39:19,480 --> 00:39:22,680 Speaker 1: to prison for UM And that's a recent development, only 630 00:39:22,680 --> 00:39:26,160 Speaker 1: in the past. Well, so there's never been a golden 631 00:39:26,200 --> 00:39:29,439 Speaker 1: age where the rich and powerful really had to fear 632 00:39:29,480 --> 00:39:31,920 Speaker 1: for the liberty if they stepped over the line. But 633 00:39:32,200 --> 00:39:34,240 Speaker 1: as I say in the book, there have been silver ages. 634 00:39:34,320 --> 00:39:37,200 Speaker 1: There have been better period. So we had Mortgage in 635 00:39:37,280 --> 00:39:41,360 Speaker 1: the sixties UM and Bob Fisk in the seventies DO 636 00:39:41,640 --> 00:39:46,400 Speaker 1: focusing on individuals taking on high level corporations UM. And 637 00:39:46,440 --> 00:39:49,520 Speaker 1: then we had Juliani, we had the end round world, 638 00:39:49,520 --> 00:39:54,960 Speaker 1: come a Delphia prosecutions. Now we are in a terrible crisis. 639 00:39:55,040 --> 00:39:57,840 Speaker 1: So if you if you want to commit widespread fraud, 640 00:39:58,680 --> 00:40:01,640 Speaker 1: don't be a Bernie Maid. Don't open a small hedge fund, 641 00:40:02,239 --> 00:40:05,279 Speaker 1: run a big bank, Run a big, big corporation, and 642 00:40:05,320 --> 00:40:08,480 Speaker 1: you're pretty much bulletproof. UM. Wann't run a big corporation. 643 00:40:08,560 --> 00:40:13,520 Speaker 1: Surround yourself with UM compliance officers, lawyers, UM, don't ask 644 00:40:13,560 --> 00:40:16,040 Speaker 1: too many questions about a division that is making too 645 00:40:16,120 --> 00:40:23,080 Speaker 1: much money. UM, be studiously incurious, UM studiously incurious. That's 646 00:40:23,080 --> 00:40:25,719 Speaker 1: a that's a title to the book that we can 647 00:40:25,719 --> 00:40:29,120 Speaker 1: actually say on the radio. There you go, studily studiously 648 00:40:29,239 --> 00:40:34,440 Speaker 1: incurious when you want to investigate, UM, the wrongdoing at 649 00:40:34,440 --> 00:40:37,120 Speaker 1: your company. Higher a firm that is also a law 650 00:40:37,160 --> 00:40:41,600 Speaker 1: firm that is also incurious enough not to ask questions 651 00:40:41,600 --> 00:40:44,120 Speaker 1: of things that will lead them the investigation to the 652 00:40:44,160 --> 00:40:46,520 Speaker 1: c suite or the board. So you reference in the 653 00:40:46,600 --> 00:40:52,200 Speaker 1: book the ability of accountant firms and law firms to 654 00:40:52,480 --> 00:40:57,840 Speaker 1: provide cover for what's pretty obvious frauds and pretty obvious 655 00:40:58,600 --> 00:41:06,400 Speaker 1: UM studious in curiosity. How significant are those organizations to 656 00:41:06,520 --> 00:41:11,040 Speaker 1: the institutionalization of fraud. Well, we talked about it earlier 657 00:41:11,080 --> 00:41:14,560 Speaker 1: that UM. The law firms are key to this now 658 00:41:15,040 --> 00:41:18,839 Speaker 1: because they conduct the internal investigations and the prosecutors don't 659 00:41:18,880 --> 00:41:22,919 Speaker 1: do it, especially if it's something like oversees wrongdoing. UM. 660 00:41:23,000 --> 00:41:27,200 Speaker 1: The Department of Justice thinks that it cannot prosecute UM 661 00:41:27,280 --> 00:41:31,880 Speaker 1: Foreign Corrupt Practices Act bribery UH, because they can't what 662 00:41:32,239 --> 00:41:34,160 Speaker 1: it's a lot that they It's not that they can't 663 00:41:34,160 --> 00:41:37,279 Speaker 1: prosecute it's that they can't investigate it um and so 664 00:41:37,360 --> 00:41:40,480 Speaker 1: they outsource the investigations to companies and they say, what, 665 00:41:40,640 --> 00:41:43,400 Speaker 1: you know, just think of the resources that we would 666 00:41:43,400 --> 00:41:46,000 Speaker 1: need to do that. And my answer is, if you 667 00:41:46,040 --> 00:41:49,600 Speaker 1: don't have the resources to sufficiently prosecute something, focus on 668 00:41:49,719 --> 00:41:52,919 Speaker 1: things that you can prosecute or get the resources. It's 669 00:41:52,960 --> 00:41:55,799 Speaker 1: not an excuse to just say our jobs are hard 670 00:41:55,920 --> 00:41:57,879 Speaker 1: or we don't have the money. We don't. I mean, 671 00:41:57,960 --> 00:42:01,200 Speaker 1: what do we gotta what do we gotta o J for? Right? 672 00:42:01,280 --> 00:42:03,960 Speaker 1: That's exactly right. It's you know, one of the things 673 00:42:04,000 --> 00:42:06,360 Speaker 1: that I was thinking about when I was reading the 674 00:42:06,400 --> 00:42:10,000 Speaker 1: book was it wasn't just the lawyers, it was the accountants. 675 00:42:10,520 --> 00:42:14,799 Speaker 1: And one of the parallel developments over the lack of 676 00:42:15,200 --> 00:42:21,000 Speaker 1: accountability for corporate executives including accountants, lawyers, orders, etcetera. I 677 00:42:21,000 --> 00:42:24,640 Speaker 1: don't think it's a coincidence that as there's been less 678 00:42:25,120 --> 00:42:29,760 Speaker 1: prosecutions of wrongdoing and the accounting rules have gotten squish 679 00:42:29,840 --> 00:42:33,880 Speaker 1: year and squish ear with who can really rely on 680 00:42:33,880 --> 00:42:39,799 Speaker 1: on corporate statements anymore, simultaneous to the huge rise of indexing, 681 00:42:40,280 --> 00:42:43,880 Speaker 1: that people have kind of reached the conclusion, hey listen, 682 00:42:43,920 --> 00:42:47,200 Speaker 1: I can't tell what earnings legitimately are. How can I 683 00:42:47,200 --> 00:42:49,759 Speaker 1: be a value investor if these are all nonsense? So 684 00:42:49,800 --> 00:42:51,440 Speaker 1: I might as well just buy the whole market and 685 00:42:51,440 --> 00:42:53,279 Speaker 1: hope for the best. Yeah, I think that's true. And 686 00:42:53,400 --> 00:42:57,000 Speaker 1: I UM, if you look at the ai G investigation, 687 00:42:57,040 --> 00:42:59,560 Speaker 1: and I go through a series of A I G 688 00:43:00,200 --> 00:43:03,879 Speaker 1: doings and investigations in the book, um, the last one 689 00:43:03,960 --> 00:43:06,560 Speaker 1: where they blew up on the CDs market and the 690 00:43:06,560 --> 00:43:11,640 Speaker 1: mortgage market. Um, sort of pivots on a very arcane, 691 00:43:11,840 --> 00:43:15,839 Speaker 1: little handwritten note in the margins from the auditors at 692 00:43:15,880 --> 00:43:19,120 Speaker 1: p WC and the higher ups that the Department of 693 00:43:19,160 --> 00:43:22,400 Speaker 1: Justice are so shaken by the existence of this note 694 00:43:22,480 --> 00:43:26,880 Speaker 1: that seems to suggest that PwC partners had some knowledge 695 00:43:26,920 --> 00:43:29,279 Speaker 1: of this, that they put the kai bosh on the 696 00:43:29,280 --> 00:43:32,839 Speaker 1: whole indictment, the whole investigation, so that it's so. In 697 00:43:32,840 --> 00:43:35,600 Speaker 1: other words, we found in this year that senior people 698 00:43:35,680 --> 00:43:39,760 Speaker 1: knew about this. We better not yeah exactly, instead of saying, 699 00:43:40,000 --> 00:43:43,520 Speaker 1: my god, if the PwC people knew about this, maybe uh, 700 00:43:43,680 --> 00:43:46,359 Speaker 1: maybe things were worse. Maybe we need to go higher up, 701 00:43:46,440 --> 00:43:48,320 Speaker 1: Maybe we need to prosecute more. Maybe we need to 702 00:43:48,360 --> 00:43:51,839 Speaker 1: put a lot of pressure on the auditors what the 703 00:43:51,880 --> 00:43:54,839 Speaker 1: innovation in the seventies from the Southern District and from 704 00:43:54,840 --> 00:43:57,959 Speaker 1: the SEC. UM. And I cover this in the book 705 00:43:58,000 --> 00:44:01,200 Speaker 1: Stanley Sporkin sort of the father of an enforcement UM. 706 00:44:01,239 --> 00:44:04,600 Speaker 1: At the SEC they put pressure on the auditors and 707 00:44:04,640 --> 00:44:08,279 Speaker 1: the lawyers. They put pressure on the enablers UM. He 708 00:44:08,400 --> 00:44:12,640 Speaker 1: calls them the gatekeepers UM. And the problem is that 709 00:44:12,680 --> 00:44:15,120 Speaker 1: we don't do that anymore. We don't put pressure on 710 00:44:15,160 --> 00:44:17,359 Speaker 1: the lawyers, and we don't put pressure on the lawyers 711 00:44:17,400 --> 00:44:21,080 Speaker 1: and the auditors to lesser extent, but the lawyers especially UM. 712 00:44:21,320 --> 00:44:23,279 Speaker 1: One of the big problems is that these guys want 713 00:44:23,320 --> 00:44:27,600 Speaker 1: to go become corporate lawyers and make two five eight 714 00:44:27,640 --> 00:44:31,200 Speaker 1: million dollars a year. So the revolving door is this 715 00:44:31,560 --> 00:44:36,480 Speaker 1: perennially corrosive um aspect of this whole thing. Before I 716 00:44:36,520 --> 00:44:39,920 Speaker 1: get to my favorite questions, I have to at least 717 00:44:40,719 --> 00:44:44,759 Speaker 1: during the podcast make reference to the actual title of 718 00:44:44,800 --> 00:44:49,200 Speaker 1: the book, and hopefully, hopefully this will make through one bleeped. 719 00:44:49,560 --> 00:44:53,400 Speaker 1: This is, by the way, published by Shimon Simon and 720 00:44:53,440 --> 00:44:59,719 Speaker 1: Schuster coming out the Chicken Ship Club, the Justice Department 721 00:44:59,760 --> 00:45:03,840 Speaker 1: and failure to prosecute white collar criminals, and the phrase 722 00:45:03,960 --> 00:45:07,600 Speaker 1: chicken ship club comes from the speech by Jim Comey. 723 00:45:07,680 --> 00:45:10,480 Speaker 1: That's pretty much how you managed to get Simon and 724 00:45:10,520 --> 00:45:16,120 Speaker 1: Schuster say that. That's astonishing. What was that? What was 725 00:45:16,760 --> 00:45:19,840 Speaker 1: by the way, I have this fantasy about The Big Short. 726 00:45:20,840 --> 00:45:24,560 Speaker 1: There's a line in it from I forgot who uh 727 00:45:24,640 --> 00:45:29,000 Speaker 1: in the book says the line um, but the line 728 00:45:29,080 --> 00:45:33,080 Speaker 1: is the poor And I just have this picture of 729 00:45:33,320 --> 00:45:36,600 Speaker 1: Michael Lewis arguing, no, no, no, the Big Short is 730 00:45:36,600 --> 00:45:39,000 Speaker 1: a subtitle. The Poor is the name of the book, 731 00:45:39,440 --> 00:45:41,319 Speaker 1: and it's a quote because this guy said it. And 732 00:45:41,480 --> 00:45:45,480 Speaker 1: obviously that doesn't happen. But the S word seems less 733 00:45:45,480 --> 00:45:48,960 Speaker 1: offensive than the F word these days, for sure. So 734 00:45:49,040 --> 00:45:51,319 Speaker 1: what was the pushback like? And by the way, everything 735 00:45:51,400 --> 00:45:54,080 Speaker 1: I just said, I'm sure we'll get But what was 736 00:45:54,160 --> 00:45:57,719 Speaker 1: the pushback like to the name? Even though there was 737 00:45:58,320 --> 00:46:01,560 Speaker 1: I kept waiting for it and it never materialized. I 738 00:46:01,560 --> 00:46:04,919 Speaker 1: think Simon and Schuster, you know, I think the book 739 00:46:05,080 --> 00:46:08,200 Speaker 1: their adults also the book business and stuff these days, 740 00:46:08,200 --> 00:46:11,440 Speaker 1: and you gotta get people's den and somehow it's it's clickworthy. 741 00:46:11,480 --> 00:46:14,520 Speaker 1: It's a little buzz buzz. Yeah. So you know, my 742 00:46:14,560 --> 00:46:17,120 Speaker 1: wife sort of feels like it's a little crude. She's 743 00:46:17,160 --> 00:46:20,880 Speaker 1: like something a little bit more refined. Um, I felt like, look, 744 00:46:21,040 --> 00:46:24,760 Speaker 1: this is this is really encapsulates it and it also 745 00:46:25,040 --> 00:46:26,960 Speaker 1: is you know, I couldn't come up with it on 746 00:46:26,960 --> 00:46:29,560 Speaker 1: my own. It came from Jim Comey. He really said it, 747 00:46:30,120 --> 00:46:32,799 Speaker 1: and you get suddenly he's in the news and talk 748 00:46:32,840 --> 00:46:35,880 Speaker 1: about you know, I really I was worried when his 749 00:46:36,000 --> 00:46:41,360 Speaker 1: reputation sank in the election with the Hillary intervention of 750 00:46:41,480 --> 00:46:44,040 Speaker 1: the campaign, and everybody thought were so, you know, on 751 00:46:44,160 --> 00:46:47,280 Speaker 1: the left, we're so angry about Hillary. Now he's revived. 752 00:46:47,640 --> 00:46:50,600 Speaker 1: That's all good for the So so let's jump over 753 00:46:50,600 --> 00:46:53,640 Speaker 1: to my favorite ten questions, and this is sort of, 754 00:46:55,160 --> 00:46:58,960 Speaker 1: um tell us. One important thing people don't know about 755 00:46:59,000 --> 00:47:04,080 Speaker 1: your background? Oh man, Um well, uh, I have no 756 00:47:04,440 --> 00:47:08,320 Speaker 1: education beyond college. I didn't study law, I didn't study 757 00:47:08,360 --> 00:47:12,360 Speaker 1: any finance. I didn't study accounting. I'm faking everything. Okay. 758 00:47:12,480 --> 00:47:14,960 Speaker 1: That's the reason that James Glick said something very similar. 759 00:47:15,080 --> 00:47:18,239 Speaker 1: Every time he picks up a new subject. Um, it's 760 00:47:18,440 --> 00:47:21,359 Speaker 1: that's his education. He becomes educated enough to be able 761 00:47:21,400 --> 00:47:24,359 Speaker 1: to ask questions. You must do something similar. Yeah, I'm 762 00:47:24,440 --> 00:47:26,640 Speaker 1: very curious. By the way, the best thing about this 763 00:47:26,719 --> 00:47:30,000 Speaker 1: show is I'd become an inveterate name dropper, not on 764 00:47:30,160 --> 00:47:32,759 Speaker 1: person on purpose, but it's like, well, when I was 765 00:47:32,800 --> 00:47:35,840 Speaker 1: speaking to Jim Click, he said, and I love his 766 00:47:35,840 --> 00:47:40,759 Speaker 1: his If you haven't read the information, oh I should, Yeah, astonishment. UM, 767 00:47:40,800 --> 00:47:43,440 Speaker 1: tell us about some of your early mentors who influenced 768 00:47:43,800 --> 00:47:47,200 Speaker 1: your approach to research and writing. Huh that's a good question. 769 00:47:47,360 --> 00:47:51,239 Speaker 1: I UM, you know, I read the big books, big 770 00:47:51,320 --> 00:47:55,040 Speaker 1: journalism books like UM Den of Thieves and Barbarians at 771 00:47:55,040 --> 00:47:59,680 Speaker 1: the gate Um that was Uh, those were big influential books. 772 00:47:59,760 --> 00:48:03,719 Speaker 1: I had, UM a bunch of great uh colleagues at 773 00:48:03,760 --> 00:48:07,040 Speaker 1: the street dot com where we really kind of learned 774 00:48:07,160 --> 00:48:12,319 Speaker 1: finance and investing and UM investigations. Uh. Dave Kansas was 775 00:48:12,360 --> 00:48:16,600 Speaker 1: the editor there. My colleagues like Colin Barrows, an editor 776 00:48:16,600 --> 00:48:19,120 Speaker 1: at the Wall Street Journal, and Alex Barrenson who went 777 00:48:19,120 --> 00:48:21,520 Speaker 1: on to the New York Times. And John Edwards was 778 00:48:21,719 --> 00:48:24,760 Speaker 1: another editor at the Wall Street Journal. UM, a bunch 779 00:48:24,800 --> 00:48:28,879 Speaker 1: of really talented people there. Uh. So that those were 780 00:48:28,880 --> 00:48:32,160 Speaker 1: probably the early influences. And then Larry and Garcia hired 781 00:48:32,160 --> 00:48:34,360 Speaker 1: me at the Wall Street Journal. Um, he's one of 782 00:48:34,400 --> 00:48:37,759 Speaker 1: the best editors of our era. So those guys all 783 00:48:37,800 --> 00:48:42,000 Speaker 1: sort of helped my colleague. My colleague, Josh Brown calls 784 00:48:42,120 --> 00:48:47,000 Speaker 1: The Street dot Com the unknown Motown of financial journalism. 785 00:48:47,040 --> 00:48:50,040 Speaker 1: I'm so glad that he appreciates it, because, um, we 786 00:48:50,120 --> 00:48:53,080 Speaker 1: really it's all been lost to history. Um, but half 787 00:48:53,160 --> 00:48:56,240 Speaker 1: my columns from there are are gone. And I'm playing 788 00:48:57,320 --> 00:48:59,360 Speaker 1: and put him on the blog, you know. Uh. And 789 00:48:59,480 --> 00:49:02,920 Speaker 1: Jim Cramer, Um, to his credit, really kind of invented 790 00:49:02,960 --> 00:49:06,400 Speaker 1: this whole kind of way vernacular of speaking about doing 791 00:49:06,480 --> 00:49:10,240 Speaker 1: financial journalism. But back then it was serious financial journalism. 792 00:49:10,320 --> 00:49:14,960 Speaker 1: We did an enormous number of real investigations, deep reporting. Um. 793 00:49:15,000 --> 00:49:17,719 Speaker 1: It was innovative, it was online, we weren't nobody had 794 00:49:17,760 --> 00:49:21,719 Speaker 1: seen anything like it before. It was totally snarky. It 795 00:49:21,880 --> 00:49:25,279 Speaker 1: was really unique. It's a lot of fun. That's how 796 00:49:25,360 --> 00:49:28,560 Speaker 1: I know Jesse long enough that we go back to 797 00:49:28,640 --> 00:49:32,000 Speaker 1: that period. And full disclosure if I have to mention this, 798 00:49:32,000 --> 00:49:35,120 Speaker 1: because if I don't, someone's gonna send a nasty email. 799 00:49:35,680 --> 00:49:41,560 Speaker 1: When Bailout Nation, UM was in the fourth editling and 800 00:49:41,600 --> 00:49:46,240 Speaker 1: I'm arguing with mcgrow hill over their SMP five D division. 801 00:49:46,520 --> 00:49:49,200 Speaker 1: I'm sorry they're standard and poor credit rating division and 802 00:49:49,239 --> 00:49:52,840 Speaker 1: they're not happy with the chapter that's critical of them. Um, 803 00:49:52,960 --> 00:49:57,919 Speaker 1: Jesse wrote a delightful column for Portfolio that pretty much 804 00:49:58,000 --> 00:50:01,279 Speaker 1: set the tone for or all the other coverage on 805 00:50:01,320 --> 00:50:05,560 Speaker 1: the book, which was um Simon and Schuster. I'm sorry 806 00:50:05,840 --> 00:50:12,319 Speaker 1: mcgroy Hill drops book critical of SMPH credit division and 807 00:50:12,360 --> 00:50:16,480 Speaker 1: that really colored all of the subsequent coverage and it 808 00:50:16,600 --> 00:50:19,719 Speaker 1: ended up going wildly and that transition just brought more 809 00:50:19,719 --> 00:50:22,640 Speaker 1: attention to it. But glad to help. Well, I I 810 00:50:22,880 --> 00:50:24,600 Speaker 1: have to say thank you, and I also I think 811 00:50:24,640 --> 00:50:29,120 Speaker 1: I am obligated to disclose that otherwise otherwise his Trouble 812 00:50:29,280 --> 00:50:32,680 Speaker 1: Spy magazine called this log rolling and yes, exactly by 813 00:50:32,680 --> 00:50:36,640 Speaker 1: the way, Denna Thieves written by James Stewart, Who's Who's 814 00:50:36,640 --> 00:50:40,759 Speaker 1: a legend? And then Barbarians at the Gate was was 815 00:50:40,800 --> 00:50:44,479 Speaker 1: that co authored Brian Burrow and John Hellier yep. And 816 00:50:44,480 --> 00:50:49,680 Speaker 1: and also to to rockstar um journalists out there for 817 00:50:50,440 --> 00:50:54,440 Speaker 1: doing doing God's work. UM talk about so so you 818 00:50:54,480 --> 00:50:58,040 Speaker 1: mentioned a handful of mentors, primarily UM, LARRYN. Grassi is 819 00:50:58,200 --> 00:51:02,720 Speaker 1: legendary and lots of those folks at the Street dot Com. 820 00:51:02,880 --> 00:51:06,160 Speaker 1: I went to the Four Winds and they're all running major. 821 00:51:07,120 --> 00:51:11,319 Speaker 1: I think, uh, who is the c the head of 822 00:51:11,960 --> 00:51:15,799 Speaker 1: USA today? There's like a whole. You could find people everywhere. Yeah, 823 00:51:16,080 --> 00:51:20,080 Speaker 1: Dave Callaway. Dave Callaway, No, he wasn't there, but there 824 00:51:20,160 --> 00:51:26,480 Speaker 1: was a guy. Uh, Dave Kansas was editor. Uh he is. 825 00:51:26,719 --> 00:51:30,600 Speaker 1: He's no longer in journalism or I don't know where David. 826 00:51:30,640 --> 00:51:32,400 Speaker 1: I haven't. I've lost touch of them, but I'm sure 827 00:51:32,440 --> 00:51:34,719 Speaker 1: I'm going to forget that million mentors. Of course, of 828 00:51:34,760 --> 00:51:38,640 Speaker 1: course when you do a list like this, but uh um, 829 00:51:38,680 --> 00:51:42,960 Speaker 1: he was one. Um. Let's talk about investors. What investors? 830 00:51:43,200 --> 00:51:50,120 Speaker 1: Um influenced your thinking about markets? Um? Well, uh, you 831 00:51:50,160 --> 00:51:53,839 Speaker 1: know it was interesting. The what happened to me was 832 00:51:53,920 --> 00:51:57,040 Speaker 1: that I was working for this obscure operation in the 833 00:51:57,080 --> 00:52:00,840 Speaker 1: street dot com. You know, nobody's really talking to me, um, 834 00:52:01,000 --> 00:52:03,919 Speaker 1: and so I kind of naturally gravitated the people would 835 00:52:03,960 --> 00:52:07,560 Speaker 1: talk to me. Um, the kind of desperate weirdos and quirks, 836 00:52:08,480 --> 00:52:13,280 Speaker 1: you know, cranks and uh um and outsiders, and most 837 00:52:13,280 --> 00:52:17,440 Speaker 1: of them were short sellers. Um. And so you know, 838 00:52:17,680 --> 00:52:22,040 Speaker 1: and in context, this is the nineties, right, and the 839 00:52:22,080 --> 00:52:25,600 Speaker 1: big bulls they have access to the New York Times, 840 00:52:25,600 --> 00:52:28,319 Speaker 1: Wall Street Journal, c NBC, they have access to all 841 00:52:28,360 --> 00:52:32,640 Speaker 1: the regular media, right, and and the business journalism was 842 00:52:33,080 --> 00:52:35,560 Speaker 1: I would argue even worse than it is today. And 843 00:52:35,600 --> 00:52:39,359 Speaker 1: I don't think I don't have a great today. If 844 00:52:39,400 --> 00:52:43,640 Speaker 1: you're a selective you can find great journalism. But you know, 845 00:52:43,760 --> 00:52:47,200 Speaker 1: overall it's still too generous and too uh. There's too 846 00:52:47,280 --> 00:52:50,960 Speaker 1: much happy talk, and there's it's too addulatory. But then 847 00:52:51,000 --> 00:52:54,480 Speaker 1: it was even worse. Sturgeons law applies to everything. Yes, 848 00:52:54,640 --> 00:52:58,800 Speaker 1: that's true, but but so um, so you know so uh. 849 00:52:58,800 --> 00:53:00,840 Speaker 1: And I always thought, you know, if a company is 850 00:53:00,880 --> 00:53:04,000 Speaker 1: making money, if a company develops this product, I was 851 00:53:04,080 --> 00:53:06,480 Speaker 1: doing pharmaceuticals and biotech, then you know, if the company 852 00:53:06,520 --> 00:53:11,680 Speaker 1: companies the science works and exact covering exactly, um, and 853 00:53:11,920 --> 00:53:15,600 Speaker 1: the science works and the drug works and um, they 854 00:53:15,680 --> 00:53:18,080 Speaker 1: tested and they get it approved by the FDA, and 855 00:53:18,080 --> 00:53:20,879 Speaker 1: they sell it and they make money on it. All 856 00:53:20,920 --> 00:53:22,920 Speaker 1: those things. They're supposed to do those things, so that's 857 00:53:22,960 --> 00:53:25,759 Speaker 1: not news. It's only news when those things they don't 858 00:53:25,760 --> 00:53:28,000 Speaker 1: do it. So I gravitated to when the drug was 859 00:53:28,080 --> 00:53:31,280 Speaker 1: killing people, when they were lying about the drugs results, 860 00:53:31,280 --> 00:53:34,040 Speaker 1: when they couldn't sell it, when they couldn't make money 861 00:53:34,080 --> 00:53:36,960 Speaker 1: on it, and those were all stories to me. And 862 00:53:37,040 --> 00:53:39,000 Speaker 1: the short sellers were the people I talked to, and 863 00:53:39,280 --> 00:53:43,600 Speaker 1: so I learned from the best short sellers in the game. 864 00:53:44,040 --> 00:53:46,560 Speaker 1: Some examples, Well, Jim Chenos was one of them, although 865 00:53:46,560 --> 00:53:49,360 Speaker 1: he didn't do as much biotech. Um, but there you know, 866 00:53:49,400 --> 00:53:51,160 Speaker 1: a lot of them were, well a lot of them. 867 00:53:51,239 --> 00:53:53,319 Speaker 1: These guys are sort out of the game. So like 868 00:53:53,480 --> 00:53:57,680 Speaker 1: Dave Shally, um is probably one of the best short 869 00:53:57,719 --> 00:54:00,840 Speaker 1: sellers ever in the And I hope that he forgives 870 00:54:00,880 --> 00:54:04,919 Speaker 1: me for outing him. Um, but now he's retired. Um 871 00:54:05,200 --> 00:54:10,640 Speaker 1: and uh he worked for a shop on um in California. 872 00:54:11,200 --> 00:54:14,160 Speaker 1: Uh and um he's one of the guys who did 873 00:54:14,200 --> 00:54:17,040 Speaker 1: the most work that he would have been He probably 874 00:54:17,080 --> 00:54:20,040 Speaker 1: would have been the best prosecutor in the Department of Justice. 875 00:54:20,120 --> 00:54:22,400 Speaker 1: Drop him into the Department of Justice today and he 876 00:54:22,440 --> 00:54:25,279 Speaker 1: would see, hands down the best prosecutor. He was one 877 00:54:25,320 --> 00:54:28,719 Speaker 1: of the most brilliant guys. No, no, he was just 878 00:54:28,800 --> 00:54:32,080 Speaker 1: a sort of finance guy, but just a nose for frauds. 879 00:54:32,120 --> 00:54:36,120 Speaker 1: And uh, um he knows Marcojodas, who was a big 880 00:54:36,160 --> 00:54:38,400 Speaker 1: short seller. You guys know, you had a partner I 881 00:54:38,440 --> 00:54:41,840 Speaker 1: won't name because he's still in the business. Um. Uh. 882 00:54:41,880 --> 00:54:46,560 Speaker 1: These guys were, Uh, these guys were the most influential. 883 00:54:46,600 --> 00:54:49,080 Speaker 1: They taught me how to read a balance sheet, which 884 00:54:49,120 --> 00:54:51,520 Speaker 1: I can do in a rudimentary fashion. They taught me 885 00:54:51,760 --> 00:54:55,960 Speaker 1: how to look for frauds, um identify them and UM 886 00:54:56,120 --> 00:54:59,600 Speaker 1: really that was that was an incredible learning experience. And 887 00:55:00,000 --> 00:55:01,319 Speaker 1: you know, the only reason they were talking to me 888 00:55:01,400 --> 00:55:03,920 Speaker 1: is no one else would talk to them. I love that. 889 00:55:04,280 --> 00:55:08,280 Speaker 1: Let's talk about books. You mentioned Danna, Thieves and Barbarians 890 00:55:08,320 --> 00:55:10,319 Speaker 1: at the Gates. What are what are some of the 891 00:55:10,320 --> 00:55:14,280 Speaker 1: books that are amongst your favorites or that you found 892 00:55:14,320 --> 00:55:18,000 Speaker 1: influential by the way, fiction, nonfiction, finance, it doesn't matter. Yeah, 893 00:55:18,000 --> 00:55:20,560 Speaker 1: I was trying to think about that earlier today. You know, 894 00:55:20,640 --> 00:55:23,920 Speaker 1: I think that the UM one of the biggest influences 895 00:55:23,960 --> 00:55:26,719 Speaker 1: that had me on a path to journalism that I 896 00:55:26,760 --> 00:55:29,600 Speaker 1: read in college was a Bright Shining Lie from Neil Sheen, 897 00:55:29,719 --> 00:55:35,040 Speaker 1: which really exposed the government's lies during Vietnam. UM and Uh, 898 00:55:35,080 --> 00:55:37,240 Speaker 1: I didn't have any idea I wanted to be a journalist. 899 00:55:37,520 --> 00:55:40,520 Speaker 1: But that's a piece of nonfiction journalism. It's brilliant and 900 00:55:40,640 --> 00:55:44,520 Speaker 1: it really captures the Vietnam era almost better than any 901 00:55:44,520 --> 00:55:46,800 Speaker 1: other book, although um, there are a lot of classics 902 00:55:46,840 --> 00:55:49,640 Speaker 1: from there. But I was I that I liked I 903 00:55:49,719 --> 00:55:53,520 Speaker 1: loved Dispatches. I loved the journalism of Michael hair. I 904 00:55:53,560 --> 00:55:56,600 Speaker 1: love the journalism of the Vietnam era. So that was great. 905 00:55:56,640 --> 00:55:59,319 Speaker 1: And then you know, I gravitated to the great um 906 00:55:59,800 --> 00:56:04,880 Speaker 1: uh essay s s polemicists like George Orwell and um 907 00:56:05,040 --> 00:56:08,000 Speaker 1: h L Menkin, those are the people that I read. 908 00:56:08,040 --> 00:56:10,600 Speaker 1: I read Joan Didion, So I was sort of gravitating 909 00:56:10,640 --> 00:56:14,520 Speaker 1: to this kind of nonfiction reportage. Um those were so 910 00:56:14,520 --> 00:56:18,480 Speaker 1: so we all know Orwell wrote four an Animal Farm. 911 00:56:18,520 --> 00:56:22,200 Speaker 1: What Menkin Pieza influenced you? Oh? Well, Menkin really does 912 00:56:22,440 --> 00:56:25,839 Speaker 1: a lot of essays. Um. And so he's he's doing 913 00:56:25,880 --> 00:56:28,520 Speaker 1: he's a critic. Really, he's doing essays, his collection of 914 00:56:28,640 --> 00:56:30,879 Speaker 1: essays or there's no one sort of novel or one 915 00:56:30,960 --> 00:56:34,839 Speaker 1: big book that that he writes. But he's really kind 916 00:56:34,880 --> 00:56:40,320 Speaker 1: of brilliant and lacerating and hilarious. Um yeah, and coins 917 00:56:40,320 --> 00:56:43,200 Speaker 1: a million words like the boom was he Um. So 918 00:56:43,280 --> 00:56:47,160 Speaker 1: he's he's very entertaining. And Joan Didion, Joan Didion Slatching 919 00:56:47,160 --> 00:56:51,160 Speaker 1: to Bethlehem, Um is the White album. Um, those are 920 00:56:51,200 --> 00:56:56,280 Speaker 1: collections of essays. She's a beautiful writer. Lucid um Uh 921 00:56:56,360 --> 00:57:02,960 Speaker 1: extraordinary observer of um of humanity, just the kind of UM, 922 00:57:03,080 --> 00:57:06,640 Speaker 1: the perfect, the best, probably the best writer of in 923 00:57:06,719 --> 00:57:08,719 Speaker 1: any journalism. And you know, I liked a lot of 924 00:57:08,719 --> 00:57:11,520 Speaker 1: new journalisms. I read a lot of wolf Tom Wolfe 925 00:57:11,560 --> 00:57:13,279 Speaker 1: and that kind of stuff. So but I think she's 926 00:57:13,280 --> 00:57:17,160 Speaker 1: probably the best of that era. So since you've joined 927 00:57:17,160 --> 00:57:20,200 Speaker 1: the industry, what do you think has changed? What's the 928 00:57:20,240 --> 00:57:26,320 Speaker 1: most significant outside of the obvious business is the biggest 929 00:57:26,360 --> 00:57:31,760 Speaker 1: transformation in the business is the discipline, UM and fear 930 00:57:32,000 --> 00:57:34,919 Speaker 1: that executives have when they talked to journalists. So when 931 00:57:34,960 --> 00:57:37,480 Speaker 1: I broke into the business in the early ninety nineties, 932 00:57:37,760 --> 00:57:40,760 Speaker 1: I could call up a desk and talk to anybody 933 00:57:40,760 --> 00:57:43,480 Speaker 1: on Wall Street UM. And I got a great education 934 00:57:43,800 --> 00:57:45,920 Speaker 1: and found out a lot of what was going on 935 00:57:46,040 --> 00:57:47,760 Speaker 1: by t I covered I p O s and I talked, 936 00:57:47,960 --> 00:57:50,160 Speaker 1: just called all the desks and talked to all the 937 00:57:50,200 --> 00:57:51,920 Speaker 1: heads of the I p O operation. There was no 938 00:57:52,080 --> 00:57:56,840 Speaker 1: pr involved. UM. And now if you call any cell 939 00:57:56,920 --> 00:58:00,280 Speaker 1: side analyst which was desperate to talk UM. Now, if 940 00:58:00,280 --> 00:58:05,000 Speaker 1: you call anyone, they understand that they could be fired 941 00:58:05,000 --> 00:58:07,600 Speaker 1: for talking to you as a journey UM. And they're 942 00:58:07,600 --> 00:58:10,360 Speaker 1: so fearful for their jobs and they're just they they're 943 00:58:10,400 --> 00:58:13,880 Speaker 1: so loyal to their companies. I think it's it's fear, 944 00:58:13,960 --> 00:58:16,880 Speaker 1: but also this kind of loyalty that they um, they 945 00:58:17,000 --> 00:58:19,520 Speaker 1: and disdain for the press. The press has really fallen 946 00:58:19,560 --> 00:58:23,080 Speaker 1: in estimation um. And that the combination of that has 947 00:58:23,680 --> 00:58:28,600 Speaker 1: resulted in this kind of pr grip on businesses that 948 00:58:28,800 --> 00:58:31,320 Speaker 1: makes it so much more difficult. It's so much harder 949 00:58:31,360 --> 00:58:37,360 Speaker 1: now to report on corporate America. That that's shocking and fascinating. Um. 950 00:58:37,400 --> 00:58:40,880 Speaker 1: What's the next positive shift do you see common um 951 00:58:40,920 --> 00:58:44,120 Speaker 1: in the business? Y? Um? Well, I mean well, I 952 00:58:44,120 --> 00:58:47,160 Speaker 1: would say two things. One is what pro Public is 953 00:58:47,160 --> 00:58:51,640 Speaker 1: proving is that the nonprofit model for investigative journalism works. Um. 954 00:58:51,680 --> 00:58:54,880 Speaker 1: When we started out, that was a question mark whether 955 00:58:54,960 --> 00:58:58,080 Speaker 1: there was going to be enough or enough money and 956 00:58:58,200 --> 00:59:01,360 Speaker 1: foundations and wealthy individuals to port this nonprofit And I 957 00:59:01,440 --> 00:59:04,680 Speaker 1: think nonprofit investigative journalism is not the solution to the 958 00:59:04,760 --> 00:59:08,480 Speaker 1: journalism crisis where we don't hold the powerful accountable enough, 959 00:59:08,760 --> 00:59:10,560 Speaker 1: but it is part of the solution. So I think 960 00:59:10,600 --> 00:59:13,320 Speaker 1: that is the most powerful development that's happened over the 961 00:59:13,400 --> 00:59:18,200 Speaker 1: last decade. And I just point it's sort of pulled 962 00:59:18,240 --> 00:59:21,880 Speaker 1: a lot of people to realize that investigative journalism is 963 00:59:21,880 --> 00:59:24,480 Speaker 1: incredibly important, and that's central to the mission of journalism. 964 00:59:24,560 --> 00:59:28,320 Speaker 1: Journalism is not about selling clicks. So BuzzFeed is um 965 00:59:28,360 --> 00:59:31,760 Speaker 1: invested in investigative journalism, and Washington Post has done more 966 00:59:31,760 --> 00:59:34,400 Speaker 1: in investigative journalism in New York Times, that's in part 967 00:59:35,120 --> 00:59:39,440 Speaker 1: um because they're waking up to their reawakening to their mission. 968 00:59:39,760 --> 00:59:43,000 Speaker 1: And I think pro public has contributed to that. What 969 00:59:43,040 --> 00:59:45,560 Speaker 1: do you do outside of the office to relax? What 970 00:59:45,600 --> 00:59:51,000 Speaker 1: do you do, uh, to keep mentally and or physically fit? Oh, 971 00:59:51,240 --> 00:59:54,080 Speaker 1: you know, I do a lot my um My work 972 00:59:54,200 --> 00:59:58,000 Speaker 1: is not particularly all consuming. Um, So I cook, I 973 00:59:58,200 --> 01:00:01,680 Speaker 1: hang out with my children. I um, I listened to music. 974 01:00:01,840 --> 01:00:04,439 Speaker 1: I'm trying to I don't know a lot about classical music, 975 01:00:04,480 --> 01:00:07,040 Speaker 1: but I'm starting to listen to it. I'd always sort 976 01:00:07,080 --> 01:00:10,160 Speaker 1: of learning. I like teaching myself the trees now, you know, 977 01:00:10,320 --> 01:00:12,360 Speaker 1: trying to figure out what they are. So I walk 978 01:00:12,400 --> 01:00:14,560 Speaker 1: around with a book. I'm I'm that guy in the 979 01:00:14,560 --> 01:00:17,120 Speaker 1: park walking around with a little tree book. I'm like, 980 01:00:17,240 --> 01:00:19,920 Speaker 1: I'm the most embarrassing dad. You can imagine. That sounds 981 01:00:19,920 --> 01:00:24,520 Speaker 1: pretty pretty amusing. Um, a millennial, someone just coming out 982 01:00:24,520 --> 01:00:26,800 Speaker 1: of college comes up to you and said, hey, I'm 983 01:00:26,840 --> 01:00:29,760 Speaker 1: interested in the career in journalism. What sort of advice 984 01:00:29,760 --> 01:00:34,320 Speaker 1: would you give them? Go abroad? Which is what I did. Um, 985 01:00:34,560 --> 01:00:38,000 Speaker 1: it's easier to find stories, and they're more desperate for 986 01:00:38,280 --> 01:00:41,400 Speaker 1: copy from there. Um because there aren't aren't that many. 987 01:00:41,480 --> 01:00:45,800 Speaker 1: So uh, and do what you like, don't do what 988 01:00:45,840 --> 01:00:48,280 Speaker 1: you think you can make a living it. UM. Gravitate 989 01:00:48,320 --> 01:00:51,280 Speaker 1: to something you like and really understand it and develop it, 990 01:00:51,680 --> 01:00:56,160 Speaker 1: and the livelihood will follow. And our final question, what 991 01:00:56,280 --> 01:00:59,560 Speaker 1: is it you know about wool Street and journalism today 992 01:00:59,600 --> 01:01:03,520 Speaker 1: that you wish you knew twenty years ago? That is 993 01:01:03,560 --> 01:01:10,760 Speaker 1: a good question. UM. I think I wish that I 994 01:01:10,880 --> 01:01:18,000 Speaker 1: had been even more jaded about the systemic corruption. Um 995 01:01:18,040 --> 01:01:20,480 Speaker 1: that it exists in the system and they in the 996 01:01:20,520 --> 01:01:26,960 Speaker 1: malign incentives. UM I would I was too. I thought 997 01:01:27,000 --> 01:01:30,200 Speaker 1: that the corruption happened at the smaller companies or was 998 01:01:30,240 --> 01:01:33,440 Speaker 1: an unusual thing. I think that the system is quite 999 01:01:33,720 --> 01:01:40,480 Speaker 1: troubled and needs, um needs more vigilant oversight. We have 1000 01:01:40,520 --> 01:01:46,200 Speaker 1: been speaking to author and journalist Jesse Eisinger. If you 1001 01:01:46,440 --> 01:01:49,200 Speaker 1: enjoy this conversation, be sure and look Up an Inch 1002 01:01:49,320 --> 01:01:54,800 Speaker 1: or Down an Inch on iTunes, SoundCloud, overcast, Bloomberg dot 1003 01:01:54,840 --> 01:01:57,120 Speaker 1: Com or the Bloomberg terminal, and you can see any 1004 01:01:57,160 --> 01:02:03,040 Speaker 1: of the other hundred and forty somethings. Uch uh previous podcasts. 1005 01:02:03,480 --> 01:02:06,120 Speaker 1: I would be remiss if I did not think my 1006 01:02:06,240 --> 01:02:12,640 Speaker 1: technical producer Medina Parwana, recording engineer par Excellence Taylor Riggs 1007 01:02:12,840 --> 01:02:16,080 Speaker 1: is our booker producer Michael bat Nick is my head 1008 01:02:16,640 --> 01:02:21,640 Speaker 1: of research. If you enjoy this conversation, we love your comments, 1009 01:02:21,680 --> 01:02:26,160 Speaker 1: feedback and suggestions right to us at m IB podcast 1010 01:02:26,200 --> 01:02:30,160 Speaker 1: at Bloomberg dot net. I'm Barry Ridholtz. You've been listening 1011 01:02:30,200 --> 01:02:42,480 Speaker 1: to Masters in Business on Bloomberg Radio. Masters in Business 1012 01:02:42,520 --> 01:02:45,920 Speaker 1: is brought to you by the American Arbitration Association. Business 1013 01:02:45,920 --> 01:02:50,360 Speaker 1: disputes are inevitable, Resolve faster with the American Arbitration Association, 1014 01:02:50,720 --> 01:02:55,120 Speaker 1: the global leader in alternative dispute resolution for over ninety years. 1015 01:02:55,600 --> 01:02:59,440 Speaker 1: Learn more at a d R dot org. Masters in 1016 01:02:59,480 --> 01:03:03,280 Speaker 1: businesses brought to you by the American Arbitration Association. Business 1017 01:03:03,320 --> 01:03:07,760 Speaker 1: disputes are inevitable, Resolve faster with the American Arbitration Association, 1018 01:03:08,120 --> 01:03:12,520 Speaker 1: the global leader in alternative dispute resolution for over ninety years. 1019 01:03:13,000 --> 01:03:15,600 Speaker 1: Learn more at a d R dot org.