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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: It's the enemy from within, all the scum that we

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Speaker 1: have to deal with that hate our country.

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Speaker 2: That's a bigger enemy than China and Russia.

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Speaker 3: Donald Trump has long railed against his perceived enemies from

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Speaker 3: within and vowed to get revenge on a long list

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Speaker 3: of prosecutors, political opponents, and private citizens. And there seems

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Speaker 3: to be little doubt that the President elect intends to

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Speaker 3: use the Justice Department to exact his revenge. We will

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Speaker 3: completely overhaul Kamala's corrupt Department of Injustice, and now Trump

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Speaker 3: is putting together a team of loyalists at the Justice

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Speaker 3: Department that would be positioned to carry out his vows

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Speaker 3: of retribution. Joining me is Stephen Gillers, an ethics professor

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Speaker 3: at NYU Law School. Trump has been very open on

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Speaker 3: the campaign trail about getting revenge against those who supposedly

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Speaker 3: wronged him, and reportedly some current and former Justice Department

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Speaker 3: and FBI officials are already contacting lawyers in anticipation of

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Speaker 3: being investigated. I mean, do you think that they need

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Speaker 3: to be worried even if they don't think they did

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Speaker 3: anything wrong.

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Speaker 4: Yeah, They need to be worried because even if they

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Speaker 4: did nothing wrong, and even if they are vindicated in

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Speaker 4: any civil or criminal case that the Justice Department brings

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Speaker 4: against them, the cost of the vindication can be enormous

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Speaker 4: in terms of lawyer fees, anxiety, lost time at their job. So, yeah,

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Speaker 4: they should be worried. They should lawyer up. They should

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Speaker 4: take Trump at his word. They should expect to be

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Speaker 4: a subject of investigation. Remember back in the first Trump administration,

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Speaker 4: there was an IRS investigation of James Comy. Now that's

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Speaker 4: the IRS. It's not the Justice Apartment, but a full

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Speaker 4: IRS Audit is I'm consuming and expensive. It has been

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Speaker 4: described as the legal equivalent of a colonoscopy. It's very

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Speaker 4: disheriting to have to go through that, and Komi had

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Speaker 4: to go through that. As it happened, it turned out

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Speaker 4: that the IRS found that he overpaid his taxes. But nonetheless,

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Speaker 4: the cost of getting to that point for Coombe in

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Speaker 4: money and anxiety would have been enormous. Well, the same

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Speaker 4: thing can happen in civil or criminal investigations by the

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Speaker 4: Justice Department.

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Speaker 3: Also, if you investigate someone long and hard enough, you

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Speaker 3: can find other things in their past that may be

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Speaker 3: illegal but not connected to the investigation. Special Counsel John

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Speaker 3: Durham conducted years and years of investigations and the only

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Speaker 3: guilteply he got was from an FBI lawyer who had

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Speaker 3: lied on some documents, so something not related to the

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Speaker 3: purpose of his investors.

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Speaker 5: Right.

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Speaker 4: You know, a thorough investigation can turn up evidence or

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Speaker 4: a parent evidence of wrongdoing civil or criminals that wasn't

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Speaker 4: on your radar screen when you started the investigation. When

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Speaker 4: you turn over every document, when you look at every email,

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Speaker 4: you could find things that arguably indicate some basis for

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Speaker 4: a lawsuit or an indictment that you didn't know about

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Speaker 4: at the beginning. But again, you know, if someone is

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Speaker 4: charged with a crime in fact or too civilly, ultimately

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Speaker 4: there's a trial. If there's no settlement, the government can

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Speaker 4: cause a lot of pain without ever having to prove

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Speaker 4: the case a trial. Just by conducting the investigation. It

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Speaker 4: can bring a case to trial and drop the case.

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Speaker 4: So vindication is not a victory for the target of

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Speaker 4: the government. Hostility and conviction or a money judge is

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Speaker 4: not necessarily the goal of a justice department that is

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Speaker 4: out for revenge. The cost in money, time and anxiety

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Speaker 4: alone can be extremely punishing.

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Speaker 3: I think we're all aware of one of the people

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Speaker 3: at the top of Trump's.

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Speaker 4: Enemies list, Jack Smith, should be considered mentally deranged. He

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Speaker 4: should be thrown out of the country.

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Speaker 3: Special counsel Jack Smith brought the two federal prosecutions against Trump.

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Speaker 3: What kind of investigation or prosecution can we expect of Smith?

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Speaker 4: Well? Smith is an interesting situation, and from Trump's point

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Speaker 4: of view, judging from what he has said, Smith is

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Speaker 4: trump Enemy number one. He must be in the President's

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Speaker 4: site as the dominant person to terrorize with legal remedies

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Speaker 4: and legal threats. Now, anything Jack Smith did to antagonize

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Speaker 4: the president as Trump's he would have done as an

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Speaker 4: employee the Justice Department. Jack Smith is in a somewhat

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Speaker 4: different position than other potential alleged enemies. He would have

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Speaker 4: to be defended by the government. That is, a Justice

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Speaker 4: Department lawyer who is accused of wrongdoing after leading government

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Speaker 4: is entitled to a government defend There are some exceptions,

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Speaker 4: but if the wrongdoing or the alleged wrongdoing is within

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Speaker 4: the scope of the lawyer's job, the government will defend him.

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Speaker 4: Now Here, that's not possible because it will be the

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Speaker 4: government itself that is targeting Jack Smith. So the Justice

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Speaker 4: Department can't be both the prosecutor and the defense lawyer,

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Speaker 4: and so Jack Smith will have to be provided with

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Speaker 4: the cost of a highly skilled defense law firm to

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Speaker 4: respond to any DOJ effort to investigate or prosecute him.

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Speaker 4: That may be good for Jack Smith in the sense

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Speaker 4: that he doesn't have to pay out of his own powers,

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Speaker 4: although even there I imagine that DOJ might argue that

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Speaker 4: Smith is not entitled to the court of a defense

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Speaker 4: for some reason that justice comes up with, and then

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Speaker 4: that question has to be litigated, and Smith will need

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Speaker 4: a lawyer to represent him on the question of whether

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Speaker 4: or not the government has to defend him or pay

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Speaker 4: for his defense when the charge comes from the government itself.

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Speaker 3: So litigation before the litigation the local failed district attorney

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Speaker 3: charging a former president of the United States for the

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Speaker 3: first time in history. What about Manhattan District Attorney Alvin Bragg,

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Speaker 3: who brought the hush money case, the only case against

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Speaker 3: Trump to actually go to trial. Trump has excoriated him,

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Speaker 3: and also New York Attorney General Letitia James, who won

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Speaker 3: that four hundred and fifty million dollar verdict against Trump.

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Speaker 4: Well, Bragg and James are also in the Trump target range.

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Speaker 4: Both of them will get a defense from New York State,

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Speaker 4: so neither of them would expect to have to pay

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Speaker 4: out of their own profit for the court of a defense. Indeed,

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Speaker 4: the state might defend them through a state agency, or

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Speaker 4: it might pay for private counsel. So that's beneficial for them.

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Speaker 4: They don't have to bankrupt themselves defending themselves. But again,

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Speaker 4: the anxiety and the time commitment of fighting the government

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Speaker 4: can be extremely painful.

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Speaker 3: I'm trying to think of what kind of prosecution the

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Speaker 3: Justice Department could bring against either one of them. I mean,

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Speaker 3: Trump has said over and over again that they brought

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Speaker 3: these cases for political reasons. That claim failed before the

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Speaker 3: trial judges. I mean, is any of that actionable.

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Speaker 4: There is no doubt that Trump lawyers see the public

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Speaker 4: or Project, would be able to articulate a remotely plausible

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Speaker 4: theory for targeting James or Bratt that will fail in court.

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Speaker 4: But all you need to do to get revenge is

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Speaker 4: to conduct the investigation. Now, it is unlikely that the

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Speaker 4: Justice Department will ever represent Trump against Bragg or James.

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Speaker 4: Trump would have to get private counsel to bring those cases.

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Speaker 4: I don't see how the investigations by Bragg and James

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Speaker 4: can be turned into a DOJ case as opposed to

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Speaker 4: a private case brought by Trump himself. He may do that.

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Speaker 4: Another option for Trump if he wants to get even

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Speaker 4: with Bragg and James, he doesn't have to pursue his

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Speaker 4: own claims. He can just call up any of the

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Speaker 4: relevant regulatory agencies. Of course, the IRS is the most obvious,

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Speaker 4: but truly not the only to look into their behavior

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Speaker 4: in going after him, and that could be enough to

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Speaker 4: cause them a great deal of anguish even if nothing

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Speaker 4: comes of it.

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Speaker 3: I assume out the window is the idea of the

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Speaker 3: Justice Department being nonpartisan and being independent of the White House.

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Speaker 4: Yeah, you know at Bonham. The problem here is that

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Speaker 4: the Supreme Court has told us that the President controls

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Speaker 4: all power of the executive branch, all of it. That's

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Speaker 4: a direct quote, all of it, And so Trump can

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Speaker 4: control the agenda for DOJ. There's no check in balance

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Speaker 4: within the executive branch. Trump is the decider all by

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Speaker 4: himself about what the executive branch will will not do

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Speaker 4: in the way of exercise of executive power. So the

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Speaker 4: tradition of norms by which the Justice Department operates independently

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Speaker 4: of the president. That tradition is not legally mandated, and

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Speaker 4: Trump did change it through the Attorney General taking control

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Speaker 4: of the decisions of the Justice Department that are of

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Speaker 4: particular interest to him. By an effect, taking control of

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Speaker 4: the decisions of the Justice Department that are of particular

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Speaker 4: interest to him, ninety nine point ninety nine percent of

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Speaker 4: what DOJ does will be of no interest to Trump

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Speaker 4: at all, But a sliver of matters will be of

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Speaker 4: great interest to him because they benefit him or friends

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Speaker 4: of his, or because they target his enemies. And where

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Speaker 4: those matters arise or could arise, Trump is the decider.

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Speaker 4: And so what we've done is flip the switch so

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Speaker 4: that at one time the Attorney General was the decider

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Speaker 4: and the executive the White House stayed away from those decisions. Now,

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Speaker 4: for a very small but important sliver of DOJ decisions,

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Speaker 4: the White House will be the decider. And there's nothing

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Speaker 4: that DOJ lawyers can do to resist that, and the

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Speaker 4: ones that Trump has chosen may not wish to resist that.

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Speaker 3: Trump is going to nominate for or Florida Attorney General

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Speaker 3: Pam Bondy to be the US Attorney General. She's a

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Speaker 3: fierce defender of his and has repeated Trump's claims that

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Speaker 3: DOJ's investigations of him were political. He's giving the two

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Speaker 3: lawyers who defended him at the hush money trial top

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Speaker 3: positions at DOJ and naming the lawyer who represented him

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Speaker 3: at the Supreme Court as the US Solicitor General. Does

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Speaker 3: this raise any alarms? Arms? Or is it concerning?

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Speaker 4: Yeah, it is concerning because you want people running Justice

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Speaker 4: Department who have no pensive loyalty to the president other

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Speaker 4: than the loyalty of following the law. But there's a

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Speaker 4: personal relationship there. You know, this goes way back to

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Speaker 4: President Kennedy chose his brother to be attorney General, and

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Speaker 4: there was a lot of criticism that selection. Well, there's

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Speaker 4: an analogy here. The relationship between Trump and his former

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Speaker 4: defense lawyers could be seen to give rise to a

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Speaker 4: sense of loyalty to Trump that will undermine the need

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Speaker 4: for distance and independence on the part of the people

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Speaker 4: who run Justice.

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Speaker 3: Is there a president in the past who used the

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Speaker 3: Justice Department in the way that Trump seems to want to.

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Speaker 4: Well, there are some reason to believe that Nixon did

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Speaker 4: had his enemies list and did use the department that way.

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Speaker 4: There has never been the kind of overt threat of

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Speaker 4: retaliation against enemies that Trump has prominently anticipated, even during

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Speaker 4: the Nixon years when John Mitchell was Attorney General. We

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Speaker 4: don't have the same degree of evidence of intent in

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Speaker 4: the Nixon Mitchell years that we have exclicitly in Trump's threats.

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Speaker 3: Thanks so much for being on the show. That's Professor

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Speaker 3: Stephen Gillers of NYU Law School. I'm June Grosso. When

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Speaker 3: you're listening to Bloomberg. On Wednesday, Arkago's founder Bill Huong

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Speaker 3: was sentenced to eighteen years in prison for securities fraud

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Speaker 3: and market manipulation. On Thursday, in a startling twist, the

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Speaker 3: defense attorney convinced the judge to consider reducing that sentence.

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Speaker 3: A jury convicted Wang in July of ten charges for

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Speaker 3: orchestrating a scheme to mislead Banks into providing Archagos with

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Speaker 3: billions of dollars in trading capacity, inflating the value of

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Speaker 3: his portfolio until the bubble burst in March of twenty

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Speaker 3: twenty one, costing banks more than nine billion dollars. At

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Speaker 3: Wednesday's sentencing, judge Alvin Hellerstein didn't seem particularly open to

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Speaker 3: the arguments by the defense, even musing at one point

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Speaker 3: that Huang was a god fearing man who cheats fellow men.

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Speaker 3: The judge sentenced him to eighteen years in prison, very

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Speaker 3: close to the twenty one years the government had asked for.

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Speaker 3: But it seems things can change radically overnight. Joining me

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Speaker 3: is Bloomberg Legal reporter Chrystal Mesh, who's been in the

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Speaker 3: courtroom for all the twists and turns. Chris, this sentencing

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Speaker 3: was unusual from the start, a two day sentencing hearing,

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Speaker 3: and it's.

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Speaker 1: Not over yet, so unusual, bizarre, however you want to

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Speaker 1: put it, is probably a good descriptor. So the judge

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Speaker 1: had extended the sentencing hearing for a day to address

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Speaker 1: some other issues such as restitution and forfeiture and bail

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Speaker 1: pending appeal. And you know, that's very unusual in itself,

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Speaker 1: because most sentencings take just a couple of hours. But

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Speaker 1: then when they came in on Thursday, Married Burke, the

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Speaker 1: lawyer for mister Wong, got up and said he had

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Speaker 1: kind of tossed and turned all night and was, you know,

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Speaker 1: just really wondering if they should have done more, and

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Speaker 1: at that point he proposed changing the sentence, essentially not

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Speaker 1: giving him less than eighteen years in custody, but having

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Speaker 1: the first eleven and a half years be in prison

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Speaker 1: in the second six point five years being home confinement.

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Speaker 1: And the reason he did that is because there's Bureau

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Speaker 1: Prison Justice Department rules that when you have more than

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Speaker 1: eleven and a half years incarceration, you can't be in

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Speaker 1: a minimum security prison, which he said, you know, would

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Speaker 1: prevent his Stanley from visiting. He's sixty years old. He

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Speaker 1: has heart issues that may require open heart surgery. He

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Speaker 1: was saying, you know, this is the kind of thing

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Speaker 1: that happened during COVID, and it sounds like the judge

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Speaker 1: is considering that. He said he thinks he's allowed to

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Speaker 1: do it. He's not saying he will. The government argued

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Speaker 1: against it, saying they think that would kind of take

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Speaker 1: the boomp out of the sentence that you know, they

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Speaker 1: wanted to send a message to others who would commit

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Speaker 1: similar crimes when they kind of noticed that a lot

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Speaker 1: of his crimes were during COVID, so a lot of

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Speaker 1: it was just done sitting around the table in an apartment.

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Speaker 1: So that's what they're kind of known, a, hey, you know,

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Speaker 1: he's going to be on home confinement, like that's not

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Speaker 1: exactly going to stop him from, you know, committing further crimes.

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Speaker 1: So the judge did not decide, but it's going to

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Speaker 1: take posts briefing from the two sides by December fifth,

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Speaker 1: and then we'll hold a hearing on December eighteenth, presumably

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Speaker 1: to dress the forfeiture in a possible fine, but that

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Speaker 1: could also be hearing on whether the sentence is changed

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Speaker 1: at all.

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Speaker 3: I imagine that Bill Wong didn't sleep well either. So

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Speaker 3: besides tossing and turning, did the defense attorney have any

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Speaker 3: new arguments for a lower sentence, I mean different from

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Speaker 3: the ones that they articulated on Wednesday, Not really.

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Speaker 1: I mean they rested on their arguments, but they were

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Speaker 1: emphasizing that they don't want to change the sentence. They

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Speaker 1: just think that you know, being in prison for that much,

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Speaker 1: it's also a much more restrictive facility if he would

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Speaker 1: be in anything above minimum security, so that you know,

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Speaker 1: it would be difficult for his family to visit, be

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Speaker 1: difficult for him to get medical care, that sort of thing.

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Speaker 1: So they didn't really expand on their arguments today was

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Speaker 1: more about his health, the fact that he wouldn't be

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Speaker 1: able to see his family, that sort of thing. The

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Speaker 1: really interesting part to me is that, you know the

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Speaker 1: fact that the judge extended the hearing for a second

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Speaker 1: day essentially gave the defense a window to make this argument.

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Speaker 1: Given this judge's age, they came back fresh and you know,

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Speaker 1: gave these defenses an opportunity to make this argument a

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Speaker 1: little more clearly. And when the judge, you know, was

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Speaker 1: fully engaged in listening to what they had to say.

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Speaker 3: He is not years old. It's amazing that he's still

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Speaker 3: presiding over trials like this, complicated trials like this. So yeah,

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Speaker 3: sure is the judge asked Wong's attorneys to submit information

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Speaker 3: on his health status to him privately, But what is

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Speaker 3: he looking for in the papers he's asking both sides.

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Speaker 1: To submit, especially, he just wants more arguments on this,

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Speaker 1: and I think he's really trying to flesh out more

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Speaker 1: of the government's arguments against this and whether he's legally

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Speaker 1: allowed to do it. I think that's what he really

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Speaker 1: wants to know. He wants case law and to know

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Speaker 1: if the law allows him to reduce a sentence. He's

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Speaker 1: already given. Another kind of procedural wrinkle to this is that,

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Speaker 1: you know, at the end of every sentencing hearing, when

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Speaker 1: someone gets sentenced, the judge usually signals what he's going

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Speaker 1: to give. He asks the parties, as there are reason

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Speaker 1: I shouldn't impose this sentence, you know, usually they say no,

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Speaker 1: and then he officially imposes sentience. He asked the dependence

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Speaker 1: to stand up, and he says, you're sentenced to this,

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Speaker 1: you know, the custody of the Bureau of Prisons for

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Speaker 1: X number of years. He didn't do that. Barry Burke

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Speaker 1: voed that, you know, at the beginning of his kind

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Speaker 1: of arguments, and that might have been, you know, some

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Speaker 1: sort of signal to him that he could have made

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Speaker 1: this argument. So the sentence has actually not been officially

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Speaker 1: imposed at this time.

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Speaker 3: I'm sensing a legal loophole ahead here, and that all

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Speaker 3: goes to what we've been talking about, which is how

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Speaker 3: bizarre the sentencing was, or at least the structure of it.

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Speaker 4: I'll just add this.

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Speaker 1: Usually it folly for a defense attorney to attempt to

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Speaker 1: get up to a federal judge and essentially re argue

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Speaker 1: their case after the judges imposed sent or reargue their

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Speaker 1: sentencing recommendation. And you know, with another judge, I don't

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Speaker 1: know if the defense attorney would have done this, because

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Speaker 1: they already kind of irked him with their request for

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Speaker 1: no jail time. And you know, if it had been

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Speaker 1: another judge, they may have been hesitant to do that.

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Speaker 1: But he's made it clear throughout the trial that you

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Speaker 1: know that he's willing to change his mind.

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Speaker 3: Chris, tell us more about his style, where he interrupt

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Speaker 3: the parties a lot, you know, interjects himself into the

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Speaker 3: proceedings more than most federal judges do.

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Speaker 1: Right, judges will spitball all the time during trials, and

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Speaker 1: you know, ask questions of counsel, but they generally prefer

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Speaker 1: to allow the proceedings to happen without their interference. And

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Speaker 1: this judge was not doing that. He was constantly engaging

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Speaker 1: with the lawyers, who was constantly telling them to move

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Speaker 1: on or ask a different question, sometimes just asking their

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Speaker 1: questions for them. So any attempt to like make another

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Speaker 1: argument to most judges is met with scorn. And you

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Speaker 1: know it's because they make it clear what they're thinking

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Speaker 1: is ahead of any kind of decision, even if they

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Speaker 1: don't tell you what the decision is going to be.

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Speaker 1: They hint at it, and Hellerstein regularly would reconsider things

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Speaker 1: in the middle of the case, and you know, if

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Speaker 1: he heard a better argument from either side, he would

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Speaker 1: change his mind. And you just don't always see that

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Speaker 1: with federal judges. They tend to believe in their convictions

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Speaker 1: and they stay and on their rulings and they don't

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Speaker 1: really reconsider them unless they're significant new evidence, right, they don't.

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Speaker 3: Want to hear the same arguments over and over again.

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Speaker 3: So I've been trying and failing to come up with

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Speaker 3: a sentencing similar to this, where a federal judge considers

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Speaker 3: resentencing the day after the sentence. Of course, as you said,

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Speaker 3: perhaps technically the sentence wasn't imposed. I mean, this isn't

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Speaker 3: like a typical motion to reconsider a sentence.

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Speaker 1: Yeah, no, that's very true. And you know that's a

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Speaker 1: good point given that, like I said, many of these

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Speaker 1: things are done in a matter of hours. They're not

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Speaker 1: done over two days. And judges are pretty quick to

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Speaker 1: adjourn a sentencing hearing if they feel they need more

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Speaker 1: briefing or there are issues they need to resolve before

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Speaker 1: they impose sentence. They want that to be the final

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Speaker 1: say kind of. It just never really happens like this.

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Speaker 1: I have seen a case where the judge this is

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Speaker 1: in Connecticut in a white collar case involving a bond trade,

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Speaker 1: or where the judge did not officially impose sentenced that

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Speaker 1: day and postponed hearing for more briefing on I don't

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Speaker 1: remember when it was restitution, but it was another issue,

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Speaker 1: and then he opposed since the next time. But that

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Speaker 1: was a probationary case. So it's not really the same

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Speaker 1: kind of scenario.

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Speaker 3: And did the prosecutor try to revoke his bail.

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Speaker 1: No, the government did not oppose having himself surrender, meaning

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Speaker 1: you know, he would just report to prison whenever the

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Speaker 1: judge told him to. But they did oppose the bail

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Speaker 1: pending appeal, saying that you know, this is a significant

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Speaker 1: term of imprisonment and he should serve it soon.

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Speaker 3: Since the judge granted him bail pending appeal, Wong will

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Speaker 3: be out through the entire reppellate process, which could take years.

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Speaker 1: Yes, unless, of course, the judge decides to reconsider institution,

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Speaker 1: and that's not.

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Speaker 3: Out of the realm of possibility in this case. Still

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Speaker 3: undecided are the questions of forfeiture and restitution, and they

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Speaker 3: weren't discussed at this latest hearing, right.

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Speaker 1: Not really, However, I will say that there were some

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Speaker 1: interesting exchanges about his assets, and the judge noting that

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Speaker 1: really wondering out loud, you know, whether his assets need

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Speaker 1: to be secured in case of, you know, a final

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Speaker 1: judgment against him that would be combined with a monetary

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Speaker 1: penalty or restitution or forfeiture, whatever have you, because he

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Speaker 1: says he only had fifty five million dollars and some

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Speaker 1: of his assets are jointly owned. So the judge wondered

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Speaker 1: whether personal loans should be called back, real estate should

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Speaker 1: be liquidated, whether his residences should be a quote unquote

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Speaker 1: more modest one, whether artworks should be liquidated. But he

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Speaker 1: also noted that any kind of forfeiture, you know, would

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Speaker 1: have to come after restitution, noting that the most important

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Speaker 1: thing is that the victims get paid back first.

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Speaker 3: So are those issues going to be discussed at the

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Speaker 3: next hearing in December.

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Speaker 1: A restitution is deferred, it doesn't sound like that's going

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Speaker 1: to be immediately addressed. Forfeiture could be, It's hard to say.

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Speaker 1: It was not entirely clear exactly what they will be

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Speaker 1: putting in those filings, but I think they will probably

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Speaker 1: cover the gamut.

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Speaker 3: Wong is going to appeal the verdict. Might one of

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Speaker 3: the grounds for appeal be the judge refusing to allow

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Speaker 3: the defense to argue that the banks were sophisticated financial

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Speaker 3: players who took their own risks.

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Speaker 6: Basically, that's part of is limiting them from a blame

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Speaker 6: the bank's strategy. They weren't going to let them argue

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Speaker 6: in the least bit that the banks were to blame

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Speaker 6: for whatever happened because they gave him too much credit

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Speaker 6: or you know, allowed him to do these trades without

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Speaker 6: due diligence. That was kind of the thrust of their

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Speaker 6: main argument before it was limited by the judge. It

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Speaker 6: was kind of you could see this coming even before

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Speaker 6: the trial, because this was the subject of numerous discussions

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Speaker 6: before trial and was clearly going to be laid as

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Speaker 6: a pass for the appeal.

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Speaker 2: That's certainly one of the issues that they're going to raise,

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Speaker 2: you know, they certainly raised it in some of their

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Speaker 2: post trial briefings. In their applications for bail pending appeal,

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Speaker 2: they call out some of the expert testimony for the

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Speaker 2: prosecution's experts when she calculated that some of the trading

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Speaker 2: losses were directly attributable to long conduct or misrepresentation, and

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Speaker 2: they say that that can't be proved, so that might

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Speaker 2: be one of the main things for appeal.

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Speaker 3: A lot more to come in this case. Thanks so much, Chris.

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Speaker 3: That's Bloomberg Legal reporter Chrystal Mesh coming up next. Why

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Speaker 3: mass tort lawyers are trapped in a cycle of debt.

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Speaker 3: I'm June Grosso and you're listening to Bloomberg.

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Speaker 1: Attention veterans who use combat arms of your plugs. Attention,

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Speaker 3: claims in various mass tortue cases. You and your family

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Speaker 3: Think about a hefty percentage of payouts that can be

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Speaker 3: in the billions. But mass tort lawyers are facing a

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Speaker 3: double dilemma these days. The payouts on some of the

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Speaker 3: huge cases are taking longer than expected, years longer, and

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Speaker 3: they can't seem to find the next big tort. That

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Speaker 3: means the high interest loans law firms take out to

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Speaker 3: fund their cases are coming due, forcing them to restructure

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Speaker 3: the loans with pricey concessions to lenders, or to refinance

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Speaker 3: with a new lender joining me is Bloomberg Law Senior

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Speaker 3: reporter Emily Siegel who's written about this so Emily. Mass

437
00:25:33,440 --> 00:25:37,320
Speaker 3: tort lawyers work on a contingency basis, meaning they get

438
00:25:37,359 --> 00:25:40,080
Speaker 3: a certain percentage of the payout if the case is

439
00:25:40,480 --> 00:25:44,680
Speaker 3: won or settled, but nothing if it's lost. Explain how

440
00:25:44,680 --> 00:25:48,480
Speaker 3: they fund these huge cases that go on for years

441
00:25:48,520 --> 00:25:49,040
Speaker 3: and years.

442
00:25:49,400 --> 00:25:52,520
Speaker 5: Sometimes mass tort firms will have their own money that

443
00:25:52,560 --> 00:25:55,200
Speaker 5: they can put towards cases, But as these cases take

444
00:25:55,280 --> 00:25:58,080
Speaker 5: longer and longer, litigation funders have come in and sort

445
00:25:58,080 --> 00:26:01,560
Speaker 5: of like filled this gap for them. So while they

446
00:26:01,920 --> 00:26:05,360
Speaker 5: wait and they pay all the fees to litigate these cases,

447
00:26:05,440 --> 00:26:08,639
Speaker 5: they can get funding from a litigation funder, and that

448
00:26:08,680 --> 00:26:12,679
Speaker 5: has been an increasingly more popular alternative in the mass

449
00:26:12,680 --> 00:26:14,560
Speaker 5: tort and like plintiffs law space.

450
00:26:15,160 --> 00:26:18,920
Speaker 3: I saw that litigation financing is a fifteen point two

451
00:26:19,160 --> 00:26:22,239
Speaker 3: billion dollar industry now. So these are loans with a

452
00:26:22,280 --> 00:26:27,040
Speaker 3: fixed interest rate that typically mature after three or four years.

453
00:26:27,480 --> 00:26:30,960
Speaker 3: Rather than being like investments that depend on the outcome

454
00:26:31,000 --> 00:26:32,760
Speaker 3: of the case, they're.

455
00:26:32,520 --> 00:26:35,520
Speaker 5: Not based on the outcome in the traditional sense of

456
00:26:35,600 --> 00:26:40,399
Speaker 5: litigation funding. But they do evaluate the case docket before

457
00:26:40,400 --> 00:26:42,840
Speaker 5: they fund them, so that's how the pricing is based.

458
00:26:42,880 --> 00:26:46,400
Speaker 5: So they'll look at a law firms like list of cases,

459
00:26:46,560 --> 00:26:50,000
Speaker 5: go through them, see what stages they're in. And you know,

460
00:26:50,040 --> 00:26:52,880
Speaker 5: some of these mass tort firms have thousands of cases,

461
00:26:52,920 --> 00:26:55,520
Speaker 5: so they may not be looking at every single one,

462
00:26:55,560 --> 00:26:57,160
Speaker 5: but they do want to get a sense of them

463
00:26:57,320 --> 00:26:59,840
Speaker 5: and how far along they are and what tortus the

464
00:27:00,119 --> 00:27:02,760
Speaker 5: involved in and how diverse it is, and that is

465
00:27:02,880 --> 00:27:06,479
Speaker 5: how they determine the total amount of the loan. So

466
00:27:06,520 --> 00:27:10,240
Speaker 5: it does still relate to the actual lawsuits that they're funding.

467
00:27:10,560 --> 00:27:14,120
Speaker 3: And the interest rates are high double digits sometimes.

468
00:27:14,000 --> 00:27:17,080
Speaker 5: Yeah, I think because these are high risks, they're often

469
00:27:17,160 --> 00:27:20,080
Speaker 5: double digit interest rates, you know, in the teens and twenties.

470
00:27:20,359 --> 00:27:22,880
Speaker 5: As the years go on, the interest rates can go up.

471
00:27:23,040 --> 00:27:26,240
Speaker 3: Two of the largest multi district court cases are against

472
00:27:26,400 --> 00:27:28,640
Speaker 3: Jay and Jay and Bayer, and they're hitting the ten

473
00:27:28,720 --> 00:27:31,600
Speaker 3: year mark with no resolution in sight. Tell us a

474
00:27:31,640 --> 00:27:33,840
Speaker 3: little about those cases, sure well.

475
00:27:33,920 --> 00:27:36,199
Speaker 5: Johnson and Johnson is one of the ones that we

476
00:27:36,280 --> 00:27:40,160
Speaker 5: often hear about. They've filed for bankruptcy three times now

477
00:27:40,200 --> 00:27:44,200
Speaker 5: to try to resolve these cases. It's just been dragging along.

478
00:27:44,600 --> 00:27:49,080
Speaker 5: The allegations are their calcum powder caused cancer and its users,

479
00:27:49,160 --> 00:27:51,320
Speaker 5: so that is the gist of the case, and it

480
00:27:51,359 --> 00:27:53,520
Speaker 5: has been going on for ten years. They just filed

481
00:27:53,760 --> 00:27:57,160
Speaker 5: for bankruptcy again, I think earlier this year, and they

482
00:27:57,160 --> 00:28:01,719
Speaker 5: have proposed global settlements that haven't been approved yet. So

483
00:28:02,200 --> 00:28:05,760
Speaker 5: there's a lot of disagreement amongst even the attorneys about

484
00:28:05,760 --> 00:28:09,600
Speaker 5: whether they should approve the bankruptcy proceedings. It's just become

485
00:28:09,640 --> 00:28:13,199
Speaker 5: a totally different type of tort because of that. So

486
00:28:13,240 --> 00:28:16,520
Speaker 5: they're really tied up in the bankruptcy proceedings and the

487
00:28:16,680 --> 00:28:20,480
Speaker 5: infighting amongst the lawyers. It's just been delayed and there's

488
00:28:20,640 --> 00:28:23,399
Speaker 5: not really a clear timeline on when it's going to

489
00:28:23,440 --> 00:28:25,639
Speaker 5: be resolved. So that's one of the main ones. And

490
00:28:25,680 --> 00:28:27,840
Speaker 5: then another one that has its sort of a different

491
00:28:27,840 --> 00:28:31,720
Speaker 5: set of issues is against there for its roundup products

492
00:28:31,920 --> 00:28:35,000
Speaker 5: and also causing cancer, and that one that there has

493
00:28:35,080 --> 00:28:38,080
Speaker 5: been three circuits that have had differing opinions on it,

494
00:28:38,120 --> 00:28:40,479
Speaker 5: which is called the circuit split. So two are in

495
00:28:40,480 --> 00:28:43,360
Speaker 5: one direction and one is in the other. So because

496
00:28:43,360 --> 00:28:47,640
Speaker 5: of that, there can be some delays in dispersing settlements

497
00:28:47,640 --> 00:28:49,880
Speaker 5: and it could be something that the Supreme Court has

498
00:28:49,960 --> 00:28:50,880
Speaker 5: to rule on.

499
00:28:51,440 --> 00:28:55,280
Speaker 3: A Supreme Court appeal can certainly take years. Brendan Bear,

500
00:28:55,360 --> 00:28:59,160
Speaker 3: the founder of Contingency Capital, said, there's a degree of

501
00:28:59,280 --> 00:29:02,840
Speaker 3: stress and distress in the space. Tell us what he

502
00:29:02,880 --> 00:29:03,400
Speaker 3: meant by that.

503
00:29:04,200 --> 00:29:07,080
Speaker 5: There are two things going on, and I think they're related.

504
00:29:07,520 --> 00:29:10,400
Speaker 5: One is that a lot of these law firms are

505
00:29:10,760 --> 00:29:14,400
Speaker 5: set up in these loans that are reaching maturity dates

506
00:29:14,440 --> 00:29:16,920
Speaker 5: and there is not a payout yet on the cases

507
00:29:17,000 --> 00:29:19,239
Speaker 5: that they were expecting to be paid on. So then

508
00:29:19,240 --> 00:29:22,800
Speaker 5: they refinance their loans either with the same thunder or

509
00:29:22,840 --> 00:29:25,560
Speaker 5: a different funder, and they have to take concessions when

510
00:29:25,560 --> 00:29:29,200
Speaker 5: they do that. So that sort of creates this environment

511
00:29:29,360 --> 00:29:33,479
Speaker 5: of constant refinancing from investors, and the money is not

512
00:29:33,480 --> 00:29:36,440
Speaker 5: necessarily coming from the cases, it's coming from other investors

513
00:29:36,440 --> 00:29:39,800
Speaker 5: in the space. And on top of that, there's not

514
00:29:40,120 --> 00:29:44,160
Speaker 5: another talcum powder right now. There's not another roundup, there's

515
00:29:44,200 --> 00:29:47,600
Speaker 5: not another camp lagoon. There are lots of mass torts

516
00:29:47,640 --> 00:29:49,920
Speaker 5: that are going on, but there's not this like gigantic

517
00:29:50,000 --> 00:29:52,760
Speaker 5: one that they're all looking towards or that's farther along.

518
00:29:53,000 --> 00:29:55,560
Speaker 5: So there are two things going on, and that the

519
00:29:55,600 --> 00:29:59,120
Speaker 5: firms are refinancing rates more often than they expected to be.

520
00:29:59,360 --> 00:30:03,480
Speaker 5: And also so there's not this big tort that everyone

521
00:30:03,640 --> 00:30:06,440
Speaker 5: is putting their money towards, or at least you know,

522
00:30:06,520 --> 00:30:09,240
Speaker 5: a lot of these law firms are really excited about

523
00:30:09,320 --> 00:30:11,880
Speaker 5: and think, you know, couldn't be helpful to their clients

524
00:30:11,920 --> 00:30:13,840
Speaker 5: but also result in a big payout.

525
00:30:14,200 --> 00:30:18,040
Speaker 3: I found that fascinating that as they're litigating these cases,

526
00:30:18,080 --> 00:30:21,880
Speaker 3: they're looking for the next big tort that they can

527
00:30:21,960 --> 00:30:22,440
Speaker 3: go after.

528
00:30:23,280 --> 00:30:26,000
Speaker 5: Yes, I mean they always are, I think to some extent.

529
00:30:26,360 --> 00:30:30,080
Speaker 5: And there was one I believe it was last year

530
00:30:30,560 --> 00:30:33,800
Speaker 5: that was against thail and all a legend that thailand

531
00:30:33,880 --> 00:30:37,440
Speaker 5: All when taken by a pregnant person would cause autism

532
00:30:37,440 --> 00:30:40,680
Speaker 5: and ADHD, and it ended up going to a Dowberd hearing,

533
00:30:40,720 --> 00:30:43,800
Speaker 5: which you know, would test the science of the claims

534
00:30:44,040 --> 00:30:47,560
Speaker 5: and it failed. So that was one that I think

535
00:30:47,720 --> 00:30:50,080
Speaker 5: some had thought could be the next big one because

536
00:30:50,120 --> 00:30:52,320
Speaker 5: a lot of women take til and all when pregnant.

537
00:30:52,360 --> 00:30:55,520
Speaker 5: It's approved, and it could have been a really massive

538
00:30:55,680 --> 00:30:58,800
Speaker 5: group of people. But then since it failed, it did

539
00:30:58,880 --> 00:31:03,000
Speaker 5: not become a multi district letigation, and that was something

540
00:31:03,280 --> 00:31:05,920
Speaker 5: not everyone. I think there were some skepticism around it,

541
00:31:05,920 --> 00:31:08,760
Speaker 5: but they were intrigued by that one, and so there

542
00:31:08,800 --> 00:31:11,360
Speaker 5: isn't something like that. I mean, one of the ones

543
00:31:11,400 --> 00:31:14,360
Speaker 5: that's referenced in the piece is Deco Crivera, which is

544
00:31:14,440 --> 00:31:18,520
Speaker 5: a contraceptive injection, and that is one that they think

545
00:31:18,560 --> 00:31:20,320
Speaker 5: will be like a big tort because there are a

546
00:31:20,360 --> 00:31:22,600
Speaker 5: lot of injuries. But you know, I haven't heard of

547
00:31:22,640 --> 00:31:23,600
Speaker 5: others at this point.

548
00:31:23,720 --> 00:31:25,920
Speaker 3: Yeah, one of the financers told you that there might

549
00:31:25,960 --> 00:31:30,120
Speaker 3: be seven major mass torts at the moment, and once

550
00:31:30,160 --> 00:31:33,600
Speaker 3: those are settled or litigated, there could be three to

551
00:31:33,720 --> 00:31:37,200
Speaker 3: five years with no actions. And some of the experienced

552
00:31:37,360 --> 00:31:40,560
Speaker 3: mass tort lawyers are blaming the new players and firms

553
00:31:40,560 --> 00:31:43,880
Speaker 3: in the space, saying they're borrowing a lot of capital

554
00:31:44,440 --> 00:31:48,240
Speaker 3: and fueling the heavily leveraged environment. One told you the

555
00:31:48,280 --> 00:31:52,120
Speaker 3: market has blown up exponentially, so they're blaming the new guys.

556
00:31:52,400 --> 00:31:54,640
Speaker 5: I think so, I think that some of the mass

557
00:31:54,640 --> 00:31:57,760
Speaker 5: tort or some of the plaintiffs. Attorneys believe that there

558
00:31:57,840 --> 00:32:00,760
Speaker 5: are other law firms that are during the space because

559
00:32:00,800 --> 00:32:03,760
Speaker 5: they want to get rich and they want to build

560
00:32:03,800 --> 00:32:05,400
Speaker 5: up their case book, and the way they want to

561
00:32:05,400 --> 00:32:07,920
Speaker 5: do that is through litigation funding. So they get all

562
00:32:07,920 --> 00:32:11,200
Speaker 5: these cases, they use the money to market and put

563
00:32:11,200 --> 00:32:15,000
Speaker 5: out commercials, They retain a lot of different claimants, and

564
00:32:15,040 --> 00:32:18,000
Speaker 5: then they have to work up those cases and they're

565
00:32:18,040 --> 00:32:21,040
Speaker 5: not really at least this is what those attorneys are saying.

566
00:32:21,040 --> 00:32:24,520
Speaker 5: They're not really prepared for the work that goes into

567
00:32:24,920 --> 00:32:27,840
Speaker 5: working up each individual case. So if you're a law

568
00:32:27,840 --> 00:32:30,520
Speaker 5: firm of two people and you have thousands of cases

569
00:32:30,600 --> 00:32:33,600
Speaker 5: because of your litigation funding, how do you attend to

570
00:32:33,640 --> 00:32:36,480
Speaker 5: all of those clients. So that's what they are saying

571
00:32:36,520 --> 00:32:39,800
Speaker 5: that there's just a lot of new firms, not necessarily

572
00:32:39,880 --> 00:32:42,240
Speaker 5: new lawyers, but new to the space coming in and

573
00:32:42,280 --> 00:32:44,920
Speaker 5: wanting to be part of this, and it's creating an

574
00:32:45,000 --> 00:32:47,560
Speaker 5: environment where there's a lot of lending going on and

575
00:32:47,640 --> 00:32:49,280
Speaker 5: also making it more crowded.

576
00:32:49,720 --> 00:32:52,880
Speaker 3: So it's a difficult area of litigation. It takes a

577
00:32:52,920 --> 00:32:55,520
Speaker 3: lot of money, it takes a lot of time. But

578
00:32:56,160 --> 00:32:59,920
Speaker 3: if you win, are the rewards for lawyers, which is

579
00:33:00,280 --> 00:33:01,840
Speaker 3: astronomical it can be.

580
00:33:02,280 --> 00:33:05,120
Speaker 5: I think it depends on the quality of the cases

581
00:33:05,120 --> 00:33:09,000
Speaker 5: that you have, quality meaning the injuries within like the

582
00:33:09,160 --> 00:33:12,760
Speaker 5: defined realm for the MDL, you know, and if you

583
00:33:12,800 --> 00:33:15,080
Speaker 5: have a lot of cases like that, you know a

584
00:33:15,080 --> 00:33:18,840
Speaker 5: lot of these mass towards lawyers are quite wealthy. So yes,

585
00:33:18,960 --> 00:33:23,120
Speaker 5: but it's also not easy defined good cases and to

586
00:33:23,320 --> 00:33:25,280
Speaker 5: work them up. So I think there's that sort of

587
00:33:25,280 --> 00:33:26,520
Speaker 5: tension going on right now.

588
00:33:26,760 --> 00:33:30,160
Speaker 3: Let's say the inexperienced lawyers or the lawyers that are

589
00:33:30,200 --> 00:33:33,400
Speaker 3: new to this field have a lot of clients they

590
00:33:33,520 --> 00:33:37,280
Speaker 3: benefit if there's a settlement, right sort of writing on

591
00:33:37,320 --> 00:33:41,320
Speaker 3: the coattails of the more experienced lead lawyers.

592
00:33:41,440 --> 00:33:44,600
Speaker 5: They could be. It sort of depends on what they're

593
00:33:44,600 --> 00:33:47,840
Speaker 5: putting their money towards, right, So if they get a

594
00:33:47,840 --> 00:33:50,280
Speaker 5: lot of funding and they put it towards marketing, but

595
00:33:50,360 --> 00:33:53,720
Speaker 5: they hire a marketing company that's not doing a great

596
00:33:53,840 --> 00:33:57,320
Speaker 5: job getting calls as they come in, you could end

597
00:33:57,400 --> 00:34:00,760
Speaker 5: up with thousands of cases that are not very valuable.

598
00:34:01,200 --> 00:34:04,160
Speaker 5: Or you can do your research, you can put them

599
00:34:04,200 --> 00:34:07,240
Speaker 5: towards marketing with the companies that you trust, and you

600
00:34:07,280 --> 00:34:09,359
Speaker 5: can be working them up as they're coming in, and

601
00:34:09,680 --> 00:34:13,800
Speaker 5: there's just different approaches. But I think the concern is

602
00:34:13,920 --> 00:34:16,880
Speaker 5: that some of these firms may have lots of cases

603
00:34:16,920 --> 00:34:21,320
Speaker 5: that actually don't qualify for the court. Maybe, like for instance,

604
00:34:21,320 --> 00:34:23,520
Speaker 5: if we talk about Camp La June, which I wrote

605
00:34:23,520 --> 00:34:26,040
Speaker 5: a piece on this last year. You know, some of

606
00:34:26,080 --> 00:34:28,520
Speaker 5: the law firms had clients who were fake, like they

607
00:34:28,520 --> 00:34:30,439
Speaker 5: gave them a fake address. They just wanted to get

608
00:34:30,440 --> 00:34:33,719
Speaker 5: in on potential settlement because they see these advertisements. So

609
00:34:34,040 --> 00:34:35,759
Speaker 5: I think, yes, they could be a big part of

610
00:34:35,800 --> 00:34:38,560
Speaker 5: the settlement, but their cases still have to qualify. It's

611
00:34:38,600 --> 00:34:41,400
Speaker 5: also have used the product and been injured by it

612
00:34:41,440 --> 00:34:42,439
Speaker 5: in a specific way.

613
00:34:42,840 --> 00:34:46,480
Speaker 3: And is there any concern that the lawyers are thinking

614
00:34:46,520 --> 00:34:51,600
Speaker 3: about their investors and their investment before their clients' concerns.

615
00:34:51,920 --> 00:34:54,520
Speaker 5: Some attorneys believe that that is the case. It's hard

616
00:34:54,560 --> 00:34:57,680
Speaker 5: to know really what's going on behind closed doors, but

617
00:34:57,840 --> 00:35:02,040
Speaker 5: there have been allegations that, in particular end the Johnson

618
00:35:02,080 --> 00:35:05,560
Speaker 5: and Johnson talcum powder cases, there have been law firms

619
00:35:05,560 --> 00:35:09,480
Speaker 5: accusing other law firms of wanting to accept the bankruptcy proposal,

620
00:35:09,600 --> 00:35:13,080
Speaker 5: but then only because they're motivated by having to pay

621
00:35:13,080 --> 00:35:17,279
Speaker 5: back their loans to the investors. So that's definitely alleged

622
00:35:17,320 --> 00:35:20,359
Speaker 5: a lot. Whether it's actually happening, it's hard to say,

623
00:35:20,719 --> 00:35:22,560
Speaker 5: but I know that a lot of lawyers are concerned

624
00:35:22,560 --> 00:35:23,400
Speaker 5: that that's happening.

625
00:35:23,640 --> 00:35:26,640
Speaker 3: Are there firms that have decided to get away from

626
00:35:26,760 --> 00:35:29,640
Speaker 3: mass torts because of the length of time involved in

627
00:35:29,680 --> 00:35:30,400
Speaker 3: these cases.

628
00:35:31,160 --> 00:35:33,480
Speaker 5: I think that there are some, at least on the

629
00:35:33,480 --> 00:35:36,680
Speaker 5: funding side. There are litigation funders that try to have

630
00:35:36,760 --> 00:35:39,720
Speaker 5: a more diverse portfolio. So if they're going to invest

631
00:35:39,800 --> 00:35:42,560
Speaker 5: in firms that have mass torts, they also want those

632
00:35:42,600 --> 00:35:46,640
Speaker 5: firms to be handling other personal injury cases because those

633
00:35:46,680 --> 00:35:50,120
Speaker 5: are shorter term, and you know, that can sort of

634
00:35:50,200 --> 00:35:53,520
Speaker 5: keep money coming in while they wait on these big torts.

635
00:35:53,719 --> 00:35:56,640
Speaker 5: I think that as they enter this period where they're

636
00:35:56,680 --> 00:36:00,480
Speaker 5: looking for another sport, they're just looking for firms that

637
00:36:00,719 --> 00:36:03,920
Speaker 5: are really aware of that and are just trying to

638
00:36:03,960 --> 00:36:06,480
Speaker 5: be as diverse as possible. There are many funders who

639
00:36:06,520 --> 00:36:09,239
Speaker 5: don't do math torts at all because they do not

640
00:36:09,440 --> 00:36:11,759
Speaker 5: like their duration issues. You know what I heard from

641
00:36:11,800 --> 00:36:14,520
Speaker 5: Andrew at s Fier Bank. You know, he saw this

642
00:36:14,560 --> 00:36:17,200
Speaker 5: happening years ago and thought I need to move farther

643
00:36:17,280 --> 00:36:21,120
Speaker 5: away from this while still having some money exposure in

644
00:36:21,239 --> 00:36:24,520
Speaker 5: math tors. But also the smaller single cases.

645
00:36:24,760 --> 00:36:27,720
Speaker 3: Well, your story is really fascinating. Emily, thanks so much.

646
00:36:28,040 --> 00:36:31,920
Speaker 3: That's Emily Siegel, Bloomberg Law Senior Reporter. And that's it

647
00:36:32,000 --> 00:36:34,960
Speaker 3: for this edition of the Bloomberg Law Podcast. Remember you

648
00:36:34,960 --> 00:36:37,719
Speaker 3: can always get the latest legal news by subscribing and

649
00:36:37,760 --> 00:36:41,319
Speaker 3: listening to the show on Apple Podcasts, Spotify, and at

650
00:36:41,320 --> 00:36:45,640
Speaker 3: Bloomberg dot com, slash podcast, slash Law. I'm June Grosso

651
00:36:45,840 --> 00:36:47,320
Speaker 3: and this is Bloomberg