WEBVTT - Cities Reject $50 Billion Opioid Settlement

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. A fifty billion

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<v Speaker 1>dollar offer by drugmakers and distributors to sell the opioid

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<v Speaker 1>litigation has ignited a fight between state attorneys general and

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<v Speaker 1>thousands of local governments over how much the pharmaceutical industry

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<v Speaker 1>should pay for its role in creating the opioid crisis.

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<v Speaker 1>Many attorneys general are backing the offers, while lawyers for

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<v Speaker 1>local governments are rejecting them. Joining me is Eric Gordon,

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<v Speaker 1>a professor at the Raw School of Business. Municipalities learned

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<v Speaker 1>a hard lesson from the Big Tobacco Settlement. So is

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<v Speaker 1>the problem that despite what seems like a large number,

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<v Speaker 1>they think it isn't enough. Is that the only problem?

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<v Speaker 1>I think it's not so much just the amount. The

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<v Speaker 1>these want to make sure they get what they think

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<v Speaker 1>is their fair share. As you said, in the tobacco settlement,

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<v Speaker 1>the city thought that the states hogged the money, and

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<v Speaker 1>they don't want to repeat of that. And there's a

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<v Speaker 1>second issue. There's the timing of when they'll get the money.

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<v Speaker 1>So they don't want to get the money over ten

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<v Speaker 1>or twenty years. They want to get the money now

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<v Speaker 1>because whatever is the link or lack of link to

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<v Speaker 1>the opioid things, a lot of cities are in big

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<v Speaker 1>financial trouble and a billion dollars today is a lot

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<v Speaker 1>more valuable than a hundred million dollars a year over

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<v Speaker 1>ten years. States also opposed the deal. So when you

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<v Speaker 1>look at those numbers, how far away from a global

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<v Speaker 1>settlement are we or can that all change really quickly?

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<v Speaker 1>I think it can change quickly, not easily, but you know,

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<v Speaker 1>I think the judge can do some head hitting, and

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<v Speaker 1>I think the States in the city says a tough choice,

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<v Speaker 1>which is get this settled, even for an amount that

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<v Speaker 1>isn't the amount we hope for, and get it settled

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<v Speaker 1>now and start getting money now, or battle this out

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<v Speaker 1>over what could be two, three or four years. So

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<v Speaker 1>I think the pressure is on to settle it, but

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<v Speaker 1>you know, there's some history that makes it a little

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<v Speaker 1>tougher and there's a lot of elbowing going on. Interestingly,

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<v Speaker 1>I'm not sure the toughest fight is between the plaintiffs

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<v Speaker 1>and the defendants. I think the toughest fight is amongst

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<v Speaker 1>the plaintiffs themselves. Let's talk about the two sixty million

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<v Speaker 1>dollars settlement. On the eve of the first federal opioid trial.

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<v Speaker 1>The lawyers were negotiating until about one in the morning,

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<v Speaker 1>others were getting ready for trial. Before they settled. That

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<v Speaker 1>trial would have been what's called a bell weather. Which

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<v Speaker 1>side fared best in the settlement, the plaintiff, Ohio counties

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<v Speaker 1>or the drug distributors. It's hard to tell which of

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<v Speaker 1>them fared better. What you can say is that the

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<v Speaker 1>bell weather really didn't become much of a bell weather

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<v Speaker 1>because in the bell weather, you get to see the

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<v Speaker 1>other side present their case, you get to see their

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<v Speaker 1>witnesses under cross examination, and you get to see a

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<v Speaker 1>real fact finder in this case, a real jury make

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<v Speaker 1>a decision, and on that basis, you have a lot

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<v Speaker 1>more information to decide what terms you're willing to offer

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<v Speaker 1>or accept in a settlement. Here, they didn't go through that,

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<v Speaker 1>as you said, I mean literally on the courthouse steps.

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<v Speaker 1>They settled it. So the bell weather didn't work all

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<v Speaker 1>that terrifically as a bell Weather. The one thing it

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<v Speaker 1>did do is it gave a range of settlement amounts.

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<v Speaker 1>It was two hundred and fifty million dollars, not two

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<v Speaker 1>and a half billion dollars. So we sort of know

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<v Speaker 1>the order of magnitude in which people are willing to settle,

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<v Speaker 1>but we haven't seen what happens when you really go

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<v Speaker 1>into the courtroom. So it's only sort of a half

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<v Speaker 1>bell Weather. And one of the factors there seemed to

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<v Speaker 1>be the ability of the municipalities to get the money quickly. Yeah,

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<v Speaker 1>the municipalities wanted the money, and they wanted it. Now

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<v Speaker 1>they're in financial trouble today and these things of spreading

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<v Speaker 1>the money over ten years or getting you know, sort

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<v Speaker 1>of payment and kind getting anti opioid drugs over the

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<v Speaker 1>course of ten years was not as appealing to them

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<v Speaker 1>as getting millions of dollars of cash in the door

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<v Speaker 1>right now. The lawyer for the cities and counties is

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<v Speaker 1>one of the best plaintiffs lawyers in the country, and

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<v Speaker 1>he was preparing a real show at trial. So is

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<v Speaker 1>a problem also going to be the plaintiff's attorneys and

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<v Speaker 1>how much they get and how tough they are. Well

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<v Speaker 1>they're tough, but those of us who have litigated or

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<v Speaker 1>negotiated deal us know that you'd rather face a really smart,

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<v Speaker 1>really experienced opponent, even if he or she is really tough,

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<v Speaker 1>because at least their experience and they know how to

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<v Speaker 1>settle things. It's much tougher to deal with an amateur.

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<v Speaker 1>I think there's some disappointment that we didn't get to

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<v Speaker 1>see the plaintiff show, because they always put on a

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<v Speaker 1>good show. The plaintiffs attorneys are going to ask for

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<v Speaker 1>lots and lots of money in June. You know from

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<v Speaker 1>our other conversations, I'm not always a fan of plaintiff's

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<v Speaker 1>lawyers who skim off millions of dollars and leave their

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<v Speaker 1>clients with very little, but this case is quite different.

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<v Speaker 1>In this case, the plaintiffs lawyers did a tremendous amount

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<v Speaker 1>of work. They went through piles and piles of documents

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<v Speaker 1>and evidence, so they're going to want a lot of

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<v Speaker 1>money and they probably have earned it. Did the plaintiffs

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<v Speaker 1>lawyers really do the groundwork rather than the attorneys generals

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<v Speaker 1>of the dates? It was a team effort, but clearly

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<v Speaker 1>the plaintiffs lawyers added some value because the attorneys general

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<v Speaker 1>are not staffed to do cases like this, especially the

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<v Speaker 1>attorneys general from some of the smaller states, so they

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<v Speaker 1>all worked together. But I think it would have been

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<v Speaker 1>tough for the attorneys general to get the results they've

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<v Speaker 1>gotten and are likely to get without the help of

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<v Speaker 1>really experienced plaintiffs attorneys. Is the opioid litigation a lot

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<v Speaker 1>like the tobacco litigation or is it different because of

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<v Speaker 1>the opioid crisis that the country is still suffering through.

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<v Speaker 1>I think the opioid litigation is tougher because the damage

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<v Speaker 1>is more horrifying. In the tobacco litigation, people died of

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<v Speaker 1>lung cancer, and that's a horrifying way to die, but

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<v Speaker 1>people died quietly and privately. The opioid crisis is very public.

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<v Speaker 1>You walk down the streets of almost any town, small

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<v Speaker 1>towns as well as big cities, and you see the

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<v Speaker 1>results of the opioid crisis, and it reached people who

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<v Speaker 1>had no idea about the dangers. We we knew about

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<v Speaker 1>the dangers of tobacco for a long time, and people

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<v Speaker 1>kept smoking anyway. A lot of the people who suffered

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<v Speaker 1>in the opioid crisis, we're just taking pills that their

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<v Speaker 1>doctor prescribed um and they look to their doctors for

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<v Speaker 1>prescribing things that would make them better, uh not addicts.

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<v Speaker 1>So I the opioid thing is I think a level

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<v Speaker 1>even worse than the tobacco disaster. Is that why the

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<v Speaker 1>manufacturers and distributors want to settle fast without even going

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<v Speaker 1>to trial. They're not even going through trials to see

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<v Speaker 1>what will happen before they say will settle. I think

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<v Speaker 1>a lot of the defendants think that there's no chance

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<v Speaker 1>of getting a fair trial. I think they fear that

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<v Speaker 1>when the story of the opioid crisis is told to

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<v Speaker 1>the jurors, that the jurors are just going to sock

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<v Speaker 1>it to them without paying much attention to the science

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<v Speaker 1>as the law. I think they're just frightened about the

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<v Speaker 1>prospect of no, no such thing as a real fair

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<v Speaker 1>trial for them. Did we learn anything from the Oklahoma trial?

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<v Speaker 1>We all we learned that there it was a fact finder.

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<v Speaker 1>It was a judge, not a jury, but a tough

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<v Speaker 1>judge who you expect to be less emotional than a jury,

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<v Speaker 1>said well you're guilty, you did really horrible stuff, and

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<v Speaker 1>you're going to pay a lot of money. If you

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<v Speaker 1>lose in front of a judge, you're almost certainly going

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<v Speaker 1>to lose in front of a jury. Is there anybody

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<v Speaker 1>to tell what the timeline is here? We're talking months years.

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<v Speaker 1>I think we're talking months, not years, and we could

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<v Speaker 1>be surprised and get a settlement within a couple of weeks,

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<v Speaker 1>but I think months is more realistic. I think there's

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<v Speaker 1>going to be urgency on the side of the cities

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<v Speaker 1>and states who need the money to not wait for years,

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<v Speaker 1>And I think on the defendant side, they want to

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<v Speaker 1>get this behind them. They want some certainty on it.

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<v Speaker 1>The stock market does not like uncertainty and might be

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<v Speaker 1>discounting the value of the companies by even more than

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<v Speaker 1>the companies will end up paying, So both sides have

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<v Speaker 1>reasons to get it settled sooner rather than later. Thanks Eric,

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<v Speaker 1>that's Eric Gordon, a professor at the Raw School of Business.

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<v Speaker 1>Thanks for listening to the Bloomberg Law Podcast. You can

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<v Speaker 1>subscribe and listen to the show on Apple podcast, SoundCloud,

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<v Speaker 1>and on Bloomberg dot com slash podcast. I'm June Bolso.

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<v Speaker 1>This is Bloomberg