Speaker 1: Welcome to the Bloomberg Law Show. I'm June Grosso. Ahead
Speaker 1: in this hour, When do campus protesters lose First Amendment protections?
Speaker 1: Audio tapes and testimony from a former White House aid
Speaker 1: In the second week of Trump's hush money trial, Elon
Speaker 1: Musk's Twitter sitter case turned down by the Supreme Court,
Speaker 1: and billionaire Binance founder Shang Panjao will be the richest
Speaker 1: person ever to do time in a federal prison. Demonstrations
Speaker 1: against the Israel Hamas war have wreaked havoc on college
Speaker 1: campuses across the country, escalating in recent weeks as pro
Speaker 1: Palestinian demonstrators refuse to remove encampments and administrators turned to
Speaker 1: police to clear them by force, often resulting in violent clashes.
Speaker 2: I kinda Gail Gibson, the police captain for the University
Speaker 2: of Cowboy of other at.
Speaker 3: And your right player has to be at my momost
Speaker 3: break ups, and you do not do so, you may
Speaker 3: be arrested or subject to other prospections.
Speaker 1: At UCLA's campus in Los Angeles on Thursday, police warned
Speaker 1: protesters for hours over loud speakers that there would be
Speaker 1: arrests if they didn't disperse, and in the pre dawn hours,
Speaker 1: police in riot gear confronted demonstrators in helmets and gas
Speaker 1: masks and arrested two hundred protesters. Similar chaotic scenes are
Speaker 1: playing out at colleges nationwide. From the White House, President
Speaker 1: Joe Biden warned against violence and said the protests put
Speaker 1: to the test two fundamental American principles. The first is
Speaker 1: the right to free speech and for people to peacefully
Speaker 1: assemble and make their voices heard. The second is the
Speaker 1: rule of law.
Speaker 2: Both must be upheld.
Speaker 1: The charge situation sp like the difficulty of balancing the
Speaker 1: right to free speech with the need to provide a
Speaker 1: space where students feel safe joining me is constitutional law
Speaker 1: scholar Michael Dorf, a professor at Cornell Law School, explain
Speaker 1: what the First Amendment protects in the context of these demonstrations.
Speaker 3: The First Amendment protects speech and other expressive activity, primarily
Speaker 3: against government interference or where it's voluntarily undertaken, private university
Speaker 3: interference that is based on the content of the speech. Right.
Speaker 3: So the critical distinction is between what are sometimes called time,
Speaker 3: place and manner restrictions. Right, you can have your rally
Speaker 3: in this place, but not that place, at this time,
Speaker 3: but not that time without amplification, except under certain circumstances.
Speaker 3: Those are about how you are making your point, and
Speaker 3: generally the government has considerable leeway to restrict that so
Speaker 3: long as it does so reasonably. Orsu content based restrictions.
Speaker 3: You can't have a rally for this side, but you
Speaker 3: can have it for the other side, right, And so
Speaker 3: that's the sort of basic principle that's operating here. The
Speaker 3: government can restrict speech, but not based on its content,
Speaker 3: and when it does so, it has to do so reasonably,
Speaker 3: meaning leave open adequate alternative channels of communication and so forth.
Speaker 1: Let me give you an example. An anti semitic chant.
Speaker 1: Would that be protected under the First Amendment?
Speaker 3: Strange as it may sound, the answer to that question
Speaker 3: is yes. In most constitutional democracies the answer would be no.
Speaker 3: But in the United States, what is sometimes called hate
Speaker 3: speech is not unprotected in virtue of the fact that
Speaker 3: it is hate speech. The leading case is a case
Speaker 3: from the US Supreme Court in nineteen ninety two called
Speaker 3: rav against City of Saint Paul, which said that the
Speaker 3: First Amendment does not include an exception for hate speech. Now,
Speaker 3: I should qualify that by saying that an anti Semitic
Speaker 3: chant under certain circumstances, could be proscribable harassment. So if
Speaker 3: you think about racial or sexual harassment at the workplace,
Speaker 3: which is forbidden by Title seven of the nineteen sixty
Speaker 3: four Civil Rights Act, or at a federally funded college
Speaker 3: or university, which means just about every college and university
Speaker 3: in the country, racial harassment is prescribed if a college
Speaker 3: university takes federal funds. It's just what all of them do.
Speaker 3: They're not permitted to tolerate racial harassment. And Department of
Speaker 3: Education guidelines define anti semitism, Islamophobia, and various other forms
Speaker 3: of hatred that you might think correlate with religion but
Speaker 3: have some sort of ethnic and therefore racial component. It
Speaker 3: defines those as covered by Title six. So if the
Speaker 3: chant rises to the level of harassment, then it is
Speaker 3: forbidden by Title six. In the universe, city is not
Speaker 3: only permitted, but obligated to stop it. And now the
Speaker 3: question that naturally raises is does the First Amendment contain
Speaker 3: an exception for harassment? The Supreme Court has never decided
Speaker 3: that question. Lower courts have assumed that the answer to
Speaker 3: that is yes, and I think that is the correct answer.
Speaker 3: That is to say that what is defined as harassment,
Speaker 3: which is sort of creating a hostile environment based on
Speaker 3: race or sex and so forth, is proscribable. That is
Speaker 3: to say, the First Moment doesn't protect that, And you
Speaker 3: have to ask, well, what's the reason for that. Why
Speaker 3: is it that if there is no exception to the
Speaker 3: First Moment for hate speech, why is it that the
Speaker 3: government can forbid harassment that takes the form of hate speech.
Speaker 3: The answer to that, I think is that the government
Speaker 3: can't forbid harassment generally where harassment consists simply of saying
Speaker 3: offensive things, but it can do so when it's targeted
Speaker 3: in circumstances where someone can't just sort of look the
Speaker 3: other way. So if a neo Nazi group or white
Speaker 3: supremacists want to have a march through Charlottesville, for example,
Speaker 3: they're protected by the First Amendment in doing so. But
Speaker 3: if they want to do that at the workplace of
Speaker 3: particular individuals, then those people are a kind of captive
Speaker 3: audience at work. And the crucial question, then, I think,
Speaker 3: for current purposes, is to what extent is a college
Speaker 3: or university campus more like a workplace where there's a
Speaker 3: kind of captive audience rationale for restricting what would otherwise
Speaker 3: be offensive. But first protected speech versus more like just
Speaker 3: the public streets and public parks and so forth. I
Speaker 3: think that's a question to which we don't have an answer,
Speaker 3: but it's sort of at the heart of the clash
Speaker 3: between the First Amendment and crimination principles.
Speaker 1: More than twenty three hundred demonstrators have been arrested across
Speaker 1: the country so far. Let's use Colombia as an example.
Speaker 1: And let's say that these protesters are charged. Do they
Speaker 1: have any defense based on the First Amendment?
Speaker 3: Say so, that's a complicated question because their right to
Speaker 3: free speech as against Columbia is of course contractual right
Speaker 3: because Columbia adopt free speech principles voluntarily. It's not imposed
Speaker 3: by the First Amendment. There is a New York state
Speaker 3: law that governs discipline for various reasons, but it doesn't
Speaker 3: really create a free speech right if they are prosecuted.
Speaker 3: And my understanding is a lot of people are being released,
Speaker 3: although I don't know what's happening with the latest rounds
Speaker 3: of arrests, I know that was true of the earlier round.
Speaker 3: But if they are prosecuted, in order to have a
Speaker 3: successful First Amendment defense, they would need to show that
Speaker 3: they were being selectively prosecuted by New York State or
Speaker 3: New York City because of their message, as opposed to
Speaker 3: because they were engaged in criminal trespass and we're told
Speaker 3: to leave and give an opportunity to leave. And it's
Speaker 3: notoriously difficult to make out a successful case of selective prosecution.
Speaker 3: And so I think the answer is very likely no,
Speaker 3: especially because my understanding is the New York City Police
Speaker 3: only moved in at Columbia's invitation. So even if we
Speaker 3: think Columbia is acting because they don't like the message,
Speaker 3: which I don't think it's established. But even if we
Speaker 3: thought that, that doesn't mean that New York City is
Speaker 3: proceeding because they don't like the message. As I said,
Speaker 3: the MIPD only goes in once they're invited. You can
Speaker 3: think of it in the following way, right, that is,
Speaker 3: there is a law against criminal trespass. If somebody comes
Speaker 3: into your apartment when you're not there, and then you
Speaker 3: ask them to leave, and they refuse to leave, and
Speaker 3: you call the comp the police come and they remove them,
Speaker 3: doesn't matter what your reason was for calling the cups.
Speaker 3: Maybe you didn't like that they were there. Because they
Speaker 3: were saying things that you found offensive that wouldn't convert
Speaker 3: the police action in removing that person into a violation
Speaker 3: of the First Amendment.
Speaker 1: What's the hardest part of this analysis of what the
Speaker 1: First Amendment protects and what it doesn't.
Speaker 3: I mean, I think the place at which you draw
Speaker 3: the line between permissible free speech and prescribable harassment. It's
Speaker 3: complicated by the fact that there are you know, many
Speaker 3: participants in these encampments, and so you know, in New York,
Speaker 3: you know, you saw Mayor Adams complaining yesterday about outside
Speaker 3: agitators sort of infiltrating the Columbia takeover of Hamilton Hall
Speaker 3: and the protests generally. And you know, that's an old problem,
Speaker 3: especially on a political left, that you have movements that
Speaker 3: attract people who have views that are sort of within
Speaker 3: a range of sort of within a standard deviation or
Speaker 3: two of the center of public opinion. And then you
Speaker 3: have people who are truly radical, and not just radical
Speaker 3: in their substance views, but in the means that they
Speaker 3: want to use, who then attach themselves to these movements,
Speaker 3: and that can then undercut the other folks. And so,
Speaker 3: you know, in addition to the question of how do
Speaker 3: you protect students who feel, in some cases justifiably threatened
Speaker 3: by the protests without you know, shutting down people's right
Speaker 3: to express themselves. There's also the question of how do
Speaker 3: you separate out the people who are really engaged in
Speaker 3: harassment or threats what have you, from people who are
Speaker 3: just there legitimately to protest. And I think that's a
Speaker 3: very very hard question.
Speaker 1: There's so much that goes into this analysis, and the
Speaker 1: Supreme Court has never drawn a line between the two.
Speaker 3: No. I mean, so the subcuit has never faced a
Speaker 3: case in which the issue was somebody is being charged
Speaker 3: with the racial or sexual harassment, whether it's an employer
Speaker 3: for failing to shut it down, whatever, and there's a
Speaker 3: claim of free speech. On the other side, there are
Speaker 3: lower court cases that in Supreme Ware cases that seem
Speaker 3: to just accept that it's permissible for the government to
Speaker 3: require private employers, private universities, et cetera, to restrict harassment,
Speaker 3: or even public universities to restrict harassment and harassment includes
Speaker 3: creating a hostile environment. But they don't directly address the
Speaker 3: question of, you know, well, what if the basis for
Speaker 3: finding that it's a hostile environment is that people are
Speaker 3: engaged in protests that express a viewpoint but also hit
Speaker 3: home with other people in the community. That is unexplored territory.
Speaker 3: There's academic writing on it, but again no definitive Supreme Court.
Speaker 1: We'll have to see how the courts handle these cases.
Speaker 1: Thanks so much, Mike. That's Professor Michael Dorf of Cornell
Speaker 1: Law School coming up. How's the prosecution doing in the
Speaker 1: second week of Trump's hush money trial. I'm June Grosso
Speaker 1: and you're listening to Bloomberg. We are appointing this till
Speaker 1: we had a fair trial.
Speaker 4: If we had a fair judge, I don't think it
Speaker 4: would to be allowed.
Speaker 2: This trial to take place.
Speaker 1: Trying to make it a salacious He's allowing things in
Speaker 1: that have nothing to do with this case.
Speaker 4: Nothing to do with it.
Speaker 1: Donald Trump once again complaining about the hush money trial
Speaker 1: on Friday, after a week in which jurors heard first
Speaker 1: hand accounts of the negotiations to pay off two women
Speaker 1: to prevent damaging stories about the former president's alleged extramarital
Speaker 1: affairs from becoming public as part of a scheme to
Speaker 1: illegally influence the twenty sixteen presidential election, and one of
Speaker 1: the pivotal pieces of evidence was a recording of a
Speaker 1: meeting between Trump and Michael Cohen, his former lawyer and fixer,
Speaker 1: shortly before the election, in which they in which they
Speaker 1: discussed a plan to pay off an ex playboy model
Speaker 1: who claimed to have had an affair with Trump, and
Speaker 1: I spoke to.
Speaker 3: Allan about it.
Speaker 5: When it comes time to the financing, which will be.
Speaker 3: We'll have to pay you, so'll no no no, I got.
Speaker 1: And the last witness this week was Trump's former top aide,
Speaker 1: Hope Hicks, who gave dramatic testimony about the campaign's panic
Speaker 1: when explosive stories about Trump's alleged affairs leaked to the public.
Speaker 1: Joining me for a look at the week is former
Speaker 1: federal prosecutor Robert Mintz, a partner maccarter in English, Bob
Speaker 1: tell us about the prosecution's strategy here, particularly in the
Speaker 1: presentation of the witnesses.
Speaker 2: The key witness in this case is certainly going to
Speaker 2: be Michael Cohene, former President Trump's lawyer and fixer, who
Speaker 2: was at the very heart of this case. What prosecutors
Speaker 2: have done is to try to say at the stage
Speaker 2: building up to the testimony of mister Cohen, which will
Speaker 2: be the climactic moment of this trial without any question,
Speaker 2: And they're trying to introduce to jurors the concept of
Speaker 2: mister Cohen, the role that he played relative to this case,
Speaker 2: and his relationship with former President Trump. And they're doing
Speaker 2: that first through the remarks of people who knew him.
Speaker 2: Now they have done it more recently by playing a
Speaker 2: tape where they can hear mister Cohne's voice along with
Speaker 2: former President Trump, and eventually they will hear from mister
Speaker 2: Cohen himself. But by the time that mister Cohn takes
Speaker 2: the stand, jurors will already be very familiar with who
Speaker 2: he is and what his role in this case is.
Speaker 2: From the standpoint of the prosecution.
Speaker 1: Prosecutors love tapes, and they played a recording that Cohen
Speaker 1: secretly made in which he's discussing with Trump financing one
Speaker 1: hundred and fifty thousand dollars payment a few months before
Speaker 1: the twenty sixteen election. But the tape seems to cut
Speaker 1: both ways because he's talking about the financing and how
Speaker 1: he's got it all under control, like he's in charge,
Speaker 1: and that sort of squares with Trump's defense that this
Speaker 1: was all, Michael Cohen.
Speaker 2: Well, when we talk about the tape that was introduced
Speaker 2: during this trial, we need to make something very clear
Speaker 2: because it's critical to how this tape came into being
Speaker 2: and how we'll be viewed by jurors. When prosecutors make tapes,
Speaker 2: and you're absolutely right, prosecutors love tapes because it's a
Speaker 2: way for them to hear from the defendants themselves. Defendants
Speaker 2: have a Fifth Amendment right not to take the stand
Speaker 2: in the criminal case. In most criminal cases, defendants do
Speaker 2: not testify on their own behalf because that generally does
Speaker 2: not end well for them. So the only way that
Speaker 2: jurors will often hear from a defendant is by hearing
Speaker 2: a tape in which they hear the defendant. According to prosecutors,
Speaker 2: talking about the criminal activity. It's a way for jurors
Speaker 2: here the voices of the co conspirators in real time
Speaker 2: carrying out the alleged criminal scheme. So tapes are a
Speaker 2: favorite tool of prosecutors, but typically the tape is done
Speaker 2: under the supervision and at the direction of the FBI
Speaker 2: or the DEA or whatever federal agency is running the case.
Speaker 2: They get the witnesses prepared, They basically give an outline
Speaker 2: to the witnesses about the conversation. It might be a wiretap.
Speaker 2: That's another way the tapes are created. But here we
Speaker 2: had an usual circumstance where Michael Cone made this tape himself.
Speaker 2: This was years before any of this started. It was
Speaker 2: in twenty sixteen, two months before the presidential election, and
Speaker 2: so Cone made this tape himself. And as a result,
Speaker 2: it's not a dream tape for prosecutors, but it does
Speaker 2: help them in some ways and it hurts them in others.
Speaker 1: What about the fact that Michael Cohen, a lawyer, is
Speaker 1: taping his own client.
Speaker 2: Well, I think one of the problems with this tape
Speaker 2: is that it does pain Michael Cohen in a rather
Speaker 2: unslattering light. It shows that he is taping former President Trump,
Speaker 2: his own client, without former President Trump's knowledge. Who knows
Speaker 2: how many other clients he may have tape. And it
Speaker 2: says something about Michael Cohen and about the way he
Speaker 2: does business that he's taping his clients in September of
Speaker 2: twenty sixteen. And what ends up happening here is we
Speaker 2: have a tape that does help prosecures by hearing former
Speaker 2: President Trump's voice talking about the hush money payments, talking
Speaker 2: about his knowledge about those payments leading up to the election.
Speaker 2: But the tape is not perfect because it doesn't.
Speaker 5: Go into other areas.
Speaker 2: And whenever you have a tape, there's always some comments
Speaker 2: that are made that are helpful, and the defense will
Speaker 2: always point to other comments that were not made during
Speaker 2: the tape to suggest that because they weren't made on
Speaker 2: the tape, then they don't exist.
Speaker 1: Let's talk about the strategy of the defense, I mean
Speaker 1: so far during the prosecution's case, so they're basically attacking
Speaker 1: the credibility of most of the witnesses, but they're also
Speaker 1: trying to put a spotlight on the actions Michael Cohen
Speaker 1: took in these schemes.
Speaker 2: The defense lawyer did a pretty good job of showing
Speaker 2: that the lawyer who represented Stormy Daniels in connections with
Speaker 2: the payment went right up to the line of extortion
Speaker 2: by demanding a payment in order not to go public
Speaker 2: with the statement of this alleged affair. And he beat
Speaker 2: up that lawyer pretty well to show him at least
Speaker 2: that someone who was skating on the edge of the
Speaker 2: law when it came to extortion, he didn't suggest he
Speaker 2: broke the law. But he certainly tried his best to
Speaker 2: paint him in an unflattering light. But really the target
Speaker 2: for the defense is always going to be Michael Cohne.
Speaker 2: Michael Cohne is at the heart of this case. They
Speaker 2: are going to suggest that Michael Cohne was the architect
Speaker 2: of this payment scheme, and most critically, they are going
Speaker 2: to suggest that it was Michael Cohne and not former
Speaker 2: President Trump who designed the payoff scheme and designed the
Speaker 2: cover up because remember, this case is not about the
Speaker 2: hush money payment that was essentially conceded at the opening
Speaker 2: statement by the Trump defense. It's all about how those
Speaker 2: payments were allegedly covered up as a business expense. That's
Speaker 2: what's made this case of crime, and the defense strategy
Speaker 2: is going to say that that was all schemed up
Speaker 2: by Michael Cohne without the involvement or the knowledge of
Speaker 2: former President Trump at the time.
Speaker 1: And now we have the big Friday witness. Prosecutors love
Speaker 1: to put on witnesses on Friday afternoon that they think
Speaker 1: are going to be very strong because it supposedly stays
Speaker 1: with the jurors all weekend. Do you buy that theory
Speaker 1: or did you fall into it? When you were a prosecutor.
Speaker 2: Well, I think at the end of the day, prosecutors
Speaker 2: have to present their witnesses in an orderly way, so
Speaker 2: you can't really rejigger the testimony of witnesses. It has
Speaker 2: to be logical, it has to flow. There's a certain
Speaker 2: strategy into how you build your case. But as a
Speaker 2: former prosecutor, I can tell you there's nothing wrong with
Speaker 2: having a very strong witness the day on Friday.
Speaker 1: Hope seems to be a lot different from the other
Speaker 1: main prosecution witnesses we've heard from so far, because she
Speaker 1: doesn't have the credibility or morality, shall we say, problems
Speaker 1: of witnesses like the former publisher of the National Inquirer
Speaker 1: or the lawyer who broker these hush money deals.
Speaker 2: Yeah, Hope Hicks does not have a lot of baggage
Speaker 2: at all. She is not a leg to being involved
Speaker 2: in this payoff scheme. She wasn't working for the National
Speaker 2: Inquirer on these tax and kill questionable practices of varying
Speaker 2: stories for money. All of that is rather unseemly, and
Speaker 2: all of those witnesses are open to cross examination based
Speaker 2: upon only their credibility, but even the morality of what
Speaker 2: they were doing. The defense lawyers made a point of
Speaker 2: attacking them, and so she will be a strong witness
Speaker 2: for the prosecution, but she doesn't have as much information
Speaker 2: at the heart of the case as some of the
Speaker 2: other witnesses are.
Speaker 1: And with hicks testimony, the focus of the trial seemed
Speaker 1: to be moving from the tabloid world to the world
Speaker 1: of the campaign in White House.
Speaker 2: What she adds to the prosecution's argument is to show
Speaker 2: the campaign's sensitivity to these issues in light of a
Speaker 2: Hollywood access tape, and how critical the campaign viewed the
Speaker 2: public perception of Donald Trump, who was then a candidate
Speaker 2: for president, and doing their best to try to tamp
Speaker 2: down some of these salacious stories that were beginning to
Speaker 2: percolate in the press. So it shows from the prosecution
Speaker 2: standpoint how critical it was for Michael Cohen to try
Speaker 2: to bury this story. That's what prosecutors are going to
Speaker 2: try to argue based upon the testimony of Hope, Hicks and.
Speaker 1: Bob The defense is refusing to stipulate to just about
Speaker 1: every piece of evidence that the prosecution wants to introduce. So,
Speaker 1: for example, one day we heard from the archivist at
Speaker 1: c SPAN, so tapes could be introduced. I mean, it
Speaker 1: slows down the trial, But how much does it really
Speaker 1: get the defense in in the end that little slow
Speaker 1: down or annoyance for the prosecution. I guess well.
Speaker 2: Often the defense will stipulate to these non controversial, essentially
Speaker 2: ministerial testimony in order to get certain documents entered into
Speaker 2: evidence at a trial.
Speaker 5: But what the.
Speaker 2: Defense seems to be doing here is not agreeing to
Speaker 2: any of these stipulated situations in order to slow down
Speaker 2: the prosecution, to try to throw them off their game
Speaker 2: and to break up the narrative. Now, it really is
Speaker 2: a strategy that's being used here. They have every right
Speaker 2: to do that. The defense is not required to stipulate
Speaker 2: to any of these documents, witnesses, And what they're doing
Speaker 2: here is slowing the case down, throwing the prosecutors off
Speaker 2: their timing, or at least they're trying to. And they're
Speaker 2: trying to slow this case down to break up the
Speaker 2: prosecution's case so they can't really build up momentum and
Speaker 2: tell a streamline narrative, which is what prosecutors are trying
Speaker 2: to accomplish here.
Speaker 1: There's been a lot of report about Trump sitting with
Speaker 1: his eyes closed during the trial and on truth Social
Speaker 1: he said that he's not sleeping. I simply close my
Speaker 1: beautiful blue eyes sometimes listen intently and take it all in.
Speaker 1: How might the jury see that.
Speaker 2: Well, it's really hard to say what's in the mind
Speaker 2: of jurors, but you can be certain that they are
Speaker 2: looking at the defendant, as they do in any criminal trial,
Speaker 2: that they're looking at the reactions to all this testimonies.
Speaker 2: And generally, if you're a defense lawyer, you want your
Speaker 2: client to not react to the testimony, to sit there
Speaker 2: essentially stoneface. So it could be that the advice that
Speaker 2: the defenselaers are giving former President trumpet is to act
Speaker 2: as if none of this testimony really means anything.
Speaker 1: Now about the gag order, this week, Judge Murshawn found
Speaker 1: Trump in contempt of court for violating the gag order
Speaker 1: on nine occasions and find him nine thousand dollars. He
Speaker 1: also had a hearing on three additional alleged violations by Trump.
Speaker 1: These monetary finds are pocket change to Trump. What can
Speaker 1: the judge do?
Speaker 2: Ultimately, the gag order is a problem for the judge
Speaker 2: because prosecutors are repeatedly bringing up evidence to former President
Speaker 2: Trump violating the gag order. Talking about witnesses. The other day,
Speaker 2: he made the statement that the court was not permitting
Speaker 2: him to testify in his own defense, so the judge
Speaker 2: had to correct. That's been made clear that he has
Speaker 2: a constitutional right to testify in his own defense, but
Speaker 2: nothing is preventing him from doing that. But at the
Speaker 2: end of the day, here the judge confine him and
Speaker 2: does have the right, as he would with any other defendant,
Speaker 2: to hold former President Trump in contempt and put him
Speaker 2: in jail. But that's not something that we're going to
Speaker 2: see happened in this case. He's not going to do that.
Speaker 2: So all he can really do is continue to admonish
Speaker 2: for our President Trump, to talk to defense lawyers to
Speaker 2: try to get their fine in line, and at the
Speaker 2: end of the day, continue to stack up fine if
Speaker 2: the violations continue to occur.
Speaker 1: Thanks Bob. That's Robert mant of maccarter and English coming up.
Speaker 1: The richest person to do time in fact prison. I'm
Speaker 1: June Grosso and you're listening to Bloomberg. Last November, Attorney
Speaker 1: General Merrick Garland announced the guilty please of Crypto Giant
Speaker 1: Finance and its chief executive Shangpen Jao for failures that
Speaker 1: allowed cyber criminals and terrorist groups to freely trade on
Speaker 1: the world's largest cryptocurrency exchange. Finance prioritized its profits over
Speaker 1: the safety of the American people. The saga ended this
Speaker 1: week when a judge sentenced the forty seven year old
Speaker 1: to four months in prison. It's the first time a
Speaker 1: CEO has ever gone to prison for a Bank Secrecy
Speaker 1: Act violation, although the Justice Department had wanted a sentence
Speaker 1: of three years to make an example out of Jao
Speaker 1: to an industry rebounding from a slew of high profile scandals.
Speaker 1: You remember Sam bankman Fried joining me is Bloomberg Legal
Speaker 1: reporter Ava Benny Morrison, who was in the Seattle courtroom
Speaker 1: for the sentencing, take us inside the courtroom.
Speaker 4: Eva sure Jow, who's better known as cz planned up
Speaker 4: to the Federal courthouse in Seattle. He had about half
Speaker 4: a dozen lawyers with him. He didn't say much throughout
Speaker 4: the proceeding other than getting up to give a statement
Speaker 4: to the judge where he talked about how remorseful he was,
Speaker 4: how he had made a mistake, but he took full
Speaker 4: responsibility and that's why he had traveled from his home
Speaker 4: in the UAE to America at the end of last
Speaker 4: year to face the prosecution. While he was sitting at
Speaker 4: the table, he was very still. He's sitting up straight,
Speaker 4: He's staring at the judge. Seemed to be absorbing everything
Speaker 4: that the judge and the prosecutors were saying. CZ's mother
Speaker 4: and his sister, Jessica were both seated in the front row,
Speaker 4: and there were a few other friends and supporters from
Speaker 4: the crypto industry that were in the courthouse as well.
Speaker 1: There was a plea deal here, but prosecutors were asking
Speaker 1: for twice the sentencing guidelines. What was their reasoning?
Speaker 4: Federal prosecutors were trying to make an example out of Cz.
Speaker 4: He was the CEO of the world's biggest crypto company,
Speaker 4: they argued, and he committed these as part of a
Speaker 4: plan to violate US laws that would allow him to
Speaker 4: make more money, allow big traders to continue using Binance
Speaker 4: even though it didn't have an adequate anti money laundry progress.
Speaker 4: So they were arguing for thirty six months in prison
Speaker 4: for Cz to really send a message notly to the
Speaker 4: crypto industry, but to corporate leaders far and wide that
Speaker 4: this sort of behavior would not be tolerated and would
Speaker 4: be punished.
Speaker 1: As you mentioned, the defense was asking for leniency and probation.
Speaker 1: What was their argument.
Speaker 4: The defense was pleading with the judge to spare cz
Speaker 4: from prison. They pointed to the fact that he voluntarily
Speaker 4: came back to America to face these charges at the
Speaker 4: end of last year. They said that he had cooperated
Speaker 4: extensively with the government in this investigation and that he
Speaker 4: directed Binance to cooperate with the DOJ as well. They
Speaker 4: pointed out that Finance had settled several investigations with knowing
Speaker 4: the DOJ, but the CFTC the Treasury Department, which resulted
Speaker 4: in the company paying four point three billion dollars worth
Speaker 4: of fines. I think the biggest sticking point in the
Speaker 4: arguments was over whether a prison sentence was warranted for
Speaker 4: this type of offense. Cz was essentially charged with violating
Speaker 4: the Bank Secrecy Act, which sounds pretty minor on the
Speaker 4: face of it, but attached to that crime were arguably
Speaker 4: pretty serious circumstances. Because he didn't have an adequate AML
Speaker 4: program at Finance, terrorist organizations like al Qaeda and Hamas
Speaker 4: were able to trade on the platform, and US customers
Speaker 4: were trading with customers in sanctioned countries like Ara. So
Speaker 4: the defense was really trying to narrow in on the
Speaker 4: fact that this was just a banking violation, for the
Speaker 4: prosecution was urging the judge to look at those serious
Speaker 4: circumstances that.
Speaker 5: Were attached to it.
Speaker 1: Did the prosecution prove in any way that CZ knew
Speaker 1: about what was happening on the platform.
Speaker 4: No, the prosecution didn't say that cind personally knew that
Speaker 4: there were the proceeds of crime moving across finance, and
Speaker 4: the defense really highlighted that as well, saying, look, there
Speaker 4: is no evidence here that cz personally, as the SEEO
Speaker 4: of the company knew that illicit funds were moving across finance,
Speaker 4: and so that needed to be taken into account.
Speaker 1: How long did his statement to the judge last and
Speaker 1: what part of it stood out to you.
Speaker 4: CZ's statement to the judge only lasted a few minutes.
Speaker 4: He started by saying that he was remorseful and he
Speaker 4: was sorry and he had made mistakes. He spoke about
Speaker 4: how difficult it was for him to step down as
Speaker 4: CEO of Finance, a company that he founded in China
Speaker 4: several years ago. He spoke about how he struggled to
Speaker 4: accept that that was essentially the only course of action here.
Speaker 4: But he spoke about how he still wants to make
Speaker 4: a difference in the world, and he's really focused on
Speaker 4: philanthropy now that he's not leading finance.
Speaker 1: And what was the judge's reasoning for handing down the
Speaker 1: four months sentence.
Speaker 4: The judge agreed with the defense that the prosecutions suggested
Speaker 4: and that Cz should be sentenced to thirty six months
Speaker 4: in prison was far too high. He said that he
Speaker 4: had taken a lot of time to reap through more
Speaker 4: than one hundred and sixty letters admitted from CZ's friends
Speaker 4: and family and co workers that painted this man in
Speaker 4: a very favorable light, describing him as a family man,
Speaker 4: a humble person, and just a hard working entrepreneur. He
Speaker 4: said that yes, while this is a Bank Secrecy Act
Speaker 4: violation and other cases involving that charge had resulted in probation,
Speaker 4: there were some egregious factors here, like the fact that
Speaker 4: Hamas and cyber criminals and dark web transactions were able
Speaker 4: to take place on the platform.
Speaker 5: Because of it.
Speaker 4: I think he just couldn't get past the Hamas al
Speaker 4: Kader dark web element of this. I will say that
Speaker 4: it's unusual for BSA cases to result in prison time,
Speaker 4: so the judge was really sort of putting his neck
Speaker 4: out here by handing down a sentence that did involve
Speaker 4: prison time. It'll be interesting thing to see if this
Speaker 4: sets a precedent for other BSA cases in white collar
Speaker 4: prosecutions in the future.
Speaker 1: What always seems striking to me about this case is
Speaker 1: that the UAE has no extradition treaty with the US,
Speaker 1: yet he flew here and turned himself in and then
Speaker 1: prosecutors stopped him from returning home pending sentence. And as
Speaker 1: for a sentencing of twice the guidelines, that scenario is
Speaker 1: not going to encourage others to turn themselves in.
Speaker 4: Yes, the defense actually did make a point out of that,
Speaker 4: saying cz has done all the right things here. He's
Speaker 4: come back from Dubai, turned himself in, pleaded guilty to
Speaker 4: the charge, agreed to pay personally a fifty million dollar
Speaker 4: fine to the government. He has ticked all the boxes.
Speaker 4: But the fact that the prosecution was then arguing for
Speaker 4: a prison sentence that was well above the federal sentencing
Speaker 4: guidelines might actually deter people from doing that in the future.
Speaker 4: And from the side to travel from a non extradition
Speaker 4: country to the US to face the charges.
Speaker 1: What happens now, Do I understand that he's not eligible
Speaker 1: to go to a minimum security prison?
Speaker 4: Yes, CZ, because he's not a US citizen, is then
Speaker 4: eligible for a minimum security prison, and that's usually where
Speaker 4: white collar defendants end up. So he has made a
Speaker 4: request for the judge to be designated to a facility
Speaker 4: called FDC C tach here in Seattle. We don't know
Speaker 4: when he needs start that prison sentence that dates still
Speaker 4: to be decided, and but his lawyer did say that
Speaker 4: he's eager to just get it over and done with
Speaker 4: and finally be able to return to Dubai to reunite
Speaker 4: with his family.
Speaker 1: This is the second high profile sentencing in the crypto
Speaker 1: industry recently. Was Sam Magman Freed mentioned at all?
Speaker 4: Sam Magman Freed did get a mention. Actually, when the
Speaker 4: prosecutor was referring to the arguments that CZ's lawyers had
Speaker 4: submitted to the court, he said, look, we're not alleging
Speaker 4: that case is a Sambang mcfred. We're not saying that
Speaker 4: he's a monster, and we're not trying to kill the
Speaker 4: crypto industry. That we are saying that this is a
Speaker 4: serious crime because he didn't have an AMO program and
Speaker 4: that allowed some of the ilicid actives and terrorists to
Speaker 4: gain access to buy it.
Speaker 1: Thanks Seva, that's Bloomberg Leigal reporter Ava Benny Morrison. Joo's
Speaker 1: wealth has ballooned to more than thirty eight billion dollars,
Speaker 1: giving him the dubious distinction of being the richest person
Speaker 1: ever to do time in a federal prison. Let's turn
Speaker 1: out to another billionaire in the legal news, Elon Musk
Speaker 1: has been trying to get rid of his Twitter sitter
Speaker 1: for years, even though he agreed to have a lawyer
Speaker 1: pre approve his tesla posts as part of a settlement
Speaker 1: with the SEC in twenty eighteen, although it's unclear exactly
Speaker 1: who's watching over his tweets and how much watching they're
Speaker 1: actually doing. In an interview with sixty Minutes at the time,
Speaker 1: Musk didn't seem too concerned about getting that soon provision.
Speaker 3: The only tweets that would have to be say, reviewed,
Speaker 3: would be if a tweet had a probability of causing
Speaker 3: im movement in the stock and that's it.
Speaker 2: Yeah, I mean, otherwise, it's hello.
Speaker 3: First Amendment like premium speech is fundamental.
Speaker 1: Freedom of speech is a fundamental constitutional right. But that
Speaker 1: argument didn't convince the lower courts to throw out his
Speaker 1: Twitter sitter agreement, and this week the Supreme Court refused
Speaker 1: to hear Musk's appeal without comment. Joining me is business
Speaker 1: law professor Eric Talley of Columbia Law School. Elon Musk
Speaker 1: has battled the sec over his social media posts since
Speaker 1: he tweeted in August twenty eighteen he had funding secured
Speaker 1: to take Tesla private.
Speaker 5: Well, this was yet another example of mister Musk's pensiant
Speaker 5: for firing things up onto Twitter or acts, you know,
Speaker 5: sort of at the spur of the moment. Back in
Speaker 5: twenty eighteen, mister Musk dropped a tweet basically said funding
Speaker 5: secured for you know, buying out Twitter at four hundred
Speaker 5: and twenty dollars share and you know that number of
Speaker 5: the four to twenty name is a very popular one
Speaker 5: for mister Musk.
Speaker 1: Case.
Speaker 5: Well, people took seriously this idea that funding was secured,
Speaker 5: and if you looked into the backstory, the funding sources
Speaker 5: were not nearly as secure as he signaled that they
Speaker 5: were at the time. So that ended up eliciting two
Speaker 5: different legal actions won by the SEC, and then there
Speaker 5: was also a class action lawsuit. He won the class
Speaker 5: action lawsuit, but the SEC moved first and said that
Speaker 5: was misleading. You didn't have the funding secured. We are
Speaker 5: going to push our own regulatory action against you. And
Speaker 5: the matter quickly settled, and it probably settled in part
Speaker 5: because the SEC has a lot of heft when it
Speaker 5: comes to sanctioned They can basically force someone not to
Speaker 5: be an officer and director of a company for many,
Speaker 5: many years if they chose to do so. So, the
Speaker 5: terms of the settlement that mister Musk reached with the
Speaker 5: SEC included monetary fines that he had to pay, which was,
Speaker 5: you know, tens of millions of dollars but kind of
Speaker 5: pocket change for him. And in addition, he had to
Speaker 5: step down as chairman of the board to keep his
Speaker 5: board position and CEO position. But then the final thing
Speaker 5: is that he needed a Twitter babysitter. He needed to
Speaker 5: consult with a lawyer before he put things up on Twitter,
Speaker 5: so the lawyer could sort of sound the alarm bells
Speaker 5: if what he was about to do had a bearing
Speaker 5: on things like, oh, I don't know securities for us,
Speaker 5: and so that's effectively what he had agreed to do
Speaker 5: in this settlement. And you know, he is a guy
Speaker 5: that tends not to like being, you know, overseen by
Speaker 5: lawyers or anyone else. And within a couple of years
Speaker 5: grew quite tired of the fact that he couldn't just
Speaker 5: post whenever he wanted, and at some point decided he
Speaker 5: was going to try to get out of the settlement.
Speaker 5: So he had petitioned lower courts to let him out
Speaker 5: of this, you know, Twitter babysitter settlement provision, saying that
Speaker 5: it by related his First Amendment rights, there was a
Speaker 5: prior restraint on what he was allowed to stay in
Speaker 5: the public forum. The courts that heard it below they
Speaker 5: were having nothing to do with it. They said, look,
Speaker 5: this is a settlement that you entered into. This is
Speaker 5: in fact a restriction that every other executive at TESLA has.
Speaker 5: They can't post anything they want. They have to have
Speaker 5: it cleared with in house counsel. And that's the same
Speaker 5: thing with you right now. So no, you made your
Speaker 5: bed and you're going to sleep it. And he tried
Speaker 5: to take it to the Supreme Court and it was
Speaker 5: rejected by the Supreme Court. You know it clearly did
Speaker 5: not command enough attention of fitting justice for them to
Speaker 5: want to get involved in this determination.
Speaker 1: He can't win all his legal fights. Thanks so much, Eric.
Speaker 1: That's Professor Eric Tally of Columbia Law School, and that's
Speaker 1: it for this edition of the Bloomberg Law Podcast. Remember
Speaker 1: you've can always get the latest legal news by subscribing
Speaker 1: and listening to the show on Apple Podcasts, Spotify, and
Speaker 1: at Bloomberg dot com, slash podcast, slash Law. I'm June
Speaker 1: Grosso and this is Bloomberg