Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: Former billionaire investor Bill Huang was sentenced to eighteen years
Speaker 2: in federal prison today over the stunning collapse of Arcago's
Speaker 2: capital management, which the prosecutor called a national calamity. In July,
Speaker 2: a jury convicted h Wong on ten criminal charges, including
Speaker 2: wire fraud, securities fraud, and market manipulation for orchestrating a
Speaker 2: scheme to mislead banks into providing Arkagos with billions of
Speaker 2: dollars in trading capacity, which ultimately led to the collapse
Speaker 2: that cost Wall Street Banks more than ten billion dollars.
Speaker 2: Joining me as Bloomberg Legal reporter Chris Domesh who covered
Speaker 2: the trial and was in the courtroom for the sentencing. Chris,
Speaker 2: this sentencing didn't follow this sort of normal script or procedures.
Speaker 3: It was really just very bisarreble knowing procedures are very
Speaker 3: straightforward and move it a very time capted script. You know,
Speaker 3: the two sides get up, they argue over sentencing guidelines
Speaker 3: and other things in the presending report, and then you know,
Speaker 3: the government gets up, they make their arguments for whatever
Speaker 3: their recommendation is. The defense gets up and they make
Speaker 3: their recommendation. In this case, it kind of proceeded very slowly,
Speaker 3: in an odd way, and the judge said at the beginning, oh, well,
Speaker 3: this might take all day long. We might have to
Speaker 3: come back tomorrow morning, which everyone was like, that's very bizarre.
Speaker 3: We don't see many two day sentencing hearings. In the end,
Speaker 3: that is what happened. But he did pronounce sentence today,
Speaker 3: and there was a lot of back and forth between
Speaker 3: the judge and the defense lawyers.
Speaker 4: It just didn't go, you know, by scripts.
Speaker 3: As it usually does, and in the end, the judge
Speaker 3: pronounced sentence without kind of making this the soliloquy that
Speaker 3: he usually does when when they're pronouncing sentences, which is
Speaker 3: to repeat all the factors they have to take into consideration, deterrence,
Speaker 3: the seriousness of the offense, all those things, and instead
Speaker 3: he just kind of pronounced them in a very succinct,
Speaker 3: quick manner. And they're coming back tomorrow morning to talk
Speaker 3: about some remaining issues, which include forfeiture and possible bail
Speaker 3: pending appeal.
Speaker 2: The prosecutors had asked for twenty one years, which is
Speaker 2: a heavy sentence in a white collar case, and the
Speaker 2: judge gave them close to what they wanted. Eighteen years.
Speaker 2: That's a long sentence, especially considering that he's sixty years old.
Speaker 3: Yes, the one thing you can kind of take from
Speaker 3: that his attorneys that asked for no jail time, and
Speaker 3: the judge called that ridiculous. He took the defense attorneys
Speaker 3: to task on that request and kind of drilled down
Speaker 3: on them to get them to come up with what
Speaker 3: they thought was a more reasonable sentencing recommendation, which in
Speaker 3: the end was forty six to fifty seven months.
Speaker 4: And clearly the judge felt that.
Speaker 3: Given the amount of losses in this case, he didn't
Speaker 3: really have the opportunity to send a lesser sentence here.
Speaker 3: If you get more than I think it's eleven and
Speaker 3: a half years, you have to go basically a higher
Speaker 3: security prison that leads to all kinds of others, whereas
Speaker 3: a lesser sentence would maybe send him to a minimum
Speaker 3: security or a camp or something like that.
Speaker 4: So that's what they.
Speaker 3: Wanted, but in the end the judge clearly was not
Speaker 3: swayed by any of that. And this is a pretty
Speaker 3: heavy sentence for a sixty year old man.
Speaker 2: Hwang is a devout Christian and his nonprofit foundation has
Speaker 2: donated something like six hundred million dollars to different causes
Speaker 2: like homelessness.
Speaker 5: Did the judge take that into consideration.
Speaker 3: Well, he did to actually take that into consideration, he
Speaker 3: just didn't seem to give it much weight, and he
Speaker 3: said essentially that a lifetime of good work doesn't offset
Speaker 3: the massive clauses in this case. You know, one of
Speaker 3: the factors that the judges have to consider when they're
Speaker 3: sentencing people is specific deterrence as to whether the individual
Speaker 3: would you do it again? And clearly the judge said, look,
Speaker 3: I'm not worried about that year. You know, he's a
Speaker 3: sixty year old man. He's probably not going to commit
Speaker 3: another crime. But he's a little worried about, you know,
Speaker 3: his indifference towards what happened to him in the past
Speaker 3: when his former firm, Tigler Global pleaded guilty and that
Speaker 3: led to the formation Barkingos. But like I said, in
Speaker 3: the end, the judge was not swayed by that. Look,
Speaker 3: Bill has a great reputation in terms of outside of
Speaker 3: these allegations. You know, he's well liked by his friends,
Speaker 3: he's known for his charitable works, he's a religious man.
Speaker 3: But just those things alone don't offset a thirty six
Speaker 3: billion dollar loss.
Speaker 2: What was the prosecutor's argument for why they wanted so
Speaker 2: much jail time?
Speaker 5: Was it under the sentencing guidelines.
Speaker 3: The sentencing guidelines are actually much more draftonian than that.
Speaker 3: They would call for him to serve two hundred years
Speaker 3: in prison, and that's the kind of sentences that are
Speaker 3: normally reserved for people who commit mass murder or terrorists
Speaker 3: or things like that. So they were well within their
Speaker 3: bounds to argue for this, And there arguments that are really
Speaker 3: driven by the losses and the fact that other people
Speaker 3: were hurt by this, not just the banks, including his employees,
Speaker 3: some of whom lost millions of dollars into third compensation
Speaker 3: and lost their job. The prosecution clearly wanted him to
Speaker 3: go to jail for a long time.
Speaker 4: Seeded.
Speaker 3: Usually in white collar crime we see much lower sentences
Speaker 3: just because the losses tend to drive up the guidelines
Speaker 3: and what they recommend. You don't usually see the government
Speaker 3: get close to what it wants when it wants to
Speaker 3: draw cunning and.
Speaker 2: That's what made it surprising when I saw the number.
Speaker 2: What was Wong's reaction?
Speaker 3: He really didn't react, which is kind of keeping with
Speaker 3: how he's been throughout the trial, very stoic and drinking
Speaker 3: water throughout, staring straight ahead, and you know, presumably he
Speaker 3: thinks he has a shot on appeal. They've asked for
Speaker 3: bail pending appeals. You know, the judge himself acknowledges their
Speaker 3: issues that are right for appeal. The one thing he
Speaker 3: kind of took the prosecution it's pasked for, is the
Speaker 3: argument that he is unrepentant. And the judge said, he's
Speaker 3: always kind of uncomfortable with arguments like that by the
Speaker 3: prosecutors because people have a right to fight the charges
Speaker 3: against them. And he said, vastly maintain he's not guilty here,
Speaker 3: so he has that right. And the judge said, you know,
Speaker 3: he doesn't really like this kind of arguments. Whether that
Speaker 3: appeal will be successful is obviously something at it for
Speaker 3: the future.
Speaker 5: On that point.
Speaker 2: That's what makes it difficult sometimes for these defendants who
Speaker 2: are appealing to then speak to the judge and tell
Speaker 2: them they're remorseful.
Speaker 5: What did Wang say.
Speaker 3: Yeah, he stopped short of that, for sure. That's a
Speaker 3: good question. Often you see defendants kind of, you know,
Speaker 3: make their case to the judge, get emotional Bill thanks
Speaker 3: the judge for taking the time to be thorough in
Speaker 3: reading his sentencing letters that his friends and family sent
Speaker 3: to him, and he praised his friends and family for
Speaker 3: writing the sentencing them most and he said he felt
Speaker 3: bad for the people who suffered. But I would say
Speaker 3: that the statements stopped short of admitting that he did
Speaker 3: something wrong. And maybe that is because of the appeal.
Speaker 3: And certainly, you know, we see that often.
Speaker 2: Not during the trial. A lot of his supporters came
Speaker 2: every day. Did they have any reaction to the sentence?
Speaker 3: They seem to hang their heads. They were here every day.
Speaker 3: They spent a lot of time in the courtroom, in
Speaker 3: the cafeteria, in the courthouse, and they were there for
Speaker 3: him the whole time. And he thanked them and he
Speaker 3: greeted them today just like he did every day of
Speaker 3: the trial.
Speaker 2: Did the defense ever tell his story, I mean, he
Speaker 2: has an amazing story, really a rags to Riches's story.
Speaker 2: He came here from Korea and had nothing.
Speaker 3: They did go into that. That was kind of the
Speaker 3: heart of their initial argument, is that you know that
Speaker 3: he came here when he was a teenager. His father
Speaker 3: had gotten a job as a pastor, and he emigrated
Speaker 3: when he was nineteen, came here seeking better, you know,
Speaker 3: treatment options for a legally blind brother, and then his
Speaker 3: father died within years of him arriving here, and they
Speaker 3: had to find a way to survive because a job
Speaker 3: as a line cook a McDonald's worked at swap meets,
Speaker 3: and then moved to la with three thousand dollars to
Speaker 3: his name and lived in the shed in the back
Speaker 3: of a church with his family. They played up the charity,
Speaker 3: you know, they said this was not a scheme. Really,
Speaker 3: it was an effort to help people. They don't want
Speaker 3: to make everything he did seem like some sort of
Speaker 3: nefarious when they argued these were just for you know,
Speaker 3: he's a god fearing man and these were his attempts
Speaker 3: to do good by his community.
Speaker 5: What about restitution?
Speaker 2: How much do the prosecutors say was lost here and
Speaker 2: how much restitution do they expect? I understand he says
Speaker 2: he's not a billionaire anymore.
Speaker 3: Yeah, he says he only has fifty five million dollars,
Speaker 3: some of which are in enjoying assets with his wife. Yeah. Actually,
Speaker 3: restitution is being deferred for a little while. They're going
Speaker 3: to talk about forfeiture tomorrow and possibly any other issues
Speaker 3: like bail, pending appeal and maybe you know, reporting dates,
Speaker 3: the kind of things that come at the end of
Speaker 3: sentencing hearings. After somebody's been pronounced with.
Speaker 2: Forfeiture, would they have to trace it back to his
Speaker 2: alleged misdeeds somehow? I mean, how would they decide forfeiture?
Speaker 4: So that's probably the most difficult proposition here.
Speaker 3: The defense says there should be no forfeiture. That argument
Speaker 3: seems to be a little less forceful than they're one
Speaker 3: about restitution. But the government is seeking nine point eight
Speaker 3: billion dollars in restitution as reimbursement for the victims the
Speaker 3: counterparty banks, and they're seeking more than twelve billion dollars
Speaker 3: in forfeiture. Now, the government acknowledges here that he doesn't
Speaker 3: have the money.
Speaker 4: They say that regardless of the fact.
Speaker 3: That he doesn't have the money, these shills should be
Speaker 3: subject to the forfeiture amount, just like say drug dealers
Speaker 3: who are convicted, who do a drug deal and lose
Speaker 3: the drugs. It was a very interesting artist, you know
Speaker 3: it often that often is a confusing proposition for people.
Speaker 3: Why are you going to ask somebody to forfeit money
Speaker 3: they don't have, But I guess it's a tempting to
Speaker 3: establish a framework for anyone who would would seek to
Speaker 3: recover money in the kid.
Speaker 2: Does the judge think he has more money than he's saying,
Speaker 2: because I noticed the judge said something about Huong buying
Speaker 2: a new condo in Hudson Yards.
Speaker 3: Yes, he did, note that it's hard to say the
Speaker 3: judge did. There's an extended question on that, so he's
Speaker 3: definitely not clear on what he needs to do here
Speaker 3: or how it could be done. So that that is
Speaker 3: going to be the meat of tomorrow's argument.
Speaker 2: And as far as appellet issues, do we already know
Speaker 2: one of the issues because the judge kirktailed Wong's defense.
Speaker 3: Yeah, that's certainly one of the issues that they're going
Speaker 3: to raise. You know, they certainly raised it in some
Speaker 3: of their post trial briefings, in their in their applications
Speaker 3: for bail pending appeal, they've noted that they call out
Speaker 3: some of the expert testimony for the prosecution's expert when
Speaker 3: she calculated that some of the the trading losses were
Speaker 3: directly attributable to to Wong conduct or misrepresentations, and they
Speaker 3: say that that can't be proven. So, you know, whether
Speaker 3: or not he actually they can they can attribute that there.
Speaker 3: That might be one of the main things for appeal.
Speaker 2: So a lot more to come, Chris, and I know
Speaker 2: you'll be there tomorrow to tell us about it. Thanks
Speaker 2: so much. That's bloom Our legal reporter Christopher Domesh coming
Speaker 2: up next on the Bloomberg Law Show. Donald Trump has
Speaker 2: vowed to get revenge on a long list of prosecutors,
Speaker 2: political opponents, and private citizens. Will he use the Justice
Speaker 2: Department to do that? I'm June Grosso and you're listening
Speaker 2: to Bloomberg.
Speaker 1: It's the enemy from within, all the scum that we
Speaker 1: have to deal with that hate our country. That's a
Speaker 1: bigger enemy than China and Russia.
Speaker 2: Donald Trump has long railed against his perceived enemies from
Speaker 2: within and vowed to get revenge on a long list
Speaker 2: of prosecutors, political opponents, and private citizens. And there seems
Speaker 2: to be little doubt that the President elect intends to
Speaker 2: use the Justice Department to help him get his revenge.
Speaker 1: We will completely overhaul Kamala's corrupt Department of Injustice.
Speaker 2: And now Trump is putting together a team of loyalists
Speaker 2: at the Justice Department that would be positioned to carry
Speaker 2: out his vows of retribution. Joining me is Steven Gillers,
Speaker 2: an ethics professor at NYU Law School. What does the
Speaker 2: choice of Matt Gates as Attorney General signal to you?
Speaker 4: Well, a lot of things. His selection has created a
Speaker 4: kind of apocalyptic response in the American bar. He is
Speaker 4: subsingularly inappropriate to serve as Attorney General by experience or
Speaker 4: temperament or knowledge that the only explanation for this election
Speaker 4: is that Trump wants someone heading Justice who will be
Speaker 4: devoted to Trump over any other consideration, and who will
Speaker 4: follow Trump's instructions about targeting what Trump views as his enemies.
Speaker 2: Trump has been very open on the campaign trail about
Speaker 2: getting revenge against those who supposedly wronged him, and reportedly
Speaker 2: some current and former Justice depart and FBI officials are
Speaker 2: already contacting lawyers in anticipation of being investigated. I mean,
Speaker 2: do you think that they need to be worried even
Speaker 2: if they don't think they did anything wrong.
Speaker 4: Yeah, they need to be worried because even if they
Speaker 4: did nothing wrong, and even if they are vindicated in
Speaker 4: any civil or criminal case that the Justice Department brings
Speaker 4: against them, the cost of the vindication can be enormous
Speaker 4: in terms of lawyer fees, anxiety, lost time at their job.
Speaker 4: So yeah, they should be worried. They should lawyer up.
Speaker 4: They should take Trump at his word. They should expect
Speaker 4: to be a subject of investigation. Remember back in the
Speaker 4: first Trump administration, there was an IRS investigation of James Comy.
Speaker 4: Now that's the IRS, not the Justice Department, but a
Speaker 4: full IRS Audit is I'm consuming expensive. It has been
Speaker 4: described as the legal equivalent of a colonoscopy. It's very
Speaker 4: dispiriting to have to go through that, and Komi had
Speaker 4: to go through that. As it happened, it turned out
Speaker 4: that the RS found that he overpaid his taxes. But nonetheless,
Speaker 4: the cost of getting to that point for Coombe in
Speaker 4: money and anxiety would have been enormous. Well, the same
Speaker 4: thing can happen in civil or criminal investigations by the
Speaker 4: Justice Department.
Speaker 2: Also, if you investigate someone long and hard enough, you
Speaker 2: can find other things in their past that may be
Speaker 2: illegal but not connected to the investigation, like tax infractions
Speaker 2: or smoking marijuana where it isn't legal. Special Counsel John
Speaker 2: Durham conducted years and years of investigations and the only guilty.
Speaker 2: Ply he got was from an FBI lawyer who had
Speaker 2: lied on some documents. So something not related to the
Speaker 2: purpose of an investigation, right.
Speaker 4: You know, a thorough investigation can turn up evidence or
Speaker 4: a parent evidence of wrongdoing civil or criminals that wasn't
Speaker 4: on your radar screen when you started the investigation. When
Speaker 4: you turn over every document, when you look at every email,
Speaker 4: you could find things that arguably indicate some basis for
Speaker 4: a lawsuit or an indictment that you didn't know about
Speaker 4: at the beginning. But again, you know, if someone is
Speaker 4: charged with a crime in fact or suits civilly, ultimately
Speaker 4: there's a trial. If there's no settlement and there's a judge,
Speaker 4: the government can cause a lot of pain without ever
Speaker 4: having to prove a case a trial. Just by conducting
Speaker 4: the investigation. It can bring a case to trial and
Speaker 4: drop the case. So vindication is not a victory for
Speaker 4: the target of the government. Hostility and eviction or a
Speaker 4: money judgment is not necessarily the goal of a justice
Speaker 4: department that is out for revenge. The cost in money,
Speaker 4: time and anxiety alone can be extremely punishing.
Speaker 2: Special Counsel Jack Smith is one of the people that
Speaker 2: Trump has mentioned over and over and over again. What
Speaker 2: kind of investigation or prosecution of Smith.
Speaker 5: Can they do well?
Speaker 4: Smith is an interesting situation and from Trump's point of
Speaker 4: view judgment from what he has said, Smith is Trump
Speaker 4: Enemy number one. He must be in the President's site
Speaker 4: as the dominant person to terrorize with legal remedies and
Speaker 4: legal threats. Now anything Jack Smith did to antagonize the President,
Speaker 4: as Trump saw it, he would have done as an
Speaker 4: employee the Justice Department. Jack Smith is in a summer
Speaker 4: different positions than other potential alleged enemies. He would have
Speaker 4: to be defended by the government. That is, a Justice
Speaker 4: Department lawyer who is accused of wrongdoing after leading government
Speaker 4: is entitled to a government defend. There are some exceptions,
Speaker 4: but if the wrongdoing or the alleged wrongdoing is within
Speaker 4: the scope of the lawyer's job, the government will defend him.
Speaker 4: Now Here, that's not possible because there will be the
Speaker 4: government itself that is targeting Jack Smith. So the Justice
Speaker 4: Department can't be both the prosecutor and the defense lawyer,
Speaker 4: and so Jack Smith will have to be provided with
Speaker 4: the cost of a highly skilled defense law firm to
Speaker 4: respond to any DOJ effort to investigate or prosecute him.
Speaker 4: That may be good for Jack Smith in the sense
Speaker 4: that he doesn't have to pay out of his own pocket,
Speaker 4: although even there I imagine that DOJ might argue that
Speaker 4: Smith is not entitled to the cost of a defense
Speaker 4: for some reason that justice comes up with, and then
Speaker 4: that question has to be litigated, and Smith will need
Speaker 4: a lawyer to represent him on the question of whether
Speaker 4: or not the government has to defend him or pay
Speaker 4: for his defense when the charge comes from the government itself.
Speaker 2: So litigation before the litigation. What about Manhattan District Attorney
Speaker 2: Alvin Bragg, who brought the hush money case, the only
Speaker 2: case against Trump to actually go to trial. Trump has
Speaker 2: excoriated him, and also New York Attorney General Letitia James,
Speaker 2: who won that four hundred and fifty million dollar verdict
Speaker 2: against Trump.
Speaker 4: Well, Bragg and James are also in the Trump target range.
Speaker 4: Both of them will get a defense from New York States,
Speaker 4: so neither of them would expect to have to pay
Speaker 4: out of their own profit for the court of a defense. Indeed,
Speaker 4: the state might defend them through a state agency, or
Speaker 4: it might pay for private counsel, so that's beneficial for them.
Speaker 4: They don't have to bankrupt themselves defending themselves. But again,
Speaker 4: the anxiety and the time commitment of fighting the government
Speaker 4: can be extremely painful, even if the cost of the
Speaker 4: defense is borne by the government itself.
Speaker 2: I'm trying to think of what kind of prosecution the
Speaker 2: Justice Department could bring against either one of them. I mean,
Speaker 2: Trump has said over and over again that they brought
Speaker 2: these cases for political reasons. That claim fail before the
Speaker 2: trial judges. I mean, is any of that actionable?
Speaker 4: There is no doubt that Trump lawyers, be the publical
Speaker 4: private would be able to articulate a remotely plausible theory
Speaker 4: for targeting James or Bratt, a theory that will fail
Speaker 4: in court. But all you need to do to get
Speaker 4: revenge is to conduct the investigation. Now, it is unlikely
Speaker 4: that the Justice Department will ever represent Trump against Bragg
Speaker 4: or James. Trump would have to get private counsel to
Speaker 4: bring those cases. I don't see how the investigations by
Speaker 4: Bragg and James can be turned into a DOJ case
Speaker 4: as opposed to a private case brought by Trump himself.
Speaker 4: He may do that. Another option for Trump if he
Speaker 4: wants to get even with Bragg and James. He doesn't
Speaker 4: have to pursue his own claims. He can just call
Speaker 4: up any of the relevant regulatory agencies. Of course, the
Speaker 4: irs is the most obvious, but truly not the only
Speaker 4: to look into their behavior in going after him, and
Speaker 4: that could be enough to cause them a great deal
Speaker 4: of anguish even if nothing comes of it.
Speaker 2: I assume out the wind though, is the idea of
Speaker 2: the Justice Department being nonpartisan and being independent of the
Speaker 2: White House.
Speaker 4: Yeah, you know at Bonham. The problem here is that
Speaker 4: the Supreme Court has told us that the president controls
Speaker 4: all power of the executive branch, all of it. That's
Speaker 4: a direct quote, all of it, And so Trump can
Speaker 4: control the agenda for DJ There's no check and balance
Speaker 4: within the executive branch, and Trump is the decider all
Speaker 4: by himself about what the executive branch will will not
Speaker 4: do in the way of exercise of executive power. So
Speaker 4: the tradition of norms by which the Justice Department operates
Speaker 4: independently of the president, that tradition is not legally mandated,
Speaker 4: and Trump did change it by an effect through Gates
Speaker 4: taking control of the decisions of the Justice Department that
Speaker 4: are of particular interest to him. Ninety nine point ninety
Speaker 4: nine percent of what DOJ does will be of no
Speaker 4: interest in Trump at all, But a sliver of matters
Speaker 4: will be of great interest to him because they benefit
Speaker 4: him or friends of his, or because they target his enemies.
Speaker 4: And where those matters arise or could rise, Trump is
Speaker 4: the decider. And so what we've done is flip the
Speaker 4: switch so that at one time the Attorney General was
Speaker 4: the decider and the executive the White House stayed away
Speaker 4: from those decisions. Now, for a very small but important
Speaker 4: sliver of DOJ decisions, the White House will be the decider.
Speaker 4: And there's nothing that DOJ lawyers can do to resist that,
Speaker 4: and the ones that Trump has chosen may not wish
Speaker 4: to reap.
Speaker 2: Trump also has chosen two of his personal lawyers who
Speaker 2: represented him at the Hushbunny trial for top positions at
Speaker 2: the Justice Department, with his attorney Todd Blanche taking the
Speaker 2: number two spot at DOJ.
Speaker 5: Does that raise alarms or is it concerning?
Speaker 4: Yeah? It is concerning because you want people running Justice
Speaker 4: Department who have no sense of loyalty to the president
Speaker 4: other than the loyalty of following the law. But there's
Speaker 4: a personal relationship there you know, this goes way back
Speaker 4: to President Kennedy chose his brother to be Attorney General,
Speaker 4: and there was a lot of criticism of that selection
Speaker 4: because Robert Kennedy would not be independent, or so it
Speaker 4: was seen of his president brother. Well, there's an analogy here.
Speaker 4: The relationship between Trump and his former defense lawyers could
Speaker 4: be seen to give rise to a sense of loyalty
Speaker 4: to Trump that will undermine the need for distance and
Speaker 4: independence on the part of the people who run Justice.
Speaker 2: The Finally, Professor, can you think of a president in
Speaker 2: the past who used the Justice Department in a similar
Speaker 2: way or in a way that Trump seems to want to.
Speaker 4: Well, there's some reason to believe that Nixon did had
Speaker 4: his enemies list and did use the department that way.
Speaker 4: There has never been the kind of overt threats of
Speaker 4: retaliation against enemies that Trump has prominently anticipated, even during
Speaker 4: the Nixon years when John Mitchell was Attorney General. We
Speaker 4: don't have the same degree of evidence of a tent
Speaker 4: in the Nixon Mitchell years that we have exclicitly in
Speaker 4: Trump's threats.
Speaker 5: Thanks so much for being on the show.
Speaker 2: That's Professor Steven Gillers of NYU Law School, mass tourt
Speaker 2: lawyers and their investors have a problem. The pay add
Speaker 2: on some huge cases is taking longer than expected, and
Speaker 2: the hunt to find the next big case has not
Speaker 2: been fruitful. So those high interest loans that law firms
Speaker 2: use to fund their work are coming due, forcing firms
Speaker 2: to refinance under less than optimal conditions. Joining me is
Speaker 2: Emily Siegel, senior Bloomberg Law reporter who's written about this.
Speaker 2: Mass tort lawyers typically work on contingency. Explain how they
Speaker 2: fund these huge cases that go on for years and years.
Speaker 6: Sometimes math tort firms will have their own money that
Speaker 6: they can put towards cases, but as these cases take
Speaker 6: longer and longer, litigation funders have come in and sort
Speaker 6: of like filled this gap for them. So while they
Speaker 6: wait and they pay all the fees to litigate these cases,
Speaker 6: they can get funding from a litigation funder, and that
Speaker 6: has been an increasingly more popular alternative in the math
Speaker 6: tort and like plan.
Speaker 2: It's laws based, and these are not necessarily based on
Speaker 2: the outcome of the case.
Speaker 5: They're more like regular loans.
Speaker 6: They're not based on the outcome in the traditional sense
Speaker 6: of litigation funding, but they do evaluate the case docket
Speaker 6: before they fund them, so that's how the pricing is based.
Speaker 6: So they'll look at a law firms like list of cases,
Speaker 6: go through them, see what stages they're in. And you know,
Speaker 6: some of these mass tort firms have thousands of cases,
Speaker 6: so they may not be looking at every single one,
Speaker 6: but they do want to get a sense of them
Speaker 6: and how far along they are and what torts they're
Speaker 6: involved in and how diverse it is, and that is
Speaker 6: how they determine the total amount of the loans. So
Speaker 6: it does still relate to the actual the lawsuits that
Speaker 6: they're funding.
Speaker 2: And the interest rates are high, double digits.
Speaker 6: Sometimes, yeah, I think because these are high risk, they're
Speaker 6: often double digit interest rates. You know, in the teens
Speaker 6: and twenties. As years go on, the interest rates can
Speaker 6: go up.
Speaker 2: Two of the largest multi district tort cases are against
Speaker 2: Jay and Jay and Bayer, and they're hitting the ten
Speaker 2: year mark with no resolution in sight.
Speaker 5: Tell us about a little about those cases, sure well.
Speaker 6: Johnson and Johnson is one of the ones that we
Speaker 6: often hear about. They've filed for bankruptcy three times now
Speaker 6: to try to resolve these cases. It's just been dragging
Speaker 6: along the allegations are their calculm powder caused cancer and
Speaker 6: its users. So that is the gist of the case,
Speaker 6: and it has been going on for ten years. They
Speaker 6: just filed for bankruptcy again, I think earlier this year,
Speaker 6: and they have proposed global settlements that haven't been approved yet.
Speaker 6: So there's a lot of disagreement amongst even the attorneys
Speaker 6: about whether they should approve the bankruptcy proceedings. It's just
Speaker 6: become a totally different type of tort because of that.
Speaker 6: So they're really tied up in the bankruptcy proceedings and
Speaker 6: the infighting amongst the lawyers. It's just been delayed and
Speaker 6: there's not really a clear timeline on when it's going
Speaker 6: to be resolved. So that's one of the main ones.
Speaker 6: And then another one that has sort of a different
Speaker 6: set of issues is against there for its roundup product
Speaker 6: and also I believe causing cancer. And that one that
Speaker 6: there has been three circuits that have had differing opinions
Speaker 6: on it, which is called the circuit split, so two
Speaker 6: are in one direction and one is in the other.
Speaker 6: So because of that there can be some delays in
Speaker 6: dispersing settlements, and it could be something that the Supreme
Speaker 6: Court has to rule on.
Speaker 2: Brendan Barreff contingency capital at a litigation finance conference said
Speaker 2: there's a degree of stress and distress in the space.
Speaker 5: What was he talking about?
Speaker 6: So there are two things going on, and I think
Speaker 6: they're related. One is that a lot of these law
Speaker 6: firms are sed up in these loans that are reaching
Speaker 6: maturity dates and there is not a payout yet on
Speaker 6: the cases that they were expecting to be paid on,
Speaker 6: So then they refinance their loans either with the same
Speaker 6: thunder or a different thunder, and they have to take
Speaker 6: confessions when they do that. So that sort of creates
Speaker 6: this environment of constant refinancing from investors, and the money
Speaker 6: is not necessarily coming from the cases, it's coming from
Speaker 6: other investors in the space. And on top of that,
Speaker 6: there's not another calcum powder right now. There's not another roundup,
Speaker 6: there's not another camp lasions. There are lots of mass
Speaker 6: torts that are going on, but there's not this like
Speaker 6: gigantic one that they're all looking towards or that's farther along.
Speaker 6: So there are two things going on, and that the
Speaker 6: firms are refinancing rates more often than they expected to
Speaker 6: be and also there's not this big tort that everyone
Speaker 6: is putting their money towards, or at least you know,
Speaker 6: a lot of these law firms are really excited about
Speaker 6: and thinks could be you know, could be helpful to
Speaker 6: their clients, but also you know, result in a big payout.
Speaker 2: I found that fascinating that as they're liv getting these cases,
Speaker 2: they're looking for the next big tort that they can
Speaker 2: go after.
Speaker 6: Yes, I mean, they always are, I think to some extent.
Speaker 6: And there was one I believe it was last year
Speaker 6: that was against thail and All, alleging that Thailand All
Speaker 6: when taken by a pregnant person would cause autism and ADHD,
Speaker 6: and it ended up going to a Dowbert hearing, which
Speaker 6: you know, would test the science of the claims, and
Speaker 6: it failed. So that was one that I think some
Speaker 6: had thought could be the next big one because a
Speaker 6: lot of women take tail and All when pregnant. It's
Speaker 6: approved and it could have been really massive group of people.
Speaker 6: But then since it failed, it did not become a
Speaker 6: multi district religation, and that was something I think not everyone,
Speaker 6: I think there were some skepticism around it, but they
Speaker 6: were intrigued by that one and so there isn't something
Speaker 6: like that. I mean, one of the ones that's referenced
Speaker 6: in the piece is Deco Privera, which is a contraceptive injection,
Speaker 6: and that is one that they think will be like
Speaker 6: a big tourt because there are a lot of injuries.
Speaker 6: But you know, I haven't heard of others.
Speaker 2: At this point, some of the experienced tourt lawyers are
Speaker 2: blaming the new players and firms. One told you the
Speaker 2: market has blown up exponentially, so they're blaming the new guys.
Speaker 4: I think so.
Speaker 6: I think that some of the mass tort or some
Speaker 6: of the plaintiffs attorneys believe that there are other law
Speaker 6: firms that are entering the space because they want to
Speaker 6: get rich and they want to build up their case book,
Speaker 6: and the way they want to do that is through
Speaker 6: litigation funding. So they get all these cases, they use
Speaker 6: the money to market and put out commercials, They retain
Speaker 6: a lot of different claimants, and then they have to
Speaker 6: work up those cases and they're not really at least
Speaker 6: this is what those attorneys are saying. They're not prepared
Speaker 6: for the work that goes into working up each individual case.
Speaker 6: So if you're a law firm of two people and
Speaker 6: you have thousands of cases because of your litigation funding,
Speaker 6: how how do you attend to all of those clients.
Speaker 6: So that's what they are saying that there's just a
Speaker 6: lot of new firms, not necessarily new lawyers, but new
Speaker 6: to the space coming in and wanting to be part
Speaker 6: of this, and it's creating an environment where there's a
Speaker 6: lot of lending going on and also making it more crowded.
Speaker 2: So it's a difficult area of litigation. It takes a
Speaker 2: lot of money, it takes a lot of time. But
Speaker 2: if you win, are the rewards for lawyers, would you
Speaker 2: say astronomical?
Speaker 4: It can be.
Speaker 6: I think it depends on the quality of the cases
Speaker 6: that you have. Are they quality, meaning are the injuries
Speaker 6: within like the defined realm for the MDL, you know,
Speaker 6: and if you have a lot of cases like that,
Speaker 6: you know a lot of these mass toward lawyers are
Speaker 6: quite wealthy. So yes, but it's also not easy to
Speaker 6: find good cases and to work them up. So I
Speaker 6: think there's that sort of tension going on right now.
Speaker 2: Let's say the inexperienced lawyers or the lawyers that are
Speaker 2: new to this field have a lot of clients they
Speaker 2: benefit if there's a settlement, right, sort of writing on
Speaker 2: the coattails of the more experienced lead lawyers.
Speaker 6: They could be. It sort of depends on what they're
Speaker 6: putting their money towards, right, So if they get a
Speaker 6: lot of funding and they put it towards marketing, but
Speaker 6: they hire a marketing company that's not doing a great
Speaker 6: job getting calls as they come in, you could end
Speaker 6: up with thousands of cases that are not very valuable.
Speaker 6: Or you can do your research, you can put them
Speaker 6: towards marketing with the companies that you trust, and you
Speaker 6: can be working them up as they're coming in, And
Speaker 6: there's just different approaches. But I think the concern is
Speaker 6: that some of these firms may have lots of cases
Speaker 6: that actually don't qualify for the tourt. Maybe like for instance,
Speaker 6: if we talk about Camp La June, which I wrote
Speaker 6: a peace on this last year, you know, some of
Speaker 6: the law firms had clients who were faked, like they
Speaker 6: gave them a fake address. They just wanted to get
Speaker 6: in on potential settlement because they see these advertisements. So
Speaker 6: I think, yes, they could be a big part of
Speaker 6: the settlement, but their cases still have to qualify. It's
Speaker 6: all to have used the product and been injured by
Speaker 6: it in a specific way.
Speaker 2: And is there any concern that the lawyers are thinking
Speaker 2: about their investors and their investment before their clients' concerns.
Speaker 6: Some attorneys believe that that is the case. It's hard
Speaker 6: to know really what's going on behind closed doors, but
Speaker 6: there have been allegations of that. In particular and the
Speaker 6: Johnson and Johnson talcum powder cases, there have been law
Speaker 6: firms accusing other law firms of wanting to accept the
Speaker 6: bankruptcy proposal, but then only because they're motivivated by having
Speaker 6: to pay back their loans and they're to the investors.
Speaker 6: So that's definitely alleged a lot. Whether it's actually happening,
Speaker 6: it's hard to say. I know that a lot of
Speaker 6: lawyers are concerned that that's happening.
Speaker 2: Are there firms that have decided to get away from
Speaker 2: mass torts because of the length of time involved in
Speaker 2: these cases?
Speaker 6: I think that there are some, at least on the
Speaker 6: funding side. There are litigation funders that try to have
Speaker 6: a more diverse portfolio. So if they're going to invest
Speaker 6: in firms that have mass torts, they also want those
Speaker 6: firms to be handling other personal injury cases because those
Speaker 6: are shorter term, and you know that can sort of
Speaker 6: keep money coming in while they wait on these big torts.
Speaker 6: I think that as they enter this period where they're
Speaker 6: looking for another sport, they're just looking for firms that
Speaker 6: are really aware of that and are just trying to
Speaker 6: be as diverse as possible. There are many funders who
Speaker 6: don't do mass torts at all because they do not
Speaker 6: like the duration issues. You know what I heard from
Speaker 6: Andrew at s Fire Bank. You know, he saw this
Speaker 6: happening years ago and thought I need to move farther
Speaker 6: away from this while still having some money closure in
Speaker 6: mass tours but also the smaller single cases.
Speaker 2: Well, your story is really fascinating. Emily, thanks so much.
Speaker 2: That's Emily Siegel, Bloomberg Law Senior Reporter, and that's it
Speaker 2: for this edition of The Bloomberg Law Show. Remember you
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