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

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Speaker 1: You'd think Elon Musk would be on his best behavior

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Speaker 1: at Tesla ahead of a shareholder's vote next week on

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Speaker 1: his fifty six billion dollar pay package, considered to be

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Speaker 1: the largest for a CEO in corporate America. Yet on

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Speaker 1: Tuesday we found Musk confirming that he had ordered artificial

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Speaker 1: intelligence chips meant for Tesla to be sent to his

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Speaker 1: social media company X, offering explanations both for the redirected

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Speaker 1: shipment and for internal Nvidia emails that cast doubt on

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Speaker 1: the carmaker's procurement plans. And then there's a new investor

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Speaker 1: lawsuit accusing him of seven point five billion dollars of

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Speaker 1: insider trading in Tesla stock. As usual, things are litigious

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Speaker 1: in Musk world. Joining me to sort it all out

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Speaker 1: is business law professor Eric Tally of colle be A

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Speaker 1: Law School. Musk told Nvidia to prioritize shipments of AI

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Speaker 1: processors to his company X over Tesla. CNBC first reported

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Speaker 1: that on Tuesday, and Musk went on X to confirm it,

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Speaker 1: saying Tesla had no place to send the Nvidia chips

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Speaker 1: to turn them on, so they would have just sat

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Speaker 1: in a warehouse. Is this a problem for him?

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Speaker 2: Listen, this is a problem anytime you've got an executive

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Speaker 2: that is essentially sitting in control of two companies that

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Speaker 2: are either in competition with one another or potentially in

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Speaker 2: competition about inputs with one another. And it has long

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Speaker 2: been known that in the EB sector, the access to

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Speaker 2: computer chips has been one of the big juggernaut constraints

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Speaker 2: that that industry has faced. And so the news CNBC

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Speaker 2: has broken about the sort of I don't know, demotion

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Speaker 2: of Tesla in the receipt of these Nvidia chips is

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Speaker 2: a potentially large concern. Now, whether it's the case or

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Speaker 2: not that Tesla didn't have a place to put these chips,

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Speaker 2: that's a different matter. I definitely remember that Elon Musk

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Speaker 2: himself had made a point about saying that Tesla was

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Speaker 2: ramping up its procurement of these chips as a mechanism

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Speaker 2: to try to ensure that this one huge supply constraint

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Speaker 2: wasn't going to affect Tesla. The broader point, however, is

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Speaker 2: that if you've got someone who is, you know, essentially

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Speaker 2: trying to doeward the ship at a bunch of different

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Speaker 2: companies that are each interested in the same input or

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Speaker 2: the same resource. It's almost inevitable that you're going to

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Speaker 2: have to make triaging choices yourself about who gets first

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Speaker 2: DIBs on this particular asset or resource, and that always

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Speaker 2: poses a challenge when it comes to you know, what

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Speaker 2: are your fiduciary duties? You know, go back June. The

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Speaker 2: kind of the foundational way that people lay out or

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Speaker 2: judges in courts have laid out fiduciary duties over the

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Speaker 2: years is that it's a duty of undivided loyalty. But

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Speaker 2: when you are dividing your time between multiple companies and

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Speaker 2: each company you owe a duty of undivided loyalty to,

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Speaker 2: that becomes a problem. Right, something has to give in

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Speaker 2: that context. Now, it may well be the case that

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Speaker 2: Tesla had no use for these computer chips. That's an

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Speaker 2: assertion that mister Musk has made, and that would, if true,

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Speaker 2: you know, dampen the extent to which the two interests

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Speaker 2: were in conflict with one another. But that is a

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Speaker 2: statement that's not necessarily consistent with other statements that he

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Speaker 2: himself has made about this, and certainly not consistent with

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Speaker 2: the way that the ev industry has been essentially stalled,

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Speaker 2: at least in part because of the availability of these resources.

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Speaker 1: Tesla's shareholders are voting on June thirteenth on a pay

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Speaker 1: package for Musk that's considered to be the largest for

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Speaker 1: a CEO in corporate America. Whether this will play into.

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Speaker 2: Their votes, it's a bit big factor, I guess I

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Speaker 2: should first say that there's a lively and interesting debate

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Speaker 2: about what the effect of this stockholder vote would actually be.

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Speaker 2: Would it have the power to overturn the judgment more

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Speaker 2: a chance record issued earlier as his pay package, Would

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Speaker 2: it complicated in any ways? And there are some people

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Speaker 2: that think it would have no effect, some people that

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Speaker 2: think it would be absolutely enough to approve the package.

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Speaker 2: I tend to come down in the middle. I think

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Speaker 2: that odds are stacked a little bit against it. There

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Speaker 2: might be a few windows by which it could be

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Speaker 2: useful in a multi pronged attempt to try to appeal

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Speaker 2: the judgment. So even the outcome of the stockholder vote,

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Speaker 2: if positive for mister Musk, doesn't necessarily put itself on

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Speaker 2: a glide path to actually approving the deal that was

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Speaker 2: disallowed back in the beginning. Of twenty twenty four. But

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Speaker 2: that is even assuming that the vote goes forward and

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Speaker 2: the vote is favorable towards a pay package. You know,

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Speaker 2: one of the things that this most recent controversy sort

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Speaker 2: of you know, resurfaces is a concern that, hey, if

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Speaker 2: you're a Tesla stockholder and you are now becoming increasingly

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Speaker 2: worried that mister Musk is sometimes giving goodies Tesla, but

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Speaker 2: sometimes giving them to x slash Twitter, sometimes giving them

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Speaker 2: to SpaceX, sometimes giving them to Neuralink, and in fact

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Speaker 2: you cannot buy stock in those companies because they're not

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Speaker 2: publicly traded. That creates a concerning amount of leakage from

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Speaker 2: your own investment. If you're a big institutional investor that

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Speaker 2: has been allowed into the walled garden of invest in

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Speaker 2: SpaceX or investing in Neuralink, or investing in x Twitter,

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Speaker 2: then you know how Elon allocates these goodies between the companies.

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Speaker 2: It may not matter as much because you know, we'll

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Speaker 2: be on the winning side and the losing side at

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Speaker 2: the same time. But if you're a Tesla public stockholder

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Speaker 2: that doesn't have stock in these other companies, the most

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Speaker 2: retail investors cannot have stock in these other companies. It's

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Speaker 2: a big concern. You know, you want to make sure

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Speaker 2: that your milk money isn't being stolen to subsidize or

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Speaker 2: support the next moonshot or the next base exmission, because

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Speaker 2: that's not what you signed up for, right That's nothing

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Speaker 2: that you're going to make profits from. So lawyers sometimes

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Speaker 2: refer to these things that's corporate opportunities, the supply contract,

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Speaker 2: the initiative in AI and robotics. Is this a corporate

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Speaker 2: opportunity that rightfully belongs to Tesla and shouldn't be spirited

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Speaker 2: out of the company, or is it something that's just

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Speaker 2: not within Tesla's line of business.

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Speaker 1: The shareholders are voting under this threat by Musk that

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Speaker 1: unless he has twenty five percent voting control, he'd prefer

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Speaker 1: to build products outside of.

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Speaker 2: Tesla, And in fact, he has begun to raise money

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Speaker 2: for an AI initiative that he's called XAI without committing

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Speaker 2: on whether that is going to be directed into Tesla

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Speaker 2: or somewhere else. So this, in some ways is the

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Speaker 2: instantiation of exactly this type of concern that you don't

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Speaker 2: really know if you're want of these public investors and Tesla,

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Speaker 2: whether the capital for your investment is actually going towards

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Speaker 2: the resources that you're expecting it to go towards, or

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Speaker 2: the most profitable resource is going to be siphoned off

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Speaker 2: or redirected to one of these other companies that you

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Speaker 2: didn't invest in. And this is kind of related to

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Speaker 2: this idea of having undivided loyalties. The field of fiduciary

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Speaker 2: duty law has a specialty inside it called the corporate

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Speaker 2: opportunities doctrine, and this is one of the thorniest areas

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Speaker 2: to navigate. It often ends up creating big trouble for

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Speaker 2: people who are trying to straddle influence on multiple companies,

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Speaker 2: because if some new business opportunity comes up for an

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Speaker 2: existing business opportunity meets at Karen Feeding, do you direct

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Speaker 2: it into one company, do you direct it to the other?

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Speaker 2: Do you just take it for yourself and so forth?

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Speaker 2: And this can be an intractable problem for a lot

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Speaker 2: of people to try to navigate. It's actually been such

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Speaker 2: an intractable problem over the years that about twenty five

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Speaker 2: years ago, the state of Delaware changed its law to

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Speaker 2: allow companies a little bit more freedom to say, oh,

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Speaker 2: you know what, we don't need to worry about corporate

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Speaker 2: opportunities in a particular category, whether it's you know, gpu

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Speaker 2: chips or whether it's something else, and you can do

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Speaker 2: that and you can sort of promulgate one of these waivers.

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Speaker 2: It's unallowable things within Delaware law. And in fact, SpaceX

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Speaker 2: has one of these waivers, sort of says, look, if

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Speaker 2: you know Elon Musk wants to pull something out of SpaceX,

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Speaker 2: we're going to disclaim certain types of categories of corporate opportunities.

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Speaker 2: But Tesla has never had one. And so there's a

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Speaker 2: sense in which that issue of Tesla's corporate opportunities is

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Speaker 2: pretty much still the traditional rule, which is that you know,

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Speaker 2: if it's within the company's line of business, it's something

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Speaker 2: that the stockholders might say rightfully belongs to them. And

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Speaker 2: that creates another problem with this vote, which is that

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Speaker 2: you know, even if you think that the vote itself

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Speaker 2: will have legal effects that will make it easier for

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Speaker 2: the compensation package to now be approved and actually awarded

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Speaker 2: or reawarded to mister Musk. The predicate assumption there is

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Speaker 2: that this shareholder vote is taking place on both a

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Speaker 2: fully informed basis and also what is known as a

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Speaker 2: non coerced basis. In other words, you can't have a

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Speaker 2: metaphorical gun to your head or the sort of Dame

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Speaker 2: Aquis is hanging over you as you're thinking about how

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Speaker 2: you're going to vote in some of these not so

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Speaker 2: veiled threats of Hey, if I don't get my way,

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Speaker 2: if i don't get my twenty five percent of the company,

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Speaker 2: I'm going to take this project and I'm not going

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Speaker 2: to let Tesla pursue it. I'm going to pursue it

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Speaker 2: elsewhere that has an element of coercion in it that,

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Speaker 2: weirdly enough, can invalidate a stockholder vote or the effect

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Speaker 2: of the stockholder vote. So even though Tesla has now

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Speaker 2: basically put out this proxy set of materials with copious

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Speaker 2: amounts of information disclosure, including the entire opinion that Chancellor

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Speaker 2: McCormick wrote in this case, they've definitely solved that you

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Speaker 2: haven't informed your stockholders problem, and they've done so quite admirably.

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Speaker 2: But at the same time, mister Musk and some other

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Speaker 2: folks are starting to hint that, hey, if the vote

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Speaker 2: doesn't come out in mister Musk's favor, he may visit

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Speaker 2: a world of hurt on the company and therefore on stockholders,

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Speaker 2: and that can actually have a backfiring effect by essentially

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Speaker 2: robbing the stockholder vote of legal effect, not because it

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Speaker 2: wasn't informed, but because it was coerced. Those are the

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Speaker 2: two things you're not supposed to do when you're getting

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Speaker 2: a stockholder vote, is to rob people of information or

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Speaker 2: with hold information, or make them feel like they're voting

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Speaker 2: in a coerced way. Tesla's fixed one. I have some

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Speaker 2: concerns that they're starting to imperil themselves of the second.

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Speaker 1: And there's more. There's so much more. There's also a

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Speaker 1: suit accusing him of insider trading when he sold more

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Speaker 1: than seven and a half billion dollars in Tesla stock

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Speaker 1: in twenty twenty two. This is about the time, I guess,

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Speaker 1: when he was looking for money for the purchase of Twitter.

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Speaker 2: Absolutely, this is exactly the moment where he had to

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Speaker 2: find some liquidity into stock. Here, I have some sympathy

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Speaker 2: for me, your musk, because the fact of the matter is,

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Speaker 2: you know, he was going to have to close this

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Speaker 2: deal and he was going to have to come up

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Speaker 2: with cash, and the only place that he could come

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Speaker 2: up with cash, really a bad amount of money, was

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Speaker 2: through you know, getting some liquidity in his Testla shares,

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Speaker 2: so he had to sell them. And this kind of

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Speaker 2: causes us to back into a very awkward aspect about

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Speaker 2: federal law, right it basically because you're not supposed to

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Speaker 2: be buying or selling stock while in possession of material

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Speaker 2: information that the public doesn't have. CEOs their entire day

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Speaker 2: consists of possessing material information, right And so if you

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Speaker 2: take that too literally, it's almost like, well, a CEO

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Speaker 2: can't ever buy or sell stock because they are always

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Speaker 2: in possession of material non public information. Now, there's a

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Speaker 2: fix that ordinarily works for this is that there's these

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Speaker 2: special like automated programs that just use an algorithm to

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Speaker 2: buy and sell stock on behalf of the CEO, so

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Speaker 2: the CEO isn't actually pulling the trigger on those sales.

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Speaker 2: That's what's sometimes known is a ten D five one program.

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Speaker 2: That's what the term of art is. But that wasn't

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Speaker 2: going to be appropriate here because this was not just

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Speaker 2: sort of the regular sort of portfolio management buying and

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Speaker 2: selling stock. He needed to liquidate a big chunk of

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Speaker 2: this so that he could make good on the purchase

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Speaker 2: price for Twitter, and this was the only way to

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Speaker 2: do it. And so in some ways that may actually

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Speaker 2: be his stating grace in this case is that it's

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Speaker 2: pretty clear he needed to come up with this money. Second,

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Speaker 2: it's pretty clear that he's always the CEO going to

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Speaker 2: be in possession of material non public information, both good

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Speaker 2: or bad. But the thing that was motivating to do

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Speaker 2: this was not to make money off of the material information,

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Speaker 2: was really just to get the liquidity of his stock

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Speaker 2: taken care of.

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Speaker 1: Coming up next, the judge in the insider trading case

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Speaker 1: knows Musk. Well, I'm June Grosso and you're listening to Bloomberg.

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Speaker 1: I've been talking to business law professor Eric Talley of

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Speaker 1: Columbia Law School about a Tesla shareholders lawsuit against Elon

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Speaker 1: muskudging insider trading. The suit claims that Musk had inside

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Speaker 1: knowledge of a miss on production and delivery numbers that

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Speaker 1: Tesla was facing when he sold more than seven point

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Speaker 1: five billion dollars in stock in twenty twenty two. It's

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Speaker 1: just the latest dispute over Musk his stock purchases, sales,

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Speaker 1: and talk. Eric. This case is coming before Chancellor Kathleen McCormick,

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Speaker 1: who's dealt with Musk before she oversaw the case over

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Speaker 1: his unsuccessful effort to back out of buying Twitter, and

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Speaker 1: in January, she voided his fifty six billion dollar pay

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Speaker 1: package after finding that Tesla directors who approved it in

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Speaker 1: twenty eighteen had a conflict of interest and that Tesla

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Speaker 1: failed to properly disclose the terms of the executive compensation plan.

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Speaker 1: Is it just luck that he keeps getting McCormick well, you.

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Speaker 2: Know, so it turns out that you know, anything that

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Speaker 2: is just fishable in front the state courts, and you know,

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Speaker 2: some g federal claims are not, but they sometimes get

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Speaker 2: lumped in with state claims and they're going to be

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Speaker 2: then heard in front of the Delaware court. If they're

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Speaker 2: heard at the state court. The Delaware Court of Chancery

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Speaker 2: has generally not operated under you know, sort of a

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Speaker 2: you know, ping pong ball randomization approach. When cases come down,

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Speaker 2: they basically say, okay, look, there are certain judges that

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Speaker 2: have developed an expertise in a particular sector, in a

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Speaker 2: particular set of disputes. And Chancellor McCormick also, because she's

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Speaker 2: the chance for the Court though, of the judges on

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Speaker 2: the Court of Chancery, she is sort of the top

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Speaker 2: of that hierarchy. It is generally seen as the Chancellor's

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Speaker 2: responsibility to take on the thornious cases, and so it's

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Speaker 2: just not surprising that a case that ends up landing

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Speaker 2: in Delaware is going to draw Chancellor McCormick to it

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Speaker 2: once again, simply because there's an awful lot of backstory here. Now,

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Speaker 2: it's worth noting that Chanceder McCormick hasn't always been presiding

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Speaker 2: over Tesla litigation. When the compensation case actually started, it

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Speaker 2: was a different judge who's now left the court by

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Speaker 2: Chancellor Slights, who also presided over the Solar City Tesla litigation.

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Speaker 2: So you know, she sort of moved into being kind

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Speaker 2: of the expert in all things Tesla when by Chancellor's

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Speaker 2: Slights left the bench. But it's just not surprising that

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Speaker 2: things that circulate around similar topics are going to draw

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Speaker 2: similar judges. And I can think of no more of

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Speaker 2: a similar topic than things that involve Elon Musk, which

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Speaker 2: seems to be attracting attention left and right.

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Speaker 1: Eric, isn't it usually the sec who finds out about

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Speaker 1: these insider trading schemes or charges first before investors?

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Speaker 2: It typically is, And so there are sometimes some lines

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Speaker 2: of demarcation that basically say, look, this can only be

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Speaker 2: brought in federal court, or it could be even though

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Speaker 2: it's a federal claim, it can be brought in state court.

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Speaker 2: And there are certain types that absolutely cannot be brought

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Speaker 2: in state courts that you've got to bring them to

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Speaker 2: federal court. And there's some that kind of bleed over.

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Speaker 2: They involve bost some states, fiduciary claims and securities claims,

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Speaker 2: and there you can end up having a state court

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Speaker 2: end up hearing it. It wouldn't surprise me if in

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Speaker 2: this case there was some sort of emotion to say, look,

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Speaker 2: this is not one of those cases. This is an

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Speaker 2: entirely federal case. This should be moved to federal court.

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Speaker 2: That's certainly a possibility. You know, the case really just

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Speaker 2: first shots have just been fired.

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Speaker 1: Do you think it's a good case for the shareholders?

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Speaker 1: A strong case?

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Speaker 2: Like I said, the argument that hey, you're not supposed

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Speaker 2: to be trading will in possession of material non public information.

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Speaker 2: He's CEO, he had this non public information about the

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Speaker 2: future of performance reports with Tesla, and he nonetheless sold

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Speaker 2: a big chunk of shares that's got all of the

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Speaker 2: ingredients of a valid cause of action. I think the

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Speaker 2: biggest argument against it was the fact that it seems

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Speaker 2: implausible that the thing that was motivating mister Musk to

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Speaker 2: engage in this sale was his desire to get out

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Speaker 2: while the getton was good as opposed to I need

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Speaker 2: liquidity for my stock so that I can essentially make

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Speaker 2: good on this rather improvident offer that I made on Twitter,

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Speaker 2: and I looks like I'm going to have to close

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Speaker 2: that deal. So I think that that probably is the

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Speaker 2: most likely motivating factor as opposed to anything that has

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Speaker 2: to do with security S fraud. There is a state

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Speaker 2: of mind requirement when you're engaged in security S fraud,

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Speaker 2: and that may actually play a role here. Right, did

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Speaker 2: he have a culpable state of mind in doing this

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Speaker 2: or was this really for a totally different reason? And

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Speaker 2: of course he couldn't help being in possession of material

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Speaker 2: information because he is the CEO. Heck, he's the CEO

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Speaker 2: of like six different companies.

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Speaker 1: It's hard to keep track of all his legal issues.

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Speaker 1: He's also sitting down for a third round of questioning

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Speaker 1: with the SEC who's investigating his Twitter purchase. I'm surprised

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Speaker 1: that's not over yet.

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Speaker 2: Yeah, I mean, I think on some level it probably

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Speaker 2: would have been over but as you might recall, j Any,

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Speaker 2: he no showed at least one of those earlier appointments.

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Speaker 2: I think this is going to be basically another requirement

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Speaker 2: that he come in in this process see its way

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Speaker 2: through the underlying allegations. There are not proof shattering, but

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Speaker 2: they are at least as alleged. They are a technical

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Speaker 2: violation of what you're supposed to be doing when you

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Speaker 2: are thinking about taking over a company, which is that

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Speaker 2: you're supposed to reveal yourself publicly once you've crossed the

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Speaker 2: five percent of ownership that threshold, and you have a

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Speaker 2: limited amount of time to do that. And the allegations

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Speaker 2: is that he delayed too long, and that's an importance

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Speaker 2: set of rules the growth of the SEC to keep

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Speaker 2: established in a publicly observable way. In fact, they just

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Speaker 2: shortened those timelines since the Twitter acquisition. So I think

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Speaker 2: in some ways this is an attempt by the SEC

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Speaker 2: to sort of say, no, we really mean it. These

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Speaker 2: rules are there, they're there for a reason, and we

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Speaker 2: are not going to look past violations. And so I

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Speaker 2: think that it may be as much of a symbolic

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Speaker 2: victory that the SEC is going after the post editing out.

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Speaker 1: Have we covered all his current legal.

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Speaker 2: Issues, Well maybe not. You know, I will say that

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Speaker 2: it is uncommon to see someone who ends up as

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Speaker 2: the chief executive officer of so many companies that are

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Speaker 2: in similar spaces with one another. And part of the

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Speaker 2: reason probably has to do with, you know, two things,

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Speaker 2: like one is just a constraint on your ability to

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Speaker 2: process things as a mere ordinary human. And there, you know,

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Speaker 2: Musk has definitely shown himself not to be the ordinary human, right.

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Speaker 2: He is a risk taker, he's iconoclastic, and he's basically

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Speaker 2: put himself in this position and it would be a

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Speaker 2: difficult one for other people to emulate. So that's kind

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Speaker 2: of a point that he's got going in favor. The

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Speaker 2: problem is that when you're in that sort of a

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Speaker 2: position where you owe these undivided duties of loyalty to

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Speaker 2: these different companies, that is almost inevitably going to collide

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Speaker 2: with a situation like, oh my gosh, you know Twitter

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Speaker 2: needs a good data scientist. Let me just poll some

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Speaker 2: one out of Tesla and have them go over there,

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Speaker 2: or have someone from SpaceX go over to Tesla, or

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Speaker 2: have when someone in Tesla go over to SpaceX or

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Speaker 2: Neuralink to help them with their things. That then sort

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Speaker 2: of creates a problem about like what what belongs to

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Speaker 2: each one of these companies, and that can create issues

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Speaker 2: from a fiduciary perspective. It can also create other issues

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Speaker 2: like are these really just all part of the same company?

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Speaker 2: If one of them gets deep into trouble, do its

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Speaker 2: creditors get to claim, Hey, look, the boundaries between these

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Speaker 2: companies have been bushed, and therefore you should just allow

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Speaker 2: us to recover from any one of these companies. So

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Speaker 2: that's another reason why the lawyers like to try to

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Speaker 2: keep these silos separate. But it's hard to do that

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Speaker 2: with someone who has as many sort of business tentacles

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Speaker 2: as Elon Muska.

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Speaker 1: And he seems to be getting more and more tentacles

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Speaker 1: as time goes on. Thanks so much, Eric. That's professor

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Speaker 1: Eric Tally of Columbia Law School. It's the fourth week

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Speaker 1: of the bribery trial of Senator Menendez, and jurors have

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Speaker 1: had to listen to lengthy testimony about a complex bribery scheme.

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Speaker 1: As prosecutors introduced evidence of emails, phone recordings, bank records,

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Speaker 1: gold bars, and hundreds of thousands of dollars in cash.

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Speaker 1: But the testimony picked up yesterday and jurors were riveted

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Speaker 1: when an undercover FBI agent testified about a video recording

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Speaker 1: she made of the New Jersey Democrat dining and laughing

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Speaker 1: with the wine flowing at an upscale steakhouse in DC

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Speaker 1: with his girlfriend and now wife, Nadine, his co defendant

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Speaker 1: Will Hannah, and two Egyptian men. The two FBI surveillance

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Speaker 1: teams were watching someone else and just happened to see Menendez.

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Speaker 1: It's not clear if the Democratic senator was even on

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Speaker 1: the FBI's radar at the time. Joining me is Bloomberg

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Speaker 1: Legal reporter David Voriakiz, who's covering the trial. So, David,

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Speaker 1: it's kind of remarkable. An FBI surveillance team posed as

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Speaker 1: a couple just happened to be watching someone else and

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Speaker 1: apparently Menandez's favorite restaurant in DC and heard an incriminating statement.

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Speaker 3: In twenty nineteen, the FBI surveiled a group of people

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Speaker 3: at Morton's Steakhouse in Washington, and the target of that investigation,

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Speaker 3: we learned in testimony in court this week was not

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Speaker 3: Bob Menendez, but someone else in the group, and the

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Speaker 3: group included menendez Is then girlfriend, Nadine Arslanian who you

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Speaker 3: later married, Menendez and three other Egyptian men. And there

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Speaker 3: were two surveillance teams at the restaurant, one inside and

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Speaker 3: one outside, it appeared, and they took a number of

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Speaker 3: photographs as well as a video, which jurors saw in

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Speaker 3: federal court in New York this week.

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Speaker 1: What the FBI agent said she heard is And the

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Speaker 1: FBI agent testified that she heard Nadine Menendez ask what

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Speaker 1: else can love of my life do for you? Was

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Speaker 1: that the only bit of conversation that's relevant to the trial.

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Speaker 3: Yes, the investigative specialist Terry Williams Thompson who testified, said

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Speaker 3: that that was what she heard, and they did not

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Speaker 3: record the conversation when they videotaped this dinner, they were

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Speaker 3: not recording the sounds. So that quote certainly suggests that

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Speaker 3: Menendez had agreed to do something for these Egyptian men.

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Speaker 3: And all this was happening at the same time that

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Speaker 3: a co defendant, will Hannah, had recently secured an exclusive

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Speaker 3: deal to inspect us meat that was bound for Egypt

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Speaker 3: and was certified as complying with halal standards and Senator Menendez,

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Speaker 3: we heard in testimony called the top US Department of

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Speaker 3: Agriculture official who had complained to the Egyptian government that

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Speaker 3: this sudden change in policy on halal meat inspections was

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Speaker 3: hurting US businesses because there were several other businesses that

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Speaker 3: had previously had this job, and all of a sudden,

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Speaker 3: it was down to one business and that was the

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Speaker 3: one by Will Hannah, and he had no background at

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Speaker 3: all in halal meat inspections. So that USDA official Ted

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Speaker 3: McKinney testified last week and this week that he got

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Speaker 3: a call out of the blue from Menendez right around

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Speaker 3: the same time as this dinner, in which Menendez told

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Speaker 3: him to stop interfering with my constituent. And he said

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Speaker 3: that Menendez's tone was kurt, and that when McKinney tried

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Speaker 3: to explain what he was doing to Menendez that the

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Speaker 3: Senator interrupted him.

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Speaker 1: And David, just to be clear, is the bribery charge

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Speaker 1: related to this incident.

433
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Speaker 3: There are couple of charges that it could relate to.

434
00:25:02,200 --> 00:25:05,360
Speaker 3: One is there's a bribery charge that has to do

435
00:25:05,520 --> 00:25:10,680
Speaker 3: with Will Hannah seeking Menendez to protect his monopoly. And

436
00:25:11,040 --> 00:25:14,960
Speaker 3: Menendez is also accused of acting as an unregistered agent

437
00:25:15,000 --> 00:25:15,640
Speaker 3: of Egypt.

438
00:25:16,240 --> 00:25:20,879
Speaker 1: Menandez Is defense attorney portrayed this as just an innocent meeting.

439
00:25:21,800 --> 00:25:25,520
Speaker 1: That the senator goes there all the time. He probably

440
00:25:25,560 --> 00:25:29,120
Speaker 1: eats at that same restaurant, at that same table two

441
00:25:29,160 --> 00:25:31,760
Speaker 1: hundred and fifty nights a year, and wow, that's a

442
00:25:31,760 --> 00:25:32,479
Speaker 1: lot of steak.

443
00:25:32,840 --> 00:25:36,320
Speaker 3: The defense said that this was a routine matter for

444
00:25:36,400 --> 00:25:41,040
Speaker 3: a US senator and that he was acting on behalf

445
00:25:41,119 --> 00:25:45,199
Speaker 3: of a constituent, that he did not pressure McKinney, he

446
00:25:45,320 --> 00:25:48,200
Speaker 3: didn't ask him to do anything corrupt.

447
00:25:48,640 --> 00:25:51,840
Speaker 1: This was four years before the indictment. Does it seem

448
00:25:51,880 --> 00:25:56,639
Speaker 1: as if the FBI started this investigation then and it

449
00:25:56,720 --> 00:25:58,560
Speaker 1: continued for four years.

450
00:25:59,119 --> 00:26:03,560
Speaker 3: Well, we know from prior court filings that the FBI

451
00:26:03,840 --> 00:26:08,600
Speaker 3: had rated will Hannah's business in Edgewater, New Jersey, and

452
00:26:08,640 --> 00:26:12,120
Speaker 3: there was an active investigation of Hannah and they were

453
00:26:12,160 --> 00:26:16,080
Speaker 3: looking into whether he was acting as an agent at Egypt.

454
00:26:16,240 --> 00:26:20,640
Speaker 3: And the FBI employee who testified said that she did

455
00:26:20,640 --> 00:26:24,080
Speaker 3: not know the subject of the investigation, but it was

456
00:26:24,119 --> 00:26:28,320
Speaker 3: not Menendez. So that suggests that the FBI was working

457
00:26:28,359 --> 00:26:33,240
Speaker 3: actively on another angle and maybe they stumbled on Menendez.

458
00:26:33,760 --> 00:26:36,760
Speaker 1: Was a testimony sort of light at certain points, because

459
00:26:36,800 --> 00:26:39,840
Speaker 1: I read that the FBI agent was asked whether she

460
00:26:40,160 --> 00:26:42,680
Speaker 1: ate while she was there, and she said I sure

461
00:26:42,760 --> 00:26:45,880
Speaker 1: did and it was good too. And then the judge said,

462
00:26:46,000 --> 00:26:48,080
Speaker 1: I hope the FBI paid for your meal.

463
00:26:48,960 --> 00:26:52,639
Speaker 3: That was definitely a fun moment in the testimony. She

464
00:26:52,880 --> 00:26:56,280
Speaker 3: was talking about how she had to dress the part

465
00:26:56,480 --> 00:26:59,679
Speaker 3: and blend in and that she was happy to do

466
00:26:59,840 --> 00:27:02,280
Speaker 3: so at Martin's, which had a great menu.

467
00:27:03,560 --> 00:27:06,240
Speaker 1: I mean, this is the kind of testimony that jurors

468
00:27:06,280 --> 00:27:09,679
Speaker 1: wake up for after weeks and weeks of seeing some

469
00:27:09,800 --> 00:27:11,080
Speaker 1: boring evidence coming in.

470
00:27:11,280 --> 00:27:14,240
Speaker 3: There was definitely a captivating witness, and there was a

471
00:27:14,280 --> 00:27:18,240
Speaker 3: lot about how she flied her craft as a surveillance person.

472
00:27:18,280 --> 00:27:20,600
Speaker 3: I mean, she apparently goes from job to job to

473
00:27:20,760 --> 00:27:24,440
Speaker 3: job blending in, and it was fascinating to hear all

474
00:27:24,480 --> 00:27:26,680
Speaker 3: this sort of spycraft in action.

475
00:27:27,359 --> 00:27:30,840
Speaker 1: The fifth defendant, the defendant who pleaded guilty and will

476
00:27:30,840 --> 00:27:35,480
Speaker 1: be called in the trial. Is his testimony just against

477
00:27:35,840 --> 00:27:40,320
Speaker 1: Nadine Menendez or is it also against Bob Menendez.

478
00:27:40,640 --> 00:27:45,040
Speaker 3: Jose Eeribe is a New Jersey businessman who pleaded guilty

479
00:27:45,400 --> 00:27:50,480
Speaker 3: and is now cooperating with prosecutors. When he is called

480
00:27:50,520 --> 00:27:55,720
Speaker 3: to testify. It's expected that he's going to implicate Bob Menendez,

481
00:27:55,920 --> 00:28:00,840
Speaker 3: Nadine Menendez, and Will Hannah, that they were all engaged

482
00:28:00,880 --> 00:28:05,000
Speaker 3: in a bribery plot together, and that he can offer

483
00:28:05,359 --> 00:28:10,000
Speaker 3: an inside account of how this plot, at least as

484
00:28:10,080 --> 00:28:13,800
Speaker 3: far as he was concerned, advanced, And his role in

485
00:28:13,840 --> 00:28:19,160
Speaker 3: this case is that a associate of his was under

486
00:28:19,240 --> 00:28:23,960
Speaker 3: state indictment. And we've reported that Bob Menendez met with

487
00:28:24,040 --> 00:28:28,280
Speaker 3: the then Attorney General, Gerbir Greywall and spoke to him

488
00:28:28,600 --> 00:28:32,600
Speaker 3: about this case. And there's some dispute about whether he

489
00:28:32,800 --> 00:28:36,960
Speaker 3: actually asked Greywall to do anything on behalf of Uribe,

490
00:28:36,960 --> 00:28:42,520
Speaker 3: but the prosecutors say essentially that Uribe bribe Menendez to

491
00:28:42,720 --> 00:28:47,520
Speaker 3: try to persuade the new Jersey Attorney General to influence

492
00:28:47,640 --> 00:28:51,760
Speaker 3: the outcome of that indictment. It was an insurance broadcase,

493
00:28:52,080 --> 00:28:56,160
Speaker 3: and that he also wanted Menendez his help in a

494
00:28:56,560 --> 00:29:01,760
Speaker 3: second related criminal investigation that did not lead to any charges.

495
00:29:02,320 --> 00:29:06,000
Speaker 1: And I asked that question because, as we've discussed, part

496
00:29:06,040 --> 00:29:10,320
Speaker 1: of Menendez's strategy is to blame his wife. But it

497
00:29:10,400 --> 00:29:14,040
Speaker 1: seems like in the testimony he's been implicated as well.

498
00:29:14,520 --> 00:29:18,880
Speaker 3: He has been implicated as well. And what his lawyers

499
00:29:18,960 --> 00:29:23,479
Speaker 3: have been carefully trying to do is parse out the

500
00:29:23,960 --> 00:29:28,080
Speaker 3: nearly five hundred thousand dollars in cash and the thirteen

501
00:29:28,120 --> 00:29:31,760
Speaker 3: gold bars that prosecutors say that he received as a

502
00:29:31,800 --> 00:29:36,360
Speaker 3: result of bride and offer innocent explanations for why he

503
00:29:36,440 --> 00:29:41,440
Speaker 3: received them, and also through cross examination, tried to show

504
00:29:41,760 --> 00:29:45,720
Speaker 3: that a series of text messages and emails in which

505
00:29:45,880 --> 00:29:51,200
Speaker 3: Nadine Menendez then his girlfriend Nadine Arslenian, arranged a series

506
00:29:51,240 --> 00:29:56,080
Speaker 3: of meetings with Egyptian officials and will Hannah that Senator

507
00:29:56,160 --> 00:30:00,920
Speaker 3: Menendez said, we're not corrupt, and that he had nothing

508
00:30:00,960 --> 00:30:04,440
Speaker 3: to do in any event with any of the financial

509
00:30:04,560 --> 00:30:09,360
Speaker 3: problems that he's been girlfriend now wife was experiencing at

510
00:30:09,400 --> 00:30:09,840
Speaker 3: the time.

511
00:30:10,600 --> 00:30:12,320
Speaker 1: They're going to try to attempt to show that there

512
00:30:12,400 --> 00:30:15,640
Speaker 1: was no corrupt intent, which is an element of.

513
00:30:15,600 --> 00:30:20,400
Speaker 3: Bribery, that's correct, and that he did not know that

514
00:30:20,520 --> 00:30:23,320
Speaker 3: his wife was having a lot of financial problems when

515
00:30:23,360 --> 00:30:25,920
Speaker 3: they got married. It was the second marriage for both

516
00:30:25,960 --> 00:30:29,520
Speaker 3: of them. And he's also trying to show that his

517
00:30:29,680 --> 00:30:32,840
Speaker 3: wife was in possession of a number of gold bars

518
00:30:32,840 --> 00:30:35,920
Speaker 3: that he had nothing to do with, that the gold

519
00:30:35,960 --> 00:30:38,440
Speaker 3: bars were given to his wife and not to him.

520
00:30:38,880 --> 00:30:44,000
Speaker 3: And he didn't understand that Nadine's friends were trying to

521
00:30:44,080 --> 00:30:47,360
Speaker 3: help her out of her financial problems. I mean, that's

522
00:30:47,400 --> 00:30:48,760
Speaker 3: the defense story.

523
00:30:49,000 --> 00:30:51,920
Speaker 1: And we should mention that Nadine Menandez will be tried

524
00:30:52,000 --> 00:30:56,160
Speaker 1: separately in July. Has there been any indication that he

525
00:30:56,200 --> 00:30:58,680
Speaker 1: would take the stand, That's not clear.

526
00:30:59,200 --> 00:31:02,720
Speaker 3: That's generally a decision that defense lawyers make at the

527
00:31:02,800 --> 00:31:06,440
Speaker 3: end of a trial, after they've assessed how the evidence

528
00:31:06,480 --> 00:31:10,400
Speaker 3: has come in. I would say that menendez Is political

529
00:31:10,440 --> 00:31:13,600
Speaker 3: support in New Jersey and in the US Senate has

530
00:31:14,080 --> 00:31:17,440
Speaker 3: collapsed as a result of this case. Just this week,

531
00:31:17,600 --> 00:31:21,320
Speaker 3: he filed to run in November for re election as

532
00:31:21,520 --> 00:31:25,920
Speaker 3: an independent Democrat because he's lost the support of the party.

533
00:31:26,160 --> 00:31:29,880
Speaker 3: So I have to assume that any decision on testifying

534
00:31:30,400 --> 00:31:34,520
Speaker 3: will also involve a political calculation on how the trial

535
00:31:34,640 --> 00:31:37,800
Speaker 3: is being received publicly. He of course wants to be

536
00:31:37,920 --> 00:31:41,200
Speaker 3: exonerated as a result of this trial and re elected.

537
00:31:41,520 --> 00:31:47,760
Speaker 3: And there's the challenge he has answering this very serious

538
00:31:47,840 --> 00:31:52,400
Speaker 3: indictment and a large amount of evidence against him. He's

539
00:31:52,440 --> 00:31:55,280
Speaker 3: got to balance that against the story that he tells

540
00:31:55,320 --> 00:31:59,160
Speaker 3: for the public, which has only heard about the indictment

541
00:31:59,280 --> 00:32:02,560
Speaker 3: and out of the evidence and passed him in a

542
00:32:02,680 --> 00:32:03,920
Speaker 3: very unflattering light.

543
00:32:04,120 --> 00:32:07,240
Speaker 1: That is a really good point because anyone who watches

544
00:32:07,320 --> 00:32:11,840
Speaker 1: the news saw the photos of his jacket stuffed with

545
00:32:12,000 --> 00:32:15,480
Speaker 1: cash and the gold bars and the Mercedes, so he

546
00:32:15,560 --> 00:32:18,400
Speaker 1: has to take a lot into consideration in his decision

547
00:32:18,440 --> 00:32:23,320
Speaker 1: to testify. This prosecution strikes me as a lot stronger

548
00:32:23,360 --> 00:32:25,880
Speaker 1: than the last time Menendez was prosecuted.

549
00:32:26,280 --> 00:32:31,520
Speaker 3: Senator Menendez's first trial in twenty seventeen was in Newark,

550
00:32:31,560 --> 00:32:37,200
Speaker 3: New Jersey, in federal court, and he was accused of

551
00:32:37,440 --> 00:32:43,760
Speaker 3: taking trips and other favors in exchange for helping a

552
00:32:44,240 --> 00:32:49,280
Speaker 3: Florida eye doctor who wanted his help. And there were

553
00:32:49,280 --> 00:32:56,520
Speaker 3: some similarities in that Menendez was contacting government officials on

554
00:32:56,920 --> 00:33:00,440
Speaker 3: Melgan's behalf, but the scale of the gifts in this

555
00:33:00,560 --> 00:33:03,840
Speaker 3: case is just much larger. The gold bars and the

556
00:33:03,960 --> 00:33:08,360
Speaker 3: cash are just much more tangible bribes as alleged by

557
00:33:08,360 --> 00:33:11,480
Speaker 3: the prosecutors than they were in the first case, in

558
00:33:11,560 --> 00:33:16,080
Speaker 3: which the jury deadlocked and the judge ultimately declared a mistrial.

559
00:33:16,720 --> 00:33:20,800
Speaker 3: In this case, for instance, the prosecutors passed around the

560
00:33:20,800 --> 00:33:24,640
Speaker 3: gold bars so the jurists could actually hold them, and

561
00:33:24,720 --> 00:33:29,320
Speaker 3: they've seen photographs of the cash that was seized by

562
00:33:29,440 --> 00:33:33,560
Speaker 3: FBI agents when they raided the house that Bob and

563
00:33:33,640 --> 00:33:36,640
Speaker 3: Nadine Menendez share in suburban New Jersey.

564
00:33:37,280 --> 00:33:41,840
Speaker 1: That is certainly tangible evidence for the jury. Thanks so much, David.

565
00:33:42,080 --> 00:33:46,400
Speaker 1: That's Bloomberg Legal reporter David Voriakis. In other legal news today,

566
00:33:46,640 --> 00:33:50,360
Speaker 1: an appeals court has halted the Georgia election interference case

567
00:33:50,400 --> 00:33:54,160
Speaker 1: against former President Donald Trump and others while it reviews

568
00:33:54,160 --> 00:33:58,080
Speaker 1: a lower court judge's ruling allowing Fulton County District Attorney

569
00:33:58,120 --> 00:34:01,120
Speaker 1: Fani Willis to remain on the case. While it was

570
00:34:01,200 --> 00:34:04,160
Speaker 1: already unlikely that the case would go to trial before

571
00:34:04,200 --> 00:34:08,200
Speaker 1: the November general election, this makes that even more certain.

572
00:34:08,600 --> 00:34:11,680
Speaker 1: The Appeals Court said that if oral argument is requested

573
00:34:11,680 --> 00:34:16,319
Speaker 1: and granted, it's tentatively scheduled for October fourth. The court

574
00:34:16,360 --> 00:34:19,080
Speaker 1: will then have until mid March to rule, and the

575
00:34:19,160 --> 00:34:21,880
Speaker 1: losing side will be able to appeal to the Georgia

576
00:34:22,000 --> 00:34:25,600
Speaker 1: Supreme Court. If you recall, a Fulton County grand jury

577
00:34:25,640 --> 00:34:29,520
Speaker 1: in August indicted Trump and eighteen others, accusing them of

578
00:34:29,560 --> 00:34:33,560
Speaker 1: participating in a sprawling scheme to illegally try to overturn

579
00:34:33,600 --> 00:34:37,160
Speaker 1: the twenty twenty presidential election in Georgia. They've tried to

580
00:34:37,200 --> 00:34:40,320
Speaker 1: get Willis in her office removed from the case, arguing

581
00:34:40,360 --> 00:34:44,320
Speaker 1: that a romantic relationship she had with Special Prosecutor Nathan

582
00:34:44,400 --> 00:34:46,760
Speaker 1: Wade created a conflict of interest.

583
00:34:47,640 --> 00:34:50,600
Speaker 2: On this vote, the yeas are fifty one, the nays

584
00:34:50,680 --> 00:34:53,760
Speaker 2: are thirty nine. Three fifths of the senator's duly chosen

585
00:34:53,800 --> 00:34:57,000
Speaker 2: and sworn not having voted in the affirmative. The motion

586
00:34:57,320 --> 00:34:58,319
Speaker 2: is not agreed to.

587
00:34:58,960 --> 00:35:02,160
Speaker 1: A Democratic led effort to advance a bill aimed at

588
00:35:02,239 --> 00:35:06,080
Speaker 1: codifying the right to access birth control failed today by

589
00:35:06,080 --> 00:35:08,520
Speaker 1: a vote of fifty one to thirty nine in the Senate.

590
00:35:09,080 --> 00:35:12,000
Speaker 1: The bill would have needed sixty votes to advance, and

591
00:35:12,120 --> 00:35:16,280
Speaker 1: only two Republicans, Senator Susan Collins of Maine and Senator

592
00:35:16,360 --> 00:35:20,879
Speaker 1: Lisa Murkowski of Alaska, crossed party lines to vote with Democrats.

593
00:35:21,280 --> 00:35:24,080
Speaker 1: Here's Democratic Senator Shaheen of New Hampshire.

594
00:35:24,760 --> 00:35:27,960
Speaker 4: This country is failing women in New Hampshire and across

595
00:35:28,000 --> 00:35:31,880
Speaker 4: the country when it comes to protecting our fundamental freedoms.

596
00:35:32,480 --> 00:35:36,160
Speaker 4: Fundamental freedoms like the right to contraception, which we thought

597
00:35:36,239 --> 00:35:38,200
Speaker 4: was safe just a few short years ago.

598
00:35:38,800 --> 00:35:42,359
Speaker 1: Republicans had called the vote a stunt and claim there's

599
00:35:42,440 --> 00:35:46,880
Speaker 1: no active effort to strip away contraception access in the US,

600
00:35:47,280 --> 00:35:51,000
Speaker 1: but democrats pointed to a series of public comments, as

601
00:35:51,040 --> 00:35:54,759
Speaker 1: well as state and local legislative proposals that would do

602
00:35:55,040 --> 00:35:58,759
Speaker 1: just that. In addition, former President Trump recently said he

603
00:35:58,800 --> 00:36:02,920
Speaker 1: would look at restricted access to contraception if president, but

604
00:36:03,040 --> 00:36:06,200
Speaker 1: later walk back that comment. And that's it for this

605
00:36:06,320 --> 00:36:09,480
Speaker 1: edition of the Bloomberg Law Podcast. Remember you can always

606
00:36:09,480 --> 00:36:12,239
Speaker 1: get the latest legal news by subscribing and listening to

607
00:36:12,280 --> 00:36:16,440
Speaker 1: the show on Apple Podcasts, Spotify, and at Bloomberg dot com,

608
00:36:16,440 --> 00:36:20,719
Speaker 1: Slash podcast, Slash Law. I'm June Grosso and this is

609
00:36:20,760 --> 00:36:21,360
Speaker 1: Bloomberg