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

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Speaker 1: Attorney General Merrick Garland has said it before, no one

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Speaker 1: is above the law. However, in an interview with NBC

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Speaker 1: this week, Garland appeared to be a little more specific

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Speaker 1: about the extent of the January sixth investigation. Look, we

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Speaker 1: pursue justice without fear or favor. We intend to hold

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Speaker 1: everyone anyone who was criminally responsible for the events surrounding

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Speaker 1: January six for any attempt to interfere with the lawful

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Speaker 1: transfer of power from one administration to another, accountable. That's

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Speaker 1: what we do. That statement, along with reports about questions

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Speaker 1: asked by prosecutors in the grand jury, indicate that the

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Speaker 1: Justice Department is indeed investigating the role of former President

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Speaker 1: Donald Trump in overturning the election results. Joining me as

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Speaker 1: former federal prosecutor Robert Mints a partner McCarter in English, Bob,

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Speaker 1: does there appear to be a change in Merrick Garland's tone. Well,

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Speaker 1: I think the very public nature about the January six

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Speaker 1: House Committee hearings, and particularly the testimony from some of

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Speaker 1: the individuals who used to work directly for the Trump administration,

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Speaker 1: was very compelling and has put a lot of pressure

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Speaker 1: on the Department of Justice to look at this information

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Speaker 1: and to consider potential criminal charges against the former president

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Speaker 1: and others in his orbit. Mark Short, former Vice President,

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Speaker 1: Pence's former chief of staff, and Greg Jacob, his former

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Speaker 1: chief council, appeared before the grand jury and they were

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Speaker 1: asked about conversations they had with Trump and his inner

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Speaker 1: circle about efforts to create false selectors. What did that

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Speaker 1: signal to you? Well, as you know, this investigation has

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Speaker 1: been going on with the Department of Justice sin shortly

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Speaker 1: after the January six assault on the Capitol, and since

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Speaker 1: that time, federal prosecutors have charged eight hundred forty individuals

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Speaker 1: with various charges directly relating to assault and to forcibly

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Speaker 1: entering the Capitol. But the investigation has taken a different

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Speaker 1: turn recently because we know that individuals who are being

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Speaker 1: brought before the grand jury are being asked questions directly

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Speaker 1: about the former president's involvement in the efforts to reverse

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Speaker 1: the election loss, and particularly what did he know, when

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Speaker 1: did he know it, and what direction was he giving

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Speaker 1: his lawyers and those around him in the events leading

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Speaker 1: up to January six. So that suggests to me that

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Speaker 1: the Department of Justice is taking a more aggressive tone,

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Speaker 1: and they are entering what is clearly a very politically

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Speaker 1: fraught phase of this investigation. The grand Jury can do

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Speaker 1: what the January sixth Committee can't or won't do. They

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Speaker 1: can subpoena former Vice President Pence. They can grant immunity

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Speaker 1: to co operators like Mark Meadows, the former chief of staff,

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Speaker 1: or John Eastman, the former attorney for Trump. Would that

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Speaker 1: be a very aggressive move for prosecutors. Well, this whole

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Speaker 1: investigation is unprecedented, and it really has placed the Department

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Speaker 1: of Justice in a very difficult circumstance because, on the

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Speaker 1: one hand, the idea of prosecuting a former president is

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Speaker 1: something that has never happened in our nation's history. When

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Speaker 1: there have been instances where a president may have committed

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Speaker 1: a criminal act, which as with former president Richard Nixon

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Speaker 1: and Bill Clinton, those cases were handled differently. There was

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Speaker 1: an impeachment at ultimately a voluntary resignation by President Nixon.

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Speaker 1: Bill Clinton was impeached but not convicted, and ultimately there

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Speaker 1: were grants of immunity and decisions to forego prosecution. So

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Speaker 1: here to indict a president would be something that has

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Speaker 1: never happened before. And the problem that the Department of

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Speaker 1: Justice has is, on the one hand, Merrick Garland, the

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Speaker 1: current Attorney General, has made Chris will clear that his

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Speaker 1: view is that nobody is above the law, and they

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Speaker 1: will investigate these alleged crimes wherever the evidence leads, including

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Speaker 1: up to the doorstep of former President Trump, if that's

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Speaker 1: where the evidence takes them. On the other hand, the

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Speaker 1: Department of Justice is aware of the politics of all

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Speaker 1: of this and they have to pursue a case in

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Speaker 1: a way that avoids appearing to use government power to

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Speaker 1: punish political enemies and ensure the tradition of a peaceful

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Speaker 1: transfer of power. So it's a very difficult balancing act

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Speaker 1: for the Department of Justice, and ultimately it will, I

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Speaker 1: think turn on whatever evidence the Department of Justice uncovers,

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Speaker 1: how powerful at evidence is and how confident prosecutors and

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Speaker 1: in this case, particularly the Attorney General Merrick Garland, is

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Speaker 1: that if they do bring criminal charges, that they will

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Speaker 1: ultimately get a conviction, and they will get a conviction

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Speaker 1: that will stand up on appeal. Do prosecutors have to

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Speaker 1: consider the effect of charging someone like former President Donald

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Speaker 1: Trump on the country well, Prosecutors are always very careful

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Speaker 1: about bringing charges against elected officials or people running for

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Speaker 1: office because of the impact that the charges can have

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Speaker 1: on the electoral process. And so in this case, for example,

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Speaker 1: if there were a decision to be made to open

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Speaker 1: a criminal investigation into Mr Trump, a decision that apparently

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Speaker 1: has not been made as at this point, and if

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Speaker 1: the decision was made after he announced his intention to

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Speaker 1: run for president again in twenty four or something that

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Speaker 1: he has not yet done, but he has certainly flirted

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Speaker 1: with that prospect. There is a rule in the Department

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Speaker 1: Justice that was put in place actually by former Attorney

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Speaker 1: General Bill Barb but has been endorsed by the current

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Speaker 1: Attorney General that says that the department's leadership would have

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Speaker 1: to take a formal consultation process and then sign a

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Speaker 1: formal approval of the department's intentions to review that potential investigation,

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Speaker 1: and that ultimately would be a decision that was made

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Speaker 1: by Merrick Garland. So prosecutors take the concept of pursuing

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Speaker 1: criminal charges against elected officials very seriously, and the general

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Speaker 1: rule is that prosecutors don't like to take steps involving

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Speaker 1: an investigation that could possibly affect the outcome of an

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Speaker 1: election that's coming up. On the other hand, they have

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Speaker 1: to followed the leads when they become known to them,

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Speaker 1: and they have to follow those leads wherever they take them.

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Speaker 1: So they're not going to delay an investigation because of

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Speaker 1: the possible political consequences. But they're certainly aware of the

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Speaker 1: consequences of any public steps that they may take in

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Speaker 1: connection with an investigation that puts an elected official or

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Speaker 1: somebody running for office under criminal investigation at a time

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Speaker 1: that may affect the outcome of an election. So they

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Speaker 1: have some time yet since he's not running till Criminally

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Speaker 1: charging a former president would be unprecedented, but there is

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Speaker 1: no Justice Department opinion against it. Is there as there

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Speaker 1: was with charging a current president. That's right. There is

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Speaker 1: no position within the Department of Justice about charging the

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Speaker 1: former president, and there really shouldn't be because it doesn't

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Speaker 1: affect their duties as an elected official. There doesn't affect

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Speaker 1: their ability to run the country. This is somebody who

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Speaker 1: was a president is no longer a president, and from

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Speaker 1: the standpoint of the Department of Justice, should not be

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Speaker 1: above the law, should be subject to the same rules

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Speaker 1: and subject to the same laws as any other citizen

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Speaker 1: in this country. But the stakes in six A prosecution

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Speaker 1: are enormous, and the Department of Justice is certainly aware

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Speaker 1: of the impact that even an indictment would bring, let

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Speaker 1: alone ultimately a trial and conviction possibly down the road.

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Speaker 1: And so that's why these investigations are typically opaque. In

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Speaker 1: other words, prosecutions too political figures which do happen more

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Speaker 1: frequently than most people realize, are done with grand jury secrecy.

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Speaker 1: No charges have been brought, people are brought before a

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Speaker 1: grand jury. An investigation may or may not lead to

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Speaker 1: criminal charges, and oftentimes the public is not even aware

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Speaker 1: that a public official has been investigated when ultimately the

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Speaker 1: decision is made not to bring charges. In this case,

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Speaker 1: this is an investigation that is not going to escape

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Speaker 1: public scrutiny, that's not going to escape the media. People

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Speaker 1: know who are being brought before the grand jury. People

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Speaker 1: are talking about their grand jury testimony, which they're allowed

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Speaker 1: to do. It the only prosecutors who are bound by

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Speaker 1: grand jury secrecy, and so it's going to be impossible

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Speaker 1: for the public not to be aware, generally speaking, where

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Speaker 1: the Department of Justice is going as this investigation. But

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Speaker 1: there may be things going on in the investigation, and

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Speaker 1: even now that we're not aware of because the grand

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Speaker 1: jury is secret and the Department of Justice is certainly

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Speaker 1: not going to comment on an ongoing investigation. The January

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Speaker 1: six Committee laid out evidence for a number of potential charges,

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Speaker 1: including conspiracy to obstruct an official proceeding and to defraud

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Speaker 1: the United States. To establish guilt for a conspiracy, do

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Speaker 1: you need to show that every member had criminal intent

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Speaker 1: or knowledge as to every part of the scheme, No,

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Speaker 1: you definitely do not. Conspiracy is a tool often used

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Speaker 1: by prosecutors, and know what it is is simply an

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Speaker 1: agreement to commit an illegal act, and then in order

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Speaker 1: to be convicted, you have to commit one or more

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Speaker 1: overt acts in furtherance of that scheme. But you don't

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Speaker 1: have to know who all the other co conspirators are.

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Speaker 1: You don't have to know all of the purposes of

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Speaker 1: that conspiracy. Necessarily, as long as you're aware of one

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Speaker 1: illegal purpose and you take one step to further that end,

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Speaker 1: you can be guilty under the conspiracy law. So it's

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Speaker 1: something that's used quite frequently by prosecutors, and it doesn't

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Speaker 1: mean that you have to know every aspect of the

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Speaker 1: potential illegal goals of the conspiracy. You just have to

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Speaker 1: know one and take one step to further that end.

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Speaker 1: If Garland were to prosecute Trump, would he want a

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Speaker 1: straightforward case that can withstand scrutiny of court proceedings and

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Speaker 1: appeals and is the scheme to create fake electors? That

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Speaker 1: more straightforward case. If the Department of Justice were to

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Speaker 1: pursue a case against former President Trump, there's no question

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Speaker 1: that Merrika will want a case that is virtually bullet proof,

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Speaker 1: to want something that is straightforward, that cures can understand,

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Speaker 1: and that will ultimately almost guarantee him a conviction and

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Speaker 1: ultimately almost guarantee him that on appeal the conviction will

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Speaker 1: not be reversed. So at this point, there were two

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Speaker 1: phases of the government's investigation. The first had centered on

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Speaker 1: the seditious conspiracy and conspiracy to obstruct government proceedings. These

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Speaker 1: are the type of charges that were brought against the

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Speaker 1: many individuals who stormed the capital on January six. But

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Speaker 1: now the investigation is moving into a second phase, as

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Speaker 1: you mentioned, where the Department of Justice is focusing on

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Speaker 1: this potential fraud associated with the false elector scheme or

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Speaker 1: with pressure that former President Trump and his allies allegedly

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Speaker 1: brought on the Department of Justice and others to falsely

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Speaker 1: claim that the election was rigged and the votes were

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Speaker 1: fraudulently cast. And that's I think something that ultimately would

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Speaker 1: be a stronger charge. But they again have to show

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Speaker 1: the knowledge of former President Trump and specifically focus on

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Speaker 1: what he said to individuals around him, what he directed

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Speaker 1: them to do, to show that he understood that these

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Speaker 1: electors were not legitimate and that it was simply going

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Speaker 1: to be a way to try to throw the election

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Speaker 1: from Congress over to the vice president so that he

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Speaker 1: could then throw the election back to the state electors.

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Speaker 1: And that's something that that there is some testimony that

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Speaker 1: the government has already developed showing that one of the

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Speaker 1: lawyers who was involved in putting the scheme together knew

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Speaker 1: that the electors were fake and actually referred to them

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Speaker 1: as state electors. That's powerful evidence, at least against that

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Speaker 1: individual lawyer. They have to then tie that to President

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Speaker 1: Trump and others around him to show that they knew

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Speaker 1: that these electors were not legitimate. You know, we talked before,

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Speaker 1: I think about for Amendment protected political activity and whether

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Speaker 1: or not Trump's speech on the ellipse could become part

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Speaker 1: of an alleged conspiracy. Would that be avoided if they

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Speaker 1: go with the fake elector scheme? Yeah, I think it

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Speaker 1: would be. I mean, certainly, there was a lot of

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Speaker 1: testimony that we heard before the January six House Committee

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Speaker 1: about the speech that former President Trump gave and the

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Speaker 1: results directly tied to that. And you heard testimony from

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Speaker 1: lots of individuals who said they believe the president was

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Speaker 1: exhorting them to march down to the Capitol and to

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Speaker 1: actually storm the Capitol and to take whatever means that

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Speaker 1: they could to prevent the certification of that election. But

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Speaker 1: that does get into that area that prosecutors don't like

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Speaker 1: to be in, where you've got this First Amendment protected

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Speaker 1: political activity issue and whether or not a person's speech

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Speaker 1: could become part of an alleged conspiracy. And if you

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Speaker 1: listen to the words that the president spoke that day,

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Speaker 1: which people have scrutinized very closely, it is a very

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Speaker 1: difficult call exactly what he was saying, what he was

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Speaker 1: urging people to do. He spoke sort of in broad generalities.

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Speaker 1: He wasn't specific, and so certainly there could be an

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Speaker 1: argument made there that that was protected political speech and

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Speaker 1: it was not really inciting people to commit violent acts.

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Speaker 1: Trump has survived previous investigations, countless civil lawsuits, and to impeachments.

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Speaker 1: Can we expect if he's indicted that there will be

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Speaker 1: countless challenges and appeals. Well, Certainly, fighting it out in

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Speaker 1: the courts is not something that is feign into President Trump.

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Speaker 1: He does it all the time and has done it

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Speaker 1: with some success as a businessman before he became president.

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Speaker 1: This would be something that would be fought out in

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Speaker 1: the courts. We can expect that the Department of Justice

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Speaker 1: would expect that, and that's why they would bring a

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Speaker 1: case that they believed would withstand that kind of scrutiny,

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Speaker 1: a case that they believe jurors would get a conviction

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Speaker 1: on and would stand up on appeal, because you could

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Speaker 1: be assured that even after a conviction, former President Trump

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Speaker 1: and his lawyers will write this thing not only to

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Speaker 1: the Court of Appeals, but even to the Supreme Court

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Speaker 1: if they're able to do that. And that's why if

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Speaker 1: the Department of Justice does decide to do it, they're

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Speaker 1: going to have to make sure that they bring a

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Speaker 1: case that is going to withstand that kind of scrutiny

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Speaker 1: and that type of barrage from the defense trying to

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Speaker 1: overturn any conviction on appeal. So the House Committee can

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Speaker 1: make a criminal referral. Does that make any difference to

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Speaker 1: the Department of Justice. I don't think it really does

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Speaker 1: at this point. I mean, a criminal referral is something

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Speaker 1: that a House Committee can do when they're conducting an

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Speaker 1: investigation and the Department of Justice may not be fully

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Speaker 1: aware of all the testimony, all the evidence that they're gathering,

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Speaker 1: and so the House Committee refers it over to the

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Speaker 1: Department of Justice for further investigation. But this is something

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Speaker 1: that is already clearly on the Department of Justice radar.

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Speaker 1: They've been listening to all the testimony. Apparently they're getting

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Speaker 1: transcripts from testimony that was provided to the House Committee

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Speaker 1: and not made public at the time. And so whether

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Speaker 1: or not there is a criminal referral will only ramp

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Speaker 1: up the pressure on the Department of Justice to bring

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Speaker 1: criminal charges, but it ultimately will not move the needle

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Speaker 1: in terms of whether or not merrit Girl and pulls

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Speaker 1: the trigger on an indictment. Here. That's something that's going

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Speaker 1: to weigh very heavily on him. It's something that will

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Speaker 1: ultimately make or break his reputation at his legacy. So

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Speaker 1: he's got a very big decision to make and it's

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Speaker 1: going to be very interesting to see what happens. Thanks

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Speaker 1: so much, Bob. That's former federal prosecutor Robert Mints a

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Speaker 1: partner McCarter in English. What do a former congressman, a

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Speaker 1: Goldman Sachs banker, and an FBI trainee have in common?

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Speaker 1: They've all been indicted for insider trading. In an unusual move,

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Speaker 1: Manhattan US Attorney Damien Williams unveiled the insider trading charges

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Speaker 1: in four unrelated cases at the same press conference this week.

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Speaker 1: We allege that each of the defendants charge today corrupted

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Speaker 1: the integrity of the markets by stealing inside and information

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Speaker 1: or trading on solen information. Former Indiana Congressman Stephen Bowyer,

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Speaker 1: former Goldman VP Brianche Coyle, and former FBI trainee Seth

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Speaker 1: Marken have denied the allegations. Joining me is Bloomberg legal

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Speaker 1: reporter Crystal Mesh. These are all unrelated cases. Why did

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Speaker 1: the U S attorney announce the indictments at the same time?

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Speaker 1: So we don't really know that the only real thread

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Speaker 1: between these cases that they were detected by the SEC

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Speaker 1: at their Market Abuse Center in Boston, UM, which kind

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Speaker 1: of you know, and analyzes data patterns to see if

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Speaker 1: maybe there's been insider trading UM. And so they detected

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Speaker 1: all of these cases. Why they decided to announce them

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Speaker 1: all at the same time, We have no idea other

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Speaker 1: than to possibly send a big signal that they're watching,

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Speaker 1: and especially now that there's a you know, a hot

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Speaker 1: trading environment going on or has been, you know, since

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Speaker 1: the pandemic. So we don't really know why. It's it's

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Speaker 1: a good question. Tell us about the former congressman and

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Speaker 1: what they alleged he did and how they found him. Yeah,

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Speaker 1: so we don't know how he found They probably detected

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Speaker 1: his activity through the center, less I said, But he

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Speaker 1: had started a consulting company after he left Congress with

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Speaker 1: a friend, and they had advised on some high profile

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Speaker 1: combinations some businesses, and he had learned about the Sprint

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Speaker 1: T Mobile acquisitions before it happened. So that was one

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Speaker 1: of these things that he's alleged to have traded on.

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Speaker 1: And now the former Goldman banker tell us about what

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Speaker 1: he's charged with. So it's pretty interesting. Case. He is

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Speaker 1: alleged to have learned tips through the credit committee at

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Speaker 1: Goldman in which he was on, and passed him to

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Speaker 1: a friend of his that he met at college in California,

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Speaker 1: and then he would pass them on and the friend

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Speaker 1: would trade on them. Sometimes, you know, they would set

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Speaker 1: it up as a squash game. He would say, hey,

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Speaker 1: do you want to meet for squash acker work? Um.

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Speaker 1: They didn't make a whole lot of money at it,

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Speaker 1: that's the interesting part. They lost on one trade, they

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Speaker 1: six hundred dollars on another. It's not like these guys

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Speaker 1: were making millions of dollars. So one could wonder why,

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Speaker 1: you know, when they have a job like this day

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Speaker 1: with risk it for such a small sum of money.

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Speaker 1: And also it seems like the prosecutor has flipped his

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Speaker 1: friend because his friend was in charge criminally, so we

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Speaker 1: are not sure about that. The friend was sued by

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Speaker 1: the SEC. He is named as a defendant in the

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Speaker 1: SEC case, and it's clear that he recorded conversations with

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Speaker 1: the Goldman guy. So we think it's possible that he's cooperated,

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Speaker 1: that maybe he's lead guilty somewhere else. Um, But we

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Speaker 1: have no real indication that he's actually cooperated. We know

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Speaker 1: he consentually recorded his friends, so U there's a large

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Speaker 1: assumption that he's some kind of co operator. But um,

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Speaker 1: there are a lot of variables that go into that

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Speaker 1: that might not make that true. But it could be

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Speaker 1: underseal who knows. Goldman has a history of having their

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Speaker 1: bankers or traders indicted for insider trading. Yes, it's happened

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Speaker 1: a few times, especially in the past five of years

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Speaker 1: or so. They had a trader who was implicated in

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Speaker 1: a rather large international insider trading ring that was all

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Speaker 1: feeding tips to one man in Switzerland who was trading

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Speaker 1: on them and later pleaded guilty and testified against the

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Speaker 1: number of them as the golden person actually pleaded guilty

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Speaker 1: and avoided that entire trial. But there have been a

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Speaker 1: number of cases. Um, in almost every case Goldman has

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Speaker 1: condemned the behavior. I should say, in every case, Goldman

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Speaker 1: is condemned the behavior as the person no longer worth there.

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Speaker 1: But um, it's obviously not a good look for one

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Speaker 1: of the most premier, best lay banks in the world.

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Speaker 1: The case that sounds most like a movie or TV

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Speaker 1: script is the one involving the FBI trainee. Yeah, you

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Speaker 1: can't really it's for insider trader cases. It doesn't get

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Speaker 1: more either than that. One of the people arrested was

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Speaker 1: a FBI trainee who got information from his girlfriend while

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Speaker 1: she was working at home and then passed it on

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Speaker 1: to a friend of his. Obviously that ended their RelA

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Speaker 1: ship uh at some point. But it does sound like

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Speaker 1: a movie. It's one of those cases where you wonder

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Speaker 1: what everybody was thinking, and it's it's also an example of,

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Speaker 1: you know, kind of the things that could happen when

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Speaker 1: people were working from home and seeing with their spouses

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Speaker 1: and their partners were doing and seeing confidential work or

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Speaker 1: peering into it. It It looks like he saw some reports

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Speaker 1: that were sitting around and she possibly had no idea.

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Speaker 1: Is this a new crackdown on insider trading? Do you know?

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Speaker 1: It kind of seems like it. Um. They don't say,

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Speaker 1: you know, directly, this is something new, We're going better,

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Speaker 1: but they're clearly indicating they're getting more aggressive. They're warning people.

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Speaker 1: I mean to enop four cases at one time, I

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Speaker 1: can't say I've seen that before, especially ones that are

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Speaker 1: not related other than the way they were detected. So

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Speaker 1: it clearly says, hey, we're doing this now I think

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Speaker 1: it's a clear line of prosecution for them. It certainly

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Speaker 1: it's been you know, a few years under the Trump administration,

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Speaker 1: white collar crime was not prosecuted aggressively, so there were

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Speaker 1: a lot of cases that kind of were called it

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Speaker 1: up in the backlog that kind of not prosecuted once

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Speaker 1: there was a new administration. But this seems to be

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Speaker 1: a new line of attack. You know, they referenced the

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Speaker 1: RAJ Roger Rottenham insider trading crackdown from about ten years

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Speaker 1: ago in the press conference, so it's clear that they

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Speaker 1: are going after this pursuing way quid crime, especially in

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Speaker 1: the week of the pandemic and the amount of trading

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Speaker 1: that was going on. Thanks Chris. That's Bloomberg Legal reporter

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Speaker 1: Crystal Mesh. Coming up next, we'll talk to a securities

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Speaker 1: law expert about the cases. This is Bloomberg joining me

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Speaker 1: a securities law expert, James Park, A professor at u

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Speaker 1: c l A Law School. At the press conference, the

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Speaker 1: words that the current Manhattan US attorney used were so

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Speaker 1: similar to the words that the former Manhattan US Attorney

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Speaker 1: pre Berrara used about a decade ago in announcing a

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Speaker 1: crackdown on insider trading. Basically, be careful, we're watching, we're listening.

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Speaker 1: Does that mean that the threat the watching didn't work.

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Speaker 1: It's a great point, June, that the misconducts continues, and

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Speaker 1: I think that the need for enforcement to happen periodically

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Speaker 1: is very important because it's been almost indected five six,

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Speaker 1: seven years. Then we had the last significant wave of

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Speaker 1: insider trading enforcement by the U. S. Attorney's Office of

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Speaker 1: the Southern District of New York. These sorts of cases

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Speaker 1: are part of that office's brand, part of the reason

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Speaker 1: why it's such a prominent office. But even with the

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Speaker 1: cases that pre Bahara brought, you know, I think the

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Speaker 1: fear had dissipated by the time this trading happened, and

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Speaker 1: so it's necessary not only to be watching, but to

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Speaker 1: be enforcing, to be bringing criminal cases, because when you

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Speaker 1: bring criminal cases, that will deter people from trading on

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Speaker 1: inside information. But I think the lesson of these events,

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Speaker 1: the discovery of this egregious trading at a very respected

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Speaker 1: investment bank with strong compliance, I think that a reminder

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Speaker 1: that it's not enough to watch, you also have to

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Speaker 1: enforce in order to deter insider trading. So the former

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Speaker 1: Goldman banker. Is the problem that he passed tips about

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Speaker 1: potential mergers to a squash buddy or that he split

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Speaker 1: the trading profits with his buddy, or is it both.

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Speaker 1: It's definitely both, and I think the fact that he

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Speaker 1: splits the profit with his buddy makes this an easy

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Speaker 1: case under insider trading doctrine. In these cases, which are

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Speaker 1: often referred to as tipping cases, the theory is that

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Speaker 1: if I give the information to someone else and they

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Speaker 1: trade on it and give me back some of the profits,

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Speaker 1: that's essentially equivalent to me trading on it myself and

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Speaker 1: keeping the profits for myself. And he was in a

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Speaker 1: position where he was not permitted to trade on inside

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Speaker 1: information because of man Sacks policies that required confidentiality with

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Speaker 1: respective this information. When he tipped it off, he basically

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Speaker 1: misappropriated that information. The gray area is what if he

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Speaker 1: had just given the information to his friends and did

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Speaker 1: not split the profit. That's where the law is a

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Speaker 1: bit more murphy. I think in New York under the

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Speaker 1: Second Circuits precedent, you still would be liable for insider

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Speaker 1: trading under the Martoma decision, which says that if you're

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Speaker 1: giving gifts to a close personal friend that we can

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Speaker 1: assume that you benefited to some extent because you are

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Speaker 1: benefiting your friend, and if you benefit your friend or

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Speaker 1: family member, you're benefiting yourself. Prosecutors have evidence of texts

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Speaker 1: between the banker and his friend about playing squash that

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Speaker 1: they say are coded messages. So is that evidence they

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Speaker 1: knew what they were doing was wrong? Absolutely? You know,

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Speaker 1: that really speaks to the maturity insider trading law. It's

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Speaker 1: often criticized as being vague and difficult to apply, but

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Speaker 1: you know, at its poor essence, I think the law

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Speaker 1: is fairly clear, and they knew they knew that what

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Speaker 1: they were doing was insider training and that they could

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Speaker 1: be prosecuted criminally. Yet they took this risk, and I think,

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Speaker 1: you know, they may not have understood some of the

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00:25:23,440 --> 00:25:27,320
Speaker 1: other ways this sort of trading can be detected. You know,

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Speaker 1: the SEC does play an important role here because my

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Speaker 1: understanding is that they were the ones who first detected

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00:25:34,440 --> 00:25:39,000
Speaker 1: the unusual trading activity, because they do monitor trading in

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Speaker 1: stocks to look for various suspicious trading rights before the

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Speaker 1: announcement of a merger. For example, if there's a spike

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00:25:47,520 --> 00:25:50,720
Speaker 1: in trading from a certain account, then they have that

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00:25:50,880 --> 00:25:53,280
Speaker 1: data that they can look into and they might refer

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Speaker 1: it to the U S. Attorney's office. And so this

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00:25:56,400 --> 00:26:00,720
Speaker 1: is not a situation where they were innocently doing something

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00:26:00,720 --> 00:26:03,840
Speaker 1: they didn't know was wrong. They knew that what they

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00:26:03,880 --> 00:26:07,119
Speaker 1: were doing was insider trading. There have been several cases

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00:26:07,160 --> 00:26:12,040
Speaker 1: against Goldman employees, including a former Goldman director. Going back

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00:26:12,080 --> 00:26:15,840
Speaker 1: to I believe ragatte Gupta, is there a problem at

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00:26:15,880 --> 00:26:19,440
Speaker 1: Goldman's the fair question to ak when you have another

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Speaker 1: incident like this. I do know Goldman Sachs has a

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00:26:23,040 --> 00:26:28,320
Speaker 1: very respective compliance department, excellent in house legal team. But

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Speaker 1: you know, there's only so much the lawyers can do

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Speaker 1: within such a large organization, and I think they are

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Speaker 1: going to have to do more to protect their reputation.

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00:26:40,160 --> 00:26:42,360
Speaker 1: I think they're going to have to really renew their

457
00:26:42,359 --> 00:26:45,760
Speaker 1: efforts to make sure that these policies are clear, and

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00:26:46,080 --> 00:26:48,240
Speaker 1: you know, I think they have to think hard about

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Speaker 1: how they can do that to protect their reputation because

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00:26:51,040 --> 00:26:53,439
Speaker 1: it is their reputation at state, even though it was

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00:26:53,480 --> 00:26:58,800
Speaker 1: wrongdoing by these two individuals. Um. I think that they're

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Speaker 1: going to be having a lot of meeting um in

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Speaker 1: their legal department to figure out what they're doing and

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Speaker 1: how they can do it better. Thanks Jim. That's James

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Speaker 1: Park of u c l A Law School, and that's

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Speaker 1: it for this edition of The Bloomberg Law Show. Remember

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00:27:12,040 --> 00:27:14,600
Speaker 1: you can always get the latest legal news honor Bloomberg

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00:27:14,720 --> 00:27:18,280
Speaker 1: Law Podcast. You can find them on Apple Podcasts, Spotify,

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00:27:18,480 --> 00:27:23,520
Speaker 1: and at www dot Bloomberg dot com, slash podcast, Slash Law,

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00:27:23,920 --> 00:27:26,560
Speaker 1: and remember to tune into The Bloomberg Law Show every

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00:27:26,600 --> 00:27:30,040
Speaker 1: week night at ten pm Wall Street Time. I'm June

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00:27:30,040 --> 00:27:32,240
Speaker 1: Grosso and you're listening to Bloomberg