Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud,
Speaker 1: and on Bloomberg dot com slash podcasts. One place you
Speaker 1: might not expect to find mishandling of sexual harassment complaints
Speaker 1: is at the Justice Department, which is responsible for the
Speaker 1: enforcement of law in the country, but the Inspector General
Speaker 1: says the d o J has systemic problems and how
Speaker 1: it handles such complaints, and that employees found to have
Speaker 1: acted improperly often do not receive the appropriate punishment. According
Speaker 1: to the Washington Post, Justice Department Inspector General Michael Horowitz
Speaker 1: sends his findings about the prevalence and mishandling of sexual
Speaker 1: harassment at the d o J to Deputy Attorney General
Speaker 1: Rod Rosenstein on May thirty one. The case is examined
Speaker 1: by the i G included a U S Attorney, a
Speaker 1: Chief Deputy U. S. Marshall, and SBI Special Agents in Charge,
Speaker 1: among others. Joining me is Debora Cat's founding partner as Cats,
Speaker 1: Marshall and Banks excuse me, Debora. Some of these cases
Speaker 1: involved senior Justice Department officials across the country, not just
Speaker 1: senior attorneys, but even a U. S attorney. What's your
Speaker 1: initial reaction to hearing this, Well, my initial reaction is
Speaker 1: one of horror, of course, but not surprised. Sexual harassment
Speaker 1: is endemic in every sector of our workforce, and you
Speaker 1: know it's it takes place in the judiciary, we know
Speaker 1: it takes place in Congress, and certainly it's no surprise
Speaker 1: that it takes place at Department of Justice. What is
Speaker 1: really falling to me in reading the Washington Post report
Speaker 1: is how long UH Rod Rosenstein, Deputy Attorney General Rod Rosenstein,
Speaker 1: has been sitting on this issue. He received the report
Speaker 1: from Sector General Michael Horowitz in May detailing extremely agreed
Speaker 1: to cases of sexual harassment, and more than that that
Speaker 1: the people who properpetrated the harassment went on to win
Speaker 1: bonuses and awards with no kind of disciplinary action. That's
Speaker 1: just absolutely shocking. And now uh we now know that,
Speaker 1: uh Lessina saying he's going to convene a task force
Speaker 1: to look at this. There's something to look at here.
Speaker 1: We know the laws, they're well established. It's time to
Speaker 1: take appropriate decisive action. If we really want to your
Speaker 1: intolerance of sexual harassment, it's times ahead to roll. The
Speaker 1: cases involved charges of growthing, stalking, peeping at sexual comments,
Speaker 1: among other things, and at times a perpetrator was transferred
Speaker 1: to another division without anything being said. Is that similar
Speaker 1: to what happens in in corporations and companies across the country.
Speaker 1: You get transferred and no one knows what happened. Yes,
Speaker 1: and this is exactly sexual harassment is allowed to uh
Speaker 1: continue as it has uh where there Uh the individuals
Speaker 1: whore victimized suffered severe career ramifications. I mean their their
Speaker 1: their careers are really painted. But the people who are
Speaker 1: perpetrating harassments just get moved on elsewhere, like we saw
Speaker 1: in the priest abuse cases and elsewhere. Um and that
Speaker 1: Department of Justice has not seen fit even with this
Speaker 1: Inspector General report, to crack down hard and decisively on
Speaker 1: these individuals who are fans to have engaged in this
Speaker 1: kind of unlawful behavior. To shocking. We're talking eight months
Speaker 1: that d J has had this Inspector General report and
Speaker 1: in August UH wasn't seen had received a letter from
Speaker 1: women in Department of Justice who also detailed that they
Speaker 1: themselves have been subjected to sexual harassment and that the
Speaker 1: problems in fact are systemic. And again no action has
Speaker 1: been taken other than saying we're going to contain a
Speaker 1: workforce to look at this. That's rights. He so, he
Speaker 1: said he's going to convene, he told. The Justice Department
Speaker 1: spokesman told the Post that rosen Stein had convened a
Speaker 1: working group to look at the issues raised by the report.
Speaker 1: Can this be investigated from inside the department or do
Speaker 1: you need someone outside the department looking in? Well, it's
Speaker 1: already been investigated. That's the purpose of the Inspector General report. Uh.
Speaker 1: The issue is that only the Department of Justice can
Speaker 1: meet at the appropriate discipline. Uh. The IGIEF Office has
Speaker 1: already detailed the egregious abuses. Now it's time for the
Speaker 1: Justice Department to take appropriate disciplinary action. And given the
Speaker 1: gravity of these offenses, it would be shocking to me
Speaker 1: if the appropriate discipline wasn't removal. These are high level
Speaker 1: officials who have significant positions of trust, who are there
Speaker 1: to enforce our nurstion's laws and are victimizing women. This
Speaker 1: is just unacceptable. So the i g S Office said,
Speaker 1: it published summaries of nineteen substantiate allegations of sexual harassment
Speaker 1: and miscon duct from through two sixteen. So they're saying
Speaker 1: that's a small number, but it's the handling of the
Speaker 1: allegations that the i G found troubling. So expand upon
Speaker 1: that a little. Sure, Well, if you have a system
Speaker 1: where people who come forward with meritorious cases find that
Speaker 1: the perpetrators suffer no consequences, it sets a tone where
Speaker 1: other individuals will not risk their careers, will not stick
Speaker 1: their next up, next out, because they know that doing
Speaker 1: so will be futile. And if you have a system,
Speaker 1: a system where meritorious cases like these just get swept
Speaker 1: under the carpet, you will create an environment where people
Speaker 1: don't report. So while Rosenstein said he's hardened by the
Speaker 1: small number of UH substantiated cases, that's really not the
Speaker 1: appropriate way to look at it. It's just like saying
Speaker 1: that there were no there were no complaints actually brought
Speaker 1: against Harvey Weinstein. If you have a system, an HR
Speaker 1: system that is ineffective that protects harasses, you're gonna have
Speaker 1: people who don't report. And we don't know what the
Speaker 1: actual number or the actual incidents of sexual harassment is
Speaker 1: its Department of Justice, because we have a system in
Speaker 1: place that doesn't punish perpetrators. Well, also, this was before
Speaker 1: the Weinstein allegations. Those allegations have encouraged women to come forward,
Speaker 1: so there might be more allegations than we're reported in
Speaker 1: the Inspector General's report. Oh, absolutely right. We are at
Speaker 1: a moment where people are coming forward in record numbers
Speaker 1: because the presumption now is that victims are telling the
Speaker 1: truth and that perpetrators are typically recentivious, serial harasses, and
Speaker 1: more women are coming forward. But the problem is when
Speaker 1: you have something like the Department of Justice, which is
Speaker 1: a large bureaucracy, and people go into believing that filing
Speaker 1: a claim would be career derailing, they're not going to
Speaker 1: do it when they see that the harassers suffer no ramification.
Speaker 1: So that's why it is crucial that Department of Justice
Speaker 1: act decisively now if they want other people to come forward,
Speaker 1: and they have to be a model employer and not
Speaker 1: allow this kind of very egregious I mean, this is
Speaker 1: horrible conduct and the fact that no one suffered any
Speaker 1: consequences is really shocking. And Deborah speaking about the lawyers
Speaker 1: that were seen as um sexual harassers. Is there additional
Speaker 1: Are there additional things that need to be done, for
Speaker 1: example reporting that to the Office of Professional Responsibility to yes,
Speaker 1: So that's an excellent point. And also the Inspector General's
Speaker 1: report noted that some of these maybe criminal offenses. There
Speaker 1: could be you know, these faults or criminal offenses. So
Speaker 1: certainly to the extent that these people are lawyers, the
Speaker 1: Office of Professional Responsibility within d J should have a
Speaker 1: role in taking appropriate action, assuming that the individuals remain
Speaker 1: employed at Department of Justice, and also that these cases
Speaker 1: should be referred for criminal uh prosecution and what what
Speaker 1: has been uh confirmed? They're substantiated by the I is
Speaker 1: assault in a number of these sank. Thank you so much, Deborah.
Speaker 1: That's Deborah Cats of Cats, Marshal and Banks. The Trump
Speaker 1: administration is about rolling back regulations. Remember when President Trump
Speaker 1: issued the two old rules for one new rule executive
Speaker 1: order in February. Well, some states are not following suit.
Speaker 1: New York's top financial watchdog has proposed regulations that would
Speaker 1: require sellers of life insurance and annuities to act in
Speaker 1: the best interests of clients, joining states such as Nevada
Speaker 1: that have raised standards even as the US government delays
Speaker 1: its fiduciary rule. Joining me is Robert Hockett, a professor
Speaker 1: at Cornell Law School. Bob, the Trump administration has delayed
Speaker 1: implementation of parts of the Department of Labors fiduciary rule
Speaker 1: that was created during President Barack Obama's presidency. Tell us
Speaker 1: about that rule and where it stands? Now? Sure? Yes? So.
Speaker 1: The idea here is that there are certain products that
Speaker 1: are sold in the financial markets h that are thought
Speaker 1: to be so sensitive and so important to the buyers,
Speaker 1: and at the same time, the transactions and those instruments
Speaker 1: are thought to be so vulnerability raising or vulnerability causing
Speaker 1: UH to buyers that some sort of special obligation should
Speaker 1: be imposed upon the seller to make a point of
Speaker 1: ensuring that whatever product is sold to a given client
Speaker 1: is indeed in the best interest of the client, right uh.
Speaker 1: And we call that the fiduciary rule. The word fiduciary,
Speaker 1: of course, comes from the Latin fee day for faith,
Speaker 1: as in good faith or confidant um. The idea is that, again,
Speaker 1: we want those who buy these products to be able
Speaker 1: to trust seller is kind of more like a close
Speaker 1: friend in selling it to them. Than like an arms
Speaker 1: length uh competitive seller in the market where anything goes. Now,
Speaker 1: that rule was developed um uh in the late in
Speaker 1: the very sort of last months, you might say, of
Speaker 1: the Obama administration. It was to go into effect shortly
Speaker 1: after Mr Trump took office, but his administration immediately delayed
Speaker 1: implementation of the rule, and ever since then it's been
Speaker 1: sort of in abeyance. It's been a in a state
Speaker 1: of limbo um and that's one reason I think the
Speaker 1: State of New York has decided to move forward with
Speaker 1: its own version of the rule. How similar is New
Speaker 1: York's version to the federal version, It seems to be
Speaker 1: essentially identical. The real key point here in both cases
Speaker 1: is that you're you're essentially imposing an obligation or a
Speaker 1: standard on a seller that's actually quite familiar to our law.
Speaker 1: It's quite often imposed in the case of say a
Speaker 1: trustee with in regard to or in relation to the
Speaker 1: beneficiaries of the trust. It's uh. It's commonly placed and
Speaker 1: sort of by operation of law, the managers and the
Speaker 1: board members of corporations when the interests of the shareholders
Speaker 1: were at stake. So essentially, what this rule does both
Speaker 1: at the federal level and here at the New York's
Speaker 1: eight level, is to sort of import into the matter
Speaker 1: of life insurance sales and annuity sales, this very familiar
Speaker 1: standard that's been with us for centuries. In these other
Speaker 1: contexts that are where where trust is thought to be
Speaker 1: especially important. The rule is expected to add to compliance
Speaker 1: costs for firms and life Insurance Council of New York
Speaker 1: and industry groups said that any implemented regulation should be
Speaker 1: uniform across the country, so companies don't face different standards
Speaker 1: in different states. Is that real concern to you? It's
Speaker 1: it's actually a ridiculous claim, um for for two reasons. Right,
Speaker 1: First of all, the compliance cost claim is ridiculous because
Speaker 1: of course, anytime you impose any regulation, there's a compliance cost.
Speaker 1: By definition, right, we make murder very costly by prohibiting it. Right,
Speaker 1: we make fraud very costly by prohibiting it. A compliance
Speaker 1: To say that there's a compliance cost is just to
Speaker 1: say that, you know, of regulation is a regulation that
Speaker 1: it actually says, it's no longer the case that anything
Speaker 1: goes as far as the uniformity matter goes. That's particularly
Speaker 1: comic call. Because we have a statute a federal stat
Speaker 1: stood in place, called the mccare and Ferguson Act that
Speaker 1: actually reserves the regulation of insurance companies to the states.
Speaker 1: That's to say, we have abjured UH federal regulation of
Speaker 1: the insurance industry ever since the mid nineteen forties. If
Speaker 1: the industry is actually interested in uniformity, it should be
Speaker 1: calling for a national system or a federal system of
Speaker 1: insurance regulation instead of opposing that which they have roots
Speaker 1: kemely done over the last several decades. But how important
Speaker 1: is this rule for consumers? It's I think very important
Speaker 1: for consumers because the problem is that life insurance is
Speaker 1: like many things, like a bank account, some something that
Speaker 1: pretty much every ordinary middle class or you know, non
Speaker 1: actually pretty much every ordinary American needs or or wants,
Speaker 1: And yet the terms of insurance contracts can be quite
Speaker 1: complicated and quite difficult for ordinary people to make sense
Speaker 1: of UH. And for that reason, it's particularly important that
Speaker 1: we hold the sellers of that product to a higher
Speaker 1: standard of behavior, a higher standard of cussworthiness then perhaps,
Speaker 1: say the sellers of used cars. No, the proposed rules
Speaker 1: are subject to a sixty day comment period before they're
Speaker 1: officially issued. Is there anything that seems to stand in
Speaker 1: their way. I don't think there is. I mean, the
Speaker 1: comment period is typically just it's meant to enable those
Speaker 1: who are thinking you're putting a rule in place, to
Speaker 1: take account of the various arguments that might be raised
Speaker 1: for it or against it, essentially to make sure that
Speaker 1: they don't overlook any important considerations. In one sense, it's
Speaker 1: the formality, right, It's you basically have to observe that
Speaker 1: particular waiting period. On the other hand, it's subsidificus the
Speaker 1: sense that you know, if people actually make sensible uh
Speaker 1: comments or recommendations or raised legitimate concerns, it gives the
Speaker 1: regulators a chance to sort of reformulate the rule or
Speaker 1: to put in place sort of special safeguards for the
Speaker 1: implementation of the rule or whatever. New York is simply
Speaker 1: going through that standard process that's gone through. You know
Speaker 1: that process has gone through in connection with every regulation.
Speaker 1: I don't think there's any specific hold up that's foreseen
Speaker 1: or expected here. And as far as the fiduciary rule
Speaker 1: that the Labor Department has or is watching over, is
Speaker 1: there any likelihood that that will be put into effect?
Speaker 1: So it's so hard to tell. I mean, the way
Speaker 1: this administration seems to be operating thus far is just
Speaker 1: to put things sort of on hold or on the
Speaker 1: back burner, with no indication at all as to whether
Speaker 1: or when the thing might be brought back to the
Speaker 1: front burner. So it's hard to tell what might happen.
Speaker 1: Maybe if Mr Trump notices that his poll members are
Speaker 1: declining among laboring Americans, he'll suddenly play the populist game
Speaker 1: again as he did during the election season. Uh and
Speaker 1: and say, okay, let's put that thing to place. If
Speaker 1: it looks as though he's not suffering any consequences from
Speaker 1: leaving it in advance, and thereby satisfying his real constituents
Speaker 1: the industries that would be regulated, then I can imagine
Speaker 1: that thing sitting there unfold indefinitely. Thanks for listening to
Speaker 1: the Bloomberg Law Podcast. You can subscribe and listen to
Speaker 1: the show on Apple Podcasts, SoundCloud, and on Bloomberg dot
Speaker 1: com slash podcasts. I'm June Bass. How this is bloombergom
Speaker 1: or doctor m hm.