WEBVTT - Recession Risk Growing as Inflation Stays Hot 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.480 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanabeck. We're here every day bringing 0:00:07.320 --> 0:00:09.840 you the latest news from the world to business and finance, 0:00:09.880 --> 0:00:13.640 clus technology, politics, economics, all furnessing the power of Business 0:00:13.680 --> 0:00:17.160 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.040 analyst in more than one twenty countries. You can download 0:00:20.040 --> 0:00:23.239 Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.440 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.200 --> 0:00:27.880 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.920 --> 0:00:32.159 YouTube search Bloomberg Global News. Alright, pretty, here is my 0:00:32.320 --> 0:00:35.280 hot take of the day, and it's a courteysy of 0:00:35.280 --> 0:00:37.880 our next guest. Stock prices are down, Treasury yields are down, 0:00:38.159 --> 0:00:41.800 oil prices are down, Corporate credit spreads are wider, the 0:00:41.800 --> 0:00:45.479 dollar exchange rate is higher. This is a recession trade. 0:00:45.479 --> 0:00:48.479 There's no other way to call it. Neil, data partner 0:00:48.560 --> 0:00:52.680 and head of economic research Renaissance Macro Research, joins us 0:00:52.680 --> 0:00:54.440 on the phone from New York City, and Neil, you 0:00:54.520 --> 0:00:56.920 put it perfectly. Even somebody like me can kind of 0:00:57.280 --> 0:00:59.960 put it all together. Here is this something that's been 0:01:00.040 --> 0:01:03.880 building for a while here. How do you think about 0:01:04.120 --> 0:01:10.640 recessions and and at risk markets? Well, I mean I think, um, 0:01:10.720 --> 0:01:14.319 you know, we're seeing uh significant continue to repricing in 0:01:14.360 --> 0:01:16.399 the in the in the financial markets, right, I mean 0:01:16.760 --> 0:01:18.360 you know you said it right there. There's no other 0:01:18.360 --> 0:01:21.760 way of describing what's going on. And you know, I 0:01:21.800 --> 0:01:24.280 think a lot of this is just um, you know, 0:01:24.520 --> 0:01:29.640 a function really of a FED guidance, right, and um, 0:01:29.720 --> 0:01:33.760 you know I think the FED is getting um, you know, 0:01:33.800 --> 0:01:36.800 frankly less data dependent, less data dependent, right, I mean, 0:01:37.680 --> 0:01:40.520 in other in other words, in other words, they're hiking 0:01:41.480 --> 0:01:46.959 aggressively even when the data I think is moving that 0:01:46.959 --> 0:01:48.600 should be leading them in a direction to not be 0:01:48.640 --> 0:01:50.840 doing that. Why do you think they're doing that? Is 0:01:50.880 --> 0:01:54.240 it just the political fear the backlash from the markets 0:01:54.240 --> 0:01:59.800 in terms of being quote unquote behind the curve? Um? Well, 0:01:59.800 --> 0:02:02.600 I think that they were so wrong on the on 0:02:02.680 --> 0:02:07.560 the transitory inflation view, right, that they almost need to 0:02:07.600 --> 0:02:10.440 be sure that inflation has turned a corner before they 0:02:10.440 --> 0:02:14.200 start pivoting off their current their current policy path. And 0:02:14.240 --> 0:02:19.400 certainly the FAIDS rhetoric has been increasingly hawkish, right, I mean, um, 0:02:19.440 --> 0:02:22.120 you know they're all in on price stability. Um. I 0:02:22.120 --> 0:02:23.959 think the big the big story in the last week 0:02:24.040 --> 0:02:28.639 is just how their their assessment of risk management has changed, right. 0:02:28.680 --> 0:02:30.840 I mean so in the beginning, it was, you know, 0:02:30.880 --> 0:02:33.600 they basically have two choices, right, two doors that they 0:02:33.639 --> 0:02:36.800 could walk through, both with pretty bad choices. On the 0:02:36.840 --> 0:02:40.320 one one door behind door number one is a recession, right, 0:02:40.360 --> 0:02:44.520 that's a mistake. Behind door number two, let inflation expectations 0:02:44.560 --> 0:02:48.120 go higher, and face with those two choices. The said 0:02:48.200 --> 0:02:50.520 saying that they'll go through door number one, which is 0:02:50.520 --> 0:02:53.120 the recession. It's like the lesser of two evils from 0:02:53.160 --> 0:02:56.400 their perspectives. And so I think that's what's changed, is 0:02:56.440 --> 0:03:00.600 that they're they're they're they're sort of assessment of risk management. Um, 0:03:00.639 --> 0:03:05.119 they would much rather, um, have a recession to bring 0:03:05.160 --> 0:03:09.080 inflation under control than the alternative, which is not getting 0:03:09.480 --> 0:03:14.359 doing enough and allowing inflation expectations to keep drifting higher. Well, 0:03:14.400 --> 0:03:17.560 inflation expected just keep drifting higher. But I have to ask, simply, 0:03:18.120 --> 0:03:21.080 it kind of sounds like, on the one hand, there's 0:03:21.120 --> 0:03:24.360 this narrative out there that this is quite literally Chairman 0:03:24.400 --> 0:03:28.880 Powell's vulgaresque moment. But then again. We spoke to Anita Markowska, 0:03:29.000 --> 0:03:31.560 of Jeffries's chief economists there just a few minutes ago 0:03:32.120 --> 0:03:35.600 Bloomber Television. She said, well, actually, we don't even need 0:03:35.640 --> 0:03:37.560 to see that. We might not even be there yet. 0:03:37.720 --> 0:03:41.760 Can you explain just the wide range here of outcomes 0:03:41.800 --> 0:03:46.360 that you're seeing. Well, I mean, as you know, if 0:03:46.360 --> 0:03:49.400 you put two economists in the room, you're you're lucky 0:03:50.080 --> 0:03:53.200 six opinions. So um, I mean I think that probably 0:03:53.200 --> 0:03:56.520 goes some way. Um um too too. I mean I 0:03:56.520 --> 0:03:59.440 think part part of this is just what we're seeing. 0:03:59.480 --> 0:04:01.680 I think is a flaw in the FED sort of 0:04:01.760 --> 0:04:05.920 expectations management strategy, right, I mean they kind of you know, 0:04:06.280 --> 0:04:09.400 they work their expectations, they try to guide the financial markets, 0:04:10.160 --> 0:04:12.360 and you know the idea, I guess is to like 0:04:12.440 --> 0:04:15.520 have the meetings essentially be sort of like foregone conclusion 0:04:15.760 --> 0:04:17.599 by the time they meet, right, I mean that's already 0:04:17.600 --> 0:04:20.120 precedentsly just do whatever the market. I just think that 0:04:20.200 --> 0:04:24.159 there there are so many moving part between each meeting, 0:04:24.279 --> 0:04:27.799 So why would you um, you know, play that play 0:04:27.839 --> 0:04:30.440 that game. So I just you know, I just think 0:04:30.440 --> 0:04:32.159 that you know, to me, this is supposed to be 0:04:32.200 --> 0:04:36.760 a dated dependent institution, right, and Um. One of the 0:04:36.800 --> 0:04:40.599 problems with expectations management is that, UM, you know you 0:04:40.680 --> 0:04:42.680 used sort of this sort of forward guidance you know 0:04:42.720 --> 0:04:46.200 a person they had been taking, is that you kind 0:04:46.200 --> 0:04:50.039 of lock yourself into a path that becomes difficult to undo. Uh. 0:04:50.040 --> 0:04:53.280 And and I think that's that's happened to some extent, Right, 0:04:53.320 --> 0:04:56.200 I mean, they're going seventies went seventies five in June. 0:04:56.680 --> 0:04:59.080 They're they're gonna go seventy five in July. And what's 0:04:59.120 --> 0:05:03.320 the off ramp uh in September fifty basis points. And remember, 0:05:03.360 --> 0:05:05.000 I mean I think this is important for your viewers 0:05:05.040 --> 0:05:09.120 to understand the sets forecast will likely be revised down 0:05:09.880 --> 0:05:14.680 in September, both for core, both for inflation and for 0:05:14.800 --> 0:05:20.200 GDP growth. UM. And they're still hiking, you know, relatively 0:05:20.240 --> 0:05:24.720 aggressively despite that. So if it looks like they're they're 0:05:24.760 --> 0:05:27.120 not data dependent, I think that's a big problem for 0:05:27.160 --> 0:05:30.240 the markets. UM, and that to me is increasingly what 0:05:30.320 --> 0:05:33.120 looks like is going to happen. Neil, about thirty seconds 0:05:33.120 --> 0:05:36.360 here you mentioned inflation expectations. You're looking at break evens here, 0:05:36.440 --> 0:05:39.640 five years, ten years, even to year break evens. They 0:05:39.680 --> 0:05:42.400 it looks at least chart wise, but they've peaked. Does 0:05:42.400 --> 0:05:46.640 that mean inflation is peaked? I mean I think inflation 0:05:46.760 --> 0:05:51.080 has peaked. Um, you know, certainly core inflation has peaked. Um. 0:05:51.160 --> 0:05:54.159 But I do think that, um, you know, part of 0:05:54.160 --> 0:05:57.880 this is just the recession trade, right, I mean, um, 0:05:57.920 --> 0:06:00.640 you know, growth expectations are declining, so if course inflation 0:06:00.680 --> 0:06:03.040 expectations will fall. The question is what does the FED 0:06:03.640 --> 0:06:06.200 do about this? Do they you know, do they take 0:06:06.200 --> 0:06:09.120 the off ramp or not? And if they don't, then 0:06:09.320 --> 0:06:12.000 we can expect these most to continue. Oh boy, alright, 0:06:12.240 --> 0:06:15.200 very tough act there for our freder Reserve. Let's see 0:06:15.200 --> 0:06:17.680 how it plays out. Neil Datta, partner and head of 0:06:17.680 --> 0:06:22.040 economic research Renaissance Macro Research is the firm, joining us 0:06:22.040 --> 0:06:25.400 on the phone from New York City. Again. He's calling 0:06:25.480 --> 0:06:28.800 this what we're seeing on our screens the recession trade. 0:06:28.839 --> 0:06:32.760 You got asset prices decline, you got oil prices declining, 0:06:32.800 --> 0:06:36.520 the dollar higher. It kind of looks a lot like 0:06:36.600 --> 0:06:38.960 a recession. And that's what Neil Datta feels like we're 0:06:38.960 --> 0:06:42.640 seeing right now. You're listening to Bloomberg Business Week with 0:06:42.760 --> 0:06:47.559 Carol Messer and Bloomberg Quick takes Tim Stinovic on Bloomberg Radio. 0:06:48.040 --> 0:06:51.040 We highlighted last week the current edition of Bloomberg business 0:06:51.040 --> 0:06:54.440 Week is their heist edition, where's all kinds of stories 0:06:54.480 --> 0:06:57.000 of skullduggery and thievery, and we've got a good one 0:06:57.080 --> 0:07:01.320 today from that edition. Simon Van's Island Would, freelance reporter 0:07:01.440 --> 0:07:03.640 for Bloomberg Business Week, joined us on the phone from 0:07:03.680 --> 0:07:07.599 New York City. Simon talked to us about this lawyer guy, 0:07:07.720 --> 0:07:12.440 the lottery lawyer. What's this scam? Okay? So, first of all, 0:07:12.480 --> 0:07:15.640 glad to be here. Uh, well, let's soften it before 0:07:15.680 --> 0:07:18.240 we get into calling it a scam because he is 0:07:18.280 --> 0:07:21.520 going on trial in about two weeks, so we have 0:07:21.560 --> 0:07:23.520 to say alleged with him, although he has some co 0:07:23.520 --> 0:07:25.920 conspirators who I'll get into, who have all played guilty 0:07:26.000 --> 0:07:30.600 and so scammy indeed just looks essentially. The lottery lawyer 0:07:30.760 --> 0:07:33.520 is a guy named Jason Kurwind, and he cornered a 0:07:33.640 --> 0:07:36.920 niche market of the legal world by representing newly minted 0:07:37.000 --> 0:07:40.000 power Ball and Megan Millions winners. And so he traveled 0:07:40.080 --> 0:07:42.880 on the Today's Show or all over the internet basically 0:07:42.880 --> 0:07:45.040 saying if you've won money and you're bewildered and you've 0:07:45.080 --> 0:07:46.800 no idea what to do with it. Called me, I'm 0:07:46.840 --> 0:07:48.720 your guy. And you know, as some of your listeners 0:07:48.720 --> 0:07:51.600 may know, a lot of a lottery winners are not 0:07:51.720 --> 0:07:54.440 financially sophisticated and a blowing at all. I feel like 0:07:54.480 --> 0:07:56.760 they've got to give it to friends or family or whatever. 0:07:57.080 --> 0:07:59.840 And so this guy takes advantage of this opening. He 0:08:00.080 --> 0:08:04.600 is alleged to basically have squandered over a hundred million 0:08:04.640 --> 0:08:07.080 dollars from some of the bigger lottery winners in recent 0:08:07.160 --> 0:08:11.640 history on a variety of colorful schemes. And that's that's 0:08:11.640 --> 0:08:14.480 sort of the top line of it. So how did 0:08:14.480 --> 0:08:19.000 he get caught here? Um? So that's a great question 0:08:19.040 --> 0:08:23.640 because there's these overlapping criminal schemes that, um that are 0:08:23.880 --> 0:08:25.880 I played here. So there was a I think that 0:08:26.160 --> 0:08:30.120 probably it's there's a Ponzi scheme involved, and so we 0:08:30.120 --> 0:08:32.920 don't really need to explain why the Ponzi schemes involved. Basically, 0:08:32.960 --> 0:08:35.920 a guy purporting to be a jeweler in Long Island 0:08:36.280 --> 0:08:38.559 was saying he could get massive returns on jeweler I 0:08:38.600 --> 0:08:40.880 think like the uncut gems out of Sandler movie, but 0:08:41.040 --> 0:08:45.000 like in Long Island. He ends up getting pinched for 0:08:45.559 --> 0:08:48.240 with the Ponzi scheme, and that Ponzi scheme overlaps the 0:08:48.240 --> 0:08:51.720 water lawyer that guy, So the Ponzi scheme jeweler guy 0:08:51.800 --> 0:08:55.480 ends up becoming a confidential informant and starts wire tapping 0:08:55.480 --> 0:08:58.920 calls involved with a lottery lawyer, and that I think 0:08:59.000 --> 0:09:01.760 ends up topping some those other people start flipping. There's 0:09:01.800 --> 0:09:05.000 wire taps up the wazoo in this call in this case. Uh. 0:09:05.040 --> 0:09:06.920 And eventually they would let down and they figure out 0:09:06.960 --> 0:09:09.240 that the water aller has been been losing money on 0:09:09.320 --> 0:09:11.680 behalf of the people they're supposed to be managing, you know, 0:09:11.720 --> 0:09:13.760 their money and growing it, not you know, throwing it 0:09:13.760 --> 0:09:18.000 down the toilet. What are some of the quote unquote investments, uh, 0:09:18.360 --> 0:09:20.400 that these folks made on behalf of their clients. Because 0:09:20.400 --> 0:09:22.120 it seems to me, I always say to myself when 0:09:22.160 --> 0:09:23.960 I see somebody on the TV screen holding up that 0:09:24.000 --> 0:09:29.040 big check for I would just buy treasuries treasuries and 0:09:29.080 --> 0:09:31.280 go to sleep. They do. So this is the irony. 0:09:31.400 --> 0:09:34.880 So these guys, they, you know, the varying levels of financialistication. 0:09:34.960 --> 0:09:38.079 But so one of his big winners in the biggest 0:09:38.080 --> 0:09:41.200 single lottery winner of all time, meaning she won. She 0:09:41.320 --> 0:09:44.800 was a South Carolina woman who kept her identity private 0:09:45.040 --> 0:09:49.560 one point five billion dollars backpot and before tax, and 0:09:49.679 --> 0:09:53.920 she said to him, please invest conservatively, and he was like, surchure. Sure. 0:09:54.200 --> 0:09:56.720 Turns out that one of the bigger investment schemes was 0:09:56.840 --> 0:10:00.640 something called the Merchant Cash Advanced Business in. Some buddies 0:10:00.679 --> 0:10:02.680 in Long Island got into mc AS and what that is. 0:10:02.679 --> 0:10:05.680 It's it's almost like kind of gray area legal loan sharking, 0:10:05.880 --> 0:10:10.480 highly extracted loans, incredibly high interest rates up to it's 0:10:10.520 --> 0:10:12.920 for people with bad credit, deathperate for cash, maybe they 0:10:12.920 --> 0:10:17.120 have criminal history, who knows, very popular kind of gray 0:10:17.160 --> 0:10:20.400 area industry here in New York State. He decides this 0:10:20.440 --> 0:10:23.319 would be a great investment scheme. Uh. The guys he 0:10:23.440 --> 0:10:26.199 ends up parting with, their total crooks, one of them 0:10:26.360 --> 0:10:29.360 one of whose grandfather was the head boss of the 0:10:29.360 --> 0:10:34.200 Colombo crime things. Yeah, and so that's maybe not the guy. 0:10:34.280 --> 0:10:36.320 I don't know if he googled him or not, but like, 0:10:36.520 --> 0:10:37.960 that might not be the guy you want to get 0:10:38.000 --> 0:10:40.880 in business with. And so that that money starts disappearing 0:10:40.880 --> 0:10:43.760 for a combination of reasons. One the grandson of the 0:10:43.800 --> 0:10:46.880 mob boss plus the other guy. Uh, they start kind 0:10:46.880 --> 0:10:48.880 of raiding the accounts, like, hey, we deserve a car, 0:10:49.000 --> 0:10:50.600 like we didn't win the lottery. One of these guys 0:10:50.600 --> 0:10:53.000 deserve all the money. So they start rating it. Then 0:10:53.040 --> 0:10:55.400 they start investing what ends up being the Ponzi scheme, 0:10:56.080 --> 0:10:58.720 which so they lose all of it. And then this 0:10:58.840 --> 0:11:00.760 is a kicker to try to get the money back. 0:11:01.200 --> 0:11:04.600 They learn about another guy who actually is an alleged 0:11:04.679 --> 0:11:06.520 member of the New York City mob but for a 0:11:06.600 --> 0:11:09.760 different family, the Genevaise family, who says this is the 0:11:09.800 --> 0:11:12.199 beginning of the pandemic. Now he says, I've got something 0:11:12.240 --> 0:11:14.439 called Ppe and I'm gonna make a ton of money 0:11:14.440 --> 0:11:16.280 on it. And then that's the final way of the 0:11:16.520 --> 0:11:20.800 losing money. There's there's a lot of layers to the story. Clearly, 0:11:20.880 --> 0:11:24.840 let's add one more. Talk to us about Cheddar Capital. Yeah, 0:11:24.840 --> 0:11:28.040 so Cheddar Capital ridiculous name and if you google it, 0:11:28.040 --> 0:11:30.679 like you, this is the name of a business, Uh, 0:11:30.880 --> 0:11:32.920 you can't even find it. It's like there's that vanity 0:11:32.920 --> 0:11:35.200 fair website called Cheddar and then there's the cheese and 0:11:35.200 --> 0:11:37.360 it's like, is this even a real thing? Cheddar was 0:11:37.400 --> 0:11:40.720 one of the merchan cash advanced businesses that he was 0:11:40.760 --> 0:11:43.120 putting a lot of the lottery winner's money in. And 0:11:43.160 --> 0:11:44.960 I think at the beginning it's possible that this was 0:11:45.000 --> 0:11:48.679 such an extractive and lucrative industry actually, um, that they 0:11:48.679 --> 0:11:51.120 were making a fair amount of money on it. Uh, 0:11:51.120 --> 0:11:53.360 it's just that it seemed to have been terribly mismanaged. 0:11:53.840 --> 0:11:58.320 Um so Cheddar. Once the Cheddar money started allegedly disappearing, 0:11:58.559 --> 0:12:01.320 Um that that toppled bunch of other dominoes which led 0:12:01.360 --> 0:12:02.920 us down the road. I was just telling you about. 0:12:03.040 --> 0:12:05.640 So Simon, there are four kind of main characters in 0:12:05.679 --> 0:12:08.360 your story here, but the lottery lawyer, and three of 0:12:08.400 --> 0:12:11.640 them have already pled guilty in their waiting sentencing. But 0:12:11.720 --> 0:12:16.360 the lottery lawyer himself, he's going to trial, right, give 0:12:16.440 --> 0:12:18.760 us a sense of the timing one once that can occur, 0:12:18.840 --> 0:12:21.280 How do you what's the expectation about how that might 0:12:21.320 --> 0:12:24.280 play out? Yeah, So the trials in um New York 0:12:24.320 --> 0:12:26.840 Southern District in about a week. I think jury selection 0:12:26.960 --> 0:12:30.640 is like in a week. Um. The looks like um 0:12:30.679 --> 0:12:33.280 at least a couple of co conspirators will testify against him, 0:12:33.600 --> 0:12:36.920 his own brother in law, who's a very careful, colorful character. 0:12:37.440 --> 0:12:42.240 He's a cosmetic surgeon in Long Island, UH called Scott Bleier, 0:12:42.400 --> 0:12:46.240 who's handle on Instagram is Dr b Fixen and definitely 0:12:46.240 --> 0:12:48.680 worth a look if you're on Instagram. He will be 0:12:48.720 --> 0:12:51.160 testifying apparently against his own brother in law and a 0:12:51.320 --> 0:12:54.800 whole separate aspect of this. I would say this, between 0:12:54.800 --> 0:12:57.400 all the words I talked to and people are involved 0:12:57.400 --> 0:12:59.720 in the case, everyone is shocked at this guy. A 0:12:59.760 --> 0:13:02.559 lot lawyers even going to trial. He was fired from 0:13:02.559 --> 0:13:04.920 his law firm, Risken Rattler, which is based on Long Island, 0:13:04.960 --> 0:13:07.520 as soon as the allegations hit that the wire tops 0:13:07.520 --> 0:13:10.760 are incriminating. There's three other guys who played guilty. Um, 0:13:10.800 --> 0:13:13.280 but his lawyer, I think he my guest is he's 0:13:13.280 --> 0:13:15.040 trying to clear his name because even if he if 0:13:15.040 --> 0:13:16.840 he takes a pleas I don't think he's worried. He's 0:13:16.880 --> 0:13:19.640 never gonna work again. And his whole reputation was based 0:13:19.679 --> 0:13:21.640 on integrity, right, I'm gonna help you manage your money. 0:13:21.640 --> 0:13:24.680 I'm the good guy. And his record was spotless until then. 0:13:24.800 --> 0:13:26.760 He seemed like a family guy. He just seemed pretty 0:13:26.800 --> 0:13:29.480 milk toast. I think he's going to Hell Mary to 0:13:29.520 --> 0:13:32.400 try to clear his name, and the lawyers, basically, I think, 0:13:32.400 --> 0:13:35.480 are going to argue that he himself was scammed by 0:13:35.559 --> 0:13:38.360 his co conspirators, that he invested money in a bench 0:13:38.360 --> 0:13:40.920 of that bunch of bad schemes and it wasn't in fault. 0:13:41.280 --> 0:13:45.600 The problem is that he, unbeknownst to the allegedly unbeknownst 0:13:45.640 --> 0:13:48.319 to the winners, was taking a cut of the investment 0:13:48.480 --> 0:13:50.840 in terms of in like these things like Cheddar, capital 0:13:50.840 --> 0:13:53.920 of these businesses, and was allegedly spending it on you know, 0:13:54.080 --> 0:13:58.880 classic cliches like sax fist avenue, uh an suv like 0:13:59.400 --> 0:14:02.439 name that of stuff, and so might be a tall 0:14:02.559 --> 0:14:05.120 hurdle for them to get an acquittal. All right, are 0:14:05.120 --> 0:14:07.920 you gonna? Are you gonna follow the trial? I have 0:14:08.080 --> 0:14:11.400 to committed. All right, We'll have you back when we 0:14:11.400 --> 0:14:14.320 get to get some kind of resolution there to the trial. 0:14:14.400 --> 0:14:18.080 Simon van Zylon would freelance reporter for Bloomberg business Week, 0:14:18.120 --> 0:14:20.720 joining us on the phone from New York City. His story. 0:14:20.880 --> 0:14:24.800 Simon story is featured in the Heist issue of Business 0:14:24.840 --> 0:14:27.840 Week magazine that's available in news stands, on the Bloomberg 0:14:28.000 --> 0:14:31.240 and at Bloomberg dot com slash business Week. Apparently that 0:14:31.320 --> 0:14:34.960 is the Heist issue is an annual issue for Business Week, 0:14:35.040 --> 0:14:39.160 widely anticipated for all the crazy stories that are reported, 0:14:39.200 --> 0:14:43.000 take up dealing mostly with financial Canary. So good, good 0:14:43.000 --> 0:14:48.120 stuff there. This is Bloomberg. This is Bloomberg Business Week 0:14:48.280 --> 0:14:52.280 with Carol Messer and Bloomberg Quick Takes Tim Stinovic on 0:14:52.400 --> 0:14:57.000 Bloomberg Radio. All right, pretty remember this Archegos management story 0:14:57.160 --> 0:14:59.680 from a few months back, Bill Lang and those guys 0:15:00.160 --> 0:15:03.960 the Bella, etcetera. Yes, lost, like you know, jillions of dollars, 0:15:04.040 --> 0:15:06.160 twenty billion dollars in a matter of days. It seems 0:15:06.160 --> 0:15:08.360 like billion. I'm sorry, twenty billion dollars. Well, he's got 0:15:08.520 --> 0:15:10.720 he's got a lot of legal problems. He's got criminal issues. 0:15:10.880 --> 0:15:14.200 Now he's got former employees suing him saying what about 0:15:14.240 --> 0:15:17.800 my bonus? I didn't steal any money. Greg Farrell, investigative 0:15:17.800 --> 0:15:21.280 reporter for the Legal Enforcement Team from Bloomberg News Joints, 0:15:21.320 --> 0:15:24.640 is live here on our Bloomberg Interactor Broker Studio. Greg, 0:15:24.680 --> 0:15:26.720 this guy's got a lot of legal issues. It just 0:15:26.760 --> 0:15:29.400 seemed to be mounting up. Now he's got employees coming 0:15:29.440 --> 0:15:32.040 back and saying you gotta pay me my bonus. Is 0:15:32.080 --> 0:15:35.080 that a thing? Yes, So today's lawsuit is from one 0:15:35.120 --> 0:15:38.680 former employee, but I guess I would guess he represents 0:15:38.680 --> 0:15:40.720 a number of others or others will join him because 0:15:40.720 --> 0:15:44.240 the same thing happened to him, to them that they 0:15:44.280 --> 0:15:47.280 were guaranteed any money they put into their deferred comp 0:15:47.320 --> 0:15:50.040 program over a period of several years would never go 0:15:50.120 --> 0:15:53.640 below par, would be backstopped, etcetera, and only have a 0:15:53.720 --> 0:15:57.600 blow up in March of last year. I have to ask, though, 0:15:57.640 --> 0:15:59.720 I mean, well, let's start with Paul here, actually, because 0:15:59.720 --> 0:16:02.480 I have to ask about the bonus dynamic. I want 0:16:02.520 --> 0:16:04.240 my bonus and I want it all, and I wanted 0:16:04.280 --> 0:16:08.760 in cash. I mean same. But but you've listen, you've 0:16:08.760 --> 0:16:11.800 worked on Wall Street for ages UM, and I have 0:16:11.920 --> 0:16:15.520 to ask about how this perhaps bonus structure is different 0:16:16.080 --> 0:16:18.080 from from some of the banks. Yeah, it goes one 0:16:18.120 --> 0:16:19.920 of two ways. One is you just on a completely 0:16:20.200 --> 0:16:23.200 discretionary bonus and it could be zero or any number 0:16:23.240 --> 0:16:25.840 above that it's not a negative number, which is another 0:16:25.840 --> 0:16:29.000 whole whole issue. Or you're on under a count contract 0:16:29.000 --> 0:16:32.040 and you only five million dollar guaranteed bonus, maybe even 0:16:32.080 --> 0:16:34.560 plus expercent of the fees I bring in something structured 0:16:34.640 --> 0:16:38.080 like that. But when there's a case of fraud, as 0:16:38.440 --> 0:16:42.360 in this potential and potentially in this case, what's the play? 0:16:43.360 --> 0:16:45.280 Is my call? If I'm the employee, I just say, hey, 0:16:45.400 --> 0:16:47.960 I didn't do anything wrong. Why can't I get my 0:16:48.000 --> 0:16:53.160 money back? That's one elemented. Another element is that this 0:16:53.280 --> 0:16:55.800 is a good time for form employees to graph for 0:16:55.880 --> 0:16:58.640 room because Bill Warring has been charged criminally, so that 0:16:58.680 --> 0:17:01.240 bolsters the case is at the U. S Attorney Manhattan 0:17:01.240 --> 0:17:04.760 has already accused Bill Wang and another top executive of 0:17:04.760 --> 0:17:08.720 criminal behavior. This will support in a civil suit like this. 0:17:09.400 --> 0:17:11.800 But then you get to the question of let's say 0:17:11.800 --> 0:17:14.720 he wins, where's the money? Is their money? And also 0:17:15.119 --> 0:17:19.360 the value the purported value of the deferred comp program 0:17:19.480 --> 0:17:22.960 was was like five million dollars as of you know, 0:17:23.119 --> 0:17:27.199 end of Was that a real number or was that 0:17:27.240 --> 0:17:29.959 the result of a lot of the same gamesmanship that 0:17:29.960 --> 0:17:33.639 Wang was accused of, you know, uh pulling off in 0:17:33.680 --> 0:17:36.800 the two years that led to the implosion. So Greg, 0:17:36.800 --> 0:17:38.080 what does he have to do to get rid of 0:17:38.119 --> 0:17:40.520 these charges? Is just a matter of paying them their bonuses? 0:17:41.800 --> 0:17:44.480 Right now? This is not a priority. Criminal charges are 0:17:44.520 --> 0:17:46.399 always a priority because you could spend the rest of 0:17:46.400 --> 0:17:49.800 his life in prison leal hassles and you know, chase 0:17:49.840 --> 0:17:51.520 the money, you know, whether or not I'll pay you. 0:17:51.600 --> 0:17:54.359 That's completely secondary. So this is not good news for 0:17:54.400 --> 0:17:56.679 Bill Wang. But the the important thing, the thing that 0:17:56.760 --> 0:17:59.719 really threatens him in his CFO with the criminal charges 0:18:00.080 --> 0:18:02.760 of a few months ago, there is a concern or 0:18:02.800 --> 0:18:06.000 I don't know this, but it's possible that you know, 0:18:06.040 --> 0:18:10.200 prosecutors don't always prosecute everything that someone allegedly did wrong, 0:18:10.240 --> 0:18:13.879 only the things they can identify. If this gets the 0:18:13.920 --> 0:18:17.040 attention of criminal prosecutors and expands leads to an expansion 0:18:17.040 --> 0:18:18.720 of the case, that would be trouble. But at least 0:18:18.760 --> 0:18:22.399 as of now, this is uh definitely a secondary matter 0:18:22.440 --> 0:18:24.639 in terms of Bill Wang. You know, civil is just 0:18:24.680 --> 0:18:26.919 not this, it's not a serious as criminal. What's the 0:18:26.920 --> 0:18:30.800 status of his criminal uh situation with the government is 0:18:30.920 --> 0:18:34.399 or an expectation for a timeline a plea deal or 0:18:34.400 --> 0:18:38.000 a timeline to actually going to trial the way So 0:18:38.240 --> 0:18:40.200 there's already been at least one hearing on this, and 0:18:40.240 --> 0:18:43.720 there's gonna be another hearing in August. I think it's 0:18:43.720 --> 0:18:45.840 expected that A. I don't think there'll be a wee deal. 0:18:45.880 --> 0:18:49.520 They both in the CFO Patrick Alligan, through their lawyers, 0:18:49.880 --> 0:18:53.440 you know, planned to fight this um. Secondly, I think 0:18:53.480 --> 0:18:55.520 given the complexity of this and the fact that we're 0:18:55.520 --> 0:18:57.240 now in the summer and nothing's really going to happen 0:18:57.320 --> 0:19:00.439 until September, suggests that in the complicated like this, if 0:19:00.480 --> 0:19:02.439 there's a trial, it will be next year. That's not 0:19:02.480 --> 0:19:05.280 a guarantee, but you know, ballpark figure it will probably 0:19:05.320 --> 0:19:08.840 be next year. And it's his defense, I didn't do it. 0:19:09.480 --> 0:19:12.960 There's two defenses, so good question. The main charges against 0:19:12.960 --> 0:19:15.760 Bill Wang and Pat Halligan from two months ago were 0:19:15.840 --> 0:19:21.200 one market manipulation and two lying to the banks. Um. 0:19:21.280 --> 0:19:23.959 In terms of the defense of market manipulation, you know, 0:19:24.000 --> 0:19:26.800 that's you know, there's a lot of gray area there 0:19:27.680 --> 0:19:32.000 because you know, yes, he didn't let each bank, each 0:19:32.000 --> 0:19:34.639 counterparty know what he was playing to do, but he 0:19:34.720 --> 0:19:37.000 was trading openly. He was trading in stocks he liked, 0:19:37.000 --> 0:19:39.560 trying to get their value up, as any investor does. 0:19:39.600 --> 0:19:42.040 So I think there's gonna be a robust argument as 0:19:42.040 --> 0:19:45.840 to whether or not market manipulation, you know, can be proved. However, 0:19:46.600 --> 0:19:48.400 it's a federal lot to lie to banks, and that's 0:19:48.400 --> 0:19:51.280 going to be much more you know, I wouldn't say 0:19:51.280 --> 0:19:53.879 slam dunk, but a much easier case for federal prosecutors 0:19:53.880 --> 0:19:56.280 to make is that you can't lie to banks, even 0:19:56.320 --> 0:19:58.040 if you didn't cheat them and they didn't lose money, 0:19:58.040 --> 0:20:01.040 you cannot make a false representationation to them. And that's 0:20:01.080 --> 0:20:04.200 going to be a much more difficult challenge for both 0:20:04.240 --> 0:20:09.200 those guys to to defend against fascinating stuff. Thirty seconds. 0:20:10.000 --> 0:20:12.520 Has someone else gone through these kind of proceedings before 0:20:13.359 --> 0:20:17.879 any kind of precedent here? No, I think the this 0:20:18.440 --> 0:20:21.639 bill waging the criminal case is highly unusual. The market 0:20:21.680 --> 0:20:24.280 manipulation theory. That's why I think this could get interesting 0:20:24.320 --> 0:20:27.120 in court, and that he might be able to mount 0:20:27.160 --> 0:20:30.200 He's got a very good lawyer, a legitimate defense, so 0:20:30.680 --> 0:20:35.000 you know, uh it really is you know, uh, whang 0:20:35.040 --> 0:20:38.000 is sort of a one off, right, all right, good stuff, 0:20:38.000 --> 0:20:40.040 Gregg Farrell, Thank you so much for joining us. Greig Farrell, 0:20:40.040 --> 0:20:43.159 investigative reporter for the legal enforcement team from Bloomberg News 0:20:43.240 --> 0:20:50.920 during us here in our Bloomberg Interactor Broker Studio Journal. 0:20:51.960 --> 0:20:56.679 Yeah but you let me drive. Oh no, no, no no, no, honey, 0:20:56.840 --> 0:21:08.320 please I drive. It's a good question. Drive this good 0:21:08.400 --> 0:21:13.919 drive to the globe. Well dry up on Bluebird Radio. 0:21:15.520 --> 0:21:18.480 Crazy intra day of trading is how I'll put it. 0:21:18.560 --> 0:21:21.159 I started the day here with greedy and the markets 0:21:21.200 --> 0:21:23.560 were looking down a couple of percent, and here we 0:21:23.600 --> 0:21:25.760 had the sp flat. We even got a one and 0:21:25.800 --> 0:21:28.119 a half percent increase on NASTAC. That is what I 0:21:28.160 --> 0:21:32.359 call intra day volatility. How does the professionals, how do 0:21:32.400 --> 0:21:35.480