Speaker 1: This is Bloombird Law with June Brusso from Bloomberg Radio.
Speaker 1: I stock today, HI had twins. I went to the
Speaker 1: poor farm. I'm a millionaires. That's life. Game of Life,
Speaker 1: Life Life when you play. The Game of Life came
Speaker 1: out in nineteen sixty and became a classic. It's now
Speaker 1: part of the permanent collection at the Smithsonian. So why now,
Speaker 1: after more than sixty years, are the heirs of the
Speaker 1: game's designer trying to reclaim the copyright to the game
Speaker 1: from Hasbro? And will they succeed? The answers to those
Speaker 1: questions could have massive repercussions, even affecting characters in the
Speaker 1: far away Marvel universe like Iron Man, Spider Man, and
Speaker 1: Doctor Strange. Here to help us sort through this really
Speaker 1: complex case is intellectual property litigator Terence Frost, a partner
Speaker 1: Captain Uten Rosenman. So Terry tell us about the story
Speaker 1: behind the Game of Life. So June in ninety nine,
Speaker 1: a toy designer by the name of Reuben claimer I
Speaker 1: was trying to pitch a new toy to the Milton
Speaker 1: Bradley Company in Massachusetts. Milton Bradley took a pass on
Speaker 1: the toy, but told them they were interested in coming
Speaker 1: up with something to commemorate the hundredth anniversary of the company,
Speaker 1: so Mr Claimer asked permission to look through their archives
Speaker 1: and he found in the archives of the Milton Bradley
Speaker 1: Company the original very first game invented by Mr Milton
Speaker 1: Bradley in eighteen sixty and it was called the checkerboard
Speaker 1: Game of Life. And Claimer decided to do a modern
Speaker 1: version of that game which would celebrate the hundredth anniversary
Speaker 1: of the founding of Milton Bradley, and Milton Bradley just
Speaker 1: loved the idea, and so Mr Claimer went back to
Speaker 1: Andrews where he was based, and being more of an
Speaker 1: ideals guy, he had to come up with somebody who
Speaker 1: could actually develop the prototype, and he talked to a
Speaker 1: guy he knew by the name of Bill Markham, who
Speaker 1: had a small company designing toys and games, and he
Speaker 1: managed to develop a prototype of the Game of Life
Speaker 1: modern version in only six weeks. Claimer took it pitched
Speaker 1: it to Milton Bradley again. They loved it as produced,
Speaker 1: They made some tweaks to it and it was out
Speaker 1: on the store shelves by March of nineteen sixty anniversary
Speaker 1: Milton Bradley. Milton Bradley goes on to make a lot
Speaker 1: of money off of this game and ultimately is bought
Speaker 1: by the Hasbroke Company. So that's the background to the
Speaker 1: Game of Life, which is the creative work at the
Speaker 1: centerpiece of this lawsuit. So this game has been out
Speaker 1: for some sixty years. Why a lawsuit at this point, Well,
Speaker 1: this lawsuit arises out of a change that Congress made
Speaker 1: to the copyright laws back when it revised them in
Speaker 1: nine And up to that time, copyright in the United
Speaker 1: States was governed by what was referred to as the
Speaker 1: nineteen o nine Act, which is one of the reasons
Speaker 1: that the Congress felt they needed to revise it, and
Speaker 1: so the new law became the nineteen seventy six Act.
Speaker 1: In this nineteen seventy six Act, Congress put in a
Speaker 1: provision that had not previously ever existed. And what that provision,
Speaker 1: Section three or four of the nineteen seventy six Acts
Speaker 1: said was that a creator that had assigned away their
Speaker 1: copyright in a creative work would have a right to
Speaker 1: terminate that assignment for a brief period time fifty six
Speaker 1: years after the copyright had originally been a paid and
Speaker 1: this was in response to numerous stories during hearings in
Speaker 1: Congress from inventors who didn't know what their rights were
Speaker 1: at the time they signed away, copyrights weren't yet popular,
Speaker 1: didn't understand their bargaining power. Flora of stories from creators
Speaker 1: about the problem with the copyright assignments led Congress to
Speaker 1: create this sort of option whereby they could get their
Speaker 1: copyrights back after a certain period of time. And that
Speaker 1: was a right that did not exist under the nine Act.
Speaker 1: And that is the source of the problem here, because
Speaker 1: the copyright in the Game of Life is under the
Speaker 1: nineteen o nine Act, not the NYT. Adding to the
Speaker 1: complexity here is the rule called the instance and expense rule.
Speaker 1: So the nineteen o nine Copyright Act did not contain
Speaker 1: any references whatsoever to how an independent contractor commissioned to
Speaker 1: create a work and this should be treated for copyright
Speaker 1: law purposes. The courts developed their own rules for addressing
Speaker 1: the problem of independent contractors commissioned to create a creative work,
Speaker 1: and the rule they developed came to be known as
Speaker 1: the Instances and Expense Rule, made a certain amount of
Speaker 1: sem for the period time in which it was developed.
Speaker 1: It essentially said that if the idea for creative work
Speaker 1: is developed by an employer and they ask a non
Speaker 1: employee of which an independent contractor, to develop that idea
Speaker 1: into the actual work, and they pay for those development costs,
Speaker 1: then they have the copyright in the ultimate work that
Speaker 1: is created, not the independent contractor. And so that became
Speaker 1: the rule throughout the United States for any copyright that
Speaker 1: was the result of work by an independent contractor and
Speaker 1: resulted in a copyright under the nineteen o nine Act.
Speaker 1: Is that why Markham lost his case at the district
Speaker 1: court and appeals court level. So keep in mind that
Speaker 1: there was no righting of the nineteen o nine Act
Speaker 1: to terminate an assignment of your copyright that comes in
Speaker 1: nineteen seventy ninety six Act. What the ninety Acts said,
Speaker 1: curiously is we are going to extend, expressly extend this
Speaker 1: right to terminate copyright assignments backwards in time to copyrights
Speaker 1: issues under the nineteen o nine Act. A very curious
Speaker 1: choice because obviously, when people were negotiating that assignment under
Speaker 1: the nineteen o nine Act, they were unaware that there
Speaker 1: might be a right determination in the future and could
Speaker 1: not deal with it now. The Congress did create an
Speaker 1: exception in the nineteen Copyright Act for this section three
Speaker 1: or four right of termination. The exception was that the
Speaker 1: right would not convey backwards in time to a work
Speaker 1: made for higher under the nineteen o nine Act. Now,
Speaker 1: the problem with the way they drafted it was the
Speaker 1: nineteen o nine Act does not contain the words work
Speaker 1: made for higher And so the courts now have been
Speaker 1: left to interpret how do we deal with an independent
Speaker 1: contractor who developed a copyright work under the nineteen o
Speaker 1: nine Act and is now seeking to terminate the assignment
Speaker 1: of that be right to the third party. Do we
Speaker 1: apply current law as it's understood now, or do we
Speaker 1: apply this instances an expense to test which was the
Speaker 1: law under the nineteen o nine Act. And that's the
Speaker 1: conundrum that the lower courts are facing here. And Mr
Speaker 1: Markham and the heirs to his estate lost in the
Speaker 1: lower courts because they believed that the law developed under
Speaker 1: the nineteen o nine Copyright Act. In other words, the
Speaker 1: instance is an expense rule should apply to explain what
Speaker 1: a work made for higher is under the nine Act.
Speaker 1: And they found in the particular instance of this lawsuit
Speaker 1: that what Mr Markham had done with respect to the
Speaker 1: Game of Life was a work made for higher because
Speaker 1: it had been commissioned at the instance of Milton Bradley,
Speaker 1: and they had paid for the development expenses. Therefore it
Speaker 1: was work made for higher and there was no right determination.
Speaker 1: So he lost in the District Court of Rhode Island
Speaker 1: and again in the First Circuit on appeal, and now
Speaker 1: he's going to the Supreme Court saying all those lower
Speaker 1: courts got it wrong. And there's a split in the circuits.
Speaker 1: Although the courts that are most involved in copyright, the
Speaker 1: Second and the Ninth Circuits, have said the rule still
Speaker 1: stands for old works. That's correct. So the state applied
Speaker 1: now is that the Second Circuit, the Ninth Circuit, which
Speaker 1: you correctly identified as the most important courts of appeal
Speaker 1: at the federal level for copy r law, and the
Speaker 1: First Circuit, which covers New England, they have all said
Speaker 1: that we apply this instance and expense rule from the
Speaker 1: nineteen o nine Act to determine what a work made
Speaker 1: for higher is under Section three or four of However,
Speaker 1: the Eleventh Circuit, down in Florida, Georgia's southeastern part of
Speaker 1: the United States, has said none of that can't be right.
Speaker 1: The right to terminate Section three or four is in
Speaker 1: the x Act, and therefore we have to use the
Speaker 1: law of the to determine that right now, June. As
Speaker 1: you know, the Spring Court is not required in the
Speaker 1: Constitution to take every single appeal that goes to It
Speaker 1: has discretionary powers in most cases except four cases between
Speaker 1: two sovereign states Georgia and North Carolina suit each other,
Speaker 1: they have to take that. But all the rest of
Speaker 1: the cases, it's a discretionary jurisdiction. And so you file
Speaker 1: a petition for certain c r which is what the
Speaker 1: Markham State has done here asking the Court to review
Speaker 1: this case because it's important and one of the things
Speaker 1: that the Spring Court looks at to determine whether the
Speaker 1: cases we're taking on appeal is is there a split
Speaker 1: in the circuit courts, Because the Spreme Court is of
Speaker 1: the view that if there's a split in the circuit courts,
Speaker 1: um different law is being applied based on the portion
Speaker 1: of the country that you're in, and we have to
Speaker 1: fix that. There has to be a uniform law across
Speaker 1: the United States, so it doesn't matter which circuit you're it.
Speaker 1: And therefore there's very strong reason here because of that
Speaker 1: circuit split to believe the Supreme Court scoring accept this case,
Speaker 1: and that has been confirmed recently by the fact that
Speaker 1: the Supreme Court asked, in a very unusual manner for
Speaker 1: the Hasbroke Company, which acquired all the rights and interests
Speaker 1: of Milton Bradley, asked Hasbroke Company, who won below. They
Speaker 1: asked them to respond to this petition for certain cry,
Speaker 1: which is usually a signal that the Supreme Court is
Speaker 1: inclined to accept the case. And so my betting is
Speaker 1: that they're going to take this case. And here it's
Speaker 1: sometime next fall. Explain the significance of this case. It's
Speaker 1: not about just the Game of Life has such wide
Speaker 1: repercussions if the rules changed. Oh, this case has millions,
Speaker 1: if not billions of dollars at stake over and beyond
Speaker 1: the Game of Life. There's a lot of money at
Speaker 1: stake ins because Game of Life is the second most
Speaker 1: popular board game of all time, selling something like thirty
Speaker 1: million copies worldwide. So there's a lot of money at
Speaker 1: stake in this case. But the real money at stake
Speaker 1: has to do with all the copyrights from the fifties
Speaker 1: and sixties that are still valid. They were procured and
Speaker 1: issued under the nineteen o nine Act, and so we
Speaker 1: have copyrights for the entire Marvel Comic book universe. All
Speaker 1: those character rights could be terminated by the creators if
Speaker 1: the Supreme Court rules in favor of the market state
Speaker 1: here and says that there is a right to terminate.
Speaker 1: Keep in mind that copyrights issued in the nineteen o
Speaker 1: nine Act exists for years, and so any copyright issued
Speaker 1: between the years nineteen seven nineteen seventy seven are still
Speaker 1: in effect. And we're issued in the nineteen o nine Act,
Speaker 1: and therefore, potentially, now out of the blue, the creators,
Speaker 1: to the extent that they've assigned away their copyright, will
Speaker 1: have a right to terminate. And that's a very big
Speaker 1: deal given the number, the large number of copyrights issued
Speaker 1: during that fifty year period. I find the ability to
Speaker 1: recapture the copyright a little bit troubling because so much
Speaker 1: goes into the success of a board game, let's say,
Speaker 1: beyond just its creation. There's the marketing, there's the promotion,
Speaker 1: the packaging, the production, the distribution, a host of things.
Speaker 1: And for someone to be able to come back after
Speaker 1: all that's been done and recapture the copyright because I
Speaker 1: didn't know about the success of the products, so they
Speaker 1: didn't know about their bargaining position. It seems unfair, and Junior,
Speaker 1: you're exactly right, and it extends beyond just the game
Speaker 1: of life and what's gone into making it so popular.
Speaker 1: I mean, think about your typical movie. Yes, you have
Speaker 1: to acquire the character, right, but somebody still has to
Speaker 1: write the story. The actors have to perform at the
Speaker 1: director has to direct it, the editor has to edit it,
Speaker 1: the found editor has to bring in the sounds. The
Speaker 1: distribution company has to get out there marketing and get
Speaker 1: into theaters make it popular. All those things are things
Speaker 1: that the owner of the copyright and the character did
Speaker 1: not do to make a fame. And that owner of
Speaker 1: that character copy right now will have an opportunity to
Speaker 1: terminate their assignment, which will stop any future movies being made,
Speaker 1: and to renegotiate the right. And I don't think Congress
Speaker 1: fully thought through what they were doing here when they
Speaker 1: put section three or four in the They clearly bought
Speaker 1: hook line and sinker all these tales of low from
Speaker 1: artists and writers that they were being taken advantage of.
Speaker 1: And there is some of that that went on but
Speaker 1: there was also a lot of just good old honest
Speaker 1: bargaining that went on. And if the purchasers of those
Speaker 1: assigned copyrights had known that there was this right to
Speaker 1: terminate in the future, they would have factored that into
Speaker 1: their economic analysis and not paid as much in the
Speaker 1: first place. Are they would have bargained in the first
Speaker 1: place for the right to give up that termination in
Speaker 1: the future. And because they didn't know that this termination
Speaker 1: right existed in nineteen sixty, for example, when the copyright
Speaker 1: Game of Life was a sign, they could not possibly
Speaker 1: negotiate that way. And so it is in some respects
Speaker 1: very unfair to the owners of these copyright assignments to
Speaker 1: now go back in time and force a renegotiation. I mean,
Speaker 1: with this conservative court disturbed the Marvel universe in this way.
Speaker 1: It's a great question, June, because we are at a
Speaker 1: nodal point in Supreme Court jurisprudence with respect the copyright law.
Speaker 1: The two great champions of copyright law at different ends
Speaker 1: of the spectrum, for Justice Ginsburg and Justice Bryer. Justice
Speaker 1: Ginsburg passed away she believed in a very strong protection
Speaker 1: for copyright. We can see how her voice was missed
Speaker 1: on the Court during the Oracle case, which was decided
Speaker 1: the last term, in which the side that believed in
Speaker 1: a weak copyright prevailed. Because she was not there to
Speaker 1: articulate the need for a strong copyright system. Justice Bryer,
Speaker 1: on the other hand, has always been her antagonist with
Speaker 1: respect the copyright laws. He has always argued in favor
Speaker 1: of a weaker copyright protection system. We saw him prevail
Speaker 1: in the Oracle case last term. If this case involving
Speaker 1: the Game of Life would come up while he was
Speaker 1: still on the court, I would say that there's a
Speaker 1: very significant risk that he would overturn or certainly try
Speaker 1: to overturn and get the votes in the court the
Speaker 1: lower court decision and say that there was a termination
Speaker 1: right in the copy right. It is likely that this
Speaker 1: case will not come before the Spring Court until next
Speaker 1: October at the earliest, and my understanding is that just
Speaker 1: as Brides likely to be off the court at that point,
Speaker 1: in which case we will have a Supreme Court that
Speaker 1: is truly bereft of any deep knowledge or experience with
Speaker 1: the copyright laws to the United States, and we will
Speaker 1: have to see who steps up to fill the spots
Speaker 1: less vacant by Justice Ginsburg, Justice Brier in the copyright
Speaker 1: field of the Supreme Court, and it's anybody's guests how
Speaker 1: this court might rule on this case. I will tell
Speaker 1: you this, If the Supreme Court agrees to take this case, um,
Speaker 1: we are going to see a flood of amacus briefs
Speaker 1: taking one side or the other. Certainly, the owners of
Speaker 1: assignments of nineteen o nine Act copyrights will be arguing
Speaker 1: to affirm the decision below, and the assignees of nineteen
Speaker 1: o nine Act copyrights are going to be flooding the
Speaker 1: courts with a meekus briefs arguing that there should be
Speaker 1: a right of termination. It will arguably be one of
Speaker 1: the busiest dockets that the Supreme Court has seen years
Speaker 1: because of the vested interests and the sheer amount of
Speaker 1: money at stake. It will be fascinating to see what happens. Terry,
Speaker 1: thanks so much. That's intellectual property litigator Terence Ross of Katon.
Speaker 1: I'm June Gross. When you're listening to Bloomberg. After years
Speaker 1: of public humiliation over sexual abuse allegations that rocked the
Speaker 1: British royal family, Prince Andrew is sparing himself a courtroom
Speaker 1: showdown by settling with his accuser. Andrew has consistently denied
Speaker 1: Virginia Drew Freese claim that he was one of several
Speaker 1: men to whom Jeffrey Epstein lent her for sexual abuse
Speaker 1: when she was a teenager. His failure to get the
Speaker 1: lawsuit dismissed last month set off a cascade of repercussions,
Speaker 1: leading to Buckingham Palace stripping him of honorific titles and
Speaker 1: royal patronage. Is Andrew has agreed to settle the case
Speaker 1: for an undisclosed sum. Here to tell us more is
Speaker 1: Bloomberg Legal editor Anthony Lynn. Did this settlement come as
Speaker 1: a surprise to people who are watching the case? I think,
Speaker 1: ultimately not. I do think it was a surprise how
Speaker 1: early it came. I think a lot of people thought
Speaker 1: maybe this would get a little closer, a little further.
Speaker 1: But a lot of people who have been following, you know,
Speaker 1: litigation relating to Jeffrey Epstein did not expect this ultimately
Speaker 1: go to trial. So ultimately the fact that it was
Speaker 1: settled wasn't that surprising. But he'd been taking a sort
Speaker 1: of scorched earth approach to her claims, indicating he wanted
Speaker 1: to vindicate his name at trial. Yeah, I think certainly
Speaker 1: the litigation strategy right up until the settlement was pretty
Speaker 1: aggressive in terms of saying she consented to some aspects
Speaker 1: of this, you know that she was out for money.
Speaker 1: But clearly there was a turning point in the sense
Speaker 1: of when the judge basically denied his motion dismissed the case.
Speaker 1: So he was facing a number of issues. For instance,
Speaker 1: he would have had to sit for a deposition soon.
Speaker 1: You know, they were getting this evidence from, for instances,
Speaker 1: his former personal assistant. So there were these sort of immediate,
Speaker 1: you know, obstacles in his path that I guess he
Speaker 1: wanted to avoid. Did the judge ever rule on his
Speaker 1: argument that this litigation was covered by a release that
Speaker 1: Dreffrey signed as part of a settlement with Epstein, No,
Speaker 1: the judge never explicitly ruled on that. So that was
Speaker 1: the core argument that he put forth in his motion
Speaker 1: to dismissed that this two thousand and nine settlement between
Speaker 1: two for and Epstein Um included him, and Duffer's lawyers
Speaker 1: said that there was there was no possible way that
Speaker 1: he could have been included in that as a potential defendant.
Speaker 1: The agreement said all potential defendants. UM, and the judge
Speaker 1: basically said it was it was too early to rule
Speaker 1: on that because there was a there was more evidence
Speaker 1: to be discovered on that basically, and so that that
Speaker 1: he basically reserved judgment on that. It seemed as if
Speaker 1: this was going to be and he said, she said,
Speaker 1: I mean, essentially, I think it's it's um, there's no UM,
Speaker 1: there's no dispute that he was friendly with Epstein and
Speaker 1: that he was apparently very close friends with Glenn Maxwell,
Speaker 1: who was you know, Epstein's former girlfriend who was just
Speaker 1: convicted in Manhattan of sex trafficking. So UM, you know,
Speaker 1: there there is a lot of you know, he can't
Speaker 1: deny that he knew them and that you know, and
Speaker 1: that they were involved in this, uh, in this scheme.
Speaker 1: But um, but whether he actually abused Virginia Duffrey. I mean,
Speaker 1: they are the only two people I think who could
Speaker 1: say one we or the other. And why wasn't this
Speaker 1: claim barred by the statute of limitations. Well, there is
Speaker 1: a law that was passed in New York at UM
Speaker 1: that extended the time for people who were um sort
Speaker 1: of childhood victims of sexual abuse to bring claims and
Speaker 1: that's actually why Duffrey, I think sued when she did
Speaker 1: UM these claims that she's she's made them publicly before. UM.
Speaker 1: But but yes, she specifically references the fact that New
Speaker 1: York passed this law. I think in the wake of UH,
Speaker 1: you know, I think, like Harvey Weinstein and some of
Speaker 1: the other me two cases, do you know why she
Speaker 1: wasn't called to testify against Maxwell? Well, I don't know
Speaker 1: why specifically. UM. I think there are potentially you could
Speaker 1: you could see that there might have been issues with
Speaker 1: some of the testimony that other witnesses had brought up.
Speaker 1: There was one witness who mentioned that Gruffrey was the
Speaker 1: one who brought her into Maxwell and Epstein's world for instance.
Speaker 1: UM so and and this is something that Andrew has
Speaker 1: alluded to and even more publicly. I guess Alan Dershwitz,
Speaker 1: who Virginia drew for his o sol suing and accusing
Speaker 1: of similar conduct, though he has denied it, UM has
Speaker 1: aggressively raised that fact in his defense, saying that that
Speaker 1: this shows that she's culpable in her own way. In
Speaker 1: the settlement, he admitted to no wrongdoing, but his tone
Speaker 1: was quite different from what we've heard from him before
Speaker 1: describe a tone that was conciliatory, I I thought, in
Speaker 1: the sense of um, you know, compared especially to the
Speaker 1: language in his motion dismissed last October and in the
Speaker 1: more recent UM answer formal answer to the to the complaint,
Speaker 1: which he only had to file after losing on the
Speaker 1: motion to dismiss, where he specifically said he was going
Speaker 1: to raise these defenses like consent. Uh. He specifically raised
Speaker 1: legal tense of unclean hands, um, you know, basically suggesting
Speaker 1: she she was as fault in this as well. She's
Speaker 1: not you know, a blameless person in in in in
Speaker 1: her own sexual abuse, which um, you know, it's pretty
Speaker 1: harsh defense to bring up and and um. In this
Speaker 1: this latest statement, he is commending her for her bravery
Speaker 1: and you know, and and saying, you know how much
Speaker 1: sympathy has for for all the victims, and you know,
Speaker 1: part of the agreement is that he's going to make
Speaker 1: a substantial donation to her charity, which is UH is
Speaker 1: supposed to support victims rights. The Telegraph in the UK
Speaker 1: is reporting that the sum will be more than twelve
Speaker 1: billion British pounds, which is more than he supposedly has.
Speaker 1: I mean, we've certainly reported that his his net worth,
Speaker 1: at least I believe it was some years ago, was
Speaker 1: estimated at five or six million pounds um. You know,
Speaker 1: I certainly seen the British papers have suggested that Buckingham
Speaker 1: Palaces is paying for this. So I don't know where
Speaker 1: that money is coming from um or in fact, whether
Speaker 1: that's that amount is accurate. Okay, thanks Tony. That's Bloomberg
Speaker 1: Legal editor Anthony Lynn counterfeits Gerald's former global co head
Speaker 1: of equities helped violate SEC rules on recording commissions on trades.
Speaker 1: That was a jury's verdict after a week long trial
Speaker 1: at which Adam Matta Such and other traders trying to
Speaker 1: cast blame on a permissive culture at the firm. Joining
Speaker 1: me is Bloomberg Legal reporter Crystal Mesh. What was he
Speaker 1: on trial for? So he was on trial for, It's
Speaker 1: kind of interesting. He was not. He's not accused of
Speaker 1: violating rules himself. He's accused of helping the firm avoid
Speaker 1: SEC rules that you know require broker dealers to provide
Speaker 1: detailed compensation information so that you know, customers and regulators
Speaker 1: whoever can identify who's bociated with what trades. So was
Speaker 1: the culture of Cantor on trial as well, not really.
Speaker 1: There have been a lot of you know, UM stories
Speaker 1: about Cantor over the years and its culture UM, so
Speaker 1: that kind of loomed over it a little bit. But
Speaker 1: this was more of a This is more of a
Speaker 1: case about um, you know, compensation, and it's it's a
Speaker 1: rare look into you know, how you know, Wall Street
Speaker 1: firms are compensated and how compensation works, and it's just
Speaker 1: something you don't see a lot of the SEC cases.
Speaker 1: If they bring criminal charges along with them, they go
Speaker 1: to trial, but rarely do we get SEC cases that
Speaker 1: go all the way to trial like this. So it
Speaker 1: was very revealing about how they pay people and what
Speaker 1: they how they distribute commissions and things like that. Because
Speaker 1: so that was probably the most impressing part about it
Speaker 1: tell us about who the SEC sued initially. So they
Speaker 1: initially sued Mattasich and another trader, Joseph Ludovico, who was
Speaker 1: one of the sales traders who split commissions with him.
Speaker 1: Ludovico UM had paid Manasuch at least fifty eight thousand
Speaker 1: dollars in one year, so he was one of the
Speaker 1: leading people that split these commissions with it, and it
Speaker 1: was actually his testimony to Finra that tipped everybody off
Speaker 1: to this commission splitting scheme that they were doing. He
Speaker 1: testified at the trial and he kind of backed up
Speaker 1: what Manisi should argued is that this was kind of
Speaker 1: an open secret that everyone exchanged personal checks on the
Speaker 1: desk open. It was not anything that was hidden. Ludovico
Speaker 1: settled with the SEC. Why didn't settle, Well, that's a
Speaker 1: very good question. Um, you know, that would be one
Speaker 1: of the first questions I would ask him. Um. You know,
Speaker 1: his lawyers decline to comment after the case other than
Speaker 1: to say, you know that they're considering there their next options,
Speaker 1: which you know could indicate an appeal, um. But it's
Speaker 1: almost a reputational thing. They weren't really um seeking any
Speaker 1: anything other than a monetary fine and you know, an
Speaker 1: injunction blocking him from violating this rule again. But he's
Speaker 1: not at the firm anymore. So that's kind of I
Speaker 1: think this was just more him trying to maintain its
Speaker 1: reputation and fight the SEC. His lawyers argued that, you know,
Speaker 1: he was a scapegoat, that he was thrown under the
Speaker 1: bus for something that was done regularly. Um. By other
Speaker 1: traders and other employees at Cantor. What's wrong with this? Well,
Speaker 1: the problem is is that this has been going on
Speaker 1: since the sect rule of the issue was dated back
Speaker 1: to two thousand one. UM. But Cancer traders never really
Speaker 1: got any guidance on this and it wasn't really necessarily
Speaker 1: known as you know, the years went by and you know,
Speaker 1: firms were required to track things more closely, you know,
Speaker 1: reveal more of their communications, you know, as electronics communication
Speaker 1: kind of makes its way in the wall street, which
Speaker 1: has done over the past twenty years, which these allegations
Speaker 1: date back to. You know, the more and more they
Speaker 1: have to comply with these rules, the more and more
Speaker 1: they start to push out people who are allegedly didn't
Speaker 1: comply with them. So he had other traders testified that
Speaker 1: this was done routinely at Cantor. Yes, they all said
Speaker 1: that they So nobody really said anything to the people
Speaker 1: about this rule until two thousand four teen when the
Speaker 1: chief compliance officer, who also testified it at the trial, UM,
Speaker 1: you know, issued a memo saying you can't share um split,
Speaker 1: you know, any kind of pay with any other employees
Speaker 1: that Cancer in connection with official business. So you know,
Speaker 1: after that they got it just kind of stopped. But
Speaker 1: the traders who got up all said that they thought
Speaker 1: that that was a new policy. They had not aware
Speaker 1: that they could not do this before. But there was
Speaker 1: also some testimony that some of these other arrangements where
Speaker 1: you know, commissions were split or something like that, UM
Speaker 1: either went through some sort of approval channels UM or
Speaker 1: you know, we're unofficially condoned by the firm. So what
Speaker 1: was that issue at trial was something that happened before.
Speaker 1: In other words, this wasn't ongoing. No, it stopped in
Speaker 1: two thousand fourteen, but they didn't pick up their probe
Speaker 1: in two thousand eighteen, and that's when it appears that
Speaker 1: they allowed him to resign. It seems a little odd
Speaker 1: to bring this to trial. I mean the SEC, like
Speaker 1: I said, all the SEC cases get settled, so and
Speaker 1: you know they don't the government doesn't tend to give
Speaker 1: up a lot of time UM, and especially the SEC
Speaker 1: doesn't get a lot of these cases. Look if these cases,
Speaker 1: if an SEC case is a fairly um substantial case,
Speaker 1: it's probably going to result in criminal charges. We saw
Speaker 1: that today with another case. So you know, when the
Speaker 1: SEC has its own case they fight and um, Mattafitch
Speaker 1: did not give up. He fought the whole way through.
Speaker 1: This is just civils. Do we know how much he's
Speaker 1: facing and fines We don't. That still has to be
Speaker 1: determined by the judge. And what did Cantor pay and fines?
Speaker 1: Canner paid um one point to five million to resolve
Speaker 1: the claims without admitting or denying wrongdoing. Thanks for being
Speaker 1: on the show, Chris. That's Chris Dalmash, Bloomberg Legal Reporter.
Speaker 1: And that's it for this edition of The Bloomberg Law Show.
Speaker 1: Remember you can always get the latest legal news on
Speaker 1: our Bloomberg Law podcast. You can find them on Apple Podcasts, Spotify,
Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,
Speaker 1: and remember to tune to The Bloomberg Laws Show every
Speaker 1: week night at ten p m. Wall Street Time. I'm
Speaker 1: June Grossow, and you're listening to Bloomberg