1 00:00:03,480 --> 00:00:07,560 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,640 --> 00:00:10,440 Speaker 1: day we bring you insight and analysis into the most 3 00:00:10,480 --> 00:00:13,399 Speaker 1: important legal news of the day. You can find more 4 00:00:13,480 --> 00:00:18,040 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 5 00:00:18,320 --> 00:00:22,600 Speaker 1: and on Bloomberg dot com Slash Podcasts. The Star Witnesses 6 00:00:22,640 --> 00:00:25,520 Speaker 1: on the Stand and the Paul Manaford Trial Rick Gates, 7 00:00:25,560 --> 00:00:29,520 Speaker 1: who flipped to testify against his former boss Manafort's defense 8 00:00:29,640 --> 00:00:32,440 Speaker 1: is to blame Gates for all his crimes. Joining me 9 00:00:32,479 --> 00:00:35,560 Speaker 1: as former federal prosecutor Jeff Kramer, Managing director at the 10 00:00:35,600 --> 00:00:39,600 Speaker 1: Berkeley Research Group, Jeff, whenever there's a witness who's cooperating, 11 00:00:39,640 --> 00:00:42,520 Speaker 1: you hear people ask, but will the jury believe someone 12 00:00:42,560 --> 00:00:45,720 Speaker 1: who admits to committing crimes and juries? Do it all 13 00:00:45,760 --> 00:00:47,960 Speaker 1: the time? The best example I can think of his 14 00:00:48,560 --> 00:00:51,519 Speaker 1: Sammy the Bullgravana, who admitted to nineteen murders and they 15 00:00:51,560 --> 00:00:55,840 Speaker 1: convicted Gotti. So what steps is the prosecution taking here 16 00:00:56,000 --> 00:01:00,200 Speaker 1: to make sure the jurors believe Gates? You're exactly right, 17 00:01:00,200 --> 00:01:02,760 Speaker 1: I mean, that is always the question. But um, you 18 00:01:02,800 --> 00:01:06,200 Speaker 1: know that's the standard prosecutorial playbook. You know, this flipper 19 00:01:06,280 --> 00:01:09,480 Speaker 1: is testifying, right, now and hundreds of cases in the 20 00:01:09,600 --> 00:01:13,440 Speaker 1: US UM and you have to corroborate that witness and 21 00:01:13,560 --> 00:01:15,800 Speaker 1: and that's what they're doing here, and that can be done, 22 00:01:15,880 --> 00:01:19,679 Speaker 1: you know, you organized crime context usually corroboration with tapes 23 00:01:20,160 --> 00:01:24,920 Speaker 1: or other witnesses, and fraud cases like this usually there's corroboration, 24 00:01:24,959 --> 00:01:27,960 Speaker 1: if not from other witnesses in documents. And that's what 25 00:01:28,080 --> 00:01:31,039 Speaker 1: we have here. So when Mr Gates says we set 26 00:01:31,080 --> 00:01:35,520 Speaker 1: up fifteen, fourteen or fifteen overseas companies to facilitate the payments, 27 00:01:36,000 --> 00:01:39,640 Speaker 1: and the prosecutors have documents showing fourteen or fifteen companies 28 00:01:39,680 --> 00:01:44,040 Speaker 1: were set up overseas well, that corroborates, That corroborates Mr Gates. 29 00:01:44,240 --> 00:01:47,600 Speaker 1: Gates did testify yesterday that he lied in a deposition 30 00:01:47,640 --> 00:01:50,200 Speaker 1: in a civil case against Maunt of Fort. Is that 31 00:01:50,240 --> 00:01:53,160 Speaker 1: going to create a problem for his credibility? You lied, Gants? 32 00:01:53,200 --> 00:01:56,840 Speaker 1: What are you lying? Now? It's definitely fodder on cross examination. 33 00:01:56,920 --> 00:01:59,960 Speaker 1: There's ample things, not only that Mr Gates has lied before, 34 00:02:00,080 --> 00:02:02,240 Speaker 1: but it turns out he was taking money from Mr 35 00:02:02,280 --> 00:02:06,600 Speaker 1: Manafort unbeknownst to Mr Manafort. But again that's hardly you know, 36 00:02:06,680 --> 00:02:08,960 Speaker 1: a man bites dog story. There's a guy in the 37 00:02:09,000 --> 00:02:12,520 Speaker 1: stand who is committing crimes with with Mr Manafort with 38 00:02:12,600 --> 00:02:15,440 Speaker 1: respect to fraud, the fact that he's a fraud ster 39 00:02:15,600 --> 00:02:18,959 Speaker 1: and a lawyer is not shocking. Uh. Jury is not 40 00:02:19,000 --> 00:02:21,359 Speaker 1: gonna like Mr Gates. They're not going to trust them 41 00:02:21,360 --> 00:02:24,840 Speaker 1: with their last dollar or their investment portfolio. But will 42 00:02:24,880 --> 00:02:28,240 Speaker 1: they believe him? I think once he's corroborated by the 43 00:02:28,360 --> 00:02:32,880 Speaker 1: documents and other witnesses and just the logic that it's 44 00:02:32,919 --> 00:02:35,520 Speaker 1: doubtful Mr Gates would be the mastermind of a twenty 45 00:02:35,600 --> 00:02:39,359 Speaker 1: or thirty million dollar scheme in order to benefit Mr Manaford. 46 00:02:39,680 --> 00:02:42,200 Speaker 1: You know that's a hard lift for the defense. Now, 47 00:02:42,280 --> 00:02:45,000 Speaker 1: I just want to get your take on what's going 48 00:02:45,080 --> 00:02:47,919 Speaker 1: on as far as the body language and the looks 49 00:02:47,960 --> 00:02:52,000 Speaker 1: between Manafort and Gates. Many people have said that Manaford 50 00:02:52,120 --> 00:02:55,840 Speaker 1: is sort of shooting Daggers, staring Gates down. But Gates 51 00:02:55,919 --> 00:02:59,280 Speaker 1: is not looking at at Manafort as a prosecutor. What 52 00:02:59,320 --> 00:03:03,320 Speaker 1: would you in sucked your witness to do exactly what 53 00:03:03,360 --> 00:03:06,519 Speaker 1: he's doing is you look at the person asking the questions, 54 00:03:06,560 --> 00:03:09,960 Speaker 1: you look at the jury. He don't get involved with 55 00:03:10,080 --> 00:03:13,200 Speaker 1: the defendant at all. And again, this is not shocking. 56 00:03:13,760 --> 00:03:16,960 Speaker 1: There's someone on the stand that Mr. Manafort trusted for 57 00:03:17,800 --> 00:03:20,680 Speaker 1: literally a generation, they've been doing business together, so he 58 00:03:20,840 --> 00:03:23,560 Speaker 1: views this as a betrayal, which in some respects it is. 59 00:03:24,080 --> 00:03:27,360 Speaker 1: So it's not shocking he's throwing him daggers because Mr Gates, 60 00:03:27,760 --> 00:03:30,959 Speaker 1: with every time he answers a question again that's corroborated 61 00:03:30,960 --> 00:03:35,080 Speaker 1: by other witnesses or documents, is really just building another 62 00:03:35,200 --> 00:03:39,560 Speaker 1: brick and with the prosecution's case, so Mr Gates is 63 00:03:39,600 --> 00:03:42,760 Speaker 1: doing exactly what he should be doing. Tensions seem to 64 00:03:42,840 --> 00:03:46,040 Speaker 1: also be high between the judge and the prosecutors. The 65 00:03:46,160 --> 00:03:48,280 Speaker 1: judge has been on the prosecutor's case to move the 66 00:03:48,320 --> 00:03:51,600 Speaker 1: trial along, not to call people oliguarts, even not to 67 00:03:51,680 --> 00:03:54,440 Speaker 1: make faces. And there's some odd things like the judge 68 00:03:54,520 --> 00:03:57,280 Speaker 1: yesterday suggesting that the prosecute one of the prosecutors was 69 00:03:57,360 --> 00:04:00,920 Speaker 1: crying and the prosecutors saying, no, I'm not what's going 70 00:04:00,960 --> 00:04:05,400 Speaker 1: on here? This judges is pretty active and on trial, 71 00:04:05,520 --> 00:04:08,640 Speaker 1: some judges are more active than others. Uh, this one 72 00:04:08,840 --> 00:04:11,000 Speaker 1: seems to be holding the prosecutor's feet to the fire, 73 00:04:11,400 --> 00:04:14,040 Speaker 1: especially because they're the ones. The prosecutors are the ones 74 00:04:14,240 --> 00:04:16,520 Speaker 1: they're gonna be dictating the time they're the ones that 75 00:04:17,240 --> 00:04:19,920 Speaker 1: will be calling the witnesses and have to get through 76 00:04:19,960 --> 00:04:22,839 Speaker 1: certain things. So if you want to keep this trial moving, 77 00:04:23,279 --> 00:04:25,960 Speaker 1: especially in August, which this judge does, you're gonna be 78 00:04:26,040 --> 00:04:29,280 Speaker 1: on the prosecutors, the faces, the crying, there's some other 79 00:04:29,320 --> 00:04:31,599 Speaker 1: odd things coming from this judge who's been on the 80 00:04:31,600 --> 00:04:34,839 Speaker 1: bench for a while. That's just he's a character, for 81 00:04:34,960 --> 00:04:37,560 Speaker 1: lack of a better term, And again, this is not 82 00:04:37,640 --> 00:04:40,800 Speaker 1: the prosecutor's first first rodeo. They've been in for in 83 00:04:40,839 --> 00:04:43,760 Speaker 1: front of difficult judges before. At the end of the day, 84 00:04:43,880 --> 00:04:46,680 Speaker 1: it does not matter. The judge does not determine guilt. 85 00:04:46,800 --> 00:04:49,479 Speaker 1: You're just arguing to the people in the box. Only 86 00:04:49,520 --> 00:04:53,440 Speaker 1: about thirty seconds here, Gates didn't specify what how much 87 00:04:53,480 --> 00:04:56,080 Speaker 1: the prosecutors would give him for a prison sentence. If 88 00:04:56,160 --> 00:04:58,320 Speaker 1: you know, he went forward with his testimony, do you 89 00:04:58,360 --> 00:05:02,000 Speaker 1: think that that's already been hammer down with his lawyers 90 00:05:02,120 --> 00:05:04,520 Speaker 1: or that's up in the air now It is up 91 00:05:04,520 --> 00:05:06,120 Speaker 1: in the air. If it was hammered down, he would 92 00:05:06,120 --> 00:05:08,040 Speaker 1: have to say, you know, I've been promised ten years 93 00:05:08,080 --> 00:05:12,520 Speaker 1: or whatever. He's been giving what's called basically a discount 94 00:05:12,560 --> 00:05:16,160 Speaker 1: based upon his testimony. Needs to be truthful, so the 95 00:05:16,200 --> 00:05:18,920 Speaker 1: prosecutors will see how the testimony goes, not if there's 96 00:05:18,920 --> 00:05:21,640 Speaker 1: a conviction, just if he's truthful. Will make an argument 97 00:05:21,640 --> 00:05:24,039 Speaker 1: to the judge, but it's up to the judge to 98 00:05:24,120 --> 00:05:26,200 Speaker 1: agree to a sentence. All right, Thanks so much, Jeff, 99 00:05:26,200 --> 00:05:28,760 Speaker 1: I have so many questions. That's Jeff Framer, managing director 100 00:05:28,800 --> 00:05:34,240 Speaker 1: the Berkeley Research Proop. Just after Judge Richard Leon cleared 101 00:05:34,240 --> 00:05:37,120 Speaker 1: the billion dollar deal between A. T and T and 102 00:05:37,160 --> 00:05:39,920 Speaker 1: Time Warner, A T and T S lawyer Daniel Petrick 103 00:05:39,960 --> 00:05:44,040 Speaker 1: Shelly talked about the court's verdict the government could present 104 00:05:44,160 --> 00:05:47,560 Speaker 1: no credible proof in support of any of its theories. 105 00:05:49,240 --> 00:05:53,719 Speaker 1: This decision was a sound and proper rejection of all 106 00:05:53,760 --> 00:05:56,760 Speaker 1: of the government's arguments to stop this merger. But the 107 00:05:56,760 --> 00:05:59,479 Speaker 1: government says it could have presented that proof if the 108 00:05:59,560 --> 00:06:03,480 Speaker 1: judge and constrained its presentation of evidence, and it's appealing 109 00:06:03,480 --> 00:06:06,440 Speaker 1: its decision even though the deal is done. Joining me 110 00:06:06,720 --> 00:06:08,920 Speaker 1: is Nicholas Economy. He is professor at m y U 111 00:06:08,960 --> 00:06:13,080 Speaker 1: Sturn School of Business. Nick Unsealed transcripts of the trial 112 00:06:13,160 --> 00:06:17,640 Speaker 1: show that during private the sidebar conversations, the judge repeatedly 113 00:06:17,880 --> 00:06:22,520 Speaker 1: shot down the prosecution's arguments that he decided were repetitive 114 00:06:22,680 --> 00:06:26,400 Speaker 1: or unhelpful in lines of testimony. Is that a strong 115 00:06:26,560 --> 00:06:32,200 Speaker 1: argument that the prosecution is making. Uh. No, I think 116 00:06:32,279 --> 00:06:34,280 Speaker 1: that by itself is not going to be able to 117 00:06:34,480 --> 00:06:38,120 Speaker 1: reverse the decision. I mean, it's true that the the 118 00:06:38,240 --> 00:06:42,479 Speaker 1: judge did not allow the government all the time the 119 00:06:42,520 --> 00:06:46,000 Speaker 1: government wanted to present its case, but this actually happens 120 00:06:46,000 --> 00:06:48,400 Speaker 1: in trials. I mean, it's up to the judge. I 121 00:06:48,680 --> 00:06:51,600 Speaker 1: I don't think that's enough to to reverse the decision. 122 00:06:52,320 --> 00:06:57,080 Speaker 1: What could make the difference is that the judge was 123 00:06:58,000 --> 00:07:03,080 Speaker 1: pretty absolute in the rejects of the government's theory. Um. 124 00:07:03,120 --> 00:07:08,000 Speaker 1: That is, he said, the judge said that the merger 125 00:07:08,520 --> 00:07:13,240 Speaker 1: will not will not lead to any increases in prices 126 00:07:13,240 --> 00:07:19,040 Speaker 1: to consumers. Uh. That's a bit extreme, and he, you know, 127 00:07:19,160 --> 00:07:22,600 Speaker 1: to reject the government's position that does didn't have to 128 00:07:22,720 --> 00:07:25,440 Speaker 1: conclude that. All he needed to conclude was that the 129 00:07:25,960 --> 00:07:31,480 Speaker 1: increases would not be substantially reducing competition. But he went 130 00:07:32,160 --> 00:07:35,120 Speaker 1: to the extreme and said there would be no uh 131 00:07:35,200 --> 00:07:40,680 Speaker 1: increases at all in prices to consumers for for delivered content, 132 00:07:40,800 --> 00:07:46,920 Speaker 1: for for cable service. So UM, that is something that 133 00:07:47,880 --> 00:07:52,880 Speaker 1: um is weak. So it is conceivable that the Court 134 00:07:52,920 --> 00:07:57,920 Speaker 1: of Appeals will reverse based on that point. What about 135 00:07:58,120 --> 00:08:02,200 Speaker 1: the government's claim that the core ignored fundamental principles of 136 00:08:02,280 --> 00:08:05,680 Speaker 1: economics and common sense, is that in addition to what 137 00:08:05,760 --> 00:08:11,680 Speaker 1: you mentioned, Well, I don't think the judge understood at 138 00:08:11,720 --> 00:08:15,440 Speaker 1: all the government's case. Didn't understand the economics of bargaining. 139 00:08:15,480 --> 00:08:17,160 Speaker 1: So that's why the government comes now to the Court 140 00:08:17,160 --> 00:08:19,600 Speaker 1: of Appeal and says, look, I mean this judge didn't 141 00:08:19,640 --> 00:08:23,160 Speaker 1: understand the economics of bargaining. The economics of bargaining are 142 00:08:23,520 --> 00:08:27,920 Speaker 1: an important part of mainstream economics. Uh, therefore you should 143 00:08:27,920 --> 00:08:31,800 Speaker 1: reverse based on on that. At the same time, to 144 00:08:31,880 --> 00:08:37,920 Speaker 1: a large extent, it's a government responsibility to explain these 145 00:08:37,960 --> 00:08:40,800 Speaker 1: economics to the judge, who is not an economist, right 146 00:08:40,840 --> 00:08:44,720 Speaker 1: he's he's a judge. So the government should have explained 147 00:08:44,800 --> 00:08:48,960 Speaker 1: much much better, Uh, these economics of of bargaining and 148 00:08:49,000 --> 00:08:51,760 Speaker 1: how they apply. So one thing is how they apply. 149 00:08:51,920 --> 00:08:55,080 Speaker 1: The other thing is what are what they are. If 150 00:08:55,120 --> 00:08:58,880 Speaker 1: the judge completely ignored significant parts of economic theory, that 151 00:08:59,080 --> 00:09:02,640 Speaker 1: would be grounds or reversal. On the other hand, if 152 00:09:02,720 --> 00:09:05,920 Speaker 1: the judge understands the basic idea of economics of bargaining 153 00:09:06,080 --> 00:09:12,880 Speaker 1: but rejects the way the government specifically interprets the facts 154 00:09:13,400 --> 00:09:16,080 Speaker 1: that could not be reversed. Well do you do you 155 00:09:16,320 --> 00:09:18,680 Speaker 1: from looking at the evidence, do you think that the 156 00:09:18,800 --> 00:09:25,160 Speaker 1: judge didn't understand the economic theories? I actually think that 157 00:09:25,120 --> 00:09:28,920 Speaker 1: the economic theory went way over his head. Yes, I 158 00:09:28,920 --> 00:09:32,400 Speaker 1: could think he understood it. Now, a T and T 159 00:09:32,559 --> 00:09:35,679 Speaker 1: S General Counsel David McAtee said in a statement, appeals 160 00:09:35,720 --> 00:09:39,240 Speaker 1: aren't due overs, which exactly what appeals are. But what 161 00:09:39,360 --> 00:09:43,800 Speaker 1: do you expect a T and T to our unit's response, Well, 162 00:09:43,880 --> 00:09:46,880 Speaker 1: a D is going to say, well, the judge understands 163 00:09:46,880 --> 00:09:49,560 Speaker 1: the basic theory. He doesn't need to understand anything more 164 00:09:49,559 --> 00:09:53,720 Speaker 1: than what he understood, and that, in fact, uh, the 165 00:09:53,800 --> 00:09:59,440 Speaker 1: interpretation by the judge of the various facts was correct, 166 00:09:59,720 --> 00:10:04,520 Speaker 1: and the in fact, nothing bad is going to happen 167 00:10:04,559 --> 00:10:07,280 Speaker 1: because of this murder. I mean you have to keep 168 00:10:07,280 --> 00:10:11,719 Speaker 1: in mind that the judge side with a T and T. 169 00:10:12,440 --> 00:10:15,640 Speaker 1: So a T T will find nothing wrong in what 170 00:10:15,760 --> 00:10:20,199 Speaker 1: the judge said. Now, so, Nick, the deal is already done. 171 00:10:20,960 --> 00:10:24,240 Speaker 1: If the government does win, what will happen They'll have 172 00:10:24,320 --> 00:10:28,200 Speaker 1: to unravel the deal, They'll have to sell time Warner. Yes, 173 00:10:28,880 --> 00:10:31,199 Speaker 1: they I don't think when you say the deal is done. Yeah, 174 00:10:31,240 --> 00:10:34,720 Speaker 1: the deal is done on paper, but the disagreement between 175 00:10:34,720 --> 00:10:37,760 Speaker 1: the government and A T and T that time Warner 176 00:10:37,840 --> 00:10:41,320 Speaker 1: will be I think until the end of February of 177 00:10:41,760 --> 00:10:47,520 Speaker 1: nineteen run as a separate company. So I don't think 178 00:10:47,559 --> 00:10:51,320 Speaker 1: there is going to be anything that cannot be reversed. 179 00:10:52,000 --> 00:10:55,360 Speaker 1: So what are the odds that this will be reversed? 180 00:10:57,800 --> 00:11:01,240 Speaker 1: I would say the probably that the Court of Appeals 181 00:11:01,320 --> 00:11:05,199 Speaker 1: will reverse this is small. I mean I would say 182 00:11:05,240 --> 00:11:08,240 Speaker 1: it's it's it's teen percent or or less. I wouldn't 183 00:11:08,240 --> 00:11:10,960 Speaker 1: say that it's much more on that. So they have 184 00:11:11,080 --> 00:11:15,439 Speaker 1: to find an error of law. And if they if 185 00:11:15,480 --> 00:11:18,040 Speaker 1: they find that there are there are a lot of 186 00:11:18,040 --> 00:11:20,920 Speaker 1: inequities in the trial, might that be enough? My that 187 00:11:21,360 --> 00:11:25,920 Speaker 1: add up to enough? Uh? It's it's hard to It's 188 00:11:25,920 --> 00:11:30,800 Speaker 1: hard to say. Uh. Ultimately, it will depend on whether 189 00:11:31,679 --> 00:11:35,719 Speaker 1: the general theory of the government makes sense to the 190 00:11:35,720 --> 00:11:39,760 Speaker 1: Court of Appeals, if they think, if we were the judge, 191 00:11:39,800 --> 00:11:43,959 Speaker 1: we would really rule completely differently. There is its possibility, 192 00:11:44,240 --> 00:11:50,800 Speaker 1: but usually courts of appeal try to be very specific 193 00:11:50,880 --> 00:11:54,719 Speaker 1: to the case and try to limit their intervention two 194 00:11:54,800 --> 00:12:00,120 Speaker 1: very specific actions of of the judge. Nick, do you 195 00:12:00,240 --> 00:12:04,439 Speaker 1: see any signs in the market of reactions or the 196 00:12:04,520 --> 00:12:10,240 Speaker 1: ramifications of this deal being approved. Well, I mean, you 197 00:12:10,360 --> 00:12:12,880 Speaker 1: have to keep in mind that somehow the market in 198 00:12:12,920 --> 00:12:15,000 Speaker 1: the very beginning thought that this was a good deal 199 00:12:15,040 --> 00:12:18,040 Speaker 1: for a t n T. I'm not completely sure. Suppose 200 00:12:18,080 --> 00:12:20,440 Speaker 1: that there is no legal challenge and it goes through, 201 00:12:21,000 --> 00:12:23,000 Speaker 1: is it clear that a tm T is going to 202 00:12:23,040 --> 00:12:26,199 Speaker 1: be able to run Time Warner. A tm T is 203 00:12:26,240 --> 00:12:30,000 Speaker 1: a company that is great in engineering and has great lawyers, 204 00:12:30,040 --> 00:12:33,319 Speaker 1: but there has no expertise whatsoever in running a company 205 00:12:33,400 --> 00:12:36,200 Speaker 1: like Time Warner. Right. Thanks so much, Nick, It's always 206 00:12:36,200 --> 00:12:39,000 Speaker 1: a pleasure. Nick Knamti is Professor M y U. Stern 207 00:12:39,080 --> 00:12:42,959 Speaker 1: School of Business. Thanks for listening to the Bloomberg Law Podcast. 208 00:12:43,320 --> 00:12:47,360 Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud, 209 00:12:47,440 --> 00:12:51,319 Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brosso. 210 00:12:51,800 --> 00:12:53,079 Speaker 1: This is Bloomberg