WEBVTT - Gates Turns Against Manafort on Second Day of Trial

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com Slash Podcasts. The Star Witnesses

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<v Speaker 1>on the Stand and the Paul Manaford Trial Rick Gates,

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<v Speaker 1>who flipped to testify against his former boss Manafort's defense

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<v Speaker 1>is to blame Gates for all his crimes. Joining me

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<v Speaker 1>as former federal prosecutor Jeff Kramer, Managing director at the

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<v Speaker 1>Berkeley Research Group, Jeff, whenever there's a witness who's cooperating,

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<v Speaker 1>you hear people ask, but will the jury believe someone

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<v Speaker 1>who admits to committing crimes and juries? Do it all

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<v Speaker 1>the time? The best example I can think of his

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<v Speaker 1>Sammy the Bullgravana, who admitted to nineteen murders and they

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<v Speaker 1>convicted Gotti. So what steps is the prosecution taking here

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<v Speaker 1>to make sure the jurors believe Gates? You're exactly right,

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<v Speaker 1>I mean, that is always the question. But um, you

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<v Speaker 1>know that's the standard prosecutorial playbook. You know, this flipper

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<v Speaker 1>is testifying, right, now and hundreds of cases in the

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<v Speaker 1>US UM and you have to corroborate that witness and

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<v Speaker 1>and that's what they're doing here, and that can be done,

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<v Speaker 1>you know, you organized crime context usually corroboration with tapes

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<v Speaker 1>or other witnesses, and fraud cases like this usually there's corroboration,

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<v Speaker 1>if not from other witnesses in documents. And that's what

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<v Speaker 1>we have here. So when Mr Gates says we set

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<v Speaker 1>up fifteen, fourteen or fifteen overseas companies to facilitate the payments,

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<v Speaker 1>and the prosecutors have documents showing fourteen or fifteen companies

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<v Speaker 1>were set up overseas well, that corroborates, That corroborates Mr Gates.

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<v Speaker 1>Gates did testify yesterday that he lied in a deposition

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<v Speaker 1>in a civil case against Maunt of Fort. Is that

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<v Speaker 1>going to create a problem for his credibility? You lied, Gants?

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<v Speaker 1>What are you lying? Now? It's definitely fodder on cross examination.

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<v Speaker 1>There's ample things, not only that Mr Gates has lied before,

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<v Speaker 1>but it turns out he was taking money from Mr

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<v Speaker 1>Manafort unbeknownst to Mr Manafort. But again that's hardly you know,

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<v Speaker 1>a man bites dog story. There's a guy in the

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<v Speaker 1>stand who is committing crimes with with Mr Manafort with

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<v Speaker 1>respect to fraud, the fact that he's a fraud ster

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<v Speaker 1>and a lawyer is not shocking. Uh. Jury is not

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<v Speaker 1>gonna like Mr Gates. They're not going to trust them

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<v Speaker 1>with their last dollar or their investment portfolio. But will

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<v Speaker 1>they believe him? I think once he's corroborated by the

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<v Speaker 1>documents and other witnesses and just the logic that it's

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<v Speaker 1>doubtful Mr Gates would be the mastermind of a twenty

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<v Speaker 1>or thirty million dollar scheme in order to benefit Mr Manaford.

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<v Speaker 1>You know that's a hard lift for the defense. Now,

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<v Speaker 1>I just want to get your take on what's going

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<v Speaker 1>on as far as the body language and the looks

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<v Speaker 1>between Manafort and Gates. Many people have said that Manaford

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<v Speaker 1>is sort of shooting Daggers, staring Gates down. But Gates

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<v Speaker 1>is not looking at at Manafort as a prosecutor. What

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<v Speaker 1>would you in sucked your witness to do exactly what

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<v Speaker 1>he's doing is you look at the person asking the questions,

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<v Speaker 1>you look at the jury. He don't get involved with

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<v Speaker 1>the defendant at all. And again, this is not shocking.

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<v Speaker 1>There's someone on the stand that Mr. Manafort trusted for

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<v Speaker 1>literally a generation, they've been doing business together, so he

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<v Speaker 1>views this as a betrayal, which in some respects it is.

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<v Speaker 1>So it's not shocking he's throwing him daggers because Mr Gates,

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<v Speaker 1>with every time he answers a question again that's corroborated

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<v Speaker 1>by other witnesses or documents, is really just building another

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<v Speaker 1>brick and with the prosecution's case, so Mr Gates is

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<v Speaker 1>doing exactly what he should be doing. Tensions seem to

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<v Speaker 1>also be high between the judge and the prosecutors. The

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<v Speaker 1>judge has been on the prosecutor's case to move the

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<v Speaker 1>trial along, not to call people oliguarts, even not to

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<v Speaker 1>make faces. And there's some odd things like the judge

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<v Speaker 1>yesterday suggesting that the prosecute one of the prosecutors was

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<v Speaker 1>crying and the prosecutors saying, no, I'm not what's going

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<v Speaker 1>on here? This judges is pretty active and on trial,

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<v Speaker 1>some judges are more active than others. Uh, this one

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<v Speaker 1>seems to be holding the prosecutor's feet to the fire,

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<v Speaker 1>especially because they're the ones. The prosecutors are the ones

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<v Speaker 1>they're gonna be dictating the time they're the ones that

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<v Speaker 1>will be calling the witnesses and have to get through

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<v Speaker 1>certain things. So if you want to keep this trial moving,

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<v Speaker 1>especially in August, which this judge does, you're gonna be

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<v Speaker 1>on the prosecutors, the faces, the crying, there's some other

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<v Speaker 1>odd things coming from this judge who's been on the

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<v Speaker 1>bench for a while. That's just he's a character, for

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<v Speaker 1>lack of a better term, And again, this is not

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<v Speaker 1>the prosecutor's first first rodeo. They've been in for in

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<v Speaker 1>front of difficult judges before. At the end of the day,

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<v Speaker 1>it does not matter. The judge does not determine guilt.

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<v Speaker 1>You're just arguing to the people in the box. Only

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<v Speaker 1>about thirty seconds here, Gates didn't specify what how much

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<v Speaker 1>the prosecutors would give him for a prison sentence. If

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<v Speaker 1>you know, he went forward with his testimony, do you

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<v Speaker 1>think that that's already been hammer down with his lawyers

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<v Speaker 1>or that's up in the air now It is up

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<v Speaker 1>in the air. If it was hammered down, he would

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<v Speaker 1>have to say, you know, I've been promised ten years

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<v Speaker 1>or whatever. He's been giving what's called basically a discount

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<v Speaker 1>based upon his testimony. Needs to be truthful, so the

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<v Speaker 1>prosecutors will see how the testimony goes, not if there's

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<v Speaker 1>a conviction, just if he's truthful. Will make an argument

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<v Speaker 1>to the judge, but it's up to the judge to

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<v Speaker 1>agree to a sentence. All right, Thanks so much, Jeff,

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<v Speaker 1>I have so many questions. That's Jeff Framer, managing director

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<v Speaker 1>the Berkeley Research Proop. Just after Judge Richard Leon cleared

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<v Speaker 1>the billion dollar deal between A. T and T and

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<v Speaker 1>Time Warner, A T and T S lawyer Daniel Petrick

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<v Speaker 1>Shelly talked about the court's verdict the government could present

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<v Speaker 1>no credible proof in support of any of its theories.

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<v Speaker 1>This decision was a sound and proper rejection of all

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<v Speaker 1>of the government's arguments to stop this merger. But the

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<v Speaker 1>government says it could have presented that proof if the

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<v Speaker 1>judge and constrained its presentation of evidence, and it's appealing

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<v Speaker 1>its decision even though the deal is done. Joining me

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<v Speaker 1>is Nicholas Economy. He is professor at m y U

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<v Speaker 1>Sturn School of Business. Nick Unsealed transcripts of the trial

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<v Speaker 1>show that during private the sidebar conversations, the judge repeatedly

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<v Speaker 1>shot down the prosecution's arguments that he decided were repetitive

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<v Speaker 1>or unhelpful in lines of testimony. Is that a strong

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<v Speaker 1>argument that the prosecution is making. Uh. No, I think

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<v Speaker 1>that by itself is not going to be able to

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<v Speaker 1>reverse the decision. I mean, it's true that the the

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<v Speaker 1>judge did not allow the government all the time the

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<v Speaker 1>government wanted to present its case, but this actually happens

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<v Speaker 1>in trials. I mean, it's up to the judge. I

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<v Speaker 1>I don't think that's enough to to reverse the decision.

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<v Speaker 1>What could make the difference is that the judge was

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<v Speaker 1>pretty absolute in the rejects of the government's theory. Um.

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<v Speaker 1>That is, he said, the judge said that the merger

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<v Speaker 1>will not will not lead to any increases in prices

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<v Speaker 1>to consumers. Uh. That's a bit extreme, and he, you know,

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<v Speaker 1>to reject the government's position that does didn't have to

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<v Speaker 1>conclude that. All he needed to conclude was that the

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<v Speaker 1>increases would not be substantially reducing competition. But he went

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<v Speaker 1>to the extreme and said there would be no uh

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<v Speaker 1>increases at all in prices to consumers for for delivered content,

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<v Speaker 1>for for cable service. So UM, that is something that

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<v Speaker 1>um is weak. So it is conceivable that the Court

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<v Speaker 1>of Appeals will reverse based on that point. What about

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<v Speaker 1>the government's claim that the core ignored fundamental principles of

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<v Speaker 1>economics and common sense, is that in addition to what

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<v Speaker 1>you mentioned, Well, I don't think the judge understood at

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<v Speaker 1>all the government's case. Didn't understand the economics of bargaining.

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<v Speaker 1>So that's why the government comes now to the Court

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<v Speaker 1>of Appeal and says, look, I mean this judge didn't

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<v Speaker 1>understand the economics of bargaining. The economics of bargaining are

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<v Speaker 1>an important part of mainstream economics. Uh, therefore you should

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<v Speaker 1>reverse based on on that. At the same time, to

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<v Speaker 1>a large extent, it's a government responsibility to explain these

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<v Speaker 1>economics to the judge, who is not an economist, right

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<v Speaker 1>he's he's a judge. So the government should have explained

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<v Speaker 1>much much better, Uh, these economics of of bargaining and

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<v Speaker 1>how they apply. So one thing is how they apply.

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<v Speaker 1>The other thing is what are what they are. If

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<v Speaker 1>the judge completely ignored significant parts of economic theory, that

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<v Speaker 1>would be grounds or reversal. On the other hand, if

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<v Speaker 1>the judge understands the basic idea of economics of bargaining

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<v Speaker 1>but rejects the way the government specifically interprets the facts

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<v Speaker 1>that could not be reversed. Well do you do you

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<v Speaker 1>from looking at the evidence, do you think that the

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<v Speaker 1>judge didn't understand the economic theories? I actually think that

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<v Speaker 1>the economic theory went way over his head. Yes, I

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<v Speaker 1>could think he understood it. Now, a T and T

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<v Speaker 1>S General Counsel David McAtee said in a statement, appeals

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<v Speaker 1>aren't due overs, which exactly what appeals are. But what

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<v Speaker 1>do you expect a T and T to our unit's response, Well,

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<v Speaker 1>a D is going to say, well, the judge understands

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<v Speaker 1>the basic theory. He doesn't need to understand anything more

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<v Speaker 1>than what he understood, and that, in fact, uh, the

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<v Speaker 1>interpretation by the judge of the various facts was correct,

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<v Speaker 1>and the in fact, nothing bad is going to happen

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<v Speaker 1>because of this murder. I mean you have to keep

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<v Speaker 1>in mind that the judge side with a T and T.

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<v Speaker 1>So a T T will find nothing wrong in what

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<v Speaker 1>the judge said. Now, so, Nick, the deal is already done.

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<v Speaker 1>If the government does win, what will happen They'll have

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<v Speaker 1>to unravel the deal, They'll have to sell time Warner. Yes,

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<v Speaker 1>they I don't think when you say the deal is done. Yeah,

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<v Speaker 1>the deal is done on paper, but the disagreement between

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<v Speaker 1>the government and A T and T that time Warner

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<v Speaker 1>will be I think until the end of February of

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<v Speaker 1>nineteen run as a separate company. So I don't think

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<v Speaker 1>there is going to be anything that cannot be reversed.

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<v Speaker 1>So what are the odds that this will be reversed?

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<v Speaker 1>I would say the probably that the Court of Appeals

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<v Speaker 1>will reverse this is small. I mean I would say

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<v Speaker 1>it's it's it's teen percent or or less. I wouldn't

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<v Speaker 1>say that it's much more on that. So they have

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<v Speaker 1>to find an error of law. And if they if

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<v Speaker 1>they find that there are there are a lot of

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<v Speaker 1>inequities in the trial, might that be enough? My that

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<v Speaker 1>add up to enough? Uh? It's it's hard to It's

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<v Speaker 1>hard to say. Uh. Ultimately, it will depend on whether

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<v Speaker 1>the general theory of the government makes sense to the

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<v Speaker 1>Court of Appeals, if they think, if we were the judge,

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<v Speaker 1>we would really rule completely differently. There is its possibility,

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<v Speaker 1>but usually courts of appeal try to be very specific

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<v Speaker 1>to the case and try to limit their intervention two

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<v Speaker 1>very specific actions of of the judge. Nick, do you

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<v Speaker 1>see any signs in the market of reactions or the

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<v Speaker 1>ramifications of this deal being approved. Well, I mean, you

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<v Speaker 1>have to keep in mind that somehow the market in

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<v Speaker 1>the very beginning thought that this was a good deal

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<v Speaker 1>for a t n T. I'm not completely sure. Suppose

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<v Speaker 1>that there is no legal challenge and it goes through,

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<v Speaker 1>is it clear that a tm T is going to

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<v Speaker 1>be able to run Time Warner. A tm T is

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<v Speaker 1>a company that is great in engineering and has great lawyers,

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<v Speaker 1>but there has no expertise whatsoever in running a company

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<v Speaker 1>like Time Warner. Right. Thanks so much, Nick, It's always

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<v Speaker 1>a pleasure. Nick Knamti is Professor M y U. Stern

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<v Speaker 1>School of Business. Thanks for listening to the Bloomberg Law Podcast.

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<v Speaker 1>You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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<v Speaker 1>and on Bloomberg dot com slash podcast. I'm June Brosso.

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<v Speaker 1>This is Bloomberg