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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. Yesterday, White House

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Speaker 1: Cybersecurity Coordinator Rob Joyce said there have been no cases

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Speaker 1: of FISA being used improperly for political purposes, something President

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Speaker 1: Trump may have been unaware of. Yesterday morning, hours before

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Speaker 1: the House vote to extend FISA, which allows the government

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Speaker 1: to intercept calls or emails from suspected foreign terrorists outside

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Speaker 1: the US, Trump caused confusion over the bill by sending

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Speaker 1: a tweet that resurrected prior claims of his that his

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Speaker 1: campaign team had been spied upon. Soon after, he posted

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Speaker 1: another tweet endorsing passage of the bill, and between the

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Speaker 1: two tweets, he phoned how Speaker Paul Ryan to talk

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Speaker 1: about the FISA bill or Acording to a Republican aide

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Speaker 1: who spoke on condition of anonymity, both the House and

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Speaker 1: sent it passed the bill, and Senate leaders are planning

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Speaker 1: to send it to the president's desk. Next week. Joining

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Speaker 1: me is William Banks, professor at Syracuse University Law School.

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Speaker 1: Bill intelligence officials call the FISA bill holy Grail a

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Speaker 1: crucial national security surveillance tool. Why so well, during it's

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Speaker 1: been a foundational part of intelligence gathering in the United

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Speaker 1: States since the late nineties seventies, in particular the portion

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Speaker 1: that's up for renewal now since two thousand and eight.

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Speaker 1: This one allows the collection of intelligence through the sort

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Speaker 1: of vacuum cleaner like gathering of electronic signals of of

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Speaker 1: non Americans abroad. So it's a it's a way that

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Speaker 1: we learn about terrorism, that we learn about other security threats,

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Speaker 1: and it's a single most important source of intelligence that

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Speaker 1: ends up in the president's daily brief. Ryan said that

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Speaker 1: Trump had concerns about domestic parts of the program that

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Speaker 1: actually weren't in the bill, and Trump tweeted that he

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Speaker 1: personally directed the fix to the unmasking process, which Nancy

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Speaker 1: Pelosi said was not in the bill. Can you sort

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Speaker 1: that out for us? Yes? I think I can, Uh, Pelosi,

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Speaker 1: is the course correct? The so called unmasking controversy had

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Speaker 1: nothing to do with the parts of FISA that we're

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Speaker 1: being debated. And then eventually reauthorized this week and next,

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Speaker 1: and in fact, the entire unmasking controversy is much ado

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Speaker 1: about nothing. This was then candidate Trump being worried that

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Speaker 1: his campaign was being surveyed by the Obama Justice Department.

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Speaker 1: As as President Trump's cyber adviser indicated today, there's absolutely

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Speaker 1: no evidence had ever occurred, nor the identities of individuals

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Speaker 1: were unmasked in the course of that surveillance. So I

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Speaker 1: think it's it's all smoke and no fire. Bill. A

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Speaker 1: bipartisan um congressional delegation wanted to make some amendments to

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Speaker 1: the bill and and failed. Uh. California Democrat Zoe Lofgren

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Speaker 1: warned the government was gathering quote, the content of your

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Speaker 1: phone calls, contents of your emails, content of your text messages,

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Speaker 1: video messages, and searching them for crimes that have nothing

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Speaker 1: to do with terrorism. This is about the allegation that

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Speaker 1: Americans emails, phone calls, and communications get vacuumed up in

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Speaker 1: the process of what the surveillance networks are doing. It

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Speaker 1: is and and and indeed representable. Lofgren and others have

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Speaker 1: been making these points for for a long time, and

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Speaker 1: I have great sympathy for them. The problem with the technology,

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Speaker 1: as the metaphor indicates, is that it's vacuum cleaner like,

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Speaker 1: so it doesn't distinguish at the initial stages of collection

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Speaker 1: between Americans and UH non Americans, foreign persons abroad. The

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Speaker 1: objective is to collect on the foreign persons, but incidentally

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Speaker 1: Americans communications are collected. I think we've come to a

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Speaker 1: point in our our national security affairs that most of

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Speaker 1: us are willing to accept the collection and the and

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Speaker 1: the greater attention has to be focused on what is

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Speaker 1: done with the material that's collected. So the bill that

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Speaker 1: actually passed does relatively little to ensure protection for that

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Speaker 1: incidentally collected information. The effort py Lofgren and others to

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Speaker 1: amend the bill was to insert far greater controls on

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Speaker 1: the autility of the government to go into the collected material,

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Speaker 1: to look further at what its contents are. It's a

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Speaker 1: it's a serious set of concerns, and I think the

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Speaker 1: only saving grace of the bill that is going to

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Speaker 1: probably be signed by President Trump next week is that

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Speaker 1: it has another six years sunset, so it's not a

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Speaker 1: permanent authorization. Congress will have to come back and take

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Speaker 1: another look at the set of questions at least within

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Speaker 1: the next six years so bill. Another thing that opponents

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Speaker 1: say is that there are too many exceptions to uh

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Speaker 1: the bills requirement that unless it's related to national security,

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Speaker 1: the FBI or or the n s A doesn't have

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Speaker 1: to get a court order. Um that the FBI doesn't

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Speaker 1: have to apply for a warrant when national security is involved,

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Speaker 1: or cases where it believes there are a threat to

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Speaker 1: life or serious bodily harm. Is that too wide an exception.

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Speaker 1: I think that exception is okay, you know, so the

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Speaker 1: way it's framed, of course, serious national security or threat

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Speaker 1: to life or serious harm to property. I think that

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Speaker 1: kind of exception has always existed in our laws. So

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Speaker 1: that material that's in the hands of the government needs

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Speaker 1: that needs to be further evaluated in those circumstances can

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Speaker 1: be Otherwise the bureau or another agency would have to

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Speaker 1: obtain a warrant from from a federal judge to do so.

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Speaker 1: Something that's a fairly normal, narrow exception. The broader one

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Speaker 1: is to allow the the FBI and others to continue

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Speaker 1: to look at the collected material so long as they're

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Speaker 1: not using it in a criminal case. And that's that

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Speaker 1: worries Loft Groom and others. I think for good reason,

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Speaker 1: six years is a long time to wait if there

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Speaker 1: are you know, privacy concerns attached to this. Is there

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Speaker 1: any other way that this that some of these problems

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Speaker 1: can be cured before the bill sunsets? Well, there is,

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Speaker 1: of course, Congress can always take up a new legislative measure.

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Speaker 1: I think one of the things that made this UH

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Speaker 1: set of corrections cantalyzingly close to fruition was the alignment

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Speaker 1: of sort of libertarian conservatives in the Republican Party and

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Speaker 1: civil liberties advocating liberals and the Democratic Party. This is

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Speaker 1: not the first time their interests have coincided, but it's

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Speaker 1: one where they nearly got it done this time. And

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Speaker 1: I think indeed, had the calendar been stretched out a

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Speaker 1: little bit further, and had President Trump not interfered with

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Speaker 1: his confusing and the conflicting set of tweets, UH, they

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Speaker 1: may well have gotten a job done. So, you know,

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Speaker 1: if they do approve this finally in the president Science

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Speaker 1: next week, I doubt that anything is going to happen

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Speaker 1: immediately to try to revisit these issues, but perhaps after

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Speaker 1: the election. Thanks so much as always for being here.

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Speaker 1: That's that's William Banks, and he is a professor at

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Speaker 1: Syracuse University Law School. Intel CEO Brian precentag pledged transparency

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Speaker 1: in an open letter on the company's website about plans

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Speaker 1: to restore confidence in the security of customer data after

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Speaker 1: the disclosure of a design flaw and its chips. But

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Speaker 1: the transparency the two key U S senators and some

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Speaker 1: stareholders want is transparency about his sale of close to

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Speaker 1: half of his direct holdings in Intel late last year,

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Speaker 1: netting proceeds of about twenty four million dollars. A sale

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Speaker 1: made before that public disclosure sent Intel shares tumbling. Democratic

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Speaker 1: Senator Jack Read and Republican Senator John Kennedy are pushing

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Speaker 1: the Securities and Exchange Commission and the Jostice Department to

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Speaker 1: investigate whether this was insider trading, and a shareholder suit

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Speaker 1: was filed on January ten. Joining me is Robert Hockett,

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Speaker 1: a professor at Cornell Law School. Bob, what brings attention

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Speaker 1: to this stock sale as possible in utter trading? Hi, June,

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Speaker 1: good be with you again. Um, So, I guess there

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Speaker 1: are two things right. One is the timing and one

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Speaker 1: is the size. Right. So Mr Presentage had in place

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Speaker 1: a sort of a pre arranged schedule of sales at

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Speaker 1: the stock right. So on a routine basis, his shares

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Speaker 1: I think twenty eight thousand or so were meant to

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Speaker 1: be sold every February, every April, and every June. Uh.

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Speaker 1: And that was the case in ten and most of

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Speaker 1: twenty seventeen. But then suddenly in October he changed the

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Speaker 1: plan uh and arranged for a much larger number of

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Speaker 1: shares to be sold, in fact close to the steams

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Speaker 1: ten times as many shares to be sold, cutting in

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Speaker 1: half his total holdings. Uh. And the timing of that was,

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Speaker 1: you know, shortly before the public announcement of the new

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Speaker 1: vulnerability that had been discovered. Uh. He and the microprocessors

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Speaker 1: that Intel produces. So that's what raises at least a suspicion.

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Speaker 1: It doesn't prove anything. More has to be looked into

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Speaker 1: in order for anything to be proved, but it at

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Speaker 1: least raises an eyebrow because of that, that timing, and

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Speaker 1: again the sheer size of the transaction. Intel said, the

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Speaker 1: share was made, the sale was made pursue into the

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Speaker 1: pre arranged stock sale plan that you mentioned. Um, what

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Speaker 1: about the fact that this brought his ownership down to

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Speaker 1: the minimum he's required to hold under company rules, so

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Speaker 1: that that's that's definitely an important piece of the story

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Speaker 1: as well, and they kind of goes it's sort of

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Speaker 1: the kind of corollary to the to the sheer size

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Speaker 1: of the transaction. So Intel is sort of both telling

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Speaker 1: the truth and speaking of false said when they said

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Speaker 1: that the sale wasn't according to the plan um. The

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Speaker 1: problem what they're what they're hoping, we think, I gather

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Speaker 1: is that we will think for talking about the plan

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Speaker 1: that's been in place since, but that's just not true

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Speaker 1: because the plan itself was changed in October. So he

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Speaker 1: was done according to quote unquote the plan, but the

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Speaker 1: plan as of October was a much different plan than that,

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Speaker 1: and the first half of again, that doesn't show that

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Speaker 1: he did anything wrong. All of this might be about board.

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Speaker 1: You might have an innocent explanation, but the fact is

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Speaker 1: that never the us. The fact that the plan was

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Speaker 1: changed when it was is highly you know, kind of

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Speaker 1: piebrow raising. And then, as you suggest, the sheer size

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Speaker 1: of the number that we're sold off again usually it's

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Speaker 1: only twenty eight thousand shares this time it was a

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Speaker 1: two forty six thousand shares approximately in addition to six

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Speaker 1: D forty four thousand options, which again brings down his

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Speaker 1: holdings to more than under the absolute minimum that he's

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Speaker 1: required by the firm to hold. So, Bob, what do regulate?

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Speaker 1: What do regulators look for in an investigation of this type, Well,

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Speaker 1: that look for other indicators um as to you know,

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Speaker 1: whether there's some innocent explanation. I think the problematic explanation

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Speaker 1: would be that, you know, he finds out right every

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Speaker 1: all the insiders to the firm find out about this vulnerability. Uh.

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Speaker 1: They realized that once they go public with that information

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Speaker 1: that the stock price will take a hit because a

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Speaker 1: lot of people will sell off some of their shares.

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Speaker 1: So in order to sort of beat the market, sell

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Speaker 1: off those insiders who hold shares of their own sell

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Speaker 1: while the price is still high in order to avoid

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Speaker 1: the laws. There looking for indications that that was what

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Speaker 1: was happening. Uh, And again the circumstantial evidence certainly points

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Speaker 1: to some such motivation. That being said, it's so obvious

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Speaker 1: that it's very hard to believe that somebody with the

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Speaker 1: sophistication in mr presented would not have known that And

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Speaker 1: and so they're going to be I'm sure very interested

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Speaker 1: to see whether there's some innocent explanation uh for the

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Speaker 1: shell off, And there might be, right, I mean, again,

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Speaker 1: it's so flagrant. If there isn't an innocent explanation that

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Speaker 1: then the mind will be boggled by the ser stupidity. Right, No, nobody,

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Speaker 1: you know, it would be hard to imagine anybody with

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Speaker 1: this man's degree, a sophistication and knowledge of the securities

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Speaker 1: laws would would actually do something so flagrant. Um. So

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Speaker 1: I'm sure they'll be bending them. Sure, sec folk and

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Speaker 1: d o J people will be bending over backwards to

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Speaker 1: find an innocent explanation for this, But circumstantially at present

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Speaker 1: it's hard to see what it would be, and likely

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Speaker 1: advising by very sophisticated securities lawyers here too. Now, let's

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Speaker 1: say let's say the sec and the d o J

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Speaker 1: pass on any kind of charges. Would the would the no?

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Speaker 1: I was I'm posing that as a real question. Would

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Speaker 1: the investigation be rigorous? In a shareholder suit? Would they

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Speaker 1: have access to more information over a longer period of time? Yeah,

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Speaker 1: I mean, under the right circumstances, you could certainly get

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Speaker 1: private litigation, uh, and Um, there's no reason to think

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Speaker 1: that in discovery, right, the discovery phase of any uh

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Speaker 1: sort of process of litigation that might might sort of

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Speaker 1: ensue in the event of private parties bring private suits,

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Speaker 1: there's no reason to think that the discovery phase of

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Speaker 1: the litigation wouldn't uncover all sorts of things right in

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Speaker 1: the court would would demand that all sorts of relevant

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Speaker 1: information be uh disclosed, as long as it can be

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Speaker 1: done in a manner that didn't, you know, sort of

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Speaker 1: compromise the security of the company. But that's always easy

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Speaker 1: to do if if in no other way than to

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Speaker 1: have a so called in camera examination of evidence. That

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Speaker 1: would be a case where the camera here's like the

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Speaker 1: as in chamber right the court chamber. So in other words,

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Speaker 1: the judge of the court would actually be able to

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Speaker 1: uh look at the information without disclosing it to a

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Speaker 1: broader public. Um. Given that safeguard, it's it's quite possible

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Speaker 1: right for private litgans to get hold of all sorts

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Speaker 1: of uh information that might be helpful in determining actually

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Speaker 1: whether it's an innocent sale or otherwise. Only about forty

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Speaker 1: five seconds here, bob, But remember the Equifax sales that

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Speaker 1: came under suspicion. Does that show that this is a

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Speaker 1: hard thing to nail down. I don't think it shows

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Speaker 1: that it's hard to nail down. Um, I mean, it's

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Speaker 1: just it's another I guess what it shows is that,

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Speaker 1: you know, this particular form of offense doesn't go away, right.

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Speaker 1: I mean, now, again, that's not to say that this

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Speaker 1: has been an offense. So it might be that there

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Speaker 1: is an innocent explanation here. But it seems that even

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Speaker 1: the most flagrant looking um offense reminiscent transactions continue to

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Speaker 1: occur in the same way right as they did back

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Speaker 1: in the nineteen twenties and forties, all the way, as

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Speaker 1: long as we've had securities laws. This is a classic,

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Speaker 1: good old fashioned insider trading case. And again, there might

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Speaker 1: be total innocence here. It's just that, you know, until

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Speaker 1: we get more information, uh, it looks highly suspicious and

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Speaker 1: remarkably crude, if I can put it that way. All right,

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Speaker 1: thank you for your insights, Bob. As always, that's Robert Hockett,

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Speaker 1: Professor at Cornell Law School. Thanks for listening to the

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Speaker 1: Bloomberg Law Podcast. You can subscribe and listen to the

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Speaker 1: show on Apple Podcasts, SoundCloud, and on bloomberg dot Com

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Speaker 1: Slash Podcast. I'm June Brasso. This is Bloomberg