Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. Earlier today, President
Speaker 1: Trump tweeted that he's asked the SEC to study ending
Speaker 1: quarterly reporting for US businesses to quote allow greater flexibility
Speaker 1: and save money. Morgan Stanley CEO James Gorman voice support
Speaker 1: for the idea on Bloomberg Today. I think quotally reporting,
Speaker 1: and to Budda bluntly, I think it's s and I
Speaker 1: every third in weeks and by the way, quote has
Speaker 1: come around with alarming frequency. Right, They've been trying to
Speaker 1: get this thing to stop. But at least you know
Speaker 1: this is one thing the Brits definitely have figured out
Speaker 1: what the six months reporting. Joining me is Peggy Collins,
Speaker 1: Bloomberg News US Investing team leader. So, Peggy, it seems
Speaker 1: natural that corporations would welcome getting rid of two reports
Speaker 1: a year. But what are the dangers? Well, A couple
Speaker 1: of the dangers are that investors have less transparency, right,
Speaker 1: So We've seen this in the news of late with
Speaker 1: Elon Musk saying he might take Tesla private. And one
Speaker 1: of the reactions that we've had from shareholders or shareholder
Speaker 1: activists is that, well, you're not getting as much information
Speaker 1: then in terms of what the company's earnings might be,
Speaker 1: what their executive pay is to influence whether you buy yourself.
Speaker 1: The other potential is that when companies are in the
Speaker 1: dark more, there's more potential for them to do nefarious
Speaker 1: things such as insider trading, for example, and for it
Speaker 1: to be harder for people to spot, or for companies
Speaker 1: to be more worried about doing it in the first place,
Speaker 1: and because they might get caught. So what are some
Speaker 1: of the less obvious advantages to corporations besides just not
Speaker 1: the extra work. Well, I think, as you said, the
Speaker 1: extra work and all so costs for smaller companies. A
Speaker 1: number of the plates that we've heard is that with
Speaker 1: all the regulation today and the requirements from the SEC
Speaker 1: of reporting, that if you're a smaller company, that's a
Speaker 1: big burden. And therefore there's more and more smaller companies
Speaker 1: that say I'm not going to go public, I'm going
Speaker 1: to stay private because I don't want to have to
Speaker 1: do all those things. So that's one of the things
Speaker 1: I think. Another point is that we've talked to some
Speaker 1: people today. You said it could make financial analysts more
Speaker 1: popular or valuable because they are supposed to be talking
Speaker 1: to companies regularly, and so if the public has information
Speaker 1: on a less frequent basis, they the financial analysts who
Speaker 1: put out reports could be become more important. So, Peggy,
Speaker 1: this was released by the White House to clarify President
Speaker 1: Trump's tweet. It says the President is interested in examining
Speaker 1: this issue on whether short term earnings reporting requirements for
Speaker 1: public companies reduce incentives for them to engage in long
Speaker 1: term investing in the United States, a part of the
Speaker 1: administration's ongoing regulatory form efforts. So put in that context,
Speaker 1: does that give you more insight into what he's looking for.
Speaker 1: So that's something definitely that I've been hearing over the
Speaker 1: last few years, covering a variety of investors and family
Speaker 1: offices that invest in companies in the US that aren't public,
Speaker 1: a lot of family owned businesses across the country, And
Speaker 1: one of the things that we've heard repeatedly is that
Speaker 1: companies are saying, you know, what if we're under this
Speaker 1: pressure every quarter to hit certain numbers in order for
Speaker 1: our shareholders and the stock price to be in the
Speaker 1: limelight in a good way. That prevents us from sometimes
Speaker 1: putting money into research and development efforts that would actually
Speaker 1: benefit the company over the longer term. So I'm not
Speaker 1: going to go public. I'm going to take some private
Speaker 1: investment money so that way I can spend some more
Speaker 1: money in the shorter term on the long term value
Speaker 1: of building another plant or or doing some research on technology,
Speaker 1: for example. The SEC has been reticent to make changes.
Speaker 1: Where does it stand well? The Trump tweet this morning
Speaker 1: would surprising for a lot of us, including me, um
Speaker 1: and so people have asked, you know, how quickly could
Speaker 1: they do something like this? My opinion is not very fast.
Speaker 1: Most regulatory items, and certainly something that would be such
Speaker 1: a sea change like this one take a long time
Speaker 1: to go through. There's a lot of public comments and
Speaker 1: studies and um and this might have to go through Congress,
Speaker 1: so I think it would take a while to have
Speaker 1: to happen. The SEC also has a lot on its
Speaker 1: plate between Elon Musk and Tesla and all sorts of things.
Speaker 1: The SEC is always busy, but it would it be
Speaker 1: likely to initiate this kind of a fundamental change. I
Speaker 1: think it's possible. We've seen this happened in other places
Speaker 1: around the world. You played that clip from James Gorman,
Speaker 1: and essentially what happened in the UK of late in
Speaker 1: the last decade or so is that they switched to
Speaker 1: a more six month model of reporting. There's mixed results
Speaker 1: on what that has actually mean. In some cases companies
Speaker 1: have actually continued to put out the same types of
Speaker 1: information on a more regular basis than six months anyway,
Speaker 1: But it is one of those things that it's possible.
Speaker 1: There's precedence for it. There's certainly a lot of corporate
Speaker 1: uh excitement around it, and we've seen President Trump say
Speaker 1: things and actually get them done in some cases faster
Speaker 1: than people expected and with less and less regulations. Who
Speaker 1: knows what will happen. So just we have about a
Speaker 1: minute here. What's your what's your opinion of it? It's
Speaker 1: a good question. I think the first thing that came
Speaker 1: to my mind being a journalist is that more information
Speaker 1: is usually better than less. Um So I think you know,
Speaker 1: I was a personal finance reporter for many years here
Speaker 1: at Bloomberg before leading our investing coverage, and that was
Speaker 1: the first thing that came to my mind that I
Speaker 1: I usually deferred to the fact that if you have
Speaker 1: more information and shareholders have more information on what a
Speaker 1: company is doing, that it keeps them more accountable to
Speaker 1: what It also helps you make a more informed decision
Speaker 1: on whether to buy yourself. I think you'll have quite
Speaker 1: a while before we actually get to that point if
Speaker 1: we do. Thanks so much, Peggy. That's Peggy Collins for
Speaker 1: burg News US Investing team leader. At a cabinet meeting yesterday,
Speaker 1: President Trump addressed the continuing fight against opioid addiction in
Speaker 1: the US, asking Attorney General Jeff Sessions to take legal action.
Speaker 1: I'd also like to ask you to bring a major
Speaker 1: lawsuit against the drug companies on opioid. Some states have
Speaker 1: done it, but I'd like a lawsuit to be brought
Speaker 1: against these companies that are really sending opioids at a
Speaker 1: level that it shouldn't be happening. Joining me is Richard
Speaker 1: Austin is a professor at the University of Kentucky Law School.
Speaker 1: Richard drug makers are also already facing more than nine
Speaker 1: hundred lawsuits by more than twenty five cities, states, counties,
Speaker 1: and others over opioid addiction, most of those in federal court,
Speaker 1: and the Trump administration has filed a request to join
Speaker 1: settlement talks in the multi district litigation in Ohio. So
Speaker 1: I have the Justice Department bring a separate suit. Well,
Speaker 1: I think the theories that they would use are somewhat
Speaker 1: different from, UH, the theories that the other plantiffs have
Speaker 1: been bringing in in the litigation that you spoke of.
Speaker 1: In particular, they are a variety of federal statutes that
Speaker 1: the drug companies and when I say drug companies, I
Speaker 1: mean manufacturers, distributors, and large scale retail sellers UH that
Speaker 1: they may have violated some of these federal statutes UH
Speaker 1: and so UH. And indeed, the federal government has brought
Speaker 1: suits against most of these UH pharmaceutical companies and has
Speaker 1: either one or has reached settlements that were very favorable
Speaker 1: to them. So I'm guessing that they don't want to
Speaker 1: get caught up in a settlement process that the global
Speaker 1: settlement process, which is which is what would come out
Speaker 1: of the multidistrict litigation. So if they're so, if there's
Speaker 1: a global settlement process going on in the multi district
Speaker 1: litigation and there's a federal separate federal lawsuit, would that
Speaker 1: affect the settlement process? Well, not directly, of course. Um, realistically,
Speaker 1: there's only so much money the drug companies have, so
Speaker 1: to the extent that they pay some of that to
Speaker 1: the federal government, there will be less left for the
Speaker 1: other plaintiffs, assuming that there is a settlement. Now, what
Speaker 1: about criminal proceedings by the Justice Department. Well, that's a
Speaker 1: very real possibility because many of these federal statutes I
Speaker 1: spoke of our criminal as well as civil UH and
Speaker 1: UH and therefore there's the prospect there's some pretty substantial
Speaker 1: criminal liability, even jail time theoretically, although of course you
Speaker 1: can't put a corporation in jail, but you can put
Speaker 1: their officers in jail. And that almost happened about ten
Speaker 1: years ago with Perdue Farm and Oxyconton. They were charged
Speaker 1: with uh mislabeling, which in that case meant that their
Speaker 1: sales reps were telling doctors that making statements to doctors
Speaker 1: that were um contradictory to what the labeling on the
Speaker 1: product approved by the FDA set And they were ultimately
Speaker 1: find about six d million dollars and there was serious
Speaker 1: talk about the sending some of the top executives to jail,
Speaker 1: and instead they were find very substantial amounts of money
Speaker 1: as well on these criminal charges. What do you see
Speaker 1: and what has history shown us about the effectiveness of
Speaker 1: litigation as a tactic to fight drug abuse. Well, I
Speaker 1: don't think the track record is very good, at least
Speaker 1: not so far. Of course, they were the only things
Speaker 1: we have to to compare this with is the tobacco
Speaker 1: litigation of some fifteen years ago, if twenty years ago,
Speaker 1: and that certainly resulted in a very large settlement that
Speaker 1: went to the States, But I'm not sure people gave
Speaker 1: up smoking UM. And indeed it was almost the devil's
Speaker 1: bargain because now the states, at least that were parties
Speaker 1: to that settlement, UM had a strong incentive not to
Speaker 1: put the tobacco companies out of business, because that would
Speaker 1: kill the goose that was laying the golden egg. UM.
Speaker 1: As far as the present UM litigation is concerned, I'm
Speaker 1: uh skeptical that it will have much of an effect.
Speaker 1: It might, of course, drug companies might change their conduct
Speaker 1: in response to the prospect of even more UM damage awards.
Speaker 1: But in the past they've pretty much just taken it
Speaker 1: as a cost of doing business, then moved on. Even
Speaker 1: that very substantial uh fine that I've spoke of earlier,
Speaker 1: six million dollars perdue, just blew it off. They paid
Speaker 1: the money, and they went back to pretty much doing
Speaker 1: what they've been doing before. So I don't know that
Speaker 1: it would uh really address the problem very very much.
Speaker 1: Only only a minute here on a topic that certainly
Speaker 1: deserves a lot of consideration. But so is the answer
Speaker 1: then in legislation, what's the best answer? Well, I think
Speaker 1: that's certainly part of it. I think in addition, um
Speaker 1: the federal government in particular is going to have to
Speaker 1: um uh finance some programs to try to deal with
Speaker 1: the addiction problem. Uh. You know, you've got perhaps as
Speaker 1: many as two million people who are addicted, and they're
Speaker 1: going to stay addicted, perhaps for the rest of their lives,
Speaker 1: and so you can't just leave them out there. You
Speaker 1: have to do something to help them, and there isn't
Speaker 1: much available at the present time. And of course, giving
Speaker 1: the states a lot of money doesn't mean they're going
Speaker 1: to spend it on these kinds of programs. It's it's
Speaker 1: it's it's a really serious problem. Almost seventy thousand Americans
Speaker 1: died from opioid overdoses last year alone. Thanks so much
Speaker 1: for joining us this conversation. Richard. That's Richard Austinus, professor
Speaker 1: at the University of Kentucky Law School. Thanks for listening
Speaker 1: to the Bloomberg Law Podcast. You can subscribe and listen
Speaker 1: to the show on Apple podcast, SoundCloud, and on Bloomberg
Speaker 1: dot com slash podcast. I'm June Brosso. This is Bloomberg