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Speaker 1: This is Bloomberg Law with June Brussel from Bloomberg Radio.

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Speaker 1: It was an escape worthy of a Hollywood movie that

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Speaker 1: stunned the world. Former Nissan chairman Carlos Gone was smuggled

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Speaker 1: out of Japan, where he was facing criminal charges in

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Speaker 1: a large case meant for audio equipment. A former Green

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Speaker 1: Beret and his son planned and executed the daring escape.

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Speaker 1: Now they're sitting in the Tokyo prison that once held

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Speaker 1: Gone while he's saved from Japanese law. In Lebanon, Michael

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Speaker 1: Taylor and his son Peter pleaded guilty on Monday to

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Speaker 1: charge that they helped Gone in his dramatic escape from Japan.

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Speaker 1: Joining me is Eric Feldman, a professor at the University

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Speaker 1: of Pennsylvania Law School. So the tailors said they had

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Speaker 1: no objection to the accusations against them. Is that the

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Speaker 1: equivalent of a guilty plea. It seems to be the

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Speaker 1: equivalent of a guilty plea by them. They don't seem

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Speaker 1: to have had any objection at all to the charges

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Speaker 1: that were read out in court. And it's not uncommon.

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Speaker 1: It's by far the norm in Japanese criminal justice r

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Speaker 1: criminal defendants to plead guilty and apologize that confession is

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Speaker 1: a typical way of doing things there. In a similar way,

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Speaker 1: I want to supposed to say that a plea bargainist

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Speaker 1: the difficult way of doing things here. They've been in

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Speaker 1: custody since March. Carlos Gone had said that the authorities

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Speaker 1: had subjected him to harsh prison conditions with the intention

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Speaker 1: of making him confess. Both of these men have spent

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Speaker 1: time in solitary confinement. Then in Japan there's questioned by

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Speaker 1: prosecutors for long periods of time without lawyer's present. Do

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Speaker 1: you think there was pressure on them to plead guilty.

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Speaker 1: I think it depends up on what one means that

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Speaker 1: a session. I don't think they were physically tortured. That

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Speaker 1: would not be the norm in Japan at all. But

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Speaker 1: there's one feel pressure to confess when they're held in

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Speaker 1: piratary to climent their repeatedly questioned by the authorities and

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Speaker 1: the passage plan like everywhere, they're we practiced in their

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Speaker 1: irrigation techniques, and they're they're certainly meant to break one

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Speaker 1: down psychologically so as to confess. I think it was

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Speaker 1: also the facts have been revealed pretty clearly. I think

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Speaker 1: these gentlemen have described in some detail elsewhere what it

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Speaker 1: took for them to help Carlos go and escape Japan.

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Speaker 1: So it would have been a bit hard for them,

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Speaker 1: arguably to object to strongly to some of the facts

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Speaker 1: in the court, the facts that they've accepted another venue.

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Speaker 1: They're due back in court on June nine, when they're

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Speaker 1: going to be cross examined. If they've played guilty already,

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Speaker 1: how does this work? Why are they going to be

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Speaker 1: cross examined at this point? Yeah, In general, a guilty

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Speaker 1: plea is not enough to still need evidence to convict.

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Speaker 1: So simply saying I did it is thought to be

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Speaker 1: a significant but not sufficient condition, very criminal judgment to

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Speaker 1: be handed down by the court. So the court still

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Speaker 1: needs to have the evidence aired and brought to the

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Speaker 1: court and aired and discussed in court before they can

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Speaker 1: actually conduct. The Japanese legal system, it said that it's

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Speaker 1: a very harsh system where of cases result in convictions.

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Speaker 1: Are any of the protections afforded to defendants in the

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Speaker 1: American justice system afforded to defend its in the Japanese

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Speaker 1: legal system. I think that the procedural rights that are

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Speaker 1: according to criminal justice defendants in the United States probably

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Speaker 1: exceed those of most other countries. So I think the

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Speaker 1: criminal defending in Japan would not necessarily have the same

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Speaker 1: procedure rights as a criminal defending in the United States.

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Speaker 1: It's not cleue to me. That's the nine percent figure

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Speaker 1: that's often quoted is much different than what one season

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Speaker 1: the United States, at least in the work I've seen

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Speaker 1: of scholars of criminal justice, particularly comparative criminal justice, whose

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Speaker 1: worth I trust in respect, I think at the end

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Speaker 1: of the day, when you go through the procedures followed

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Speaker 1: in the United States and the procedures followed in Japan,

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Speaker 1: we find about the same percentage of individuals who are

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Speaker 1: initially charged with the crimes who are ultimately convicted of

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Speaker 1: the crime. It's just that the systems work in somewhat

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Speaker 1: different ways. I should also say about the Japanese criminal

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Speaker 1: justice system generally, is the degree that we think we

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Speaker 1: need criminal justice system and courts and police and prosecutors

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Speaker 1: in order to keep society's safe. The contrast between rates

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Speaker 1: of violent crime and general safety in Japan and the

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Speaker 1: United States just couldn't be more stark. There was a

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Speaker 1: a new survey if the world safe, the cities came

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Speaker 1: out last week and two of the top three in

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Speaker 1: the Japanese cities, Tokyo and also side by is Osako

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Speaker 1: is number one for three and Singapore or Sandwich between them.

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Speaker 1: So it's always hard, of course to figure out what

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Speaker 1: the exact relationship is between policing, criminal justice and they think.

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Speaker 1: But it is clear that one can enjoy certain liberties

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Speaker 1: within the Japanese society, like not wandering much, for example,

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Speaker 1: about being the victim of a violent crime. For women,

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Speaker 1: frequency of rape in Japan is inciditely lower than it

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Speaker 1: is in the United States. Comicide is extremely low in

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Speaker 1: Japan compared to here. So yes, I think there is

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Speaker 1: somewhat more unctional arguably in the Japanese criminal justice system.

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Speaker 1: On the other hand, to the degree that what they're

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Speaker 1: trading office is for a significantly safe for society, I

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Speaker 1: think many can suggest that it may well be worth it.

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Speaker 1: They face a maximum of three years in prison. Is

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Speaker 1: it often the case that the prison sentences are maxed out?

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Speaker 1: I think that often depends to the degree that one

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Speaker 1: appreciates that the Norman Japan confession. I think people see

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Speaker 1: confession and repentance and then reintegration into society as in

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Speaker 1: many ways the highest goal of the really great aspiration

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Speaker 1: of the criminal justice system, so that I think people

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Speaker 1: often would expect somewhat lower sentences than the maximum sentence

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Speaker 1: if they've played their part as criminal descendants, if they've apologized,

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Speaker 1: I they repentance and serious etcetera. About that repentance, it's

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Speaker 1: to the degree that they remain with their heels does

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Speaker 1: man and insist they did nothing wrong and they're being

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Speaker 1: prosecuted unfairly, I think they're much more likely to see

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Speaker 1: the maximum sentence. Years ago, I parked illegally in Tokyo.

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Speaker 1: I had a runfr right, I parked somewhere. I didn't

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Speaker 1: really know whether it was legally rellegal. And I came

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Speaker 1: back and what they do in your park illegally sometimes

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Speaker 1: as they put the very brightly colored plastic on your mirror,

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Speaker 1: so it's decide your shame and you can't drive your

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Speaker 1: color with everybody's seeing that your car has been tact.

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Speaker 1: And I went to the local police station and they

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Speaker 1: you know, you parked illegally, and I said, I'm aware

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Speaker 1: of that, very sorry. And there is an older crop

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Speaker 1: and a younger prop and on the older officer, you know,

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Speaker 1: we're really glad you're sorry, and the younger officer said,

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Speaker 1: I don't think he's really sorry. And with the degree

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Speaker 1: that I wasn't really sorry, he had decided that I

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Speaker 1: should be penalized. And it caught my lessons to the

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Speaker 1: degree that I was sorry to let go. And they

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Speaker 1: had a long debate about how sorry I really was

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Speaker 1: until they finally pulled the paper out from the desk

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Speaker 1: in the police office. Um. It was a pre printed

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Speaker 1: apology letter that I had to sign, apologizing deeply from

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Speaker 1: a interraction on swearing I would never do it again.

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Speaker 1: What a great story. Thanks Eric. That's Professor Eric Fillman

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Speaker 1: of the University of Pennsylvania Law School. Corporate executives regularly

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Speaker 1: unload stock through scheduling plans they create under the Securities

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Speaker 1: and Exchange Commissions Rule ten B five one. There have

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Speaker 1: been calls to toughen the regulation for years. The Council

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Speaker 1: of Institutional Investors, which represents pensions, petition the SEC in

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Speaker 1: to prohibit executives from having multiple ten B five one

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Speaker 1: plans and frequently modifying or canceling them. Now is the

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Speaker 1: SEC is considering toughening the rules. It's being urged to

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Speaker 1: tread carefully turning me. A securities attorney Robert him a

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Speaker 1: partner a Tartar, Krinsky and Droken tell us about how

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Speaker 1: corporate executives unload stock under Rule ten B five one.

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Speaker 1: Rule is a rule that the SEC adopted about twenty

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Speaker 1: years ago that allows corporate executives to put in place

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Speaker 1: a written plan that allows them to sell their shares

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Speaker 1: in public companies in an orderly way. Uh. And there's

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Speaker 1: a couple of requirements under the rule one, and probably

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Speaker 1: the most important part is that the executive cannot have

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Speaker 1: any sort of material non public information at the time

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Speaker 1: that he enters into the plan. And what rule five

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Speaker 1: one does is that it provides a defense to executives

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Speaker 1: so that the plan can continue selling shares you know,

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Speaker 1: whether it's a certain number, you know, every month, even

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Speaker 1: though the executive might later learn about inside information at

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Speaker 1: the company. Despite this rule, can executives still use inside

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Speaker 1: information to cash in? No, they can't. Under the rule.

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Speaker 1: The SEC specifically says that if an executive has inside information,

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Speaker 1: he can't establish one of these ten five one plans.

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Speaker 1: Um The executive has to wait until that information is

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Speaker 1: announced by the company, typically in some sort of earnings release.

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Speaker 1: What plans allow executives to do is to set up

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Speaker 1: something in writing, usually with their broker, that will dictate

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Speaker 1: that certain stock sales will occur at specified times. I

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Speaker 1: guess the great advantage of types of plans is that

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Speaker 1: in the old days, before these plans were around, every

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Speaker 1: time an executive wanted to sell shares, they would have

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Speaker 1: to check with their company's compliance department or their general

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Speaker 1: counsel's office to see if they could, and then some

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Speaker 1: sort of decision would have to be made about whether

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Speaker 1: the executive had material non public information. But with the

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Speaker 1: one plan, as long as the executive does not have

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Speaker 1: inside information when he sets up the plan, the sales

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Speaker 1: can continue throughout the life of the plan, even though

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Speaker 1: the executive might later come into possession of material non

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Speaker 1: public information. So why have there been calls to change

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Speaker 1: the rule for years? What do people find problematic now?

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Speaker 1: These types of trading plans have been somewhat controversial um

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Speaker 1: since the time that they were adopted, and the SEC

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Speaker 1: Chairman Gary Ginsler recently gave a speech where he outlined

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Speaker 1: some very serious concerns the SEC has um that echoed

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Speaker 1: a lot of the their concerns that we're in the market.

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Speaker 1: You know, well, first of all, there's no waiting period

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Speaker 1: for the plans to be adopted, so there's a perception

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Speaker 1: that that these plans can sometimes be used to really

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Speaker 1: allow executives to sell shares even though they have material

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Speaker 1: non public information. Uh And and they're using the plans

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Speaker 1: in a long way. Uh So one of the concerns

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Speaker 1: that there's no waiting period, that an executive can adopt

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Speaker 1: the plan and start selling shares under the plan within

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Speaker 1: a week or two of adopting the plan. And in fact,

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Speaker 1: some research that the SEC sided shows that about of

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Speaker 1: trading plans they start within thirty days, which the SEC

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Speaker 1: uses problematic. And secondly, there's really no limit on the

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Speaker 1: number of plans a person could have, so a person

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Speaker 1: could could implement different trading strategies. And combined with the

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Speaker 1: fact that an executive can cancel a plan, it seems

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Speaker 1: like it gives people an opportunity to pick and choose.

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Speaker 1: Um and and abused the process to get around the

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Speaker 1: insider trading restrictions. And in a Wall Street Journal analysis

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Speaker 1: found that executives did better than expected on their trades

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Speaker 1: around the time of market moving news. Yes, I have

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Speaker 1: seen that analysis that the one plans are very popular

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Speaker 1: among corporate executives because they do allow the executives to

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Speaker 1: sell shares when they otherwise would be prohibited from doing

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Speaker 1: so under the insider trading provisions, and it has allowed

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Speaker 1: many many executives to to sell to sell shares. The

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Speaker 1: SEC is has not been particularly active in enforcement in

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Speaker 1: this area. There are a couple of notable cases. One

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Speaker 1: was against Ken Lay from Enron, where he was alleged

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Speaker 1: to have sold about twenty million dollars of stock inappropriately

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Speaker 1: under one plan, and there is another case against Angelo

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Speaker 1: mozilo Um more recently from Countrywide, who was alleged to

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Speaker 1: have sold a hundred thirty nine million dollars of stock

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Speaker 1: in violation of the insider trading provisions. So um the

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Speaker 1: plans have been abused, and there's certainly a perception among

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Speaker 1: academics and others that that they they're open for abuse.

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Speaker 1: In order to pursue insider trading is the problem that

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Speaker 1: the SEC would have to show intent. Yes, the SEC

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Speaker 1: has to show that the person when they adopted the

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Speaker 1: plan already knew some inside information, already knew something that

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Speaker 1: was material that was in public, and that can be

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Speaker 1: challenging for the SEC, particularly kind of trying to root

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Speaker 1: out UM insider trading amainst all the many thousands of

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Speaker 1: plans that are in effect. Uh so the SEC could

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Speaker 1: have a hard time proving insider trading. And what makes

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Speaker 1: it even more problematic from the SEC is that executives

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Speaker 1: anyone else when they adopt one of these ten be

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Speaker 1: I have one plans. And that was one of the

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Speaker 1: other concerns that Chairman Ginsler from the SEC had is

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Speaker 1: that there there's really no light and no sort of

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Speaker 1: disposure to have the SEC have a window into how

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Speaker 1: many plans or in existence and what the plans provide.

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Speaker 1: What's the proposed rule going to change. Gainsler and the

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Speaker 1: but I think it's pretty clear from his speech that

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Speaker 1: one thing the SEC is looking at is having a

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Speaker 1: cooling lost period between four to six months before executives

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Speaker 1: can sell shares under these ten five one plans UM.

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Speaker 1: One of the criticisms is that the executives adopt the

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Speaker 1: plans and almost immediately can be begin selling stock UM.

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Speaker 1: So one of the proposals that Chairman Gainsler mentioned is

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Speaker 1: having a much longer cooling off period of four to

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Speaker 1: six months. Another restriction that the Chairman gainst Are mentioned

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Speaker 1: about potentially adopting would be having limits on executives being

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Speaker 1: able to cancel the plans once they're in place. As

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Speaker 1: it is now, an executive can have a plan in

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Speaker 1: place that says, you know, sell fifty thou shares every

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Speaker 1: month for six months, but on months three, if the

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Speaker 1: executive becomes aware of some very positive non public development

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Speaker 1: at the company, that executive can go and cancel the

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Speaker 1: plan and thereby keep the shares so that they would

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Speaker 1: presumably go up and value. And the SEC is looking

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Speaker 1: at having a rule that says an executive cannot cancel

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Speaker 1: plan once adopted, so there's been some pushback. One of

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Speaker 1: the people urging caution for the SEC is Uber Deputy

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Speaker 1: General Council Here Gums. He told the agency's Investor Advisory

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Speaker 1: Committee last week that Rule tend B five one plans

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Speaker 1: are effective at helping executives ethically sell stock and shouldn't

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Speaker 1: be discouraged. What are some of the concerns that companies

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Speaker 1: may have about changing the rule messing up the executive

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Speaker 1: compensation packages is one concern that companies have, and and

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Speaker 1: the other thing is that the fact of the matter

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Speaker 1: is these plans have been around for about twenty years

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Speaker 1: and there's really been very very little um evidence or

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Speaker 1: enforcement activity that executives are abusing the plans. UM and

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Speaker 1: the plan to become very popular with executives and companies

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Speaker 1: because they allow executives to sell shares that they've acquired

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Speaker 1: an orderly manner and reduced the compliance burden on companies

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Speaker 1: to have to try to determine whether or not a

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Speaker 1: particular executive has material non public information. But yes, many

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Speaker 1: of the executives have large concentrations of their net worth

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Speaker 1: tied up in the stock that they earned as compensation,

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Speaker 1: and the executives would like to have UM an orderly

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Speaker 1: way to ethically sell shares UM and can be five

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Speaker 1: plans to be in a popular way of doing that. So, Bob,

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Speaker 1: let's say they proposed the rule in October. What happens

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Speaker 1: after they proposed the rule. After the SEC proposes the rule,

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Speaker 1: there's going to be a common period where people from

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Speaker 1: from the industry can comment as well as investors, both

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Speaker 1: in institutional and retail investors can comment on the proposed rules,

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Speaker 1: and after that comment period, which typically lasts about sixty days,

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Speaker 1: the SEC will evaluate all the comments that they perceived,

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Speaker 1: and oftentimes the SEC does make modifications to the rules

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Speaker 1: that were proposed, and then usually within UM you know,

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Speaker 1: ninety two and twenty days, the SEC would come out

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Speaker 1: with a new final rule which would go into effect

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Speaker 1: and would likely contain some of these types of provisions.

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Speaker 1: UM and and the industry is noted as well as

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Speaker 1: other institutional investors that some of the things the SEC

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Speaker 1: wants to implement are already being done as a best practice,

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Speaker 1: even though they're not required. But UM there's a best practice.

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Speaker 1: Many brokers UM will recommend to executives to wait sixty

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Speaker 1: days before the plan can kick in and start selling securities. UM.

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Speaker 1: So some of these practices are already in place, but

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Speaker 1: they would essentially be mandated under an SEC rule if

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Speaker 1: if it does get adopted. Do you think these changes

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Speaker 1: are a good idea? I do think some of the

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Speaker 1: changes are a good idea. Of the academic research that's

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Speaker 1: been done, UM has raised some troubling concerns UH specifically

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Speaker 1: surrounding UM executives to implement these plans and immediately start

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Speaker 1: selling shares in their companies. I think as a there

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Speaker 1: can be uh, you know, very good questions raised about

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Speaker 1: whether executives um have materials public information during that time frame.

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Speaker 1: At the same time, waiting for the six months seems

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Speaker 1: very long, UM, and I would be more comfortable with

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Speaker 1: the sixt or nine cooling off period uh. And so

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Speaker 1: perhaps there's some room for compromise UM at the SEC UM.

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Speaker 1: But I do think reforms are are warranted from the

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Speaker 1: research that's been done, and hopefully the common period will

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Speaker 1: o the SEC to come up with sensible reforms that

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Speaker 1: still allow executives to sell their securities in an ethical

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Speaker 1: way without violating the inside of trading laws. Thanks for

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Speaker 1: being on the show, Bob That securities attorney Robert him

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Speaker 1: of Charter, Krinsky and Dragon. In the first legal test

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Speaker 1: of COVID nineteen vaccine mandates, a Texas federal judge tossed

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Speaker 1: out a lawsuit against Houston Methodist Hospital over its requirement

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Speaker 1: that employees get vaccinated. In a blistering opinion, Judge Lynn

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Speaker 1: Hughes said vaccine mandates are not coercive and claims that

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Speaker 1: the vaccines are dangerous are false. And irrelevant. It's the

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Speaker 1: first test of whether emergency federal approval effects an employer's

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Speaker 1: ability to mandate vaccinations. Joining me is Robert I have

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Speaker 1: fula Bloomberg Law reporter. So, now tell us what the

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Speaker 1: judge ruled in the case of Houston Methodist Hospital. So

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Speaker 1: the judge throughout the lawsuit rejected the claims that were

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Speaker 1: made by the workers. The lawsuit had alleged that the

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Speaker 1: mandate was illegal because they were on emergency use authorization

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Speaker 1: rather than the full authorization. But it also made some

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Speaker 1: rhetorical claims, you know, likening the vaccine mandate to Nazi

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Speaker 1: era experimentation on concentration camp prisoner. Was a short foot

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Speaker 1: blistering opinion that throughout the lawsuit and criticized the talcal claims.

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Speaker 1: This is the first opinion about the COVID nineteen vaccine mandates.

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Speaker 1: Explain how it doesn't have binding power on other courts,

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Speaker 1: but it might be persuasive for other courts. So this

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Speaker 1: was a ruling from a Texas federal judge at the

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Speaker 1: district court level. So distrecord opinions like that, they're not

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Speaker 1: binding on other federal courts, but they can't be persuasive.

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Speaker 1: Particularly in instances such as this, where it's a novel

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Speaker 1: legal issue that hasn't been tested, and then one judge

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Speaker 1: comes down with a ruling, particularly a ruling like this,

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Speaker 1: that's so forceful and direct, other judges will look to that,

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Speaker 1: and sometimes they can use that as a framework or

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Speaker 1: guidance for how they'll treat the same issue. So you

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Speaker 1: spoke to several professors, and Professor Nicholas Bagley of Michigan

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Speaker 1: Law said, if you're a conservative judge, the argument doesn't

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Speaker 1: speak to you, and if you're a liberal judge, the

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Speaker 1: argument doesn't speak to you. So I don't think it's

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Speaker 1: likely to go anywhere. So explain what he meant. The

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Speaker 1: professor was explaining that if you look at the laws,

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Speaker 1: there's a certain ideological argument there that's pitched more towards

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Speaker 1: sort of conservative world views, you know, about not being

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Speaker 1: told what to do and not being made to take

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Speaker 1: a vaccine that you don't want to take. But he

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Speaker 1: was also saying that Republican appointed judges. Conservative judges also

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Speaker 1: tend to be more in favor of giving employers the

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Speaker 1: power to set terms of employment and control their workplace,

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Speaker 1: and they'll be able to tell their workers on what

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Speaker 1: they're supposed to do. So he was highlighting sort of

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Speaker 1: the mismatch there that conservative judges aren't likely to cotton

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Speaker 1: to this argument because they believe in my employer freedom.

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Speaker 1: But the attorney behind this lawsuit, Jared Woodfill, who was

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Speaker 1: also involved in election litigation, says he's not giving up.

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Speaker 1: The attorney explained that or the workers planned to appeal

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Speaker 1: this ruling, so that would be appealed to the Fifth

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Speaker 1: Circuit Court of Appeals, and he also said that he's

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Speaker 1: trying to pursue some of these claims to get the

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Speaker 1: case before the Texas Supreme Court, and that would require

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Speaker 1: date law only claims. This lawsuit, who was dismissed by

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Speaker 1: a Texas federal judge, was originally filed in state court,

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Speaker 1: but because of the federal law issues that were central

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Speaker 1: to the lawsuit, it was transferred from state court federal court.

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Speaker 1: So he wants to try to pursue some state law

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Speaker 1: claims in state court, but he did not elaborate specifically

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Speaker 1: on you know, what those claims might look like. He's

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Speaker 1: been involved in politics, so I understand that he was

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Speaker 1: the chairman of the Harris County Republican Party for a

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Speaker 1: couple of terms. UM, and he had it he was

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Speaker 1: involved in some election related litigation. UM. I believe it

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Speaker 1: was a lawsuit about some There were a hundred, only

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Speaker 1: a hundred seventy eight workers out of twenty six thousand

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Speaker 1: that refused to get vaccinated here, So it's just a tiny,

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Speaker 1: a tiny percentage of workers. Yeah, yeah, it was. The

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Speaker 1: hospital had reported that. UM. You know, at the time

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Speaker 1: of the filing and a lawsuit, the dy nine percent

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Speaker 1: of the workers had complied with the vaccination man day

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Speaker 1: UM and yeah, there were these outfiers who he didn't

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Speaker 1: want to get a shot, and UH sued to prevent that. UM.

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Speaker 1: I also understand from the attorney representing the workers that

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Speaker 1: some of them filed or he was preparing charges to

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Speaker 1: file with the e e O c UM complaining about

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Speaker 1: the hospital rejecting some of these workers m requests for

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Speaker 1: accommodation based on health or religious reasons. Once the f

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Speaker 1: d A approves these vaccines, the basis for these lawsuits

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Speaker 1: will disappear once there's final approval. I think that's right.

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Speaker 1: Two of the three companies that have gotten Emergency Youth

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Speaker 1: Authorization Visor and Maderna UH, they've filed with the FDA

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Speaker 1: for the full authorization. And it should be said that

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Speaker 1: emergency use authorization, although it's a speed up process, it's

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Speaker 1: still quite rigorous. The primary difference, to my understanding, is

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Speaker 1: the amount of data they need as far as looking

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Speaker 1: at people who have received the shot and what sort

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Speaker 1: of health conditions they're having. I believe for the emergency

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Speaker 1: use they need something like two months worth of data,

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Speaker 1: and for the full authorization they need something like six

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Speaker 1: months worth of data. Thanks Bob. That's Bloomberg Law reporter

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Speaker 1: Robert Ayafola. And that's it for the edition of the

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Speaker 1: Bloomberg Law Show. I'm June Grosso. Please join me every

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Speaker 1: week night MPM Eastern, right here on Bloomberg Radio.