WEBVTT - FBI Crypto Sting & Michael Madigan Trial

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<v Speaker 1>This is Bloomberg Law with June Brusso from Bloomberg Radio.

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<v Speaker 1>In what was an elaborate sting operation in which the

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<v Speaker 1>FBI created its own crypto tooken. Fifteen crypto promoters and

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<v Speaker 1>traders were charged with market manipulation and fraud, the first

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<v Speaker 1>ever criminal charges against financial services firms for market manipulation

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<v Speaker 1>and wash trading in the cryptocurrency industry. The acting US

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<v Speaker 1>Attorney for Massachusetts, Joshua Levy, said, these are cases where

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<v Speaker 1>an innovative technology cryptocurrency met a century old scheme, the

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<v Speaker 1>pump and dump. The sting operation also led to the

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<v Speaker 1>seizure of more than twenty five million dollars in cryptocurrency,

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<v Speaker 1>and multiple trading bots responsible for wash trades for about

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<v Speaker 1>sixty different cryptocurrencies were deactivated. Joining me is former federal

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<v Speaker 1>process computer Seth Gertz, a partner at Dorsey and Whitney,

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<v Speaker 1>tell us about this sting operation.

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<v Speaker 2>Set A sting operation is a good way to put it, actually,

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<v Speaker 2>and it's not something you often see in a context

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<v Speaker 2>of investment frauds. And it's an interesting example where I

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<v Speaker 2>can sort of think of the analogy of what is

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<v Speaker 2>good for the goose is apparently also good for the gander,

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<v Speaker 2>and in this case, the FBI created their own cryptocurrency token,

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<v Speaker 2>next fund Ai. Marketed as a novel security related cryptocurrency token.

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<v Speaker 2>It was on the Ethereum blockchain. And actually what the

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<v Speaker 2>FBI did was quite clever, working with the SEC and

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<v Speaker 2>other law enforcement agencies, was they was held a large

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<v Speaker 2>balance of the tokens themselves, and so it was almost

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<v Speaker 2>from its outset, appeared to be a lucrative, novel, unique

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<v Speaker 2>token that attracted a lot of interest from the market

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<v Speaker 2>and in particular to unscrupulous market participants in other cryptocurrency traders.

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<v Speaker 2>And so that was the basic format and the programming

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<v Speaker 2>of the token that the goal was then obviously to

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<v Speaker 2>see how improper traders or cryptocurrency fraudsters were going to

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<v Speaker 2>use and utilize the token. And what's unique in this

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<v Speaker 2>space is that because the token was being traded on

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<v Speaker 2>this Ethereum blockchain, every transaction that occurs for each one

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<v Speaker 2>of these tokens is viewable and can be seen and

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<v Speaker 2>tracked and followed, and so that allows law enforce in

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<v Speaker 2>the FBI an incredible window and to see how the

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<v Speaker 2>coin was going to be utilized and in this case

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<v Speaker 2>manipulated and.

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<v Speaker 1>Tell us about the charges against the defendants here, and

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<v Speaker 1>so they.

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<v Speaker 2>Are alleged to have done what is called wash trading

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<v Speaker 2>that facilitate a pump and dump scheme, and that those

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<v Speaker 2>are the technical investment fraud terms. Wash trading is typically

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<v Speaker 2>traditionally when the same firm or entity buys and sells

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<v Speaker 2>the same instrument like a stock or a bond repeatedly

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<v Speaker 2>to artificially inflate its value and to demonstrate additional trading

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<v Speaker 2>activity to make it team more lucrative, but the entity

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<v Speaker 2>itself suffers no risk or market adjustment because it's simply

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<v Speaker 2>buying and reselling the same instrument. What was interesting about

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<v Speaker 2>this case is that some of the defendants, the cryptocurrency

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<v Speaker 2>markets here had utilized bots to buy and sell the token,

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<v Speaker 2>this token, the next fund Ai token, along with sixty

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<v Speaker 2>others repeatedly, and because it was a bot and realizing bots,

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<v Speaker 2>some of these tokens were being bought and sold like

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<v Speaker 2>ten times a minute, and that activity, that trading activity

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<v Speaker 2>artificially inflated the value of the coins, and one of

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<v Speaker 2>the coins that issue went up to multi billion dollars

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<v Speaker 2>worth of value. And then when they reached the apex

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<v Speaker 2>of value. Defendants then sold off the token, causing their

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<v Speaker 2>value to then plummet, and so that's sort of the

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<v Speaker 2>wash trading was the quick buying and selling. It reaches

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<v Speaker 2>its apex, and then it's sort of part of the

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<v Speaker 2>pump and dump and then is sold off kind of

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<v Speaker 2>in a fire sale. And because all of this is

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<v Speaker 2>occurring on a public ledger, this blockchain, the FBI was

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<v Speaker 2>able to witness all of it, and in some cases

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<v Speaker 2>even there were allegations that there were complete sham transactions

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<v Speaker 2>that were occurring. I mean, that's especially what was occurring,

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<v Speaker 2>but even beyond that, some of the markets were trading

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<v Speaker 2>created multiple different wallets, which is a sort of unique

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<v Speaker 2>cryptocurrency term, but allowed them to really facilitate completely sham

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<v Speaker 2>transactions that would have otherwise likely got unnoticed. But for

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<v Speaker 2>again the ability for the FBI to be almost completely

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<v Speaker 2>embedded in every one of these transactions.

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<v Speaker 1>Were they targeting specific firms when they came up with

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<v Speaker 1>this plan, You.

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<v Speaker 2>Know, that's really interesting. I think it remains to be seen.

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<v Speaker 2>We'll have to see how the case unfolds and what

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<v Speaker 2>discovery shows us. Several defendants of already plead guilty which

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<v Speaker 2>makes you think that perhaps they were at the same time. Though,

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<v Speaker 2>what is so unique about like cryptocurrency is that and

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<v Speaker 2>that this was so novel, is that they postured this

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<v Speaker 2>coin as a really unique security related token, and that

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<v Speaker 2>from the outset was going to attract possible criminals. Criminals

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<v Speaker 2>or their frausters were attempting to use a token with

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<v Speaker 2>other security measures to protect their trading activity, to protect

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<v Speaker 2>their own finances, and so they think they certainly postured

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<v Speaker 2>it in a way that would have been to hopefully

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<v Speaker 2>attract possible bad actors. Whether they intentionally had specific ones

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<v Speaker 2>in mind, I would think that would be a little

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<v Speaker 2>bit difficult to do, just based upon the nature and

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<v Speaker 2>the fluidity of cryptocurrency, But they were certainly posturing it

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<v Speaker 2>from the outset in an attempt to sort of cast

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<v Speaker 2>a broad net and hope to bring in some bad actors. Certainly,

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<v Speaker 2>I mean.

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<v Speaker 1>They're selling this token. Didn't a lot of people buy it,

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<v Speaker 1>like average people or you know, people who didn't have

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<v Speaker 1>a criminal intent.

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<v Speaker 2>Absolutely, that's what's so fascinating about it. And if you

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<v Speaker 2>look at the press release that came out, there's a

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<v Speaker 2>link for anyone who bought this just part of the

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<v Speaker 2>general public. It's still trading. I think I thought it's

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<v Speaker 2>market value was somewhere like two hundred dollars a coin

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<v Speaker 2>or something at least as of a sort of last week.

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<v Speaker 2>So it's still trading. It's still out there. That is

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<v Speaker 2>what's so unique in this case. One of the things

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<v Speaker 2>unique about this the ability to create a cryptocurrency token.

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<v Speaker 2>In this decentralized world of finance, where you can do this,

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<v Speaker 2>it can still have its own independent value. It's being

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<v Speaker 2>utilized for law enforcement purposes, but if I were to

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<v Speaker 2>just go buy it, there's still a potential that I

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<v Speaker 2>could derive some you know, independent value as a result

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<v Speaker 2>of of how it's set up. It is almost impossible

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<v Speaker 2>to think of an analogous situation in the financial world

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<v Speaker 2>similar to this, Like the amount of work that would

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<v Speaker 2>be required they have we had to create a company

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<v Speaker 2>to go public, to sell something on the stock exchange,

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<v Speaker 2>it's just completely inconceivable, really, Whereas in this unique financial

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<v Speaker 2>contact that we have with cryptocurrency, this can be done

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<v Speaker 2>and it's both a value at the law enforcement and

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<v Speaker 2>even those of us who unwittingly bought it because we

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<v Speaker 2>thought it was interesting perhaps are not really being harmed

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<v Speaker 2>necessarily and so it is super interesting and this.

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<v Speaker 1>Also involves Cytoma. Tell me about the connection.

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<v Speaker 2>There, Well, Saitama was one of these coins that was

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<v Speaker 2>also being utilized here and part of the pump and

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<v Speaker 2>dumps game. The reason it is being talked about so

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<v Speaker 2>much is because this activity caused that token loan to

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<v Speaker 2>rise to be worth multi billion dollars, So to the

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<v Speaker 2>extent there was sort of large dollar amounts of fraud.

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<v Speaker 2>It relates to this Sitoma token.

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<v Speaker 1>Are the FEDS targeting cryptocurrency because they're seeing more crimes

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<v Speaker 1>in the area or they're seeing a potential for more

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<v Speaker 1>crimes in.

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<v Speaker 2>The area, Well, certainly, I mean you are saying increased

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<v Speaker 2>heightened regulatory activity within cryptocurrency rit large. I mean you

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<v Speaker 2>see the security is an exchange commission essentially going to

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<v Speaker 2>war with various cryptocurrency exchanges, attempting to regulate all of

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<v Speaker 2>cryptocurrency as a security. And you are seeing now the

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<v Speaker 2>FBI more aggressively target cryptocurrency investment schemes and activities, and

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<v Speaker 2>it is certainly drawing increased regulatory scrutiny. The more ways

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<v Speaker 2>in which cryptocurrency gained mainstream attention and is utilized by

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<v Speaker 2>regular investors, the more you're going to see regulators step

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<v Speaker 2>in to ensure the playing fielder is level and bad

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<v Speaker 2>actors aren't exploiting it. It is one thing to use,

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<v Speaker 2>and cryptocurrency has been used as a powerful money launering device,

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<v Speaker 2>but when you are getting into straight up investment schemes

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<v Speaker 2>and investment frauds, this is what you would hope to

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<v Speaker 2>see from government regulators stepping into police this activity. And

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<v Speaker 2>I think this is certainly a sign of things to come.

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<v Speaker 2>So other bad actors, people with improper investment schemes, certainly,

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<v Speaker 2>I think, are going to be on high alert and

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<v Speaker 2>should be given the increased regulatory and law enforcement scrutiny

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<v Speaker 2>in this space.

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<v Speaker 1>So does the DOJ have a specific team deals with cryptocurrency.

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<v Speaker 2>They do, and they have they have several actually, so

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<v Speaker 2>within DOJ's Made Justice component there is that what's called

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<v Speaker 2>the National Cryptocurrency Enforcement Team, and they do a lot

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<v Speaker 2>of cryptocurrency cyber related fraud. That actually that that team

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<v Speaker 2>and set, as they're known, does not appear to have

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<v Speaker 2>been involved in this investigation, though it's possible they were

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<v Speaker 2>behind the scenes. It looked like there was a lot

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<v Speaker 2>of different components that were helping. Within various US Attorney's

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<v Speaker 2>offices and Department of Justice components, there are specific sections

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<v Speaker 2>that work with financial crimes, cybercrimes, and cryptocurrency related activity.

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<v Speaker 2>And as cryptocurrency becomes more mainstream because we're part of

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<v Speaker 2>the financi system, you are seeing greater capabilities within federal

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<v Speaker 2>law enforcement to both trace cryptocurrency, to follow investment schemes,

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<v Speaker 2>and in this case, a very sophisticated and novel effort

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<v Speaker 2>to really create exactly to describe it, an undercover sting

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<v Speaker 2>operations related to cryptocurrency.

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<v Speaker 1>I mean you.

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<v Speaker 2>Would see stuff like this in like a drug dealer context,

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<v Speaker 2>where you watch that you have an undercover agent deliver

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<v Speaker 2>the drug. You see it sometimes in like money laundered investigations,

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<v Speaker 2>where you have the government or federal agents attempt to

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<v Speaker 2>launder clean funds through a money laundering organization to see

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<v Speaker 2>where the money goes. But even still you don't quite

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<v Speaker 2>have the control and the visibility that you would have

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<v Speaker 2>with cryptocurrency. This is a real demonstration of sophisticated efforts

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<v Speaker 2>by the DOJ to track and to follow cryptocurrency investment fraud.

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<v Speaker 1>Coming up, could the defense raise entrapment. This is Bloomberg.

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<v Speaker 1>We've been talking about an elaborate sting operation in which

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<v Speaker 1>the FBI created its own crypto tokens, and as a result,

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<v Speaker 1>prosecutors were able to bring the first ever criminal charges

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<v Speaker 1>against financial services firms for market manipulation and wash trading

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<v Speaker 1>in the cryptocurrency industry. I've been talking to former federal

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<v Speaker 1>prosecutor Seth Kertz of Dorsey and Whitney. Do you think

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<v Speaker 1>that the defense will raise entrapment claims?

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<v Speaker 2>You know, entrapment is always a potential when you have

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<v Speaker 2>undercover operations, when you have issues like this, But what

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<v Speaker 2>you can always do to well, what the government will

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<v Speaker 2>surely do is that the defendants were doing this with

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<v Speaker 2>or without them anyway, and you show that by their

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<v Speaker 2>repeated pattern of conduct. And so when you have sixty

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<v Speaker 2>other tokens that were being manipulated in the same manner

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<v Speaker 2>that we're being washed, traded and then pumped and dumped

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<v Speaker 2>in the same way as next one, that's a very

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<v Speaker 2>difficult argument to make in good faith the entrapment issue.

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<v Speaker 2>I think one of them certainly will likely make it.

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<v Speaker 2>What becomes difficult cyber and cryptocurrency context is putting a person,

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<v Speaker 2>an individual person behind the keyboard, behind the computer screen,

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<v Speaker 2>attributing specific conduct to an individual when it's occurring digitally,

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<v Speaker 2>and so it will be interesting to see what contemporaneous emails,

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<v Speaker 2>with contemporaneous text messages that the DOJ was able to

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<v Speaker 2>get to attach specific individuals.

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<v Speaker 1>To this conduct because they use bots.

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<v Speaker 2>Because they use bots, because when it's an entity, when

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<v Speaker 2>it's an online and essentially an online decentralized entity that

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<v Speaker 2>is causing the activity to occur, it's hard to know

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<v Speaker 2>which specific you know, human being was actually causing that occur.

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<v Speaker 2>So you're exactly right, it's certainly these entities, these market

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<v Speaker 2>platforms were doing the were guilty of the bad conduct,

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<v Speaker 2>But which actual individuals have the specific criminal intent that

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<v Speaker 2>were causing these activities to occur. That's where it becomes

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<v Speaker 2>tricky in a cyber fraud cryptocurrency related criminal investigation. You know,

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<v Speaker 2>the activities occurred, demonstrate that is no problem in this case,

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<v Speaker 2>you see it, you can watch it. But actually attributing

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<v Speaker 2>that to a specific human being and then demonstrating criminal

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<v Speaker 2>intent to commit a fraud, that's where it becomes a

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<v Speaker 2>little trickier. And so you will need you would think

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<v Speaker 2>specific communications, other types of evidence to attach a person

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<v Speaker 2>to the actual conduct.

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<v Speaker 1>Has the DOJ done many trials involving cryptocurrency or do

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<v Speaker 1>they usually settle beforehand?

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<v Speaker 2>No, the DOJ, this is an area in which they

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<v Speaker 2>are definitely increasing their competence, their capabilities. They are in

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<v Speaker 2>trial routinely on these issues. I think this is the

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<v Speaker 2>first instance in which you have a full fledged undercover

0:13:41.280 --> 0:13:44.120
<v Speaker 2>operations of the creation of their own token. So it

0:13:44.120 --> 0:13:46.480
<v Speaker 2>will be interesting to see how the DOJ has to

0:13:46.520 --> 0:13:49.000
<v Speaker 2>put on that evidence. That's to explain how they did it,

0:13:49.240 --> 0:13:51.440
<v Speaker 2>how they created it, and communicate it in a way

0:13:51.440 --> 0:13:53.920
<v Speaker 2>in which they don't lose the jury, in which they

0:13:53.920 --> 0:13:56.199
<v Speaker 2>can demonstrate the activity of the curve. And there's a

0:13:56.240 --> 0:13:59.439
<v Speaker 2>lot of different concepts going on here. You have cryptocurrency

0:13:59.640 --> 0:14:01.800
<v Speaker 2>just on the one hand, explain that to a jury,

0:14:01.840 --> 0:14:05.000
<v Speaker 2>explain the creation of a token, explaining that the issues

0:14:05.040 --> 0:14:07.440
<v Speaker 2>with the type of investment fraud that was occurring here,

0:14:07.920 --> 0:14:11.040
<v Speaker 2>explaining the crime that occurred, and then having to put

0:14:11.080 --> 0:14:15.040
<v Speaker 2>specific individuals or tax specific individuals to that crime. So

0:14:15.080 --> 0:14:17.240
<v Speaker 2>there is a lot of moving parts. You know, several

0:14:17.280 --> 0:14:20.280
<v Speaker 2>defendants have already played guilty. They're likely going to cooperate

0:14:20.440 --> 0:14:22.520
<v Speaker 2>against those who don't, and so that's going to be

0:14:22.680 --> 0:14:26.880
<v Speaker 2>very powerful evidence. Having cooperating testimony, which will be I

0:14:26.880 --> 0:14:29.240
<v Speaker 2>would imagine its hugely helped with the government here, But

0:14:29.320 --> 0:14:31.160
<v Speaker 2>there is still a lot of moving parts and a

0:14:31.200 --> 0:14:33.360
<v Speaker 2>lot that you would have to prove and a trial

0:14:33.480 --> 0:14:36.200
<v Speaker 2>like this and so well, the dj certainly has experience

0:14:36.200 --> 0:14:39.640
<v Speaker 2>in cybercrimes and cryptocurrency. This is novel, and it will

0:14:39.640 --> 0:14:42.080
<v Speaker 2>be interesting to see how they put this evidence on

0:14:42.160 --> 0:14:43.400
<v Speaker 2>at trials should one occur.

0:14:44.160 --> 0:14:49.880
<v Speaker 1>In researching this, I saw some basically anonymous allegations that

0:14:49.960 --> 0:14:55.320
<v Speaker 1>the FBI, in creating this token had violated the copyright laws,

0:14:55.960 --> 0:14:58.760
<v Speaker 1>perhaps by not getting a license on the code.

0:14:59.240 --> 0:15:01.520
<v Speaker 2>Oh that's interesting, well, you know, and that will be

0:15:02.240 --> 0:15:06.280
<v Speaker 2>that's that's where this does become interesting, because how the

0:15:06.360 --> 0:15:11.000
<v Speaker 2>FBI created its token and you know, the propriety of

0:15:11.080 --> 0:15:13.720
<v Speaker 2>it doing so, and whether it was a you know,

0:15:14.040 --> 0:15:18.560
<v Speaker 2>legally authorized token for any number of reasons. It's certainly

0:15:18.560 --> 0:15:22.560
<v Speaker 2>an interesting question and possibly goes to an entrapment defense. Potentially,

0:15:22.920 --> 0:15:25.160
<v Speaker 2>it is something I would think defense would certainly try

0:15:25.160 --> 0:15:29.080
<v Speaker 2>to raise. But whether that was or not, I think

0:15:29.320 --> 0:15:31.720
<v Speaker 2>the difficult to get defendants have in this case is

0:15:31.760 --> 0:15:34.600
<v Speaker 2>that it wasn't just the FBI token that was manipulated.

0:15:35.200 --> 0:15:38.360
<v Speaker 2>It was the FBI token along with sixty others. And

0:15:38.400 --> 0:15:41.280
<v Speaker 2>what the FBI token allowed FBI to do was to

0:15:41.360 --> 0:15:45.840
<v Speaker 2>get complete visibility into how these defendants were manipulating the

0:15:45.880 --> 0:15:50.760
<v Speaker 2>cryptocurrency market through their activities. And so even if sort

0:15:50.760 --> 0:15:53.360
<v Speaker 2>of there were issues with this FBI tokens, they still

0:15:53.360 --> 0:15:55.600
<v Speaker 2>have all the evidence of the visibility of how they

0:15:55.640 --> 0:15:59.960
<v Speaker 2>were manipulating fifty nine others. That's speculation of my part

0:16:00.600 --> 0:16:02.640
<v Speaker 2>without sort of knowing too much of the weeds of

0:16:02.680 --> 0:16:05.840
<v Speaker 2>how the token was created. But it is interesting, and

0:16:06.400 --> 0:16:09.720
<v Speaker 2>the unique thing about cryptocurrency is once you can get

0:16:09.720 --> 0:16:12.240
<v Speaker 2>a window into the activity that's occurring and you sort

0:16:12.240 --> 0:16:15.560
<v Speaker 2>of get an ability to model it to understand it.

0:16:15.640 --> 0:16:19.640
<v Speaker 2>The nature of a public ledger, a blockchain allows so

0:16:19.800 --> 0:16:23.800
<v Speaker 2>much visibility into how activity is occurring that if you

0:16:23.840 --> 0:16:27.080
<v Speaker 2>are doing it on a wide scale basis, as it

0:16:27.080 --> 0:16:30.920
<v Speaker 2>appears these defendants were, law enforcement is given a tremendous

0:16:30.960 --> 0:16:32.640
<v Speaker 2>amount of information as a result of that.

0:16:33.800 --> 0:16:36.160
<v Speaker 1>And the acting US Attorney said, this is a case

0:16:36.200 --> 0:16:42.200
<v Speaker 1>where an innovative technology cryptocurrency met a century old scheme

0:16:42.560 --> 0:16:43.400
<v Speaker 1>to pump and dump.

0:16:43.760 --> 0:16:47.120
<v Speaker 2>It's an interesting case and that you have in a

0:16:47.160 --> 0:16:50.320
<v Speaker 2>lot of ways, these old school methods, old school types

0:16:50.320 --> 0:16:53.760
<v Speaker 2>of investment fraud being brought forward into a more advanced

0:16:53.800 --> 0:16:57.600
<v Speaker 2>digital age. And you have various investigative tools like undercover

0:16:57.680 --> 0:17:01.760
<v Speaker 2>operations that have existed forever but being brought forward into

0:17:01.800 --> 0:17:05.119
<v Speaker 2>again more advanced digital age. And you're seeing the interplay

0:17:05.160 --> 0:17:08.679
<v Speaker 2>of those and you're seeing, you know, cryptocurrency so often

0:17:08.760 --> 0:17:12.040
<v Speaker 2>hear about how it is utilized by criminals to obviouscate

0:17:12.080 --> 0:17:15.359
<v Speaker 2>in the high activity. Well, the government has now entered

0:17:15.440 --> 0:17:17.480
<v Speaker 2>the playing field, and he was using it in a

0:17:17.520 --> 0:17:21.119
<v Speaker 2>way to hide and to allow a very sophisticated undercover

0:17:21.160 --> 0:17:22.439
<v Speaker 2>operation to go forward.

0:17:22.800 --> 0:17:26.080
<v Speaker 1>Perhaps this is the first of many. Thanks so much, Seth.

0:17:26.359 --> 0:17:29.359
<v Speaker 1>That's Seth Gertz, a partner at Dorsey and Whitney. Turning

0:17:29.440 --> 0:17:31.760
<v Speaker 1>to a trial now in which the jury is being

0:17:31.800 --> 0:17:36.560
<v Speaker 1>selected in Illinois. The defendant's reign over Illinois politics is

0:17:36.600 --> 0:17:40.879
<v Speaker 1>reflected in his nickname the Velvet Hammer, earned because of

0:17:40.920 --> 0:17:44.080
<v Speaker 1>the way he led the Illinois House of Representatives and

0:17:44.200 --> 0:17:48.359
<v Speaker 1>extracted fealty from its members. As the longest serving House

0:17:48.480 --> 0:17:52.040
<v Speaker 1>leader of any state in US history, but now at

0:17:52.080 --> 0:17:56.800
<v Speaker 1>eighty two. Michael Madigan is facing corruption charges for allegedly

0:17:56.880 --> 0:18:01.520
<v Speaker 1>running a criminal enterprise for nearly a decade, a multimillion

0:18:01.600 --> 0:18:06.320
<v Speaker 1>dollar racketeering and bribery scheme that included the state's largest

0:18:06.440 --> 0:18:10.040
<v Speaker 1>utility comm ed and the case will test the government's

0:18:10.080 --> 0:18:15.000
<v Speaker 1>ability to prosecute corruption after the Supreme Court case narrowing

0:18:15.040 --> 0:18:18.879
<v Speaker 1>the scope of a federal bribery law last term. Joining

0:18:18.920 --> 0:18:22.959
<v Speaker 1>me is former federal prosecutor Brian Klein, a partner Waymaker

0:18:23.359 --> 0:18:24.879
<v Speaker 1>tell us about the charges here.

0:18:25.400 --> 0:18:29.560
<v Speaker 3>Yeah, he's charged with racketeering, bribery, and wire fraud. And

0:18:29.600 --> 0:18:33.000
<v Speaker 3>that's expected to be a ten week trial. Obviously, things

0:18:33.000 --> 0:18:35.520
<v Speaker 3>have been going on for quite some time. There's been

0:18:35.560 --> 0:18:40.000
<v Speaker 3>other trials of other defendants tied to these charges. He's

0:18:40.080 --> 0:18:43.200
<v Speaker 3>charged with basically trading on his position as the leader

0:18:43.240 --> 0:18:46.280
<v Speaker 3>of the state House of Representatives. I'm the chairman of

0:18:46.320 --> 0:18:49.440
<v Speaker 3>the Democratic Party in Illinois as well as he's also

0:18:49.880 --> 0:18:52.480
<v Speaker 3>I believe involved an award and he worked at a

0:18:52.560 --> 0:18:55.439
<v Speaker 3>law firm to a tax firm, probably tax firm, So

0:18:55.520 --> 0:19:00.320
<v Speaker 3>basically trading his position of power for financial benefits getting

0:19:00.359 --> 0:19:02.080
<v Speaker 3>things through the legislature.

0:19:02.440 --> 0:19:04.680
<v Speaker 1>How far back to the allegations.

0:19:04.000 --> 0:19:06.960
<v Speaker 3>Go, they switched back to years and he was really

0:19:07.440 --> 0:19:10.240
<v Speaker 3>like a living legend in the state of Illinois because

0:19:10.280 --> 0:19:13.520
<v Speaker 3>of the power he accumulated at length time that he

0:19:13.720 --> 0:19:16.919
<v Speaker 3>was in power. And this is obviously a very important

0:19:17.000 --> 0:19:20.560
<v Speaker 3>case following the Supreme Court Snyder ruling that came out

0:19:20.800 --> 0:19:25.280
<v Speaker 3>earlier this year, which essentially said that you know, just

0:19:25.320 --> 0:19:28.960
<v Speaker 3>giving a politician to gratuity isn't enough to make it

0:19:29.000 --> 0:19:31.760
<v Speaker 3>a federal crime. The federal bribery laws, you actually have

0:19:31.840 --> 0:19:35.080
<v Speaker 3>to have a quid pro quote an exchange, so you

0:19:35.119 --> 0:19:38.160
<v Speaker 3>give them some money or a watch or something in exchange,

0:19:38.240 --> 0:19:40.160
<v Speaker 3>they are going to actually take an official act.

0:19:40.600 --> 0:19:43.359
<v Speaker 1>The government here is alleging that there was this quid

0:19:43.400 --> 0:19:46.400
<v Speaker 1>pro quote, that there was a deal in place before

0:19:47.000 --> 0:19:48.920
<v Speaker 1>the alleged corruption.

0:19:50.240 --> 0:19:52.960
<v Speaker 3>They are his lawyers. After the Snyder ruling came down,

0:19:53.200 --> 0:19:55.600
<v Speaker 3>sought to have certain of the charges dismissed and challenge

0:19:55.680 --> 0:19:58.399
<v Speaker 3>them and they lost that ruling, and they're in the

0:19:58.480 --> 0:20:03.080
<v Speaker 3>Seventh Circuit. That circuit has its view of the bribery

0:20:03.119 --> 0:20:06.359
<v Speaker 3>statutes and how briberry is effectuated, has this stream of

0:20:06.440 --> 0:20:09.960
<v Speaker 3>payments theory, so it's not just one payment for one act.

0:20:10.480 --> 0:20:12.800
<v Speaker 3>You can have an agreement that you reach and then

0:20:12.840 --> 0:20:15.800
<v Speaker 3>over time, there can be these streams of payment, and

0:20:15.840 --> 0:20:18.560
<v Speaker 3>it's I think potentially possible that, like you can't match

0:20:18.640 --> 0:20:21.919
<v Speaker 3>up every payment with some act, but it's sort of

0:20:22.400 --> 0:20:26.000
<v Speaker 3>the theory is there's this ongoing relationship where you're doing

0:20:26.080 --> 0:20:29.280
<v Speaker 3>these quid pro quos and you're getting payments over time.

0:20:29.320 --> 0:20:32.440
<v Speaker 3>So those are the focus of these allegations. Of course,

0:20:32.480 --> 0:20:36.840
<v Speaker 3>his lawyers dispute this. You know, he's presumed innocent, found guilty,

0:20:37.040 --> 0:20:40.000
<v Speaker 3>and you know there's been fighting very hard on his

0:20:40.119 --> 0:20:41.560
<v Speaker 3>behalf before we.

0:20:41.560 --> 0:20:45.119
<v Speaker 1>Get to his possible defenses. So is the heart of

0:20:45.160 --> 0:20:51.040
<v Speaker 1>the prosecution's case, this informant former Chicago alderman appears to be.

0:20:51.119 --> 0:20:54.040
<v Speaker 3>They also have a lot of tastes. Unclear who actually

0:20:54.080 --> 0:20:56.560
<v Speaker 3>made all those tastes, at least right now, but there's

0:20:56.600 --> 0:20:59.280
<v Speaker 3>a lot of you know what you call like secret

0:20:59.320 --> 0:21:02.959
<v Speaker 3>recordings they plan introduced. I think there's hundreds of them.

0:21:02.960 --> 0:21:04.240
<v Speaker 3>I don't know if they're prod uce all of them,

0:21:05.040 --> 0:21:08.159
<v Speaker 3>but it does appear that, you know, their case is

0:21:08.200 --> 0:21:11.080
<v Speaker 3>built on sort of peeking behind the curtain of what

0:21:11.359 --> 0:21:14.359
<v Speaker 3>happened here with recordings, and presumably they're going to call

0:21:14.400 --> 0:21:17.800
<v Speaker 3>witnesses who were around and actually witnessed them, whether they

0:21:17.920 --> 0:21:20.359
<v Speaker 3>knew about them or just were asked to do.

0:21:20.240 --> 0:21:25.240
<v Speaker 1>Something incline of waymaker. The government has already won convictions

0:21:25.240 --> 0:21:30.080
<v Speaker 1>against several people since it started to investigate the former

0:21:30.160 --> 0:21:34.600
<v Speaker 1>speaker and other Illinois politicians. Individuals known as the comment

0:21:34.840 --> 0:21:38.879
<v Speaker 1>for for instance, were convicted of facilitating the hiring of

0:21:38.880 --> 0:21:43.160
<v Speaker 1>Madigan associates for no work jobs. So jurors delivered guilty

0:21:43.240 --> 0:21:47.399
<v Speaker 1>verdicts in those cases for conspiring to bribe Madigan. But

0:21:47.480 --> 0:21:51.240
<v Speaker 1>then but the jury failed to reach a verdict in

0:21:51.320 --> 0:21:54.960
<v Speaker 1>a case charging former at and T Illinois President Paul

0:21:55.040 --> 0:21:59.600
<v Speaker 1>Lochiatza with bribing Madigan. So the government has had mixed

0:21:59.680 --> 0:22:02.160
<v Speaker 1>verdicts having to do with these facts.

0:22:03.200 --> 0:22:05.840
<v Speaker 3>Well, it's a little hard to say because each trial

0:22:05.920 --> 0:22:09.679
<v Speaker 3>is so specific, you know, and Madigan's going to be

0:22:09.800 --> 0:22:12.040
<v Speaker 3>He's the center point, you know, He's the big fish

0:22:12.080 --> 0:22:16.199
<v Speaker 3>here what they're going after. So sometimes, and I'll just

0:22:16.240 --> 0:22:19.280
<v Speaker 3>call it a little fish, trials go mix directions for

0:22:19.359 --> 0:22:22.959
<v Speaker 3>various reasons. But it doesn't mean, you know, I wouldn't

0:22:23.000 --> 0:22:26.160
<v Speaker 3>read too much into it about how successful they may

0:22:26.200 --> 0:22:29.919
<v Speaker 3>be improving their charges against Madigan. Now, there's an advantage

0:22:29.920 --> 0:22:32.800
<v Speaker 3>to the defense here, which is they learn a lot

0:22:32.880 --> 0:22:35.480
<v Speaker 3>about the government theory of the case. They also have

0:22:35.520 --> 0:22:40.680
<v Speaker 3>transcripts from those trials, So the defense has an advantage

0:22:40.680 --> 0:22:44.040
<v Speaker 3>in that sense. It's not walking into you know, there's

0:22:44.080 --> 0:22:45.720
<v Speaker 3>not going to be as many surprises for them, and

0:22:45.840 --> 0:22:51.600
<v Speaker 3>allows them to prepare better for cross examination, exhibit, to

0:22:51.640 --> 0:22:54.000
<v Speaker 3>think through how they're going to challenge the government's case.

0:22:55.359 --> 0:22:57.840
<v Speaker 1>I mean, does the government have any advantage by having

0:22:57.880 --> 0:23:02.400
<v Speaker 1>been through a presentation of something close to what they

0:23:02.400 --> 0:23:03.360
<v Speaker 1>have against Madigan?

0:23:04.359 --> 0:23:06.240
<v Speaker 3>Yeah, they had this. They had a like sort of

0:23:06.240 --> 0:23:08.840
<v Speaker 3>the other side of that coin, which is they now

0:23:08.960 --> 0:23:11.960
<v Speaker 3>can see what was resonating arguably with the jury and

0:23:11.960 --> 0:23:15.000
<v Speaker 3>what wasn't. So in the hung trial hujury trial, they

0:23:15.000 --> 0:23:18.480
<v Speaker 3>may they feel like they can recalibrate some of their

0:23:18.520 --> 0:23:21.159
<v Speaker 3>presentation to deal with issues. They may. I don't know

0:23:21.160 --> 0:23:22.959
<v Speaker 3>that they did, but it's possible they spoke with some

0:23:23.000 --> 0:23:27.240
<v Speaker 3>of the jurors afterwards. Possible they learned things during the

0:23:27.280 --> 0:23:30.400
<v Speaker 3>trial just because observe jurors, how they were responding, whether

0:23:30.440 --> 0:23:34.879
<v Speaker 3>they were paying attention. So each side gains information. You know,

0:23:34.920 --> 0:23:36.359
<v Speaker 3>the real question is who's going to be able to

0:23:36.400 --> 0:23:37.280
<v Speaker 3>put its better use.

0:23:38.119 --> 0:23:41.480
<v Speaker 1>So you mentioned that the Supreme Court has narrowed the

0:23:41.520 --> 0:23:45.040
<v Speaker 1>scope of the federal bribery law. That's the federal bribery

0:23:45.119 --> 0:23:46.600
<v Speaker 1>law that's at issue.

0:23:46.240 --> 0:23:49.720
<v Speaker 3>Here, Snyder case. You know, it's far reaching implications, not

0:23:49.840 --> 0:23:52.960
<v Speaker 3>just for this case with Madigan, but when the federal

0:23:52.960 --> 0:23:56.119
<v Speaker 3>prosecutes are playing federal bribery statutes, you know, the courts

0:23:56.119 --> 0:23:58.359
<v Speaker 3>are going to be looking at whether there was a

0:23:58.400 --> 0:24:01.480
<v Speaker 3>quid pro qo and how that's viewed is open to

0:24:01.520 --> 0:24:05.040
<v Speaker 3>interpretation by lower courts. But you know, not all of

0:24:05.040 --> 0:24:07.400
<v Speaker 3>his charges relate to that either. So he has other

0:24:07.480 --> 0:24:11.040
<v Speaker 3>charges fire fraud right as an example, So that's not

0:24:11.240 --> 0:24:14.080
<v Speaker 3>going to be covered by that. So but you know,

0:24:14.720 --> 0:24:16.800
<v Speaker 3>I think if you're a defense lawyer, and I'm sure

0:24:17.400 --> 0:24:19.320
<v Speaker 3>his lawyers here are looking at them and saying, look,

0:24:19.359 --> 0:24:22.480
<v Speaker 3>we want to maybe we can use those charges to

0:24:22.520 --> 0:24:25.240
<v Speaker 3>help undermine the other charges too, So you know, we

0:24:25.240 --> 0:24:29.000
<v Speaker 3>can knock out, you know, the bribery charges either with

0:24:29.040 --> 0:24:31.280
<v Speaker 3>the jury or the judge at some point along the way,

0:24:32.000 --> 0:24:35.680
<v Speaker 3>and that will expose deficiencies or cause the judge or

0:24:35.680 --> 0:24:38.600
<v Speaker 3>the jury or both to question the government's case overall.

0:24:39.320 --> 0:24:41.200
<v Speaker 3>So I think, you know, it's always helpful with the

0:24:41.240 --> 0:24:44.640
<v Speaker 3>defense lawyer if you have Supreme court precedent coming out

0:24:44.760 --> 0:24:48.359
<v Speaker 3>that generally is supportive or helps you.

0:24:50.560 --> 0:24:53.120
<v Speaker 1>One of the defenses is something that we hear over

0:24:53.160 --> 0:24:55.760
<v Speaker 1>and over again. I mean Eric Adams, who was just

0:24:55.800 --> 0:24:58.160
<v Speaker 1>indicted in New York. The mayor of New York has

0:24:58.160 --> 0:25:02.159
<v Speaker 1>said this, and his attorneys have said it basically, you know,

0:25:02.720 --> 0:25:05.800
<v Speaker 1>this is what politicians do. We do favors for people.

0:25:06.720 --> 0:25:09.679
<v Speaker 3>Yes, And I think that's a common defense in these

0:25:09.720 --> 0:25:12.760
<v Speaker 3>types of cases. And also, frankly, a lot of jurors

0:25:12.760 --> 0:25:15.640
<v Speaker 3>are going to understand or feel that politicians do trade

0:25:15.680 --> 0:25:19.360
<v Speaker 3>on favors, right, that's just the practical reality and perception

0:25:19.440 --> 0:25:21.760
<v Speaker 3>of politicians. Now, a lot of people also think that

0:25:22.600 --> 0:25:28.120
<v Speaker 3>all or most politicians are corrupt, So that cuts both ways, right. Probably,

0:25:28.520 --> 0:25:32.760
<v Speaker 3>you know they're going to get these twelve jurors plus

0:25:32.800 --> 0:25:34.920
<v Speaker 3>six or whatever number of ultimates. They're going to have

0:25:34.960 --> 0:25:38.880
<v Speaker 3>their own real life experiences understanding of politics and their

0:25:38.960 --> 0:25:41.120
<v Speaker 3>views on it. This is going to be vetted during

0:25:41.160 --> 0:25:45.040
<v Speaker 3>the jury selection process. But you know, you ask most

0:25:45.080 --> 0:25:48.760
<v Speaker 3>people in the street, are politicians corrupt? Do they trade favors?

0:25:48.760 --> 0:25:50.600
<v Speaker 3>The answer is going to be yes, A lot of

0:25:50.600 --> 0:25:54.320
<v Speaker 3>them are. So I don't know how that's going to

0:25:54.359 --> 0:25:57.320
<v Speaker 3>play out. With this jury. But I think, you know,

0:25:57.480 --> 0:26:00.960
<v Speaker 3>they're because of these recordings, which is the presumably has

0:26:01.000 --> 0:26:02.480
<v Speaker 3>listened to, and because they've seen a lot of the

0:26:02.480 --> 0:26:04.159
<v Speaker 3>evidence because the government has to give it to him

0:26:04.160 --> 0:26:06.879
<v Speaker 3>in advance. You know, they have to deal with the

0:26:06.920 --> 0:26:09.400
<v Speaker 3>reality of some of the statements, some of the things

0:26:09.440 --> 0:26:12.359
<v Speaker 3>that happened. They can't just pretend it didn't happen. My

0:26:12.440 --> 0:26:14.679
<v Speaker 3>guess is that the government has a lot of proof

0:26:15.440 --> 0:26:18.240
<v Speaker 3>of a number of these things. The question is, how

0:26:18.240 --> 0:26:21.320
<v Speaker 3>do you, you know, look at it overall, like what happened?

0:26:21.600 --> 0:26:23.240
<v Speaker 3>And I think the defense is going to say, Okay,

0:26:23.960 --> 0:26:25.960
<v Speaker 3>each of these may be little trees, but let's look

0:26:25.960 --> 0:26:29.520
<v Speaker 3>at the forest here, right, or maybe the opposite that say,

0:26:30.240 --> 0:26:32.439
<v Speaker 3>government's trying to tell you this is one big forest,

0:26:32.960 --> 0:26:34.760
<v Speaker 3>but let's look at each of these acts and look

0:26:34.760 --> 0:26:38.160
<v Speaker 3>at the trees and it is so you know, that's

0:26:38.160 --> 0:26:40.120
<v Speaker 3>going to be an interesting thing to see play out,

0:26:40.200 --> 0:26:45.040
<v Speaker 3>is how the defense responds to the recordings, however, responds

0:26:45.080 --> 0:26:48.639
<v Speaker 3>to the witnesses who come in. And you know, we

0:26:48.760 --> 0:26:51.479
<v Speaker 3>will learn a lot with the opening statements, because that's

0:26:51.800 --> 0:26:55.000
<v Speaker 3>both sides opportunity to frame the case for the jury

0:26:55.000 --> 0:26:57.920
<v Speaker 3>at the very beginning and how they expect the evidence

0:26:58.119 --> 0:27:01.320
<v Speaker 3>to come in, both witness testimonies and documents and recording.

0:27:02.240 --> 0:27:04.480
<v Speaker 1>So I mean this is a kind of case if

0:27:04.520 --> 0:27:08.960
<v Speaker 1>he loses, that the Supreme Court could take up as

0:27:08.960 --> 0:27:12.639
<v Speaker 1>sort of the next And they're continuing cutting back on

0:27:12.880 --> 0:27:14.680
<v Speaker 1>prosecutions of public corruption.

0:27:15.240 --> 0:27:18.320
<v Speaker 3>Spreme Court has been very interested in public corruption cases

0:27:18.359 --> 0:27:20.840
<v Speaker 3>in the last five to ten years. They've addressed a

0:27:20.920 --> 0:27:25.000
<v Speaker 3>number of it. They've really narrowed prosecutors' views of the

0:27:25.000 --> 0:27:28.520
<v Speaker 3>statutes and the cases. And I think that the defense

0:27:29.040 --> 0:27:32.720
<v Speaker 3>is clearly aware of that. I think brief Snyder recently,

0:27:32.880 --> 0:27:36.359
<v Speaker 3>there's no doubt thinking ahead of it. If our client

0:27:36.400 --> 0:27:38.960
<v Speaker 3>gets convicted, we want to have a good record for appeal.

0:27:39.480 --> 0:27:42.240
<v Speaker 3>We'd want this to be something the Seventh Circuit would

0:27:42.400 --> 0:27:44.840
<v Speaker 3>decide in our favor, but if they don't, then we'd

0:27:44.840 --> 0:27:47.399
<v Speaker 3>want something that the Supreme Court might bite at. Supreme

0:27:47.400 --> 0:27:50.600
<v Speaker 3>Court takes very few cases nowadays, under one hundred cases

0:27:50.640 --> 0:27:55.600
<v Speaker 3>a year typically, so it's very hard to assume the

0:27:55.640 --> 0:27:59.200
<v Speaker 3>Supreme Court is going to take your case. The fact

0:27:59.200 --> 0:28:03.080
<v Speaker 3>that this is a very prominent case, very prominent former politician,

0:28:03.600 --> 0:28:06.800
<v Speaker 3>you know, a very high profile case makes it more likely.

0:28:06.920 --> 0:28:09.320
<v Speaker 3>But it's just really impossible to predict this juncture.

0:28:09.720 --> 0:28:14.400
<v Speaker 1>The Supreme Court's limiting of public corruption cases started quite

0:28:14.440 --> 0:28:17.280
<v Speaker 1>a while ago with the McDonald case, but still, were

0:28:17.280 --> 0:28:20.879
<v Speaker 1>you surprised by how far they went in the Snyder

0:28:21.000 --> 0:28:22.840
<v Speaker 1>case last term?

0:28:23.160 --> 0:28:25.760
<v Speaker 3>I mean, I wasn't surprising, since I think they were

0:28:25.800 --> 0:28:28.440
<v Speaker 3>getting to the right of result, but you just never

0:28:28.600 --> 0:28:31.480
<v Speaker 3>know where they're going to come down. I think this

0:28:31.560 --> 0:28:37.960
<v Speaker 3>Supreme Court often reads statutes fairly narrowly and interprets them

0:28:38.080 --> 0:28:41.520
<v Speaker 3>very narrowly overall because of the composition of them and

0:28:41.600 --> 0:28:46.320
<v Speaker 3>their backgrounds and how they approached statutory interpretation. So I

0:28:46.320 --> 0:28:49.200
<v Speaker 3>guess it wasn't that surprising in this sense, but you

0:28:49.320 --> 0:28:52.920
<v Speaker 3>just really never know. Then the world of criminal defense,

0:28:53.000 --> 0:28:56.080
<v Speaker 3>in the world of criminal law, prosecutors who do these cases,

0:28:56.120 --> 0:28:58.800
<v Speaker 3>that obviously is a seminal case that's gotten a lot.

0:28:58.640 --> 0:29:02.680
<v Speaker 1>Of attentions mentioned it in the Eric Adams case as well.

0:29:02.800 --> 0:29:07.120
<v Speaker 1>So it seems like it's a tougher road for prosecutors

0:29:07.360 --> 0:29:09.120
<v Speaker 1>these days to get someone on bribery.

0:29:09.360 --> 0:29:11.400
<v Speaker 3>I would, says the Temple, It should always be a

0:29:11.400 --> 0:29:15.400
<v Speaker 3>tough road. Proving criminal chargers should always should not be easy.

0:29:15.680 --> 0:29:17.600
<v Speaker 3>I mean, you know, the burden of proof is on

0:29:17.640 --> 0:29:21.000
<v Speaker 3>the government. They have a lot of power and it's

0:29:21.040 --> 0:29:24.360
<v Speaker 3>really important that they be appropriately constrained. You know, both

0:29:24.400 --> 0:29:26.560
<v Speaker 3>sides are going to be very mindful of Snyder and

0:29:26.600 --> 0:29:28.200
<v Speaker 3>they're not going to want to trip over well, the

0:29:28.240 --> 0:29:30.120
<v Speaker 3>government's not going to want to trip over it, and

0:29:30.160 --> 0:29:32.840
<v Speaker 3>the defense is going to be opening that the government

0:29:32.880 --> 0:29:35.160
<v Speaker 3>does right. So I think that's going to be an

0:29:35.200 --> 0:29:36.400
<v Speaker 3>important overlay here.

0:29:36.680 --> 0:29:40.160
<v Speaker 1>Thanks for being on the show. That's former federal prosecutor

0:29:40.320 --> 0:29:43.760
<v Speaker 1>Brian Klein, a partner at Waymaker. And that's it for

0:29:43.800 --> 0:29:46.840
<v Speaker 1>this edition of the Bloomberg Law Podcast. Remember you can

0:29:46.880 --> 0:29:49.800
<v Speaker 1>always get the latest legal news by subscribing and listening

0:29:49.840 --> 0:29:53.560
<v Speaker 1>to the show on Apple Podcasts, Spotify, and at Bloomberg

0:29:53.600 --> 0:29:57.720
<v Speaker 1>dot com, slash podcast, Slash Law. I'm June Grosso and

0:29:57.760 --> 0:29:59.040
<v Speaker 1>this is Bloomberg