1 00:00:00,200 --> 00:00:03,120 Speaker 1: Barkley's in the US Justice Department are engaged in a 2 00:00:03,240 --> 00:00:07,080 Speaker 1: legal battle over the suspected fraudulent sale of mortgage securities 3 00:00:07,120 --> 00:00:10,320 Speaker 1: a decade ago. But is there a settlement in the offing? 4 00:00:10,440 --> 00:00:13,760 Speaker 1: In the offing, they've reopened negotiations about an out of 5 00:00:13,800 --> 00:00:16,600 Speaker 1: court settlement at the request of the London Bank, According 6 00:00:16,640 --> 00:00:19,640 Speaker 1: to people with knowledge of the situation, joining us as 7 00:00:19,640 --> 00:00:23,639 Speaker 1: Professor Robert Hocket of Cornell University Law School, Bob, let's 8 00:00:23,680 --> 00:00:28,040 Speaker 1: begin with the lawsuit itself tell us about it. Yeah, 9 00:00:28,040 --> 00:00:30,360 Speaker 1: so this is in a certain sense kind of familiar, 10 00:00:30,400 --> 00:00:32,239 Speaker 1: at least as far as the content of it goes right. 11 00:00:32,280 --> 00:00:37,800 Speaker 1: The claim is that Barkley's quite cavalierly sold defective mortgage 12 00:00:37,800 --> 00:00:42,440 Speaker 1: backed securities to its various customers, and that it's financed, indeed, 13 00:00:42,880 --> 00:00:45,959 Speaker 1: the extending of mortgage loans to people who are very 14 00:00:45,960 --> 00:00:48,800 Speaker 1: bad risks. So it's essentially a kind of classic sort 15 00:00:48,840 --> 00:00:52,160 Speaker 1: of securities fraud type claim or wire fraud type claim. 16 00:00:52,560 --> 00:00:56,600 Speaker 1: Um quite a great deal like many other such cases 17 00:00:56,880 --> 00:00:59,200 Speaker 1: or suits that we've heard about in the year's past. 18 00:00:59,280 --> 00:01:01,600 Speaker 1: What was sort of different about this one was essentially 19 00:01:01,600 --> 00:01:04,480 Speaker 1: the sort of tardiness with which it was filed. This 20 00:01:04,560 --> 00:01:08,240 Speaker 1: wasn't filed until last December, and in the essentially the 21 00:01:08,240 --> 00:01:12,280 Speaker 1: waning days of the Obama Justice Department, well bob other 22 00:01:12,440 --> 00:01:16,440 Speaker 1: lenders negotiated settlements worth tens of billions of dollars in 23 00:01:16,520 --> 00:01:20,640 Speaker 1: penalties overall, rather than risk litigation. Deutsche Bank paid seven 24 00:01:20,640 --> 00:01:24,280 Speaker 1: point two billion dollars, but people familiar with the situation 25 00:01:24,319 --> 00:01:27,080 Speaker 1: say Barkley's was willing to pay no more than two 26 00:01:27,120 --> 00:01:30,559 Speaker 1: billion to settle the matter, while the Justice Department reportedly 27 00:01:30,640 --> 00:01:34,399 Speaker 1: demanded five billion. What are some of the possible reasons 28 00:01:34,440 --> 00:01:39,080 Speaker 1: that Barkley's preferred having the government suet well that there 29 00:01:39,080 --> 00:01:42,039 Speaker 1: seemed to be two possibilities at least that come to 30 00:01:42,120 --> 00:01:45,640 Speaker 1: my mind. The first is that Barkley's actually believed what 31 00:01:45,760 --> 00:01:48,960 Speaker 1: it said at the time, which was that, well, look, 32 00:01:49,040 --> 00:01:51,520 Speaker 1: we didn't do nearly as much of this kind of 33 00:01:51,640 --> 00:01:54,360 Speaker 1: thing as the other banks did, and we certainly didn't 34 00:01:54,360 --> 00:01:58,360 Speaker 1: do anything nearly as much as the American banks did. Uh, 35 00:01:58,360 --> 00:02:00,360 Speaker 1: and so the settle, the kind of settlement that would 36 00:02:00,360 --> 00:02:03,400 Speaker 1: be reasonable for us, should be much lower than were 37 00:02:03,400 --> 00:02:07,440 Speaker 1: the settlements for other American banks, especially, but also other 38 00:02:07,480 --> 00:02:11,040 Speaker 1: European banks, including Deutsche Bank. UM. So that was that 39 00:02:11,160 --> 00:02:13,919 Speaker 1: was one I think. I mean, if they believed that 40 00:02:13,960 --> 00:02:15,800 Speaker 1: when they said it, then that might be one reason 41 00:02:15,800 --> 00:02:19,000 Speaker 1: they might have been standing on principle. A second possibility 42 00:02:19,120 --> 00:02:22,720 Speaker 1: is that because the suit in their case was sort 43 00:02:22,720 --> 00:02:25,799 Speaker 1: of looming fairly late in the game, and by which 44 00:02:25,800 --> 00:02:27,280 Speaker 1: I mean late in the in the time of the 45 00:02:27,320 --> 00:02:30,440 Speaker 1: Obama administration, they might very well have been guessing or 46 00:02:30,520 --> 00:02:33,000 Speaker 1: betting that they could actually do better with a Trump 47 00:02:33,040 --> 00:02:35,800 Speaker 1: to Justice Department in any event, because that department doesn't 48 00:02:35,800 --> 00:02:39,960 Speaker 1: seem to have been quite as zealous about pursuing securities 49 00:02:39,960 --> 00:02:42,520 Speaker 1: broad type matters, although it must be said that the 50 00:02:42,560 --> 00:02:47,400 Speaker 1: Obama o j wasn't particularly zealous about this either. Barclay's 51 00:02:47,440 --> 00:02:50,120 Speaker 1: asked a federal judge in Brooklyn to dismiss the case 52 00:02:50,200 --> 00:02:55,080 Speaker 1: this month now, in April, the judge skeptically urged Barkley's 53 00:02:55,080 --> 00:02:58,680 Speaker 1: to settle rather than request the case dismissal. So is 54 00:02:58,680 --> 00:03:02,720 Speaker 1: that a clear ignal or fairly clear signal that they're 55 00:03:02,800 --> 00:03:06,520 Speaker 1: unlikely to win dismissal of the government suit? Yeah, I 56 00:03:06,560 --> 00:03:09,600 Speaker 1: think that's a very that's that's not a particularly ambiguous 57 00:03:09,600 --> 00:03:13,280 Speaker 1: signals that way. And there was one other signal that 58 00:03:13,360 --> 00:03:15,120 Speaker 1: came out as well, and that was that the Trump 59 00:03:15,160 --> 00:03:19,440 Speaker 1: p o J contested right, that particular request, right, that 60 00:03:19,480 --> 00:03:22,560 Speaker 1: particular motion to dismiss was contested by the Trump d 61 00:03:22,639 --> 00:03:25,480 Speaker 1: o J. And that itself might also have come as 62 00:03:25,600 --> 00:03:28,240 Speaker 1: something of a surprise to Bartley's because again, you know, 63 00:03:28,360 --> 00:03:32,080 Speaker 1: one leading theory I suppose as to what Barkley's is 64 00:03:32,120 --> 00:03:34,800 Speaker 1: thinking is that or at least what they were thinking, 65 00:03:34,880 --> 00:03:36,960 Speaker 1: is that they were probably thinking that they would actually 66 00:03:37,200 --> 00:03:39,760 Speaker 1: again fair better under a Trump d o J. And 67 00:03:39,760 --> 00:03:41,560 Speaker 1: that doesn't seem to be happening for them, So they 68 00:03:41,560 --> 00:03:45,240 Speaker 1: seem to be reassessing partly on that basis. And Bob, 69 00:03:45,640 --> 00:03:48,560 Speaker 1: the bank and its chief executive officer are also under 70 00:03:48,600 --> 00:03:51,480 Speaker 1: scrutiny in the UK, the Bank by the Serious Fraud 71 00:03:51,600 --> 00:03:56,040 Speaker 1: Office and Justice Daily by the Financial Conduct Authority. What's 72 00:03:56,040 --> 00:04:01,360 Speaker 1: happening there, Well, that's still in aggress. Uh. And and 73 00:04:01,520 --> 00:04:03,720 Speaker 1: you might recall we talked a little while back about 74 00:04:03,720 --> 00:04:06,960 Speaker 1: other charges has been brought against Barkley's back at home 75 00:04:07,000 --> 00:04:11,000 Speaker 1: by those UK offices. So Barkley's has been implicated. And 76 00:04:11,040 --> 00:04:13,000 Speaker 1: again I have to stress that's not to say that 77 00:04:13,040 --> 00:04:16,600 Speaker 1: they've been found guilty, but but uh, they have been 78 00:04:16,640 --> 00:04:20,200 Speaker 1: implicated in a number of scandals and in recent years. Uh, 79 00:04:20,240 --> 00:04:23,240 Speaker 1: and so there's still you know, under active investigation in 80 00:04:23,240 --> 00:04:26,720 Speaker 1: the UK, partly for mortgage fraud type matters of the 81 00:04:26,839 --> 00:04:29,000 Speaker 1: kind that are the subject of the current d o 82 00:04:29,080 --> 00:04:32,719 Speaker 1: J negotiations, but also for other ones as well. So 83 00:04:32,960 --> 00:04:37,159 Speaker 1: have those lawsuits in the different situations Barkley that is 84 00:04:37,160 --> 00:04:41,479 Speaker 1: facing contributed to its decline in stock this year and 85 00:04:41,760 --> 00:04:46,279 Speaker 1: might that be moving Barkley's also towards US settlement. Well, yeah, 86 00:04:46,680 --> 00:04:48,520 Speaker 1: that's a great, great point and I think that's has 87 00:04:48,600 --> 00:04:51,000 Speaker 1: been another very important piece of the story here. Right. 88 00:04:51,040 --> 00:04:54,240 Speaker 1: So as you know, um, the stock I guess Barkley 89 00:04:54,240 --> 00:04:58,120 Speaker 1: Stows declined something like eight percent over the past year UM, 90 00:04:58,600 --> 00:05:02,840 Speaker 1: in particular after yesterday right when they reported a significant 91 00:05:02,839 --> 00:05:06,800 Speaker 1: decline in their trading revenue. I think so the fact 92 00:05:06,839 --> 00:05:09,200 Speaker 1: that the firm is not doing so well in the 93 00:05:09,240 --> 00:05:12,600 Speaker 1: market at the moment, and the fact that uncertainty looming 94 00:05:12,640 --> 00:05:15,680 Speaker 1: over it when it comes to litigation of both in 95 00:05:15,680 --> 00:05:18,680 Speaker 1: the UK and here in the US on the part 96 00:05:18,760 --> 00:05:23,200 Speaker 1: of actual law enforcement authorities, probably isn't a welcome situation 97 00:05:23,279 --> 00:05:24,720 Speaker 1: for the to be in. And I'm sure at this 98 00:05:24,760 --> 00:05:26,520 Speaker 1: point they'd be really happy to be kind of get 99 00:05:26,520 --> 00:05:28,440 Speaker 1: it behind them as quickly as they can, just to 100 00:05:28,440 --> 00:05:30,640 Speaker 1: get rid of the uncertainty. Always great to have you 101 00:05:30,680 --> 00:05:34,400 Speaker 1: on the show, Bob, I appreciate your candor. That's Robert Hockett, 102 00:05:34,400 --> 00:05:38,360 Speaker 1: professor at Cornell University Law School, coming up on Bloomberg Law. 103 00:05:38,600 --> 00:05:41,440 Speaker 1: The tech giants now occupy the top five spots in 104 00:05:41,480 --> 00:05:45,000 Speaker 1: the ranks of the largest US companies by market capitalization, 105 00:05:45,560 --> 00:05:48,119 Speaker 1: but for the first time in decades, lawmakers are putting 106 00:05:48,160 --> 00:05:49,000 Speaker 1: up some barriers.