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

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Speaker 2: Donald Trump is under the gun if he wants to

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Speaker 2: appeal the staggering verdict against him in New York civil

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Speaker 2: fraud trial. He faces a March twenty fifth deadline to

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Speaker 2: post an appeal bond for four hundred and fifty four

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Speaker 2: million dollars for the verdict plus ten percent for interest,

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Speaker 2: and New York Attorney General Letitia James has a take

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Speaker 2: no prisoner's approach.

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Speaker 3: If he does not have funds to pay off the judgment,

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Speaker 3: then we will seek, you know, judgment enforcement mechanisms in court,

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Speaker 3: and we will ask the judge to seize his assets.

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Speaker 2: The billionaire former president is running short on cash after

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Speaker 2: losing two civil trials in less than two months, and

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Speaker 2: he's trying to post a smaller one hundred million dollar

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Speaker 2: bond or no bond at all. But the age argues

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Speaker 2: he must post the full bond because without that Trump

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Speaker 2: could attempt to avoid paying the fine if his appeal fails.

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Speaker 2: Trump's legal debts put a spotlight on an obscure segment

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Speaker 2: of the insurance market. The appeal bond joining me is

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Speaker 2: Bloomberg Legal reporter Greg Ferrell, who's written about it, tell

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Speaker 2: us why courts generally require either the cash or a

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Speaker 2: bond if a person is going to appeal a civil judgment.

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Speaker 1: Simply put, courts do not want defendants of people in

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Speaker 1: the losing end of a civil judgment to basically appeal,

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Speaker 1: because they can kick the can down the road by

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Speaker 1: time to dispose of assets otherwise. You know, in the

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Speaker 1: case of contractors, where surety bonds are often used, you

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Speaker 1: know what, if the guy goes bust, you want the

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Speaker 1: money there in case something happens. In Trump's case, it

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Speaker 1: wasn't so much going bust as much as it's applicable

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Speaker 1: because there are people like him who just will keep

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Speaker 1: appealing just to like put off the day of judgment.

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Speaker 2: An appeal bond is like a surety bond. Explain more

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Speaker 2: about it.

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Speaker 1: Yes, it's an insurance product. It's a guarantee. Basically, it's

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Speaker 1: almost like a lock box. You get a surrety company

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Speaker 1: which is separate. There are some surity agencies, but most

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Speaker 1: of them are affiliated with big global insurance firms, and

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Speaker 1: they will have underwriters who will have to be satisfied

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Speaker 1: that the money is there and that it's accessible to

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Speaker 1: them that they have a priority on it, and then

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Speaker 1: they will write the bond so that the court can

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Speaker 1: you hold the bond. The court does not want to

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Speaker 1: hold cash, so that the bond will be there at

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Speaker 1: the point in time when an appeals court upholds the judgment.

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Speaker 1: If that's the case and a.

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Speaker 2: Losing party could put up.

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Speaker 1: Cash, yes, in fact, that's the easiest way to do.

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Speaker 1: It's that the court itself, this is why it becomes

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Speaker 1: a surty bond doesn't want to become a bank and

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Speaker 1: hold large amounts of cash around. So it's a cost

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Speaker 1: to the defendant in this case Trump to actually have

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Speaker 1: to like get the money, be one hundred and ten

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Speaker 1: percent of the money, and that number will grow if

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Speaker 1: this appeal goes months and months or more than a

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Speaker 1: year or something, that number could become larger. And you know, basically,

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Speaker 1: as the plaintiff's layer quoted that at the end of

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Speaker 1: the story, it's in the cash register. So once the

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Speaker 1: final judgment from the appeals court the circuit comes down,

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Speaker 1: it's like kachin, open up the cash register and take

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Speaker 1: it out, so the interest.

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Speaker 2: Keeps accruing even once he pays the bond.

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Speaker 1: Yes, and that's why you have to put up one

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Speaker 1: hundred and ten percent because you're you're not only securing

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Speaker 1: today's judgment, but it's going to be months or longer

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Speaker 1: before the Circuit court is aft. So you have to

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Speaker 1: put in extra for that amount so that you don't

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Speaker 1: just have the bond of the judgment today. But meanwhile,

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Speaker 1: a year from now, when the verdict comes down, that

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Speaker 1: money which the winner should have had in their possession

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Speaker 1: and would have grown an interest, you know, they're deprived

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Speaker 1: of that. As the case I pointed to at the

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Speaker 1: bottom of the store about Lynn Tilton is that the

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Speaker 1: original judgment I think was for thirty eight million, but

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Speaker 1: over the course of time, I think it took well

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Speaker 1: over a year, maybe two years, that it swelled to

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Speaker 1: fifty one million. So the surety bond, you know, there's

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Speaker 1: a projection that you know, if this takes two years

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Speaker 1: for the Pellet Court to get around to this, that

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Speaker 1: the money will grow, there'll be enough to cover and

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Speaker 1: ten percent ray for two years, which is a real number.

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Speaker 2: For the first Egen Carrol verdict five million. Trump gave

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Speaker 2: the cash plus ten percent, But now Trump has gotten

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Speaker 2: a bond to cover the Egen Carrol verdict of eighty

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Speaker 2: three point three million.

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Speaker 1: The defamation one, which was much more expensive for him.

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Speaker 1: That's right. Ironically, the trial about whether or not he

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Speaker 1: assaulted her resulted in a five million dollar penalty, but

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Speaker 1: this one for defaming her was a much larger verdict,

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Speaker 1: and he's contesting that. So that's eighty three plus eight

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Speaker 1: point three million, which is like ten percent of it,

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Speaker 1: which is where you get to, like, I guess ninety

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Speaker 1: one point six.

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Speaker 2: Trump used the Federal Insurance Company, an arm of the

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Speaker 2: insurance giant Chubb, to post the bond. Do we know

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Speaker 2: anything else about it, like the collateral he put.

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Speaker 1: Up unforcing No, and we'd love to know about it.

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Speaker 1: And even more importantly, here's the key Trump billionaire and

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Speaker 1: he points to all his real estate assets and other

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Speaker 1: things in his statements of financial condition to support the

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Speaker 1: notion that he's a billionaire several times over. But what

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Speaker 1: we don't know is whether all these buildings like forty

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Speaker 1: Wall Street and some of these other trophy properties, are

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Speaker 1: they owned free and clear or are they encumbered with

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Speaker 1: other loans and mortgages that are in the public eye.

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Speaker 1: So that's one of the real interesting points here for

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Speaker 1: us on the outside is Chubb obviously became satisfied that,

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Speaker 1: you know, they would be made whole no matter what.

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Speaker 1: So either he put up some cash for that or

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Speaker 1: something that was as good as cash. But I think

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Speaker 1: in this much larger bond, that's the next one, which

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Speaker 1: is going to have to be like close to five

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Speaker 1: hundred million dollars, namely four hundred and fifty the judgment

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Speaker 1: that Letitia James, the New York Attorney General won that

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Speaker 1: judgment plus ten percent another forty five, so you're getting

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Speaker 1: close to five hundred million. Trump does not have that

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Speaker 1: kind of cash around. You know, he talked about having

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Speaker 1: four hundred million around, but he's probably used some of

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Speaker 1: that already, and he needs to get cash around to

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Speaker 1: run his businesses. So now we're in a place where

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Speaker 1: he has to either rely on an angel investor of

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Speaker 1: some kind, you know, Musk type character who's willing to

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Speaker 1: put up some money for him, or some kind of

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Speaker 1: a collateral using his property, either selling some of his

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Speaker 1: buildings in real estate assets, or allowing a surety bond

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Speaker 1: company to take a priority interest in one or more

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Speaker 1: pieces of real estate so that they'll be made whole.

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Speaker 1: If Trump were to lose on that appeal, so this

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Speaker 1: is going to be a much more serious one. And yes,

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Speaker 1: the key point is we don't know that We've got

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Speaker 1: no insight last Friday as to where this money came from,

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Speaker 1: whether it was cash or whether it was a pledge

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Speaker 1: of property, And for the bigger one, we probably won't

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Speaker 1: know either. The only thing we would find out, I

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Speaker 1: would imagine, is once the appellate courts decide, and if

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Speaker 1: they decide against Trump and then he has to put

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Speaker 1: forty Wall Street up for sale, then we'll know from

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Speaker 1: the outside that he'd pledged a particular building as collateral,

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Speaker 1: and therefore the people who underwrote the surety bond have

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Speaker 1: to go execute on that and force the sale of

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Speaker 1: some of his buildings.

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Speaker 2: And the surety company gets money up front, right, a percentage.

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Speaker 1: Right, so they get a premium. Basically in general it's

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Speaker 1: two percent. So chub Insurance, which wrote the surety bond

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Speaker 1: or underwrote the surety bond for Trumpet, two percent, or

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Speaker 1: about one point eight million dollars just as a fee

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Speaker 1: to do this. So right, Unlike other insurance products, you know,

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Speaker 1: they plan on no losses. They're not built around losses.

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Speaker 1: That's why They're kind of an odd duck as an

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Speaker 1: insurance product line because it is a form of insurance.

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Speaker 1: But they write to a zero percent loss target. You

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Speaker 1: know that they're always going to be money there to

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Speaker 1: cover them. So that's why the surty bonds were the unwanted,

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Speaker 1: red headed step child of the insurance industry. But in

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Speaker 1: the past decade, as the insurance industry, the property and

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Speaker 1: casualty insurance industry has undergone some difficult times with a

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Speaker 1: whole series of natural disasters and investments that have not

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Speaker 1: panned out in the markets, that this has become something

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Speaker 1: that attractive to them their profit center. Surity bonds make

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Speaker 1: money from day one. They don't lose money the way

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Speaker 1: property and casualty insurance policies are designed to do.

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Speaker 2: You spoke to a lawyer, Scott Horton, who said, it's

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Speaker 2: very to see a financial institution agreeing to post a

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Speaker 2: bond in the amount necessary here. But Trump has all

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Speaker 2: that real estate.

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Speaker 1: Yes, but here's another problem. Trump does have some relationships

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Speaker 1: with banks. I think the Deutsche Bank loans have been

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Speaker 1: either paid off or transferred, so Deutsche Bank is no

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Speaker 1: longer the bank it used to be for Trump. But

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Speaker 1: there are other lenders. However, Trump can't just go and

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Speaker 1: get five hundred million dollars elsewhere when he already has

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Speaker 1: some kind of a debt or a loan obligation to

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Speaker 1: the bank. So he has to get some kind of

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Speaker 1: a waiver from his existing banks to allow him to

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Speaker 1: go take on other debts to pay this off or

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Speaker 1: else use those banks, and then those banks have to

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Speaker 1: become comfortable with, Okay, if he loses this, if the

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Speaker 1: judgment goes against him and it's going to be five

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Speaker 1: hundred million dollars, we need to be able to get

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Speaker 1: a priority position on selling the real estate or wherever

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Speaker 1: it is it's going to come from.

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Speaker 2: Trump has made an emergency request to stop enforcement of

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Speaker 2: the verdict in the New York fraud case that was

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Speaker 2: denied by an appeals or judge. It will be decided

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Speaker 2: by a full appellate panel. He's also proposing posting a

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Speaker 2: smaller one hundred million dollar bond, but the ag is

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Speaker 2: not having any of it right.

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Speaker 1: So that'll be up to the judge to decide. But

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Speaker 1: in the real world in which we live, this is

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Speaker 1: a huge appeal bond. Trump's going to have to come

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Speaker 1: up with in order to appeal this verdict and the

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Speaker 1: achie forcefully. As you pointed out, we responded that no,

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Speaker 1: he should be obliged to obey the law or the

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Speaker 1: rules like everyone else and put up, you know, the

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Speaker 1: full amount plus ten percent. Trump's goal here is to

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Speaker 1: convince the judge in this matter that you know that

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Speaker 1: amount would force him to basically sell properties at a

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Speaker 1: firesale price, you know, so that you'd have to take

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Speaker 1: a loss. And then in the case that he actually

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Speaker 1: wins the appeal, then you can't just go back and

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Speaker 1: buy it back for the same amount you sold with

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Speaker 1: for It's like you've basically forced losses well above the

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Speaker 1: norm on this. So that's the current state of play

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Speaker 1: on Trump's bond. He's trying to get it lower to

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Speaker 1: a one hundred million dollar, much more manageable amount than

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Speaker 1: the larger ones. It will be interesting to see how

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Speaker 1: this plays out. This is going to fold over the

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Speaker 1: next few weeks. Is whether or not Trump will get

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Speaker 1: some relief and be able to just post a smaller

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Speaker 1: amount if he gets judicial approval, or if he has

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Speaker 1: to come up with five hundred million dollars. That will

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Speaker 1: be interesting to see where he comes up with it.

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Speaker 1: And who provides it, because if it is some deep

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Speaker 1: pocket person, we will not know that necessarily within a month.

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Speaker 1: If this happens, it would only be if he loses

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Speaker 1: his appeal that well we'll get some indication as to

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Speaker 1: where the funds come from because.

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Speaker 2: The age, he says, she doesn't believe that he has

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Speaker 2: to sell properties at a loss in order to secure

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Speaker 2: the bond, and she wants proof that sure any companies

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Speaker 2: refuse to accept. She loves forty Wall Street the skyscraper

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Speaker 2: as collateral.

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Speaker 1: First of all, that is a great property. It's going

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Speaker 1: to be worth well more than enough to cover this.

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Speaker 1: But yes, Trump makes lots of claims. In fact, just

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Speaker 1: last week he wanted to delay this particular bond that

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Speaker 1: he delivered on Friday, and the judge ruled against him, saying, no,

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Speaker 1: you've had like a month to do this, and only

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Speaker 1: now you're showing up at the end thinking over enough time.

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Speaker 1: You've had plenty of time. And of course when you

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Speaker 1: looked at the bond, it had been struck on March fifth,

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Speaker 1: or more than a week ago. So it's just, you know,

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Speaker 1: Trump's very consistent when he's dealing with legal issues in

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Speaker 1: putting things off never you know, speed it up and

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Speaker 1: get it over with. Always kick the can down the

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Speaker 1: road to lay this. Dragged this out and it's been

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Speaker 1: successful for him. But I think James brings up a

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Speaker 1: fair point here. If no one's going to write it

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Speaker 1: to show us, you know what the surety Agency, prove

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Speaker 1: your claim to us. In other words, don't just talk,

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Speaker 1: but actually show some evidence supporting your position that you

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Speaker 1: need more time or it needs to be lowered. The

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Speaker 1: issue is this, though, if he loses the appeal, then

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Speaker 1: the State of New York is going to have to

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Speaker 1: chase him down for years, especially if he's president. You know,

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Speaker 1: by then they won't be able to get it. So

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Speaker 1: I think there's a legitimate point on the State of

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Speaker 1: New York having won this judgment, that no, we want

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Speaker 1: it in a lock box that we can have access

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Speaker 1: to instead of trying to chase it down, because yes,

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Speaker 1: if he's president, you know, come and get it, you know,

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Speaker 1: I mean, can.

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Speaker 2: You imagine how difficult that would be? Thanks so much, Greg.

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Speaker 2: That's Bloomberg Legal reporter Greg Fair coming up next. How

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Speaker 2: Mitch McConnell's stacked the courts. I'm June Gross. When you're

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Speaker 2: listening to Bloomberg. Judicial nominations don't usually get much attention

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Speaker 2: unless they're at the Supreme Court level, but the importance

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Speaker 2: of Circuit court nominees can't be overstated. Just look at

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Speaker 2: the ultra conservative Fifth Circuit, with twelve judges appointed by Republicans,

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Speaker 2: including six named by former President Donald Trump, and only

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Speaker 2: four appointed by Democrats. The circuit has limited access to

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Speaker 2: a commonly used abortion pill, tossed out the federal ban

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Speaker 2: on bump stocks, and said people subject to a domestic

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Speaker 2: violence restraining order still have the constitutional right to carry

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Speaker 2: a gun. Just a few of the far reaching, almost

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Speaker 2: impossible to ignore Fifth Circuit rulings that the Supreme Court

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Speaker 2: has taken up this term. And it was then Senate

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Speaker 2: Majority leader Republican Mitch McConnell, of one third of the

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Speaker 2: federal appeals Court ban during Trump's presidency. Joining me is

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Speaker 2: an expert on the federal judiciary, Carl Tobias, a professor

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Speaker 2: at the University of Richmond School of Law. Before we

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Speaker 2: turn to Mitch McConnell's influence, Carl, let's talk about Biden's nominees.

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Speaker 2: The Judiciary Committee advanced a slate of nominees which will

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Speaker 2: bring unprecedented diversity to trial courts in DC, Rhode Island,

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Speaker 2: and Virginia. And most of those nominees got biparties in support, yes.

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Speaker 4: And so that's very positive. And those are really well

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Speaker 4: qualified mainstream nominees. So they will be terrific and they'll

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Speaker 4: make history in Rhode Island and Western District of Virginia

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Speaker 4: in the District of Columbia District Court.

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Speaker 2: Are things changing on the Judiciary Committee that you're getting,

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Speaker 2: you know, four out of five biparties in support.

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Speaker 4: Well, I think Lindsey Graham is critical to that. He's

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Speaker 4: the ranking member from South Carolina and he believes that

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Speaker 4: everyone on his side of the aisle should differ when

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Speaker 4: they are acceptable nominees from this White House and has

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Speaker 4: urged his colleagues on the Committee and the Caucus to

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Speaker 4: work with the White House. And a lot of these

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Speaker 4: recent nominees there were five and one hearing, all were

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Speaker 4: Red state nominees supported by two home state GOP senators

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Speaker 4: and so that's very encouraging. But he often will vote

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Speaker 4: and Susan Collins and Lisa Murkowski and others have joined in,

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Speaker 4: and especially those in the Red states who have recommended

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Speaker 4: the nominees and then they have gone on through the

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Speaker 4: process very smoothly.

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Speaker 2: Where does this put Biden as far as you know

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Speaker 2: what I call the risks for judicial nominees, I mean,

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Speaker 2: where does it put him this point?

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Speaker 4: Well, he now is ahead of the same point in

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Speaker 4: twenty twenty with Trump's numbers on the district level. So

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Speaker 4: after this week, I think there'll be five more district

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Speaker 4: nominees who will be confirmed, and Trump had one hundred

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Speaker 4: and thirty eight at this point. If Biden succeeds in

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Speaker 4: having the five confirmed this week, he will have one

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Speaker 4: hundred and forty four. The difference is in the appellate

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Speaker 4: once where at this point in twenty twenty, Trump had

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Speaker 4: fifty one appellet and Biden has forty appellate confirmations, but

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Speaker 4: three are on the floor waiting votes and one needs

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Speaker 4: a hearing. So that's where we are, and we'll see

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Speaker 4: there are close to ten pellet vacancies and some of

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Speaker 4: us don't have nominees, but I'm cautiously optimistic that those

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Speaker 4: could be filled, and so it could be quite close.

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Speaker 4: And I think it's pretty clear now that I will

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Speaker 4: eclipse the number of district nominees confirmed it's more difficult

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Speaker 4: to appellate level.

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Speaker 2: Now, how much can we credit Mitch McConnell with Trump's

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Speaker 2: level of appointees substantially?

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Speaker 4: Remember back in twenty fifteen to sixteen, at the end

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Speaker 4: of Obama's second term, the Republicans in twenty fourteen captured

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Speaker 4: a majority in the Senate and they only confirmed two

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Speaker 4: appellate nominees Obama's last two years, and one was for

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Speaker 4: the federal Circuit and only eighteen I think district judges.

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Speaker 4: So that left an enormous number of vacancies over one hundred,

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Speaker 4: but especially at the appellate level for Trump to fill,

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Speaker 4: which he did quite vigorously, especially in the appeals courts.

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Speaker 4: It's been a long time since anyone's confirmed fifty four

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Speaker 4: appellate nominees in the first term of a president.

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Speaker 5: See.

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Speaker 2: So, Mitch McConnell, it seems like his driving goal in

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Speaker 2: his career has been to stack the courts with conservatives.

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Speaker 2: Was he stacking them with conservatives or was he stacking

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Speaker 2: them with white male conservatives.

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Speaker 4: Well that's a good question. I think most of them

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Speaker 4: turned out to be white males, but there were many

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Speaker 4: conservatives who were also people of color. There were some.

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Speaker 4: I'm thinking of Naomi Rao on the DC Circuit and

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Speaker 4: Jim Hoe on the Fifth Circuit, and a number of others.

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Speaker 4: But I think principally you're correct if he were to

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Speaker 4: look through and there were no black nominees for the

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Speaker 4: Appeals Court from Trump in his entire tenure, which is

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Speaker 4: a very telling contrast with Biden.

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Speaker 2: So can we credit or should we credit Mitch McConnell

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Speaker 2: with two Trump appointees to the Supreme Court.

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Speaker 4: No, we credit him with three?

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Speaker 2: With three, okay, I thought one was the retirement of

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Speaker 2: Justice Kennedy, so we didn't count that.

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Speaker 4: Well, you'll remember back to twenty sixteen, Maryrick Garland was

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Speaker 4: Obama's nominee for Justice Scalia's vacancy, and McConnell refused to

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Speaker 4: process his nomination and so held that seat. And basically

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Speaker 4: Democrats think that he stole that seat, which by rights

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Speaker 4: and tradition should have been one that Obama philled. And

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Speaker 4: Merrick Garland was a well qualified, mainstream nominee for the

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Speaker 4: Supreme Court. But remember then, when Justice Ginsberg unfortunately died

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Speaker 4: in the fall of twenty twenty, then McConnell rushed through

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Speaker 4: Amy Comy Barrett to be confirmed a week before Biden

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Speaker 4: defeated Trump for the presidency, So on either end there

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Speaker 4: he wasn't consistent in his treatment, but succeeded in confirming

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Speaker 4: three and of course in the middle was Justice Kavanaugh

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Speaker 4: for the Kennedy seats.

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Speaker 2: McConnell's stepping down as leader, but he said if the

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Speaker 2: Republicans won control of the Senate, they would not advance

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Speaker 2: any Supreme Court nominees of a Democratic president. Have we

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Speaker 2: gotten to that point, or now that he's out of leadership,

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Speaker 2: do you think we go back to confirming nominees the

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Speaker 2: way they used to be confirmed, no matter who's the president.

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Speaker 4: Perhaps I think when they're at the Supreme Court level,

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Speaker 4: all bets are really off at this point, even at

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Speaker 4: the lower courts. Remember, there's been a lot of lockstep

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Speaker 4: voting against Biden nominees, but to some extent Democrats reflected

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Speaker 4: something similar, though not as overwhelming during the Trump years.

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Speaker 4: Es actually asked to the appellate nominees who Democrats opposed,

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Speaker 4: especially once they saw what the nominees look like over

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Speaker 4: time and what McConnell was doing so successfully at the

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Speaker 4: appellate level, which of course is where ninety nine percent

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Speaker 4: of cases ultimately are decided. Because the Supreme Court here

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Speaker 4: is so few, Is.

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Speaker 2: There anyone ready to take his place in this arena?

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Speaker 4: Well, the names, of course are the three Johns, and

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Speaker 4: the two leaders seem to be Cornin and Thune, and

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Speaker 4: I think they're not quite as rigid as McConnell was

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Speaker 4: on these issues, and they haven't either one made a

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Speaker 4: name for themselves, but I think they have voted with

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Speaker 4: the party on especially Supreme Court nominees and appellate nominees

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Speaker 4: as well. And Cornant has been on Judiciary senior member

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Speaker 4: of that committee and speaks with some authority, but also

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Speaker 4: works quite I think, well with the White House on

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Speaker 4: lower courts, especially in Texas. And I don't think Foon,

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Speaker 4: you know, has much expertise or interest in the judiciary,

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Speaker 4: though there are two nominees from South Dakota who he

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Speaker 4: has recommended and they're going to easily be confirmed. But

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Speaker 4: I don't think there is that kind of ruthlessness, if

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Speaker 4: you will, that McConnell exhibited that either of the two

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Speaker 4: front runners is likely to subscribe to. So we'll see,

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Speaker 4: but it may be, you know, again, all the Supreme

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Speaker 4: Court vacancies are suy generous in terms of how the

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Speaker 4: processes play out.

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Speaker 2: Let's just turn to something that I just found interesting,

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Speaker 2: which is that administrative employees of the federal judiciary are

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Speaker 2: now allowed once again to engage in political activities outside

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Speaker 2: of work. A Trump administration rule had stopped them from

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Speaker 2: doing that.

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Speaker 4: It's eleven hundred or so employees, I think, mostly administrative

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Speaker 4: officer of the courts, and I think the feeling was

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Speaker 4: in the Trump administration that public employees in the courts

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Speaker 4: shouldn't participate too actively in politics. But I don't think

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Speaker 4: anybody's worried that those eleven hundred employees are going to

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Speaker 4: make a difference in a particular race. But you know,

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Speaker 4: of course judges cannot be involved at all in anything political.

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Speaker 4: All of them are not, you know, under the canons

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Speaker 4: and just practice, and so I'm not too worried that

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Speaker 4: these court employees, you know, will upset anyone. But you know,

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Speaker 4: we're worried about the appearance in twenty eight USC.

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Speaker 6: Four p.

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Speaker 4: Fifty five about conflicts of interest. But I think this

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Speaker 4: is fine, and I don't expect a lot of political activity,

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Speaker 4: but it's nice that they are allowed to participate.

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Speaker 2: Thanks so much. For being on the show Carl That's

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Speaker 2: Professor Carl Tobias of the University of Richmond Law School,

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Speaker 2: and in other legal news today.

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Speaker 5: We did not, however, identify evidence that rose to the

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Speaker 5: level of proof beyond a reasonable doubt. Because the evidence

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Speaker 5: fell short of that standard, I declined to recommend criminal

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Speaker 5: charges against mister Biden.

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Speaker 2: Special Counsel Robert Hurr testified for more than four hours

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Speaker 2: before the House Judiciary Committee today, steadfastly standing by his

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Speaker 2: decision not to charge President Joe Biden over his handling

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Speaker 2: of classified documents and his statements about the president's memory

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Speaker 2: that outraged Democrats.

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Speaker 5: I did not sanitize my explanation, nor did I disparage

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Speaker 5: the president unfairly. I explained to the Attorney General my

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Speaker 5: decision and the reasons for it. That's what I was

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Speaker 5: required to do.

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Speaker 2: Her had characterized the president as a quote sympathetic, well meaning,

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Speaker 2: elderly man with a poor memory, and Democrats took issue

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Speaker 2: with that. California Congressman Adam Shift said that language should

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Speaker 2: not have been included.

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Speaker 5: That is nowhere in the rules. I was to prepare

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Speaker 5: a confidential report that was comprehensive and thorough of any

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Speaker 5: What is in.

439
00:24:03,320 --> 00:24:05,800
Speaker 7: The rules, mister Hurr. What is in the rules is

440
00:24:06,560 --> 00:24:10,520
Speaker 7: you don't gratuitously do things to prejudice this subject of

441
00:24:10,560 --> 00:24:15,359
Speaker 7: an investigation where you're declining to prosecute. You don't gratuitously

442
00:24:15,480 --> 00:24:18,000
Speaker 7: add language that you'll know will be useful in a

443
00:24:18,040 --> 00:24:22,639
Speaker 7: political campaign. You were not born yesterday. You understood exactly

444
00:24:23,040 --> 00:24:23,960
Speaker 7: what you were doing.

445
00:24:24,680 --> 00:24:26,760
Speaker 2: The hearing comes at a time when the White House

446
00:24:26,880 --> 00:24:31,280
Speaker 2: is confronting questions about Biden's age, which poll's show is

447
00:24:31,280 --> 00:24:34,359
Speaker 2: one of his biggest liabilities heading into the November election.

448
00:24:34,800 --> 00:24:38,920
Speaker 2: Coming up next, If you know about financial misconduct overseas,

449
00:24:39,000 --> 00:24:42,440
Speaker 2: bribery or other corporate fraud, you could get a reward

450
00:24:42,480 --> 00:24:46,440
Speaker 2: for providing that information to the Justice Department. That's coming

451
00:24:46,520 --> 00:24:49,480
Speaker 2: up next on the Bloomberg Law Show. I'm June Grosso

452
00:24:49,680 --> 00:24:53,760
Speaker 2: and you're listening to Bloomberg. If you know about financial

453
00:24:53,800 --> 00:24:58,600
Speaker 2: misconduct overseas, bribery or other corporate fraud, you could get

454
00:24:58,640 --> 00:25:02,600
Speaker 2: a reward for tipping off the Justice Department. DOJ has

455
00:25:02,600 --> 00:25:06,240
Speaker 2: announced it will start paying whistleblowers who help the Department

456
00:25:06,280 --> 00:25:10,760
Speaker 2: discover significant corporate or financial misconduct. It's the latest in

457
00:25:10,800 --> 00:25:15,760
Speaker 2: the Biden administrations. White collar enforcement policy shift designed to

458
00:25:16,040 --> 00:25:20,280
Speaker 2: entice more self reporting of corporate wrongdoing. Joining me is

459
00:25:20,359 --> 00:25:24,680
Speaker 2: Nicole Ingish, a former federal prosecutor in Minnesota state judge

460
00:25:24,840 --> 00:25:27,919
Speaker 2: and now a partner at Dorsey and Whitney. What do

461
00:25:28,000 --> 00:25:31,280
Speaker 2: we know about this program at this point?

462
00:25:32,280 --> 00:25:36,439
Speaker 6: So what we know is that the Department of Justice

463
00:25:36,680 --> 00:25:40,080
Speaker 6: is within the next ninety days going to be doing

464
00:25:40,160 --> 00:25:43,600
Speaker 6: what they call a ninety day sprint to gather information

465
00:25:44,040 --> 00:25:50,040
Speaker 6: to implement a new whistleblower reward program. So the Department

466
00:25:50,080 --> 00:25:54,000
Speaker 6: of Justice is going to be studying existing programs, looking

467
00:25:54,040 --> 00:25:56,760
Speaker 6: at those as models for its own, and then by

468
00:25:56,800 --> 00:25:59,040
Speaker 6: the end of the year, it's going to be implementing

469
00:25:59,080 --> 00:26:05,119
Speaker 6: a program that should be rewarding whistleblowers who alert prosecutors

470
00:26:05,280 --> 00:26:07,600
Speaker 6: to significant corporate misconduct.

471
00:26:07,920 --> 00:26:09,960
Speaker 2: I mean, is this really necessary? There are so many

472
00:26:10,200 --> 00:26:13,280
Speaker 2: whistleblower programs out there right.

473
00:26:14,119 --> 00:26:19,280
Speaker 6: The Deputy Attorney General, Lisa Monica noted that the purpose

474
00:26:19,359 --> 00:26:22,320
Speaker 6: of this particular program is to fill in the gap.

475
00:26:22,440 --> 00:26:26,320
Speaker 6: So basically, she described sort of a patchwork quilt that

476
00:26:26,480 --> 00:26:29,320
Speaker 6: is on the bed that's only covering part of the bed.

477
00:26:29,680 --> 00:26:33,240
Speaker 6: So the existing programs have gaps that this program is

478
00:26:33,280 --> 00:26:38,080
Speaker 6: expected to fill. For example, the Securities and Exchange Commission

479
00:26:38,440 --> 00:26:42,360
Speaker 6: has a program, the Commodities Futures Trading Commission has a

480
00:26:42,400 --> 00:26:46,200
Speaker 6: whistleblower program, and the False Claims Act has a key

481
00:26:46,320 --> 00:26:51,200
Speaker 6: TAM whistleblower statutory scheme. But each of these is necessarily

482
00:26:51,280 --> 00:26:57,600
Speaker 6: limited jurisdictionally and otherwise to more narrow scopes. The Department

483
00:26:57,640 --> 00:27:01,080
Speaker 6: of Justice's new whistleblower program is going to be much

484
00:27:01,119 --> 00:27:04,600
Speaker 6: broader because the mission of the Department of Justice is

485
00:27:04,680 --> 00:27:05,400
Speaker 6: much broader.

486
00:27:05,840 --> 00:27:11,160
Speaker 2: Are there specific areas that they want whistleblowers to come

487
00:27:11,240 --> 00:27:11,760
Speaker 2: forward in?

488
00:27:12,920 --> 00:27:16,720
Speaker 6: Yes, the Department of Justice has a broad mission covering

489
00:27:17,359 --> 00:27:22,440
Speaker 6: all federal crimes, but the Deputy Attorney General is going

490
00:27:22,480 --> 00:27:26,000
Speaker 6: to be particularly interested in those complaints that relate to

491
00:27:26,160 --> 00:27:30,800
Speaker 6: abuses of the US financial system corruption cases, So this

492
00:27:30,840 --> 00:27:35,320
Speaker 6: would include foreign corruption cases that are outside the jurisdiction

493
00:27:35,840 --> 00:27:40,440
Speaker 6: of the sec also domestic corruption cases, and that would

494
00:27:40,440 --> 00:27:45,600
Speaker 6: be especially those cases that involve corporate payments to government officials.

495
00:27:45,920 --> 00:27:49,440
Speaker 6: The Department of Justice is also looking in particular at

496
00:27:49,560 --> 00:27:52,600
Speaker 6: cases that would be brought under the very newly enacted

497
00:27:53,000 --> 00:27:56,760
Speaker 6: Foreign Extortion Prevention Act, which is going to target foreign

498
00:27:56,760 --> 00:28:00,640
Speaker 6: officials on the demand side of foreign bribery cases.

499
00:28:01,520 --> 00:28:05,280
Speaker 2: How necessary do you think this program is and could

500
00:28:05,280 --> 00:28:09,880
Speaker 2: it sort of overwhelm the resources of the Justice Department.

501
00:28:10,720 --> 00:28:14,760
Speaker 6: Well, the purpose of it is to kind of go

502
00:28:14,920 --> 00:28:20,720
Speaker 6: hand in glove with the existing corporate criminal enforcement policies

503
00:28:20,760 --> 00:28:25,920
Speaker 6: to sort of encourage and foster a climate of compliance.

504
00:28:26,640 --> 00:28:30,919
Speaker 6: And so the idea is to follow along with some

505
00:28:31,000 --> 00:28:35,399
Speaker 6: of these existing policies that the Deputy Attorney General and

506
00:28:35,600 --> 00:28:39,520
Speaker 6: Attorney General Merrick Garland have been implementing in recent years

507
00:28:39,560 --> 00:28:45,160
Speaker 6: to really encourage corporations, for example, to voluntarily self disclose

508
00:28:45,720 --> 00:28:50,720
Speaker 6: their own criminal misconduct or to identify culpable individuals if

509
00:28:50,920 --> 00:28:54,840
Speaker 6: they're not doing so, then the point of this whistleblower

510
00:28:54,920 --> 00:28:59,520
Speaker 6: program is to ensure that if the corporations don't voluntarily

511
00:28:59,560 --> 00:29:02,640
Speaker 6: self disis close, there's going to be a financial incentive

512
00:29:03,080 --> 00:29:07,200
Speaker 6: for those who might know of the misconduct to disclose.

513
00:29:07,680 --> 00:29:11,320
Speaker 6: All of which the goal at least is to encourage

514
00:29:11,640 --> 00:29:14,280
Speaker 6: that overall, you compliance culture.

515
00:29:14,960 --> 00:29:17,760
Speaker 2: It seems to take a lot of effort at the

516
00:29:17,880 --> 00:29:22,440
Speaker 2: SEC to go through these whistleblower complaints, you know, to

517
00:29:22,560 --> 00:29:27,120
Speaker 2: check them out, follow up bring cases. Does the Justice

518
00:29:27,160 --> 00:29:30,760
Speaker 2: Department intend to put enough people into this to make

519
00:29:30,800 --> 00:29:31,320
Speaker 2: it work?

520
00:29:31,800 --> 00:29:35,360
Speaker 6: It remains to be seen the details that are going to,

521
00:29:35,560 --> 00:29:38,760
Speaker 6: you know, be a part of this program and exactly

522
00:29:39,400 --> 00:29:43,000
Speaker 6: who's going to be involved. We do know that it's

523
00:29:43,000 --> 00:29:46,440
Speaker 6: going to be the Money Laundering and Asset Recovery Section

524
00:29:46,520 --> 00:29:50,320
Speaker 6: that's going to take a leading role in basically designing

525
00:29:50,360 --> 00:29:53,240
Speaker 6: and coming up with the specifics both for the pilot

526
00:29:53,560 --> 00:29:56,640
Speaker 6: and then for the program as a whole. So it

527
00:29:56,680 --> 00:29:58,960
Speaker 6: would seem that the Department is going to make the

528
00:29:59,040 --> 00:30:03,240
Speaker 6: investment in this. But the important thing is that because

529
00:30:03,480 --> 00:30:06,640
Speaker 6: the funds that will be used to pay for it

530
00:30:06,720 --> 00:30:10,800
Speaker 6: to pay whistleblowers the reward are monies coming out of

531
00:30:11,000 --> 00:30:16,760
Speaker 6: asset forfeiture, there already will be an existing source for

532
00:30:16,840 --> 00:30:19,320
Speaker 6: the funds for the whistleblower payments.

533
00:30:20,080 --> 00:30:25,120
Speaker 2: The administration has also asked in the past for corporations

534
00:30:25,240 --> 00:30:28,800
Speaker 2: to hand over evidence of internal misconduct.

535
00:30:29,120 --> 00:30:33,400
Speaker 6: That's exactly right. Especially in recent years again with Attorney

536
00:30:33,400 --> 00:30:38,000
Speaker 6: General Merrick Garland and this Deputy Attorney General Lisa Monico,

537
00:30:38,400 --> 00:30:41,440
Speaker 6: they've really been kind of emphasizing a carrot and sticks

538
00:30:41,640 --> 00:30:48,920
Speaker 6: approach to corporate enforcement and really trying to incentivize corporations

539
00:30:48,960 --> 00:30:53,760
Speaker 6: to voluntarily self disclose. And this program is to fit

540
00:30:53,960 --> 00:30:57,360
Speaker 6: right within that and so the idea is it should

541
00:30:57,400 --> 00:31:00,920
Speaker 6: add pressure on corporations to sell report and to do

542
00:31:01,000 --> 00:31:04,280
Speaker 6: so promptly before a whistleblower does so.

543
00:31:05,120 --> 00:31:09,640
Speaker 2: Has the BUYD administration then have they up to enforcement

544
00:31:09,720 --> 00:31:10,920
Speaker 2: of white collar crime?

545
00:31:11,400 --> 00:31:15,200
Speaker 6: The enforcement of white collar crime has been going down

546
00:31:15,400 --> 00:31:18,280
Speaker 6: every year since I think a height of it in

547
00:31:18,320 --> 00:31:23,240
Speaker 6: twenty eleven. There's some independent organizations that have done assessments,

548
00:31:23,560 --> 00:31:27,840
Speaker 6: some of which the Department disagrees with, but overall, the

549
00:31:27,880 --> 00:31:30,920
Speaker 6: prosecution of white collar crime has been going down. So

550
00:31:31,080 --> 00:31:35,160
Speaker 6: part of the goal behind this program is to increase

551
00:31:35,200 --> 00:31:38,280
Speaker 6: the cases that will find their way to the Department

552
00:31:38,320 --> 00:31:41,880
Speaker 6: of Justice, not only the number, but probably the breath

553
00:31:41,920 --> 00:31:45,000
Speaker 6: of criminal cases that the Department of Justice will be

554
00:31:45,040 --> 00:31:48,640
Speaker 6: able to prosecute in the white collar area. And that's

555
00:31:48,880 --> 00:31:54,600
Speaker 6: because white collar criminal cases are notoriously difficult to detect

556
00:31:55,080 --> 00:31:59,040
Speaker 6: and difficult to bring. Typically, you do need someone on

557
00:31:59,080 --> 00:32:01,760
Speaker 6: the inside who can tell the government what's going on

558
00:32:01,880 --> 00:32:05,560
Speaker 6: and who can alert the government to the alleged crime.

559
00:32:06,120 --> 00:32:11,160
Speaker 6: And so there's no doubt this program is intended to

560
00:32:11,200 --> 00:32:15,000
Speaker 6: potentially increase the number of white collar cases that the

561
00:32:15,080 --> 00:32:16,680
Speaker 6: Department can prosecute.

562
00:32:17,000 --> 00:32:20,920
Speaker 2: And is it clear that the Department has the authority

563
00:32:21,040 --> 00:32:22,200
Speaker 2: to implement this.

564
00:32:23,560 --> 00:32:26,920
Speaker 6: Yes. In fact, the Department has the authority and has

565
00:32:27,320 --> 00:32:31,800
Speaker 6: had the authority for some time statutorially to pay monetary

566
00:32:31,800 --> 00:32:37,560
Speaker 6: awards to individuals who provide information or assistance that leads

567
00:32:37,640 --> 00:32:40,720
Speaker 6: to civil or criminal forfeitures. But this is the first

568
00:32:40,720 --> 00:32:44,240
Speaker 6: time in the Department of Justice is actually creating an

569
00:32:44,240 --> 00:32:48,640
Speaker 6: official program to do so to award whistleblowers. But it

570
00:32:48,680 --> 00:32:52,560
Speaker 6: certainly has the statutory authority to do that, and that

571
00:32:52,640 --> 00:32:56,480
Speaker 6: comes under Title twenty eight of the United States Code.

572
00:32:56,920 --> 00:33:00,440
Speaker 2: Is there any problem you see with this program? It's

573
00:33:00,440 --> 00:33:03,240
Speaker 2: in the preliminary stages, but do you see any problems?

574
00:33:03,800 --> 00:33:09,040
Speaker 6: There are some requirements and therefore some limitations on this

575
00:33:09,280 --> 00:33:15,440
Speaker 6: that also create some challenges. For example, the whistleblower under

576
00:33:15,480 --> 00:33:19,800
Speaker 6: this program will have to present information that the prosecutors

577
00:33:19,800 --> 00:33:23,520
Speaker 6: and that's prosecutors in any office across the country don't

578
00:33:23,520 --> 00:33:26,960
Speaker 6: already know, So a whistleblower may or may not know

579
00:33:27,080 --> 00:33:31,200
Speaker 6: in advance whether they are presenting information the Department is

580
00:33:31,240 --> 00:33:34,239
Speaker 6: aware of or not. The whistleblower also has to be

581
00:33:34,280 --> 00:33:36,960
Speaker 6: the first in the door to get any kind of benefits,

582
00:33:36,960 --> 00:33:39,480
Speaker 6: and again may not know if someone else beat them

583
00:33:39,640 --> 00:33:44,800
Speaker 6: to the door. The whistleblower will not be permitted to

584
00:33:44,840 --> 00:33:47,800
Speaker 6: have engaged in any of the wrongdoing or have been

585
00:33:47,800 --> 00:33:53,640
Speaker 6: involved in the underlying criminal activity. The whistleblower can't have

586
00:33:53,720 --> 00:33:59,480
Speaker 6: any existing financial disclosure obligation or incentive, including under a

587
00:33:59,560 --> 00:34:02,840
Speaker 6: key Tan action that might be available or from any

588
00:34:02,880 --> 00:34:07,960
Speaker 6: of the other federal whistleblower programs, and any payments to

589
00:34:08,000 --> 00:34:13,200
Speaker 6: whistleblowers will only be made after all victims have been compensated.

590
00:34:14,120 --> 00:34:18,400
Speaker 6: So all of those requirements create challenges. In addition, it

591
00:34:18,480 --> 00:34:21,200
Speaker 6: is typically a process it can take a long time,

592
00:34:21,480 --> 00:34:27,280
Speaker 6: which may disincentivize other would be whistleblowers from coming forward.

593
00:34:28,120 --> 00:34:32,719
Speaker 6: And because we're talking about criminal cases, it's unlikely that

594
00:34:32,880 --> 00:34:37,200
Speaker 6: whistleblowers in this program will be able to remain anonymous,

595
00:34:37,239 --> 00:34:40,799
Speaker 6: which they are able to be in the SEC and

596
00:34:40,840 --> 00:34:45,799
Speaker 6: the CFTC process through a central whistleblower office. It's unlikely

597
00:34:45,880 --> 00:34:53,400
Speaker 6: here because typically criminal cases result in discovery through the

598
00:34:53,480 --> 00:34:59,000
Speaker 6: criminal case process, meaning the defendant it's going to be

599
00:34:59,280 --> 00:35:03,040
Speaker 6: entitled to know, so who is raising issues and who

600
00:35:03,160 --> 00:35:06,520
Speaker 6: brought the issue to the attention of the government, Not always,

601
00:35:06,560 --> 00:35:09,839
Speaker 6: but in most instances. So I think it's likely that

602
00:35:10,000 --> 00:35:14,080
Speaker 6: whistleblowers in this program can't be anonymous, their credibility is

603
00:35:14,239 --> 00:35:17,120
Speaker 6: likely to be subject to being attacked as part of

604
00:35:17,160 --> 00:35:22,880
Speaker 6: the criminal case. And there's also a risk that a

605
00:35:22,880 --> 00:35:26,080
Speaker 6: whistleblower comes forward and that a defendant may point, you know,

606
00:35:26,160 --> 00:35:29,400
Speaker 6: the finger to the whistleblower and say that person is

607
00:35:29,440 --> 00:35:33,359
Speaker 6: actually the culpable person. And if they prevail, not only

608
00:35:33,520 --> 00:35:37,200
Speaker 6: could be whistleblower be prosecuted, but they won't be entitled

609
00:35:37,200 --> 00:35:41,319
Speaker 6: to get any recovery of funds. And not only are

610
00:35:41,760 --> 00:35:45,200
Speaker 6: some of these things that I've mentioned, you know, unique challenges,

611
00:35:46,280 --> 00:35:51,640
Speaker 6: but other programs don't necessarily have these same requirements. As mentioned,

612
00:35:51,680 --> 00:35:55,840
Speaker 6: the SEC and the CFTC does allow for anonymous and

613
00:35:55,920 --> 00:36:01,040
Speaker 6: confidential complaints, and for example, the False Class Act will

614
00:36:01,080 --> 00:36:05,960
Speaker 6: allow someone a whistleblower to recover at least part of

615
00:36:06,000 --> 00:36:09,719
Speaker 6: an award even if they have some culpability. So those

616
00:36:09,760 --> 00:36:13,560
Speaker 6: are some of the main challenges that this new program

617
00:36:13,680 --> 00:36:15,400
Speaker 6: appears to be imposing.

618
00:36:15,880 --> 00:36:18,920
Speaker 2: Well, we'll find out more in about ninety days, I guess,

619
00:36:19,200 --> 00:36:21,759
Speaker 2: thanks so much for being on the show. Nicole. That's

620
00:36:21,840 --> 00:36:24,880
Speaker 2: Nicole Ingish, a partner at Dorsey and Whitney and a

621
00:36:24,880 --> 00:36:29,319
Speaker 2: former federal prosecutor and Minnesota State Court judge. And that's

622
00:36:29,360 --> 00:36:32,320
Speaker 2: it for this edition of the Bloomberg Law Podcast. Remember

623
00:36:32,360 --> 00:36:35,080
Speaker 2: you can always get the latest legal news by subscribing

624
00:36:35,120 --> 00:36:38,560
Speaker 2: and listening to the show on Apple Podcasts, Spotify, and

625
00:36:38,680 --> 00:36:43,120
Speaker 2: at Bloomberg dot com, slash podcast, slash Law. I'm June Grosso,

626
00:36:43,360 --> 00:36:44,839
Speaker 2: and this is Bloomberg