1 00:00:00,080 --> 00:00:03,200 Speaker 1: This crossing the Bloomberg terminal. Broadcom is said to be 2 00:00:03,279 --> 00:00:07,280 Speaker 1: exploring a deal to acquire chip maker Qualcom. Broadcom jumped 3 00:00:07,680 --> 00:00:11,360 Speaker 1: up three point four percent, Qualcom up six point seven percent, 4 00:00:12,039 --> 00:00:16,599 Speaker 1: now turning to associate A General News, It's rare for 5 00:00:16,680 --> 00:00:20,239 Speaker 1: investigations of global banks to reach the executive suites, but 6 00:00:20,480 --> 00:00:23,880 Speaker 1: that's what's happening at societ A General. According to people 7 00:00:23,920 --> 00:00:27,880 Speaker 1: familiar with the matter, the US Justice Department's investigation into 8 00:00:27,880 --> 00:00:32,159 Speaker 1: interest rate manipulation at global banks is piercing the executive suite, 9 00:00:32,360 --> 00:00:36,159 Speaker 1: with prosecutors scrutinizing the activities of senior officials of the 10 00:00:36,200 --> 00:00:39,360 Speaker 1: French bank. The case is one of three major US 11 00:00:39,440 --> 00:00:43,279 Speaker 1: criminal investigations of sak Gen. The bank said today that 12 00:00:43,400 --> 00:00:46,479 Speaker 1: it is in talks to settle the cases involving allegations 13 00:00:46,520 --> 00:00:50,520 Speaker 1: that bank officials bribe lib Libyans to win investment deals 14 00:00:50,560 --> 00:00:53,640 Speaker 1: and that it manipulated the live or interest rate. Joining 15 00:00:53,720 --> 00:00:56,280 Speaker 1: us as one of our favorite guests, Robert Hockett, professor 16 00:00:56,280 --> 00:01:00,560 Speaker 1: at Cornell Law School, bob the government has collected documents 17 00:01:00,600 --> 00:01:04,920 Speaker 1: suggesting that executives were aware that bankers there were submitting 18 00:01:05,080 --> 00:01:10,160 Speaker 1: fake US dollar library rates. Tell us about those. Yeah, 19 00:01:10,200 --> 00:01:13,160 Speaker 1: so this is actually very important, um, and it's it's 20 00:01:13,160 --> 00:01:15,120 Speaker 1: full significance. I guess there are a couple of interpretations 21 00:01:15,120 --> 00:01:16,640 Speaker 1: we can put on a pluggets that in the moment. 22 00:01:17,000 --> 00:01:18,880 Speaker 1: So the key the key points are the key facts are. 23 00:01:19,160 --> 00:01:21,480 Speaker 1: First of all, of course, the library rate is is 24 00:01:21,520 --> 00:01:24,280 Speaker 1: what I've written about elsewhere as a systemically important price 25 00:01:24,360 --> 00:01:27,000 Speaker 1: or index, right, I call these things cities. These are 26 00:01:27,080 --> 00:01:29,440 Speaker 1: highly important because they serve as benchmarks for many other 27 00:01:29,480 --> 00:01:31,679 Speaker 1: pricing decisions that are made out there. And yet at 28 00:01:31,720 --> 00:01:33,920 Speaker 1: the same time they're controlled by very small numbers of people, 29 00:01:33,959 --> 00:01:36,720 Speaker 1: basically cartels or clubs. That means in turn that those 30 00:01:36,720 --> 00:01:39,760 Speaker 1: things are highly manipulable. And when they're manipulated, they can 31 00:01:39,760 --> 00:01:41,560 Speaker 1: be used of course, and the chief people essentially to 32 00:01:41,600 --> 00:01:44,039 Speaker 1: engage in forms of fraud, insider trading, that kind of thing. 33 00:01:44,400 --> 00:01:48,040 Speaker 1: So the allegation is that lower downs down at at Sockton, 34 00:01:48,480 --> 00:01:51,440 Speaker 1: we're actually doing this. We're manipulating a live board in 35 00:01:51,200 --> 00:01:53,880 Speaker 1: in that kind of classic way. Uh. And that's not 36 00:01:53,960 --> 00:01:55,520 Speaker 1: all that uncommon in there has been a lot of 37 00:01:55,560 --> 00:01:57,680 Speaker 1: lification about this. Lots of banks have been used of 38 00:01:57,720 --> 00:02:00,200 Speaker 1: doing this. The key point here, though, is that we 39 00:02:00,280 --> 00:02:03,000 Speaker 1: now have a kind of smoking gun that suggests that 40 00:02:03,080 --> 00:02:05,400 Speaker 1: people in the executive suite right at the very top 41 00:02:05,760 --> 00:02:08,040 Speaker 1: we're at least aware or should have been aware of 42 00:02:08,040 --> 00:02:09,760 Speaker 1: the fact that this was going on. There is, in 43 00:02:09,840 --> 00:02:13,639 Speaker 1: other words, no longer plausible deniability, because at least one 44 00:02:13,720 --> 00:02:16,400 Speaker 1: person lowered down at Sawgen sort of blew the whistles 45 00:02:16,400 --> 00:02:19,280 Speaker 1: and an email for an executive, and the executive acknowledged 46 00:02:19,360 --> 00:02:21,520 Speaker 1: receipt of that email actually wrote back, and so we 47 00:02:21,600 --> 00:02:23,880 Speaker 1: know then that there is at the very least constructive 48 00:02:23,960 --> 00:02:27,400 Speaker 1: and probably actually you know, actual knowledge among the higher 49 00:02:27,480 --> 00:02:30,320 Speaker 1: ups about what was going down farther below. Well, Bob, 50 00:02:30,400 --> 00:02:34,079 Speaker 1: the government's already indicted two lower level employees in this case, 51 00:02:34,160 --> 00:02:39,840 Speaker 1: haven't Yeah, yeah, sorry, go ahead, go ahead. Yes. So 52 00:02:40,000 --> 00:02:43,800 Speaker 1: we they've already indicted lower employees, and it seems highly 53 00:02:43,840 --> 00:02:46,160 Speaker 1: unlikely that we're actually going to be able to prosecute 54 00:02:46,160 --> 00:02:48,720 Speaker 1: them because France is not actually cooperating with extradition here. 55 00:02:49,080 --> 00:02:50,639 Speaker 1: They have various reasons that they give, and so it 56 00:02:50,680 --> 00:02:52,520 Speaker 1: looks as though it's going to be very difficult for 57 00:02:52,639 --> 00:02:55,040 Speaker 1: US authorities actually to kind of get custody of or 58 00:02:55,120 --> 00:02:59,480 Speaker 1: jurisdiction personal jurisdiction over these people. But it's nevertheless helpful 59 00:02:59,520 --> 00:03:01,680 Speaker 1: for the d o J to file indict it's not 60 00:03:01,720 --> 00:03:03,600 Speaker 1: only against these people, but now against the higher ups 61 00:03:03,639 --> 00:03:06,280 Speaker 1: as well, because the thought is that this will a 62 00:03:06,280 --> 00:03:09,240 Speaker 1: bit more pressure on Softgen to settle with the d 63 00:03:09,320 --> 00:03:11,240 Speaker 1: o J, rather than to continue to say, you know, 64 00:03:11,840 --> 00:03:13,600 Speaker 1: you know, Nana nona and you can't get me. I'm 65 00:03:13,600 --> 00:03:16,840 Speaker 1: over in France. Are they actually saying no non in 66 00:03:16,919 --> 00:03:23,600 Speaker 1: the negotiations because I think there was a normal so um, 67 00:03:23,800 --> 00:03:27,760 Speaker 1: so today we have sucked Gen announcing that it is 68 00:03:27,800 --> 00:03:31,680 Speaker 1: in negotiations. Um after it's set aside more than two 69 00:03:31,720 --> 00:03:37,200 Speaker 1: point five billion dollars in reserves for a settling legal affairs. 70 00:03:37,240 --> 00:03:40,400 Speaker 1: So did it did this do the trick then? Yeah? 71 00:03:40,480 --> 00:03:42,960 Speaker 1: I think this suggests that the pressure strategy might be 72 00:03:43,040 --> 00:03:45,640 Speaker 1: paying law. The thing about Suntion is it's thus far 73 00:03:45,800 --> 00:03:48,640 Speaker 1: managed to avoid having to deal with or to pay 74 00:03:49,000 --> 00:03:51,040 Speaker 1: the piper so to speak, at the o J um 75 00:03:51,160 --> 00:03:53,320 Speaker 1: not with sending the fact that many of its global competitors, 76 00:03:53,400 --> 00:03:56,920 Speaker 1: such as Deutsche Bank and Barkley's have indeed had to 77 00:03:56,960 --> 00:03:58,480 Speaker 1: do this, had they have had to pay the piper 78 00:03:58,560 --> 00:04:00,600 Speaker 1: so to speak. So it's look things as though they're 79 00:04:00,600 --> 00:04:02,320 Speaker 1: that they themselves are feeling the pressure now too, and 80 00:04:02,360 --> 00:04:04,400 Speaker 1: as you know, their share prices taking a significant hit 81 00:04:04,800 --> 00:04:07,120 Speaker 1: ever since yesterday's announcement, and even more I think since 82 00:04:07,120 --> 00:04:09,560 Speaker 1: this morning's uh SO, it might very well be at 83 00:04:09,560 --> 00:04:12,920 Speaker 1: the strategy. The d ok strategy here is paying off, Bob. 84 00:04:12,960 --> 00:04:16,560 Speaker 1: Why is France not really cooperating with the United States 85 00:04:16,560 --> 00:04:19,880 Speaker 1: in these cases? There are a couple of reasons. Of 86 00:04:19,960 --> 00:04:21,560 Speaker 1: one of the reasons is a sort of an innocent 87 00:04:22,000 --> 00:04:24,039 Speaker 1: reason or a really said the form of an innocent reason, 88 00:04:24,080 --> 00:04:25,560 Speaker 1: and the other ones a little bit less so. But 89 00:04:25,680 --> 00:04:29,440 Speaker 1: the innocent reason is that French claim to uh ball 90 00:04:29,680 --> 00:04:31,880 Speaker 1: at some of our procedures, would say that some of 91 00:04:31,880 --> 00:04:34,400 Speaker 1: our judicial procedures would say think are violative a certain 92 00:04:34,440 --> 00:04:36,880 Speaker 1: basic human rights. I don't know that they're actually serious 93 00:04:36,880 --> 00:04:39,240 Speaker 1: about that. That might be textual, it looks as the 94 00:04:39,279 --> 00:04:42,120 Speaker 1: real reason, or at least a less noble sound increcent 95 00:04:42,120 --> 00:04:44,560 Speaker 1: at least as they've definitely been smarting over the fact 96 00:04:44,560 --> 00:04:48,159 Speaker 1: that US prosecutors have been going after other French banks 97 00:04:48,200 --> 00:04:51,479 Speaker 1: that have been accused of violating various legal provisions, and 98 00:04:51,640 --> 00:04:53,760 Speaker 1: the French are are heard saying that this is harming 99 00:04:53,800 --> 00:04:56,680 Speaker 1: our economy, harming our financial institutions and so forth. In 100 00:04:56,720 --> 00:04:58,800 Speaker 1: that case, if that's I if that's the real motivators, 101 00:04:58,800 --> 00:05:02,880 Speaker 1: then it looks like kind of bear economic nationalism. Bob. 102 00:05:02,960 --> 00:05:07,520 Speaker 1: This alleged misconduct happened from May of to October of 103 00:05:08,360 --> 00:05:12,080 Speaker 1: and that is nearly a year after lib or manipulation 104 00:05:12,240 --> 00:05:16,080 Speaker 1: was targeted by authorities at other banks. So is it 105 00:05:16,080 --> 00:05:20,240 Speaker 1: it's true that they didn't deter them at all? I 106 00:05:20,279 --> 00:05:24,760 Speaker 1: think it's oftentimes, Um, you know, one institution might think 107 00:05:25,000 --> 00:05:28,400 Speaker 1: that it's somehow going to avoid scrutiny when other institutions 108 00:05:28,400 --> 00:05:30,839 Speaker 1: are nevertheless attracting it. Uh. This is a sort of 109 00:05:30,839 --> 00:05:32,400 Speaker 1: a common I guess you could think of this as 110 00:05:32,400 --> 00:05:36,360 Speaker 1: a sort of cognitive bias that oftentimes broadsters or manipulators, Um, 111 00:05:36,520 --> 00:05:40,800 Speaker 1: they have maybe an overabundance of self confidence. Let's say 112 00:05:40,800 --> 00:05:43,560 Speaker 1: that the same kind of arrogance that's required uh to 113 00:05:43,920 --> 00:05:46,039 Speaker 1: impel you into engaging in these sorts of behaviors in 114 00:05:46,040 --> 00:05:48,960 Speaker 1: the first place, oftentimes also have you thinking that you're 115 00:05:49,000 --> 00:05:51,000 Speaker 1: above the law, or that you know you can outwit 116 00:05:51,040 --> 00:05:55,280 Speaker 1: your opponents and can't possibly be caught. Well, Bob, do 117 00:05:55,320 --> 00:05:58,520 Speaker 1: you think that, I mean, do you think that the 118 00:05:58,680 --> 00:06:00,680 Speaker 1: way that this is going to play out is that 119 00:06:01,400 --> 00:06:06,480 Speaker 1: um despite French intransigence, and there you know, we may 120 00:06:06,480 --> 00:06:08,600 Speaker 1: see more indictments or at least some kind of settlement 121 00:06:08,640 --> 00:06:11,520 Speaker 1: in all these cases. I think we probably will, because 122 00:06:11,560 --> 00:06:13,400 Speaker 1: if you think about it, ultimately, it really doesn't matter 123 00:06:13,440 --> 00:06:15,680 Speaker 1: that much because we can actually get personal jurisdiction over 124 00:06:15,720 --> 00:06:18,360 Speaker 1: the individual human beings. Keep it's possible actually to indict 125 00:06:18,400 --> 00:06:21,640 Speaker 1: the institutions themselves. Uh, that's very bad pressed for them, 126 00:06:21,680 --> 00:06:23,480 Speaker 1: and then they tend to suffer in the markets, as 127 00:06:23,480 --> 00:06:25,520 Speaker 1: we're seeing of course today and yesterday, and so they 128 00:06:25,600 --> 00:06:28,440 Speaker 1: ultimately come around even if we're not able actually ultimately 129 00:06:28,480 --> 00:06:31,480 Speaker 1: to attach personal jurisdiction to the individual human beings who 130 00:06:31,520 --> 00:06:35,040 Speaker 1: are ultimately responsible. Bob. But what would be the impact 131 00:06:35,320 --> 00:06:39,800 Speaker 1: of the view of the bank suck gen if some 132 00:06:39,920 --> 00:06:43,880 Speaker 1: senior officials were actually indicted. I think it would be 133 00:06:43,960 --> 00:06:46,400 Speaker 1: it would be earth shaking. Maybe it might be a 134 00:06:46,400 --> 00:06:48,760 Speaker 1: splitt exaggeration, but it would be. It would be highly significant, 135 00:06:48,960 --> 00:06:50,800 Speaker 1: because as you know, it's very very rare. I think 136 00:06:50,800 --> 00:06:52,359 Speaker 1: at the people at the top, because there are so 137 00:06:52,360 --> 00:06:55,400 Speaker 1: many layers between them and those below that they usually 138 00:06:55,440 --> 00:06:58,039 Speaker 1: have some kind of plausible deniability or it might not 139 00:06:58,120 --> 00:07:00,360 Speaker 1: be plausible, but it's at least legally classed. Well, even 140 00:07:00,360 --> 00:07:03,520 Speaker 1: I thought sort of, you know, practically that's plausible, but 141 00:07:03,640 --> 00:07:06,039 Speaker 1: now we have, you know, an actual smoking god where 142 00:07:06,040 --> 00:07:07,960 Speaker 1: we can actually say people at the very top you 143 00:07:08,080 --> 00:07:11,760 Speaker 1: definitely knew this, or at least are are are reasonably 144 00:07:11,840 --> 00:07:14,200 Speaker 1: charged with knowledge of it, because you actually got noticed 145 00:07:14,240 --> 00:07:17,200 Speaker 1: that we have it right here in Prince. It's it's 146 00:07:17,240 --> 00:07:20,360 Speaker 1: it sounds like it's going to be an interesting case, 147 00:07:20,440 --> 00:07:22,640 Speaker 1: and we'll be consulting with you as we go along. 148 00:07:22,760 --> 00:07:27,120 Speaker 1: Thanks as always, That's Robert Hockett, professor at Cornell Law School. 149 00:07:27,160 --> 00:07:29,400 Speaker 1: That's it for this edition of Bloomberg Law. We'll be 150 00:07:29,440 --> 00:07:32,000 Speaker 1: back Monday at one pm Wall Street time, and hope 151 00:07:32,040 --> 00:07:34,920 Speaker 1: you will be as well. Thanks to our producer David 152 00:07:34,960 --> 00:07:38,600 Speaker 1: Suckerman and our technical director Chris trike Comy. You can 153 00:07:38,640 --> 00:07:40,880 Speaker 1: listen to the latest legal topics and news on our 154 00:07:40,880 --> 00:07:45,560 Speaker 1: Bloomberg Law podcast. 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