Speaker 1: This crossing the Bloomberg terminal. Broadcom is said to be
Speaker 1: exploring a deal to acquire chip maker Qualcom. Broadcom jumped
Speaker 1: up three point four percent, Qualcom up six point seven percent,
Speaker 1: now turning to associate A General News, It's rare for
Speaker 1: investigations of global banks to reach the executive suites, but
Speaker 1: that's what's happening at societ A General. According to people
Speaker 1: familiar with the matter, the US Justice Department's investigation into
Speaker 1: interest rate manipulation at global banks is piercing the executive suite,
Speaker 1: with prosecutors scrutinizing the activities of senior officials of the
Speaker 1: French bank. The case is one of three major US
Speaker 1: criminal investigations of sak Gen. The bank said today that
Speaker 1: it is in talks to settle the cases involving allegations
Speaker 1: that bank officials bribe lib Libyans to win investment deals
Speaker 1: and that it manipulated the live or interest rate. Joining
Speaker 1: us as one of our favorite guests, Robert Hockett, professor
Speaker 1: at Cornell Law School, bob the government has collected documents
Speaker 1: suggesting that executives were aware that bankers there were submitting
Speaker 1: fake US dollar library rates. Tell us about those. Yeah,
Speaker 1: so this is actually very important, um, and it's it's
Speaker 1: full significance. I guess there are a couple of interpretations
Speaker 1: we can put on a pluggets that in the moment.
Speaker 1: So the key the key points are the key facts are.
Speaker 1: First of all, of course, the library rate is is
Speaker 1: what I've written about elsewhere as a systemically important price
Speaker 1: or index, right, I call these things cities. These are
Speaker 1: highly important because they serve as benchmarks for many other
Speaker 1: pricing decisions that are made out there. And yet at
Speaker 1: the same time they're controlled by very small numbers of people,
Speaker 1: basically cartels or clubs. That means in turn that those
Speaker 1: things are highly manipulable. And when they're manipulated, they can
Speaker 1: be used of course, and the chief people essentially to
Speaker 1: engage in forms of fraud, insider trading, that kind of thing.
Speaker 1: So the allegation is that lower downs down at at Sockton,
Speaker 1: we're actually doing this. We're manipulating a live board in
Speaker 1: in that kind of classic way. Uh. And that's not
Speaker 1: all that uncommon in there has been a lot of
Speaker 1: lification about this. Lots of banks have been used of
Speaker 1: doing this. The key point here, though, is that we
Speaker 1: now have a kind of smoking gun that suggests that
Speaker 1: people in the executive suite right at the very top
Speaker 1: we're at least aware or should have been aware of
Speaker 1: the fact that this was going on. There is, in
Speaker 1: other words, no longer plausible deniability, because at least one
Speaker 1: person lowered down at Sawgen sort of blew the whistles
Speaker 1: and an email for an executive, and the executive acknowledged
Speaker 1: receipt of that email actually wrote back, and so we
Speaker 1: know then that there is at the very least constructive
Speaker 1: and probably actually you know, actual knowledge among the higher
Speaker 1: ups about what was going down farther below. Well, Bob,
Speaker 1: the government's already indicted two lower level employees in this case,
Speaker 1: haven't Yeah, yeah, sorry, go ahead, go ahead. Yes. So
Speaker 1: we they've already indicted lower employees, and it seems highly
Speaker 1: unlikely that we're actually going to be able to prosecute
Speaker 1: them because France is not actually cooperating with extradition here.
Speaker 1: They have various reasons that they give, and so it
Speaker 1: looks as though it's going to be very difficult for
Speaker 1: US authorities actually to kind of get custody of or
Speaker 1: jurisdiction personal jurisdiction over these people. But it's nevertheless helpful
Speaker 1: for the d o J to file indict it's not
Speaker 1: only against these people, but now against the higher ups
Speaker 1: as well, because the thought is that this will a
Speaker 1: bit more pressure on Softgen to settle with the d
Speaker 1: o J, rather than to continue to say, you know,
Speaker 1: you know, Nana nona and you can't get me. I'm
Speaker 1: over in France. Are they actually saying no non in
Speaker 1: the negotiations because I think there was a normal so um,
Speaker 1: so today we have sucked Gen announcing that it is
Speaker 1: in negotiations. Um after it's set aside more than two
Speaker 1: point five billion dollars in reserves for a settling legal affairs.
Speaker 1: So did it did this do the trick then? Yeah?
Speaker 1: I think this suggests that the pressure strategy might be
Speaker 1: paying law. The thing about Suntion is it's thus far
Speaker 1: managed to avoid having to deal with or to pay
Speaker 1: the piper so to speak, at the o J um
Speaker 1: not with sending the fact that many of its global competitors,
Speaker 1: such as Deutsche Bank and Barkley's have indeed had to
Speaker 1: do this, had they have had to pay the piper
Speaker 1: so to speak. So it's look things as though they're
Speaker 1: that they themselves are feeling the pressure now too, and
Speaker 1: as you know, their share prices taking a significant hit
Speaker 1: ever since yesterday's announcement, and even more I think since
Speaker 1: this morning's uh SO, it might very well be at
Speaker 1: the strategy. The d ok strategy here is paying off, Bob.
Speaker 1: Why is France not really cooperating with the United States
Speaker 1: in these cases? There are a couple of reasons. Of
Speaker 1: one of the reasons is a sort of an innocent
Speaker 1: reason or a really said the form of an innocent reason,
Speaker 1: and the other ones a little bit less so. But
Speaker 1: the innocent reason is that French claim to uh ball
Speaker 1: at some of our procedures, would say that some of
Speaker 1: our judicial procedures would say think are violative a certain
Speaker 1: basic human rights. I don't know that they're actually serious
Speaker 1: about that. That might be textual, it looks as the
Speaker 1: real reason, or at least a less noble sound increcent
Speaker 1: at least as they've definitely been smarting over the fact
Speaker 1: that US prosecutors have been going after other French banks
Speaker 1: that have been accused of violating various legal provisions, and
Speaker 1: the French are are heard saying that this is harming
Speaker 1: our economy, harming our financial institutions and so forth. In
Speaker 1: that case, if that's I if that's the real motivators,
Speaker 1: then it looks like kind of bear economic nationalism. Bob.
Speaker 1: This alleged misconduct happened from May of to October of
Speaker 1: and that is nearly a year after lib or manipulation
Speaker 1: was targeted by authorities at other banks. So is it
Speaker 1: it's true that they didn't deter them at all? I
Speaker 1: think it's oftentimes, Um, you know, one institution might think
Speaker 1: that it's somehow going to avoid scrutiny when other institutions
Speaker 1: are nevertheless attracting it. Uh. This is a sort of
Speaker 1: a common I guess you could think of this as
Speaker 1: a sort of cognitive bias that oftentimes broadsters or manipulators, Um,
Speaker 1: they have maybe an overabundance of self confidence. Let's say
Speaker 1: that the same kind of arrogance that's required uh to
Speaker 1: impel you into engaging in these sorts of behaviors in
Speaker 1: the first place, oftentimes also have you thinking that you're
Speaker 1: above the law, or that you know you can outwit
Speaker 1: your opponents and can't possibly be caught. Well, Bob, do
Speaker 1: you think that, I mean, do you think that the
Speaker 1: way that this is going to play out is that
Speaker 1: um despite French intransigence, and there you know, we may
Speaker 1: see more indictments or at least some kind of settlement
Speaker 1: in all these cases. I think we probably will, because
Speaker 1: if you think about it, ultimately, it really doesn't matter
Speaker 1: that much because we can actually get personal jurisdiction over
Speaker 1: the individual human beings. Keep it's possible actually to indict
Speaker 1: the institutions themselves. Uh, that's very bad pressed for them,
Speaker 1: and then they tend to suffer in the markets, as
Speaker 1: we're seeing of course today and yesterday, and so they
Speaker 1: ultimately come around even if we're not able actually ultimately
Speaker 1: to attach personal jurisdiction to the individual human beings who
Speaker 1: are ultimately responsible. Bob. But what would be the impact
Speaker 1: of the view of the bank suck gen if some
Speaker 1: senior officials were actually indicted. I think it would be
Speaker 1: it would be earth shaking. Maybe it might be a
Speaker 1: splitt exaggeration, but it would be. It would be highly significant,
Speaker 1: because as you know, it's very very rare. I think
Speaker 1: at the people at the top, because there are so
Speaker 1: many layers between them and those below that they usually
Speaker 1: have some kind of plausible deniability or it might not
Speaker 1: be plausible, but it's at least legally classed. Well, even
Speaker 1: I thought sort of, you know, practically that's plausible, but
Speaker 1: now we have, you know, an actual smoking god where
Speaker 1: we can actually say people at the very top you
Speaker 1: definitely knew this, or at least are are are reasonably
Speaker 1: charged with knowledge of it, because you actually got noticed
Speaker 1: that we have it right here in Prince. It's it's
Speaker 1: it sounds like it's going to be an interesting case,
Speaker 1: and we'll be consulting with you as we go along.
Speaker 1: Thanks as always, That's Robert Hockett, professor at Cornell Law School.
Speaker 1: That's it for this edition of Bloomberg Law. We'll be
Speaker 1: back Monday at one pm Wall Street time, and hope
Speaker 1: you will be as well. Thanks to our producer David
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