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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcasts. It's hard to

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Speaker 1: know what President Trump's position is on the hush money

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Speaker 1: paid to adult film star Stephanie Clifford, because it keeps changing.

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Speaker 1: Thanks to his attorney Rudy Giuliani, one thing that has

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Speaker 1: remained consistent in the Trump defense is the contention that

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Speaker 1: it's the president's choice whether it talked to Special Counsel

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Speaker 1: Robert Mueller, even under subpoena. Speaking to ABC's This Week

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Speaker 1: on Sunday, Giuliani reiterated that the president doesn't even have

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Speaker 1: to comply with a subpoena to testify. We don't have

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Speaker 1: to is the president United States. We can assert the

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Speaker 1: same privilege as other presidents have. President Clinton negotiated a

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Speaker 1: deal in which he didn't admit the effectiveness of the subpoena.

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Speaker 1: They withdrew it. My guest is Solomon Weisenberger, partner at

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Speaker 1: Nelson Mullins. He was the Deputy Independent Council in the

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Speaker 1: Whitewater Lewinsky investigation. So let's let's talk about the last

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Speaker 1: thing that Trump said. Trump's attorneys can exert the same

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Speaker 1: privileges that other presidents have, but would that protect him

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Speaker 1: from having to testify under a grand jury subpoena. Well,

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Speaker 1: first of all, the statement that Trump can't be subpoenaed

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Speaker 1: or that he can ignore a subpoena is clearly wrong.

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Speaker 1: The two Supreme Court cases, uh that really deal with

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Speaker 1: the issue. One is Us versus Nixon. In that case,

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Speaker 1: the court enforced the subpoena against the sitting president eight

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Speaker 1: to zero in a criminal case. And in Clinton versus

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Speaker 1: Jones or Jones versus Clinton, the civil case involving Paula

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Speaker 1: Jones at the Court I'm talking about, the Supreme Court

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Speaker 1: rejected President Clinton's argument that you can't subpoena a sitting president. So, um,

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Speaker 1: he's completely wrong. What the president can do is um

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Speaker 1: invoke executive privilege, And that would be very interesting because

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Speaker 1: in that regard, President Trump might be in a little

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Speaker 1: stronger constitutional position than President Nixon was. So that'll be

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Speaker 1: interesting to see how that plays out. My guess is

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Speaker 1: that if Mueller issues a subpoena, the president will invoke

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Speaker 1: executive privilege and just talk a little bit about executive privilege,

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Speaker 1: and you know what that pertains to. It doesn't pertain

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Speaker 1: to things before he was president or the many many

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Speaker 1: things that he has tweeted about and talked about. Well,

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Speaker 1: it does. It could relate to some things right before

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Speaker 1: when he's in the transition period after he's won the election,

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Speaker 1: when he's contemplating being the president. But by and large,

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Speaker 1: you're you're correct. Now. The other question is can you

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Speaker 1: waive executive privilege? Sure, any privilege can be waived, but

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Speaker 1: that would be that would be a fact question. The

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Speaker 1: main problem that Mueller may have is that he has

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Speaker 1: not been given the explicit authority to litigate or contest

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Speaker 1: executive privilege issues. For calling Us Versus Nixon, the special

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Speaker 1: prosecutor Leon Jaworski issued a trial subpoena or caused the

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Speaker 1: trial subpoena to be issued to President Nixon, and one

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Speaker 1: of President Nixon's arguments was, this is an intra branch dispute.

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Speaker 1: The court shouldn't even rule on this. Leon Jaworski is

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Speaker 1: an inferior officer. I'm the president, and I'm invoking executive privilege,

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Speaker 1: and the Supreme Court rejected that argument by President Nixon.

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Speaker 1: But they did so because the regulation, the federal regulation

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Speaker 1: that governed Leon Jaworski, gave Jaworski the explicit authority to

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Speaker 1: contest executive privilege. Bob Mueller does not have that authority,

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Speaker 1: so he might not even get the first base on

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Speaker 1: the executive privilege issue. It's kind of a technical point,

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Speaker 1: but it's an important one. I do want to say

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Speaker 1: one thing. Mayor Juliani keeps saying that there's immunity a

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Speaker 1: president doesn't have to respond to a subpoena because there's

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Speaker 1: presidential immunity written into the constitution. That's completely false. There's

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Speaker 1: no there's no immunity written into the constitution. He's made

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Speaker 1: a number, Giuliani of preposterous, preposterously inaccurate statements. So I'd

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Speaker 1: be very embarrassed if I were him. Do you have

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Speaker 1: any inkling of what's happening, because he's also you know,

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Speaker 1: he's stated facts and then taking them back, and Trump

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Speaker 1: has said, well, he's just come on and he doesn't

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Speaker 1: know the facts. I mean, it seems like it's it's

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Speaker 1: very much being mishandled he's he's winging it. He should

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Speaker 1: change his name to Rusty Juliani because he's he's very

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Speaker 1: rusty on the law. You know, Rusty Rudy. We should

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Speaker 1: the president likes to give people nicknames. We should call

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Speaker 1: him Rusty Ruddy. That's a good one. Cell. So now

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Speaker 1: let's turn to something else he said yesterday, which he

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Speaker 1: did not rule out, that Trump would plead the fifth

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Speaker 1: in response to Mueller's Russia investigation. Now, is this a president?

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Speaker 1: This is a political decision as much as anything. Is

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Speaker 1: this the president that could actually get away with taking

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Speaker 1: the fifth? Is Mueller dealing with the president that's different

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Speaker 1: from other presidents before him, the one that you had

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Speaker 1: to deal with, for example, Well, a lot of the

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Speaker 1: things that Trump and his surrogus are doing or are

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Speaker 1: straight out of the Clinton playbook, particularly attacking the special counsel.

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Speaker 1: In our case, it was the Independent Council. The one

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Speaker 1: big difference is that President Clinton did it through surrogates

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Speaker 1: and President Trump is doing it himself and through surrogates.

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Speaker 1: But but quite your question, can he can he get

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Speaker 1: away with taking the fifth? First of all, any white

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Speaker 1: collar attorney will tell you that if you had a

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Speaker 1: normal client, in in President Trump's situation, you would insist

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Speaker 1: that they invoked the Fifth Amendment. I've been saying for

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Speaker 1: months that, you know, President Trump could could pull it

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Speaker 1: off politically because and it looks like they may be

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Speaker 1: preparing to do that, though, I think they're going to

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Speaker 1: go to the executive privilege route by saying, look, this

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Speaker 1: is a setup. I've said, this is a witch hunt.

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Speaker 1: And the Supreme Court has said for seventy years that

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Speaker 1: the privilege against self incrimination in the Fifth Amendment protects

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Speaker 1: the innocent as well as the guilty, and it specifically

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Speaker 1: protects them from the artful questions of prosecutors and people

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Speaker 1: like that. And I've said all along, this is a

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Speaker 1: gotcha investigation and I'm not going to submit to that.

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Speaker 1: So I think he's he's setting the groundwork for possibly

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Speaker 1: doing that, and I think he can pull it off. Well.

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Speaker 1: In about do we have about a minute and a

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Speaker 1: half here, Could the Special Counsel immunize him by giving

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Speaker 1: him use and derivative use immunity? Well, if he takes

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Speaker 1: a he could certainly he could certainly try to do that. Yes,

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Speaker 1: but then what do you do if he gives him

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Speaker 1: immunity and the press and it pulls the Susan McDougall

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Speaker 1: and says, I don't care if you give me immunity,

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Speaker 1: I'm still not going to talk. Uh. You know, do

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Speaker 1: you try to indict the president for contempt like we

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Speaker 1: did against Susan McDougal, Well, that's a problem because d

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Speaker 1: o J regulations which Mueller has to follow, So you

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Speaker 1: can't indict a sitting president. So that would be very interesting.

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Speaker 1: I mean, I think at the end of the day,

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Speaker 1: he will probably invoke executive privilege, and only if he

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Speaker 1: loses on the executive privilege issue the president that is,

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Speaker 1: will he go and invoke the Sifth Amendment. So, Saul,

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Speaker 1: in about thirty seconds, what are the chances in your opinion,

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Speaker 1: of his actually sitting down of his own accord after

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Speaker 1: a deal is hammered out with the special counsel one

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Speaker 1: point three. I won't ask you how you came to

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Speaker 1: that exact, but I will take that as gospel. Thanks

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Speaker 1: so much, it's a pleasure to have you here. That's

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Speaker 1: Solomon Weisenberg, a partner at Nelson Mullins, and he was

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Speaker 1: the pet independent council in the Whitewater Lewinsky investigation. In

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Speaker 1: a matter of hours, the government got a one two

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Speaker 1: punch to the heart of its five year cracked down

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Speaker 1: on deceptive bond practices. Former Jefferies Group trader Jesse lit Back,

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Speaker 1: the first person charged in the federal crackdown, walked out

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Speaker 1: of a federal prison in Florida last Thursday after an

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Speaker 1: appeals court New York throughout his conviction for the second time.

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Speaker 1: Just hours before, Connecticut jury acquitted former Candor Fitzgerald managing

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Speaker 1: director David Demos of defrauding customers by lying about the

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Speaker 1: prices of mortgage backed securities. My guess is Peter Henning,

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Speaker 1: professor at Wayne State University Law School. Peter, these were

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Speaker 1: two of the higher profile cases in the bond market.

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Speaker 1: Were these devastating results for the government, Well, certainly the

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Speaker 1: answer to that is yes, um, at least when you

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Speaker 1: look at trading in the types of securities involved here,

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Speaker 1: which were residential mortgage backed securities, the kind of securities

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Speaker 1: that many claim were at the heart of causing the

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Speaker 1: financial crisis back in two thousand and eight. The traders

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Speaker 1: involved here and the customers were on both sides, were

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Speaker 1: very sophisticated. So this isn't buying and selling corporate bonds

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Speaker 1: or stock or something like that. These weren't mom and

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Speaker 1: pop investors. These were sophisticated institutional investors. So it's devastating

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Speaker 1: for the government's attempt to police that market. I would

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Speaker 1: have to say that it's going to be very difficult

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Speaker 1: going forward for the government to ever get a conviction

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Speaker 1: in this area. The common thread basically is that bond

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Speaker 1: traders can't lie to customers while haggling over prices. But

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Speaker 1: there's a lot more to it than that. Talk about

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Speaker 1: the scope of this and what the why they government

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Speaker 1: had so many problems proving these cases well. I think

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Speaker 1: part of the problem was that these again, these weren't

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Speaker 1: people who were just coming in and dealing with their broker.

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Speaker 1: It wasn't lie uh, they were just walking and saying,

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Speaker 1: give me the best bond you can that the buyers

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Speaker 1: are sellers here there were transactions on both sides. Um

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Speaker 1: they did their own analysis of the mortgage backed securities

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Speaker 1: figuring out what they're likely value were. So what a

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Speaker 1: salesman or a trader might say, this is what we

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Speaker 1: paid for it. The argument was that really shouldn't have

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Speaker 1: much influence on the decision whether to buy or sell

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Speaker 1: and certainly, at least with the not guilty verdict that

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Speaker 1: seemed to have taken hold with the jury. And I

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Speaker 1: think in the lip Bax case it convinced the Court

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Speaker 1: of Appeals that the government's evidence really just was too

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Speaker 1: thin to be able to prove a fraud even though

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Speaker 1: there's a lie, and that that's really the starting point.

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Speaker 1: They did lie about what their firms paid or bought

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Speaker 1: securities for, but the courts essentially have said that's irrelevant.

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Speaker 1: Lip backs are in January put traders on notice. It

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Speaker 1: led to financial firms clamping down on sort of the

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Speaker 1: shady sales tactics. How much have traders changed their behavior

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Speaker 1: that lying or the puffing in the negotiation and what

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Speaker 1: happens now, well that's a good question about you know,

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Speaker 1: is it just puffing or is it really lying? The

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Speaker 1: firms are going to be more careful that they don't

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Speaker 1: like being caught, and they're certainly reputational damage here that

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Speaker 1: if you get um known as someone who plays fast

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Speaker 1: and loose with the truth, then the investors aren't going

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Speaker 1: to come to you in the future. So there's a

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Speaker 1: good economic incentive for the firms to start policing. Will

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Speaker 1: it keep traders from um shading the truth. Well, you know,

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Speaker 1: maybe for a little while, but on Wall Street, everybody

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Speaker 1: is pursuing that last little bit of profit and so

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Speaker 1: if you can get away with being less than fully honest.

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Speaker 1: I don't see in the future there being that much

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Speaker 1: of a change here, except the firms are going to

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Speaker 1: try to be more careful, or maybe it'll just go

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Speaker 1: further underground. The government hasn't said whether they're whether they're

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Speaker 1: going to try to retry lit back. What's your take

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Speaker 1: on it. Uh, you know, maybe the third time is

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Speaker 1: the charm, but what they're down to is one count left,

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Speaker 1: one transaction, and if they were to retry it, the

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Speaker 1: second Circuit's message was that there was one bit of

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Speaker 1: evidence in his second trial and that shouldn't have been

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Speaker 1: admitted um and therefore we're going to reverse the conviction.

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Speaker 1: I think the Second Circuit is sending a message here

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Speaker 1: that there's just not enough evidence to prove a fraud

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Speaker 1: when you have investors who are conducting their own analysis,

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Speaker 1: and this is frankly an arm length negotiations. So you know,

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Speaker 1: when you walk on the used car lot, do you

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Speaker 1: believe everything? The salesman says, to you. Well, that seems

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Speaker 1: to be the rule here, at least in the mortgage

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Speaker 1: backed securities bond market, that you get better take it

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Speaker 1: with a lot of assault. What the other side is

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Speaker 1: saying to you? Now? In the in the trial of Demos,

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Speaker 1: the Connecticut trial David Demos, it was remarkable that a

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Speaker 1: portfolio manager who was testifying for the government, Eric Mark, said,

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Speaker 1: when my boss trained me, he always told me to

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Speaker 1: watch out for what people tell you, because you have

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Speaker 1: to assume they're lying to you. So that kind of

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Speaker 1: evidence came out in the prosecution's case. Well, certainly. And

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Speaker 1: you know, if anybody thinks that the traders are you know,

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Speaker 1: more generally on Wall Street, that they are not a

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Speaker 1: bunch of sharks, then you are going to get eaten.

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Speaker 1: So yeah, that are you going to get lied to

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Speaker 1: in a negotiation? Well, you know, in any negotiation, if

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Speaker 1: you're buying a house or a car, someone will say,

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Speaker 1: this is my last best offer. Do you actually believe that? Um,

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Speaker 1: you know you're going to come to a negotiated price.

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Speaker 1: Is that the best price? Well, you can't ever really

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Speaker 1: look back, you can only go forward. So I think

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Speaker 1: the message here is that, look, when you've got parties

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Speaker 1: with relatively equal bargaining strengths. Bargaining positions. Um, yeah, people

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Speaker 1: are going to not be fully truthful and know it

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Speaker 1: and live with it, So, Peter, the government's record in

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Speaker 1: the trials of the traders charged in this crackdown is mixed,

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Speaker 1: and recently there there have been, as we mentioned, as

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Speaker 1: we've talked about problems. So was the government overreaching in

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Speaker 1: in initiating this crackdown? I don't think so. Any fraud

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Speaker 1: case is built around a lie, and when you find

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Speaker 1: a lie, you then go from there and if you

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Speaker 1: can find someone who lost money, then that should give

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Speaker 1: you a pretty good fraud case. But here we're in

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Speaker 1: a fairly narrow slice of the market, and I don't

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Speaker 1: want anyone to think that I'm saying that. Well, in

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Speaker 1: other areas you can lie to customers or clients to

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Speaker 1: the answer to that is no, you cannot. But here

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Speaker 1: in this area, um, you've got negotiations here. This is

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Speaker 1: not a market like where you buy stock, where you

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Speaker 1: look on the exchange and say that's a good price.

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Speaker 1: People have to come up with their own valuations and

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Speaker 1: so in this area, I think the government has learned

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Speaker 1: a less in that you can't just take the simple

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Speaker 1: fraud case and apply it in a very sophisticated part

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Speaker 1: of the bond market. So, Peter, in thirty seconds, is

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Speaker 1: it likely the government will go forward with some of

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Speaker 1: the other cases. Well, I wouldn't be surprised if one

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Speaker 1: of the other cases involving no mirror securities defendants, if

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Speaker 1: the second circuit reversed there. I wonder whether they're going

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Speaker 1: to continue to pursue case is in the mortgage backed

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Speaker 1: securities market or any kind of sophisticated securities market. It

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Speaker 1: may just be too difficult. Thanks so much, Peter. As always,

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Speaker 1: that's Peter Henning, a professor at Wayne State University Law School.

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Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can

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Speaker 1: subscribe and listen to the show on Apple Podcasts, SoundCloud,

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