Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: Jack Smith should be considered mentally deranged and he should
Speaker 2: be thrown out of the country. Somebody said, why don't
Speaker 2: you be nice to him? I said, it wouldn't matter.
Speaker 2: Wouldn't matter. This guy's a maniac. We wouldn't be under
Speaker 2: investigation by deranged Jack Smith. He's a deranged human man.
Speaker 2: You take a look at that face. You say that
Speaker 2: guy is a sick man. There's something wrong with him.
Speaker 3: Donald Trump has berated and ridiculed Special counsel Jack Smith
Speaker 3: over and over again, so much so that many consider
Speaker 3: Smith to be at the top of the president elect's
Speaker 3: list of targets when he takes office. But Smith reportedly
Speaker 3: intends to resign before that and a sort of cleaning
Speaker 3: house before inauguration day. Today, he filed motions to drop
Speaker 3: all federal charges against Trump in the case over his
Speaker 3: effort to overturn the twenty two any presidential election and
Speaker 3: the case over his mishandling of classified documents. Joining me
Speaker 3: is Bloomberg Legal reporters Zoe Tillman. Did this come as
Speaker 3: any surprise or were we expecting this?
Speaker 1: We were expecting this in broad strokes, given the Justice
Speaker 1: Department policy which is longstanding that sitting presidents can't be
Speaker 1: charged or prosecuted. And you know, we had confirmation that
Speaker 1: the Special Council would be winding down these prostitutions. I
Speaker 1: think what was unclear was, you know, whether they would
Speaker 1: let stand a lower court ruling finding the Special Council
Speaker 1: and constitutional in the Classified Documents case, or whether they
Speaker 1: would try to preserve some part of that appeal. And
Speaker 1: we got that answer today, which is that they will
Speaker 1: try to move forward with it for now. But you know,
Speaker 1: once Trump takes office, he has the ability to shut
Speaker 1: it down completely or to pardon his co defendants. So
Speaker 1: there's not much more that can be done. But for now,
Speaker 1: at least you know that part of the case is
Speaker 1: still active.
Speaker 3: So the Classified Documents case had already been dismissed by
Speaker 3: a Florida judge, so.
Speaker 1: He dropped the election interference indictment against Trump and also
Speaker 1: said that they would no longer appeal the dismissal of
Speaker 1: charges against Trump in the Classified Documents case. Lower court
Speaker 1: judge in Florida, Judge Aalen Cannon had already dismissed that indictment.
Speaker 1: Finding that Jacksmith's appointment and funding more unconstitutional. So prosecutors
Speaker 1: were in the middle of appealing that decision. They're not
Speaker 1: really dismissing the indictment because it was already dismissed by
Speaker 1: a judge, but they're just saying we're not going to
Speaker 1: appeal anymore. That's part of the case.
Speaker 3: That decision by Judge Eileen Cannon finding the Special Council
Speaker 3: unconstitutional was totally novel and went against all the precedents.
Speaker 3: Do they really want that decision remaining on the books?
Speaker 1: Well, see they right now they've said we are not
Speaker 1: dismissing the appeal. As to Trump's co defendants, Walt Nauda
Speaker 1: and Carlos the ala Vera, there's a reply brief from
Speaker 1: the government in the next few days. If something, they
Speaker 1: don't spile it today along with their notice. The Eleventh
Speaker 1: Circuit hasn't set arguments yet, so it's still possible that
Speaker 1: if the court wanted to move quickly before Trump is
Speaker 1: sworn in on January twentieth, the Eleventh Circuit could hear
Speaker 1: arguments and rule on the issue before he takes office.
Speaker 1: It would be a very expedited schedule. But we've certainly
Speaker 1: seen courts move quickly when asked to under certain circumstances.
Speaker 1: So I think that's the one outstanding question is whether
Speaker 1: prosecutors can you know, get more done on this in
Speaker 1: the next months than a half or so.
Speaker 3: Tell us what jack Smith said specifically, Did he say
Speaker 3: anything about the strength of the case.
Speaker 1: Yeah, so, you know, you could sort of describe it
Speaker 1: as the grudging dismissal of the case in the election
Speaker 1: obstruction case, at least in their notice that they were,
Speaker 1: you know, asking the judge to dismiss it. On the
Speaker 1: first page, Jacksmith says, you know, we stand fully behind
Speaker 1: the strength of the case. This is not about the merits,
Speaker 1: which we still think, you know, we're valid and should
Speaker 1: have moved forward. But that gives Justice Department policy on
Speaker 1: not prosecuting sitting presidents is categorical and sort of forced,
Speaker 1: basically forced his hands, you know. The other thing to
Speaker 1: note is that they asked Judge China Chutkin to dismiss
Speaker 1: the indictment without prejudice, which sort of leaves the door
Speaker 1: open to a future Justice Department four years from now
Speaker 1: under whoever is president next, thinking about whether they would
Speaker 1: want to try it again, which then raisesultsors of questions
Speaker 1: about whether, you know, could Trump self pardon in the
Speaker 1: White House to head off that possibility. It's just a
Speaker 1: lot of uncertainty. But you know, notable that they didn't
Speaker 1: say we're going to close the door on this altogether.
Speaker 3: So this really shows how Trump's policy in all his
Speaker 3: cases of delay, delay, delay, really worked for him.
Speaker 1: It did, I think, there's no question about that. And
Speaker 1: you know, from the beginning the move had been to
Speaker 1: argue in favor of schedules. You know, first they were
Speaker 1: saying there should be no trial to ask the election,
Speaker 1: and no judge was on board with that, even in Florida,
Speaker 1: where you know, Judge Cannon was seen as more accommodating
Speaker 1: of you know, what the president elect was asking for.
Speaker 1: But she Eden said, I'm not going to push this back,
Speaker 1: you know, until after the election is and do that
Speaker 1: kind of political calendar making. But in the end, you know,
Speaker 1: he successfully pressed appeals that delayed. He raised issues that
Speaker 1: just forced later deadlines by virtue of the rule criminal
Speaker 1: rules of person jervis. He files motions that requires responses,
Speaker 1: and everyone needs time to press the briefs and argue.
Speaker 1: You know, Judge Chucklin and Washington tried very hard to
Speaker 1: keep her case on track. But when there's a question
Speaker 1: of presidential immunity, that is, and everyone agreed that is
Speaker 1: immediately appealable up to the Supreme Court, and these things
Speaker 1: just take time, so you know, to the extent, they
Speaker 1: found ways to file motions that no one could really
Speaker 1: argue would build in delays. They ran out the crocs successfully, and.
Speaker 3: The Supreme Court helped out with its decision on presidential immunity.
Speaker 1: I mean, the court did side with him. He prevailed
Speaker 1: in that they didn't agree that he had absolute immunity
Speaker 1: against the case, so it kept it alive. But certainly,
Speaker 1: you know, the majority of justices agreed with him that
Speaker 1: at least some of the indictment would be off limits,
Speaker 1: the part dealing with his discussions with Justice Department officials,
Speaker 1: anything that was sort of overtly part of business in
Speaker 1: the White House. And then you know, said we're going
Speaker 1: to send it back to a lower court judge to
Speaker 1: do another round of determinations. So you know, in theory,
Speaker 1: I guess the Supreme Court could have said, we're going
Speaker 1: to resolve all these questions ourselves and put the case
Speaker 1: back on track if they thought that any part of
Speaker 1: it could survive, but didn't send it back to Judge Chuckkin,
Speaker 1: who then had to set up schedule for more brief
Speaker 1: And at that point it seems impossible that it could
Speaker 1: be on track for a trial before election day.
Speaker 3: So still Judge Chuckkin has to sign off on this.
Speaker 4: She does yees.
Speaker 1: Generally speaking, judges have very little discussion in these types
Speaker 1: of situations if the government says we don't want to
Speaker 1: pursue this case anymore, especially ahead of a trial. You know,
Speaker 1: one instance where we saw judge put a hold on
Speaker 1: cod trying to drop something within the case of Michael Flynn,
Speaker 1: who was Trump's former national security advisor, and Flynn had
Speaker 1: been prosecuted under a former Special Council and then spun
Speaker 1: off to a US attorney office related to the Russian investigation.
Speaker 1: But Michael Frinn had already had pleaded guilty. So the
Speaker 1: judge in that case has said, you know, I'm not
Speaker 1: sure if I can drop this right away if he's
Speaker 1: already been factual findings about guilt and acceptance of responsibility,
Speaker 1: et cetera, et cetera. But that's not the case here.
Speaker 1: There's been no fact finding. It's much early. Even though
Speaker 1: it feels like so much has happened, it's really much
Speaker 1: earlier in the proceedings. So, you know, I don't think
Speaker 1: there's an expectation that Judge Chuckkins would refuse to dismiss
Speaker 1: it at this point. But whether she calls them in
Speaker 1: for some other reason, you know, it's with final questions.
Speaker 1: I guess we could wait and see that. It would
Speaker 1: be very unusual to have her do that.
Speaker 3: Now, what about Jack Smith? There are reports that he
Speaker 3: is going to step down before Trump takes.
Speaker 1: Office, So our reporting has signaled that he is expected
Speaker 1: to resign from his position as special counsel before Trump
Speaker 1: is sworn in. Whether he would leave the Justice Department
Speaker 1: all together, you know, sort of what form that takes exactly,
Speaker 1: we're not sure and waiting to see sort of what
Speaker 1: he announces he'll do. You know, we're waiting to also
Speaker 1: see if he finishes a report on his investigation on
Speaker 1: his work, what happens with that, so you know, today
Speaker 1: it doesn't walk out the door and never come.
Speaker 5: Back, you think.
Speaker 1: So we're not quite sure. But you know, even if
Speaker 1: he were to stay in the Justice Department in some
Speaker 1: capacity in the next few weeks. There's little doubt that
Speaker 1: Trump would fire him immediately.
Speaker 3: Well, Trump has promised that, and he's also said that
Speaker 3: Smith should be thrown out of the country. That seems
Speaker 3: beyond even his power as a president. But isn't Smith
Speaker 3: required to file a report on his charging decisions to
Speaker 3: the Attorney General before he leaves office?
Speaker 1: You know, I'd have to go back and check their regulations,
Speaker 1: but the expectation is that you will write a report
Speaker 1: and submit that to the Attorney General to close out
Speaker 1: his office, sort of administrative task that he also has
Speaker 1: to do. We'll get a final budget report as he
Speaker 1: closes down on the office, you know. I guess another
Speaker 1: unanswered question is if there were other investigative threads that
Speaker 1: they were pursuing, whether they would send those files, you know,
Speaker 1: send them off to a US attorney office for further investigation,
Speaker 1: or to redirect them like we saw with Special Council Luller,
Speaker 1: where you know, certain issues were redirected to US attorney
Speaker 1: offices after he left. So, you know, I think this
Speaker 1: is not little astically heard from Jacksmith. But I think
Speaker 1: depending on timing, you know, he files his report before
Speaker 1: inauguration and the pressure will be on Attorney General's Garland
Speaker 1: to release that ice effect. But we just haven't heard
Speaker 1: one way or the other sort of what's next, And
Speaker 1: so we.
Speaker 3: Tell us about the push from Texas to get access
Speaker 3: to Smith's files.
Speaker 1: There's a case pending from the Texas Attorney General's office.
Speaker 1: Kim Paxton has been a long time ally of Trump,
Speaker 1: trying to get Jacksmith's files and release more of his
Speaker 1: work and what happened in that office. I think there's
Speaker 1: also the next beat will be like the investigation into
Speaker 1: the investigation of Jack Smith.
Speaker 3: It seems to be never ending, and one has to
Speaker 3: wonder about what parts of Jack Smith's investigation the Texas
Speaker 3: Attorney General would release to the public. Some more to come,
Speaker 3: Thanks so much, Zoe. That's Bloomberg Legal reporter Zoe Tillman.
Speaker 3: Coming up next on the Bloomberg Law Show. Federal prosecutors
Speaker 3: are presenting their case in the trial of the longest
Speaker 3: serving House leader in the country, Michael Madigan. I'm June
Speaker 3: Grosso and you're listening to Bloomberg Dan.
Speaker 4: Yes, Mike Madigan speaker, How are you? I I'm good.
Speaker 3: How are you? Michael Madigan, the longest serving House leader
Speaker 3: of any state in US history. Is an almost mythical
Speaker 3: figure in Illinois politics. His three decade rain earned him
Speaker 3: the nickname the Velvet Hammer because of the way he
Speaker 3: led the Illinois House and extracted fealty from its members.
Speaker 4: If you can get near you, mind that your client
Speaker 4: is only Mike Madigan.
Speaker 3: Now, the eighty two year old Madigan is on trial
Speaker 3: for bribery, extortion, and racketeering for allegedly running a criminal
Speaker 3: enterprise to add to his vast political power, get business
Speaker 3: for his private law firm and reward his friends and allies.
Speaker 3: Government attorneys are building their case against him with witnesses
Speaker 3: who've made plea deals and war wires, documents, emails, and
Speaker 3: hundreds of wiretap conversations like these.
Speaker 4: I generally never refer to the speaker. I just say
Speaker 4: our friend. So if you could say our friend, no
Speaker 4: one really knows what we're talking about.
Speaker 5: Speak of that.
Speaker 4: Hey, micaeh, Hey, will you tell the speaker I took
Speaker 4: care of burials and Pennonovic Did you just throw away
Speaker 4: that note? Yep.
Speaker 3: For those outside of Illinois who don't know about Madigan,
Speaker 3: you know, tell us a little bit about his background.
Speaker 3: Why you was nicknamed the velvet hammer.
Speaker 5: So Mike Madigan is the longest serving speaker of the
Speaker 5: Illinois House in history, and in addition to the extraordinary
Speaker 5: political power and influence that he wielded from that position,
Speaker 5: he also had a private practice of laws. The indictment
Speaker 5: charges that he used both of these positions to retain
Speaker 5: and consolidate his power.
Speaker 3: So the prosecutors are alleging that he used his political
Speaker 3: power in offices as a criminal enterprise. I mean, what
Speaker 3: exactly are they charging there?
Speaker 5: Yes, that's exactly right, a criminal enterprise which is casually
Speaker 5: referred to as the Madigan enterprise. And in brief, it
Speaker 5: boils down to what is at the heart of all
Speaker 5: public corruption cases, which is precisely money and power, the
Speaker 5: abuse of public office for private gain, and the abuse
Speaker 5: of power to retain and consolidate power. The evidence that's
Speaker 5: been introduced in the case so far focuses on Commed,
Speaker 5: the public utility here in Illinois, and Madigan's essentially leveraging
Speaker 5: commed dependence on his political power, depending on Madigan's support
Speaker 5: for legislation and policy that are favorable to Commed in
Speaker 5: exchange for a variety of things. This is one large
Speaker 5: issue among others.
Speaker 3: His co defendant, Mike McClain, And he's already been convicted
Speaker 3: on public corruption charges. Why are they trying to show
Speaker 3: that he's an agent of Madigan?
Speaker 5: So Mike mclan, as you say, has already been convicted
Speaker 5: in a separate trial. That trial is referred to as
Speaker 5: the trial of the comment for in this instance, Mike
Speaker 5: McLean is charged as a co defendant and an agent
Speaker 5: of the former speaker Mike Madigan. And under an agency
Speaker 5: theory of liabil Mike Madigan's knowledge, his criminal intent, and
Speaker 5: the actions that he directs are all imputed to Mike
Speaker 5: McLean as his agent. This is the theory of the prosecution.
Speaker 5: Of course, mister McLean contests it.
Speaker 3: Let's talk about the defense. Is the defense that this
Speaker 3: is what politicians do? Is it that defense that we've
Speaker 3: heard a million times? Or is there more to it?
Speaker 5: That is essentially the defense. It is a defense that
Speaker 5: has gained credence in recent years with a series of
Speaker 5: Supreme Court rulings that have held in essence that federal
Speaker 5: prosecutors have been overly ambitious with their interpretation of public
Speaker 5: corruption laws and have swept into their prosecutions instances of
Speaker 5: politics as usual constituent services, and the type of deal making,
Speaker 5: which is how the sausage is made. And in the
Speaker 5: words of Chief Justice John Roberts in the case of
Speaker 5: the former Virginia governor Bob McDonald, it may be unseemly,
Speaker 5: but that doesn't mean it's criminal.
Speaker 3: The Supreme Court has been pairing back public corruption law
Speaker 3: since the McDonald case, and last June, in the Snyder case,
Speaker 3: the Justices undid the conviction of a former Indiana mayor
Speaker 3: who received thirteen thousand dollars from a trucking company after
Speaker 3: it was awarded city contracts. In this case, how are
Speaker 3: the prosecutors getting around the Snyder decision?
Speaker 5: Well, First of all, the Snyder case involved a very
Speaker 5: particular statute. It involved a charge of illegal gratuities, which
Speaker 5: the prosecution argued was included in eighteen US could six
Speaker 5: sixty six, which is a federal law that applies to
Speaker 5: state and local bribery. The Supreme Court Court ruled in
Speaker 5: Snyder that that interpretation was in correct, that six sixty
Speaker 5: six encompasses quid pro quol bribery, but not illegal gratuities,
Speaker 5: which was the theory of liability in Snyder. The Madigan
Speaker 5: case by contrast, is not a theory of illegal gratuities. Rather,
Speaker 5: it is a criminal enterprise. So rico is charged along
Speaker 5: with wire fraud and actual bribery. Bribery is considered one
Speaker 5: of the necessary predicate offenses that can be used as
Speaker 5: a basis to charge a racketeering enterprise.
Speaker 3: Are quid pro quo allegations key to the government's case
Speaker 3: against Madigan and McLain.
Speaker 5: A theory of quid pro quo liability, yes, But the
Speaker 5: reason that quid pro quo, although it's a commonly used
Speaker 5: term in the vernacular for corruption, is not a legal
Speaker 5: term of art, is because in truth, corrupt acts are
Speaker 5: most often far more complex than the concepts of this
Speaker 5: for that. So, in the case that's been brought by
Speaker 5: the government against Madigan, what is alleged is that essentially
Speaker 5: comed owed Mike Madigan. The company was indebted to him
Speaker 5: for numerous times he had helped them benefit with legislation
Speaker 5: that was favorable to the company. So you're in a
Speaker 5: situation where the defendant already has influenced power, clout and leverage.
Speaker 5: What is alleged is that Mike Madgan in turn then
Speaker 5: use that to demand favors from coned, So it is
Speaker 5: a quid pro quo, but it's not a simple or
Speaker 5: isolated transaction.
Speaker 3: So the government has all kinds of evidence. People who
Speaker 3: wore wires, the wire tapped, they have documents. What do
Speaker 3: you see as the longest evidence they have so far.
Speaker 5: All of the government's evidence has strengths, and it also
Speaker 5: has ways in which it can be attacked by defense counsel,
Speaker 5: and it is being attacked by defense counsel. Government witnesses
Speaker 5: who are so called cooperating witnesses, including those who have
Speaker 5: negotiated flea deals, of course, have received the benefit from
Speaker 5: the government. These are individuals who have negotiated a flee
Speaker 5: deal in exchange for their cooperation with the government, and
Speaker 5: they have an expectation of a reduced sentence. Therefore, Council
Speaker 5: for the Defense will be cross examining them on their bias,
Speaker 5: on their incentive to curry favor with the government, and
Speaker 5: arguably what they will certainly argue to the jury is
Speaker 5: that those witnesses are therefore not credible, not to be believed. Recordings,
Speaker 5: of course, are not of witnesses who may or may
Speaker 5: not have an incentive to shade the truth on the
Speaker 5: witness stand. A famous Chicago defense attorney once said, you
Speaker 5: don't need to believe me, Just believe mister Panasonic. You
Speaker 5: press play, and the recording speaks for itself. Now, in
Speaker 5: some instances, these recordings are grainy, of lower quality, may
Speaker 5: not be the smoking gun that they have been made
Speaker 5: out to be. And so I am certain that the
Speaker 5: jury is listening very carefully when the videos and audio
Speaker 5: recordings are played to see if the content actually lines
Speaker 5: up with what the government promised the evidence would show
Speaker 5: in its opening statement, because you can bet that if
Speaker 5: it doesn't, when the defense makes its closing argument, it
Speaker 5: will point out the ways in which the government's case
Speaker 5: fell short.
Speaker 3: Some of the recordings seemed pretty stunning, one where MacLean said,
Speaker 3: your client is only mag Madigan. It's not the Democratic Party,
Speaker 3: it's not anybody who hired you, it's not your mom
Speaker 3: and dad. But the defense, I assume, can frame that
Speaker 3: in a different.
Speaker 5: Way, certainly, and you can see both sides of that coin.
Speaker 5: On the one hand, it speaks to Speaker Madigan's really
Speaker 5: extraordinary influence in a way that certainly undermines a democratic
Speaker 5: or meritocratic process. On the other hand, you can say, well, yeah,
Speaker 5: who is the leading Democrat in Illinois. He was conflated
Speaker 5: with the Democratic Party, and MacLean is just making clear
Speaker 5: that Madigan's agenda is the overwhelming agenda that we'll get
Speaker 5: through in Springfield, and indeed, for many years that was
Speaker 5: the case.
Speaker 3: Is there any indication that Madigan might take the stand.
Speaker 5: There has been no indication as of yet. He will
Speaker 5: need to make that decision when the government rests its case.
Speaker 5: The government is still, of course presenting its case in chief,
Speaker 5: and the burden of proof remains with the government at
Speaker 5: all times. The Speaker, of course, is entitled to a
Speaker 5: presumption of innocence and also entitled to a right to
Speaker 5: remain silent. So if he chooses not to take the stand,
Speaker 5: the jury must draw no inference from that, and the
Speaker 5: government cannot comment on it. Speaker Madigan is obviously an
Speaker 5: intelligent and shrewd person, and I imagine that he's listening
Speaker 5: very closely along with his skilled defense counsel as the
Speaker 5: evidence comes in. If you're asking me to place a wager,
Speaker 5: I will wager that he is not going to take
Speaker 5: a stand.
Speaker 3: The prosecution would certainly have a lot to cross examine
Speaker 3: him on if he did. As you mentioned, there were
Speaker 3: guilty verdicts against Commed's former top executive and three of
Speaker 3: its former lobbyists. We're conspiring to bribe Madigan. But then
Speaker 3: a trial on charges at form At and t Illinois
Speaker 3: President Paul Lacchiatza illegally influenced the X speaker resulted in
Speaker 3: a hung jury. Was there a problem in that later
Speaker 3: trial that the government might encounter in a Madigan trial?
Speaker 5: So the problem with that case is the problem with
Speaker 5: all public corruption and indeed white collar cases. These are
Speaker 5: specific intent crimes, and the government must prove corrupt intent
Speaker 5: beyond a reasonable doubt. So not just the actions themselves,
Speaker 5: but the individual's state of mind. And when one can
Speaker 5: argue that a state of mind is politics as usual,
Speaker 5: and you do hear that line in the Madigan trial
Speaker 5: as well. This is how things are done in Illinois.
Speaker 5: This is politics as usual that can undermine evidence that
Speaker 5: goes to corrupt intent, especially when it is circumstantial evidence.
Speaker 5: And that's another point. These individuals are smart, they are sophisticated.
Speaker 5: You will never here then use the term quid pro quo.
Speaker 5: You will never hear then use the word bribe. And
Speaker 5: so frequently the evidence in corruption cases is circumstantial, and
Speaker 5: jurors are asked to draw reasonable inferences from the evidence.
Speaker 5: So access the prostitutions of public corruption cases are hard?
Speaker 3: Are they harder in Illinois? Because the city is known
Speaker 3: from the days of mayor daily and you've had several
Speaker 3: I think Illinois governors who've been prosecuted. I mean, are
Speaker 3: the citizens of Chicago sort of inord to it? You know?
Speaker 3: Are they just sort of stealed against it?
Speaker 5: Well, the social science literature related to popular perceptions of
Speaker 5: corruption indicates the opposite. Actually, public corruption is deeply unpopular
Speaker 5: with ordinary citizens, and indeed it is something that motivates
Speaker 5: people when it comes to casting votes to seek in
Speaker 5: coll change. I'm not in a position to say whether
Speaker 5: public corruption prosecutions are harder or easier in Illinois, but
Speaker 5: I would tend to doubt that they would be harder.
Speaker 3: A long way to go in this one, yet, Thanks
Speaker 3: so much, Juliet. That's Professor Juliet Sorenson of Loyola University
Speaker 3: Chicago Law School coming up the Supreme Court today. This
Speaker 3: is Bloomberg. The Supreme Court released its calendar for the
Speaker 3: February argument session. The justices will hear cases on reverse discrimination,
Speaker 3: nuclear fuel storage, post conviction DNA testing, and whether the
Speaker 3: Mexican government can sue US gun manufacturers. And today the
Speaker 3: Justices announced that they'll weigh a new line of attack
Speaker 3: on federal administrative power, agreeing to consider the constitutionality of
Speaker 3: the decades old Universal Service Fund. Joining me is Bloomberg
Speaker 3: Supreme Court reporter Greg store So, Greg tell us about
Speaker 3: the Universal Service Fund, which some people may not know about,
Speaker 3: but there's a charge on there wireless phone bills for
Speaker 3: it every month.
Speaker 6: So this is an eight billion dollar program. And what
Speaker 6: it is at the standpoint of a consumer, on your
Speaker 6: monthly phone bill, there's a charge for there's a Universal
Speaker 6: Service Fund, and that is used to subsidize the cost
Speaker 6: of phone and internet service for poor people in rural areas,
Speaker 6: for schools and libraries. And that program has been around
Speaker 6: since nineteen ninety six tele Communications Act. But now it
Speaker 6: is being challenged as exceeding both Congress's authority and the
Speaker 6: Federal Communications Commission's authority.
Speaker 3: So this was a circuit split, I mean, basically, was
Speaker 3: the Fifth Circuit, which is often an outliers circuit, extremely conservative,
Speaker 3: And what did the Fifth.
Speaker 6: Circuit do with Fifth Circuit declared it invalid. That caused
Speaker 6: a split with two other appeals courts that had said
Speaker 6: it was constitutional, and the Fifth Circuit said it was
Speaker 6: invalid sort of for a combination of reasons. There is
Speaker 6: this doctrine that is known as the non delegation doctrine
Speaker 6: that the Supreme Court hasn't invoked since the New Deal.
Speaker 6: But the idea is that Congress can't just hand off
Speaker 6: its legislative power to a federal agency. And then there's
Speaker 6: also this related notion as the private non delegation doctrine,
Speaker 6: which is that the agency can't just hand over its
Speaker 6: authority to some private entity. And this circuit said that
Speaker 6: this program was set up in a way where the
Speaker 6: Congress gave an awful lot of authority to the SEC
Speaker 6: to set the amounts of that charge on your phone bill,
Speaker 6: and then the SEC in turn gave a private entity
Speaker 6: a lot of power to determine exactly what that charge
Speaker 6: would be. And the combination of those two issues made
Speaker 6: it unconstitutional, a violation of the separation of powers.
Speaker 3: Are people anticipating that the Supreme Court may use this
Speaker 3: case to cut back further on agency powers.
Speaker 6: It's certainly a possibility now I don't want to read
Speaker 6: too much into the fact that they took this case.
Speaker 6: They didn't have a whole lot of choice, given that
Speaker 6: the Fifth Circuit had said this program is invalid, and
Speaker 6: two other appeal sports had gone the other way. But
Speaker 6: this notion of the non delegation doctrine is sort of
Speaker 6: the last big thing. Let me, I shouldn't ay last
Speaker 6: big thing, but the next big thing for people who
Speaker 6: want to reduce administrative power. So the Supreme Court a
Speaker 6: few years ago establish the thing called the Major Questions
Speaker 6: Doctrine that said Congress has to be super clear if
Speaker 6: it's going to delegate a major question to an agency.
Speaker 6: Then the Court last term overturned the so called Chevron
Speaker 6: doctrine that gave agency is an awful lot of discretion
Speaker 6: to interpret ambiguous statutes. And this is sort of the
Speaker 6: next thing. It would potentially limit what Congress can do.
Speaker 6: It would say there are constitutional limits to what Congress
Speaker 6: can hand off to the agency. In terms of legislative power.
Speaker 6: Congress has to be the one to make these decisions
Speaker 6: like say how big this this charge is that's going
Speaker 6: to be on your phone bill?
Speaker 3: Greg The arguments will take place when Trump has already
Speaker 3: taken office, so there'll be a new solicitor general. I mean,
Speaker 3: might the Trump administration reverse course and disagree with the
Speaker 3: Biden administration.
Speaker 6: It's certainly possible, and it's worth watching. This is not
Speaker 6: one of those things that this fund. The criticisms about
Speaker 6: this fund have tended to be more about what businesses
Speaker 6: are in charge of collecting it. And so right now,
Speaker 6: I said that this is the charge that shows up
Speaker 6: in your phone bill, so that the telecom companies that
Speaker 6: are sort of on the hook to collect it from
Speaker 6: you and then pay into the fund. And a lot
Speaker 6: of folks think internet companies should be doing that, they
Speaker 6: should be carrying some of the load as well, And
Speaker 6: that tends to be the sort of thing one might
Speaker 6: expect the Trump administration to weigh in on and say,
Speaker 6: you know, we want to change how the fee is
Speaker 6: put together, rather than knocking out the fund altogether, because
Speaker 6: as I said, it does cover an awful lot of people,
Speaker 6: poor people, people in rural areas. A lot of them are,
Speaker 6: frankly the folks who voted Donald Trump for president. And
Speaker 6: it may not be top of the list of things
Speaker 6: that the Trump administration wants to do when it starts
Speaker 6: trying to eliminate regulations.
Speaker 3: So the court decided not to take a case from
Speaker 3: the tobacco industry. The tobacco industry is fighting putting these
Speaker 3: really graphic pictures on cigarette packs.
Speaker 6: Yes, this has been a long time coming. There's eleven
Speaker 6: of these warnings are supposed to be on the top
Speaker 6: half of a package of cigarette. One of them is
Speaker 6: a woman with this baseball sized bulge in her neck
Speaker 6: and with a thing that says warning, smoking causes head
Speaker 6: and neck cancer. And the tobacco companies basically made the argument,
Speaker 6: led by our Jo Reynolds, basically made the argument that
Speaker 6: this is a free speech violation. You're compelling us to
Speaker 6: say something we don't want to say. And in this
Speaker 6: case a lower court federal appeals court said the Fifth
Speaker 6: Circuit actually said, know what this is. It's akin to
Speaker 6: regulation of deceptive advertisement. As long as the company is
Speaker 6: only being forced to say something that is purely factual
Speaker 6: and uncontroversial, that is okay. That phrases from a nineteen
Speaker 6: eighty five Supreme Court decision. So the Fifth Circuit rejected
Speaker 6: the free speech challenge. The tobacco companies turned to the
Speaker 6: Supreme Court, and the Supreme Court said, no, we're not
Speaker 6: going to take your case.
Speaker 3: And I mean when I say graphic, these pictures a
Speaker 3: lot of them are really hard to look at, which
Speaker 3: I suppose is the point. But is there anything left
Speaker 3: for the tobacco industry to do well?
Speaker 6: There is, of course a new administration coming in that
Speaker 6: is potentially one one avenue. This was something that Congress
Speaker 6: told the FBA, the Food and Drug Administration to do
Speaker 6: to put these sorts of advertisements together. Now, these exact
Speaker 6: pictures that you're talking about that are so graphic, and
Speaker 6: go to Bloomberg dot com and find find the story,
Speaker 6: you'll see some of those, yeah images, But it is
Speaker 6: something that Congress Commerce asked for in these very very
Speaker 6: graphic warnings as well, very descriptive warnings about what smoking
Speaker 6: does also the sort of thing that Congress required. So
Speaker 6: it's possible that to really prevent this from happening, we
Speaker 6: need new legislation. But I could certainly imagine that the
Speaker 6: back of companies will try to get the FDA a
Speaker 6: reverse course once the Trump presidency resumes.
Speaker 3: So now, last Friday, the Court dismissed a case that
Speaker 3: had been argued Facebook's appeal of the shareholder lawsuit against it.
Speaker 6: Yeah, so this stems from the data harvesting scandal involving
Speaker 6: the political consulting firm Cambridge Analytic, and essentially in these
Speaker 6: shareholders are claiming that Facebook inflated share prices by misleading
Speaker 6: shareholders about the risk that scandal would cause a misuse
Speaker 6: of user data. And there are various points along the
Speaker 6: timeline where the shareholders say, you knew more than you
Speaker 6: told us. A federal appeals court fed the lawsuit against
Speaker 6: Facebook could go forward. The Supreme Court in June agreed
Speaker 6: to consider the appeal by Meta Meta is the new
Speaker 6: name for Facebook hurt arguments in the case actually the
Speaker 6: day after the election, and then for reasons that it
Speaker 6: did not describe, decided we're not going to decide this case.
Speaker 6: We're going to drop it. And so that is the
Speaker 6: first quote opinion of the Supreme Court's term to not
Speaker 6: decide this Facebook appeal.
Speaker 3: There were also oral arguments in a sort of similar case,
Speaker 3: an appeal by Nvidia of a shareholder's lawsuit against it.
Speaker 3: And I'm wondering if the same thing might happen to
Speaker 3: the Nvidia case, that they might dismiss it as improvidently granted,
Speaker 3: because I remember that some of the justices were saying,
Speaker 3: I don't know why we took this case.
Speaker 6: Yeah, there were, by my account for justices who said
Speaker 6: I don't know why we took this case. And to
Speaker 6: be honest with you, that was what I thought we
Speaker 6: were going to beginning on Friday instead of the Facebook case,
Speaker 6: because oftentimes when there's an argument and a number of
Speaker 6: justices start saying things like that, the court will dismiss
Speaker 6: an appeal. That case is a very different issue in
Speaker 6: terms of securities law. It's all about what kind of
Speaker 6: specificity you need in your lawsuit, in your complaint for
Speaker 6: a case to go forward. This is a case involving
Speaker 6: whether the video was forthcoming enough about where its revenue
Speaker 6: was coming from. The shareholders say, you were actually more
Speaker 6: dependent on crypto mining revenue to being used for crypto
Speaker 6: mining than you let on. And that's a bad thing
Speaker 6: because everybody knows the crypto industry is very volatile, and
Speaker 6: so crypto industry took a big dip. That meant that
Speaker 6: in videos, shares also dipped because you eventually had to
Speaker 6: reveal that sales were down any of that date. The
Speaker 6: Supreme Court did suggest during arguments. As I said that
Speaker 6: this did not present deserved broad legal issue that would
Speaker 6: be a good candidate for a Supreme Court ruling. But
Speaker 6: from the time being, at least, it looks like the
Speaker 6: Court is going to go ahead and decide that case.
Speaker 3: And in the Facebook case, back to Facebook for a minute,
Speaker 3: there were comments that once you let the case go
Speaker 3: forward to the discovery phase where they're exchanging documents, I
Speaker 3: think it was just as Kavanaugh that said game over,
Speaker 3: because then it almost forces the companies to settle the cases.
Speaker 3: And what are the estimates of a settlement in the
Speaker 3: Facebook case.
Speaker 6: Matt Settenhelm, is an analyst at Bloomberg Intelligence, says that
Speaker 6: potentially in the Facebook case, we're talking about billion with
Speaker 6: a B dollars because the amount of the market drop
Speaker 6: was something like two hundred billion dollars, and geralders say
Speaker 6: that was caused in large part by these misleading disclosures,
Speaker 6: So it is potentially a very large sum of money.
Speaker 6: You know, Facebook is such a big company that two
Speaker 6: billion dollars means a little less to them than it
Speaker 6: does to you and me. But that is what you
Speaker 6: hear all the time from the companies that yes, once
Speaker 6: you get past that stage in litigation, once you get
Speaker 6: to the discovery phaise, once the planks have a right
Speaker 6: to start demanding documents and other evidence from you, that's
Speaker 6: when litigation gets really, really expensive, and that's when companies
Speaker 6: have a real incentive to go ahead and settle.
Speaker 3: So we'll wait for Nvidia next. Thanks so much, Greg.
Speaker 3: That's Bloomberg Supreme Court Reporter Greg Store and that's it
Speaker 3: for this edition of the Bloomberg Law Show. Remember you
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