WEBVTT - US Is Main Actor In Panama Papers Tax Evasion: Author Bernstein 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:34.800 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The 0:00:34.880 --> 0:00:39.760 United States loses about seventy billion dollars a year in 0:00:40.120 --> 0:00:43.519 tax revenues due to the shifting of corporate taxes to 0:00:43.760 --> 0:00:48.320 tax havens. Here to talk about this whole underworld of 0:00:48.479 --> 0:00:52.720 secretly stashed money is Jake Bernstein. He's author and reporter 0:00:53.080 --> 0:00:56.280 and journal it and uh the person who wrote the 0:00:56.280 --> 0:00:59.960 book Secrecy World Inside the Panama Papers Investigation of Alyssa 0:01:00.160 --> 0:01:03.279 money networks and the global Elite. He joins us here 0:01:03.320 --> 0:01:06.600 in our eleven three Oh Studios. Jake, can you give 0:01:06.680 --> 0:01:10.160 us a sense of just how big this secret world 0:01:10.440 --> 0:01:13.679 is and who the players are that have stashed their 0:01:13.720 --> 0:01:17.600 money in it? Lisa, I mean, it's only an estimate, 0:01:17.640 --> 0:01:20.600 but there are trillions of dollars that throw that flow 0:01:20.680 --> 0:01:23.200 through this underground economy. I mean, just to give you 0:01:23.240 --> 0:01:25.920 a taste of it. The U. S. Treasury estimates that 0:01:26.160 --> 0:01:30.560 three hundred billion dollars is laundered in the United States 0:01:30.640 --> 0:01:34.640 every year. That's just in the United States. Um. And 0:01:34.680 --> 0:01:37.520 to give you a taste of of what of what 0:01:37.600 --> 0:01:41.320 the Panama Papers sort of reaped for tax authorities worldwide. 0:01:41.520 --> 0:01:45.280 To date, they've recovered half a billion dollars in taxes 0:01:45.319 --> 0:01:48.840 that were evaded as a result of the Panama Papers leak. 0:01:49.440 --> 0:01:52.000 What did you learn in doing all of your investigations 0:01:52.040 --> 0:01:54.840 for the book in terms of the motivation behind all 0:01:54.880 --> 0:01:57.000 of this, Because there are a lot of ways that 0:01:57.120 --> 0:01:59.320 you can hide your income, there are many ways in 0:01:59.360 --> 0:02:03.320 which you can avoid paying taxes. What did you come 0:02:03.360 --> 0:02:08.080 away with on a thematic basis? That's interesting question because 0:02:08.440 --> 0:02:11.960 as one most like Fonseca lawyer, this is the Panamanian 0:02:12.160 --> 0:02:15.359 law firm behind the Panama PAPERSUS. One lawyer said candidly 0:02:15.680 --> 0:02:19.560 in a private email. He said, of our business is 0:02:19.600 --> 0:02:22.760 to help our clients legally avoid taxes, and so I 0:02:22.800 --> 0:02:26.440 think that's the major so impetus for people who use 0:02:26.520 --> 0:02:29.079 this off shore system. But at the same time it's 0:02:29.080 --> 0:02:34.200 also being used for criminals, money launders, drug traffickers, ponzi schemers, 0:02:34.240 --> 0:02:36.160 all those kinds of things that we found in the 0:02:36.200 --> 0:02:39.840 Panama papers. So how does this work? Ah? Well, I 0:02:39.880 --> 0:02:43.359 mean there's there's different layers of sophistication, right, I mean, 0:02:43.400 --> 0:02:46.160 the the simplest way is is you get an anonymous 0:02:46.160 --> 0:02:49.359 shell company in Panama or the British Virgin Islands or 0:02:49.360 --> 0:02:52.040 a place like that, and they use that to open 0:02:52.320 --> 0:02:55.800 a bank account somewhere, maybe in Singapore, maybe in Cyprus, 0:02:55.880 --> 0:02:58.520 someplace like that, and then you can do sort of business. 0:02:58.560 --> 0:03:02.800 But true wealthy people are much more sophisticated. They do layering. 0:03:03.000 --> 0:03:06.239 So you have an anonymous shell company, it'll have fake directors, 0:03:06.400 --> 0:03:08.520 It'll be attached to a trust, which will be attached 0:03:08.520 --> 0:03:11.000 to a foundation, and so there's different layers that makes 0:03:11.000 --> 0:03:14.720 it almost impossible to figure out who's actually behind it. 0:03:14.800 --> 0:03:18.720 Is there any guidance that you've seen from governments or 0:03:18.800 --> 0:03:22.000 law enforcement officials in order to deal with this in 0:03:22.040 --> 0:03:25.560 the future, because I can't imagine that everybody's just shut 0:03:25.600 --> 0:03:29.280 down their entire system as you've described it. It's probably 0:03:29.320 --> 0:03:33.240 morphed into something else, perhaps even more sophisticated. You're absolutely right. 0:03:33.280 --> 0:03:34.800 I mean, this is one of the things that I 0:03:34.840 --> 0:03:36.800 talked about in my book Secrecy World, and that you 0:03:36.800 --> 0:03:39.520 can really see through the Panama papers is this is 0:03:39.960 --> 0:03:43.960 a living organism almost. I mean it evolves over time 0:03:44.040 --> 0:03:47.160 to to take advantage of different things. And you know, 0:03:47.240 --> 0:03:49.920 one one avenue is shut off, it moves to another place. 0:03:50.240 --> 0:03:53.119 So for example, if the b v I tightens up, uh, 0:03:53.160 --> 0:03:56.520 you know, stuff moves to Singapore, moves to Dubai and 0:03:56.760 --> 0:04:00.640 uh and it continues on. We talked about who the 0:04:00.760 --> 0:04:06.000 people are behind this world. It's from rich people all 0:04:06.000 --> 0:04:09.480 over the world, right, Um, But Russia has played a 0:04:09.520 --> 0:04:13.920 sort of central role in this universe. Can you explain 0:04:13.960 --> 0:04:16.560 why that is? Sure? I mean, part of it is 0:04:16.600 --> 0:04:18.280 the fact that there is you know, the rule of 0:04:18.360 --> 0:04:22.000 law as tenuous at best in Russia. So people are 0:04:22.040 --> 0:04:24.599 are eager to to send their money out of the 0:04:24.640 --> 0:04:27.440 country because they're afraid that someone might take it because 0:04:27.480 --> 0:04:30.520 the judicial system is rigged, right, So there's major offshore 0:04:30.560 --> 0:04:33.000 and there's been a lot of instability, you know, and 0:04:33.000 --> 0:04:35.440 and and prices are fluctuated, and so that's part of 0:04:35.480 --> 0:04:38.679 the motivation. Also, people want to park their cash someplace 0:04:38.720 --> 0:04:41.320 where it's safe, oftentimes in real estate here in the 0:04:41.400 --> 0:04:44.280 United States or in London places like that. But at 0:04:44.320 --> 0:04:47.479 the same time, the oligarchs and UH and the power 0:04:47.560 --> 0:04:51.800 centers around Vladimir Putin himself are very adept at using this. 0:04:52.839 --> 0:04:55.599 A number of them have backgrounds in the KGB and 0:04:55.640 --> 0:04:58.880 they have been working with the offshore system for decades. 0:04:59.200 --> 0:05:00.680 They know how to use is it and how to 0:05:00.760 --> 0:05:05.000 hide their activities? Really well, how prevalent is it among 0:05:05.640 --> 0:05:08.440 the wealthiest individuals in the United States? I mean, I 0:05:08.480 --> 0:05:12.440 know that there's been some talk of the current cabinet 0:05:13.040 --> 0:05:17.160 of the US UH government that it's the wealthiest cabinet 0:05:17.200 --> 0:05:21.120 ever in the history of of the country. Um, are 0:05:21.160 --> 0:05:23.520 they tied in it all? Well? There was a second 0:05:23.560 --> 0:05:27.080 leak after the Panama Papers, called the Paradise Papers, which 0:05:27.080 --> 0:05:30.359 centered around a law firm in Bermuda called Appleby, and 0:05:30.400 --> 0:05:33.440 there were more than thirty one thousand Americans found in 0:05:33.440 --> 0:05:37.320 that league alone. So it's it's quite prevalent, and it 0:05:37.480 --> 0:05:41.560 is being used by wealthy all over the world, including 0:05:41.600 --> 0:05:45.840 the United States. The Paradise Papers UH revealed a number 0:05:45.920 --> 0:05:50.640 of Democratic wealthy donors and Republican wealthy donors, and as 0:05:50.640 --> 0:05:53.960 you say, a number of Trump cabinet members and donors, 0:05:54.200 --> 0:05:58.400 including Wilbur Ross. The Secretary of Commerce. Is there an 0:05:58.520 --> 0:06:02.840 industry uh that is out there actively pursuing this kind 0:06:02.880 --> 0:06:06.919 of business? I mean yes, it's there's a whole infrastructure 0:06:06.960 --> 0:06:11.320 behind the secrecy world. And it's bankers, it's lawyers, it's accountants, 0:06:11.360 --> 0:06:16.039 it's trust managers. Um, it's it's thriving. They have meetings, 0:06:16.160 --> 0:06:19.200 um and uh, and they're doing well that they do 0:06:19.279 --> 0:06:23.960 not feel any I mean the more regulatory rules that 0:06:24.000 --> 0:06:27.200 are overlaid on top of this just means more business 0:06:27.279 --> 0:06:29.280 for them. That's where I was going with this. So, 0:06:29.400 --> 0:06:33.039 as a result of increased attention to this very issue, 0:06:33.839 --> 0:06:37.440 has this is this something that you can fight from 0:06:37.680 --> 0:06:41.279 the regulatory side or is there a way to I 0:06:41.279 --> 0:06:43.640 don't know whether there's a way to convince individuals who 0:06:43.880 --> 0:06:46.520 do this kind of stuff to just stop doing it 0:06:46.560 --> 0:06:49.919 because it's so complicated. What's so interesting is that what 0:06:50.040 --> 0:06:53.159 the Panama paper showed was this firm, most Conseca, that 0:06:53.240 --> 0:06:55.719 had this crazy business model, right. They wanted to be 0:06:55.760 --> 0:06:58.599 the McDonald's of the off shore system, right, high volume, 0:06:58.680 --> 0:07:01.159 low cost, and they want to make it available to 0:07:01.560 --> 0:07:04.880 lots of people, particularly the New Wealth in the developing world. 0:07:05.080 --> 0:07:07.200 Well that's starting to change now and the bar to 0:07:07.360 --> 0:07:10.640 entry is getting higher. So really it's for people who 0:07:10.720 --> 0:07:13.240 who are who are really rich, and you know, not 0:07:13.320 --> 0:07:15.880 just the merely wealthy, but the uber wealthy, people who 0:07:15.880 --> 0:07:18.480 have fifty million dollars and more. And these people do 0:07:18.560 --> 0:07:20.720 not look at the nation state in the same way 0:07:20.760 --> 0:07:23.120 that most of us do. Right. They have homes in 0:07:23.160 --> 0:07:25.840 London and New York and in some place sunny, and 0:07:25.920 --> 0:07:28.680 they have bank accounts in Switzerland and lots of different places, 0:07:29.080 --> 0:07:32.280 and uh, and it's very hard to sort of appeal 0:07:32.360 --> 0:07:34.680 to their conscience and say, oh, you know, you should 0:07:34.720 --> 0:07:36.480 pay attention to the place where you were born or 0:07:36.520 --> 0:07:39.000 where you make your money. So it's a challenge, but 0:07:39.240 --> 0:07:42.400 I mean, it's going to require a population that gets 0:07:42.760 --> 0:07:46.240 awoken to what's happening here. One thing that you said 0:07:46.240 --> 0:07:49.280 when you walked in is it's sort of interesting how 0:07:49.320 --> 0:07:52.280 central of a role the US plays in this secret world. 0:07:52.320 --> 0:07:54.360 Can you just quickly give a sense of what you're 0:07:54.400 --> 0:08:00.040 talking about? Sure? I mean, one of the people have 0:07:59.240 --> 0:08:02.640 have have said, and I think it's probably true that 0:08:02.760 --> 0:08:05.320 the the US is the largest tax haven in the world. 0:08:05.840 --> 0:08:08.560 Now this strikes many people as crazy, right, They think 0:08:08.560 --> 0:08:11.360 of tax havens as a sunny place with palm trees 0:08:11.400 --> 0:08:15.720 and ocean breezes. But in fact, Delaware, Wyoming, Nevada are 0:08:15.760 --> 0:08:18.400 pumping out tens of thousands, hundreds of thousands of these 0:08:18.400 --> 0:08:21.120 anonymous shell companies all the time. I mean, the Delaware 0:08:21.120 --> 0:08:24.920 Public Registry pulls in a billion dollars a year on 0:08:25.160 --> 0:08:29.720 fees just associated with this business. It's great for them, 0:08:29.760 --> 0:08:32.200 and the Secretaries of State, led by Delaware have made 0:08:32.280 --> 0:08:35.200 sure that the rules have always been very favorable to 0:08:35.240 --> 0:08:38.040 them for this, even though the State Department and Treasury 0:08:38.040 --> 0:08:41.800 Department have complained bitterly that this system Delaware companies are 0:08:41.800 --> 0:08:46.640 being used by Russian mafia and transnational gangs. Jacob Bernstein, 0:08:46.720 --> 0:08:50.720 thank you very much. Author reporter his book Secrecy World 0:08:50.880 --> 0:08:55.120 Inside the Panama Papers, investigation of elicit money, networks and 0:08:55.320 --> 0:08:59.520 the global elite. Follow him on Twitter at Jake Underscore 0:08:59.559 --> 0:09:15.480 Burns Sam Let's turn our attention out to the world 0:09:15.520 --> 0:09:19.360 of gaming. Brian Edgar is our senior gaming and lodging 0:09:19.360 --> 0:09:22.480 analysts for Bloomberg Intelligence, and he can be followed on 0:09:22.520 --> 0:09:26.959 Twitter at Breaking Call and Brian, I understand that the 0:09:27.040 --> 0:09:29.439 kind of epicenter of the world of gaming might be 0:09:29.840 --> 0:09:37.520 shifting just slightly to upstate New York, cat slots, a 0:09:37.640 --> 0:09:41.080 hundred and thirty table games, one point to billion dollars, 0:09:41.160 --> 0:09:44.400 three hundred and thirty hotel rooms, a golf course, a 0:09:44.520 --> 0:09:49.199 water park, and it's just five miles from uh Monticello 0:09:49.320 --> 0:09:52.720 Raceway exactly. No, it's a big year for domestic gaming 0:09:52.760 --> 0:09:56.199 outside Vegas, with anywhere from five to fifteen casinos opening up. 0:09:56.200 --> 0:09:58.400 You mentioned the one of the cat's skills. That's a 0:09:58.400 --> 0:10:00.640 big deal because Genting is a powerful company with a 0:10:00.640 --> 0:10:03.600 lot of Asian properties. That property will be ninety miles 0:10:03.600 --> 0:10:06.560 from New York City. There's a cross marketing opportunities. So 0:10:06.600 --> 0:10:09.520 we are seeing this year a very big and consequential 0:10:09.960 --> 0:10:13.360 build out of casinos in various states within the Northeast, 0:10:13.400 --> 0:10:16.800 which is which is a very pronounced development. So what's 0:10:16.840 --> 0:10:21.199 driving this because typically we think of Las Vegas. Uh, 0:10:21.360 --> 0:10:23.439 it has the weather, right, I mean, if you've got 0:10:23.440 --> 0:10:26.440 the snow, it's not exactly as encouraging. They have the 0:10:26.559 --> 0:10:29.959 laws that allow it. What's driving the Northeast build out? 0:10:29.960 --> 0:10:34.000 I think it's really tapping new markets there's high population density. 0:10:34.040 --> 0:10:36.360 You've got the build out and development of the Western 0:10:36.400 --> 0:10:39.959 New England market where MGM will be the Catskills market. 0:10:39.960 --> 0:10:43.080 As you mentioned, uh Atlantic City had a monopoly in 0:10:43.120 --> 0:10:46.000 the northeast up until the that's all changed and now 0:10:46.080 --> 0:10:50.080 the northeast market is a ten billion dollar five state market, 0:10:50.080 --> 0:10:52.679 the same size as Las Vegas. So it really it's 0:10:52.679 --> 0:10:55.480 about where the people are and the opportunity to bring 0:10:55.520 --> 0:10:59.600 those casinos closer to population centers. Is it likely that 0:10:59.679 --> 0:11:02.959 this will encourage even more building and as a result 0:11:03.000 --> 0:11:06.160 we're gonna end up with a glut of gaming opportunities. Well, 0:11:06.200 --> 0:11:07.880 the one state I would point to where there is 0:11:07.920 --> 0:11:11.080 an unusual a man of expansion is Pennsylvania. Pennsylvania just 0:11:11.160 --> 0:11:15.760 in October authorized ten new uh mini casinos to be 0:11:15.760 --> 0:11:18.880 built throughout the state. That's on top of twelve existing 0:11:18.960 --> 0:11:22.800 racetrack and stand alone casino So Pennsylvania authorized for tax 0:11:22.880 --> 0:11:26.040 revenue generation purposes a very large build out. It will 0:11:26.080 --> 0:11:29.679 include slots and airports and and up to five video 0:11:29.679 --> 0:11:33.400 gaming devices at truck stops. So Pennsylvania itself is making 0:11:33.400 --> 0:11:36.400 a big rab for a big move towards expanding gaming 0:11:36.400 --> 0:11:38.480 in that state. So yes, there's some cities where it's 0:11:38.600 --> 0:11:40.960 very rapidly development. So what does this all mean for 0:11:41.040 --> 0:11:44.679 Atlantic Avenue. I mean it has obviously gotten pretty run down. 0:11:45.080 --> 0:11:47.199 Will it rebuild, will it try to compete, or will 0:11:47.240 --> 0:11:49.920 this just sort of further deteriorate the outlook Atlantic City. 0:11:50.240 --> 0:11:53.040 Despite its many problems, it went from twelve casinos to 0:11:53.120 --> 0:11:56.400 seven after an extensive shakeout. At least now is starting 0:11:56.440 --> 0:11:59.320 to grow. Same store growth in Atlantic City was up 0:11:59.360 --> 0:12:05.000 seven percent last year. Um, Burgata uh is still the 0:12:05.040 --> 0:12:08.520 dominant property owned by MGM that's in the market. Um, 0:12:08.600 --> 0:12:10.280 we'll see I think we're what you're doing now is 0:12:10.280 --> 0:12:12.760 this summer you'll see two new casinos in Atlantic City 0:12:13.360 --> 0:12:16.800 opening up. You've got both the hard Rock Casino and 0:12:16.840 --> 0:12:19.360 the and the Ocean Ocean Resort will grow the market 0:12:19.360 --> 0:12:22.120 by almost The real test will be whether or not 0:12:22.559 --> 0:12:25.120 you've get enough critical massive gaming attractions to bring in 0:12:25.240 --> 0:12:29.600 enough people to offset the potential adverse effect, competitive effect 0:12:29.600 --> 0:12:32.520 and other properties. So who's gonna be the big beneficiary? 0:12:32.559 --> 0:12:34.800 What companies are the ones that really are going to 0:12:35.120 --> 0:12:37.360 be able to take advantage of this build out? You know, 0:12:37.440 --> 0:12:40.480 taking a step back and looking at the northeast horizon, generally, 0:12:40.640 --> 0:12:43.800 MGM has got a big advantage because it has really 0:12:43.880 --> 0:12:47.640 a corridor of casinos from National Harbor in Maryland to Burgota, 0:12:47.679 --> 0:12:51.360 Atlantic City and as a September Springfield and Massachusetts. So 0:12:51.440 --> 0:12:53.640 it really has got a walk on a corridor of 0:12:53.640 --> 0:12:56.880 powerful properties with a big brand name in the northeast. 0:12:56.920 --> 0:12:58.880 There are some losers as well, and I can talk 0:12:58.920 --> 0:13:02.280 about those. Uh in Pennsylvania. Penn National is going to 0:13:02.360 --> 0:13:06.360 face off against some potential new small casinos in that state. 0:13:06.480 --> 0:13:10.400 And also penn has a racetrack casino in Massachusetts, Plain 0:13:10.480 --> 0:13:13.040 Rich Park, which is going to get new competition both 0:13:13.040 --> 0:13:16.760 from MGM and Springfield and from Tiverton in Rhode Island. 0:13:17.840 --> 0:13:20.880 So I just sort of backing out a little bit. 0:13:21.280 --> 0:13:23.520 I just want to get a sense of how gambling 0:13:23.559 --> 0:13:26.439 revenues have been. I mean, it's been a pretty good economy. 0:13:26.480 --> 0:13:28.640 Does that usually mean that people cample more? Do they 0:13:28.679 --> 0:13:31.640 gamble less? Because they actually have jobs that can pay 0:13:31.679 --> 0:13:34.679 their bills? The good economy helps. But at the same time, 0:13:34.720 --> 0:13:36.640 we've had a lot more competition. So if I were 0:13:36.640 --> 0:13:42.120 to characterize US gaming outside of Vegas, it's a slow growth, 0:13:42.160 --> 0:13:45.840 mature industry, maybe anywhere from you know, minus two percent 0:13:45.920 --> 0:13:49.920 to plus two percent same store growth. It's growing modestly. 0:13:50.040 --> 0:13:53.440 It's a relatively mature industry. There are pockets of opportunity, 0:13:53.679 --> 0:13:57.800 but compared to thirty years ago, Uh, the domestic gaming 0:13:57.840 --> 0:14:01.520 scene outside Las Vegas in many parts of the country 0:14:01.559 --> 0:14:03.920 is fairly well built out. Again with these pockets of 0:14:03.960 --> 0:14:07.319 opportunity like Western New England, for example, online gaming and 0:14:07.440 --> 0:14:11.200 he thought gaming is right now on an intrastate basis 0:14:11.240 --> 0:14:15.000 limited uh to Nevada and New Jersey. There's talk about 0:14:15.000 --> 0:14:18.920 placing and elsewhere. Uh, there's uh there's an online gaming 0:14:19.000 --> 0:14:21.880 element to what's happening in Pennsylvania, which had this big, 0:14:22.240 --> 0:14:25.880 massive expansion of gaming. So online gaming may continue to 0:14:25.960 --> 0:14:29.920 develop state by state intrastate, but for now on a 0:14:30.000 --> 0:14:33.480 federal interstate basis that's a bit more problematic. Brian Eger, 0:14:33.680 --> 0:14:35.880 thank you so much for joining us. Brian Egger, senior 0:14:35.920 --> 0:14:40.120 gaming and lodging analysts for Bloomberg Intelligence. Talking about the 0:14:40.160 --> 0:14:59.320 gaming industry, there have been many stories about the various 0:14:59.480 --> 0:15:03.640 method that Uber used that really uh went up to 0:15:03.720 --> 0:15:06.960 the edges of the law. And there's a phenomenal article 0:15:06.960 --> 0:15:10.800 on the Bloomberg today. Uber used secret tool for keeping 0:15:10.800 --> 0:15:14.280 the authorities in the dark. That just builds on some 0:15:14.360 --> 0:15:16.760 of what we have heard in the past. Joining us 0:15:16.800 --> 0:15:19.440 now is one of the authors of that article, Olivia's Aleski. 0:15:19.720 --> 0:15:23.560 She's a technology reporter for Bloomberg. Olivia, what is this 0:15:23.680 --> 0:15:27.120 secret tool and how is Uber using it? Well, let 0:15:27.120 --> 0:15:30.400 me give you some contacts. First, U in Uber really 0:15:30.440 --> 0:15:33.280 started to get a lot of attention from the authorities. Uh. 0:15:33.360 --> 0:15:36.480 These authorities, especially in the you believe that the company 0:15:36.600 --> 0:15:39.720 was violating tax laws and labor laws and was really 0:15:39.880 --> 0:15:42.760 UM sort of playing too hard and too fast in 0:15:42.800 --> 0:15:47.600 their jurisdictions. So these authorities began raiding Uber's offices looking 0:15:47.640 --> 0:15:51.120 for evidence. Uber didn't like this, and UM created a 0:15:51.160 --> 0:15:55.720 tool that it called ripley Um to essentially shut down 0:15:55.720 --> 0:15:57.920 its offices whenever there was a police rate and shut 0:15:57.920 --> 0:16:02.840 down all the computers so that police could not collect evidence. Now, 0:16:02.960 --> 0:16:06.520 this is a tool that I guess ripley is you 0:16:06.640 --> 0:16:11.840 mentioned a riff on the character that's Sigourney an alien 0:16:12.520 --> 0:16:14.680 In true Uber form that you know, they would come 0:16:14.720 --> 0:16:18.120 up with these creative names for their various software programs. 0:16:18.160 --> 0:16:21.200 We had gray Ball, and in Hell or god View, 0:16:21.240 --> 0:16:24.480 and justin in Uber fashion, this one was called Ripley 0:16:24.520 --> 0:16:27.800 after the main character an alien Um because she had 0:16:27.840 --> 0:16:30.600 a line in the movie where she says, uh, let's 0:16:30.680 --> 0:16:32.920 nuke the site from orbit. It's the only way to 0:16:32.960 --> 0:16:34.600 be sure, meaning it's the only way to be sure 0:16:34.640 --> 0:16:37.880 that the aliens won't come back and get us. Okay, 0:16:37.920 --> 0:16:41.320 So run with that and maybe use the example of 0:16:41.360 --> 0:16:46.760 what authorities in Montreal we're looking for and how Ripley works. 0:16:46.960 --> 0:16:50.480 It's a remote control system. Yeah, let me walk you 0:16:50.520 --> 0:16:56.600 through it. So essentially, in authorities from the Canadian Tax 0:16:56.600 --> 0:17:01.520 Bureau showed up at Uber's headquarters in Montreal um seeking 0:17:02.200 --> 0:17:08.000 tax documents, and essentially a manager in that office paged 0:17:08.560 --> 0:17:13.200 system this Ripley system, and within a few minutes UM 0:17:13.320 --> 0:17:17.800 the headquarters in San Francisco shut down all the computers 0:17:17.840 --> 0:17:23.000 and some phones in Montreal and made these Canadian authorities 0:17:23.080 --> 0:17:26.000 very frustrated because they went to open you know, they 0:17:26.040 --> 0:17:29.800 went to uh talk to employees and ask them for records, 0:17:30.040 --> 0:17:32.439 and those employees couldn't even open their computers because they 0:17:32.440 --> 0:17:36.800 had been locked out. Is this legal? So that's a 0:17:36.920 --> 0:17:39.720 very good question. We have had trouble getting an answer 0:17:39.800 --> 0:17:45.280 on that because there's a real patchwork of different laws abroad, 0:17:45.480 --> 0:17:48.240 and some people have said it's it's an obstruction of justice. 0:17:48.280 --> 0:17:51.119 Some people have said it is legal as long as 0:17:51.160 --> 0:17:52.960 it's done in the right way, and you have to 0:17:53.000 --> 0:17:55.439 have uh, you know, there are all sorts of various 0:17:55.440 --> 0:17:58.960 complicated conversations, but you know, that'll be for somebody else 0:17:58.960 --> 0:18:02.199 to determine. What we do understand is that employees at 0:18:02.280 --> 0:18:05.960 Uber felt very uncomfortable with it, and um that there 0:18:06.000 --> 0:18:08.960 were a lot of discussions about, you know, how to 0:18:09.080 --> 0:18:11.280 keep this quiet, how to keep it secret. So they 0:18:11.280 --> 0:18:16.400 were obviously concerned about something olivia physically. How did they 0:18:16.840 --> 0:18:21.879 engage this tool? In other words, how did they find 0:18:21.920 --> 0:18:23.679 out that there was going to be some kind of 0:18:23.720 --> 0:18:29.800 investigation and automatically shut down all of the computers? Well, 0:18:30.119 --> 0:18:32.040 I think, you know, I don't want to go into 0:18:32.119 --> 0:18:34.879 whether or not they knew the police were coming or 0:18:34.880 --> 0:18:37.320 the authorities were coming, because that can be seen as 0:18:37.359 --> 0:18:40.199 a violation of Foreign corpt Practices Act. And we just 0:18:40.240 --> 0:18:43.000 don't know if they did that. UM. We do understand 0:18:43.040 --> 0:18:46.800 that they were expecting raids in in their offices all 0:18:46.800 --> 0:18:50.040 over the world because they knew they were a target 0:18:50.359 --> 0:18:54.000 because they were disruptive. UM. So they designed the system 0:18:54.040 --> 0:18:57.800 to work in any office abroad. UM. And essentially the 0:18:57.880 --> 0:19:00.400 employee in the office, the manager or some boy who 0:19:00.400 --> 0:19:02.560 had been trained to use it, would page a number 0:19:02.600 --> 0:19:06.320 on their phone UM. It would route through this program Twilio, 0:19:06.400 --> 0:19:10.320 and then it would go to headquarters UM where they 0:19:10.320 --> 0:19:13.680 it would initiate a program to just log everybody off 0:19:13.720 --> 0:19:17.320 the computers or UM. Eventually they developed a program where 0:19:17.320 --> 0:19:19.240 they could keep the computers on, but they could hide 0:19:19.359 --> 0:19:24.520 information UM that perhaps the authorities were collecting. Olivia, what 0:19:24.680 --> 0:19:27.560 have you heard from either Joe Sullivan or Sally you 0:19:27.800 --> 0:19:31.960 These were both the heads of the departments, the security 0:19:31.960 --> 0:19:35.920 and legal departments, respectively at UBER when this has taken place. Yeah, 0:19:36.000 --> 0:19:38.080 we haven't heard back from them. UM. Both of them 0:19:38.160 --> 0:19:41.680 did not respond to our requests for comment. UM Uber's 0:19:41.920 --> 0:19:45.760 UM communications department has been very active in managing this 0:19:45.880 --> 0:19:47.800 story with us. We've been on the phone with them 0:19:47.920 --> 0:19:51.119 many times the past week, and I'm really trying to 0:19:51.200 --> 0:19:55.960 understand the program. And they feel very much that that 0:19:56.160 --> 0:20:01.280 this was in their rights and that they UM you know, essentially, 0:20:01.280 --> 0:20:03.119 they feel that they were doing what was in the 0:20:03.119 --> 0:20:06.399 best interests of their customers, which was to protect data, 0:20:06.440 --> 0:20:10.080 and that these authorities in other countries were on fishing expeditions. 0:20:10.119 --> 0:20:12.600 They feel that they were the warrants that they were 0:20:12.600 --> 0:20:15.400 collecting information for were too broad and so that they 0:20:15.400 --> 0:20:18.920 had the right to um request, you know, to lock 0:20:19.000 --> 0:20:20.800 everything down and say come back to us with something 0:20:20.800 --> 0:20:23.560 that's more specific. Olivia, real quick, do you know of 0:20:23.760 --> 0:20:27.360 any other company out there that has done something similar 0:20:27.400 --> 0:20:30.480 to this? So it's interesting. That was another point that 0:20:30.600 --> 0:20:32.879 Uber brought up. They said, everybody does this. You know 0:20:32.960 --> 0:20:36.680 that this is common, that everybody has a lockdown button, 0:20:36.720 --> 0:20:38.760 and you know, you should even look at Bloomberg they 0:20:38.800 --> 0:20:41.280 may have this. What we found is lots of companies 0:20:41.320 --> 0:20:44.760 have a way to shut down computers for an unexpected 0:20:44.840 --> 0:20:48.120 visitor and you know, maybe there's um, a competitor breaks in, 0:20:48.320 --> 0:20:52.200 or there's a situation where um, you know, there's even 0:20:52.320 --> 0:20:54.680 a terrorist attack and they need to keep their information 0:20:54.720 --> 0:20:57.159 all locked up. But we have not found a situation 0:20:57.160 --> 0:20:59.840 where it was used so frequently, um you know, dozens 0:20:59.880 --> 0:21:04.240 of times, and where it um was pervasive in offices 0:21:04.280 --> 0:21:06.960 around the world. We've got to leave it there. Olivia Zeleski, 0:21:07.119 --> 0:21:27.040 technology reporter for Bloomberg. Thanks very much. Trade talks they 0:21:27.040 --> 0:21:30.399 are heating up again this year, and yesterday there is 0:21:30.480 --> 0:21:33.240 news that Canada believes that there is a much greater 0:21:33.359 --> 0:21:37.120 likelihood that the US will exit the NAFTA, the North 0:21:37.160 --> 0:21:41.280 American Free Trade Agreement in the upcoming months. Here to 0:21:41.320 --> 0:21:45.000 talk about that is Caitlin and Webber, government analysts covering 0:21:45.240 --> 0:21:48.119 US trade policy for Bloomberg Intelligence. Since she comes to 0:21:48.200 --> 0:21:52.320 us from our Bloomberg studio in Washington, d C. Caitlin, 0:21:52.880 --> 0:21:55.960 can you just lay out what we found out yesterday 0:21:56.320 --> 0:21:59.320 and if there really is a much greater likelihood at 0:21:59.320 --> 0:22:02.720 this point that the US will withdraw from NAFTA. Yeah, So, 0:22:02.880 --> 0:22:06.920 yesterday news broke that Canada, um, you know, really actually 0:22:07.359 --> 0:22:10.280 came out and and sort of is reflecting a lot 0:22:10.320 --> 0:22:13.600 of the pessimism we're hearing from a lot of the 0:22:13.640 --> 0:22:17.480 company's industries that rely on NAFTA. There's been a lot 0:22:17.520 --> 0:22:20.240 of sort of doom and gloom around the NAPTA talks 0:22:20.320 --> 0:22:23.440 so far. Um, we're on the sixth round and there's 0:22:23.480 --> 0:22:25.840 been no chapters closed so far, and typically you see 0:22:25.840 --> 0:22:28.240 that after a couple of rounds. Um, So I think 0:22:28.400 --> 0:22:32.320 Canada coming out yesterday and saying, um, you know, even 0:22:32.359 --> 0:22:33.920 though they sort of walked that back a bit later, 0:22:34.320 --> 0:22:38.119 that there's an increasing likelihood the Trump administration may attempt 0:22:38.160 --> 0:22:41.000 to withdraw from the deal. UM. You know, I think 0:22:41.080 --> 0:22:46.840 that is a growing sort of recognition of increasing reality. Caitlyn, 0:22:46.920 --> 0:22:48.760 I keep thinking that we're gonna end up sending you 0:22:48.800 --> 0:22:52.879 to Detroit to cover this story because NAFTA and the 0:22:52.920 --> 0:22:56.080 automobile industry they are linked. And I'm wondering if you 0:22:56.080 --> 0:22:57.960 could tell us what are some of the issues that 0:22:58.080 --> 0:23:01.560 contentious demands that the US has when it comes to 0:23:01.640 --> 0:23:05.520 automotive content. Yeah, so the Trump administration has really said 0:23:05.560 --> 0:23:08.800 that the auto the auto industry is why they came 0:23:08.840 --> 0:23:11.720 to the table. Really, that's their number one issue that 0:23:11.760 --> 0:23:13.760 they want to see a lot of change on and 0:23:13.800 --> 0:23:16.879 that really centers around content rules. So currently too, in 0:23:16.960 --> 0:23:19.560 order to qualify for duty free status under the deal, 0:23:20.119 --> 0:23:22.520 UM a vehicle has to be a little over half 0:23:22.720 --> 0:23:26.719 UM NAFTA UM content in order to qualify for getting 0:23:26.760 --> 0:23:31.199 tariffs reduced. Now, the Trump administration wants to significantly increase that, 0:23:32.400 --> 0:23:37.000 including solely US value. Canada and Mexico for their parts, 0:23:37.040 --> 0:23:39.760 say that proposal is a non starter and to this 0:23:39.840 --> 0:23:45.280