WEBVTT - FBI Settles Eavesdropping Lawsuit (Audio)

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<v Speaker 1>You're listening to Bloomberg Law. I'm June Gronzo with Greg Store.

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<v Speaker 1>In this day of electronic surveillance, we all know about

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<v Speaker 1>the government wire tapping phones, but you may not know

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<v Speaker 1>that just because the government has a lawful warrant to

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<v Speaker 1>wire tap your phone, that doesn't mean FBI agents can

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<v Speaker 1>tape every conversation. Take the case of Craig Dramal, a

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<v Speaker 1>former Galleon Group trader convicted of insider trading. Dramal's wife, Arlene,

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<v Speaker 1>claimed that FBI agents wrongfully ease dropped on more than

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<v Speaker 1>one d eight of her intimate conversations with her husband

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<v Speaker 1>while they were lawfully tapping their phone to get information

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<v Speaker 1>on insider trading. New York Federal Judge Richard Sullivan refused

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<v Speaker 1>to throw out those conversations, but Sullivan called the FBI's

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<v Speaker 1>actions nothing short of disgraceful and said he was deeply

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<v Speaker 1>troubled by this unnecessarily and apparently voyeuristic intrusion into the

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<v Speaker 1>Jamal's private life. In other words, the FBI should have

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<v Speaker 1>hung up the phone. Arlene Jamal sued the FBI, and

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<v Speaker 1>in a departure, the FBI has settled the suit. Our

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<v Speaker 1>guest as former federal prosecutor and and criminal trial attorney

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<v Speaker 1>George Newhouse, a partner at Denton's. George, how unusual is

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<v Speaker 1>it for the FBI to settle a case? Good morning, June. Uh.

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<v Speaker 1>It's really the case that the FBI, or frankly, the

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<v Speaker 1>federal government settles these cases, particularly involving law enforcement. So

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<v Speaker 1>that's that is something to take note of. But of

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<v Speaker 1>course we don't know the amount of the money that

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<v Speaker 1>was paid or whatever. The terms of the settlement are

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<v Speaker 1>as confidential, so it may have been settled for all

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<v Speaker 1>low amount. Well, George, what is it about this case

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<v Speaker 1>if we don't know the terms of the settlement, What

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<v Speaker 1>is it about the case that might have prompted the

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<v Speaker 1>FBI to settle here, you know, whereas normally they don't. Well,

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<v Speaker 1>there are two now to at least two federal judges,

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<v Speaker 1>Judge Sullivan in the Southern District of New York, who

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<v Speaker 1>who handled the criminal prosecution of Craig Dremal, the Galleon

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<v Speaker 1>trader whose phone was being tapped um and a judge

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<v Speaker 1>in Connecticut who is holding the UH the case, the

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<v Speaker 1>civil case against the FBI agents. So two judges now

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<v Speaker 1>have sharply criticized the FBI sum conduct in monitoring these

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<v Speaker 1>phone conversations pursued into Title three. So I think when

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<v Speaker 1>when federal judges are critical and suggests that there was

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<v Speaker 1>wrongful conduct, then the government quickly tries to put those

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<v Speaker 1>cases to bed. George, explain what Title three is and

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<v Speaker 1>what restrictions it imposes on the government. Title three is

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<v Speaker 1>actually part of the Omnibus Crime Control on Safe Street

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<v Speaker 1>Acts of but it's commonly referred to Title three, or

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<v Speaker 1>sometimes simply as T three. UM. That's a federal law

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<v Speaker 1>that allowed past the nineteen sixty eight that allows federal

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<v Speaker 1>agents the FBI to place wire taps on phone conversations

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<v Speaker 1>between US citizens occurring inside the United States, conduct which

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<v Speaker 1>of course a private citizen does is a is a felony,

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<v Speaker 1>and before that the government had no authorization to conduct

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<v Speaker 1>those kind of monitoring. It was initially passed in order

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<v Speaker 1>to combat organized crime and narcotics trafficking. UM. And the

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<v Speaker 1>law does, in some circumstances allow the government to put

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<v Speaker 1>this wire tap on, and that of course is monitored

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<v Speaker 1>by federal agents who listen in on these phone conversations.

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<v Speaker 1>And George, what are agents supposed to do? So? They

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<v Speaker 1>tap somebody's phone, some of those conversations are going to

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<v Speaker 1>be relevant to the investigation. Uh, is a rule just

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<v Speaker 1>that they're supposed to hang up as soon as they

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<v Speaker 1>realize that it's not relevant or or or is it

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<v Speaker 1>different because of a spouse? How does it work now?

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<v Speaker 1>Exactly right? That's that's a great question. The law imposes

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<v Speaker 1>a number of stringent requirements restrictions on what the government

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<v Speaker 1>can do when they're conducting the tap, so they always

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<v Speaker 1>have to have This is one reason why these taps

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<v Speaker 1>are fairly rare because they are exceedingly labor intensive for

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<v Speaker 1>the federal agency. So literally scores of agents have to

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<v Speaker 1>be around the clock listening in on phone calls because

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<v Speaker 1>you never know when the call is going to come in,

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<v Speaker 1>and they're required to monitor every call. Then here's the wrinkle.

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<v Speaker 1>They're required to do something called minimization, and they receive

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<v Speaker 1>and did in this case receive detailed instructions from the

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<v Speaker 1>supervising Assistant U S Attorney in New York that basically

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<v Speaker 1>said to the agents, you can listen to every call,

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<v Speaker 1>but once you determine that it's not pertinent or relevant

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<v Speaker 1>to what we're investigating. In this case, insider trading, then

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<v Speaker 1>you must immediately switch off the machine. You you have

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<v Speaker 1>to stop listening, you have to stop recording, and you

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<v Speaker 1>can every now and then you can go back because

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<v Speaker 1>they can still see that the calls are going on,

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<v Speaker 1>they can go in and and listen for a minute to

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<v Speaker 1>determine to make sure that they're not talking about matters

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<v Speaker 1>that they're authorized to listen to, so it is restricted

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<v Speaker 1>by subject matter. And then finally they're told, if you

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<v Speaker 1>are listening to a privileged conversation, if you're listening to

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<v Speaker 1>a conversation between the subject and his lawyer, or a

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<v Speaker 1>subject and his spouse, that's the marital privilege, then you

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<v Speaker 1>have to be especially careful that we don't intrude into

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<v Speaker 1>that protected sphere. And that was what occurred in this case.

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<v Speaker 1>There were, as June indicated, a hundred and eighty calls

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<v Speaker 1>between Craig and his wife Arlene, and a number of

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<v Speaker 1>those uh the monitoring went on too long before the

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<v Speaker 1>agents switched it off, and at least three or four

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<v Speaker 1>Judge Sullivan found were indefensible. Those calls apparently got into

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<v Speaker 1>some very intimate details that sometimes, as we all know,

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<v Speaker 1>husbands and wives will have conversations that they don't want

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<v Speaker 1>anyone else to hear. George, as a former federal prosecutor,

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<v Speaker 1>do FBI agents often ignore those minimization requirements or expand

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<v Speaker 1>what they're listening to wait a little too long? Well,

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<v Speaker 1>here's the problem that the answer is the FBI. I

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<v Speaker 1>have now worked with them for many years as a prosecutor,

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<v Speaker 1>and I've worked on the other side as a white

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<v Speaker 1>collar defense lawyer. This is the flagship of federal agencies.

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<v Speaker 1>This is an agency with amazing people. They're they're dedicated,

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<v Speaker 1>they're intelligent. There they're well screened, but they do make mistakes.

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<v Speaker 1>And these minimization rules, as you can imagine, are very

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<v Speaker 1>difficult to actually implement because again, you can listen to

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<v Speaker 1>every conversation, but how and at what point do you

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<v Speaker 1>determine that it's not pertinent. So the instructions were given. Um,

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<v Speaker 1>there were thousands of calls that were monitored, and the

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<v Speaker 1>judge ultimately allowed the the monitored calls to come into evidence.

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<v Speaker 1>But there were some instances where mistakes were made. In Actually,

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<v Speaker 1>the court in Connecticut dismissed the case against sixteen thirteen

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<v Speaker 1>of the sixteen agents and only said, well, three agents

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<v Speaker 1>may have made some mistakes. So the answer is it's

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<v Speaker 1>actually difficult to implement um. I think the agents were

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<v Speaker 1>probably operating in good faith, trying to do the best

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<v Speaker 1>they can, but some of them did a better job

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<v Speaker 1>and minimizing than others, and that was really what the

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<v Speaker 1>case turned up. George, can you talk just a bit

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<v Speaker 1>more about you mentioned marital privilege and how does that

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<v Speaker 1>work in practice? I mean, if if the wife call

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<v Speaker 1>calls them up and her first words are the inside

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<v Speaker 1>information arrived, surely they can they can keep listening to that, right,

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<v Speaker 1>great question, Absolutely correct. So marital privilege, like the attorney

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<v Speaker 1>client privilege, is subject to something called the crime fraud exception.

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<v Speaker 1>So if if the subject of the conversation is, hey, dear,

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<v Speaker 1>you know, the insider trading information that we're getting is

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<v Speaker 1>really great, then the agents would be allowed to listen

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<v Speaker 1>to that and to monitor that. But other than that,

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<v Speaker 1>the instructions were clear. If it's between the husband and

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<v Speaker 1>the wife and they're talking about the school kids that

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<v Speaker 1>they're talking about, as in this case marital problems, that's

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<v Speaker 1>clearly not relevant and they have to switch it off.

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<v Speaker 1>It's just about a minute. Is the FBS the FBI

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<v Speaker 1>under a lot of scrutiny late lately in pressure because

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<v Speaker 1>of this and the FBI agent leaking in the Billy

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<v Speaker 1>Walters case. Well, again, the FBI is a large agency.

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<v Speaker 1>They have thousands of agents. There are always going to

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<v Speaker 1>be some isolated incidents where an agent does something that

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<v Speaker 1>is um uh called into question, and I think the

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<v Speaker 1>agency responds appropriately to that. But I don't see any

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<v Speaker 1>any trend here. The work that they do is um

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<v Speaker 1>by all measures usually exemplary. Um. I don't I don't

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<v Speaker 1>see a trend here. Um. The interesting thing about this case,

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<v Speaker 1>by the ways, this was the first time in around

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<v Speaker 1>two thousand nine when they went up on a wire

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<v Speaker 1>that any federal agency had ever used a wire tap

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<v Speaker 1>in a securities fraud investigation. So that did attract some attention.

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<v Speaker 1>Thank you so much for being on Bloomberg Law. As always,

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<v Speaker 1>it's a pleasure to have you. That's former federal prosecutor

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<v Speaker 1>George Newhouse. He is a partner at Denton's