Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio,
Speaker 1: fresh on victories in other legal cases. Donald Trump is
Speaker 1: now asking a New York appeals court to overturn the
Speaker 1: nearly five hundred million dollars civil fraud judgment against him
Speaker 1: after a trial. Judge Arthur and Goren found in February
Speaker 1: that Trump, his company, and top executives, including his sons,
Speaker 1: schemed for years to inflate his wealth on financial statements
Speaker 1: used to secure loans and make deals. In the appeal,
Speaker 1: Trump's lawyers called the judge's decisions legally bereft and untethered
Speaker 1: to the law or to commercial reality, raising several arguments,
Speaker 1: many that echoed the gripes that Trump complained about over
Speaker 1: and over during the trial.
Speaker 2: There were no victims because the banks made a lot
Speaker 2: of money. They made one hundred million dollars and by
Speaker 2: the way, I paid three hundred million dollars in taxes.
Speaker 1: Joining me is Bloomberg Legal reporter Eric Larson, who has
Speaker 1: been covering the New York Trump trials. Eric, before we
Speaker 1: talk about the appeal, tell us about the judge's decision.
Speaker 3: Sure, so this is now several months later after Trump
Speaker 3: was found libel for fraud and the civil fraud case
Speaker 3: brought against him by the New York Attorney General. Of course,
Speaker 3: this stems from his asset valuations of all of his
Speaker 3: various assets that the State of New York alleged had
Speaker 3: been wildly inflated in order to get Trump better terms
Speaker 3: on loans from banks for over a decade. And so
Speaker 3: the state won this trial. It was a non jury trial,
Speaker 3: and in that time, of course, the former president had
Speaker 3: vowed to appeal, and this was his appeal brief filed
Speaker 3: with an intermediate appeals court, which really spelled out his
Speaker 3: case for trying to overturn the verdict and the five
Speaker 3: hundred and fifty four million dollar penalty last him.
Speaker 1: He raises a lot of arguments here, one being that
Speaker 1: there were no victims and no losses right.
Speaker 3: That is one of the top arguments that Trump makes
Speaker 3: in this filing. He argues that the New York Attorney General,
Speaker 3: Letitia James, didn't have any right to bring this case
Speaker 3: under the New York executive law, in part because there
Speaker 3: were no victims. This is a consumer fraud type case.
Speaker 3: They're saying, where are the victims? Where are the consumers
Speaker 3: who are hurt by this. Of course, we will get
Speaker 3: a full response from the Attorney General to this argument
Speaker 3: and others in the brief, but she has previously responded
Speaker 3: to this, and I should note that all of these
Speaker 3: arguments in this brief have sort of been made before
Speaker 3: by Trump. But the Attorney General says that she had
Speaker 3: a right to sue because it's up to the state
Speaker 3: to make sure that documents used in financial transactions, like
Speaker 3: the loan documents at issue in this case, have to
Speaker 3: be accurate and they can't knowingly contain false information. So
Speaker 3: while the banks didn't come out and say, hey, we
Speaker 3: were defrauded here, the idea for Leticia James is is
Speaker 3: that you have to prevent future violations by other individuals
Speaker 3: and companies by showing that they do enforce the law
Speaker 3: here when there's obvious violations according to the state.
Speaker 1: And we have heard this point since the very beginning
Speaker 1: that the Attorney General is politically motivated.
Speaker 3: Right, So that's another one of the arguments spelled out
Speaker 3: in this brief. They say that the only reason that
Speaker 3: Leticia James brought this case is because she campaigned as
Speaker 3: a Democrat on going after Trump, and that she had
Speaker 3: promised to do that, And in a sense, Trump is
Speaker 3: arguing here that this entire investigation and the lawsuit was
Speaker 3: sort of pretextual, that she had to come up with
Speaker 3: something in order to please the voters who voted for her.
Speaker 3: As with some of the other arguments, you know, Trump
Speaker 3: made this argument repeatedly before this ever went to trial,
Speaker 3: and the judge shot that down repeatedly and allowed the
Speaker 3: case to go to trial. So that's kind of kind
Speaker 3: of a tough one there for Trump to be because
Speaker 3: I believe the appeals court has already kind of heard
Speaker 3: this argument before as well.
Speaker 1: Yes, they heard a lot of these arguments, because Trump's
Speaker 1: lawyers went to the Appellate Division at least ten times
Speaker 1: to challenge the judge's rulings, including during the trial. Most
Speaker 1: of those appeals were, of course unsuccessful. And yet another
Speaker 1: argument that has resurfaced was based on the Statute of limitations.
Speaker 3: Right. So Trump makes a big point in this filing
Speaker 3: of saying that the last time the appeals court heard
Speaker 3: this case, I believe it was when the motion to
Speaker 3: dismiss was denied and the appeals court reviewed that decision.
Speaker 3: It reversed the judge, the trial judge on a few things. First,
Speaker 3: it granted dismissal for Ivanka Trump. Of course left the
Speaker 3: claims pending against Donald Trump and his two sons, Don
Speaker 3: Junior and Eric Trump. But they did reverse on Ivanka
Speaker 3: Trump in part because of the statute of limitations, and
Speaker 3: the court said, you can't go as far back as
Speaker 3: you wanted to in looking at these documents, these transactions.
Speaker 3: So the appeals court didn't say exactly what the trial
Speaker 3: judge had to do with that information and left it
Speaker 3: to the judge to sort of decide himself what to
Speaker 3: do with it. And the judge, Arthur Engron, decided that
Speaker 3: even with that statute of limitations determination, that the older
Speaker 3: documents that were too old had been used repeatedly as
Speaker 3: the years went on to verify Trump's finances and the
Speaker 3: company's finances as the loans continued. So that's how he
Speaker 3: kept the claims alive to go to trial. And Trump
Speaker 3: argues in this document that he never should have done
Speaker 3: that and claims that the judge, you know, just ignored
Speaker 3: the appeals court order for no apparent reason. So that's
Speaker 3: kind of what that part of the argument boils down to.
Speaker 1: They're also questioning the size of the judgment, calling it
Speaker 1: disproportionate and saying that it violates state and US constitutional
Speaker 1: guarantees against excessive punishments.
Speaker 3: Right, So this seems like a little bit more of
Speaker 3: a typical type of thing he might see in an
Speaker 3: appeal where a huge judgment is going to be scrutinized
Speaker 3: by an appeals court and they're going to look at
Speaker 3: whether or not the Attorney General calculated these damages correctly.
Speaker 3: Of course, a lot of that includes interest. So we
Speaker 3: saw a lot of arguments back and forth between the
Speaker 3: parties just leading up to the final award being handed down,
Speaker 3: and the Attorney General is confidence. She says she's confident
Speaker 3: that they calculated all of this correctly. They're clawing back
Speaker 3: what they say was the profit that Trump made off
Speaker 3: of two deals in particular, including the old post office,
Speaker 3: that luxury hotel in DC, and also saying that if
Speaker 3: they hadn't had that money, that profit in Trump's bank account,
Speaker 3: then he wouldn't have been able to do additional deals.
Speaker 3: So they're sort of like clawing back what they say
Speaker 3: was an illegal profit or an improper profit that Trump
Speaker 3: got by lying about the value of his assets and
Speaker 3: getting a better terms on his loans, and then, of course,
Speaker 3: as I said, a lot of that is interest as well.
Speaker 3: So I'm sure we'll see the appeals court scrutinize this
Speaker 3: a lot and perhaps come up with a different poculation.
Speaker 3: But you know, who knows at this point.
Speaker 1: Now, there are some things that you don't normally see
Speaker 1: in appeals Reef sounds sort of like campaigning or Trump
Speaker 1: outside the courthouse that the verdict would be a disaster
Speaker 1: for New York as businesses flee from an attorney general
Speaker 1: targeting victimless transactions, and also talking about him as among
Speaker 1: the most visionary and iconic real estate developers in American history.
Speaker 1: Was there a lot of fluff? I'll call it fluff.
Speaker 3: Well, yes, you could probably call it that, because I
Speaker 3: don't I don't know that the appeals court judges care
Speaker 3: about that in terms of determining whether or not this
Speaker 3: was all correctly done here. But actually that did form
Speaker 3: a big part of the defense case. At trial, his
Speaker 3: lawyers put on a big presentation, you know, a PowerPoint
Speaker 3: looking presentation that went on for quite some time, detailing
Speaker 3: essentially every deal that Trump had ever done, starting from
Speaker 3: the beginning of his career up to the you know,
Speaker 3: the old post office in DC, and you know, putting
Speaker 3: it in these these terms of him being such an
Speaker 3: impressive real estate businessman. But then also they say this
Speaker 3: to make the point that the banks that did business
Speaker 3: with him were eager to do business with him, that
Speaker 3: he was seen as visionary by these lenders that fought
Speaker 3: for his business, and they did put up that kind
Speaker 3: of testimony during the trial to show to make the
Speaker 3: point again, as we said earlier, about there not being
Speaker 3: any victims. So yeah, I mean, it's sort of inevitable
Speaker 3: that you see stuff like that pop up in Trump's filings.
Speaker 3: But I noticed that when he said that, you know,
Speaker 3: businesses were fleeing New York as a result of Letitia
Speaker 3: James's enforcement of this law, that there was no footnote there.
Speaker 3: It didn't lead to any examples of other businesses that
Speaker 3: were fleeing the state as a result of this case
Speaker 3: and this trial. And I remember that after the verdict
Speaker 3: was handed down, Trump had a press conference in which
Speaker 3: he's said that Exxon Mobile had fled New York as
Speaker 3: a result of a lawsuit brought by the New York
Speaker 3: Attorney General, a case that actually the Attorney General lost,
Speaker 3: but at any rate. He said that that excellent had
Speaker 3: fled and that's that's actually just not true.
Speaker 1: Trump had a problem coming up with the cash or
Speaker 1: the money for the appealed bond. Remind us what happened there.
Speaker 3: Yeah, So in order to put that judgment on hold
Speaker 3: during his appeal, he had to put up an appeal
Speaker 3: bond about one hundred and seventy five million dollars. Initially,
Speaker 3: the state wanted an appeal bond of the full amounts
Speaker 3: and plus i think an extra twenty percent, which they
Speaker 3: said that they were entitled to because Trump couldn't be
Speaker 3: trusted to pay up if his appeal failed. But the
Speaker 3: courts did not agree and lowered the size of the
Speaker 3: appeal bond. And of course Trump was able to do
Speaker 3: that by finding a company that provides these bonds based
Speaker 3: out of California, that a Trump supporter essentially owns the
Speaker 3: company and agreed to do that for him. There was
Speaker 3: still some contention between the parties over whether or not
Speaker 3: that company could pay up if necessary, but for all
Speaker 3: intents and purposes that that debate was sort of put
Speaker 3: to rest and the judgment is on hold. Trump's assets
Speaker 3: were not seized, as the Attorney General is threatening to
Speaker 3: do if he didn't pay up. So that bit of
Speaker 3: drama is over, and now it's sort of turning to
Speaker 3: the actual appeals court case, which itself could potentially drag
Speaker 3: on for quite some time.
Speaker 1: Eric Trump's sentencing for his conviction in the hush money
Speaker 1: case has been put off because he's asking the judge
Speaker 1: to toss out his conviction due to the controversial Supreme
Speaker 1: Court opinion on presidential immunity. Where does that stand?
Speaker 3: So, of course, Trump lost his first criminal trial here
Speaker 3: in New York, the so called hush money case over
Speaker 3: the falsified records that hid his hush money payment to
Speaker 3: porn star Stormy Daniels. And even though that verdict was
Speaker 3: handed down by a jury before this Supreme Court's immunity ruling,
Speaker 3: Trump has circled back and said, hey, this has to
Speaker 3: be tossed out. He has asked the judge to do so,
Speaker 3: and the Manhattan District Attorney, Alvin Bragg is to file
Speaker 3: his response to that request today. We may not necessarily
Speaker 3: see it right away today, but we can expect that
Speaker 3: the prosecutors are going to urge the court to uphold
Speaker 3: the verdicts and say, hey, even though some of this
Speaker 3: evidence in testimony potentially could be impacted by the immunity
Speaker 3: ruling from the Supreme Court. All of the other evidence
Speaker 3: in testimony in the case justify this verdict. I think
Speaker 3: that's probably what we can expect to hear from the
Speaker 3: district attorney.
Speaker 1: Thanks so much for coming on the show.
Speaker 3: Eric.
Speaker 1: That's Bloomberg Legal reporter Eric Larson coming up next on
Speaker 1: the Bloomberg Lawn Show. The fallout continues in the Alaska
Speaker 1: judge scandal. Just how many cases might be reversed. I'm
Speaker 1: June Grosso and you're listening to Bloomberg. Federal prosecutors in
Speaker 1: Alaska have identified nearly two dozen criminal cases with potentially
Speaker 1: undisclosed conflicts of interest involving former federal judge Joshua Kindred
Speaker 1: and the attorneys who worked on cases before him. The
Speaker 1: Trump appointee resigned this month amid allegation of sexual misconduct.
Speaker 1: A judiciary investigation found that Kindred had an inappropriate relationship
Speaker 1: with a female clerk who later worked for the US
Speaker 1: Attorney's office in Alaska. The battle also found the judge
Speaker 1: created a hostile work environment, including by discussing his romantic
Speaker 1: life in the workplace and lied about his conduct to
Speaker 1: judiciary officials conducting the inquiry. The Federal Public Defender's Office
Speaker 1: is undertaking its own review. Federal Defender Jamie McGrady has
Speaker 1: said she believes the number of potentially conflicted cases is
Speaker 1: higher than the twenty three identified by prosecutors. The inquiry
Speaker 1: could lead to the reopening of multiple criminal cases that
Speaker 1: came before Kindred during his more than four years on
Speaker 1: the bench. Joining me is Abby Smith, director of Georgetown
Speaker 1: Law's Criminal Defense and Prisoner Advocacy Clinic. The US Attorney
Speaker 1: is conducting an investigation. The Federal Public Defender is conducting
Speaker 1: an investigation to identify potential conflicts of interest. Would it
Speaker 1: be any case in which the judge had a relationship
Speaker 1: with the attorney? Would it be more than that?
Speaker 4: Well, any investigation would start with the judge having a
Speaker 4: relationship with a prosecutor in an ongoing case in which
Speaker 4: the prosecutor is one of counsel. That needed to have
Speaker 4: been disclosed at the very least, and it was you know,
Speaker 4: up to either side could have asked for recusal or disqualification.
Speaker 4: But I think this case goes beyond that. I mean,
Speaker 4: it sounds like there is a pattern of misbehavior on
Speaker 4: the part of the judge that some would or you
Speaker 4: made him an unfit judge while he was presiding over
Speaker 4: cases period. You know, the case that came to mind
Speaker 4: for me when I read about what's happening in Alaska
Speaker 4: is it's a little different, but it led to the
Speaker 4: dismissal of several dozen cases. It involved a judge who
Speaker 4: had been confronted by the FBI for having taken bribes
Speaker 4: from a leading union in Philadelphia, and they offered her
Speaker 4: a chance to be an informant to earn some mitigation
Speaker 4: and you know, perhaps non prosecution. Anyhow, she wore a
Speaker 4: wire and proceeded to start talking to a bunch of
Speaker 4: other judges as she's a sitting judge presiding over cases
Speaker 4: and basically in the pocket of the FBI, and with
Speaker 4: a deep need to ingratiate herself with the government so
Speaker 4: that she not be prosecuted. So she was wearing many hats.
Speaker 4: And the challenge to all of the cases that she
Speaker 4: ruled upon during that time period was a couple of things.
Speaker 4: As you know, broadly, a problem under the due process
Speaker 4: clause of the US Constitution is this good and fair behavior.
Speaker 4: There were also questions about separation of powers. Can you
Speaker 4: be both a judge and essentially a prosecutorial agent at
Speaker 4: the same time. You know, the idea that she was
Speaker 4: attempting to curry favor, that is, she needed to be
Speaker 4: the best informant she could be meant that some of
Speaker 4: that was going to go down hard on the defendants
Speaker 4: appearing before, so she would be more and more appealing
Speaker 4: to the prosecution. So here's this judge in Alaska who,
Speaker 4: according to what I've read, and one of the more
Speaker 4: troubling aspects of the case is that he was found
Speaker 4: to applied to the higher court investigating him, that he
Speaker 4: had engaged in widespread misconduct, you know, an improper relationship
Speaker 4: with one currently employed prosecutor and being wildly inappropriate, engaging
Speaker 4: in what probably would be hostile workplace environment behavior, maybe
Speaker 4: sexual harassment with others. You know, I'm interested in whether
Speaker 4: there could be a challenge as to general unfitness.
Speaker 1: Is it a no brainer that those cases involving the
Speaker 1: prosecutor he was having the sexual relationship with, or the
Speaker 1: one who sent him the nude photos, will those cases
Speaker 1: easily be reversed?
Speaker 4: Yes, it seems to be. That's the that's the low
Speaker 4: hanging fruit. That should be pretty easy. But the question
Speaker 4: is who's going to start that process. So, just to
Speaker 4: give you the defense perspective, depends. You know, quite often
Speaker 4: it's useful to challenge any and all convictions because it's
Speaker 4: harder to prove a case the more time goes by.
Speaker 4: So arguably there's some strategic advantage and kind of always
Speaker 4: if you get a second bite of the apple, to
Speaker 4: go for it. On the other hand, I don't know.
Speaker 4: You know, maybe this judge was a fairly lenient sentence,
Speaker 4: or maybe you know, there was a plea before him,
Speaker 4: and a better that the defendant be sentenced by this judge,
Speaker 4: no matter how corrupt or bizarre his behavior, than the
Speaker 4: luck of the draw the next time around. So you know,
Speaker 4: I guess question number one will be who brings the challenge?
Speaker 4: Will the federal defenders seek to undo every conviction that
Speaker 4: came before this judge? Will the prosecution, which has an
Speaker 4: ethical responsibility to do justice, will they, on their own accord,
Speaker 4: you know, move to dismiss those cases or somehow seeks
Speaker 4: the ability to not prost those cases after the fact.
Speaker 4: I don't know, and I don't want to paint this
Speaker 4: too broadly, because Alaska's a relatively small jurisdiction as jurisdictions go,
Speaker 4: and you know, the people tend to know each other
Speaker 4: in courthouses, the criminal bar tends to know each other.
Speaker 4: It's not unheard of that a judge is married to
Speaker 4: a prosecutor, or to a defense lawyer, or a prosecutor
Speaker 4: is married to a defense lawyer, because that's the society
Speaker 4: they keep. But it needs to be disclosed, and the
Speaker 4: prudent course would be to not have that person appear
Speaker 4: before you ever if you're married to them. You know,
Speaker 4: I'm not saying that like it doesn't happen. I don't
Speaker 4: need to sound like a Pollyanna about it. But it's
Speaker 4: just that there needs to be disclosure, and the people
Speaker 4: involved need to be wise about ensuring fairness to other people,
Speaker 4: including to the public, because that's the thing about judges
Speaker 4: and prosecutors. Appearance of proprieties the most important thing, because
Speaker 4: that has to do with people regarding the system as legitimate.
Speaker 1: I mean, it seems like the US Attorney's office could
Speaker 1: also be at faull Tier. Yes, three of the lawyers
Speaker 1: were from that office, and apparently the office was aware
Speaker 1: of a conflict.
Speaker 4: Yes, they should have disclosed. They should have said on
Speaker 4: the record so the events could at least consider it
Speaker 4: and want to reveal for the record that or disclosed
Speaker 4: for the record that you know. I have a colleague
Speaker 4: who's currently involved in a relationship with a judge. Here's
Speaker 4: what happens pretty commonly, and I just don't understand why
Speaker 4: this is a problem, because it's so ordinary for judges
Speaker 4: who've had law clerks who then either join the local
Speaker 4: prosecutor's office or the local public defender office or haines
Speaker 4: a shingle. It's usually an arrangement where that judge doesn't
Speaker 4: take cases involving that lawyer who was so recently a
Speaker 4: judge's clerk. Now, depending upon the size of the jurisdiction
Speaker 4: and the years that go by, that could change. But
Speaker 4: I think that's the kind of prudent thing to do.
Speaker 4: And if the judge forgets, then the lawyer should you
Speaker 4: reveal that that's the relationship. It's a little trickier when
Speaker 4: you're defense counsel because defense because our ethical obligation is
Speaker 4: to pursue our client's interests, and there's no ethical rule
Speaker 4: that says you have to disclose that you had some
Speaker 4: sort of relationships with a judge, you know. I mean,
Speaker 4: there are some rules that have to do with what
Speaker 4: proper relationships you know, exist between lawyer and client. But frankly,
Speaker 4: the ethical rules don't have a whole lot to say
Speaker 4: about relationships among lawyers or judges. But the US Attorney's
Speaker 4: office should have disclosed and the judge should have disclosed
Speaker 4: apparently period.
Speaker 1: One of the attorneys of the potential conflict is a
Speaker 1: defense lawyer.
Speaker 4: Well, that, you know, the judge needed to have disclosed.
Speaker 4: So do you understand what I'm saying about The defense
Speaker 4: is in a really different position. I'm not gonna you know,
Speaker 4: I might have a I might have a counseling session
Speaker 4: with my client where I say, look, I have this,
Speaker 4: you know, particular relationtionship with this judge. I want you
Speaker 4: to know that, and if you're uncomfortable with that, you know,
Speaker 4: let's talk. That's true. I mean, you might have a conversation,
Speaker 4: and you probably should have a conversation with your clients.
Speaker 4: But defense lawyer doesn't have to disclose having any sort
Speaker 4: of social relationship with a judge. That would be for
Speaker 4: the judge to do unless the lawyer does that, because
Speaker 4: it serves the client's interest. I mean, I've had judges say,
Speaker 4: you know, I'm a law professor who else appears in court.
Speaker 4: One time, I was at some very large fundraising event
Speaker 4: in Washington, d C. There are probably several hundred people there,
Speaker 4: and I ran into a judge who I sometimes appear before.
Speaker 4: I'm not friends with this judge. I've never socialized with
Speaker 4: this judge. I wouldn't even characterize our contact at the
Speaker 4: event as having a drink together. It didn't go that far.
Speaker 4: It's more like a little small suck. Then the next
Speaker 4: time I appear in court, the judges, I, you know,
Speaker 4: I feel compelled to disclose that that Miss Smith and I,
Speaker 4: you know, are are social acquaintances or something. And I thought,
Speaker 4: oh my god, it's going to hurt my reputation. I'm
Speaker 4: not good friends with this judge, trust me. But no
Speaker 4: judges do that. And I think careful judges would err
Speaker 4: on the side of overdisclosure and let the party stuff
Speaker 4: it out. But I can't believe this judge was keeping
Speaker 4: it secret. And if the US Attorney's office knew, that's
Speaker 4: really bad for him. I'm sure that smart people in
Speaker 4: the local federal defender are thinking of all kinds of
Speaker 4: creative motions to get a second crack in some of
Speaker 4: those cases that were decided by that US Attorney's office
Speaker 4: and that judge.
Speaker 1: Do you think that it will take years for this
Speaker 1: to unwind all the repercussions.
Speaker 4: I don't know, because I betshit things move more quickly
Speaker 4: in Alaska. I don't think the docket is his. If
Speaker 4: this was, you know, the Southern District of New York,
Speaker 4: then I would say could take a long time. But
Speaker 4: I'm not sure it will take that long a time.
Speaker 4: It's really interesting that the judge was not very few judges,
Speaker 4: especially so junior and their tenure, would give up a
Speaker 4: lifetime appointment. There must be dirt there. So you know,
Speaker 4: I think investigation is wise. We may only have the
Speaker 4: tip of the icebergs.
Speaker 1: Let's say you're a defense lawyer looking at this. Your
Speaker 1: client had a case before this judge involving the prosecutor,
Speaker 1: but your client got a light sentence. How do you
Speaker 1: weigh whether to retry the case. I mean, that seems
Speaker 1: like it's a tough decision.
Speaker 4: It is. That's a really good question. I would go
Speaker 4: out and see the client say, look, all hell is
Speaker 4: broken loose. This judge is now resigned, you know, under
Speaker 4: a cloud, and we may have an opportunity to seek
Speaker 4: to revisit your case to maybe get the conviction set
Speaker 4: aside and or get you resentenced. But let's think about this.
Speaker 4: Let's look at the other judges that you could appear
Speaker 4: before for sentencing. Here's the sentence you got. Is it
Speaker 4: worth the risk? Is this what you want to do?
Speaker 4: Or should we consider ourselves having cut our losses. That's
Speaker 4: the kind of discussion any good defense lawyer would have
Speaker 4: that even though in the initial moment of kind of
Speaker 4: surprise and maybe even hilarity about a judge, you know,
Speaker 4: blowing up the way this one did. You know, you
Speaker 4: may want to say, oh, let's bring every single case,
Speaker 4: but you know, let's challenge every single case that this
Speaker 4: judge had a hand in. Might not be good for
Speaker 4: the client. You got to take each case individually.
Speaker 1: It's really interesting seeing it from the defense point of view.
Speaker 1: Thanks so much, Abby. That's Abby Smith, director of Georgetown Laws,
Speaker 1: Criminal Defense and Prisoner Advocacy Clinic. Coming up next on
Speaker 1: The Bloomberg Lawn Show, the Federal Trade Commission is looking
Speaker 1: into what it calls the opaque market of surveillance pricing,
Speaker 1: using consumer data to charge different customers different prices for
Speaker 1: the same goods. I'm June Grasso, and this is Bloomberg.
Speaker 1: Federal regulators are examined how companies including MasterCard, JP, Morgan Chase,
Speaker 1: and McKinsey provide clients with algorithms that use consumers personal
Speaker 1: data to set prices based on a shopper's individual characteristics.
Speaker 1: The Federal Trade Commission said it was seeking to better
Speaker 1: understand the opaque market of surveillance pricing practices using consumer
Speaker 1: data including credit information, location, and browsing history, to charge
Speaker 1: different customers different prices for the same goods. To do this,
Speaker 1: the agency noted third party intermediaries claimed to use advanced algorithms,
Speaker 1: artificial intelligence and other technology. FTC chair Lina Khan said,
Speaker 1: quote firms that harvest Americans' personal data can't put people's
Speaker 1: privacy at risk. Now, firms could be exploiting this vast
Speaker 1: trove of personal information to charge people higher prices. Joining
Speaker 1: me is Bloomberg? Anti trust reporter Leah Nylan exactly is
Speaker 1: surveillance pricing?
Speaker 5: Surveillance pricing is something that goes under a lot of
Speaker 5: different names. Sometimes people call it price discrimination. Sometimes they
Speaker 5: call it online pricing, dynamic pricing, a couple different things. Essentially,
Speaker 5: the idea is that the price isn't one thing. It
Speaker 5: changes based on who is buying it and when they're
Speaker 5: buying it. The best example of this probably airline pricing.
Speaker 5: You know, people are very familiar with the idea that
Speaker 5: the price of the airline ticket changes depending on when
Speaker 5: you're buying it, like how close to the flight it is,
Speaker 5: and sometimes whether you're logged in or not. So whether
Speaker 5: it knows that you have like rewards or status with
Speaker 5: that particular airline, it might change the price.
Speaker 1: Does it also happen with like consumer products? Let's say
Speaker 1: I don't know, vacuum cleaners. People are used to hearing
Speaker 1: that about airlines, you know, when you book makes a difference,
Speaker 1: et cetera. But what about like consumer products.
Speaker 5: Yeah, So that's why that FTC is conducting the study
Speaker 5: because they have heard from a lot of people that
Speaker 5: companies are now sort of using these types of pricing
Speaker 5: techniques on more and more consumer products. So one of
Speaker 5: the biggest examples that people know about also is McDonald's.
Speaker 5: For example, if you walk up to the counter or
Speaker 5: go through the drive through at McDonald's, you're actually probably
Speaker 5: going to be paying a little bit more money than
Speaker 5: if you ordered a head through the apps because McDonald's
Speaker 5: often gives out different types of rewards or you know,
Speaker 5: price discounts if you're ordering through the app. So it
Speaker 5: is becoming more and more common for these types of
Speaker 5: consumer products to have some kind of dynamic pricing elements
Speaker 5: to them, and they're very interested in how companies are
Speaker 5: deciding when they want to use these types of discounts
Speaker 5: or price hikes, and whether they might be using information
Speaker 5: about individuals that's not technically allowed, so things like you
Speaker 5: know your gender, your race, things like that that are
Speaker 5: prevented by various discrimination laws.
Speaker 1: Are they allowed to use the consumers online footprint?
Speaker 5: So that's another thing that FEC is going to be
Speaker 5: looking at, how much are these companies using your online footprint? Because,
Speaker 5: for example, when you go online, a lot of that
Speaker 5: is tracked through your browser history, and it's not that
Speaker 5: hard sometimes for companies to like figure out maybe you
Speaker 5: were looking at this pair of shoes online, so maybe
Speaker 5: they should when you go into the store offer you
Speaker 5: a discount or maybe a price hike on it. You
Speaker 5: see it in different types of things like surge pricing
Speaker 5: on Uber. There was a really interesting study that found
Speaker 5: if your phone battery is low, Uber is much more
Speaker 5: likely to put surge pricing on a particular fare because
Speaker 5: you really know that you really need to get where
Speaker 5: you're going before your phone dies. So that's outrageous to me. Yeah,
Speaker 5: they found, like, there was a study that had a
Speaker 5: few people at the same place ask for a ride
Speaker 5: to the same location, and then they looked at how
Speaker 5: much they were charging those people if they had a
Speaker 5: full battery versus if they had a really low battery,
Speaker 5: and the person with a really low battery was often
Speaker 5: getting a much higher fare because Uber sort of knew
Speaker 5: that they had more urgency and sort of getting to
Speaker 5: the location before their phone died. So these are the
Speaker 5: sorts of things that the SEC is looking at, Like,
Speaker 5: how are companies determining the prices when they're when they're
Speaker 5: doing these sorts of surge pricing or dynamic pricing options.
Speaker 1: An app like that knows the strength of your battery.
Speaker 5: Yeah, in terms of your phone, like there's actually a
Speaker 5: lot of when you open an app, it knows a
Speaker 5: lot of information about your phone. It knows you know,
Speaker 5: what your battery level is. It might know some of
Speaker 5: your contacts. They might know some other apps that you've
Speaker 5: gone to on the phone. So for example, if you
Speaker 5: open up the Uber app and then you open up
Speaker 5: the Lift app, sometimes it might, you know, change the
Speaker 5: price that's available because it knows that you might be
Speaker 5: like checking between the two, sort of triaging the price.
Speaker 1: So I do that all the time.
Speaker 5: Yeah, I don't know if you've ever if you've ever
Speaker 5: the food delivery app. This happens to me all the time.
Speaker 5: Like if I open one of the food delivery apps,
Speaker 5: all of a sudden, I start getting pop ups from
Speaker 5: the other ones being like hungry, try this offer.
Speaker 1: We're laughing, but it's scary that so much of your
Speaker 1: personal information is exposed by an app.
Speaker 5: Yeah, and that's part of what the FEC is trying
Speaker 5: to look at here, they said, you know, they're not
Speaker 5: necessarily implying that companies have done anything wrong, but they
Speaker 5: do want to know how often companies are using these
Speaker 5: types of information, what information is sort of going into
Speaker 5: these types of algorithms that are determining price. A lot
Speaker 5: of the companies that they sent these inquiries to, some
Speaker 5: of them you've heard of like MasterCard and Jason Morgan,
Speaker 5: but a lot of them are probably companies. You never
Speaker 5: heard of something called Reveonics, Task Group Pros, but they
Speaker 5: actually work for a lot of very household names. Taskworks
Speaker 5: for Starbucks and McDonald's. Pros works for Luftanza the airline,
Speaker 5: and Neshleie Revionics works for home Depot. Like all sorts
Speaker 5: of companies are doing this more and more a sort
Speaker 5: of trying to personalize pricing. You know, maybe you've gone
Speaker 5: to Home Depot and they know that you're working on
Speaker 5: some home projects, so like the next time you come in,
Speaker 5: maybe they'll try and offer you a discount on you know,
Speaker 5: whatever it is that you're working on, or maybe they
Speaker 5: know that you're much more likely to like really need that,
Speaker 5: so they might hike the price on something. It's very interesting,
Speaker 5: we're in this new world sort of with pricing because
Speaker 5: they now know a lot more about you and maybe
Speaker 5: what you're more willing to pay for.
Speaker 1: So they send subpoenas. What kind of information are they
Speaker 1: asking for?
Speaker 5: Yes, this is an FTP study, so they are allowed
Speaker 5: to compel the companies to provide information, but they ask
Speaker 5: them for a lot of details about one the services
Speaker 5: that they offer with software. So some of these companies
Speaker 5: call it like price optimization or search pricing. They have
Speaker 5: a lot of different terms for what they do. So
Speaker 5: they're asking them what specifically do you offer and how
Speaker 5: would you describe it? And then what sort of information
Speaker 5: goes into that sort of algorithm because often this is
Speaker 5: done by computer algorithms, So they want to know what
Speaker 5: are the inputs into that, so that they would want
Speaker 5: to know, for example, are they looking at the phone
Speaker 5: battery to determine this, Are they looking at you know,
Speaker 5: your contacts and what other things you've looked at? And then,
Speaker 5: as I said, are they looking at your browsing history?
Speaker 5: And then they wanted to know how they choose which
Speaker 5: offers because they do have some concerns that maybe companies
Speaker 5: are sort of targeting richer consumers to give lots of
Speaker 5: price hikes and not giving them to, you know, more
Speaker 5: low income consumers, which might be potentially discriminatory. Whenever you
Speaker 5: have your phone, it has some information about where you're located,
Speaker 5: and geography could be going into this. Perhaps if you're
Speaker 5: located in a lower income area, you're not as likely
Speaker 5: to get some of these offers as you are if
Speaker 5: you live in a rich suburb, So they really want
Speaker 5: to know all of the inputs that are going into
Speaker 5: how they decide what the offers are and who gets them.
Speaker 1: You know, we think of the FTC, I think most
Speaker 1: of us in a different way. They're doing this under
Speaker 1: the so called six B Authority.
Speaker 5: Yeah, so the FDC is an enforcement agency, but it
Speaker 5: also has this really interesting research arm. Congress gave it
Speaker 5: the ability to do these six PE studies. They're sort
Speaker 5: of like market studies and they're allowed to compel information
Speaker 5: from companies to sort of do a deep dive into
Speaker 5: specific areas of the economy or areas of the market.
Speaker 5: So they've done some of these on all sorts of things.
Speaker 5: They've done them on pharmaceutical benefit managers, which are sort
Speaker 5: of the drug middlemen who come up with pharmaceutical pricing
Speaker 5: between the pharma companies and the health insurance. They've done
Speaker 5: them on patentrols and like how much those were impacting innovation.
Speaker 5: They've been doing ones on pricing of online Internet pricing.
Speaker 5: That was one that came up sort of during the pandemic.
Speaker 5: And they did one on supply chains, like what caused
Speaker 5: some of the supply chain crises of the pandemic. So
Speaker 5: the idea behind these studies is that, like the SPC
Speaker 5: really does a deep dive into what is really happening,
Speaker 5: and then they publish a study with the information and
Speaker 5: that can help Congress as it is considering new laws,
Speaker 5: or if the STC finds something that's a little bit questionable,
Speaker 5: it can lead them to open an investigation into something
Speaker 5: related to it.
Speaker 1: How long do these studies usually take?
Speaker 5: These studies do you tend to take a little bit
Speaker 5: of time. Oftentimes when they start them, it takes like
Speaker 5: maybe six months or so for the companies to send
Speaker 5: them the information and then usually they spend a little
Speaker 5: bit of time looking at it. So it's not unusual
Speaker 5: for it to be a year or two before the
Speaker 5: SPC publishes its findings.
Speaker 1: Well, this has really opened my eyes about being tracked
Speaker 1: by apps on your phone. Thanks so much, Leah. That's
Speaker 1: Bloomberg Anti Trust reporter Leah Nylan And that's it for
Speaker 1: this edition of the Bloomberg Law Podcast. Remember you can
Speaker 1: always get the latest legal news by subscribing and listening
Speaker 1: to the show on Apple Podcasts, Spotify, and at Bloomberg
Speaker 1: dot com, Slash Podcast, Slash Law. I'm June Grosso and
Speaker 1: this is Bloomberg.