1 00:00:00,080 --> 00:00:03,360 Speaker 1: You're listening to Bloomberg Law. I'm June Grasso with Michael Best. 2 00:00:03,760 --> 00:00:07,200 Speaker 1: Las Vegas gambler Billy Walters is betting that a judge 3 00:00:07,200 --> 00:00:11,520 Speaker 1: will dismiss insider trading charges against him. Walters, who's accused 4 00:00:11,520 --> 00:00:14,680 Speaker 1: of making forty three million dollars by trading on leaks 5 00:00:14,720 --> 00:00:17,720 Speaker 1: from an insider, now wants his case toss because of 6 00:00:17,800 --> 00:00:21,640 Speaker 1: leaks from an FBI agent. In announcing Walter's indictment in May, 7 00:00:21,720 --> 00:00:25,680 Speaker 1: Manhattan U S Attorney Pret Berrara described a brazen scheme 8 00:00:25,760 --> 00:00:30,040 Speaker 1: involving corporate intrigue, gambling debts, and secret codes where the 9 00:00:30,080 --> 00:00:34,080 Speaker 1: former chairman of Dean Foods gave illegal stock tips to Walters. 10 00:00:34,920 --> 00:00:38,599 Speaker 1: When the board member of a fortune company feeds inside 11 00:00:38,640 --> 00:00:42,120 Speaker 1: information to a professional gambler who makes a killing on 12 00:00:42,159 --> 00:00:45,320 Speaker 1: well time trades in that very company stock, that is 13 00:00:45,320 --> 00:00:49,199 Speaker 1: a form of corruption, corruption of our markets. The government's 14 00:00:49,240 --> 00:00:52,160 Speaker 1: case is now in jeopardy because an FBI agent leaked 15 00:00:52,240 --> 00:00:56,680 Speaker 1: details to the press about the confidential investigation of Walters 16 00:00:56,720 --> 00:01:00,040 Speaker 1: and golf star Phil Mickelson, who paid back almost a 17 00:01:00,160 --> 00:01:04,319 Speaker 1: million dollars from stock trades. Walter says the FBI violated 18 00:01:04,400 --> 00:01:07,920 Speaker 1: his rights with leaks designed to revive an investigation that 19 00:01:08,040 --> 00:01:12,039 Speaker 1: had stalled. My guests are former federal prosecutor Robert Mints, 20 00:01:12,080 --> 00:01:15,360 Speaker 1: a partner McCarter in English, and Peter Henning, professor at 21 00:01:15,400 --> 00:01:20,720 Speaker 1: Wayne State University. Bob the FBI agent David Chavez has 22 00:01:20,800 --> 00:01:24,920 Speaker 1: hired his own attorney as the case against him is investigated. 23 00:01:25,400 --> 00:01:31,520 Speaker 1: Tell us what he admitted he did and why. Short June, 24 00:01:31,800 --> 00:01:35,959 Speaker 1: according to the United States Attorney's Office that was ordered 25 00:01:36,040 --> 00:01:41,160 Speaker 1: by the judge to conduct an investigation into these leaking allegations, 26 00:01:41,200 --> 00:01:47,640 Speaker 1: this veteran FBI supervisor admitted to leaking information about this 27 00:01:47,720 --> 00:01:51,760 Speaker 1: insider trading investigation to reporters at both the Wall Street 28 00:01:51,840 --> 00:01:55,880 Speaker 1: Journal and The New York Times, and the defense has alleged, 29 00:01:56,160 --> 00:01:59,080 Speaker 1: as the basis for their motion to dispiss this indictment, 30 00:01:59,360 --> 00:02:04,840 Speaker 1: that these leaks were strategically timed and strategically released in 31 00:02:04,960 --> 00:02:08,880 Speaker 1: order to try to influence the investigation and ultimately generate 32 00:02:09,000 --> 00:02:12,280 Speaker 1: evidence that, but for the leaks, would never have been 33 00:02:12,320 --> 00:02:16,960 Speaker 1: available to the government. Well, so Billy Walters is now 34 00:02:17,040 --> 00:02:21,560 Speaker 1: Peter trying to get the case dismissed because of these leaks. 35 00:02:22,360 --> 00:02:25,679 Speaker 1: Is there a legal basis for doing that? Well, he's 36 00:02:25,720 --> 00:02:29,160 Speaker 1: got two grounds to do with. The first ground is 37 00:02:29,240 --> 00:02:34,560 Speaker 1: that the conduct by the agent, which the defense is 38 00:02:34,600 --> 00:02:37,919 Speaker 1: claiming as a violation of the Gran Jury secrecy rule 39 00:02:38,320 --> 00:02:41,480 Speaker 1: and perhaps even a couple of other statutes, that that 40 00:02:41,680 --> 00:02:49,000 Speaker 1: generated evidence that the government got impermissibly and therefore that 41 00:02:49,160 --> 00:02:53,560 Speaker 1: violated Walter's rights, that it violated the Green jury clause 42 00:02:53,639 --> 00:02:59,120 Speaker 1: because the violations by the agent um ended up influencing 43 00:02:59,160 --> 00:03:02,400 Speaker 1: the grand jury's decision. The other is a broader claim 44 00:03:03,120 --> 00:03:08,440 Speaker 1: of outrageous government conduct that, in effect, the Justice Department, 45 00:03:08,639 --> 00:03:12,399 Speaker 1: both the prosecutors, and the FBI ought to be punished, 46 00:03:12,440 --> 00:03:16,520 Speaker 1: if you will, for this type of improper action. That 47 00:03:16,960 --> 00:03:19,840 Speaker 1: a defendant shouldn't be put on trial when the government 48 00:03:20,520 --> 00:03:24,320 Speaker 1: violates the law itself. And so those are the two grounds. 49 00:03:24,480 --> 00:03:27,560 Speaker 1: It's not an easy argument to make, but that's the 50 00:03:27,600 --> 00:03:31,080 Speaker 1: basis on which he's trying to get these charges dismissed. Bob. 51 00:03:31,120 --> 00:03:35,320 Speaker 1: The defense motion papers say the misconduct here is significantly 52 00:03:35,400 --> 00:03:40,560 Speaker 1: more flagrant, far ranging, and insidious than it expected. Is 53 00:03:40,600 --> 00:03:46,560 Speaker 1: this level of conduct unprecedented? How would you describe it? Well, 54 00:03:46,600 --> 00:03:49,320 Speaker 1: I wouldn't say it's unprecedented, but I would agree that 55 00:03:49,400 --> 00:03:53,320 Speaker 1: it is highly unusual. In this case, the FBI agent 56 00:03:53,360 --> 00:03:58,480 Speaker 1: has admitted to leaking information to these reporters on numerous occasions. 57 00:03:59,000 --> 00:04:02,360 Speaker 1: He claims that the investigation was dormant at the time 58 00:04:02,800 --> 00:04:04,920 Speaker 1: and that's why he gave them the information. But the 59 00:04:04,960 --> 00:04:08,240 Speaker 1: defense has argued that that is precisely the problem, that 60 00:04:08,320 --> 00:04:12,560 Speaker 1: the investigation was going nowhere, and so the agent strategically 61 00:04:12,640 --> 00:04:16,960 Speaker 1: leaked this information in order to try to generate new evidence. 62 00:04:17,240 --> 00:04:19,400 Speaker 1: And they argue that there was a couple of things 63 00:04:19,440 --> 00:04:24,159 Speaker 1: going on, Uh, We're behind this inappropriate leaking of information. 64 00:04:24,560 --> 00:04:26,440 Speaker 1: One was that they had a wire tap going and 65 00:04:26,480 --> 00:04:29,440 Speaker 1: they were hoping that by leaking this information to the 66 00:04:29,440 --> 00:04:33,360 Speaker 1: public that people who were under investigation might discuss their 67 00:04:33,360 --> 00:04:36,679 Speaker 1: criminal conduct on this wire tap. But probably their better 68 00:04:36,839 --> 00:04:41,360 Speaker 1: argument is that one of the individuals he was under investigation, um, 69 00:04:41,440 --> 00:04:46,279 Speaker 1: the former president of Dean Foods UM, as a result 70 00:04:46,360 --> 00:04:50,120 Speaker 1: of this information coming out, took a cell phone that 71 00:04:50,200 --> 00:04:54,080 Speaker 1: allegedly had information that would have implicated him UH and 72 00:04:54,680 --> 00:04:58,080 Speaker 1: Billy Walters and threw that into a stream behind his 73 00:04:58,160 --> 00:05:02,440 Speaker 1: house and destroyed evidence. Once he destroyed that evidence, according 74 00:05:02,480 --> 00:05:05,799 Speaker 1: to the defense, he had obstructed justice, and prosecutors used 75 00:05:05,920 --> 00:05:09,680 Speaker 1: that as leverage to ultimately get him to recant his 76 00:05:09,760 --> 00:05:12,599 Speaker 1: statements that he was innocent, to come back and agree 77 00:05:12,600 --> 00:05:15,120 Speaker 1: to cooperate with the government and now become the key 78 00:05:15,120 --> 00:05:19,680 Speaker 1: witness against the defense is client in this case. Well, Peter, 79 00:05:19,760 --> 00:05:23,640 Speaker 1: there's also some indication, isn't there that the higher ups 80 00:05:23,880 --> 00:05:28,080 Speaker 1: in the Justice Department we're trying to prevent the league 81 00:05:28,120 --> 00:05:31,000 Speaker 1: from happening or take some disciplinary action about the league, 82 00:05:31,000 --> 00:05:33,200 Speaker 1: and might that be some mitigating factor here in the 83 00:05:33,279 --> 00:05:37,120 Speaker 1: judges mind. Well, certainly that's what the Justice Department is 84 00:05:37,120 --> 00:05:40,960 Speaker 1: going to argue that there's no reason to dismiss the charges. 85 00:05:41,000 --> 00:05:45,120 Speaker 1: In other words, give Walters a free pass for conduct 86 00:05:45,160 --> 00:05:48,920 Speaker 1: that may well have constituted insider trading. He shouldn't get 87 00:05:48,920 --> 00:05:52,800 Speaker 1: the charges dismissed. Instead, the Justice Department should be allowed 88 00:05:52,839 --> 00:05:57,640 Speaker 1: to pursue the proper remedy, which is to discipline shab 89 00:05:57,720 --> 00:06:00,760 Speaker 1: As and perhaps even pursue a criminal case against him. 90 00:06:00,800 --> 00:06:04,160 Speaker 1: He could be charged with contemptive court, perhaps even obstruction 91 00:06:04,240 --> 00:06:08,800 Speaker 1: of justice. What the Justice Department wants is essentially to say, 92 00:06:08,839 --> 00:06:13,040 Speaker 1: these are two separate cases and um as bad as 93 00:06:13,160 --> 00:06:18,120 Speaker 1: what Chavez did, that doesn't impact the government's case and 94 00:06:18,120 --> 00:06:22,200 Speaker 1: the evidence of insider trading against Walters. So I expect 95 00:06:22,240 --> 00:06:24,880 Speaker 1: that will be the road the Justice Department goes down 96 00:06:25,160 --> 00:06:28,559 Speaker 1: when it files its brief in the next week or two, Bob. 97 00:06:28,640 --> 00:06:32,440 Speaker 1: Does the defendant have to show that the government's misconduct 98 00:06:32,560 --> 00:06:35,920 Speaker 1: affected the case against him in some way or is 99 00:06:36,000 --> 00:06:41,360 Speaker 1: the misconduct itself considered enough? Well? The defense here makes 100 00:06:41,480 --> 00:06:45,919 Speaker 1: essentially three different arguments. Under the leading Supreme Court case 101 00:06:46,480 --> 00:06:49,560 Speaker 1: of Bank of Nova Scotia, the government the defense would 102 00:06:49,600 --> 00:06:54,719 Speaker 1: have to show either that the misconduct substantially influenced the 103 00:06:54,760 --> 00:06:57,480 Speaker 1: grand jury's decision to return an indictment, which is one 104 00:06:57,480 --> 00:07:00,800 Speaker 1: of their better arguments here. They also to argue that 105 00:07:00,800 --> 00:07:04,080 Speaker 1: they're the history of prosecutorial misconduct here, in that they 106 00:07:04,120 --> 00:07:08,200 Speaker 1: alleged that this particular FBI agent likely leaked information in 107 00:07:08,240 --> 00:07:11,240 Speaker 1: a series of other cases, although their evidence on that 108 00:07:11,440 --> 00:07:15,040 Speaker 1: is more speculative. And finally, they make the argument um 109 00:07:15,120 --> 00:07:18,160 Speaker 1: that the government's conduct here was just so outrageous that 110 00:07:18,280 --> 00:07:22,720 Speaker 1: it shocks the conscience and should be dismissed on those grounds. 111 00:07:22,760 --> 00:07:26,360 Speaker 1: But that's an exceedingly hard argument to make, and the 112 00:07:26,720 --> 00:07:31,160 Speaker 1: one case where the government um failed to prevail on that, 113 00:07:31,200 --> 00:07:34,360 Speaker 1: where the indictment was in fact dismissed, is one where 114 00:07:34,360 --> 00:07:37,920 Speaker 1: an agent, for example, UH engage in sexual relations with 115 00:07:38,000 --> 00:07:40,840 Speaker 1: the defendant in order to gather evidence. And that's the 116 00:07:40,880 --> 00:07:43,520 Speaker 1: case where the court just said that the government just 117 00:07:43,600 --> 00:07:47,600 Speaker 1: went too far to gather evidence and dismiss the indictment here. 118 00:07:47,640 --> 00:07:52,280 Speaker 1: I think their best argument is that they somehow allowed 119 00:07:52,320 --> 00:07:57,800 Speaker 1: the government by leaking information to gather this information about 120 00:07:58,200 --> 00:08:01,360 Speaker 1: this key cooperating witness who, as a result of the 121 00:08:01,400 --> 00:08:05,360 Speaker 1: leaked information, allegedly destroyed that cell phone, and the government 122 00:08:05,360 --> 00:08:08,760 Speaker 1: then used that as leverage to try to gain his cooperation. 123 00:08:09,080 --> 00:08:11,880 Speaker 1: The government's could argue that this defendant had plenty of 124 00:08:11,920 --> 00:08:14,200 Speaker 1: other reasons to try to cooperate, that the weight of 125 00:08:14,240 --> 00:08:17,800 Speaker 1: the evidence that was overwhelming, his cooperation was based on 126 00:08:17,840 --> 00:08:20,240 Speaker 1: a series of factors, and that the fact that he 127 00:08:20,280 --> 00:08:23,440 Speaker 1: destroyed his cell phone may have been only one of them. Peter, 128 00:08:23,520 --> 00:08:25,880 Speaker 1: we only have about thirty seconds. But what do you 129 00:08:25,880 --> 00:08:28,960 Speaker 1: think the judge is going to do? Well? This is 130 00:08:29,000 --> 00:08:32,280 Speaker 1: one tough call. Judge Castle is not happy and in 131 00:08:32,360 --> 00:08:36,800 Speaker 1: fact invited the defense to file emotion to dismiss and 132 00:08:36,960 --> 00:08:40,599 Speaker 1: so um I mean I I think the judge is 133 00:08:40,640 --> 00:08:44,880 Speaker 1: going to give this very serious consideration. Um, if he 134 00:08:44,960 --> 00:08:47,920 Speaker 1: does dismiss, I could certainly see the Justice Department appealing 135 00:08:47,920 --> 00:08:50,640 Speaker 1: it to the Second Circuit, and so this is going 136 00:08:50,679 --> 00:08:54,360 Speaker 1: to be a very close call. Bob, do you in 137 00:08:54,440 --> 00:08:56,800 Speaker 1: fifteen seconds do you want to agree with Peter or 138 00:08:56,840 --> 00:09:01,280 Speaker 1: contradict him? No, I agree. These are usually the arguments 139 00:09:01,320 --> 00:09:04,520 Speaker 1: that the defense makes. I wouldn't say routinely, but it's 140 00:09:04,559 --> 00:09:07,679 Speaker 1: not unusual. This is one of the closer calls, and 141 00:09:07,720 --> 00:09:10,439 Speaker 1: the judge could really go either way here. It's going 142 00:09:10,440 --> 00:09:12,839 Speaker 1: to be fascinating to see. Thank you both for being 143 00:09:12,880 --> 00:09:16,640 Speaker 1: on Bloomberg Law. That's Robert Mint's a partner mcarter in English, 144 00:09:16,679 --> 00:09:19,800 Speaker 1: and Peter Henning, a professor at Wayne State University.