Speaker 1: You're listening to Bloomberg Law. I'm June Grasso with Michael Best.
Speaker 1: Las Vegas gambler Billy Walters is betting that a judge
Speaker 1: will dismiss insider trading charges against him. Walters, who's accused
Speaker 1: of making forty three million dollars by trading on leaks
Speaker 1: from an insider, now wants his case toss because of
Speaker 1: leaks from an FBI agent. In announcing Walter's indictment in May,
Speaker 1: Manhattan U S Attorney Pret Berrara described a brazen scheme
Speaker 1: involving corporate intrigue, gambling debts, and secret codes where the
Speaker 1: former chairman of Dean Foods gave illegal stock tips to Walters.
Speaker 1: When the board member of a fortune company feeds inside
Speaker 1: information to a professional gambler who makes a killing on
Speaker 1: well time trades in that very company stock, that is
Speaker 1: a form of corruption, corruption of our markets. The government's
Speaker 1: case is now in jeopardy because an FBI agent leaked
Speaker 1: details to the press about the confidential investigation of Walters
Speaker 1: and golf star Phil Mickelson, who paid back almost a
Speaker 1: million dollars from stock trades. Walter says the FBI violated
Speaker 1: his rights with leaks designed to revive an investigation that
Speaker 1: had stalled. My guests are former federal prosecutor Robert Mints,
Speaker 1: a partner McCarter in English, and Peter Henning, professor at
Speaker 1: Wayne State University. Bob the FBI agent David Chavez has
Speaker 1: hired his own attorney as the case against him is investigated.
Speaker 1: Tell us what he admitted he did and why. Short June,
Speaker 1: according to the United States Attorney's Office that was ordered
Speaker 1: by the judge to conduct an investigation into these leaking allegations,
Speaker 1: this veteran FBI supervisor admitted to leaking information about this
Speaker 1: insider trading investigation to reporters at both the Wall Street
Speaker 1: Journal and The New York Times, and the defense has alleged,
Speaker 1: as the basis for their motion to dispiss this indictment,
Speaker 1: that these leaks were strategically timed and strategically released in
Speaker 1: order to try to influence the investigation and ultimately generate
Speaker 1: evidence that, but for the leaks, would never have been
Speaker 1: available to the government. Well, so Billy Walters is now
Speaker 1: Peter trying to get the case dismissed because of these leaks.
Speaker 1: Is there a legal basis for doing that? Well, he's
Speaker 1: got two grounds to do with. The first ground is
Speaker 1: that the conduct by the agent, which the defense is
Speaker 1: claiming as a violation of the Gran Jury secrecy rule
Speaker 1: and perhaps even a couple of other statutes, that that
Speaker 1: generated evidence that the government got impermissibly and therefore that
Speaker 1: violated Walter's rights, that it violated the Green jury clause
Speaker 1: because the violations by the agent um ended up influencing
Speaker 1: the grand jury's decision. The other is a broader claim
Speaker 1: of outrageous government conduct that, in effect, the Justice Department,
Speaker 1: both the prosecutors, and the FBI ought to be punished,
Speaker 1: if you will, for this type of improper action. That
Speaker 1: a defendant shouldn't be put on trial when the government
Speaker 1: violates the law itself. And so those are the two grounds.
Speaker 1: It's not an easy argument to make, but that's the
Speaker 1: basis on which he's trying to get these charges dismissed. Bob.
Speaker 1: The defense motion papers say the misconduct here is significantly
Speaker 1: more flagrant, far ranging, and insidious than it expected. Is
Speaker 1: this level of conduct unprecedented? How would you describe it? Well,
Speaker 1: I wouldn't say it's unprecedented, but I would agree that
Speaker 1: it is highly unusual. In this case, the FBI agent
Speaker 1: has admitted to leaking information to these reporters on numerous occasions.
Speaker 1: He claims that the investigation was dormant at the time
Speaker 1: and that's why he gave them the information. But the
Speaker 1: defense has argued that that is precisely the problem, that
Speaker 1: the investigation was going nowhere, and so the agent strategically
Speaker 1: leaked this information in order to try to generate new evidence.
Speaker 1: And they argue that there was a couple of things
Speaker 1: going on, Uh, We're behind this inappropriate leaking of information.
Speaker 1: One was that they had a wire tap going and
Speaker 1: they were hoping that by leaking this information to the
Speaker 1: public that people who were under investigation might discuss their
Speaker 1: criminal conduct on this wire tap. But probably their better
Speaker 1: argument is that one of the individuals he was under investigation, um,
Speaker 1: the former president of Dean Foods UM, as a result
Speaker 1: of this information coming out, took a cell phone that
Speaker 1: allegedly had information that would have implicated him UH and
Speaker 1: Billy Walters and threw that into a stream behind his
Speaker 1: house and destroyed evidence. Once he destroyed that evidence, according
Speaker 1: to the defense, he had obstructed justice, and prosecutors used
Speaker 1: that as leverage to ultimately get him to recant his
Speaker 1: statements that he was innocent, to come back and agree
Speaker 1: to cooperate with the government and now become the key
Speaker 1: witness against the defense is client in this case. Well, Peter,
Speaker 1: there's also some indication, isn't there that the higher ups
Speaker 1: in the Justice Department we're trying to prevent the league
Speaker 1: from happening or take some disciplinary action about the league,
Speaker 1: and might that be some mitigating factor here in the
Speaker 1: judges mind. Well, certainly that's what the Justice Department is
Speaker 1: going to argue that there's no reason to dismiss the charges.
Speaker 1: In other words, give Walters a free pass for conduct
Speaker 1: that may well have constituted insider trading. He shouldn't get
Speaker 1: the charges dismissed. Instead, the Justice Department should be allowed
Speaker 1: to pursue the proper remedy, which is to discipline shab
Speaker 1: As and perhaps even pursue a criminal case against him.
Speaker 1: He could be charged with contemptive court, perhaps even obstruction
Speaker 1: of justice. What the Justice Department wants is essentially to say,
Speaker 1: these are two separate cases and um as bad as
Speaker 1: what Chavez did, that doesn't impact the government's case and
Speaker 1: the evidence of insider trading against Walters. So I expect
Speaker 1: that will be the road the Justice Department goes down
Speaker 1: when it files its brief in the next week or two, Bob.
Speaker 1: Does the defendant have to show that the government's misconduct
Speaker 1: affected the case against him in some way or is
Speaker 1: the misconduct itself considered enough? Well? The defense here makes
Speaker 1: essentially three different arguments. Under the leading Supreme Court case
Speaker 1: of Bank of Nova Scotia, the government the defense would
Speaker 1: have to show either that the misconduct substantially influenced the
Speaker 1: grand jury's decision to return an indictment, which is one
Speaker 1: of their better arguments here. They also to argue that
Speaker 1: they're the history of prosecutorial misconduct here, in that they
Speaker 1: alleged that this particular FBI agent likely leaked information in
Speaker 1: a series of other cases, although their evidence on that
Speaker 1: is more speculative. And finally, they make the argument um
Speaker 1: that the government's conduct here was just so outrageous that
Speaker 1: it shocks the conscience and should be dismissed on those grounds.
Speaker 1: But that's an exceedingly hard argument to make, and the
Speaker 1: one case where the government um failed to prevail on that,
Speaker 1: where the indictment was in fact dismissed, is one where
Speaker 1: an agent, for example, UH engage in sexual relations with
Speaker 1: the defendant in order to gather evidence. And that's the
Speaker 1: case where the court just said that the government just
Speaker 1: went too far to gather evidence and dismiss the indictment here.
Speaker 1: I think their best argument is that they somehow allowed
Speaker 1: the government by leaking information to gather this information about
Speaker 1: this key cooperating witness who, as a result of the
Speaker 1: leaked information, allegedly destroyed that cell phone, and the government
Speaker 1: then used that as leverage to try to gain his cooperation.
Speaker 1: The government's could argue that this defendant had plenty of
Speaker 1: other reasons to try to cooperate, that the weight of
Speaker 1: the evidence that was overwhelming, his cooperation was based on
Speaker 1: a series of factors, and that the fact that he
Speaker 1: destroyed his cell phone may have been only one of them. Peter,
Speaker 1: we only have about thirty seconds. But what do you
Speaker 1: think the judge is going to do? Well? This is
Speaker 1: one tough call. Judge Castle is not happy and in
Speaker 1: fact invited the defense to file emotion to dismiss and
Speaker 1: so um I mean I I think the judge is
Speaker 1: going to give this very serious consideration. Um, if he
Speaker 1: does dismiss, I could certainly see the Justice Department appealing
Speaker 1: it to the Second Circuit, and so this is going
Speaker 1: to be a very close call. Bob, do you in
Speaker 1: fifteen seconds do you want to agree with Peter or
Speaker 1: contradict him? No, I agree. These are usually the arguments
Speaker 1: that the defense makes. I wouldn't say routinely, but it's
Speaker 1: not unusual. This is one of the closer calls, and
Speaker 1: the judge could really go either way here. It's going
Speaker 1: to be fascinating to see. Thank you both for being
Speaker 1: on Bloomberg Law. That's Robert Mint's a partner mcarter in English,
Speaker 1: and Peter Henning, a professor at Wayne State University.