1 00:00:03,160 --> 00:00:07,920 Speaker 1: This is Bloombird Law with June Brussel from Bloombird Radio. 2 00:00:09,320 --> 00:00:13,640 Speaker 1: The sudden collapse of Arkaegos Capital Management last year sent 3 00:00:13,800 --> 00:00:18,360 Speaker 1: shockwaves through global finance, exposed gaping holes and how major 4 00:00:18,440 --> 00:00:22,320 Speaker 1: banks managed their risks, and how regulators oversea Wall Street, 5 00:00:22,560 --> 00:00:26,480 Speaker 1: Manhattan US attorney Damien Williams says it was a massive 6 00:00:26,560 --> 00:00:30,920 Speaker 1: fraud of vast criminal scheme to mislead banks and manipulate 7 00:00:31,000 --> 00:00:35,800 Speaker 1: the markets that nearly jeopardized our financial system. The lies 8 00:00:36,280 --> 00:00:42,400 Speaker 1: fed the inflation, and the inflation fed more lies. Round 9 00:00:42,440 --> 00:00:46,440 Speaker 1: and round it went. The last year, the music stopped, 10 00:00:47,000 --> 00:00:50,960 Speaker 1: the bubble burst, the prices dropped, and when they did, 11 00:00:51,520 --> 00:00:57,120 Speaker 1: billions of dollars nearly evaporated overnight. Arkaegos founder James Wong 12 00:00:57,240 --> 00:01:00,920 Speaker 1: and its chief financial officer, Patrick Halligan were arrested on 13 00:01:01,000 --> 00:01:06,320 Speaker 1: Wednesday on securities fraud, racketeering and market manipulation charges. Joining 14 00:01:06,360 --> 00:01:08,640 Speaker 1: me is James Park, a professor at u c l 15 00:01:08,680 --> 00:01:11,240 Speaker 1: A Law School. This is being called one of the 16 00:01:11,360 --> 00:01:16,479 Speaker 1: highest profile white color prosecutions in recent memory. Do you agree? 17 00:01:16,720 --> 00:01:21,640 Speaker 1: I agree, simply because of the size of the alleged 18 00:01:21,880 --> 00:01:26,080 Speaker 1: market manipulation, something that I think the extent of which, 19 00:01:26,280 --> 00:01:30,920 Speaker 1: in my mind, seemed unimaginable until it actually happened. And 20 00:01:31,160 --> 00:01:35,280 Speaker 1: it's also a very ambitious case. In my view, market 21 00:01:35,319 --> 00:01:40,959 Speaker 1: manipulation is very difficult to identify and define, and so 22 00:01:41,360 --> 00:01:45,440 Speaker 1: the case in my view, is forging ahead in new 23 00:01:45,480 --> 00:01:50,120 Speaker 1: areas and could not only affect the individual defendants in 24 00:01:50,160 --> 00:01:53,800 Speaker 1: the case, but it could also create lawed expectations for 25 00:01:53,920 --> 00:01:57,360 Speaker 1: the way that creating happens on Wall Street. The U 26 00:01:57,440 --> 00:02:00,960 Speaker 1: S attorney said the scheme was his oric in scope. 27 00:02:01,040 --> 00:02:04,720 Speaker 1: Can you explain what the scheme was? The theory was 28 00:02:04,840 --> 00:02:08,880 Speaker 1: that he was manipulating the prices of stock that he 29 00:02:09,000 --> 00:02:13,640 Speaker 1: was invested in very simply by buying huge amounts of 30 00:02:13,800 --> 00:02:18,240 Speaker 1: stock using his own funds and also critically borrowed money, 31 00:02:18,320 --> 00:02:22,359 Speaker 1: money that was borrowed from various investment banks, and simply 32 00:02:22,360 --> 00:02:25,680 Speaker 1: by buying and buying. He was trying to drive the 33 00:02:25,800 --> 00:02:29,000 Speaker 1: price up. He was buying at certain times the end 34 00:02:29,000 --> 00:02:31,799 Speaker 1: of the trading day, when those trades would have a 35 00:02:31,880 --> 00:02:37,080 Speaker 1: larger impact. They were engaging in transactions before the market opened, 36 00:02:37,160 --> 00:02:40,560 Speaker 1: when there's not a high volume of transactions, and so 37 00:02:41,000 --> 00:02:43,840 Speaker 1: in some ways, the basic scheme is actually fairly simple. 38 00:02:43,880 --> 00:02:47,000 Speaker 1: It's simply supply and demand. You know, the more you 39 00:02:47,080 --> 00:02:50,720 Speaker 1: demand of a particular thing, the higher the price goes, 40 00:02:50,960 --> 00:02:54,480 Speaker 1: and the alleged intent was to increase the price of 41 00:02:54,560 --> 00:02:57,480 Speaker 1: his holding. A second element of the team was that 42 00:02:57,520 --> 00:03:00,480 Speaker 1: in order to get the funds from the investment banks, 43 00:03:00,560 --> 00:03:05,840 Speaker 1: he lied about the condition of his firm. He didn't 44 00:03:05,960 --> 00:03:10,239 Speaker 1: disclose the extent to which he had very large, concentrated 45 00:03:10,320 --> 00:03:13,840 Speaker 1: risky positions in the stocks. I get what his lying 46 00:03:13,880 --> 00:03:17,200 Speaker 1: to the bank was about, but why is it illegal 47 00:03:17,400 --> 00:03:20,079 Speaker 1: to buy a lot of stock to buy it at 48 00:03:20,080 --> 00:03:23,079 Speaker 1: different times of the day, when what's illegal about that? 49 00:03:23,480 --> 00:03:25,600 Speaker 1: It's a very high standard to meet you, and I 50 00:03:25,680 --> 00:03:27,760 Speaker 1: think you've really hit the nail on the head. The 51 00:03:27,840 --> 00:03:32,840 Speaker 1: standard for market manipulation, which was discussed in the criminal 52 00:03:32,919 --> 00:03:35,520 Speaker 1: context about thirty years ago in a case of the 53 00:03:35,560 --> 00:03:39,320 Speaker 1: Second Circuit decided called the Moharan case, basically says the 54 00:03:39,360 --> 00:03:43,840 Speaker 1: sole purpose of the stock purchases has to be manipulation, 55 00:03:44,040 --> 00:03:48,800 Speaker 1: that you are buying the stock prices solely to artificially 56 00:03:48,800 --> 00:03:52,800 Speaker 1: inflaged the stock price, and it's really a question of intent. 57 00:03:53,120 --> 00:03:56,320 Speaker 1: Low is the intent of archegos Hung and the other 58 00:03:56,360 --> 00:04:00,640 Speaker 1: participants in the scheme was the sole intent to artificially 59 00:04:00,640 --> 00:04:03,920 Speaker 1: inflayed the stock price, and I think that's a very 60 00:04:04,120 --> 00:04:07,480 Speaker 1: tough standard to meet, although I think it's very fact 61 00:04:07,560 --> 00:04:10,160 Speaker 1: specific and for the key thing the government has going 62 00:04:10,200 --> 00:04:14,520 Speaker 1: for it maybe the sheer size of the transaction and 63 00:04:14,920 --> 00:04:18,440 Speaker 1: what may be a complete lack of any connection to 64 00:04:18,560 --> 00:04:23,720 Speaker 1: any economic fundamentals or you know, analysis that the stock 65 00:04:24,000 --> 00:04:27,960 Speaker 1: was under priced and so further investment was warranted. But 66 00:04:28,120 --> 00:04:31,520 Speaker 1: it is going to be a challenging legal theory to 67 00:04:32,080 --> 00:04:35,480 Speaker 1: win that trial, and also who knows what the Second 68 00:04:35,480 --> 00:04:38,000 Speaker 1: Circuit will do if the case goes up on appeal. 69 00:04:38,360 --> 00:04:40,520 Speaker 1: On the other hand, this is an area of law 70 00:04:40,680 --> 00:04:44,960 Speaker 1: that has not been developed all that much, and sometimes 71 00:04:45,200 --> 00:04:49,200 Speaker 1: court will adjust the law to some extent based upon 72 00:04:49,200 --> 00:04:52,679 Speaker 1: a particularly egregious set of fact, and so I would 73 00:04:52,680 --> 00:04:56,800 Speaker 1: not rule out the viability of this legal theory. Tell 74 00:04:56,880 --> 00:04:59,640 Speaker 1: us how the law on the Second Circuit might be 75 00:04:59,760 --> 00:05:02,280 Speaker 1: hell helpful to the defense here, I think. I think 76 00:05:02,320 --> 00:05:06,120 Speaker 1: the Moharon case me is the case that the defense 77 00:05:06,120 --> 00:05:10,640 Speaker 1: will most likely site, and in that case, the Second 78 00:05:10,640 --> 00:05:13,560 Speaker 1: Circuit implied that the standard for the manipulation was that 79 00:05:13,640 --> 00:05:16,799 Speaker 1: it has to be the sole purpose of the stock crisis, 80 00:05:17,000 --> 00:05:19,920 Speaker 1: that the manipulation has to be the only reason you're 81 00:05:19,960 --> 00:05:25,239 Speaker 1: making these purchases. And I imagine the defense will argue that, 82 00:05:25,480 --> 00:05:27,880 Speaker 1: you know, they bought the stock because they believed there 83 00:05:27,920 --> 00:05:31,520 Speaker 1: was undervalue, they believed that the stock was worth more, 84 00:05:31,920 --> 00:05:35,760 Speaker 1: and that they were aggressively entering into this position because 85 00:05:35,760 --> 00:05:38,839 Speaker 1: they thought that this would be a good investment, and 86 00:05:38,880 --> 00:05:42,040 Speaker 1: that they weren't artificially, you know, just trying to increase 87 00:05:42,080 --> 00:05:46,640 Speaker 1: the price for some arbitrary reason. Another piece of language 88 00:05:46,640 --> 00:05:48,599 Speaker 1: in that decision that I think will be helpful to 89 00:05:48,640 --> 00:05:51,400 Speaker 1: the defense is that if you lose money on a 90 00:05:51,440 --> 00:05:55,479 Speaker 1: manipulative game, that that can be a fact that weighs 91 00:05:55,560 --> 00:05:59,480 Speaker 1: against the finding of manipulation, and that could be something 92 00:05:59,560 --> 00:06:02,520 Speaker 1: that of defendants would argue would cut against the idea 93 00:06:02,600 --> 00:06:07,039 Speaker 1: that this was a successful manipulation. You said earlier that 94 00:06:07,160 --> 00:06:11,120 Speaker 1: this was almost unimaginable to you. Explain why. I just 95 00:06:11,200 --> 00:06:14,480 Speaker 1: want to highlight this is a really remarkable Hey, Typically 96 00:06:14,480 --> 00:06:17,200 Speaker 1: when we think of security fraud, we think about a 97 00:06:17,279 --> 00:06:22,080 Speaker 1: corporation issuing false statement to inflate the stock price. You know, 98 00:06:22,160 --> 00:06:26,720 Speaker 1: think about Enron twenty years ago issuing false financial statements. 99 00:06:26,839 --> 00:06:31,479 Speaker 1: But now you have investors with family offices that are 100 00:06:31,560 --> 00:06:35,359 Speaker 1: so large and are able to get so much of 101 00:06:35,440 --> 00:06:39,000 Speaker 1: financing through these derivatives, these total return slops where they're 102 00:06:39,080 --> 00:06:42,800 Speaker 1: essentially not even buying the stock, but they're entering into 103 00:06:42,800 --> 00:06:45,880 Speaker 1: a contract with the bank where the bank pays the 104 00:06:45,920 --> 00:06:48,800 Speaker 1: investor if the stock price goes up, the investor pays 105 00:06:48,839 --> 00:06:51,800 Speaker 1: the bank if the stock price goes down. And you know, 106 00:06:51,880 --> 00:06:56,080 Speaker 1: to see a public company stock price manipulated by a 107 00:06:56,160 --> 00:06:59,920 Speaker 1: large investor like this is really really remarkable in the 108 00:07:00,120 --> 00:07:04,440 Speaker 1: history of securities fraud and securities fraud regulation. Also very 109 00:07:04,520 --> 00:07:08,599 Speaker 1: interesting comparison with the game Stop situation about a year ago, 110 00:07:08,720 --> 00:07:11,400 Speaker 1: where you have a whole bunch of small retail investors 111 00:07:11,440 --> 00:07:15,160 Speaker 1: banding together inflating the stock price of game Stop, and 112 00:07:15,400 --> 00:07:19,240 Speaker 1: a MC coordinating through chat boards, and this is a 113 00:07:19,280 --> 00:07:22,120 Speaker 1: little bit more of an elite form of that sort 114 00:07:22,400 --> 00:07:26,440 Speaker 1: of market activity. And I think that it's very interesting 115 00:07:26,560 --> 00:07:30,520 Speaker 1: to be that even public company stocks can be manipulated 116 00:07:30,600 --> 00:07:34,440 Speaker 1: in this way. The conventional understanding before was that, you know, 117 00:07:34,480 --> 00:07:36,800 Speaker 1: with a big public company stock, there's just too many 118 00:07:36,840 --> 00:07:41,000 Speaker 1: shares out there for anyone to effectively manipulate the stock 119 00:07:41,080 --> 00:07:44,080 Speaker 1: prices of those companies. But this shows that that's no 120 00:07:44,160 --> 00:07:47,120 Speaker 1: longer the case, and I think that the SDC will 121 00:07:47,160 --> 00:07:49,880 Speaker 1: have to do some thinking about how we can sat 122 00:07:49,960 --> 00:07:52,920 Speaker 1: prevent these sorts of shots to the system from happening 123 00:07:52,920 --> 00:07:55,080 Speaker 1: in the future. Now, on the other hand, there is 124 00:07:55,120 --> 00:07:57,920 Speaker 1: the language Mohar that may be somewhat useful to the 125 00:07:57,960 --> 00:08:02,360 Speaker 1: government's case. And you know, the full purpose standard was 126 00:08:02,600 --> 00:08:05,240 Speaker 1: used in deciding that case, but there is some language 127 00:08:05,280 --> 00:08:09,880 Speaker 1: in the second circuit indicating that it's not clear that 128 00:08:09,880 --> 00:08:13,600 Speaker 1: that is the standard for determining whether there's manipulation um, 129 00:08:13,640 --> 00:08:16,720 Speaker 1: and so we'll have to see how that law is 130 00:08:16,760 --> 00:08:20,760 Speaker 1: interpreted by the judges in this case. The collapse put 131 00:08:20,760 --> 00:08:25,400 Speaker 1: a spotlight on large family offices. What do you think 132 00:08:25,440 --> 00:08:28,280 Speaker 1: should be done about large family offices? Should they be 133 00:08:28,360 --> 00:08:31,040 Speaker 1: held to different standards than they are now. I think 134 00:08:31,120 --> 00:08:35,840 Speaker 1: some level of disclosure would be prudent for family offices 135 00:08:35,920 --> 00:08:40,160 Speaker 1: over a certain size. And I think the assumption behind 136 00:08:40,200 --> 00:08:45,360 Speaker 1: the current framework which exempts family offices from a disclosure 137 00:08:45,640 --> 00:08:48,400 Speaker 1: to the SEC is the assumption that they're not going 138 00:08:48,440 --> 00:08:52,040 Speaker 1: to be able to impact market stability. They're not a 139 00:08:52,080 --> 00:08:55,559 Speaker 1: systemic risk to the market. But this shows that they 140 00:08:55,559 --> 00:08:57,800 Speaker 1: can be large enough so that they can have such 141 00:08:57,840 --> 00:09:00,320 Speaker 1: an impact and the SEC has been moved being in 142 00:09:00,320 --> 00:09:06,800 Speaker 1: the direction of requiring disclosure of investment companies investment advisors 143 00:09:07,000 --> 00:09:11,480 Speaker 1: in order to monitor better their potential impact on markets, 144 00:09:11,480 --> 00:09:14,640 Speaker 1: and to the extent that hedge funds and private equity 145 00:09:14,679 --> 00:09:18,559 Speaker 1: funds are going to be required to disclose information about 146 00:09:18,600 --> 00:09:22,480 Speaker 1: their losses to the SEC so that the SEC can 147 00:09:22,520 --> 00:09:26,880 Speaker 1: evaluate market risk. I don't see any reason why family 148 00:09:26,960 --> 00:09:31,840 Speaker 1: offices of a certain size should be exempt from those requirements. 149 00:09:32,320 --> 00:09:36,320 Speaker 1: The U. S. Attorney's Office is now gathering evidence around 150 00:09:36,320 --> 00:09:40,800 Speaker 1: whether or not thanks engaged in illegal activities here, particularly 151 00:09:40,840 --> 00:09:44,120 Speaker 1: whether some market participants were getting tipped off ahead of time. 152 00:09:44,480 --> 00:09:47,200 Speaker 1: Would that also be a really difficult case to prove. 153 00:09:47,679 --> 00:09:51,200 Speaker 1: I think if they find the evidence, and you know, 154 00:09:51,320 --> 00:09:53,600 Speaker 1: I think the question to some extent is to what 155 00:09:53,720 --> 00:09:57,560 Speaker 1: extent will some of these defendants agree to cooperate. That 156 00:09:57,760 --> 00:10:01,240 Speaker 1: is something that could come into the a Asian And 157 00:10:01,480 --> 00:10:04,000 Speaker 1: you know, I think they'll have access to their records, 158 00:10:04,000 --> 00:10:07,439 Speaker 1: their documents, so they'll be able to look at various communications. 159 00:10:07,440 --> 00:10:10,400 Speaker 1: But I would suspect to the accept their worth such agreement. 160 00:10:11,080 --> 00:10:13,960 Speaker 1: They may not be memorialized. I think that some of 161 00:10:14,040 --> 00:10:17,280 Speaker 1: these participants are becoming more savvy about the potential for 162 00:10:17,440 --> 00:10:20,280 Speaker 1: government regulations, So I think it will be difficult. But 163 00:10:20,320 --> 00:10:23,319 Speaker 1: if they find the evidence, you think that very clearly 164 00:10:23,360 --> 00:10:28,000 Speaker 1: would be illegal, and certainly this could result in more cases. 165 00:10:28,720 --> 00:10:32,400 Speaker 1: You said earlier that this was almost unimaginable to you. 166 00:10:32,640 --> 00:10:35,240 Speaker 1: Explain why. I just want to highlight this is a 167 00:10:35,280 --> 00:10:39,079 Speaker 1: really remarkable Hey. Typically when we think of security fraud, 168 00:10:39,160 --> 00:10:43,960 Speaker 1: we think about a corporation issuing false statements to inflate 169 00:10:44,040 --> 00:10:47,319 Speaker 1: the stock price. You know, think about Enron twenty years 170 00:10:47,320 --> 00:10:52,359 Speaker 1: ago issuing false financial statements. But now you have investors 171 00:10:52,559 --> 00:10:56,640 Speaker 1: with family offices that are so large and are able 172 00:10:56,720 --> 00:11:00,120 Speaker 1: to get so much of financing through these drive is 173 00:11:00,240 --> 00:11:03,840 Speaker 1: these total return slops where they're essentially not even buying 174 00:11:03,840 --> 00:11:06,840 Speaker 1: the stock, but they're entering into a contract with the 175 00:11:06,880 --> 00:11:09,959 Speaker 1: bank where the bank pays the investor if the stock 176 00:11:10,000 --> 00:11:12,439 Speaker 1: price goes up, the investor pays the bank if the 177 00:11:12,480 --> 00:11:15,720 Speaker 1: stock price goes down. And you know, to see a 178 00:11:15,880 --> 00:11:20,560 Speaker 1: public company stock price manipulated by a large investor like 179 00:11:20,800 --> 00:11:24,199 Speaker 1: this is really really remarkable in the history of securities 180 00:11:24,240 --> 00:11:29,160 Speaker 1: fraud and securities fraud regulation. Also very interesting comparison with 181 00:11:29,240 --> 00:11:32,080 Speaker 1: the game Stop situation about a year ago, where you 182 00:11:32,080 --> 00:11:35,319 Speaker 1: have a whole bunch of small retail investors banning together 183 00:11:35,640 --> 00:11:38,920 Speaker 1: inflating the stock price of game Stop, and a MC 184 00:11:39,600 --> 00:11:42,960 Speaker 1: coordinating through chatboards. And this is a little bit more 185 00:11:42,960 --> 00:11:46,920 Speaker 1: of an elite form of that sort of market activity. 186 00:11:47,120 --> 00:11:50,680 Speaker 1: And I think that it's very interesting to see that 187 00:11:50,880 --> 00:11:54,280 Speaker 1: even public company stocks can be manipulated in this way. 188 00:11:54,360 --> 00:11:57,520 Speaker 1: The conventional like understanding before was that you know, with 189 00:11:57,640 --> 00:12:00,360 Speaker 1: a big public company stock, there's just too many airs 190 00:12:00,440 --> 00:12:04,480 Speaker 1: out there for anyone to effectively manipulate the stock prices 191 00:12:04,520 --> 00:12:07,520 Speaker 1: of those companies. But this shows that that's no longer 192 00:12:07,600 --> 00:12:10,280 Speaker 1: the case, and I think that the SBC will have 193 00:12:10,400 --> 00:12:13,320 Speaker 1: to do some thinking about how we can best prevent 194 00:12:13,440 --> 00:12:16,000 Speaker 1: the sources of shocks to the system from happening in 195 00:12:16,040 --> 00:12:19,840 Speaker 1: the future. Thanks James. That's Professor James Park of u 196 00:12:19,840 --> 00:12:24,560 Speaker 1: c l A Law School. A divided Supreme Court allowed 197 00:12:24,559 --> 00:12:28,280 Speaker 1: a selective Northern Virginia public high school to keep using 198 00:12:28,320 --> 00:12:32,600 Speaker 1: an admissions policy adopted to add more racial and socioeconomic 199 00:12:32,679 --> 00:12:36,320 Speaker 1: diversity to its student body. The Justice is refused to 200 00:12:36,320 --> 00:12:40,800 Speaker 1: block Thomas Jefferson High School's euro policy, which a community 201 00:12:40,800 --> 00:12:45,040 Speaker 1: group challenged as discriminating against Asian American applicants, but the 202 00:12:45,080 --> 00:12:49,000 Speaker 1: Fairfax County school Board said it's using race neutral methods 203 00:12:49,040 --> 00:12:53,280 Speaker 1: to foster diversity, something the Supreme Court had previously indicated 204 00:12:53,360 --> 00:12:57,280 Speaker 1: was constitutional. A federal judge had blocked the policy for 205 00:12:57,320 --> 00:13:00,560 Speaker 1: the current admissions cycle, but a federal appeals court put 206 00:13:00,600 --> 00:13:02,960 Speaker 1: that ruling on hold by a two to one vote. 207 00:13:03,400 --> 00:13:06,960 Speaker 1: The case tests what steps schools and universities can take 208 00:13:07,080 --> 00:13:10,920 Speaker 1: to ensure racial diversity in their classrooms. Joining me is 209 00:13:10,920 --> 00:13:15,680 Speaker 1: Audrey Anderson, who heads the higher education practice at Bassbarian Sims. 210 00:13:16,200 --> 00:13:19,640 Speaker 1: The school board says it's using race neutral methods to 211 00:13:19,800 --> 00:13:23,920 Speaker 1: foster diversity. Can you describe those methods, Audrey. So the 212 00:13:24,000 --> 00:13:28,000 Speaker 1: way they are choosing students for this school is completely 213 00:13:28,120 --> 00:13:31,679 Speaker 1: race neutral. When the applicants are being considered, there is 214 00:13:31,720 --> 00:13:36,040 Speaker 1: no indication of their name, their gender, or their race 215 00:13:36,080 --> 00:13:41,120 Speaker 1: on the applications. Everybody is given an application number and 216 00:13:41,160 --> 00:13:46,400 Speaker 1: that's how they are considered. So then they also take 217 00:13:46,600 --> 00:13:52,160 Speaker 1: a certain percentage from every middle school that is within 218 00:13:52,200 --> 00:13:56,200 Speaker 1: the area that this high school covers, but that's all 219 00:13:56,360 --> 00:14:00,360 Speaker 1: race neutral as well. So the way they're choosing students 220 00:14:00,440 --> 00:14:04,880 Speaker 1: is completely race neutral. The reason why um the lower court, 221 00:14:04,880 --> 00:14:08,760 Speaker 1: the district court here found that that on its face 222 00:14:09,040 --> 00:14:13,680 Speaker 1: race neutral admissions program violated the Constitution. Was because the 223 00:14:13,720 --> 00:14:18,040 Speaker 1: court found that, compared to the admissions program they had before, 224 00:14:18,760 --> 00:14:23,000 Speaker 1: their new admissions program had a disparate impact on Asian 225 00:14:23,160 --> 00:14:27,520 Speaker 1: American students. And the court also found that the school 226 00:14:27,520 --> 00:14:31,960 Speaker 1: boards whole process was the word he used, was infected 227 00:14:32,440 --> 00:14:38,000 Speaker 1: with racial balancing, which the district court found is unconstitutional. 228 00:14:38,440 --> 00:14:40,320 Speaker 1: So we said, even though it is the race neutral 229 00:14:40,320 --> 00:14:44,480 Speaker 1: on its face, the school board had an unlawful intent 230 00:14:45,040 --> 00:14:48,960 Speaker 1: to harm a particular racial group and their plan indeed 231 00:14:49,200 --> 00:14:53,320 Speaker 1: has a disparate impact on Asian Americans if it's race 232 00:14:53,400 --> 00:14:58,200 Speaker 1: neutral on its face. Due courts usually dig into the 233 00:14:58,320 --> 00:15:02,560 Speaker 1: intent or this is expected intent, Well, they they do 234 00:15:02,640 --> 00:15:06,040 Speaker 1: the on its face, the law the district court applied 235 00:15:06,800 --> 00:15:10,280 Speaker 1: is the appropriate law, and the school board doesn't argue 236 00:15:10,280 --> 00:15:13,200 Speaker 1: with the legal tests. What the school board argues with 237 00:15:13,360 --> 00:15:16,920 Speaker 1: is that the district court got the facts wrong, um, 238 00:15:17,080 --> 00:15:20,640 Speaker 1: And they said that when you look at the facts, uh, 239 00:15:20,640 --> 00:15:26,080 Speaker 1: there was no intent to harm any particular racial group. 240 00:15:26,640 --> 00:15:30,360 Speaker 1: What the school board says they were trying to do, 241 00:15:30,480 --> 00:15:32,800 Speaker 1: and they say, all the findings that you can make 242 00:15:33,360 --> 00:15:36,080 Speaker 1: is that the school board was trying to gain a 243 00:15:36,160 --> 00:15:42,960 Speaker 1: more diverse student body in the school, measured by geography, 244 00:15:43,120 --> 00:15:48,200 Speaker 1: measured by English language learner status, measured by socio economic background, 245 00:15:48,480 --> 00:15:52,200 Speaker 1: and measured by race. And so there there are um 246 00:15:52,360 --> 00:15:56,040 Speaker 1: statements in the record that show that the school board 247 00:15:56,160 --> 00:15:59,520 Speaker 1: was paying attention to race and how they could get 248 00:15:59,560 --> 00:16:03,480 Speaker 1: greater racial diversity. But they say that's not the same 249 00:16:03,520 --> 00:16:05,840 Speaker 1: thing as saying that the school board had an intent 250 00:16:06,120 --> 00:16:09,120 Speaker 1: to harm any particular racial group or to have an 251 00:16:09,160 --> 00:16:13,840 Speaker 1: adverse impact on any particular racial group. The group challenging this, 252 00:16:14,640 --> 00:16:16,880 Speaker 1: what is it they want? Do they want the school 253 00:16:17,040 --> 00:16:21,800 Speaker 1: just to admit students based on their tests, on their 254 00:16:21,880 --> 00:16:24,120 Speaker 1: g p A. How do they want the school to 255 00:16:24,200 --> 00:16:28,320 Speaker 1: admit students? Well, they don't want the They don't want 256 00:16:28,360 --> 00:16:32,880 Speaker 1: the admissions program that the school board enacted. How exactly 257 00:16:32,880 --> 00:16:36,640 Speaker 1: they want it changed is not clear from the court 258 00:16:36,720 --> 00:16:39,480 Speaker 1: record that I have seen. I don't know if they 259 00:16:39,480 --> 00:16:43,080 Speaker 1: are asking to go back to the process exactly how 260 00:16:43,120 --> 00:16:46,080 Speaker 1: it was before. I think that from the papers, what 261 00:16:46,120 --> 00:16:48,040 Speaker 1: they're saying is they want the school board to come 262 00:16:48,120 --> 00:16:52,040 Speaker 1: up with some other process that is constitutional, and to 263 00:16:52,160 --> 00:16:55,640 Speaker 1: do that in the matter of weeks and make the 264 00:16:55,680 --> 00:16:58,960 Speaker 1: new choices in a way that does not harm um 265 00:16:59,040 --> 00:17:02,040 Speaker 1: Asian Americans to the same extent, or that actually does 266 00:17:02,080 --> 00:17:05,600 Speaker 1: not harm them at all. The Supreme Court turned this away. 267 00:17:05,920 --> 00:17:09,840 Speaker 1: It was on what's called the shadow docket, an emergency request. 268 00:17:10,680 --> 00:17:13,440 Speaker 1: Did it say anything about the issue itself or could 269 00:17:13,440 --> 00:17:16,040 Speaker 1: it just have turned it away because they'd argued that 270 00:17:16,080 --> 00:17:19,960 Speaker 1: it was you know, it was too late to make changes, right. 271 00:17:20,040 --> 00:17:23,159 Speaker 1: So what happened after the district court found that the 272 00:17:23,240 --> 00:17:28,080 Speaker 1: plan was unconstitutional and the district court actually enjoined the 273 00:17:28,119 --> 00:17:31,240 Speaker 1: school board from using that admissions plan, then the school 274 00:17:31,240 --> 00:17:33,040 Speaker 1: board went to the Court of Appeals and the Court 275 00:17:33,040 --> 00:17:35,359 Speaker 1: of Appeals said, you know, hey, it's going to be 276 00:17:35,400 --> 00:17:37,119 Speaker 1: way too hard for the school board to put a 277 00:17:37,119 --> 00:17:39,760 Speaker 1: new plan in place in this amount of time. But 278 00:17:39,960 --> 00:17:42,480 Speaker 1: the judges on the Court of Appeals for the Fourth 279 00:17:42,480 --> 00:17:45,159 Speaker 1: Circuit also said, you know, we think that the district 280 00:17:45,160 --> 00:17:48,879 Speaker 1: court might have gotten this wrong. Disrecourt shouldn't have given 281 00:17:49,000 --> 00:17:53,760 Speaker 1: summary judgment. There are there are disputed facts here, um, 282 00:17:53,800 --> 00:17:55,320 Speaker 1: and they may have cut The distrec Court might have 283 00:17:55,359 --> 00:17:58,680 Speaker 1: come to the wrong factual conclusions as to disparate impact 284 00:17:58,800 --> 00:18:02,560 Speaker 1: and the school board it's intent. So we're going to 285 00:18:03,400 --> 00:18:06,359 Speaker 1: um put a stay on the injunction. So then it 286 00:18:06,400 --> 00:18:10,639 Speaker 1: went to the Supreme Court and the student group is 287 00:18:10,680 --> 00:18:14,840 Speaker 1: now saying, please vacate the stay, so we have an 288 00:18:14,840 --> 00:18:17,400 Speaker 1: injunction again so the old so that the new plan 289 00:18:17,480 --> 00:18:20,359 Speaker 1: won't go into effect. So on the one hand, it 290 00:18:20,400 --> 00:18:22,840 Speaker 1: doesn't say anything at all, because there is a very 291 00:18:22,960 --> 00:18:27,000 Speaker 1: high standard, at least on paper, for the Supreme Court 292 00:18:27,119 --> 00:18:31,720 Speaker 1: to reach down and and say, you know, we are 293 00:18:31,800 --> 00:18:36,240 Speaker 1: going to um with no real briefing, with no real argument, 294 00:18:36,520 --> 00:18:39,600 Speaker 1: We're going to undo what the Court of Appeals has done. 295 00:18:40,200 --> 00:18:42,760 Speaker 1: It's a very high standard. One of the things that 296 00:18:42,840 --> 00:18:46,359 Speaker 1: some lawyers are complaining about or raising some concerns about, 297 00:18:46,440 --> 00:18:49,000 Speaker 1: is that over the last you know, two or three 298 00:18:49,119 --> 00:18:52,119 Speaker 1: years or maybe five years, the court seems to have 299 00:18:52,640 --> 00:18:55,920 Speaker 1: in practice loosen that standard, even though on paper it's 300 00:18:55,960 --> 00:18:59,040 Speaker 1: the same. So on the one hand, you say, there's 301 00:18:59,080 --> 00:19:01,320 Speaker 1: nothing to be learned about here. They didn't meet the 302 00:19:01,400 --> 00:19:04,399 Speaker 1: very high standard. But the thing that is a little 303 00:19:04,400 --> 00:19:08,040 Speaker 1: more concerning is that there were three justices who dissented 304 00:19:08,560 --> 00:19:12,719 Speaker 1: from that decision. There's nothing written, so there's no opinion written, 305 00:19:13,720 --> 00:19:18,320 Speaker 1: but Justice Thomas, Justice Alito, and Justice Corsus would have 306 00:19:18,359 --> 00:19:22,240 Speaker 1: granted the application to vacate the stay, which means that 307 00:19:22,400 --> 00:19:26,840 Speaker 1: from their perspective, they think that the Court would take 308 00:19:26,960 --> 00:19:31,080 Speaker 1: this case to review it, that there is irreparable harm 309 00:19:31,280 --> 00:19:36,200 Speaker 1: being visited on these Asian American students by the new plan, 310 00:19:37,280 --> 00:19:42,080 Speaker 1: and that there's a likelihood success for the Asian American students. 311 00:19:42,080 --> 00:19:45,639 Speaker 1: So they've already got three votes um at the Supreme Court. 312 00:19:45,840 --> 00:19:48,760 Speaker 1: If they can get the case there or likely do, 313 00:19:49,240 --> 00:19:51,359 Speaker 1: the Supreme Court would say, well, this is you know, 314 00:19:51,440 --> 00:19:54,840 Speaker 1: a preliminary vote on something like this doesn't tell you 315 00:19:54,920 --> 00:19:57,320 Speaker 1: exactly how will vote at the end of the day, 316 00:19:57,359 --> 00:20:00,479 Speaker 1: but it usually does, so that's the most eesting thing. 317 00:20:00,520 --> 00:20:02,800 Speaker 1: They've got three votes now if they were to make 318 00:20:02,840 --> 00:20:05,439 Speaker 1: it to the Supreme Court. But isn't it surprising that 319 00:20:05,520 --> 00:20:08,760 Speaker 1: they don't have the Chief Justice? No, I don't think 320 00:20:08,760 --> 00:20:10,960 Speaker 1: it's surprising at all, June that they don't have the 321 00:20:11,040 --> 00:20:15,040 Speaker 1: Chief Justice on this, because the Chief has been more 322 00:20:15,680 --> 00:20:19,359 Speaker 1: likely to stick to the court real test of we 323 00:20:19,440 --> 00:20:23,960 Speaker 1: are not going to give emergency relief on a case 324 00:20:24,200 --> 00:20:27,600 Speaker 1: unless they meet this very high standard. And having to 325 00:20:27,640 --> 00:20:31,400 Speaker 1: make the school district change their admissions policy in such 326 00:20:31,400 --> 00:20:34,520 Speaker 1: a very short period of time, I think is something 327 00:20:34,560 --> 00:20:37,600 Speaker 1: that would usually, you know, weigh against doing that. In 328 00:20:37,640 --> 00:20:40,639 Speaker 1: a situation like this, So that's not a huge surprise. 329 00:20:41,000 --> 00:20:44,320 Speaker 1: We've talked before about the what's coming next term at 330 00:20:44,359 --> 00:20:48,600 Speaker 1: the Supreme Court, this showdown over affirmative action, if you will, 331 00:20:48,920 --> 00:20:52,959 Speaker 1: in cases involving Harvard College and the University of North Carolina. 332 00:20:53,480 --> 00:20:57,080 Speaker 1: Is this different because those programs explicitly take account of 333 00:20:57,200 --> 00:21:01,160 Speaker 1: race as one factor among many, where as this high 334 00:21:01,200 --> 00:21:06,879 Speaker 1: school program uses race neutral criteria. So is it different, Yes, Junior, right, 335 00:21:06,960 --> 00:21:09,200 Speaker 1: it's different because of that. And the Supreme Court, though, 336 00:21:09,240 --> 00:21:13,080 Speaker 1: has already dated out that things are different at K 337 00:21:13,280 --> 00:21:18,600 Speaker 1: twelve schools rather than at schools of higher education. So 338 00:21:19,080 --> 00:21:22,600 Speaker 1: whereas the Court has clearly held in the precedent that's 339 00:21:22,640 --> 00:21:27,439 Speaker 1: being challenged this coming term that colleges and universities do 340 00:21:27,560 --> 00:21:32,840 Speaker 1: have a compelling interest in a diverse student enrollments and 341 00:21:33,200 --> 00:21:37,720 Speaker 1: that they may use race conscious measures to forward those 342 00:21:37,800 --> 00:21:41,320 Speaker 1: means as long as they're narrowly tailored, there's not really 343 00:21:41,359 --> 00:21:45,000 Speaker 1: a holding from the Supreme Court for K twelve institutions 344 00:21:45,040 --> 00:21:49,160 Speaker 1: the same way. And that's from a case from two 345 00:21:49,200 --> 00:21:53,879 Speaker 1: thousand and six called Parents Involved in Community Schools versus Seattle, 346 00:21:54,640 --> 00:21:57,840 Speaker 1: And that's that's the case that the lawyers who are 347 00:21:57,880 --> 00:22:02,160 Speaker 1: representing the plainists in this Thomas Jefferson High School case. 348 00:22:02,200 --> 00:22:06,960 Speaker 1: Specific Legal Foundation, the Pacific Legal Foundation is very interested 349 00:22:07,160 --> 00:22:12,159 Speaker 1: in efforts to create more racially diverse student enrollments in 350 00:22:12,320 --> 00:22:16,359 Speaker 1: K twelve schools, so they are on the lookout for 351 00:22:16,480 --> 00:22:23,000 Speaker 1: cases that they can support to further their efforts in 352 00:22:23,520 --> 00:22:27,720 Speaker 1: what they believe are improper uses of race. Even when 353 00:22:27,760 --> 00:22:30,960 Speaker 1: the school boards say this is race neutral, we're not 354 00:22:31,119 --> 00:22:33,880 Speaker 1: using race at all, as in this case, the Specific 355 00:22:34,000 --> 00:22:37,400 Speaker 1: Legal Foundation will sometimes say, oh, but these other things 356 00:22:37,400 --> 00:22:40,720 Speaker 1: you're doing our our pretext for using race. And in fact, 357 00:22:41,200 --> 00:22:43,800 Speaker 1: when the parents involved in the Community Schools case was 358 00:22:44,119 --> 00:22:48,040 Speaker 1: argued on the Pacific Legal Foundation and other amiki, we're 359 00:22:48,119 --> 00:22:52,359 Speaker 1: trying to push the court to not only say that 360 00:22:52,520 --> 00:22:55,040 Speaker 1: school boards can't use race conscious measures, they were also 361 00:22:55,080 --> 00:22:56,840 Speaker 1: trying to get the court to go so far as 362 00:22:56,920 --> 00:23:00,439 Speaker 1: to say that any time that a school to strict 363 00:23:00,880 --> 00:23:05,320 Speaker 1: talks about the racial components of their school, talks about 364 00:23:05,440 --> 00:23:09,720 Speaker 1: trying to take any race neutral steps to create a 365 00:23:09,760 --> 00:23:14,960 Speaker 1: greater diversity in a school, that that was unconstitutional because 366 00:23:15,000 --> 00:23:17,959 Speaker 1: the Constitution is supposed to be color blind, and so 367 00:23:18,080 --> 00:23:21,000 Speaker 1: governmental actors should not be talking about race at all. 368 00:23:21,400 --> 00:23:23,480 Speaker 1: So I see that this is kind of a step 369 00:23:23,560 --> 00:23:27,960 Speaker 1: towards them maybe trying to cement that idea as law. 370 00:23:28,600 --> 00:23:31,960 Speaker 1: Thanks for your insights, Audrey. That's Audrey Anderson, who heads 371 00:23:31,960 --> 00:23:36,080 Speaker 1: the higher education practice at Basparian SIMS. I'm June Grosso 372 00:23:36,200 --> 00:23:37,639 Speaker 1: and you're listening to Bloomberg.