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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: We're gonna start with a friend of Harris who's going

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Speaker 1: to have some idea where the French art has been hidden.

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Speaker 1: How can I hope who was still stolen? Not the

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Speaker 1: Nazis are taken everything with him. So we have to

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Speaker 1: get as close to the front as we can. Look

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Speaker 1: at this. That says if Hitler dies or if Germany falls,

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Speaker 1: there to destroy everything everything. Toward the end of World

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Speaker 1: War Two, an army unit nicknamed the monuments Men race

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Speaker 1: to track down and recover priceless artwork stolen by the

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Speaker 1: Nazis before it could be destroyed or moved. The movie

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Speaker 1: aptlete titled The monuments Men, is based on their recovery

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Speaker 1: of more than five million works of art. It may

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Speaker 1: not be as dramatic as going into a war zone,

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Speaker 1: but today federal prosecutors in New York, known as the

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Speaker 1: Klepto Captured Task Force, are working to track down and

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Speaker 1: sees artworks boad or sold by Russian oligarchs as long

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Speaker 1: as ten years ago, even targeting specific works of art

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Speaker 1: like Mornes Lebasan on Nefia and serving subpoenas on high

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Speaker 1: end auction houses. The goal is to get the assets

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Speaker 1: before they can be moved to another jurisdiction. Joining me

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Speaker 1: is Bloomberg Legal reporter Eva Benny Morrison. Eva tell us

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Speaker 1: how the US expanded sanctions targeting Russian businessmen since the

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Speaker 1: invasion of Ukraine last year. Since the invasion of Ukraine,

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Speaker 1: and the US government has expanded the number of individuals

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Speaker 1: that are on the sanctions list, and this was to

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Speaker 1: put a lot of pressure on Russia and in protests

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Speaker 1: in opposition to what they were doing in Ukraine. The

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Speaker 1: US was targeting businessmen and their companies who had ties trutin.

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Speaker 1: Number of these businessmen multi billionaires. They have an interest

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Speaker 1: in the final things my real estate, artwork, yachts, cars,

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Speaker 1: and all the rest of those things. And some of

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Speaker 1: those assets have been contained and brought old traders in

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Speaker 1: the US. So it's definitely impacted some of those items.

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Speaker 1: So what are federal prosecutors looking into specifically with these

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Speaker 1: works of art and all the rest of it. The

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Speaker 1: US has had sanctions with for a long time, but

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Speaker 1: there seems to be a real laser focus at the

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Speaker 1: moment on figuring out if any of those sanctions are

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Speaker 1: being violated for federal prosecutors attached to this relatively new

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Speaker 1: task force called Clepto Capture trying to track down assets

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Speaker 1: like artwork and Middle States that was bought and sold

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Speaker 1: by Russian oligarchs anywhere from five to ten years ago.

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Speaker 1: We've seen this focus in the art world. Recently, what's

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Speaker 1: been happening is prosecutors are sending subpoenas to some of

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Speaker 1: the major auction houses based in New York asking for

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Speaker 1: any information to do with transactions with Russian oligarchs or

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Speaker 1: with any shell companies that are known to be associated

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Speaker 1: with those individuals. And over the past twelve to eighteen months,

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Speaker 1: those inquiries have narrowed, so rather than just seeing prosecutors

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Speaker 1: are asking for information about particular individuals Oleg Dairy, Pasca,

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Speaker 1: Roman and Bromovich and a few other very well known

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Speaker 1: Russian oligarchs, they're also asking for specific pieces of artwork,

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Speaker 1: So that suggests that they've got some sort of intel

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Speaker 1: about particular works that were bought and sold by these

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Speaker 1: individuals or by companies linked to them. We've seen offshore

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Speaker 1: as well. There's been a yacht owned by a Russian

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Speaker 1: olgark that has been frozen off the coast of Spain,

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Speaker 1: another one in the South Pacific, and there's also been

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Speaker 1: real estate in d C and here in New York

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Speaker 1: City that's been rated by the FBI is part of

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Speaker 1: these investigations. Prosecutors alleged that these two properties in particular

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Speaker 1: are linked to Russian billionaire by the name of ol

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Speaker 1: Dairy Pasca. So the Department of Justice has indicated recently

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Speaker 1: that they're planning to commence civil forfeiture proceedings against those properties.

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Speaker 1: So are they not only looking at sanctions violations? Are

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Speaker 1: they also looking at possible money laundering? Yes, the two

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Speaker 1: sort of go hand in hand, I guess because some

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Speaker 1: of the allegations in these types of cases usually are

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Speaker 1: based around the fact that these assets like artwork, property, yachts,

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Speaker 1: were obtained through ill gotten games, so that ties into

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Speaker 1: the offense of money laundering. It can be very difficult

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Speaker 1: to prosecute these sanctions cases, but that is definitely one

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Speaker 1: line of inquiry that prosecutors are going down, and a

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Speaker 1: bit of an associators avenue. I guess that they're looking

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Speaker 1: at is the facilitators who exist around these oligarchs. We

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Speaker 1: saw recently in the past couple of weeks there were

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Speaker 1: a couple of associates allegedly tied to that same oligarch

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Speaker 1: I mentioned earlier Oleg dairy Pasca, who are accused of

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Speaker 1: money laundering and helping that oligarch of aide transaction. As

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Speaker 1: you said that these sanctions cases are difficult to prosecute

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Speaker 1: why a lot of these individuals are based offshore to

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Speaker 1: start with, and secondly, it's not as easy as one

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Speaker 1: of certain's best friends or his lawyer or his banker

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Speaker 1: walking into an art gallery in Chelsea and buying a

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Speaker 1: magnificent piece of artwork. A lot of these transactions are

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Speaker 1: done through shell companies, relatives, names have been used in

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Speaker 1: the past to purchase these kinds of assets, so it

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Speaker 1: takes a very long time to sort of pick apart

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Speaker 1: the web of corporate structures and other obscurities to try

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Speaker 1: and figure out who the ultimate beneficial owner is of

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Speaker 1: a particular assets. And one of the defenses that has

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Speaker 1: been thrown up before from some of these oligarchs is

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Speaker 1: all that property, all that asset is owned by a

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Speaker 1: relative or a family member. It's not owned by may

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Speaker 1: So that's why it can be particularly difficult to sort

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Speaker 1: of way through all those complexities and jump over all

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Speaker 1: those legal barricades. There are some very famous artworks involved here.

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Speaker 1: When you mentioned your story, bought by fertilizer tycoon Andre

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Speaker 1: Melnichenko was a mone that he paid apparently almost fifty

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Speaker 1: million dollars for. So are they looking to prevent them

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Speaker 1: from being moved? Are they looking to seize these so

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Speaker 1: that they can stop any movement. Yes, they're going back

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Speaker 1: and looking at artwork that these oligarchs had bought or

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Speaker 1: sold many years ago and trying to figure out where

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Speaker 1: they are now. Prosecutors are going back through years and

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Speaker 1: years of records figure out whether artworks previously bought and

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Speaker 1: sold by Russian oligarchs who are now in the sanctions

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Speaker 1: list have been moved out of the country. If they

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Speaker 1: have in the past twelve months from after the most

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Speaker 1: recent round of sanctions, or even the individuals who Room

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Speaker 1: of Sanctions listens to doesn't eighteen, that would be a

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Speaker 1: violation of those sanctions. Who are trying to figure out

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Speaker 1: where those work are, if they have been moved out

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Speaker 1: of the country, how long ago they were moved out

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Speaker 1: of the country, how they got out, whose names that

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Speaker 1: they were shipped out of as well. You know a

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Speaker 1: number of these oliser, their taste for art and their

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Speaker 1: interest in art has been very well documented. And we're

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Speaker 1: talking pieces worth millions and millions and millions of dollars.

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Speaker 1: So it's been very interesting, I guess the prosecutors to

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Speaker 1: try and figure out where some of these artworks are.

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Speaker 1: And there's a recent case actually where one of the

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Speaker 1: oliser had bought more than a dozen pieces of artwork

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Speaker 1: in two thousand and eight and they just sat in

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Speaker 1: a storage facility in New York until two thousand and

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Speaker 1: eighteen nineteen, when someone who worked for him tried to

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Speaker 1: have him set out of the country. Yeah, and that

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Speaker 1: man has been indicted, Graham Bottom Carter, and he's fighting extradition,

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Speaker 1: that's right. He's based in the UK, Graham Bottom Carter,

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Speaker 1: and he was working for over Dairy Pasca, and the

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Speaker 1: prosecutors alleged that while he was based in the UK,

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Speaker 1: he contacted an auction house in New York and tried

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Speaker 1: to pass off Derry Pasker's artworks as his own. He

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Speaker 1: tried to have them shipped from the auction house in

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Speaker 1: New York to London, which would have been a clear

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Speaker 1: violation of trade sanctions, but it was actually the auction

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Speaker 1: house that raised red flag in the first place. They

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Speaker 1: went through their records and saw that the artworks had

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Speaker 1: actually been purchased from under the name of a shell

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Speaker 1: company which was linked to Derry Paska more than ten

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Speaker 1: years ago. And they challenged Graham Bonham Carter around this,

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Speaker 1: and he tried to push back. He said, just give

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Speaker 1: me a little bit more time and I'll come up

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Speaker 1: with some proof to show that it is mine. And

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Speaker 1: he's my credit card statement showing that I'm paying for

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Speaker 1: the shipping. But it just wasn't enough to convince the

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Speaker 1: auction house that the artworks were in fact his, and

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Speaker 1: they ended up reporting it to OSPAK, which is a

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Speaker 1: part of the Treasury Department in the US that looks

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Speaker 1: after the sanctions. So have all the major auction houses

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Speaker 1: cooperated with subpoenas and quest for information. When I went

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Speaker 1: to the auction houses last week as part of this reporting,

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Speaker 1: most of them said that yes, we do corporate with

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Speaker 1: law enforcement when they ask, and from what I heard

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Speaker 1: from talking to different sources and the industry and legal

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Speaker 1: sources as well, they do hand over the information when

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Speaker 1: prosecutors are asking for it. It's not good for business

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Speaker 1: to be violating trade sanctions. It comes with massive fines,

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Speaker 1: and it was already a lot of attention on the

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Speaker 1: art world. In particular, there was a Senate report in

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Speaker 1: two thousand and twenty that looked at money laundering in

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Speaker 1: the art world, and it highlighted a very high profile

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Speaker 1: example where two brothers from Russia, the Rottenberg's, very wealthy individuals,

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Speaker 1: managed to evade trade sanctions and purchase some pieces of

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Speaker 1: artwork from US based auction houses by using a shell company.

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Speaker 1: Ever since then that the industry has really made an

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Speaker 1: effort to implement their own compliance programs, even though that

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Speaker 1: it's not legislated by law, to try and make sure

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Speaker 1: that won't happen again, and because it really gives some

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Speaker 1: of parts of the industry and the auction houses a

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Speaker 1: bad name, and they definitely don't want that. So eva

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Speaker 1: despite the major auction houses implementing voluntary anti money laundering

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Speaker 1: programs and even some including in contracts that the buyer

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Speaker 1: or seller not be sanctioned or engaged in criminal activity,

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Speaker 1: it still may not be enough to prevent the true

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Speaker 1: owners of artworks from shielding themselves behind these webs of

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Speaker 1: corporate structures or relatives exactly, and there's not a huge

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Speaker 1: legal requirements on auction houses to dig very deep to

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Speaker 1: try and figure out who the ultimate beneficial owner of

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Speaker 1: an artwork is. One of the big debates that were

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Speaker 1: sparked by report was whether the art industry should be

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Speaker 1: subject to the same banking and financial regulation requirements as

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Speaker 1: the rest of the financial industry. So that would be

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Speaker 1: the same as some of the big banks and the

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Speaker 1: art industry. Different auction houses private sellers would have to

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Speaker 1: create money laundering programs which are very time intensive, cost intensive,

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Speaker 1: and it would impose a lot especially on some of

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Speaker 1: those smaller sellers which don't have the same resources as

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Speaker 1: the big financial institutions. That hasn't happened yet, so you know,

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Speaker 1: some of the big auction houses say that they make

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Speaker 1: a concerted effort to try and figure out who the

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Speaker 1: ultimate beneficial lineries of the piece of artwork, To go

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Speaker 1: and figure out who owns the company that pursues in

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Speaker 1: the artwork. They don't want to miss any red flags.

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Speaker 1: But they're doing that voluntarily. It's not a legal requirement,

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Speaker 1: so there are still some details that can fall through

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Speaker 1: the cracks. I spoke to one attorney who put it

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Speaker 1: very accurately when he said, it's not like Putain's banker

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Speaker 1: is going to walk into an art gallery on Madison

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Speaker 1: Avenue and by a percsper Is there any estimate about

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Speaker 1: how many millions or tens of millions or hundreds of

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Speaker 1: millions of dollars of art work are involved. That's a

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Speaker 1: really good question, not that I've seen, to be honest,

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Speaker 1: from the interviews that I did from this reporting, it

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Speaker 1: seemed as if prosecutors were sort of just starting to

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Speaker 1: figure out who owned what, and they were starting to

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Speaker 1: name different pieces of artwork and different scupoenas they were

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Speaker 1: setting to the auction houses so they might start to

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Speaker 1: get a better picture, I guess of how much artwork

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Speaker 1: is left in the US that is actually owned by

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Speaker 1: some of these sanctioned individuals. Just reminds me in some

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Speaker 1: ways of the monuments men who tracked down Nazi stolen

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Speaker 1: art in World War Two. And it's interesting this same U. S.

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Speaker 1: Attorney's Office in the Southern District of New York has

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Speaker 1: had a few successful investigations in seizing artwork that was

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Speaker 1: stolen by the Nazis two and they've used the same

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Speaker 1: proceedings and sort of the same approach I guess in

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Speaker 1: these cases civil asset forfeiture. Sort of interesting to see

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Speaker 1: whether they have the same results. Here. There is one

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Speaker 1: interesting example when you asked me about whether they're looking

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Speaker 1: at money laundering. One of the individuals who was named

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Speaker 1: in the subpoenas was Roman and Bromovich, who's one of

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Speaker 1: the more well known Russian oligarchs who used to own

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Speaker 1: the football team in Chelsea. He's actually not sanctioned in

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Speaker 1: the US, unlike the others who are named the subpoenas,

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Speaker 1: and Bromovich is sanctioned in the UK, which I thought

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Speaker 1: was interesting because it wouldn't be as simple as looking

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Speaker 1: at him the trade sanctions violations in the US. And

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Speaker 1: when I asked a few different attorneys about these and

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Speaker 1: who practiced in this space, they said that because he

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Speaker 1: is sanctioned in the UK, prosecutors could be looking at

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Speaker 1: whether he is trying to get around those sanctions and

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Speaker 1: use the US financial system, which would be through a

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Speaker 1: form of money laundering. So I think that's a pretty

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Speaker 1: key example as well. That's how prosecutors are looking at

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Speaker 1: trade sanctions violations as a whole money laundering definitely comes

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Speaker 1: under that. It's a great story. I know a lot

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Speaker 1: of research went into it. Thanks so much, Ava. That's

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Speaker 1: Bloomberg Legal reporter Ava Benny Morrison. Elon Musk is building

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Speaker 1: on his teflon Elon Street cred winning a case in

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Speaker 1: which it seemed like the odds were stacked against him.

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Speaker 1: Investors claimed that Musk defraunded them when he tweeted four

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Speaker 1: and a half years ago that he was considering taking

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Speaker 1: Tesla private and had funding secured to make the deal happen.

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Speaker 1: It was a risky trial that many high profile executives

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Speaker 1: would have avoided by reaching an out of court settlement,

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Speaker 1: and Musk could have been on the hook for billions,

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Speaker 1: but he escaped unscathed. After a three week trial in

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Speaker 1: which Musk was the star witness, the jury found after

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Speaker 1: just two hours of deliberations that he was not liable

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Speaker 1: for investors losses. My guest is business law expert Eric Tallely,

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Speaker 1: a professor at Columbia Law School. A jury in San

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Speaker 1: Francisco took just two hours to clear Musk, despite the

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Speaker 1: judge having decided that the funding secured tweet was false,

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Speaker 1: despite testimony showing that Musk bankers had barely been consulted,

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Speaker 1: and even a week after the treat they were still

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Speaker 1: working out how the deal would be structured and who

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Speaker 1: would pay for it. So Musk got away from a

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Speaker 1: jury verdict against him. Again, maybe you got away with it,

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Speaker 1: but I realized that there is definitely a set of

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Speaker 1: ground rules to bring one of these simple suits. You

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Speaker 1: can't just rest on your laurels with a you know,

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Speaker 1: definitely a beneficial for the plaintiffs finding that thes this

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Speaker 1: was a false and inaccurate tweet that he said there

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Speaker 1: are more ingredients, and that's what the plaintiffs we're going

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Speaker 1: to have to contend with here. There are probably two

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Speaker 1: major issues that contributed to the outcome, and possibly some more,

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Speaker 1: but you know, one of them I think was just

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Speaker 1: that there really was a sense that the jury kind

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Speaker 1: of had to, you know, figure out the compared to

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Speaker 1: what story right, If Musk's tweet the funding was secured

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Speaker 1: was incorrect, well, what would it have looked like had

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Speaker 1: it been absolutely correct? And there it seems to me

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Speaker 1: his his legal team did a good job of saying,

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Speaker 1: you know, at the time, everyone thought Elon Musk could

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Speaker 1: move mountains. So even if he had tweeded out funding

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Speaker 1: kind of close to secured, and I'm still working out

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Speaker 1: some of the details, but I'm pretty sure this is

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Speaker 1: going to happen. Maybe at the time, that kind of

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Speaker 1: is taken by just about everyone as being the rough

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Speaker 1: equivalent of funding secured, and that mattered, and matters generally

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Speaker 1: for defendants because if the nature of the misstatement, even

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Speaker 1: if it was clearly a misstatement, if the nature of

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Speaker 1: it isn't big enough to be really, really material or

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Speaker 1: to have caused any any losses, the market reaction would

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Speaker 1: have been exactly the same even if he had said

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Speaker 1: accurately where he was in this process. That is a

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Speaker 1: definitely ironclad defense to a securities lawsuit, and that seems

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Speaker 1: to be something that the defense did very effectively here.

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Speaker 1: The second factor has to do a little bit with

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Speaker 1: um how you present facts to a jury. This was

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Speaker 1: never going to be the easiest lift for the plaintiff

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Speaker 1: class in this case, in large part because it not

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Speaker 1: only involved getting to understand how these relatively complex securities

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Speaker 1: markets work, but also different plaintiffs that were part of

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Speaker 1: the plaintiff class. They had different positions in the stocks,

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Speaker 1: some of them, you know, we're buying the underlying stock.

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Speaker 1: Some of them had options positions, those themselves can be

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Speaker 1: horribly complex to try to work through, and the approach

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Speaker 1: in this case was to handle both liability and remedy

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Speaker 1: at the same time. So the sheet that the jury

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Speaker 1: was given on remedy almost looked like a math like

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Speaker 1: a high school math test, and they had to, you know,

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Speaker 1: go through month by months to try to figure out

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Speaker 1: how much that our day by day that the stock

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Speaker 1: of overpriced and so forth. And there's one quick way

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Speaker 1: to not have to do any of that math, which

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Speaker 1: is to say, I don't think the plaintiffs made their

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Speaker 1: case on the basis of liability, and therefore filling out

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Speaker 1: the rest of the math quiz is not necessary. That's

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Speaker 1: always a challenge in these cases. It's probably you know,

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Speaker 1: the big Roulette wheel spin of what's going to happen

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Speaker 1: in a damages phase of the trial is something that

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Speaker 1: both sides find hard to predict. And so this was

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Speaker 1: one of these cases where we just didn't see that

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Speaker 1: many cases that go all the way to litigation. This jury,

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Speaker 1: you know, felt evidently comfortable enough in their conclusion that

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Speaker 1: there just hadn't been enough in there to show liability

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Speaker 1: that they were able to conclude, much to their relief,

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Speaker 1: no doubt that they didn't have to then start engaging

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Speaker 1: in computations related to damages. So the format of the

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Speaker 1: jury said the case against Musk was disorganized, he wasn't

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Speaker 1: sure what the plaintiffs were driving at, and the lawsuits

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Speaker 1: seemed to be relying on just the tweets. He said

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Speaker 1: that Musk's lawyers did a better job of showing that

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Speaker 1: Musk was presenting what he believed to be true and

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Speaker 1: was acting as a genuine bidder for the going private transaction.

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Speaker 1: Did Musk just mesmerize the jury? I think there's probably

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Speaker 1: always a possibility that Musk has mesmerized someone in a

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Speaker 1: jury pool or a general investing public. He still has

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Speaker 1: some of that gravity defying power that Bloom is definitely

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Speaker 1: at least partially off the rows. Over the last six months,

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Speaker 1: and in fact, Musk's team themselves had moved to try

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Speaker 1: to relocate the trial to Texas under the theory that

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Speaker 1: he couldn't get a fair trial in the Bear That

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Speaker 1: never happened. Um, But you know, I think that was

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Speaker 1: in part an acknowledgement of the fact that the number

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Speaker 1: of folks out there that are willing to, you know,

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Speaker 1: effectively take it on faith whenever Elon Musk utters something

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Speaker 1: has gone down. That having been said, I do think

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Speaker 1: that the defense did a good job of, um, you know,

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Speaker 1: trying to make sure the jury trans order themselves back

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Speaker 1: to two thousand eighteen, where Elon must still had an

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Speaker 1: almost an unalloyed mythical, you know, sort of aura around him,

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Speaker 1: and that has more of the ability to move markets

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Speaker 1: even if you're not, you know, saying things with great

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Speaker 1: certainty like funding secured. And I think that the defense

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Speaker 1: did a good job of taking apart the different ingredients

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Speaker 1: that have to go in to a civil claim for

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Speaker 1: security spraud, finding a couple of those in which it's

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Speaker 1: not really clear that he was acting, you know, from

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Speaker 1: a desire to mislead people, and in fact, you could

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Speaker 1: tell a story as Musk himself did understand, but you know,

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Speaker 1: he was just trying to keep people informed of what

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Speaker 1: was going on, and may have in artfully chosen a

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Speaker 1: few words, but the gist of his of his message,

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Speaker 1: at least according to him, was truthful. And so you know,

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Speaker 1: it's usually the case in a lot of these business

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Speaker 1: litigation matters that there are multiple parts of a cause

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Speaker 1: of act action that defendants, if they kind of make

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Speaker 1: the world look complex, they have more of a chance

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Speaker 1: of winning on one or two of those elements and

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Speaker 1: all if all of them are required, that's gonna be

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Speaker 1: bad news for the plaintiffs. And so the defense kind

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Speaker 1: of has that built in advantage here. That advantage was

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Speaker 1: somewhat depleted because of the prior ruling on the falsity

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Speaker 1: of the statement, but the defendant, you know, still kind

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Speaker 1: of had a position of saying, look, all we have

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Speaker 1: to do is win on one of these issues materiality, loss, causation,

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Speaker 1: and the entire case of the plaintiffs is sunk. And

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Speaker 1: they did a pretty effective job of doing that. The plaintifts,

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Speaker 1: in contrast, their effort is really going to be this

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Speaker 1: is a really really simple case. This is easy to

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Speaker 1: boil down. You know, this is not complicated. This doesn't

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Speaker 1: require the jury members to do you know, double reverse,

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Speaker 1: you know, flipping twists in the air to figure out

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Speaker 1: what was going on. And there, you know, there's gonna

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Speaker 1: be a huge premium on putting on a very linear,

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Speaker 1: easy to understand case and out of the box. The

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Speaker 1: plaintiffs in this case the theory was a little bit

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Speaker 1: more circuitous to try to get to what the wrong was,

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Speaker 1: and and that can matter particularly, you know what, the

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Speaker 1: jury of your first couple of witnesses kind of you know,

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Speaker 1: send them on a wild goose chase. There's just not

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Speaker 1: a second chance to make a first impression. His lawyer,

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Speaker 1: Alex Spireau, also want a defamation lawsuit against Musk over

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Speaker 1: his tweet calling a cave explorer a pedo guy. Is

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Speaker 1: this a case of a lawyer who gets elon Musk

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Speaker 1: and knows how to present him to a jury so

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Speaker 1: they get him. Yes, maybe, um, but remember Mr Spirow

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Speaker 1: also was representing Mr Musk in the Twitter acquisition that

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Speaker 1: ended up settling with essentially a complete capitulation from Mr Musk.

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Speaker 1: So you know, in both of these cases, they've you know,

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Speaker 1: they've sort of fought it out to a successful resolution.

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Speaker 1: But you know, I think it seems to most people

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Speaker 1: that the fight against having to close the deal on

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Speaker 1: Twitter was largely a white flag operation by Team Musk,

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Speaker 1: or at least eventually became one. But you know, listen,

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Speaker 1: the quality of lawyers that Mr Musk has is very high.

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Speaker 1: Spireau as a well, regarded litigator at at Quinn Emmanuel

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Speaker 1: and as a result, you know, it shouldn't be surprising

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Speaker 1: that he's going to find someone that's good at what

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Speaker 1: they do. And Mr spirow is you know, I think

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Speaker 1: that it also a sort of testament to when do

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Speaker 1: you actually take the case into the courthouse and do

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Speaker 1: the live hearing versus decide to save your powder for

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Speaker 1: another day? And and you know, in the Twitter acquisition

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Speaker 1: they decided to save their powder. They here they decided

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Speaker 1: to fight and ended up prevailing at the end. I

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Speaker 1: wonder if the difference in the Twitter case and the

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Speaker 1: other cases is a judge hearing the case versus a

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Speaker 1: jury that can certainly matter, the judge is almost always

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Speaker 1: going to be more inclined to stick to their jurisprudential

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Speaker 1: knitting on you know, out of the key elements of

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Speaker 1: the legal claim here and what is proven versus what

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Speaker 1: is kind of you know, gesticulated as a type of

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Speaker 1: an innuendo or hint uh, And so that there may

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Speaker 1: be something to that, you know, I think this case

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Speaker 1: to the extent that this was at least in part

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Speaker 1: a process of kind of you know, appealing to a

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Speaker 1: lay jury that had hazards in both directions, right. You know,

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Speaker 1: even in picking the jury, there were many prospective jurors

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Speaker 1: that you know, described Mr Musk as being unlikable and

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Speaker 1: detestable and so so I think that you are sort of,

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Speaker 1: you know, playing a little bit more of a game

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Speaker 1: of chance when you're bringing things in front of a

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Speaker 1: lay jury. But by the same token, you do have

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Speaker 1: the opportunity to persuade them by your demeanored by your character.

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Speaker 1: That probably gets a little bit more play when there's

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Speaker 1: live testimony in front of a jury than in front

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Speaker 1: of a judge. The plaintiffs lawyer in the closing argument said,

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Speaker 1: this case ultimately is about whether rules that apply to

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00:25:01,000 --> 00:25:05,720
Speaker 1: everyone else should also apply to Elon Musk. So if

435
00:25:05,760 --> 00:25:09,680
Speaker 1: another CEO had done this, would they have gotten off

436
00:25:09,840 --> 00:25:13,320
Speaker 1: or is it? Well, it's Elon Musk. He's tweeting all day.

437
00:25:13,440 --> 00:25:16,160
Speaker 1: He's tweeting a lot of nonsense, So you can't take

438
00:25:16,200 --> 00:25:20,760
Speaker 1: him that seriously. Well, one need not venture very far

439
00:25:20,840 --> 00:25:23,960
Speaker 1: into history to find other examples of CEOs whose tweets

440
00:25:23,960 --> 00:25:26,359
Speaker 1: have gotten them into trouble, and in some cases those

441
00:25:26,359 --> 00:25:30,800
Speaker 1: CEOs have been sued for various manifestations of securities fraud

442
00:25:31,240 --> 00:25:32,960
Speaker 1: and just about all those cases, the case is just

443
00:25:33,040 --> 00:25:35,639
Speaker 1: sort of quietly settled. We don't you sometimes know if

444
00:25:35,680 --> 00:25:38,520
Speaker 1: there was a payment made, Sometimes we don't. And so

445
00:25:38,960 --> 00:25:41,960
Speaker 1: one of the key differentiators here is that Mr Musk

446
00:25:42,080 --> 00:25:44,480
Speaker 1: was willing to just take this into the you know,

447
00:25:44,560 --> 00:25:47,200
Speaker 1: not only up to the courthouse steps, but over them

448
00:25:47,200 --> 00:25:51,000
Speaker 1: and and to to litigate the case the one you know,

449
00:25:51,040 --> 00:25:53,879
Speaker 1: it's kind of left wondering well does this leave what

450
00:25:53,960 --> 00:25:56,520
Speaker 1: does this leave in its wake for those future CEOs

451
00:25:56,560 --> 00:25:59,760
Speaker 1: who may issue improvident tweets? Uh? Is this going to

452
00:25:59,840 --> 00:26:02,960
Speaker 1: make them more likely or less likely to say we're

453
00:26:02,960 --> 00:26:05,440
Speaker 1: going to fight this out in court and not capitulate

454
00:26:05,600 --> 00:26:07,840
Speaker 1: to a settlement. And you know, my sense is that

455
00:26:07,880 --> 00:26:09,960
Speaker 1: most people who watch these sorts of cases, that's going

456
00:26:10,040 --> 00:26:12,680
Speaker 1: to be the more durable aspect of the securities fraud

457
00:26:12,760 --> 00:26:17,120
Speaker 1: lawsuit on you know, the situations, the frequency and the

458
00:26:17,160 --> 00:26:21,159
Speaker 1: contingencies under which parties will settle the case versus just

459
00:26:21,200 --> 00:26:23,680
Speaker 1: deciding they're going to duke it out in court. We've

460
00:26:23,680 --> 00:26:27,600
Speaker 1: talked about this before, how it's unusual for a securities

461
00:26:27,640 --> 00:26:31,359
Speaker 1: fraud case like this to actually get before a jury.

462
00:26:31,520 --> 00:26:35,480
Speaker 1: Did you did others watching this learn anything from this

463
00:26:35,520 --> 00:26:38,560
Speaker 1: case getting to the jury. I think one of the

464
00:26:38,640 --> 00:26:40,640
Speaker 1: key lessons is, if you're going to put a securities

465
00:26:40,680 --> 00:26:43,560
Speaker 1: fraud case in front of a jury, you better be

466
00:26:43,960 --> 00:26:47,280
Speaker 1: very very conscientious of trying to simplify things as much

467
00:26:47,320 --> 00:26:50,879
Speaker 1: as possible. That in some cases may mean that you

468
00:26:50,920 --> 00:26:55,880
Speaker 1: want to split the liability phase from the damages phase. Uh.

469
00:26:55,920 --> 00:26:59,679
Speaker 1: It's not entirely beyond one's imagination to think that this

470
00:26:59,760 --> 00:27:02,840
Speaker 1: jury was thinking, Okay, look, it's kind of a close

471
00:27:02,920 --> 00:27:07,400
Speaker 1: column liability. You know, I guess I'd lean slightly against,

472
00:27:07,440 --> 00:27:10,280
Speaker 1: but I lean even more against if I have to

473
00:27:10,320 --> 00:27:13,000
Speaker 1: do the math quiz to fill out the damages portion

474
00:27:13,040 --> 00:27:16,119
Speaker 1: of the case. So there may be, you know, one

475
00:27:16,200 --> 00:27:18,200
Speaker 1: of the lessons here is that, you know, while there

476
00:27:18,240 --> 00:27:21,480
Speaker 1: can sometimes be some advantages to just having the same

477
00:27:21,560 --> 00:27:25,800
Speaker 1: jury process both questions of liability and questions of quantifying

478
00:27:25,880 --> 00:27:30,760
Speaker 1: damages together, that can be hazardous if essentially the verdict sheet,

479
00:27:30,880 --> 00:27:34,640
Speaker 1: the verdict form uh starts to look like you're being

480
00:27:34,680 --> 00:27:37,920
Speaker 1: asked to retake the ssay T or something like that.

481
00:27:38,000 --> 00:27:41,600
Speaker 1: And so there may be a couple of takeaways here

482
00:27:42,080 --> 00:27:45,800
Speaker 1: for future cases that end up going before juries know

483
00:27:45,960 --> 00:27:48,080
Speaker 1: how to articulate your case in a you know, with

484
00:27:48,240 --> 00:27:51,919
Speaker 1: relatively few moving parts and possibly you know, try to

485
00:27:51,920 --> 00:27:55,840
Speaker 1: concentrate people's attentions on the liability phase without you know,

486
00:27:55,960 --> 00:27:58,760
Speaker 1: sort of clouding folks views on Okay, what were the

487
00:27:58,800 --> 00:28:03,240
Speaker 1: damages associated with it? So a lawyer for the investors said,

488
00:28:03,440 --> 00:28:06,960
Speaker 1: we're disappointed with the result and considering our next steps.

489
00:28:07,400 --> 00:28:11,080
Speaker 1: What are possible next steps and appeal. Any case like

490
00:28:11,160 --> 00:28:14,439
Speaker 1: this can be appealed. The problem when you appeal a

491
00:28:14,520 --> 00:28:18,760
Speaker 1: case that now has some factual findings and then has

492
00:28:18,760 --> 00:28:24,840
Speaker 1: an award is that to overturn a defense side outcome

493
00:28:24,920 --> 00:28:27,960
Speaker 1: below appellate level courts are going to be very, very

494
00:28:28,000 --> 00:28:31,840
Speaker 1: reluctant to revisit the jury's interpretation of the facts. Here

495
00:28:32,080 --> 00:28:35,040
Speaker 1: it's given an enormous amount of weight, and only if

496
00:28:35,040 --> 00:28:38,479
Speaker 1: there's just no reasonable way a juror could interpret facts

497
00:28:38,520 --> 00:28:41,040
Speaker 1: in the way that they did, would and a palate

498
00:28:41,080 --> 00:28:43,960
Speaker 1: court saying okay, we're gonna overturn that and maybe throw

499
00:28:44,040 --> 00:28:49,400
Speaker 1: this back to being relitigated. So appeal is always a possibility.

500
00:28:49,440 --> 00:28:52,680
Speaker 1: I tend to think in this case that the best

501
00:28:52,720 --> 00:28:54,480
Speaker 1: that you're going to be able to do on appeal

502
00:28:54,760 --> 00:28:58,240
Speaker 1: is retry the case. And you know, and unless you've

503
00:28:58,280 --> 00:29:00,160
Speaker 1: got a good theory about how you can make is

504
00:29:00,280 --> 00:29:04,360
Speaker 1: less complicated, uh more approachable to the jury, it may

505
00:29:04,400 --> 00:29:07,440
Speaker 1: not be worthwhile doing. After all, there is you know,

506
00:29:07,560 --> 00:29:11,280
Speaker 1: this was a fairly volatile period of time in the

507
00:29:11,360 --> 00:29:14,760
Speaker 1: life cycle of Tesla stock. You know, during this period

508
00:29:14,800 --> 00:29:17,280
Speaker 1: of time, it's definitely the case that Tesla stock was

509
00:29:17,320 --> 00:29:21,479
Speaker 1: fluctuating wildly, probably not as much as it has fluctuated

510
00:29:21,520 --> 00:29:24,680
Speaker 1: in the time since, but you know, there definitely was

511
00:29:24,760 --> 00:29:28,160
Speaker 1: a lot of movement in the stock, largely due to

512
00:29:28,480 --> 00:29:32,320
Speaker 1: speculation around this potential going private transaction. You know, at

513
00:29:32,320 --> 00:29:35,760
Speaker 1: some point you're throwing good money after bad continuing to

514
00:29:35,800 --> 00:29:39,040
Speaker 1: try to press this particular legal claim. Um. You know,

515
00:29:39,080 --> 00:29:42,920
Speaker 1: other options may simply be you know, restructuring and rethinking

516
00:29:42,920 --> 00:29:46,680
Speaker 1: the way that one invest in some of these situations,

517
00:29:46,720 --> 00:29:51,040
Speaker 1: and uh, you know, possibly placing greater pressure on companies

518
00:29:51,040 --> 00:29:54,960
Speaker 1: to uh to either audit or in some ways sense

519
00:29:55,040 --> 00:29:57,240
Speaker 1: or for certain types of tweets that might be sent

520
00:29:57,280 --> 00:30:00,560
Speaker 1: out that are informationally sensitive to appeal. Some of the

521
00:30:00,640 --> 00:30:03,959
Speaker 1: judges rulings, I think most of the judge's rulings were

522
00:30:04,120 --> 00:30:08,640
Speaker 1: favorable to the plaintiffs, weren't they certainly leading up to

523
00:30:08,720 --> 00:30:12,160
Speaker 1: the to the actual trial. The plaintiffs were looking like

524
00:30:12,200 --> 00:30:14,520
Speaker 1: they were playing a fairly strong hands, and some of

525
00:30:14,520 --> 00:30:17,000
Speaker 1: the elements that they would have to demonstrate had already

526
00:30:17,000 --> 00:30:21,440
Speaker 1: been adjudicated in their favor. That having been said, there

527
00:30:21,520 --> 00:30:23,840
Speaker 1: was a trial for a reason because not all of

528
00:30:23,880 --> 00:30:27,000
Speaker 1: the elements of the securities proud claim have been adjudicated.

529
00:30:27,200 --> 00:30:30,200
Speaker 1: And to win on liability, you gotta you gotta run

530
00:30:30,280 --> 00:30:32,200
Speaker 1: the table as a plaintiff. You can't just went on

531
00:30:32,200 --> 00:30:35,360
Speaker 1: one or two of these elements, their conjunctive elements, which

532
00:30:35,360 --> 00:30:37,880
Speaker 1: you've got to win all of So, you know, the

533
00:30:37,880 --> 00:30:40,320
Speaker 1: the odds had been evened up a little bit by

534
00:30:40,360 --> 00:30:42,960
Speaker 1: by some of those prior rulings by the judge. But

535
00:30:43,040 --> 00:30:45,280
Speaker 1: then ultimately it was clear to everyone that the judge

536
00:30:45,320 --> 00:30:47,960
Speaker 1: was going to hand over the rest of these determinations

537
00:30:48,000 --> 00:30:50,560
Speaker 1: to a jury, and there was no guarantee that this

538
00:30:50,640 --> 00:30:52,080
Speaker 1: jury was going to act in a way that was

539
00:30:52,120 --> 00:30:54,840
Speaker 1: consistent with how the judge had acted previously. Thanks so

540
00:30:54,880 --> 00:30:57,400
Speaker 1: much for being on the show. Eric. That's Eric Tallely,

541
00:30:57,520 --> 00:31:00,560
Speaker 1: a business law professor at Columbia Law School, And that's

542
00:31:00,600 --> 00:31:03,240
Speaker 1: it for this edition of the Bloomberg Law Show. Remember

543
00:31:03,240 --> 00:31:05,320
Speaker 1: you can always get the latest legal news on our

544
00:31:05,360 --> 00:31:09,480
Speaker 1: Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

545
00:31:09,680 --> 00:31:14,720
Speaker 1: and at www dot bloomberg dot com, slash podcast slash Law,

546
00:31:15,120 --> 00:31:17,280
Speaker 1: and remember to tune in to The Bloomberg Law Show

547
00:31:17,400 --> 00:31:20,200
Speaker 1: every week night at ten p m. Wall Street Time.

548
00:31:20,720 --> 00:31:23,440
Speaker 1: I'm June Grosso and you're listening to Bloomberg