Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 1: We're gonna start with a friend of Harris who's going
Speaker 1: to have some idea where the French art has been hidden.
Speaker 1: How can I hope who was still stolen? Not the
Speaker 1: Nazis are taken everything with him. So we have to
Speaker 1: get as close to the front as we can. Look
Speaker 1: at this. That says if Hitler dies or if Germany falls,
Speaker 1: there to destroy everything everything. Toward the end of World
Speaker 1: War Two, an army unit nicknamed the monuments Men race
Speaker 1: to track down and recover priceless artwork stolen by the
Speaker 1: Nazis before it could be destroyed or moved. The movie
Speaker 1: aptlete titled The monuments Men, is based on their recovery
Speaker 1: of more than five million works of art. It may
Speaker 1: not be as dramatic as going into a war zone,
Speaker 1: but today federal prosecutors in New York, known as the
Speaker 1: Klepto Captured Task Force, are working to track down and
Speaker 1: sees artworks boad or sold by Russian oligarchs as long
Speaker 1: as ten years ago, even targeting specific works of art
Speaker 1: like Mornes Lebasan on Nefia and serving subpoenas on high
Speaker 1: end auction houses. The goal is to get the assets
Speaker 1: before they can be moved to another jurisdiction. Joining me
Speaker 1: is Bloomberg Legal reporter Eva Benny Morrison. Eva tell us
Speaker 1: how the US expanded sanctions targeting Russian businessmen since the
Speaker 1: invasion of Ukraine last year. Since the invasion of Ukraine,
Speaker 1: and the US government has expanded the number of individuals
Speaker 1: that are on the sanctions list, and this was to
Speaker 1: put a lot of pressure on Russia and in protests
Speaker 1: in opposition to what they were doing in Ukraine. The
Speaker 1: US was targeting businessmen and their companies who had ties trutin.
Speaker 1: Number of these businessmen multi billionaires. They have an interest
Speaker 1: in the final things my real estate, artwork, yachts, cars,
Speaker 1: and all the rest of those things. And some of
Speaker 1: those assets have been contained and brought old traders in
Speaker 1: the US. So it's definitely impacted some of those items.
Speaker 1: So what are federal prosecutors looking into specifically with these
Speaker 1: works of art and all the rest of it. The
Speaker 1: US has had sanctions with for a long time, but
Speaker 1: there seems to be a real laser focus at the
Speaker 1: moment on figuring out if any of those sanctions are
Speaker 1: being violated for federal prosecutors attached to this relatively new
Speaker 1: task force called Clepto Capture trying to track down assets
Speaker 1: like artwork and Middle States that was bought and sold
Speaker 1: by Russian oligarchs anywhere from five to ten years ago.
Speaker 1: We've seen this focus in the art world. Recently, what's
Speaker 1: been happening is prosecutors are sending subpoenas to some of
Speaker 1: the major auction houses based in New York asking for
Speaker 1: any information to do with transactions with Russian oligarchs or
Speaker 1: with any shell companies that are known to be associated
Speaker 1: with those individuals. And over the past twelve to eighteen months,
Speaker 1: those inquiries have narrowed, so rather than just seeing prosecutors
Speaker 1: are asking for information about particular individuals Oleg Dairy, Pasca,
Speaker 1: Roman and Bromovich and a few other very well known
Speaker 1: Russian oligarchs, they're also asking for specific pieces of artwork,
Speaker 1: So that suggests that they've got some sort of intel
Speaker 1: about particular works that were bought and sold by these
Speaker 1: individuals or by companies linked to them. We've seen offshore
Speaker 1: as well. There's been a yacht owned by a Russian
Speaker 1: olgark that has been frozen off the coast of Spain,
Speaker 1: another one in the South Pacific, and there's also been
Speaker 1: real estate in d C and here in New York
Speaker 1: City that's been rated by the FBI is part of
Speaker 1: these investigations. Prosecutors alleged that these two properties in particular
Speaker 1: are linked to Russian billionaire by the name of ol
Speaker 1: Dairy Pasca. So the Department of Justice has indicated recently
Speaker 1: that they're planning to commence civil forfeiture proceedings against those properties.
Speaker 1: So are they not only looking at sanctions violations? Are
Speaker 1: they also looking at possible money laundering? Yes, the two
Speaker 1: sort of go hand in hand, I guess because some
Speaker 1: of the allegations in these types of cases usually are
Speaker 1: based around the fact that these assets like artwork, property, yachts,
Speaker 1: were obtained through ill gotten games, so that ties into
Speaker 1: the offense of money laundering. It can be very difficult
Speaker 1: to prosecute these sanctions cases, but that is definitely one
Speaker 1: line of inquiry that prosecutors are going down, and a
Speaker 1: bit of an associators avenue. I guess that they're looking
Speaker 1: at is the facilitators who exist around these oligarchs. We
Speaker 1: saw recently in the past couple of weeks there were
Speaker 1: a couple of associates allegedly tied to that same oligarch
Speaker 1: I mentioned earlier Oleg dairy Pasca, who are accused of
Speaker 1: money laundering and helping that oligarch of aide transaction. As
Speaker 1: you said that these sanctions cases are difficult to prosecute
Speaker 1: why a lot of these individuals are based offshore to
Speaker 1: start with, and secondly, it's not as easy as one
Speaker 1: of certain's best friends or his lawyer or his banker
Speaker 1: walking into an art gallery in Chelsea and buying a
Speaker 1: magnificent piece of artwork. A lot of these transactions are
Speaker 1: done through shell companies, relatives, names have been used in
Speaker 1: the past to purchase these kinds of assets, so it
Speaker 1: takes a very long time to sort of pick apart
Speaker 1: the web of corporate structures and other obscurities to try
Speaker 1: and figure out who the ultimate beneficial owner is of
Speaker 1: a particular assets. And one of the defenses that has
Speaker 1: been thrown up before from some of these oligarchs is
Speaker 1: all that property, all that asset is owned by a
Speaker 1: relative or a family member. It's not owned by may
Speaker 1: So that's why it can be particularly difficult to sort
Speaker 1: of way through all those complexities and jump over all
Speaker 1: those legal barricades. There are some very famous artworks involved here.
Speaker 1: When you mentioned your story, bought by fertilizer tycoon Andre
Speaker 1: Melnichenko was a mone that he paid apparently almost fifty
Speaker 1: million dollars for. So are they looking to prevent them
Speaker 1: from being moved? Are they looking to seize these so
Speaker 1: that they can stop any movement. Yes, they're going back
Speaker 1: and looking at artwork that these oligarchs had bought or
Speaker 1: sold many years ago and trying to figure out where
Speaker 1: they are now. Prosecutors are going back through years and
Speaker 1: years of records figure out whether artworks previously bought and
Speaker 1: sold by Russian oligarchs who are now in the sanctions
Speaker 1: list have been moved out of the country. If they
Speaker 1: have in the past twelve months from after the most
Speaker 1: recent round of sanctions, or even the individuals who Room
Speaker 1: of Sanctions listens to doesn't eighteen, that would be a
Speaker 1: violation of those sanctions. Who are trying to figure out
Speaker 1: where those work are, if they have been moved out
Speaker 1: of the country, how long ago they were moved out
Speaker 1: of the country, how they got out, whose names that
Speaker 1: they were shipped out of as well. You know a
Speaker 1: number of these oliser, their taste for art and their
Speaker 1: interest in art has been very well documented. And we're
Speaker 1: talking pieces worth millions and millions and millions of dollars.
Speaker 1: So it's been very interesting, I guess the prosecutors to
Speaker 1: try and figure out where some of these artworks are.
Speaker 1: And there's a recent case actually where one of the
Speaker 1: oliser had bought more than a dozen pieces of artwork
Speaker 1: in two thousand and eight and they just sat in
Speaker 1: a storage facility in New York until two thousand and
Speaker 1: eighteen nineteen, when someone who worked for him tried to
Speaker 1: have him set out of the country. Yeah, and that
Speaker 1: man has been indicted, Graham Bottom Carter, and he's fighting extradition,
Speaker 1: that's right. He's based in the UK, Graham Bottom Carter,
Speaker 1: and he was working for over Dairy Pasca, and the
Speaker 1: prosecutors alleged that while he was based in the UK,
Speaker 1: he contacted an auction house in New York and tried
Speaker 1: to pass off Derry Pasker's artworks as his own. He
Speaker 1: tried to have them shipped from the auction house in
Speaker 1: New York to London, which would have been a clear
Speaker 1: violation of trade sanctions, but it was actually the auction
Speaker 1: house that raised red flag in the first place. They
Speaker 1: went through their records and saw that the artworks had
Speaker 1: actually been purchased from under the name of a shell
Speaker 1: company which was linked to Derry Paska more than ten
Speaker 1: years ago. And they challenged Graham Bonham Carter around this,
Speaker 1: and he tried to push back. He said, just give
Speaker 1: me a little bit more time and I'll come up
Speaker 1: with some proof to show that it is mine. And
Speaker 1: he's my credit card statement showing that I'm paying for
Speaker 1: the shipping. But it just wasn't enough to convince the
Speaker 1: auction house that the artworks were in fact his, and
Speaker 1: they ended up reporting it to OSPAK, which is a
Speaker 1: part of the Treasury Department in the US that looks
Speaker 1: after the sanctions. So have all the major auction houses
Speaker 1: cooperated with subpoenas and quest for information. When I went
Speaker 1: to the auction houses last week as part of this reporting,
Speaker 1: most of them said that yes, we do corporate with
Speaker 1: law enforcement when they ask, and from what I heard
Speaker 1: from talking to different sources and the industry and legal
Speaker 1: sources as well, they do hand over the information when
Speaker 1: prosecutors are asking for it. It's not good for business
Speaker 1: to be violating trade sanctions. It comes with massive fines,
Speaker 1: and it was already a lot of attention on the
Speaker 1: art world. In particular, there was a Senate report in
Speaker 1: two thousand and twenty that looked at money laundering in
Speaker 1: the art world, and it highlighted a very high profile
Speaker 1: example where two brothers from Russia, the Rottenberg's, very wealthy individuals,
Speaker 1: managed to evade trade sanctions and purchase some pieces of
Speaker 1: artwork from US based auction houses by using a shell company.
Speaker 1: Ever since then that the industry has really made an
Speaker 1: effort to implement their own compliance programs, even though that
Speaker 1: it's not legislated by law, to try and make sure
Speaker 1: that won't happen again, and because it really gives some
Speaker 1: of parts of the industry and the auction houses a
Speaker 1: bad name, and they definitely don't want that. So eva
Speaker 1: despite the major auction houses implementing voluntary anti money laundering
Speaker 1: programs and even some including in contracts that the buyer
Speaker 1: or seller not be sanctioned or engaged in criminal activity,
Speaker 1: it still may not be enough to prevent the true
Speaker 1: owners of artworks from shielding themselves behind these webs of
Speaker 1: corporate structures or relatives exactly, and there's not a huge
Speaker 1: legal requirements on auction houses to dig very deep to
Speaker 1: try and figure out who the ultimate beneficial owner of
Speaker 1: an artwork is. One of the big debates that were
Speaker 1: sparked by report was whether the art industry should be
Speaker 1: subject to the same banking and financial regulation requirements as
Speaker 1: the rest of the financial industry. So that would be
Speaker 1: the same as some of the big banks and the
Speaker 1: art industry. Different auction houses private sellers would have to
Speaker 1: create money laundering programs which are very time intensive, cost intensive,
Speaker 1: and it would impose a lot especially on some of
Speaker 1: those smaller sellers which don't have the same resources as
Speaker 1: the big financial institutions. That hasn't happened yet, so you know,
Speaker 1: some of the big auction houses say that they make
Speaker 1: a concerted effort to try and figure out who the
Speaker 1: ultimate beneficial lineries of the piece of artwork, To go
Speaker 1: and figure out who owns the company that pursues in
Speaker 1: the artwork. They don't want to miss any red flags.
Speaker 1: But they're doing that voluntarily. It's not a legal requirement,
Speaker 1: so there are still some details that can fall through
Speaker 1: the cracks. I spoke to one attorney who put it
Speaker 1: very accurately when he said, it's not like Putain's banker
Speaker 1: is going to walk into an art gallery on Madison
Speaker 1: Avenue and by a percsper Is there any estimate about
Speaker 1: how many millions or tens of millions or hundreds of
Speaker 1: millions of dollars of art work are involved. That's a
Speaker 1: really good question, not that I've seen, to be honest,
Speaker 1: from the interviews that I did from this reporting, it
Speaker 1: seemed as if prosecutors were sort of just starting to
Speaker 1: figure out who owned what, and they were starting to
Speaker 1: name different pieces of artwork and different scupoenas they were
Speaker 1: setting to the auction houses so they might start to
Speaker 1: get a better picture, I guess of how much artwork
Speaker 1: is left in the US that is actually owned by
Speaker 1: some of these sanctioned individuals. Just reminds me in some
Speaker 1: ways of the monuments men who tracked down Nazi stolen
Speaker 1: art in World War Two. And it's interesting this same U. S.
Speaker 1: Attorney's Office in the Southern District of New York has
Speaker 1: had a few successful investigations in seizing artwork that was
Speaker 1: stolen by the Nazis two and they've used the same
Speaker 1: proceedings and sort of the same approach I guess in
Speaker 1: these cases civil asset forfeiture. Sort of interesting to see
Speaker 1: whether they have the same results. Here. There is one
Speaker 1: interesting example when you asked me about whether they're looking
Speaker 1: at money laundering. One of the individuals who was named
Speaker 1: in the subpoenas was Roman and Bromovich, who's one of
Speaker 1: the more well known Russian oligarchs who used to own
Speaker 1: the football team in Chelsea. He's actually not sanctioned in
Speaker 1: the US, unlike the others who are named the subpoenas,
Speaker 1: and Bromovich is sanctioned in the UK, which I thought
Speaker 1: was interesting because it wouldn't be as simple as looking
Speaker 1: at him the trade sanctions violations in the US. And
Speaker 1: when I asked a few different attorneys about these and
Speaker 1: who practiced in this space, they said that because he
Speaker 1: is sanctioned in the UK, prosecutors could be looking at
Speaker 1: whether he is trying to get around those sanctions and
Speaker 1: use the US financial system, which would be through a
Speaker 1: form of money laundering. So I think that's a pretty
Speaker 1: key example as well. That's how prosecutors are looking at
Speaker 1: trade sanctions violations as a whole money laundering definitely comes
Speaker 1: under that. It's a great story. I know a lot
Speaker 1: of research went into it. Thanks so much, Ava. That's
Speaker 1: Bloomberg Legal reporter Ava Benny Morrison. Elon Musk is building
Speaker 1: on his teflon Elon Street cred winning a case in
Speaker 1: which it seemed like the odds were stacked against him.
Speaker 1: Investors claimed that Musk defraunded them when he tweeted four
Speaker 1: and a half years ago that he was considering taking
Speaker 1: Tesla private and had funding secured to make the deal happen.
Speaker 1: It was a risky trial that many high profile executives
Speaker 1: would have avoided by reaching an out of court settlement,
Speaker 1: and Musk could have been on the hook for billions,
Speaker 1: but he escaped unscathed. After a three week trial in
Speaker 1: which Musk was the star witness, the jury found after
Speaker 1: just two hours of deliberations that he was not liable
Speaker 1: for investors losses. My guest is business law expert Eric Tallely,
Speaker 1: a professor at Columbia Law School. A jury in San
Speaker 1: Francisco took just two hours to clear Musk, despite the
Speaker 1: judge having decided that the funding secured tweet was false,
Speaker 1: despite testimony showing that Musk bankers had barely been consulted,
Speaker 1: and even a week after the treat they were still
Speaker 1: working out how the deal would be structured and who
Speaker 1: would pay for it. So Musk got away from a
Speaker 1: jury verdict against him. Again, maybe you got away with it,
Speaker 1: but I realized that there is definitely a set of
Speaker 1: ground rules to bring one of these simple suits. You
Speaker 1: can't just rest on your laurels with a you know,
Speaker 1: definitely a beneficial for the plaintiffs finding that thes this
Speaker 1: was a false and inaccurate tweet that he said there
Speaker 1: are more ingredients, and that's what the plaintiffs we're going
Speaker 1: to have to contend with here. There are probably two
Speaker 1: major issues that contributed to the outcome, and possibly some more,
Speaker 1: but you know, one of them I think was just
Speaker 1: that there really was a sense that the jury kind
Speaker 1: of had to, you know, figure out the compared to
Speaker 1: what story right, If Musk's tweet the funding was secured
Speaker 1: was incorrect, well, what would it have looked like had
Speaker 1: it been absolutely correct? And there it seems to me
Speaker 1: his his legal team did a good job of saying,
Speaker 1: you know, at the time, everyone thought Elon Musk could
Speaker 1: move mountains. So even if he had tweeded out funding
Speaker 1: kind of close to secured, and I'm still working out
Speaker 1: some of the details, but I'm pretty sure this is
Speaker 1: going to happen. Maybe at the time, that kind of
Speaker 1: is taken by just about everyone as being the rough
Speaker 1: equivalent of funding secured, and that mattered, and matters generally
Speaker 1: for defendants because if the nature of the misstatement, even
Speaker 1: if it was clearly a misstatement, if the nature of
Speaker 1: it isn't big enough to be really, really material or
Speaker 1: to have caused any any losses, the market reaction would
Speaker 1: have been exactly the same even if he had said
Speaker 1: accurately where he was in this process. That is a
Speaker 1: definitely ironclad defense to a securities lawsuit, and that seems
Speaker 1: to be something that the defense did very effectively here.
Speaker 1: The second factor has to do a little bit with
Speaker 1: um how you present facts to a jury. This was
Speaker 1: never going to be the easiest lift for the plaintiff
Speaker 1: class in this case, in large part because it not
Speaker 1: only involved getting to understand how these relatively complex securities
Speaker 1: markets work, but also different plaintiffs that were part of
Speaker 1: the plaintiff class. They had different positions in the stocks,
Speaker 1: some of them, you know, we're buying the underlying stock.
Speaker 1: Some of them had options positions, those themselves can be
Speaker 1: horribly complex to try to work through, and the approach
Speaker 1: in this case was to handle both liability and remedy
Speaker 1: at the same time. So the sheet that the jury
Speaker 1: was given on remedy almost looked like a math like
Speaker 1: a high school math test, and they had to, you know,
Speaker 1: go through month by months to try to figure out
Speaker 1: how much that our day by day that the stock
Speaker 1: of overpriced and so forth. And there's one quick way
Speaker 1: to not have to do any of that math, which
Speaker 1: is to say, I don't think the plaintiffs made their
Speaker 1: case on the basis of liability, and therefore filling out
Speaker 1: the rest of the math quiz is not necessary. That's
Speaker 1: always a challenge in these cases. It's probably you know,
Speaker 1: the big Roulette wheel spin of what's going to happen
Speaker 1: in a damages phase of the trial is something that
Speaker 1: both sides find hard to predict. And so this was
Speaker 1: one of these cases where we just didn't see that
Speaker 1: many cases that go all the way to litigation. This jury,
Speaker 1: you know, felt evidently comfortable enough in their conclusion that
Speaker 1: there just hadn't been enough in there to show liability
Speaker 1: that they were able to conclude, much to their relief,
Speaker 1: no doubt that they didn't have to then start engaging
Speaker 1: in computations related to damages. So the format of the
Speaker 1: jury said the case against Musk was disorganized, he wasn't
Speaker 1: sure what the plaintiffs were driving at, and the lawsuits
Speaker 1: seemed to be relying on just the tweets. He said
Speaker 1: that Musk's lawyers did a better job of showing that
Speaker 1: Musk was presenting what he believed to be true and
Speaker 1: was acting as a genuine bidder for the going private transaction.
Speaker 1: Did Musk just mesmerize the jury? I think there's probably
Speaker 1: always a possibility that Musk has mesmerized someone in a
Speaker 1: jury pool or a general investing public. He still has
Speaker 1: some of that gravity defying power that Bloom is definitely
Speaker 1: at least partially off the rows. Over the last six months,
Speaker 1: and in fact, Musk's team themselves had moved to try
Speaker 1: to relocate the trial to Texas under the theory that
Speaker 1: he couldn't get a fair trial in the Bear That
Speaker 1: never happened. Um, But you know, I think that was
Speaker 1: in part an acknowledgement of the fact that the number
Speaker 1: of folks out there that are willing to, you know,
Speaker 1: effectively take it on faith whenever Elon Musk utters something
Speaker 1: has gone down. That having been said, I do think
Speaker 1: that the defense did a good job of, um, you know,
Speaker 1: trying to make sure the jury trans order themselves back
Speaker 1: to two thousand eighteen, where Elon must still had an
Speaker 1: almost an unalloyed mythical, you know, sort of aura around him,
Speaker 1: and that has more of the ability to move markets
Speaker 1: even if you're not, you know, saying things with great
Speaker 1: certainty like funding secured. And I think that the defense
Speaker 1: did a good job of taking apart the different ingredients
Speaker 1: that have to go in to a civil claim for
Speaker 1: security spraud, finding a couple of those in which it's
Speaker 1: not really clear that he was acting, you know, from
Speaker 1: a desire to mislead people, and in fact, you could
Speaker 1: tell a story as Musk himself did understand, but you know,
Speaker 1: he was just trying to keep people informed of what
Speaker 1: was going on, and may have in artfully chosen a
Speaker 1: few words, but the gist of his of his message,
Speaker 1: at least according to him, was truthful. And so you know,
Speaker 1: it's usually the case in a lot of these business
Speaker 1: litigation matters that there are multiple parts of a cause
Speaker 1: of act action that defendants, if they kind of make
Speaker 1: the world look complex, they have more of a chance
Speaker 1: of winning on one or two of those elements and
Speaker 1: all if all of them are required, that's gonna be
Speaker 1: bad news for the plaintiffs. And so the defense kind
Speaker 1: of has that built in advantage here. That advantage was
Speaker 1: somewhat depleted because of the prior ruling on the falsity
Speaker 1: of the statement, but the defendant, you know, still kind
Speaker 1: of had a position of saying, look, all we have
Speaker 1: to do is win on one of these issues materiality, loss, causation,
Speaker 1: and the entire case of the plaintiffs is sunk. And
Speaker 1: they did a pretty effective job of doing that. The plaintifts,
Speaker 1: in contrast, their effort is really going to be this
Speaker 1: is a really really simple case. This is easy to
Speaker 1: boil down. You know, this is not complicated. This doesn't
Speaker 1: require the jury members to do you know, double reverse,
Speaker 1: you know, flipping twists in the air to figure out
Speaker 1: what was going on. And there, you know, there's gonna
Speaker 1: be a huge premium on putting on a very linear,
Speaker 1: easy to understand case and out of the box. The
Speaker 1: plaintiffs in this case the theory was a little bit
Speaker 1: more circuitous to try to get to what the wrong was,
Speaker 1: and and that can matter particularly, you know what, the
Speaker 1: jury of your first couple of witnesses kind of you know,
Speaker 1: send them on a wild goose chase. There's just not
Speaker 1: a second chance to make a first impression. His lawyer,
Speaker 1: Alex Spireau, also want a defamation lawsuit against Musk over
Speaker 1: his tweet calling a cave explorer a pedo guy. Is
Speaker 1: this a case of a lawyer who gets elon Musk
Speaker 1: and knows how to present him to a jury so
Speaker 1: they get him. Yes, maybe, um, but remember Mr Spirow
Speaker 1: also was representing Mr Musk in the Twitter acquisition that
Speaker 1: ended up settling with essentially a complete capitulation from Mr Musk.
Speaker 1: So you know, in both of these cases, they've you know,
Speaker 1: they've sort of fought it out to a successful resolution.
Speaker 1: But you know, I think it seems to most people
Speaker 1: that the fight against having to close the deal on
Speaker 1: Twitter was largely a white flag operation by Team Musk,
Speaker 1: or at least eventually became one. But you know, listen,
Speaker 1: the quality of lawyers that Mr Musk has is very high.
Speaker 1: Spireau as a well, regarded litigator at at Quinn Emmanuel
Speaker 1: and as a result, you know, it shouldn't be surprising
Speaker 1: that he's going to find someone that's good at what
Speaker 1: they do. And Mr spirow is you know, I think
Speaker 1: that it also a sort of testament to when do
Speaker 1: you actually take the case into the courthouse and do
Speaker 1: the live hearing versus decide to save your powder for
Speaker 1: another day? And and you know, in the Twitter acquisition
Speaker 1: they decided to save their powder. They here they decided
Speaker 1: to fight and ended up prevailing at the end. I
Speaker 1: wonder if the difference in the Twitter case and the
Speaker 1: other cases is a judge hearing the case versus a
Speaker 1: jury that can certainly matter, the judge is almost always
Speaker 1: going to be more inclined to stick to their jurisprudential
Speaker 1: knitting on you know, out of the key elements of
Speaker 1: the legal claim here and what is proven versus what
Speaker 1: is kind of you know, gesticulated as a type of
Speaker 1: an innuendo or hint uh, And so that there may
Speaker 1: be something to that, you know, I think this case
Speaker 1: to the extent that this was at least in part
Speaker 1: a process of kind of you know, appealing to a
Speaker 1: lay jury that had hazards in both directions, right. You know,
Speaker 1: even in picking the jury, there were many prospective jurors
Speaker 1: that you know, described Mr Musk as being unlikable and
Speaker 1: detestable and so so I think that you are sort of,
Speaker 1: you know, playing a little bit more of a game
Speaker 1: of chance when you're bringing things in front of a
Speaker 1: lay jury. But by the same token, you do have
Speaker 1: the opportunity to persuade them by your demeanored by your character.
Speaker 1: That probably gets a little bit more play when there's
Speaker 1: live testimony in front of a jury than in front
Speaker 1: of a judge. The plaintiffs lawyer in the closing argument said,
Speaker 1: this case ultimately is about whether rules that apply to
Speaker 1: everyone else should also apply to Elon Musk. So if
Speaker 1: another CEO had done this, would they have gotten off
Speaker 1: or is it? Well, it's Elon Musk. He's tweeting all day.
Speaker 1: He's tweeting a lot of nonsense, So you can't take
Speaker 1: him that seriously. Well, one need not venture very far
Speaker 1: into history to find other examples of CEOs whose tweets
Speaker 1: have gotten them into trouble, and in some cases those
Speaker 1: CEOs have been sued for various manifestations of securities fraud
Speaker 1: and just about all those cases, the case is just
Speaker 1: sort of quietly settled. We don't you sometimes know if
Speaker 1: there was a payment made, Sometimes we don't. And so
Speaker 1: one of the key differentiators here is that Mr Musk
Speaker 1: was willing to just take this into the you know,
Speaker 1: not only up to the courthouse steps, but over them
Speaker 1: and and to to litigate the case the one you know,
Speaker 1: it's kind of left wondering well does this leave what
Speaker 1: does this leave in its wake for those future CEOs
Speaker 1: who may issue improvident tweets? Uh? Is this going to
Speaker 1: make them more likely or less likely to say we're
Speaker 1: going to fight this out in court and not capitulate
Speaker 1: to a settlement. And you know, my sense is that
Speaker 1: most people who watch these sorts of cases, that's going
Speaker 1: to be the more durable aspect of the securities fraud
Speaker 1: lawsuit on you know, the situations, the frequency and the
Speaker 1: contingencies under which parties will settle the case versus just
Speaker 1: deciding they're going to duke it out in court. We've
Speaker 1: talked about this before, how it's unusual for a securities
Speaker 1: fraud case like this to actually get before a jury.
Speaker 1: Did you did others watching this learn anything from this
Speaker 1: case getting to the jury. I think one of the
Speaker 1: key lessons is, if you're going to put a securities
Speaker 1: fraud case in front of a jury, you better be
Speaker 1: very very conscientious of trying to simplify things as much
Speaker 1: as possible. That in some cases may mean that you
Speaker 1: want to split the liability phase from the damages phase. Uh.
Speaker 1: It's not entirely beyond one's imagination to think that this
Speaker 1: jury was thinking, Okay, look, it's kind of a close
Speaker 1: column liability. You know, I guess I'd lean slightly against,
Speaker 1: but I lean even more against if I have to
Speaker 1: do the math quiz to fill out the damages portion
Speaker 1: of the case. So there may be, you know, one
Speaker 1: of the lessons here is that, you know, while there
Speaker 1: can sometimes be some advantages to just having the same
Speaker 1: jury process both questions of liability and questions of quantifying
Speaker 1: damages together, that can be hazardous if essentially the verdict sheet,
Speaker 1: the verdict form uh starts to look like you're being
Speaker 1: asked to retake the ssay T or something like that.
Speaker 1: And so there may be a couple of takeaways here
Speaker 1: for future cases that end up going before juries know
Speaker 1: how to articulate your case in a you know, with
Speaker 1: relatively few moving parts and possibly you know, try to
Speaker 1: concentrate people's attentions on the liability phase without you know,
Speaker 1: sort of clouding folks views on Okay, what were the
Speaker 1: damages associated with it? So a lawyer for the investors said,
Speaker 1: we're disappointed with the result and considering our next steps.
Speaker 1: What are possible next steps and appeal. Any case like
Speaker 1: this can be appealed. The problem when you appeal a
Speaker 1: case that now has some factual findings and then has
Speaker 1: an award is that to overturn a defense side outcome
Speaker 1: below appellate level courts are going to be very, very
Speaker 1: reluctant to revisit the jury's interpretation of the facts. Here
Speaker 1: it's given an enormous amount of weight, and only if
Speaker 1: there's just no reasonable way a juror could interpret facts
Speaker 1: in the way that they did, would and a palate
Speaker 1: court saying okay, we're gonna overturn that and maybe throw
Speaker 1: this back to being relitigated. So appeal is always a possibility.
Speaker 1: I tend to think in this case that the best
Speaker 1: that you're going to be able to do on appeal
Speaker 1: is retry the case. And you know, and unless you've
Speaker 1: got a good theory about how you can make is
Speaker 1: less complicated, uh more approachable to the jury, it may
Speaker 1: not be worthwhile doing. After all, there is you know,
Speaker 1: this was a fairly volatile period of time in the
Speaker 1: life cycle of Tesla stock. You know, during this period
Speaker 1: of time, it's definitely the case that Tesla stock was
Speaker 1: fluctuating wildly, probably not as much as it has fluctuated
Speaker 1: in the time since, but you know, there definitely was
Speaker 1: a lot of movement in the stock, largely due to
Speaker 1: speculation around this potential going private transaction. You know, at
Speaker 1: some point you're throwing good money after bad continuing to
Speaker 1: try to press this particular legal claim. Um. You know,
Speaker 1: other options may simply be you know, restructuring and rethinking
Speaker 1: the way that one invest in some of these situations,
Speaker 1: and uh, you know, possibly placing greater pressure on companies
Speaker 1: to uh to either audit or in some ways sense
Speaker 1: or for certain types of tweets that might be sent
Speaker 1: out that are informationally sensitive to appeal. Some of the
Speaker 1: judges rulings, I think most of the judge's rulings were
Speaker 1: favorable to the plaintiffs, weren't they certainly leading up to
Speaker 1: the to the actual trial. The plaintiffs were looking like
Speaker 1: they were playing a fairly strong hands, and some of
Speaker 1: the elements that they would have to demonstrate had already
Speaker 1: been adjudicated in their favor. That having been said, there
Speaker 1: was a trial for a reason because not all of
Speaker 1: the elements of the securities proud claim have been adjudicated.
Speaker 1: And to win on liability, you gotta you gotta run
Speaker 1: the table as a plaintiff. You can't just went on
Speaker 1: one or two of these elements, their conjunctive elements, which
Speaker 1: you've got to win all of So, you know, the
Speaker 1: the odds had been evened up a little bit by
Speaker 1: by some of those prior rulings by the judge. But
Speaker 1: then ultimately it was clear to everyone that the judge
Speaker 1: was going to hand over the rest of these determinations
Speaker 1: to a jury, and there was no guarantee that this
Speaker 1: jury was going to act in a way that was
Speaker 1: consistent with how the judge had acted previously. Thanks so
Speaker 1: much for being on the show. Eric. That's Eric Tallely,
Speaker 1: a business law professor at Columbia Law School, And that's
Speaker 1: it for this edition of the Bloomberg Law Show. Remember
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