Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: As I've often said, it's a wild West and a
Speaker 2: bunch of casino operators.
Speaker 1: SEC chair Gary Gensler has made no secret of his
Speaker 1: views on the crypto industry, repeatedly arguing that most tokens
Speaker 1: are subject to his agency's oversight and that swaths of
Speaker 1: the industry have been breaking the law.
Speaker 2: In the crypto space, it's largely built on a business
Speaker 2: model that's non compliant with the securities laws. People are
Speaker 2: coe mingling all of the customer funds there. It would
Speaker 2: be as if the New York Stock Exchange is also
Speaker 2: operating a hedge fund and trading against their customers.
Speaker 1: And now, in a one to two punch, the SEC
Speaker 1: is cracking down on the shadowy industry that burned investors
Speaker 1: with blow ups like the collapse of FTX last year,
Speaker 1: suing its two biggest players, Binance, the world's largest cryptocurrency exchange,
Speaker 1: and Coinbase Global, the largest US crypto exchange. CEO Brian
Speaker 1: Armstrong says Coinbase has taken a compliance first approach and
Speaker 1: in its complaint, the SEC has made no allegations of
Speaker 1: misappropriation of customer funds or wash trading.
Speaker 3: It's really debating this more technical legal question of are
Speaker 3: some of these assets commodities or are these securities? And
Speaker 3: I think that's something the court will have to decide
Speaker 3: to sort of get some legal press, some case law
Speaker 3: out there which will ultimately benefit us, because that's what
Speaker 3: we've been asking the SEC for for a long time,
Speaker 3: is how do we get more clarity? So if we
Speaker 3: need to go to the course to do it, it's
Speaker 3: not our first choice. We'd rather the regular had just
Speaker 3: published a clearer rule book.
Speaker 1: Joining me is securities law expert James Park, a professor
Speaker 1: at UCLA Law School. Two lawsuits against major crypto exchange
Speaker 1: is in two days. What's the message the SEA is sending?
Speaker 4: So I think that they've been very deliberate and thoughtful
Speaker 4: about bringing cases and building up the argument that they
Speaker 4: should regulate the industry. And I think part of what
Speaker 4: we're seeing here through enforcement is that the SEC is
Speaker 4: essentially making the case that regulation is necessary, and they
Speaker 4: are doing so in a way that is not too abrupt.
Speaker 4: I mean, I think they're also capitalizing on the SPX crisis,
Speaker 4: where we all see what can happen with an unregulated exchange,
Speaker 4: and so I think the argument that exchanges should be
Speaker 4: regulated and is going to fall in more sympathetic years.
Speaker 4: And I think that's why we see this one two punch.
Speaker 4: In these cases that the SEC has brought this week,
Speaker 4: they're sending a very clear message that they are here
Speaker 4: in the space and there is asserting their authority to
Speaker 4: regulate cryptos. And I think that they're trying to strike
Speaker 4: while the iron is hot.
Speaker 1: Are these cases, the one against Finance and the one
Speaker 1: against Coinbase? Are they similar in in some ways are
Speaker 1: completely different?
Speaker 4: There are some similarities. I would say the Binance case
Speaker 4: involves some more serious allegations of market manipulation and permitting
Speaker 4: market manipulation to happen. There's also an allegation in Binance
Speaker 4: about commingling of funds and the concern that customer funds
Speaker 4: that are deposited by US investors could be diverted by
Speaker 4: the parent company and the founder. And I think this
Speaker 4: clearly is meant to be analogous to what happened with FTX,
Speaker 4: where customer funds were diverted and used to make vet
Speaker 4: by an affiliated hedge fund. So I think the charges
Speaker 4: against Finance are more serious although a smaller percentage of
Speaker 4: Binance's operations are in the United States, and so the
Speaker 4: significance of the coin Base case is that Coinbase is
Speaker 4: primarily operating in the United States, but we don't have
Speaker 4: the same allegations of market manipulation and problematic commingling. This
Speaker 4: is really more of a basic argument that this is
Speaker 4: a securities exchange that is subjects to regulation under the
Speaker 4: Securities Exchange Act of nineteen thirty four, and that basic
Speaker 4: argument is made with respect to both Finance and Coinbase.
Speaker 1: The question of whether certain tokens are securities has hung
Speaker 1: over the crypto industry for years, and SEC chair Gary
Speaker 1: Gensler says most crypto products are no different from stocks, bonds,
Speaker 1: and other securities, and the crypto businesses have to follow
Speaker 1: the same rules as traditional stock and bond exchanges. Explain
Speaker 1: what he's looking.
Speaker 4: To do, you know, I think you can see a
Speaker 4: little more elaboration about his position in the two complaints
Speaker 4: that we saw filed by the SEC and Coinbase and Binance.
Speaker 4: And one of the things that the complaints highlights is
Speaker 4: that you know, if you go on to these websites
Speaker 4: and purchase crypto, you know the interfaces in the distinguishable
Speaker 4: from the website of Fidelity or Vanguard, where I'm buying
Speaker 4: stocks or bonds, and so I think that is a
Speaker 4: message they're trying to convey, is that fundamentally these assets
Speaker 4: are just like security. They are valued based upon assessments
Speaker 4: of the success of some underlying projects, some underlying business,
Speaker 4: and very important for investors to get fair prices when
Speaker 4: they're buying and selling these particular assets, and I think
Speaker 4: that's a similar concern that we see in stock markets.
Speaker 4: There's also the potential for manipulation. That's an allegation we
Speaker 4: saw in Binance, where market participants can insuade the price
Speaker 4: of the security through certain manipulative trading, meaning that investors
Speaker 4: are not getting fair prices. So there is a similar
Speaker 4: concern between stock markets and crypto assets markets. Now, I
Speaker 4: think the limitation though. One of the questions I had
Speaker 4: about both of these cases, and it's also a question
Speaker 4: about Genstler's position, is that the SEC only identifies about
Speaker 4: ten to fifteen crypto assets that it claims we're trading
Speaker 4: on these exchanges, that it clearly makes the case that
Speaker 4: they were securities under the so called Howie test, which
Speaker 4: governs whether or not something is or is not a security,
Speaker 4: and that's out of maybe two or three hundred different
Speaker 4: crypto assets that are trading on these exchanges. And so
Speaker 4: that to me since sort of an odd message where
Speaker 4: Genstler is saying, you know, most or virtually all crypto
Speaker 4: assets are securities, but then the case that they're filing,
Speaker 4: they only identify a small percentage of the crypto assets
Speaker 4: on these exchanges and make the case that they are securities. Now,
Speaker 4: the SEC does say that at a minimum of you
Speaker 4: ten to thirteen crypto assets that are trading on these
Speaker 4: exchanges that are security, so there may be more, but
Speaker 4: it seems a little bit odd to bring a case
Speaker 4: where you're only identifying a small percentage of the crypto
Speaker 4: assets on the exchanges when the chair is saying that
Speaker 4: virtually all of these crypto ascids are securities.
Speaker 1: On Bloomberg TV today there was an interview with coinbase
Speaker 1: CEO Brian Armstrong, and he said that they had had
Speaker 1: something like thirty meetings with the SEC over the last year.
Speaker 1: They got no feedback and then they got the wills notice,
Speaker 1: which tells you the SEC is going to bring an
Speaker 1: enforcement action. I mean, should the SEC be providing these
Speaker 1: companies with better guidance A great question.
Speaker 4: I think the SEC's argument is that, you know, you
Speaker 4: started up this exchange that has violated securities laws, and
Speaker 4: it's operating, and now you come in and say you
Speaker 4: want a register, right, Why should we accommodate you when
Speaker 4: you didn't come to us before you started this business
Speaker 4: which has billions and billions of dollars of transactions that
Speaker 4: are happening, and many, according to the SEC, are clearly
Speaker 4: in violation of securities laws, violate the law, and then
Speaker 4: you come in and try to fix things. You know,
Speaker 4: we should have some discretion as to what we do
Speaker 4: in a situation like that. You know, we have no
Speaker 4: obligation to accommodate you. We think we should bring enforcement
Speaker 4: because you went ahead without asking us and created a
Speaker 4: very very large business in this space that is violating
Speaker 4: federal securities law. That is the position of the SEC.
Speaker 4: I think Cooinbaso would say that that's not fair because
Speaker 4: the law's unclear. We didn't know that there were these
Speaker 4: ten or fifteen crypto assets that you consider to be securities,
Speaker 4: or at least we believed in good faith they were
Speaker 4: not securities. We've been trying to comply with the law,
Speaker 4: and so we want to talk to you and get
Speaker 4: some more parity about your position of what the law is.
Speaker 4: The reason we moved forward without your permission is that
Speaker 4: we sincerely believe that these assets were not securities, and
Speaker 4: to the extent that you believe that they are securities,
Speaker 4: you should give us a little bit of leeway in
Speaker 4: finding a mutually agreeable solution. So I think there are
Speaker 4: arguments on both sides as to the significance of these meetings.
Speaker 1: The reaction by both coinbase and Binance has been similar
Speaker 1: in that respect. Armstrong said the SEC under this chair
Speaker 1: has created regulation by enforcement instead of creating a clear
Speaker 1: rule book, and Binance said the lawsuit reflected the SEC's
Speaker 1: misguided and conscious refusal to provide clarity to the crypto industry.
Speaker 4: That's an argument that has been made for many decades.
Speaker 4: It first appeared back in the nineteen seventies with investigations
Speaker 4: relating to foreign bribes paid by public companies. The companies
Speaker 4: argued that it was not clear that these bribes violated
Speaker 4: securities law. The SEC brought a lot of enforcement cases,
Speaker 4: and there were some criticisms that they were regulating through
Speaker 4: prosecution or regulating from by enforcement. Now, I think the
Speaker 4: SEC's defense in this situation is that, you know, these
Speaker 4: are laws that are on the books, and they are
Speaker 4: deliberately vague. They are deliberately vague because we don't want
Speaker 4: to provide a roadmap to people who are committing fraud
Speaker 4: as to how they can evade regulation. Congress made the
Speaker 4: definition of a security deliberately vague because they understood there
Speaker 4: are going to be a lot of things that people
Speaker 4: would try to structure in order to avoid regulation through
Speaker 4: the federal securities laws. And that's how the federal securities
Speaker 4: laws are built, and so to some extent, some form
Speaker 4: of regulation by enforcement is inevitable. I would also say
Speaker 4: in the SEC's defense that the problem of crypto has
Speaker 4: been extremely challenging because if you, you know, think about
Speaker 4: the technology, you can create fifty billion crypto assets with
Speaker 4: a single program and distribute it widely, almost instantaneously to
Speaker 4: millions and millions of investors. This is a far different
Speaker 4: world from the old stock schemes, where at least you'd
Speaker 4: have to print out stock certificates and all people on
Speaker 4: the phone. The speed and magnitude of the development of
Speaker 4: crypto has been extraordinary, and I think the SEC has
Speaker 4: been scrambling over the last five to six years as
Speaker 4: to how they should respond with respect to the boom
Speaker 4: in crypto assets. So I think that the industry has
Speaker 4: a point to some extent that perhaps at times the
Speaker 4: SEC has been a little bit clumsy in terms of
Speaker 4: the message that it's sending. Maybe it's been a little
Speaker 4: bit deliberately unclear in a certain way because it wants
Speaker 4: to avoid being put into a box. The SEC's response is, well,
Speaker 4: that's just how the security laws are structured. I mean,
Speaker 4: we're just trying to understand the issue and problem, and
Speaker 4: it takes time for us to do this, and that's
Speaker 4: why we're not giving you clear answers. We're trying to
Speaker 4: figure it out first, and we don't want to preclude
Speaker 4: any regulation by taking premature positions that are not well
Speaker 4: thought out.
Speaker 1: Gensler has compared the crypto industry to the wild wild
Speaker 1: West at pure exaggeration or is that true in many respects.
Speaker 4: I think it is, and it's something to be concerned about.
Speaker 4: And I think retail investors, you know, young people for examples,
Speaker 4: are very sort of into these digital markets, and they're
Speaker 4: on social media where these coins are being touted, and
Speaker 4: there's a concern that a lot of money is going
Speaker 4: to be lost to people who are essentially stealing it,
Speaker 4: and that's not a good thing. And I think that
Speaker 4: there has been a tendency by the industry to push
Speaker 4: the boundaries, to push the boundaries of regulation, and I
Speaker 4: think that the idea that it's sort of the wild West,
Speaker 4: you know, it's an apt description.
Speaker 1: Looking at these cases, do you think that they're hard
Speaker 1: cases for the SEC to make?
Speaker 4: There are challenges with both cases. In the finance case,
Speaker 4: you have more problematic conduct, so that's in favor of
Speaker 4: the SDC. On the other hand, only a portion of
Speaker 4: finances operations are clearly in the United States, and so
Speaker 4: there's kind of a question of the limits of the
Speaker 4: SEC's jurisdiction and to what extent can they regulate operations
Speaker 4: that are completely overseas. The SEC is making the argument
Speaker 4: that these overseas operations clearly have an impact in the
Speaker 4: US because they are basically soliciting US investors and encouraging
Speaker 4: them to sign up for trading on foreign platforms, even
Speaker 4: though the foreign platforms are not really supposed to have
Speaker 4: US investors. There's some allegations that they're encouraging potential US
Speaker 4: clients to log in with an Internet connection that doesn't
Speaker 4: identify where you are logging in from in order to
Speaker 4: allow that person to get through the various screens that
Speaker 4: are meant to keep out US investors. So certainly there
Speaker 4: is an argument that some of these other operations should
Speaker 4: be subject to US jurisdiction, but I think that could
Speaker 4: be a bit complicated to establish coin Base. I think
Speaker 4: the challenge for the SDC is that, you know, they've
Speaker 4: only identified about ten or so crypto assets that it
Speaker 4: maintains are clearly securities, and so certainly Coinbase may try
Speaker 4: to dispute in court that these crypto assets are actually
Speaker 4: securities under the Howie test. They may dispute that the
Speaker 4: sec may have to defend its position crypto asset by
Speaker 4: crypto assets. And that's sort of the broader question of
Speaker 4: what does the SDC want in the coin Base case.
Speaker 4: Are they trying to say that Coinbase should be shut down?
Speaker 4: Is there an alternative registration option that they think could proceed?
Speaker 4: You know, could Coinbase argue, hey, we'll just stop allowing
Speaker 4: training in these ten to fifteen things that you see
Speaker 4: our security and if we do that, maybe we're not
Speaker 4: an exchange and so we don't have to register going forward.
Speaker 4: So I think that, you know, these are very carefully
Speaker 4: thought through, thoroughly investigated cases, but there could be some
Speaker 4: complications if these exchange decide to litigate.
Speaker 1: In course, maybe you can make this clear. If there
Speaker 1: are only those few in the coin Base case that
Speaker 1: the SEC is asserting our securities, is this then not
Speaker 1: an attempt by the SEC to assert its jurisdiction over
Speaker 1: the crypto industry.
Speaker 4: They are still saying, though, that your entire exchange has
Speaker 4: to register with US, and so that's a little bit
Speaker 4: puzzling to me. You know, I just read the complaints.
Speaker 4: I haven't really had a lot of time to think
Speaker 4: through the legal issues in doctrine, but that's something that
Speaker 4: seems a bit odd to me, because you know, clearly
Speaker 4: there are crypto assets trading on coinbase that are not securities.
Speaker 4: You know, my understanding is about half of the trading
Speaker 4: volume is bitcoin and ether, and the SEC has conceded
Speaker 4: that those are not securities, and so there's kind of
Speaker 4: this issue of, well, if only a portion of the
Speaker 4: trading on your exchange relates to securities, should you have
Speaker 4: to register with the SEC, and the SEC is saying, yes,
Speaker 4: you do, and so I think they are asserting authority
Speaker 4: over these exchanges. I think the question is whether or
Speaker 4: not there may be some questions about the legality of that,
Speaker 4: because you know, there might be intermediate solutions where you
Speaker 4: could kind of jettison those crypto assets that are securities
Speaker 4: and argue that you're outside of the SEC's jurisdiction. But
Speaker 4: I think it's clear the SEC in the lawsuits they
Speaker 4: do want to regulate coinbase and binance as stock exchanges
Speaker 4: securities exchanges.
Speaker 1: So if Congress doesn't act in this area, does that
Speaker 1: mean the courts will be deciding what is a security
Speaker 1: and what is not?
Speaker 4: Yeah, they'll be deciding a couple things, right, They'll be
Speaker 4: deciding case by case, are these crypto assets that the
Speaker 4: SEC claims are securities are they actually securities? And then secondly,
Speaker 4: they're going to decide the broader issue of when do
Speaker 4: you have to register with the SEC as a securities exchange.
Speaker 4: I think there are a couple of major legal issues
Speaker 4: here that the court will look at if Congress does
Speaker 4: not act and Coinbase and Binance decide to litigate these cases.
Speaker 1: Some people say these lawsuits could transform the crypto market.
Speaker 1: Do you think that's true.
Speaker 4: I think they could. If the SEC wins, then I
Speaker 4: think we're going to have a much more regulated crypto market.
Speaker 4: When you register as an exchange, the SEC has oversight,
Speaker 4: the power to shape the rules on the exchange and
Speaker 4: their obligations on the exchange to look for market manipulation
Speaker 4: in fraud. It's going to be much more of a
Speaker 4: regulated industry. If the SDC succeeds, that may not be
Speaker 4: such a bad thing for exchanges to comply with SDC oversights.
Speaker 4: And you know, this is not unprecedented in that, you know,
Speaker 4: you think about the New York Stock Exchange more than
Speaker 4: one hundred years ago. It starts out as a private
Speaker 4: association of individuals who are interested in making a more marketplace.
Speaker 4: It becomes, you know, this great institution, a private institution,
Speaker 4: and you have the federal government in the Securities Exchange
Speaker 4: Act of nineteen thirty four, basically taking jurisdiction over this
Speaker 4: private organization. And so we could have a similar dynamic
Speaker 4: here in the crypto industry. And that you know, in
Speaker 4: the long run, could that be a good thing for
Speaker 4: crypto It might be it might be something that gives
Speaker 4: the crypto markets a bit more legitimacy to the extent
Speaker 4: that they are regulating. I don't envy the SPC and
Speaker 4: sort of the difficulty of regulating this industry. So one
Speaker 4: of the questions that may come up with these cases
Speaker 4: is that these exchanges have been operating for some time.
Speaker 4: You know, why didn't the SEC act sooner? And I
Speaker 4: think the answer is if they had acted sooner, then
Speaker 4: there would have been criticism of the SEC that there's
Speaker 4: squelching entrepreneurship, there's squelching something that could be really, really good.
Speaker 4: And so I think that they've been very deliberate and
Speaker 4: thoughtful about bringing cases and building up the argument that
Speaker 4: they should regulate the industry. The SEC is taking advantage
Speaker 4: of what it believes is public perception that these crypto
Speaker 4: exchanges are problematic, and I think this comes out of
Speaker 4: the FTX collapse, and I think they're sending a message
Speaker 4: that they are going to regulate the space fairly heavily.
Speaker 4: And I think that they think that public perception is
Speaker 4: skeptical about the value of crypto and is very wary
Speaker 4: of the potential for fraud and manipulation at these exchanges.
Speaker 4: So I think they're sending a very clear message that
Speaker 4: they are here in the space.
Speaker 1: It'll be interesting to see where these two cases go.
Speaker 1: Thanks so much, Jim Best, Professor James Park of UCLA
Speaker 1: Law School. Revelations about Justice Clarence Thomas's real estate transactions
Speaker 1: and undisclosed luxury trips paid for by his billionaire friend
Speaker 1: and GOP donor Harlan crow have fueld debate about the
Speaker 1: conduct and ethics of the justices and the lack of
Speaker 1: oversight over the highest court in the land. A Bloomberg
Speaker 1: review of ethics policies across the federal government shows that
Speaker 1: the other two million federal workers would face a harder
Speaker 1: time accepting gifts far smaller than those bestowed on Thomas.
Speaker 1: Joining me is Bloomberg Legal reporter David Voriakis, who's been
Speaker 1: looking into this, start by refreshing our recollections about Justice
Speaker 1: Thomas's failure to report travel and other perks what was revealed.
Speaker 5: Pro Publica reported that Justice Thomas accepted several luxury gifts
Speaker 5: and perks from his billionaire friend Harlan Crowe. They included
Speaker 5: private jet travel to go on a vacation on Crowe's yacht,
Speaker 5: and they also included buying the home where his mother
Speaker 5: lives and still lives. And these gusts were not reported
Speaker 5: by Clarence Thomas, and that's caused quite a controversy about
Speaker 5: whether they should have been reported. He said that he
Speaker 5: did not need to report them because they were excluded
Speaker 5: under federal ethics regulations by the friendship exception that if
Speaker 5: this is a friend of his, that he did not
Speaker 5: have to report it. And Harlan Crowe has described a
Speaker 5: close personal friendship with Clarence Thomas. What made the pro
Speaker 5: public A reporting so powerful was the extent to which
Speaker 5: they had a very close friendship and the lavishness of
Speaker 5: the gifts that Harlan Crowe gave to Justice Thomas.
Speaker 1: So what's the rule for most federal employees as far
Speaker 1: as gifts are concerned or perks?
Speaker 5: Most federal employees are not allowed to accept gifts above
Speaker 5: a very modest level. In most cases, they are supposed
Speaker 5: to refuse those gifts, particularly if they're from someone outside
Speaker 5: the government, if they're from someone that they may have
Speaker 5: a matter pending before them. And there is a certain
Speaker 5: gift threshold level beyond which many thousands of employees are
Speaker 5: supposed to disclose those gifts. I would say that across
Speaker 5: the government, in the legislative branch, in Congress, in the
Speaker 5: executive branch, which is nearly two million employees, and in
Speaker 5: the judiciary, there is this so called friendship exception, which
Speaker 5: is that if you have a personal friend or a
Speaker 5: relative who gives you a gift, that is an exception.
Speaker 5: There are other exceptions as well. And what we report
Speaker 5: did was that in many instances, gifts or other types
Speaker 5: of ethical dilemmas that may arise for federal workers go
Speaker 5: before ethics officers who are following and interpreting the nineteen
Speaker 5: seventy eight Ethics and Government Act and later legislation and
Speaker 5: regulation that flowed from that. And that's the legislation that
Speaker 5: essentially determines what sort of gifts, what sort of travel,
Speaker 5: what sort of recusals or conflicts of interest, what sort
Speaker 5: of post employment opportunities people can accept. And for the
Speaker 5: vast majority of the federal workforce, they understand that those
Speaker 5: rules are in place and that they need to go
Speaker 5: through ethics officers in cases that you know, maybe or
Speaker 5: close calls or where the regulations need to be interpreted.
Speaker 5: What's different with Justice Thomas is while the Chief Justice
Speaker 5: John Roberts says that the nine Supreme Court justices follow
Speaker 5: the rules that are in place for the federal judiciary,
Speaker 5: there is no outside oversight of the Supreme Court and
Speaker 5: how those rules should be interpreted for the nine justices,
Speaker 5: and so that's caused a lot of controversy and obviously
Speaker 5: of pushing Congress to try to reform that, and there's
Speaker 5: been a subsequent pushback by Chief Justice Roberts, who essentially
Speaker 5: says that they adhere the highest standards of conduct.
Speaker 1: Thomas maintains he didn't have to disclose the luxuried trips
Speaker 1: because Crowe's a close friend, but for everyone, don't gifts
Speaker 1: totaling over four hundred and fifty dollars in one year
Speaker 1: from a single source, including friends, have to be disclosed.
Speaker 5: They do, And there are tens of thousands of federal
Speaker 5: employees who need to make annual financial disclosures, as do
Speaker 5: Thesereme Court justices and all the district judge and of
Speaker 5: Pella judges and members of Congress and senior executive branch employees,
Speaker 5: so they would have to disclose those on their financial forms.
Speaker 5: The difference with Supreme Court justices, is they don't have
Speaker 5: to go to an ethics official in their branch of
Speaker 5: government for permission. For instance, with Congress, which generally has
Speaker 5: more permissive ethics rules, because the notion is we want
Speaker 5: our legislators to be out in the community and meeting people.
Speaker 5: They need advance approval for many types of trips and
Speaker 5: gifts and honur area. And that's also the case in
Speaker 5: the executive branch, that they need advanced approval for various
Speaker 5: types of gifts and travel. With the judiciary, it's largely
Speaker 5: on them to decide do they need to disclose financial conflicts,
Speaker 5: say to litigants, do they need to disclose gifts on
Speaker 5: their disclosure forms? So to a large degree it's up
Speaker 5: to those judges.
Speaker 1: Let's go through a few possible gift situations and you'll
Speaker 1: tell me what's acceptable for different government employees. So a
Speaker 1: lobbyist offers to pay one hundred and twenty five dollars
Speaker 1: share in a private golf club's.
Speaker 5: Green fees, what we reported is across all three branches
Speaker 5: of government, that's not an acceptable situation because the general
Speaker 5: notion is that if someone has business before the government,
Speaker 5: it's unacceptable to take a gift from that person, because
Speaker 5: that could be seen as trying to improperly influence their decision,
Speaker 5: their action, or possible inaction in a way that's favorable
Speaker 5: to that lobbyist.
Speaker 1: This one strikes me as it probably happens a lot.
Speaker 1: A trade group offers two hundred dollar concert tickets. People
Speaker 1: are always throwing around tickets to different events.
Speaker 5: There's some fairly complicated rules on what events are permissible
Speaker 5: to accept. There are public events that are in some
Speaker 5: cases permissible, but not in a case where there's significant
Speaker 5: value attached to tickets, like in this hypothetical scenario. So again,
Speaker 5: in this case, all three branches of government would say
Speaker 5: that's not an acceptable gift, that if you want to
Speaker 5: take the tickets, you need to pay the fair market
Speaker 5: value for those tickets.
Speaker 1: And here's one that sounds very familiar, an invitation to
Speaker 1: fly on a jet owned by a friend for a
Speaker 1: quail hunting trip in Idaho.
Speaker 5: In that case, we said, essentially in all three branches
Speaker 5: of government in Congress, the executive branch, and the judiciary,
Speaker 5: that would be permissible because of the personal friendship aspect.
Speaker 5: But in Congress it would need the approval of the
Speaker 5: House Ethics Committee or the Senate Ethics Committee. In the
Speaker 5: executive branch, it would be permissible if the gift is
Speaker 5: motivated by friendship and not by business interests. And in
Speaker 5: the Judiciary, we said that it would be permissible, but
Speaker 5: that the flight would need to be disclosed on the
Speaker 5: judge's annual financial statement.
Speaker 1: And I understand that Justice Thomas is going to after
Speaker 1: the fact update his disclosures. So you talked to Walter Shabb,
Speaker 1: who ran the Office of Government Ethics for four years.
Speaker 5: Tell us what he said about He says, essentially that
Speaker 5: the practical effect is that ethics laws applied more rigorously
Speaker 5: to low level executive branch employees than to members of
Speaker 5: the Supreme Court. And he believes that's the travesty and
Speaker 5: that it's standing ethics on its head. And he believes
Speaker 5: that the higher up you are, the more you should
Speaker 5: be accountable, because you have more power to do harm.
Speaker 5: I had talked to a number of ethics officials across
Speaker 5: the government in working on this, and the idea is
Speaker 5: that you want an open government free from undisclosed financial
Speaker 5: or business interests that are operating in secrecy to influence
Speaker 5: the outcome of legislation or executive actions or court proceedings.
Speaker 5: These were all post Watergate era reforms, and there are
Speaker 5: several hundred ethics officers across the federal government who are
Speaker 5: working to try to ensure the government is as open
Speaker 5: as it could be. Now, of course, we know that
Speaker 5: in practice it doesn't always work that way. But what
Speaker 5: is driving the reform effort for the Supreme Court, which
Speaker 5: so far has resisted those efforts, is a similar notion
Speaker 5: that the Supreme Court should be just as open as
Speaker 5: the other branches of government.
Speaker 1: Thanks David, your article illuminates a real problem. That's Bloomberg
Speaker 1: Legal reporter David Voriakis coming up next a Tennessee anti
Speaker 1: dragshow law is deemed unconstitutional. This is Bloomberg and that's
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