1
00:00:03,200 --> 00:00:08,000
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

2
00:00:10,440 --> 00:00:14,640
Speaker 1: In a Seattle courtroom today, prosecutors asked Judge Richard Jones

3
00:00:14,640 --> 00:00:18,439
Speaker 1: to sentence by NaN's founder Jang Pen Joo to three

4
00:00:18,520 --> 00:00:22,200
Speaker 1: years in prison for allowing rampant money laundering on the

5
00:00:22,200 --> 00:00:27,600
Speaker 1: world's largest cryptocurrency exchange. Joao's lawyers pleaded with the judge

6
00:00:27,640 --> 00:00:30,960
Speaker 1: to spare him from prison. The judge gave neither side

7
00:00:31,000 --> 00:00:34,199
Speaker 1: what they wanted, sentencing Jiao to four months in prison.

8
00:00:34,920 --> 00:00:38,200
Speaker 1: Cz As He's called, pleaded guilty in November to one

9
00:00:38,280 --> 00:00:42,160
Speaker 1: count of failing to maintain an anti money laundering program

10
00:00:42,440 --> 00:00:45,920
Speaker 1: and stepped down as Binance agreed to pay four point

11
00:00:45,920 --> 00:00:50,519
Speaker 1: three billion dollars to settle related allegations. This closes a

12
00:00:50,600 --> 00:00:54,080
Speaker 1: long running probe for the Justice Department, which had wanted

13
00:00:54,120 --> 00:00:57,680
Speaker 1: to make an example of Jao in an industry rebounding

14
00:00:57,720 --> 00:01:01,240
Speaker 1: from a slew of high profile scandal. You remember Sam

15
00:01:01,280 --> 00:01:05,040
Speaker 1: Bankman Freed Joining me from Seattle is Bloomberg Legal reporter

16
00:01:05,160 --> 00:01:08,240
Speaker 1: Ava Benny Morrison, who was in the courtroom for the sentencing,

17
00:01:08,720 --> 00:01:10,840
Speaker 1: set the scene for us Eva sure So.

18
00:01:11,080 --> 00:01:13,600
Speaker 2: Changpeng Joo, who's better known as Caz panned up to

19
00:01:13,640 --> 00:01:16,880
Speaker 2: the Federal courthouse in Seattle just before nine am. He

20
00:01:16,959 --> 00:01:20,000
Speaker 2: had about half a dozen lawyers with him. He didn't

21
00:01:20,040 --> 00:01:23,399
Speaker 2: say much throughout the proceeding, other than getting up to

22
00:01:23,640 --> 00:01:25,759
Speaker 2: give a statement to the judge where he talked about

23
00:01:26,000 --> 00:01:28,480
Speaker 2: how remorseful he was, how he had made a mistake,

24
00:01:28,720 --> 00:01:31,759
Speaker 2: but he took full responsibility and that's why he had

25
00:01:31,760 --> 00:01:35,280
Speaker 2: traveled from his home in the UAE to America at

26
00:01:35,319 --> 00:01:38,240
Speaker 2: the end of last year to face the prosecution. While

27
00:01:38,240 --> 00:01:40,479
Speaker 2: he was sitting at the table, he was very still.

28
00:01:40,520 --> 00:01:43,720
Speaker 2: He's sitting up straight, He's staring at the judge. Seemed

29
00:01:43,760 --> 00:01:46,720
Speaker 2: to be absorbing everything that the judge and the prosecutors

30
00:01:46,800 --> 00:01:51,120
Speaker 2: were saying. CZ's mother and his sister Jessica were both

31
00:01:51,160 --> 00:01:53,400
Speaker 2: seated in the front row, and there were a few

32
00:01:53,520 --> 00:01:56,560
Speaker 2: other friends and supporters from the crypto industry that were

33
00:01:56,560 --> 00:01:57,560
Speaker 2: in the courthouse as well.

34
00:01:57,840 --> 00:02:00,880
Speaker 1: There was a plea deal here, but prosecute were asking

35
00:02:00,960 --> 00:02:04,720
Speaker 1: for twice the sentencing guidelines. What was their reasoning?

36
00:02:05,200 --> 00:02:08,120
Speaker 2: Fedrol Foski's were trying to make an example out of Cz.

37
00:02:08,680 --> 00:02:11,960
Speaker 2: He was the CEO of the world's biggest crypto company,

38
00:02:12,000 --> 00:02:15,240
Speaker 2: they argued, and he committed these crimes as part of

39
00:02:15,480 --> 00:02:18,640
Speaker 2: a plan to violate US laws that would allow him

40
00:02:18,680 --> 00:02:22,280
Speaker 2: to make more money allow big traders to continue using

41
00:02:22,360 --> 00:02:25,079
Speaker 2: Finance even though it didn't have an adequate anti money

42
00:02:25,160 --> 00:02:29,280
Speaker 2: laundering progres. So they were arguing for thirty six months

43
00:02:29,320 --> 00:02:31,920
Speaker 2: in prison to Cz to really send a message not

44
00:02:31,919 --> 00:02:35,200
Speaker 2: only to the crypto industry but to corporate leaders far

45
00:02:35,280 --> 00:02:37,360
Speaker 2: and wide that this sort of behavior would not be

46
00:02:37,400 --> 00:02:38,880
Speaker 2: tolerated and would be punished.

47
00:02:39,160 --> 00:02:43,240
Speaker 1: As you mentioned, the defense was asking for leniency and probation.

48
00:02:43,400 --> 00:02:44,400
Speaker 1: What was their argument.

49
00:02:44,720 --> 00:02:48,040
Speaker 2: The defense was pleading with the judge to spare Cz

50
00:02:48,200 --> 00:02:52,040
Speaker 2: from prison. They pointed to the fact that he voluntarily

51
00:02:52,120 --> 00:02:55,120
Speaker 2: came back to America to face these charges at the

52
00:02:55,160 --> 00:02:58,240
Speaker 2: end of last year. They said that he had cooperated

53
00:02:58,360 --> 00:03:01,600
Speaker 2: extensively with the government in this investigation and that he

54
00:03:01,680 --> 00:03:05,079
Speaker 2: directed Finance to cooperate with the DOJ as well. They

55
00:03:05,120 --> 00:03:09,600
Speaker 2: pointed out that Finance had settled several investigations with know

56
00:03:09,840 --> 00:03:14,160
Speaker 2: the DOJ, but the CFTC, the Treasury Department, which resulted

57
00:03:14,240 --> 00:03:17,480
Speaker 2: in the company paying four point three billion dollars worth

58
00:03:17,520 --> 00:03:20,120
Speaker 2: of fines. I think the biggest sticking point in the

59
00:03:20,240 --> 00:03:24,959
Speaker 2: arguments today was over whether a prison sentence was warranted

60
00:03:25,000 --> 00:03:27,800
Speaker 2: for this type of offense. CZ was essentially charged with

61
00:03:27,880 --> 00:03:31,200
Speaker 2: violating the Bank Secrecy Act, which sounds pretty minor on

62
00:03:31,240 --> 00:03:34,639
Speaker 2: the face of it, but attached to that crime were

63
00:03:35,640 --> 00:03:40,040
Speaker 2: arguably pretty serious circumstances. Because he didn't have an adequate

64
00:03:40,080 --> 00:03:44,280
Speaker 2: AML program at finance, terrorist organizations like al Qaeda and

65
00:03:44,440 --> 00:03:47,200
Speaker 2: Hamas were able to trade on the platform, and US

66
00:03:47,280 --> 00:03:51,440
Speaker 2: customers were trading with customers in sanctioned countries like Arah.

67
00:03:51,800 --> 00:03:54,040
Speaker 2: So the defense was really trying to narrow in on

68
00:03:54,040 --> 00:03:57,160
Speaker 2: the fact that this was just a banking violation, for

69
00:03:57,280 --> 00:04:00,360
Speaker 2: the prosecution was urging the judge to look at those

70
00:04:00,400 --> 00:04:02,080
Speaker 2: serious circumstances that were.

71
00:04:01,960 --> 00:04:02,600
Speaker 3: Attached to it.

72
00:04:02,960 --> 00:04:07,040
Speaker 1: Did the prosecution say or prove in any way that

73
00:04:07,280 --> 00:04:11,120
Speaker 1: CZ knew about what was happening on the platform, you know,

74
00:04:11,240 --> 00:04:13,440
Speaker 1: like the terrorist organization's trading.

75
00:04:14,400 --> 00:04:18,880
Speaker 2: No, the prosecution didn't say that CD personally knew that

76
00:04:19,279 --> 00:04:23,440
Speaker 2: there were the proceeds of crime moving across finance, and

77
00:04:23,520 --> 00:04:27,280
Speaker 2: the defense really highlighted that as well, saying, look, there

78
00:04:27,320 --> 00:04:29,960
Speaker 2: is no evidence here that CZ personally, as the sea

79
00:04:30,040 --> 00:04:34,440
Speaker 2: of the company, knew that illicit funds were moving across finance,

80
00:04:34,560 --> 00:04:36,560
Speaker 2: and so that needed to be taken into account.

81
00:04:36,920 --> 00:04:40,400
Speaker 1: How long did his statement to the judge last and

82
00:04:40,680 --> 00:04:42,120
Speaker 1: what part of it stood out to you.

83
00:04:43,440 --> 00:04:46,400
Speaker 2: CZ's statement to the judge only lasted a few minutes.

84
00:04:46,680 --> 00:04:50,240
Speaker 2: He started by saying that he was remorse and he

85
00:04:50,400 --> 00:04:53,360
Speaker 2: was sorry and he had made mistakes. He spoke about

86
00:04:53,360 --> 00:04:55,760
Speaker 2: how difficult it was for him to step down as

87
00:04:55,960 --> 00:04:59,240
Speaker 2: CEO of Finance, a company that he founded in China

88
00:04:59,360 --> 00:05:02,880
Speaker 2: several years go. He spoke about how he struggled to

89
00:05:02,920 --> 00:05:05,839
Speaker 2: accept that that was essentially the only course of action here.

90
00:05:06,120 --> 00:05:08,480
Speaker 2: But he spoke about how he still wants to make

91
00:05:08,520 --> 00:05:10,880
Speaker 2: a difference in the world and he's really focused on

92
00:05:11,240 --> 00:05:14,120
Speaker 2: philanthropy now that he's not leading Binance.

93
00:05:14,480 --> 00:05:16,960
Speaker 1: And it wasn't just what the prosecution asked for and

94
00:05:17,000 --> 00:05:20,360
Speaker 1: the defense asked for. Tell us about the other recommendations.

95
00:05:20,800 --> 00:05:21,359
Speaker 3: There was such a.

96
00:05:21,400 --> 00:05:25,320
Speaker 2: Big gap years between what each of the parties were recommending.

97
00:05:25,760 --> 00:05:28,840
Speaker 2: The prosecution wanted thirty six months probation and pre trial

98
00:05:28,880 --> 00:05:31,880
Speaker 2: services had recommended only five months. And then of course

99
00:05:31,920 --> 00:05:35,279
Speaker 2: the Z's defense team was asking for only probation and

100
00:05:35,320 --> 00:05:39,360
Speaker 2: the federal offenders and guidelines were between twelve and eighteen months.

101
00:05:39,480 --> 00:05:42,200
Speaker 2: So there was a lot of discrepancy there that the

102
00:05:42,320 --> 00:05:43,799
Speaker 2: judge had to navigate.

103
00:05:43,960 --> 00:05:46,120
Speaker 1: And so tell us about you know what the judge

104
00:05:46,120 --> 00:05:47,719
Speaker 1: said before he sentenced him.

105
00:05:48,320 --> 00:05:53,560
Speaker 2: The judge agreed with the defense that the prosecution's suggestion

106
00:05:53,760 --> 00:05:56,279
Speaker 2: that Caz should be sentenced to thirty six months in

107
00:05:56,320 --> 00:05:59,800
Speaker 2: prison was far too high. He said that he had

108
00:06:00,000 --> 00:06:02,640
Speaker 2: taken a lot of time to read through more than

109
00:06:02,680 --> 00:06:05,599
Speaker 2: one hundred and sixty letters admitted from CZ's friends and

110
00:06:05,720 --> 00:06:09,440
Speaker 2: family and co workers that painted this man in a

111
00:06:09,520 --> 00:06:12,880
Speaker 2: very favorable light, describing him as a family man, a

112
00:06:12,960 --> 00:06:16,760
Speaker 2: humble person, and just a hard working entrepreneur. He said

113
00:06:16,800 --> 00:06:20,160
Speaker 2: that yes, while this is a big Secrecy Act violation

114
00:06:20,720 --> 00:06:24,200
Speaker 2: and other cases involving that charge had resulted in probation,

115
00:06:24,520 --> 00:06:27,480
Speaker 2: there were some egregious actors here, like the fact that

116
00:06:27,720 --> 00:06:32,159
Speaker 2: Hamas and cyber criminals and dark web transactions were able

117
00:06:32,160 --> 00:06:34,919
Speaker 2: to take place on the platform because of it. I

118
00:06:34,960 --> 00:06:39,799
Speaker 2: think he just couldn't get pasted the Hamas al Kader

119
00:06:40,279 --> 00:06:43,320
Speaker 2: dark web element of this. I will say that it's

120
00:06:43,400 --> 00:06:47,159
Speaker 2: unusual for BSA cases to result in prison time, So

121
00:06:47,440 --> 00:06:50,680
Speaker 2: the judge was really sort of putting his neck out

122
00:06:50,720 --> 00:06:54,920
Speaker 2: here by handing down a sentence that did involve prison time.

123
00:06:55,440 --> 00:06:59,080
Speaker 2: It'll be interesting to see if this sets a precedent

124
00:06:59,320 --> 00:07:03,960
Speaker 2: for other BSA cases in white collar prosecutions in the future.

125
00:07:04,360 --> 00:07:07,200
Speaker 1: What always seems striking to me about this case is

126
00:07:07,240 --> 00:07:11,120
Speaker 1: that the UAE has no extradition treaty with the US.

127
00:07:11,560 --> 00:07:14,920
Speaker 1: Yet he flew here and turned himself in and then

128
00:07:15,200 --> 00:07:20,320
Speaker 1: prosecutors stopped him from returning home pending sentence. Did anyone

129
00:07:20,400 --> 00:07:25,000
Speaker 1: mention that this whole scenario might stop other people from

130
00:07:25,080 --> 00:07:26,680
Speaker 1: turning themselves in in the future.

131
00:07:27,200 --> 00:07:30,280
Speaker 2: Yes, the defense actually did make a point out of that,

132
00:07:30,480 --> 00:07:33,320
Speaker 2: saying cz has done all the right things here. He's

133
00:07:33,320 --> 00:07:37,520
Speaker 2: come back from Dubai, turned himself in, pleaded guilty to

134
00:07:37,560 --> 00:07:41,200
Speaker 2: the charge, agreed to pay personally a fifty million dollars

135
00:07:41,240 --> 00:07:44,160
Speaker 2: fign to the government. He has ticked all the boxes.

136
00:07:44,400 --> 00:07:45,440
Speaker 3: But the fact that.

137
00:07:45,400 --> 00:07:49,120
Speaker 2: The prosecution was then arguing for a prison sentence that

138
00:07:49,240 --> 00:07:52,960
Speaker 2: was well above the federal sentencing guidelines might actually deter

139
00:07:53,160 --> 00:07:56,480
Speaker 2: people from doing that in the future, and from deciding

140
00:07:56,520 --> 00:07:59,720
Speaker 2: to travel from a non extradition country to the US

141
00:07:59,760 --> 00:08:00,760
Speaker 2: to the charges.

142
00:08:01,640 --> 00:08:05,280
Speaker 1: But was there a feeling going in as to what

143
00:08:05,360 --> 00:08:07,320
Speaker 1: he might get? I mean, did anyone think you know

144
00:08:07,360 --> 00:08:10,160
Speaker 1: that he would walk out of there without any prison time.

145
00:08:10,520 --> 00:08:12,960
Speaker 2: I think he was certainly hoping that, but there really

146
00:08:13,040 --> 00:08:15,320
Speaker 2: was a feeling in the courtroom that this could go

147
00:08:15,400 --> 00:08:18,400
Speaker 2: either way. There could either be a very small amount

148
00:08:18,440 --> 00:08:20,880
Speaker 2: of prison time or no prison time at all. You

149
00:08:20,920 --> 00:08:24,080
Speaker 2: could tell that his lawyers had really prepared their arguments

150
00:08:24,120 --> 00:08:26,720
Speaker 2: and were putting in a pretty tough fight to try

151
00:08:26,720 --> 00:08:29,280
Speaker 2: and keep him out of prison. But the judge in

152
00:08:29,320 --> 00:08:32,679
Speaker 2: the end was persuaded by the prosecution's argument that this

153
00:08:32,880 --> 00:08:35,800
Speaker 2: just wasn't a run of the mill Bank Secrecy Act case.

154
00:08:35,920 --> 00:08:40,480
Speaker 2: This behavior, this crime allowed illicted actors to launder money

155
00:08:40,600 --> 00:08:43,400
Speaker 2: and use finance when they shouldn't have been able to

156
00:08:43,400 --> 00:08:43,760
Speaker 2: do that.

157
00:08:44,600 --> 00:08:47,560
Speaker 1: What happens now, Do I understand that he's not eligible

158
00:08:47,840 --> 00:08:50,880
Speaker 1: to go to a minimum security prison?

159
00:08:51,640 --> 00:08:54,720
Speaker 2: Yes, CZ, because he's not a US citizen, is then

160
00:08:55,000 --> 00:08:58,960
Speaker 2: eligible for a minimum security prison, and that's usually where

161
00:08:59,040 --> 00:09:02,280
Speaker 2: white collar defends didn't end up. So he has made

162
00:09:02,280 --> 00:09:05,240
Speaker 2: a request for the judge to be designated to a

163
00:09:05,280 --> 00:09:09,440
Speaker 2: facility called FDC stach here in Seattle. We don't know

164
00:09:09,520 --> 00:09:12,680
Speaker 2: when he needs to turn up and start that prison.

165
00:09:12,720 --> 00:09:15,920
Speaker 2: Sentence that dates still to be decided, but he will

166
00:09:15,960 --> 00:09:19,280
Speaker 2: spend four months there. His lawyer did say that he's

167
00:09:19,320 --> 00:09:21,280
Speaker 2: eager to just get it over and done with and

168
00:09:21,440 --> 00:09:24,199
Speaker 2: finally be able to return to Dubai to reunite with

169
00:09:24,280 --> 00:09:27,040
Speaker 2: his family. CZ and his lawyers are waiting to hear

170
00:09:27,080 --> 00:09:29,959
Speaker 2: from probation to decide on an appropriate date for him

171
00:09:29,960 --> 00:09:32,680
Speaker 2: to turn up to the prison and start his four

172
00:09:32,679 --> 00:09:33,280
Speaker 2: month sentence.

173
00:09:33,360 --> 00:09:36,760
Speaker 1: This is the second high profile sentencing in the crypto

174
00:09:37,559 --> 00:09:41,760
Speaker 1: industry recently. Was Sam Bankman Freed mentioned at all?

175
00:09:42,360 --> 00:09:45,560
Speaker 2: Sam Bateman Freed did get a mention. Actually, when the

176
00:09:45,559 --> 00:09:49,480
Speaker 2: prosecutor was referring to the arguments that Z's lawyers had

177
00:09:49,880 --> 00:09:53,200
Speaker 2: submitted to the court, he said, look, we're not alleging

178
00:09:53,320 --> 00:09:56,400
Speaker 2: that Cz is a Sam Bateman Freed. We're not saying

179
00:09:56,400 --> 00:09:58,400
Speaker 2: that he's a monster, and we're not trying to kill

180
00:09:58,400 --> 00:10:01,640
Speaker 2: the crypto industry. We are saying that this is a

181
00:10:01,720 --> 00:10:05,520
Speaker 2: serious crime because he didn't have an IMO program and

182
00:10:05,559 --> 00:10:08,280
Speaker 2: that allowed some of the ILICID actives and terrorists to

183
00:10:08,320 --> 00:10:09,320
Speaker 2: gain access.

184
00:10:08,960 --> 00:10:09,360
Speaker 3: To buy it.

185
00:10:09,800 --> 00:10:13,160
Speaker 1: Thanks so much, Ava, that's Bloomberg Legal reporter Ava. Benny

186
00:10:13,240 --> 00:10:16,480
Speaker 1: Morrison Jow will enter the history books as the richest

187
00:10:16,520 --> 00:10:20,280
Speaker 1: person ever to do time in US federal lockup. His

188
00:10:20,440 --> 00:10:24,320
Speaker 1: ownership of Binance and an estimated forty three billion dollar

189
00:10:24,440 --> 00:10:28,559
Speaker 1: personal fortune tied to it, remain intact, and his wealth

190
00:10:28,679 --> 00:10:32,880
Speaker 1: is likely to grow even more as Binance's business accelerates

191
00:10:33,240 --> 00:10:37,320
Speaker 1: amid crypto's latest bull run. In fact, his wealth balloon

192
00:10:37,440 --> 00:10:41,600
Speaker 1: by twenty five billion dollars as the crypto industry recovered

193
00:10:41,679 --> 00:10:44,640
Speaker 1: last year, and he's currently ranked as the thirty eight

194
00:10:44,760 --> 00:10:48,360
Speaker 1: richest person in the world according to the Bloomberg Billionaire's Index.

195
00:10:48,800 --> 00:10:52,439
Speaker 1: And despite having to relinquish the chief executive title as

196
00:10:52,559 --> 00:10:55,480
Speaker 1: part of his deal with the government, his influence on

197
00:10:55,520 --> 00:10:58,120
Speaker 1: the company is hard to miss. Its new board of

198
00:10:58,160 --> 00:11:01,800
Speaker 1: directors is dominated by his devoted friends, and the mother

199
00:11:01,840 --> 00:11:04,360
Speaker 1: of three of his children plays a major role in

200
00:11:04,480 --> 00:11:08,320
Speaker 1: running its operations. Coming up next on The Bloomberg Lawn Show,

201
00:11:09,440 --> 00:11:13,280
Speaker 1: the FTC has banned non compete clauses which prevent workers

202
00:11:13,320 --> 00:11:17,640
Speaker 1: from transferring to other companies in the same industry. However,

203
00:11:17,720 --> 00:11:20,480
Speaker 1: companies may not have to rush to comply with that

204
00:11:20,679 --> 00:11:25,160
Speaker 1: FTC non compete ban. Will tell you why I'm June Grossewin.

205
00:11:25,240 --> 00:11:29,840
Speaker 1: This is Bloomberg. The Federal Trade Commission's rule banning most

206
00:11:29,920 --> 00:11:34,320
Speaker 1: non compete clauses that prohibit workers from switching jobs within

207
00:11:34,360 --> 00:11:37,839
Speaker 1: an industry is scheduled to take effect one hundred twenty

208
00:11:37,920 --> 00:11:42,440
Speaker 1: days from its publication on April twenty third. However, standing

209
00:11:42,440 --> 00:11:45,319
Speaker 1: in the way are lawsuits by the Chamber of Commerce

210
00:11:45,440 --> 00:11:49,120
Speaker 1: and others seeking to block the rule, arguing the FTC

211
00:11:49,280 --> 00:11:52,520
Speaker 1: doesn't have the authority to issue it, and a judge

212
00:11:52,559 --> 00:11:56,200
Speaker 1: could issue a preliminary injunction stopping the rule from going

213
00:11:56,240 --> 00:12:01,120
Speaker 1: into effect while the litigation proceeds. Me Is Kimberly Carson,

214
00:12:01,200 --> 00:12:04,439
Speaker 1: a partner Quinn Emmanuel, and an expert on non competes

215
00:12:04,960 --> 00:12:08,240
Speaker 1: tell us about this near total ban on non competes.

216
00:12:08,960 --> 00:12:13,240
Speaker 4: Sure so, last week, the Federal Trade Commission issued a

217
00:12:13,320 --> 00:12:19,560
Speaker 4: rule banning non compete nationwide. The rule essentially prohibits employers

218
00:12:19,720 --> 00:12:24,520
Speaker 4: from doing three things after the effective date, one enforcing

219
00:12:24,640 --> 00:12:28,719
Speaker 4: existing non competes with workers, two entering into new non

220
00:12:28,800 --> 00:12:34,000
Speaker 4: competes with workers, and three representing that workers are subjects

221
00:12:34,040 --> 00:12:38,160
Speaker 4: to non compete clauses. The rule also has a notice

222
00:12:38,200 --> 00:12:41,959
Speaker 4: requirement that essentially requires employers to give notice, by the

223
00:12:42,000 --> 00:12:45,800
Speaker 4: rule of effective dates to every effective worker who's found

224
00:12:45,840 --> 00:12:48,640
Speaker 4: by an existing non compete that the non compete won't

225
00:12:48,640 --> 00:12:49,960
Speaker 4: be enforced in the future.

226
00:12:50,880 --> 00:12:54,560
Speaker 1: Is this ban expected to have a widespread effect on

227
00:12:54,600 --> 00:12:56,120
Speaker 1: the workforce.

228
00:12:56,240 --> 00:13:01,280
Speaker 4: Yes, certainly if you read the FDC's rule and company guidance.

229
00:13:01,760 --> 00:13:06,840
Speaker 4: The FDC's intention is for it to apply to all workers,

230
00:13:07,040 --> 00:13:13,000
Speaker 4: including employees, independent contractors, externs, interns, volunteers, really anyone who

231
00:13:13,080 --> 00:13:18,400
Speaker 4: works for someone, whether paid or unpaid, with certain limited exceptions.

232
00:13:18,480 --> 00:13:22,439
Speaker 4: And the rule is also intended to apply to all employers,

233
00:13:22,679 --> 00:13:26,040
Speaker 4: regardless of size, regardless of whether they're private or public,

234
00:13:26,440 --> 00:13:29,840
Speaker 4: really all people, partnership and companies that are within the

235
00:13:30,040 --> 00:13:35,320
Speaker 4: SEC's jurisdiction. While there's an exception for senior executives with

236
00:13:35,400 --> 00:13:39,319
Speaker 4: existing non competes, the FTC estimates, but that will apply

237
00:13:39,440 --> 00:13:41,520
Speaker 4: to less than one percent of workers.

238
00:13:42,040 --> 00:13:45,440
Speaker 1: President Biden and the Biden administration has been pushing for

239
00:13:45,600 --> 00:13:49,760
Speaker 1: non competes, and we've heard a lot about the positive effects.

240
00:13:49,880 --> 00:13:52,200
Speaker 1: I mean, what are the downsides of this ban?

241
00:13:52,720 --> 00:13:54,880
Speaker 4: I think there's a lot of concern at the business

242
00:13:54,960 --> 00:13:59,960
Speaker 4: level about how companies can continue to protect trade secrets,

243
00:14:00,280 --> 00:14:05,720
Speaker 4: client goodwill, employee goodwill, their investment in human capital in

244
00:14:05,760 --> 00:14:11,000
Speaker 4: the absence of noncompete. So that's certainly a concern. And

245
00:14:11,080 --> 00:14:14,800
Speaker 4: you see that reference in the handful of legal challenges

246
00:14:15,400 --> 00:14:17,640
Speaker 4: that have been filed for the rule so far, including

247
00:14:17,679 --> 00:14:20,560
Speaker 4: by the US Chamber of Commerce. There are, of course

248
00:14:20,760 --> 00:14:25,280
Speaker 4: other contractual and legal mechanisms to protect those sorts of interest,

249
00:14:25,480 --> 00:14:29,360
Speaker 4: and the sec itself pointed out some of them, and

250
00:14:29,400 --> 00:14:31,400
Speaker 4: so that's what a lot of the discussion and focus

251
00:14:31,400 --> 00:14:33,360
Speaker 4: has down at the business level that I've been seeing.

252
00:14:33,800 --> 00:14:36,720
Speaker 1: You mentioned the lawsuit the Chamber of Commerce and other

253
00:14:36,760 --> 00:14:40,640
Speaker 1: business groups are suing explain the grounds for their lawsuit.

254
00:14:40,960 --> 00:14:45,280
Speaker 4: So the US Chamber of Commerce has filed the lawsuit

255
00:14:45,400 --> 00:14:50,520
Speaker 4: in federal court in Texas challenging the rule. They're asking

256
00:14:50,560 --> 00:14:54,080
Speaker 4: the court to issue in order staying the rules effective, dates,

257
00:14:54,160 --> 00:14:58,320
Speaker 4: in joining the FTC's enforcement of the rule, or both,

258
00:14:59,080 --> 00:15:03,520
Speaker 4: and they've raised various arguments in support, including that the

259
00:15:03,600 --> 00:15:08,520
Speaker 4: non compete exceeds the spc's statutory authority. They've argued that

260
00:15:08,560 --> 00:15:11,840
Speaker 4: the STC doesn't have the authority to prohibit unfair methods

261
00:15:11,840 --> 00:15:15,840
Speaker 4: of competition through rulemaking. They've also argued that the rule

262
00:15:15,960 --> 00:15:22,440
Speaker 4: is unlawfully retroactive, and they've also taken issue with the

263
00:15:22,480 --> 00:15:26,840
Speaker 4: evidence that the SPC has cited in support of the rule.

264
00:15:27,200 --> 00:15:31,120
Speaker 4: The retroactivity point is interesting. I've seen as an employment

265
00:15:31,160 --> 00:15:34,320
Speaker 4: litigator and advisor to companies that are looking at what

266
00:15:34,400 --> 00:15:37,480
Speaker 4: this rule means for their business. A lot of discussions

267
00:15:37,480 --> 00:15:40,240
Speaker 4: and focused on the retroactivity point. I will say that

268
00:15:40,320 --> 00:15:43,800
Speaker 4: the rule, once effective, will apply not only to future

269
00:15:43,880 --> 00:15:47,440
Speaker 4: non compete but also non competes already in existence as

270
00:15:47,440 --> 00:15:50,920
Speaker 4: of the effective date. The rule says that pretty expressly.

271
00:15:51,320 --> 00:15:55,760
Speaker 4: There is, however, an express carve out for claims that

272
00:15:55,880 --> 00:15:58,360
Speaker 4: accrued before the effective date of the rule. So what

273
00:15:58,400 --> 00:16:01,200
Speaker 4: that means is if a lawyer is alleging that a

274
00:16:01,280 --> 00:16:04,480
Speaker 4: worker accepted employment in breach of a nine compete and

275
00:16:04,520 --> 00:16:06,760
Speaker 4: the breach occurred before the effective date of the rule,

276
00:16:07,160 --> 00:16:10,000
Speaker 4: that will be outside the scope of the rule. And

277
00:16:10,240 --> 00:16:12,200
Speaker 4: because of that carve out, the FDC has said in

278
00:16:12,240 --> 00:16:15,720
Speaker 4: the rulemaking guidance that they think that the rule is

279
00:16:15,760 --> 00:16:19,960
Speaker 4: not impermissively retroactive, but you know, business groups in the

280
00:16:20,040 --> 00:16:21,760
Speaker 4: Chamber of Commerce disagree.

281
00:16:22,120 --> 00:16:24,800
Speaker 1: Is this a strong challenge to the ban?

282
00:16:25,520 --> 00:16:28,640
Speaker 4: From what I've seen, a lot of practitioners in the

283
00:16:28,680 --> 00:16:33,560
Speaker 4: space anticipate that there could be a stay or injunction

284
00:16:34,040 --> 00:16:37,760
Speaker 4: of the rule tending these lawsuits, including the Chamber of

285
00:16:37,760 --> 00:16:43,440
Speaker 4: Commerce's challenge, which could delay the rule out and timeline

286
00:16:43,720 --> 00:16:45,000
Speaker 4: of compliance for the rule.

287
00:16:45,480 --> 00:16:48,000
Speaker 1: I want to talk more about the rule. You know,

288
00:16:48,120 --> 00:16:51,080
Speaker 1: we've had a story on Bloomberg that Wall Street traders

289
00:16:51,120 --> 00:16:54,280
Speaker 1: and money managers could be in for disappointment if they're

290
00:16:54,320 --> 00:16:56,880
Speaker 1: hoping that this rule will clear the way for them

291
00:16:56,960 --> 00:17:01,960
Speaker 1: to go to higher paying competitors. Tell us about garden leaves.

292
00:17:02,480 --> 00:17:07,520
Speaker 4: So there is express language in the rule that says

293
00:17:07,560 --> 00:17:10,600
Speaker 4: that the rule does not apply to garden lease agreements.

294
00:17:10,720 --> 00:17:14,879
Speaker 4: A garden leave agreement is essentially an agreement whereby the

295
00:17:14,920 --> 00:17:18,679
Speaker 4: worker is still employed and still being paid for some

296
00:17:18,920 --> 00:17:23,000
Speaker 4: period after they've given notice of resignation. So during that period,

297
00:17:23,000 --> 00:17:25,080
Speaker 4: there's still an employee, they're still getting paid, they still

298
00:17:25,119 --> 00:17:28,960
Speaker 4: have contractual and produciary duties. And the SEC has advised

299
00:17:28,960 --> 00:17:32,280
Speaker 4: that that type of garden leave agreement is not an

300
00:17:32,320 --> 00:17:35,879
Speaker 4: impermissible non compete under the rule. And that's because non

301
00:17:36,000 --> 00:17:39,679
Speaker 4: competes really govern the period after your employment ends, whereas

302
00:17:39,800 --> 00:17:42,920
Speaker 4: a garden leave agreement is not a post employment restriction.

303
00:17:43,680 --> 00:17:46,000
Speaker 4: That is a period where you're still an employee. So

304
00:17:46,320 --> 00:17:49,720
Speaker 4: for the bankers out there, to the extent their employer

305
00:17:49,800 --> 00:17:53,160
Speaker 4: is covered and under FTC jurisdiction, and they're looking at

306
00:17:53,359 --> 00:17:56,399
Speaker 4: garden leave arrangements those are expressly outside the scope of

307
00:17:56,400 --> 00:17:57,400
Speaker 4: the non compete.

308
00:17:57,080 --> 00:18:00,720
Speaker 1: Band have been litigated because it does seem like it's

309
00:18:00,840 --> 00:18:04,760
Speaker 1: preventing a worker from going somewhere else.

310
00:18:05,440 --> 00:18:07,960
Speaker 4: You know, it's an interesting question. It doesn't come up

311
00:18:07,960 --> 00:18:10,119
Speaker 4: a lot. I do a lot of research of covenant

312
00:18:10,119 --> 00:18:14,240
Speaker 4: litigation all over the country and contractual notice of termination

313
00:18:14,359 --> 00:18:16,959
Speaker 4: periods where you have to say, you know, give sixty

314
00:18:17,040 --> 00:18:19,880
Speaker 4: or ninety day notice that you're leaving, or garden leave

315
00:18:19,880 --> 00:18:23,320
Speaker 4: agreements where you know your termination, your your resignation is

316
00:18:23,320 --> 00:18:26,679
Speaker 4: not effective for some period. Those are not often litigated.

317
00:18:26,880 --> 00:18:31,040
Speaker 4: I think there's a notion of fairness because employees are

318
00:18:31,080 --> 00:18:33,960
Speaker 4: being paid to sit on the beach for that period

319
00:18:34,240 --> 00:18:39,119
Speaker 4: and essentially cooperate with transition requirements, So those aren't litigated

320
00:18:39,280 --> 00:18:44,000
Speaker 4: as frequently as post employment restrictions. That said, I think

321
00:18:44,040 --> 00:18:47,560
Speaker 4: that you know, if an employee is inclined to say,

322
00:18:48,080 --> 00:18:50,719
Speaker 4: I want my resignation to be effective immediately, I'm not

323
00:18:50,760 --> 00:18:54,439
Speaker 4: going to accept compensations for my notice period or my

324
00:18:54,480 --> 00:18:56,880
Speaker 4: garden leaf period. I want to get immediately to work.

325
00:18:57,320 --> 00:19:00,959
Speaker 4: That could be an interesting question for adjudication court, but

326
00:19:01,000 --> 00:19:03,959
Speaker 4: that doesn't come up very often in my practice.

327
00:19:04,880 --> 00:19:07,600
Speaker 1: So yeah, they're paid to sit on the beach, not

328
00:19:07,640 --> 00:19:10,760
Speaker 1: paid to sit in the garden. This name seems a

329
00:19:10,800 --> 00:19:13,399
Speaker 1: little bit odd to me. Do you know where that

330
00:19:13,520 --> 00:19:14,240
Speaker 1: name came from?

331
00:19:14,720 --> 00:19:17,240
Speaker 4: My understanding has always been that it's a British concept.

332
00:19:17,400 --> 00:19:19,760
Speaker 1: Okay, all right, they're sitting in the garden and we're

333
00:19:19,800 --> 00:19:24,000
Speaker 1: sitting on the beach. Yeah, so this is a national

334
00:19:24,040 --> 00:19:27,840
Speaker 1: band by the FTC. Some states also have bands, I

335
00:19:27,840 --> 00:19:30,320
Speaker 1: mean do A lot of states have bands on non competes.

336
00:19:31,640 --> 00:19:34,879
Speaker 4: A lot of states have restrict of covenant statutes, and

337
00:19:34,960 --> 00:19:38,840
Speaker 4: that trend has been increasing over the years. Obviously, when

338
00:19:39,119 --> 00:19:41,919
Speaker 4: you think about the state bans, the first state that

339
00:19:42,000 --> 00:19:46,040
Speaker 4: comes to mind is California. They have probably the strongest

340
00:19:46,119 --> 00:19:50,600
Speaker 4: language and their various statutes restricting post employment restrictions. But

341
00:19:50,680 --> 00:19:54,760
Speaker 4: there are several other states that are relatively hostile to

342
00:19:55,320 --> 00:19:58,760
Speaker 4: enforcing restrict of covenants. And then there are many other

343
00:19:58,880 --> 00:20:03,960
Speaker 4: states that have some limits on research of covenance. For example,

344
00:20:04,080 --> 00:20:06,720
Speaker 4: you know, states might ban them for low wage workers.

345
00:20:06,960 --> 00:20:09,680
Speaker 4: In terms of how this rule interacts with state statutes

346
00:20:09,720 --> 00:20:13,560
Speaker 4: and regulations, the rule doesn't limit or affect enforcement of

347
00:20:13,600 --> 00:20:16,800
Speaker 4: state laws that restrict none competes, where those state laws

348
00:20:16,800 --> 00:20:21,080
Speaker 4: don't conflict with the rule. However, if state laws do conflict,

349
00:20:21,760 --> 00:20:25,119
Speaker 4: so for example, state laws permit none competes, then the

350
00:20:25,240 --> 00:20:27,800
Speaker 4: FTC's rule would would preheunce them.

351
00:20:28,359 --> 00:20:33,399
Speaker 1: Some have predicted that the FTC's nationwide ban will spur

352
00:20:33,760 --> 00:20:38,159
Speaker 1: more states to pass laws limiting restrictive covenants. I mean,

353
00:20:38,160 --> 00:20:40,320
Speaker 1: do you think that's likely. If there's a federal ban,

354
00:20:40,760 --> 00:20:42,760
Speaker 1: why would the states need their own bans?

355
00:20:43,119 --> 00:20:46,200
Speaker 4: I think that's right. I think states would only need

356
00:20:46,280 --> 00:20:50,680
Speaker 4: to have legislation to the extent they're interested in, even

357
00:20:50,760 --> 00:20:54,399
Speaker 4: broader restrictions than the FDC ban. The FDC ban, on

358
00:20:54,480 --> 00:20:58,040
Speaker 4: its faces is pretty broad. I think that over the

359
00:20:58,119 --> 00:21:01,359
Speaker 4: last few years you have seen growing interest at the

360
00:21:01,400 --> 00:21:06,520
Speaker 4: state level in restrict of covenant limits, and this national

361
00:21:07,119 --> 00:21:09,560
Speaker 4: rule that was supposed over a year ago has certainly,

362
00:21:10,040 --> 00:21:14,800
Speaker 4: I think changed the tone of that discourse. That said,

363
00:21:14,880 --> 00:21:18,920
Speaker 4: given the various legal challenges to the spc's rule and

364
00:21:19,359 --> 00:21:23,240
Speaker 4: uncertainty about when it will go into effects and whether

365
00:21:23,280 --> 00:21:25,480
Speaker 4: it will be stayed or enjoined by a court, could

366
00:21:25,520 --> 00:21:29,639
Speaker 4: still you know, inspire states to take their own actions

367
00:21:29,680 --> 00:21:33,000
Speaker 4: with respects to retrich of covenant limits or bans.

368
00:21:33,359 --> 00:21:37,760
Speaker 1: So employers in states that don't have these bands in place.

369
00:21:38,680 --> 00:21:40,560
Speaker 1: Do they have some time now, sort of like an

370
00:21:40,640 --> 00:21:44,280
Speaker 1: interim time to still leave the non competes in and

371
00:21:44,359 --> 00:21:45,320
Speaker 1: see what happens.

372
00:21:46,040 --> 00:21:48,680
Speaker 4: Yeah, so the rule is not effective yet. The rule

373
00:21:48,760 --> 00:21:51,040
Speaker 4: says that it will become effective one hundred and twenty

374
00:21:51,119 --> 00:21:54,200
Speaker 4: days after it's published in the Federal Register, but as

375
00:21:54,240 --> 00:21:56,920
Speaker 4: of now, it's not likely to take effects before September

376
00:21:56,920 --> 00:22:01,000
Speaker 4: twenty twenty four. That means compliance isn't required until at

377
00:22:01,000 --> 00:22:04,359
Speaker 4: the earliest September twenty twenty four. And has discussed that

378
00:22:04,440 --> 00:22:07,920
Speaker 4: devine could get pushed as the results of court challenges.

379
00:22:08,160 --> 00:22:12,879
Speaker 4: So in the meantime, companies do have time right now

380
00:22:13,040 --> 00:22:16,280
Speaker 4: to assess the rule, talk to lawyers about what it

381
00:22:16,320 --> 00:22:20,040
Speaker 4: does and doesn't require, consider how the rule might impact

382
00:22:20,160 --> 00:22:24,400
Speaker 4: their business, do an assessment of workers with non compete

383
00:22:24,720 --> 00:22:26,800
Speaker 4: workers that may or may not fall in the senior

384
00:22:26,800 --> 00:22:30,199
Speaker 4: executive exception, and really start to plan for how they

385
00:22:30,240 --> 00:22:33,240
Speaker 4: want to handle this going forward, how they might notify

386
00:22:33,359 --> 00:22:36,800
Speaker 4: workers when and if it becomes effective, Whether they might

387
00:22:36,840 --> 00:22:41,760
Speaker 4: want to incorporate alternative contractual mechanisms in their contracts with

388
00:22:41,880 --> 00:22:45,439
Speaker 4: employees to protect trade secrets. Those are all things that

389
00:22:45,520 --> 00:22:48,719
Speaker 4: I think employers should be thinking about right now as

390
00:22:48,800 --> 00:22:51,120
Speaker 4: we approach the effective date over the summer.

391
00:22:51,200 --> 00:22:54,240
Speaker 1: And we'll be watching to see if that judge in

392
00:22:54,320 --> 00:22:58,880
Speaker 1: Texas issues of preliminary injunction stopping the rule from going

393
00:22:59,000 --> 00:23:03,399
Speaker 1: to effect until the litigation is complete. Thanks so much, Kim.

394
00:23:03,760 --> 00:23:07,840
Speaker 1: That's Kimberly Carson, a partner at Quinn Emmanuel. I'm June Grosso.

395
00:23:07,840 --> 00:23:11,400
Speaker 1: When you're listening to Bloomberg. The jury in Donald Trump's

396
00:23:11,440 --> 00:23:15,119
Speaker 1: hush money trial heard the most vivid testimony yet about

397
00:23:15,119 --> 00:23:18,840
Speaker 1: payments to silence a former playboy playmate and an adult

398
00:23:18,880 --> 00:23:22,960
Speaker 1: film star before the twenty sixteen election. Both claim to

399
00:23:23,000 --> 00:23:26,960
Speaker 1: have had affairs with the billionaire developer. Los Angeles attorney

400
00:23:27,040 --> 00:23:30,280
Speaker 1: Keith Davidson took the witness stand to recount how he

401
00:23:30,359 --> 00:23:34,000
Speaker 1: represented the former playmate Karen McDougall, who was paid one

402
00:23:34,080 --> 00:23:37,520
Speaker 1: hundred and fifty thousand dollars, and Stormy Daniels, who got

403
00:23:37,520 --> 00:23:41,400
Speaker 1: one hundred thirty thousand dollars to keep quiet. Before Davidson

404
00:23:41,440 --> 00:23:45,200
Speaker 1: took the stand, Judge Van Mrschan find the former president

405
00:23:45,320 --> 00:23:48,480
Speaker 1: one thousand dollars for each of nine violations of the

406
00:23:48,560 --> 00:23:52,040
Speaker 1: gag order he said defended is hereby warned that the

407
00:23:52,080 --> 00:23:57,000
Speaker 1: Court will not tolerate continued wilful violations of its lawful orders,

408
00:23:57,320 --> 00:24:00,920
Speaker 1: and that, if necessary and appropriate under the so circumstances,

409
00:24:01,240 --> 00:24:05,879
Speaker 1: it will impose an incarceratory punishment. Trump's use of social media,

410
00:24:06,000 --> 00:24:09,800
Speaker 1: news interviews, and campaign speeches has created a challenge for

411
00:24:09,960 --> 00:24:13,800
Speaker 1: judges overseeing his many legal cases as they weigh the

412
00:24:13,920 --> 00:24:17,919
Speaker 1: impact of his public comments on the proceedings against his

413
00:24:18,000 --> 00:24:22,160
Speaker 1: free speech rights things against his free speech rights. Joining

414
00:24:22,200 --> 00:24:25,320
Speaker 1: me is Bloomberg legal reporter Patricia Hurtado, who's covering the

415
00:24:25,359 --> 00:24:29,720
Speaker 1: trial for US pat tell us about the judges finding

416
00:24:29,800 --> 00:24:33,080
Speaker 1: Trump nine thousand dollars and warning him about prison time.

417
00:24:33,240 --> 00:24:37,400
Speaker 3: Judge Murshawn has had a pending request from the district

418
00:24:37,400 --> 00:24:43,040
Speaker 3: attorney to basically find Trump in contempt for repeatedly violating

419
00:24:43,119 --> 00:24:49,000
Speaker 3: his gag order, and today Judge Murshan found that nine

420
00:24:49,080 --> 00:24:53,600
Speaker 3: violations of the gag by making comments about Stormy Daniels

421
00:24:54,000 --> 00:24:55,280
Speaker 3: and Michael cowen Her.

422
00:24:55,320 --> 00:24:55,800
Speaker 1: Both.

423
00:24:57,080 --> 00:25:02,080
Speaker 3: Proposed key prosecution witnesses a against him, commenting about them,

424
00:25:02,359 --> 00:25:07,199
Speaker 3: commenting on their veracity, making comments about David Pecker, the

425
00:25:07,920 --> 00:25:12,200
Speaker 3: former basically publisher of a national inquirer, saying he was

426
00:25:12,240 --> 00:25:16,439
Speaker 3: a good candidate, who is basically finding he's repeatedly violated it.

427
00:25:16,800 --> 00:25:20,680
Speaker 3: But in the meantime, the DA's asked for four additional

428
00:25:21,119 --> 00:25:25,640
Speaker 3: penalties that Trump is additionally violated. So there's another contempt

429
00:25:25,680 --> 00:25:29,280
Speaker 3: hearing on Thursday about this. So Trump's been fining nine

430
00:25:29,320 --> 00:25:32,119
Speaker 3: thousand dollars and the judge's warning him he better behave

431
00:25:32,680 --> 00:25:34,880
Speaker 3: or he could say possible Jaily.

432
00:25:34,960 --> 00:25:37,800
Speaker 1: And as far as signs, that's the maximum the judge

433
00:25:37,880 --> 00:25:39,359
Speaker 1: can impose.

434
00:25:40,520 --> 00:25:43,560
Speaker 3: It's a maximum one thousand dollars per fine. So that's

435
00:25:43,680 --> 00:25:47,320
Speaker 3: under the statute the max the judge can impose. But

436
00:25:47,680 --> 00:25:51,639
Speaker 3: on the other side, what the judge has warrened Trump

437
00:25:51,680 --> 00:25:54,720
Speaker 3: he wants to balance his rights to speak freely in

438
00:25:54,760 --> 00:25:57,800
Speaker 3: his First Amendment rights that he can pains to return

439
00:25:57,840 --> 00:26:00,400
Speaker 3: to the White House, but he also wants to make

440
00:26:00,480 --> 00:26:06,679
Speaker 3: sure that trunk doesn't impair and you know, impact the trial.

441
00:26:07,160 --> 00:26:10,399
Speaker 1: So now the first witness on the stand today was

442
00:26:10,520 --> 00:26:14,199
Speaker 1: on the stand Friday, Michael Cohen's ex banker, tell us

443
00:26:14,200 --> 00:26:15,560
Speaker 1: what his testimony was about.

444
00:26:15,960 --> 00:26:19,280
Speaker 3: His testimony is basically setting up how these transfers happened

445
00:26:19,320 --> 00:26:22,399
Speaker 3: and how does Stormy Daniels get paid off. The story

446
00:26:22,400 --> 00:26:26,000
Speaker 3: of the DA alleges that Michael Cohen paid her. He

447
00:26:26,040 --> 00:26:29,080
Speaker 3: took out a home equity line of credit, funded this

448
00:26:29,480 --> 00:26:33,600
Speaker 3: LLC he created, and then paid her off. Stormy off

449
00:26:33,680 --> 00:26:37,080
Speaker 3: the one hundred and thirty thousand dollars on his own.

450
00:26:37,800 --> 00:26:42,280
Speaker 3: Prior payments were made, if you remember, by AMI and

451
00:26:42,520 --> 00:26:47,720
Speaker 3: National Inquirer had paid off Karen McDougal and a doorman,

452
00:26:48,080 --> 00:26:50,919
Speaker 3: a Trunk Power doorman had been paid off as well

453
00:26:51,040 --> 00:26:55,720
Speaker 3: by AMI, but this time David Pecker had refused. So

454
00:26:55,800 --> 00:26:58,520
Speaker 3: now we get to the stage of the paper trail

455
00:26:59,320 --> 00:27:03,800
Speaker 3: time he's a hush funny payment to Stormy Daniel. And

456
00:27:03,840 --> 00:27:06,680
Speaker 3: we see how the banker said that the accounts were created,

457
00:27:06,720 --> 00:27:09,560
Speaker 3: you know, he was already Michael Cohen's banker, and that

458
00:27:09,680 --> 00:27:12,879
Speaker 3: Michael Cohen calls him an a frantic that he needs

459
00:27:12,920 --> 00:27:16,560
Speaker 3: to set up this new LLC, comes up with the

460
00:27:16,760 --> 00:27:20,800
Speaker 3: alternative names, funds it, and then pays makes the money payments.

461
00:27:20,680 --> 00:27:23,960
Speaker 1: On cross examination. Was the defense trying to show that

462
00:27:24,280 --> 00:27:26,080
Speaker 1: Trump had nothing to do with this.

463
00:27:26,600 --> 00:27:28,719
Speaker 3: Well, so that's not the story. The story is that

464
00:27:28,800 --> 00:27:31,800
Speaker 3: Michael Cohen paste it, and so the BA is never

465
00:27:31,920 --> 00:27:34,720
Speaker 3: alleged that Michael Cohen is doing this out of the

466
00:27:34,720 --> 00:27:36,919
Speaker 3: goodness of his own heart, and he either did the

467
00:27:37,000 --> 00:27:39,600
Speaker 3: US attorneys in the Southern District of New York. When

468
00:27:39,640 --> 00:27:44,280
Speaker 3: Michael Cohen pled guilty to finance campaign finance violation, he

469
00:27:44,320 --> 00:27:46,320
Speaker 3: wasn't doing that out was goodness of his own heart.

470
00:27:46,359 --> 00:27:49,400
Speaker 3: He was making these payments on Donald Trump's behalf. That's

471
00:27:49,400 --> 00:27:51,879
Speaker 3: what the DA says, and that's what Michael Cohen says.

472
00:27:52,240 --> 00:27:54,800
Speaker 3: You see him paying. I mean, it's not Stormy Daniels

473
00:27:54,840 --> 00:27:57,959
Speaker 3: does not his the silence. It's Donald Trump's trouble.

474
00:27:58,359 --> 00:28:01,120
Speaker 1: So what did the defense try to do on Cross.

475
00:28:00,920 --> 00:28:03,119
Speaker 3: Well, the defense was trying to ask these questions that

476
00:28:03,200 --> 00:28:05,560
Speaker 3: made it seem like Donald Trump had nothing to do

477
00:28:05,600 --> 00:28:07,600
Speaker 3: with this. And yes, that's true, but that's only half

478
00:28:07,600 --> 00:28:11,080
Speaker 3: the story. The doesn't allege that the DA doesn't allege

479
00:28:11,119 --> 00:28:15,680
Speaker 3: that the bank that provided these loans was Donald Trump's account. No,

480
00:28:15,840 --> 00:28:19,120
Speaker 3: this is Donald Trump's banker. It's not a bank account.

481
00:28:19,359 --> 00:28:22,080
Speaker 3: The money didn't come from these accounts Michael Cohen, and

482
00:28:22,119 --> 00:28:24,800
Speaker 3: the DA says the money came from Michael Cohen because

483
00:28:24,800 --> 00:28:27,159
Speaker 3: Trump wanted him to pay it. And we can expect

484
00:28:27,200 --> 00:28:29,920
Speaker 3: Michael Cohen to take the stand and describe it this way.

485
00:28:30,320 --> 00:28:33,920
Speaker 3: So what we heard later today was very interesting witness.

486
00:28:34,240 --> 00:28:37,920
Speaker 3: He's probably the most compelling. This guy's Keith Davidson. He's

487
00:28:37,960 --> 00:28:42,320
Speaker 3: an LA lawyer who represented not only Stormy Daniels but

488
00:28:42,520 --> 00:28:46,800
Speaker 3: also Karen McDougall. So we hear from his perspective of

489
00:28:47,040 --> 00:28:50,080
Speaker 3: he's the lawyer who's got a hot story. He called

490
00:28:50,080 --> 00:28:54,400
Speaker 3: it a blockbuster story that was worth selling, and they

491
00:28:54,440 --> 00:28:58,160
Speaker 3: were going to try to sell Stormy Daniel's story, and

492
00:28:58,920 --> 00:29:02,400
Speaker 3: then it come up that they try to get its soul.

493
00:29:02,920 --> 00:29:06,880
Speaker 3: So first you have Karen mcgougall's story and he's negotiating

494
00:29:06,960 --> 00:29:10,520
Speaker 3: with Trump, but he's also talking to ABC News. Karen mcgougaal,

495
00:29:10,600 --> 00:29:13,320
Speaker 3: the former Playboy model, wanted to keep it quiet. She

496
00:29:13,400 --> 00:29:16,920
Speaker 3: had said she had an intimate sexual relationship, she claimed,

497
00:29:16,920 --> 00:29:21,240
Speaker 3: with Trump, and so they were talking about possibly selling

498
00:29:21,280 --> 00:29:23,560
Speaker 3: it to ABC News, but she said she didn't want

499
00:29:23,560 --> 00:29:26,400
Speaker 3: to be the scarlet letter woman and she didn't want

500
00:29:26,440 --> 00:29:30,960
Speaker 3: to be like, you know, Monica Lewinsky branded as a harlet,

501
00:29:31,120 --> 00:29:34,120
Speaker 3: so she would rather keep it quiet. So she agreed

502
00:29:34,160 --> 00:29:37,760
Speaker 3: to keep it quiet for the hushmany payment which she got, and.

503
00:29:37,680 --> 00:29:39,800
Speaker 1: Tell us about this sort of side story.

504
00:29:40,720 --> 00:29:44,760
Speaker 3: This is in June twenty sixteen. And then suddenly comes

505
00:29:44,840 --> 00:29:49,640
Speaker 3: this alert that there's another woman. And Keith Davidson said

506
00:29:50,040 --> 00:29:53,240
Speaker 3: he had talked to Michael Cohen way back in twenty

507
00:29:53,320 --> 00:29:57,200
Speaker 3: eleven because Michael Cohen had called him up and demanded

508
00:29:57,560 --> 00:30:01,560
Speaker 3: there was some kind of website and they had published

509
00:30:01,800 --> 00:30:05,360
Speaker 3: this anonymous story saying that Donald Trump had had an

510
00:30:05,360 --> 00:30:09,479
Speaker 3: affair with this porn star named Stormy Daniels, and Cohen

511
00:30:09,560 --> 00:30:13,480
Speaker 3: called Davidson up and says, you better I'm threatening you

512
00:30:13,960 --> 00:30:17,160
Speaker 3: right now, and you better say he was accusing Stormy

513
00:30:17,160 --> 00:30:20,760
Speaker 3: of being the source of this story. Keith Davidson says

514
00:30:20,840 --> 00:30:24,120
Speaker 3: he wrote a piece and assist letter to the website

515
00:30:24,160 --> 00:30:27,320
Speaker 3: saying take that story down, and they did, and then

516
00:30:27,400 --> 00:30:32,080
Speaker 3: here we are five years later. It's now July, August, September,

517
00:30:32,200 --> 00:30:35,840
Speaker 3: and the Stormy Daniels story was burbling along and then boom,

518
00:30:36,280 --> 00:30:41,720
Speaker 3: the Access Hollywood tape comes out. And that's when suddenly

519
00:30:41,880 --> 00:30:45,280
Speaker 3: Davidson says, there's a whole new focus on this story

520
00:30:45,320 --> 00:30:49,320
Speaker 3: getting caught all over again, and Stormy story could get out.

521
00:30:49,720 --> 00:30:54,120
Speaker 3: So suddenly the Trump campaign and Cohen started calling him.

522
00:30:54,640 --> 00:30:58,320
Speaker 3: There were negotiations that went on between Keith Davidson, the

523
00:30:58,400 --> 00:31:04,080
Speaker 3: lawyer representing Army am I and the editor's name is

524
00:31:04,360 --> 00:31:07,920
Speaker 3: Dylan Howard and then Michael Cohen, and you could see

525
00:31:08,000 --> 00:31:12,280
Speaker 3: Dylan Howard and Keith Davidson had worked together on other

526
00:31:12,400 --> 00:31:16,840
Speaker 3: stories in the past. He represented a lot of celebrity clients.

527
00:31:17,280 --> 00:31:20,920
Speaker 3: So he gets reached out to and they start negotiating

528
00:31:21,080 --> 00:31:24,440
Speaker 3: a deal. But then it becomes unclear who's going to

529
00:31:24,520 --> 00:31:28,800
Speaker 3: pay for Stormy's story, and that's when Michael Cohen comes

530
00:31:28,840 --> 00:31:31,920
Speaker 3: in and there's some discussions about how she's going to

531
00:31:31,960 --> 00:31:35,600
Speaker 3: get paid. And there was a deal worked out where

532
00:31:35,720 --> 00:31:42,360
Speaker 3: it was basically an agreement between Cohen and Davidson that

533
00:31:43,000 --> 00:31:45,920
Speaker 3: Cohen and Trump would buy the story, that Trump was

534
00:31:45,920 --> 00:31:48,960
Speaker 3: going to buy this story from Stormy Daniels keep her quiet.

535
00:31:49,440 --> 00:31:51,280
Speaker 3: But then it turns out.

536
00:31:51,680 --> 00:31:55,200
Speaker 1: And the lawyer testified about how he started get frustrated

537
00:31:55,200 --> 00:31:55,880
Speaker 1: with the whole thing.

538
00:31:56,400 --> 00:31:59,400
Speaker 3: Keith Davidson started getting very frustrated because he said he

539
00:31:59,440 --> 00:32:02,600
Speaker 3: started getting the run around from Michael Cohen that there

540
00:32:02,680 --> 00:32:05,080
Speaker 3: was no money, There was no money, there was no money,

541
00:32:05,200 --> 00:32:08,080
Speaker 3: and he kept saying, if Joh I'm Kapoor, I can't

542
00:32:08,120 --> 00:32:11,480
Speaker 3: pay you and send me your wire information so I

543
00:32:11,520 --> 00:32:14,800
Speaker 3: can transfer you the funds and September goes into October

544
00:32:15,240 --> 00:32:19,600
Speaker 3: and it's still getting the run around. Eventually, Keith Davidson

545
00:32:19,720 --> 00:32:23,120
Speaker 3: begins to think that maybe Trump was tight with his

546
00:32:23,280 --> 00:32:28,400
Speaker 3: money and Cohen didn't have the authority. He said the

547
00:32:28,600 --> 00:32:31,120
Speaker 3: entire matter was very frustrating to me, and that it

548
00:32:31,200 --> 00:32:33,840
Speaker 3: was on again and off again, and there were cancelations

549
00:32:33,840 --> 00:32:37,959
Speaker 3: and disengaging from clients and re engaging with clients. Dylan

550
00:32:38,080 --> 00:32:40,920
Speaker 3: meaning Dylan Howard of the National Inquirer, said he reached

551
00:32:40,960 --> 00:32:44,040
Speaker 3: out to Pecker, who's the publisher of the National Inquirer,

552
00:32:44,080 --> 00:32:46,920
Speaker 3: and that everything was keed up. He's basically telling me

553
00:32:47,000 --> 00:32:50,880
Speaker 3: to call Cohen, and Cohen says, I'm not paying anything,

554
00:32:51,000 --> 00:32:55,000
Speaker 3: a AMI is paying. It was just one more natoo.

555
00:32:55,600 --> 00:33:01,840
Speaker 3: So eventually Davidson confronts Cohen and there's more discussion. He

556
00:33:02,040 --> 00:33:06,000
Speaker 3: called Cohen highly excitable, sort of a chance on fire

557
00:33:06,160 --> 00:33:08,760
Speaker 3: kind of guy, and he said he had a lot

558
00:33:08,760 --> 00:33:11,760
Speaker 3: of things going on. He had two phone and talking

559
00:33:11,760 --> 00:33:14,480
Speaker 3: out of each of his two ears, sort of like

560
00:33:14,560 --> 00:33:18,480
Speaker 3: that movie up where the dog says whirl whirl. So

561
00:33:18,600 --> 00:33:22,680
Speaker 3: then Michael Cohen with this excitable character, and that Michael

562
00:33:22,760 --> 00:33:26,440
Speaker 3: Cohen had promised that don't worry Trump's going to come clean.

563
00:33:27,000 --> 00:33:31,320
Speaker 3: And there's basically a discussion between Dylan Howard, the National

564
00:33:31,360 --> 00:33:35,880
Speaker 3: Inquirer editor, and Davidson, the lawyer for Stormy, basically like

565
00:33:35,960 --> 00:33:39,280
Speaker 3: they can't understand. I can't use the words but their

566
00:33:39,320 --> 00:33:42,400
Speaker 3: blue language. He fed it up and why was this

567
00:33:42,560 --> 00:33:45,240
Speaker 3: And that was a discussion that Trump was tight with

568
00:33:45,400 --> 00:33:48,440
Speaker 3: money that they had to feel on a silver platter

569
00:33:48,520 --> 00:33:50,360
Speaker 3: and it was there for the taking and the only

570
00:33:50,400 --> 00:33:52,960
Speaker 3: reason it didn't close was because they didn't want to

571
00:33:53,040 --> 00:33:55,440
Speaker 3: fund it. And the only reason they didn't fund it

572
00:33:55,480 --> 00:33:57,560
Speaker 3: is they didn't want to spend the money.

573
00:33:58,360 --> 00:34:02,200
Speaker 1: I'm sure this testimony kept the jar attention and tomorrow

574
00:34:02,200 --> 00:34:04,520
Speaker 1: he'll be back on the stand. Thanks so much, Pat.

575
00:34:04,680 --> 00:34:08,000
Speaker 1: That's Bloomberg Legal reporter Patricia Hurtado, and that's it for

576
00:34:08,040 --> 00:34:11,040
Speaker 1: this edition of the Bloomberg Law Podcast. Remember you can

577
00:34:11,080 --> 00:34:14,040
Speaker 1: always get the latest legal news by subscribing and listening

578
00:34:14,080 --> 00:34:17,759
Speaker 1: to the show on Apple Podcasts, Spotify, and at Bloomberg

579
00:34:17,800 --> 00:34:21,840
Speaker 1: dot com, Slash podcast, Slash Law. I'm June Grosso and

580
00:34:22,000 --> 00:34:23,239
Speaker 1: this is Bloomberg