Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 1: In a Seattle courtroom today, prosecutors asked Judge Richard Jones
Speaker 1: to sentence by NaN's founder Jang Pen Joo to three
Speaker 1: years in prison for allowing rampant money laundering on the
Speaker 1: world's largest cryptocurrency exchange. Joao's lawyers pleaded with the judge
Speaker 1: to spare him from prison. The judge gave neither side
Speaker 1: what they wanted, sentencing Jiao to four months in prison.
Speaker 1: Cz As He's called, pleaded guilty in November to one
Speaker 1: count of failing to maintain an anti money laundering program
Speaker 1: and stepped down as Binance agreed to pay four point
Speaker 1: three billion dollars to settle related allegations. This closes a
Speaker 1: long running probe for the Justice Department, which had wanted
Speaker 1: to make an example of Jao in an industry rebounding
Speaker 1: from a slew of high profile scandal. You remember Sam
Speaker 1: Bankman Freed Joining me from Seattle is Bloomberg Legal reporter
Speaker 1: Ava Benny Morrison, who was in the courtroom for the sentencing,
Speaker 1: set the scene for us Eva sure So.
Speaker 2: Changpeng Joo, who's better known as Caz panned up to
Speaker 2: the Federal courthouse in Seattle just before nine am. He
Speaker 2: had about half a dozen lawyers with him. He didn't
Speaker 2: say much throughout the proceeding, other than getting up to
Speaker 2: give a statement to the judge where he talked about
Speaker 2: how remorseful he was, how he had made a mistake,
Speaker 2: but he took full responsibility and that's why he had
Speaker 2: traveled from his home in the UAE to America at
Speaker 2: the end of last year to face the prosecution. While
Speaker 2: he was sitting at the table, he was very still.
Speaker 2: He's sitting up straight, He's staring at the judge. Seemed
Speaker 2: to be absorbing everything that the judge and the prosecutors
Speaker 2: were saying. CZ's mother and his sister Jessica were both
Speaker 2: seated in the front row, and there were a few
Speaker 2: other friends and supporters from the crypto industry that were
Speaker 2: in the courthouse as well.
Speaker 1: There was a plea deal here, but prosecute were asking
Speaker 1: for twice the sentencing guidelines. What was their reasoning?
Speaker 2: Fedrol Foski's were trying to make an example out of Cz.
Speaker 2: He was the CEO of the world's biggest crypto company,
Speaker 2: they argued, and he committed these crimes as part of
Speaker 2: a plan to violate US laws that would allow him
Speaker 2: to make more money allow big traders to continue using
Speaker 2: Finance even though it didn't have an adequate anti money
Speaker 2: laundering progres. So they were arguing for thirty six months
Speaker 2: in prison to Cz to really send a message not
Speaker 2: only to the crypto industry but to corporate leaders far
Speaker 2: and wide that this sort of behavior would not be
Speaker 2: tolerated and would be punished.
Speaker 1: As you mentioned, the defense was asking for leniency and probation.
Speaker 1: What was their argument.
Speaker 2: The defense was pleading with the judge to spare Cz
Speaker 2: from prison. They pointed to the fact that he voluntarily
Speaker 2: came back to America to face these charges at the
Speaker 2: end of last year. They said that he had cooperated
Speaker 2: extensively with the government in this investigation and that he
Speaker 2: directed Finance to cooperate with the DOJ as well. They
Speaker 2: pointed out that Finance had settled several investigations with know
Speaker 2: the DOJ, but the CFTC, the Treasury Department, which resulted
Speaker 2: in the company paying four point three billion dollars worth
Speaker 2: of fines. I think the biggest sticking point in the
Speaker 2: arguments today was over whether a prison sentence was warranted
Speaker 2: for this type of offense. CZ was essentially charged with
Speaker 2: violating the Bank Secrecy Act, which sounds pretty minor on
Speaker 2: the face of it, but attached to that crime were
Speaker 2: arguably pretty serious circumstances. Because he didn't have an adequate
Speaker 2: AML program at finance, terrorist organizations like al Qaeda and
Speaker 2: Hamas were able to trade on the platform, and US
Speaker 2: customers were trading with customers in sanctioned countries like Arah.
Speaker 2: So the defense was really trying to narrow in on
Speaker 2: the fact that this was just a banking violation, for
Speaker 2: the prosecution was urging the judge to look at those
Speaker 2: serious circumstances that were.
Speaker 3: Attached to it.
Speaker 1: Did the prosecution say or prove in any way that
Speaker 1: CZ knew about what was happening on the platform, you know,
Speaker 1: like the terrorist organization's trading.
Speaker 2: No, the prosecution didn't say that CD personally knew that
Speaker 2: there were the proceeds of crime moving across finance, and
Speaker 2: the defense really highlighted that as well, saying, look, there
Speaker 2: is no evidence here that CZ personally, as the sea
Speaker 2: of the company, knew that illicit funds were moving across finance,
Speaker 2: and so that needed to be taken into account.
Speaker 1: How long did his statement to the judge last and
Speaker 1: what part of it stood out to you.
Speaker 2: CZ's statement to the judge only lasted a few minutes.
Speaker 2: He started by saying that he was remorse and he
Speaker 2: was sorry and he had made mistakes. He spoke about
Speaker 2: how difficult it was for him to step down as
Speaker 2: CEO of Finance, a company that he founded in China
Speaker 2: several years go. He spoke about how he struggled to
Speaker 2: accept that that was essentially the only course of action here.
Speaker 2: But he spoke about how he still wants to make
Speaker 2: a difference in the world and he's really focused on
Speaker 2: philanthropy now that he's not leading Binance.
Speaker 1: And it wasn't just what the prosecution asked for and
Speaker 1: the defense asked for. Tell us about the other recommendations.
Speaker 3: There was such a.
Speaker 2: Big gap years between what each of the parties were recommending.
Speaker 2: The prosecution wanted thirty six months probation and pre trial
Speaker 2: services had recommended only five months. And then of course
Speaker 2: the Z's defense team was asking for only probation and
Speaker 2: the federal offenders and guidelines were between twelve and eighteen months.
Speaker 2: So there was a lot of discrepancy there that the
Speaker 2: judge had to navigate.
Speaker 1: And so tell us about you know what the judge
Speaker 1: said before he sentenced him.
Speaker 2: The judge agreed with the defense that the prosecution's suggestion
Speaker 2: that Caz should be sentenced to thirty six months in
Speaker 2: prison was far too high. He said that he had
Speaker 2: taken a lot of time to read through more than
Speaker 2: one hundred and sixty letters admitted from CZ's friends and
Speaker 2: family and co workers that painted this man in a
Speaker 2: very favorable light, describing him as a family man, a
Speaker 2: humble person, and just a hard working entrepreneur. He said
Speaker 2: that yes, while this is a big Secrecy Act violation
Speaker 2: and other cases involving that charge had resulted in probation,
Speaker 2: there were some egregious actors here, like the fact that
Speaker 2: Hamas and cyber criminals and dark web transactions were able
Speaker 2: to take place on the platform because of it. I
Speaker 2: think he just couldn't get pasted the Hamas al Kader
Speaker 2: dark web element of this. I will say that it's
Speaker 2: unusual for BSA cases to result in prison time, So
Speaker 2: the judge was really sort of putting his neck out
Speaker 2: here by handing down a sentence that did involve prison time.
Speaker 2: It'll be interesting to see if this sets a precedent
Speaker 2: for other BSA cases in white collar prosecutions in the future.
Speaker 1: What always seems striking to me about this case is
Speaker 1: that the UAE has no extradition treaty with the US.
Speaker 1: Yet he flew here and turned himself in and then
Speaker 1: prosecutors stopped him from returning home pending sentence. Did anyone
Speaker 1: mention that this whole scenario might stop other people from
Speaker 1: turning themselves in in the future.
Speaker 2: Yes, the defense actually did make a point out of that,
Speaker 2: saying cz has done all the right things here. He's
Speaker 2: come back from Dubai, turned himself in, pleaded guilty to
Speaker 2: the charge, agreed to pay personally a fifty million dollars
Speaker 2: fign to the government. He has ticked all the boxes.
Speaker 3: But the fact that.
Speaker 2: The prosecution was then arguing for a prison sentence that
Speaker 2: was well above the federal sentencing guidelines might actually deter
Speaker 2: people from doing that in the future, and from deciding
Speaker 2: to travel from a non extradition country to the US
Speaker 2: to the charges.
Speaker 1: But was there a feeling going in as to what
Speaker 1: he might get? I mean, did anyone think you know
Speaker 1: that he would walk out of there without any prison time.
Speaker 2: I think he was certainly hoping that, but there really
Speaker 2: was a feeling in the courtroom that this could go
Speaker 2: either way. There could either be a very small amount
Speaker 2: of prison time or no prison time at all. You
Speaker 2: could tell that his lawyers had really prepared their arguments
Speaker 2: and were putting in a pretty tough fight to try
Speaker 2: and keep him out of prison. But the judge in
Speaker 2: the end was persuaded by the prosecution's argument that this
Speaker 2: just wasn't a run of the mill Bank Secrecy Act case.
Speaker 2: This behavior, this crime allowed illicted actors to launder money
Speaker 2: and use finance when they shouldn't have been able to
Speaker 2: do that.
Speaker 1: What happens now, Do I understand that he's not eligible
Speaker 1: to go to a minimum security prison?
Speaker 2: Yes, CZ, because he's not a US citizen, is then
Speaker 2: eligible for a minimum security prison, and that's usually where
Speaker 2: white collar defends didn't end up. So he has made
Speaker 2: a request for the judge to be designated to a
Speaker 2: facility called FDC stach here in Seattle. We don't know
Speaker 2: when he needs to turn up and start that prison.
Speaker 2: Sentence that dates still to be decided, but he will
Speaker 2: spend four months there. His lawyer did say that he's
Speaker 2: eager to just get it over and done with and
Speaker 2: finally be able to return to Dubai to reunite with
Speaker 2: his family. CZ and his lawyers are waiting to hear
Speaker 2: from probation to decide on an appropriate date for him
Speaker 2: to turn up to the prison and start his four
Speaker 2: month sentence.
Speaker 1: This is the second high profile sentencing in the crypto
Speaker 1: industry recently. Was Sam Bankman Freed mentioned at all?
Speaker 2: Sam Bateman Freed did get a mention. Actually, when the
Speaker 2: prosecutor was referring to the arguments that Z's lawyers had
Speaker 2: submitted to the court, he said, look, we're not alleging
Speaker 2: that Cz is a Sam Bateman Freed. We're not saying
Speaker 2: that he's a monster, and we're not trying to kill
Speaker 2: the crypto industry. We are saying that this is a
Speaker 2: serious crime because he didn't have an IMO program and
Speaker 2: that allowed some of the ILICID actives and terrorists to
Speaker 2: gain access.
Speaker 3: To buy it.
Speaker 1: Thanks so much, Ava, that's Bloomberg Legal reporter Ava. Benny
Speaker 1: Morrison Jow will enter the history books as the richest
Speaker 1: person ever to do time in US federal lockup. His
Speaker 1: ownership of Binance and an estimated forty three billion dollar
Speaker 1: personal fortune tied to it, remain intact, and his wealth
Speaker 1: is likely to grow even more as Binance's business accelerates
Speaker 1: amid crypto's latest bull run. In fact, his wealth balloon
Speaker 1: by twenty five billion dollars as the crypto industry recovered
Speaker 1: last year, and he's currently ranked as the thirty eight
Speaker 1: richest person in the world according to the Bloomberg Billionaire's Index.
Speaker 1: And despite having to relinquish the chief executive title as
Speaker 1: part of his deal with the government, his influence on
Speaker 1: the company is hard to miss. Its new board of
Speaker 1: directors is dominated by his devoted friends, and the mother
Speaker 1: of three of his children plays a major role in
Speaker 1: running its operations. Coming up next on The Bloomberg Lawn Show,
Speaker 1: the FTC has banned non compete clauses which prevent workers
Speaker 1: from transferring to other companies in the same industry. However,
Speaker 1: companies may not have to rush to comply with that
Speaker 1: FTC non compete ban. Will tell you why I'm June Grossewin.
Speaker 1: This is Bloomberg. The Federal Trade Commission's rule banning most
Speaker 1: non compete clauses that prohibit workers from switching jobs within
Speaker 1: an industry is scheduled to take effect one hundred twenty
Speaker 1: days from its publication on April twenty third. However, standing
Speaker 1: in the way are lawsuits by the Chamber of Commerce
Speaker 1: and others seeking to block the rule, arguing the FTC
Speaker 1: doesn't have the authority to issue it, and a judge
Speaker 1: could issue a preliminary injunction stopping the rule from going
Speaker 1: into effect while the litigation proceeds. Me Is Kimberly Carson,
Speaker 1: a partner Quinn Emmanuel, and an expert on non competes
Speaker 1: tell us about this near total ban on non competes.
Speaker 4: Sure so, last week, the Federal Trade Commission issued a
Speaker 4: rule banning non compete nationwide. The rule essentially prohibits employers
Speaker 4: from doing three things after the effective date, one enforcing
Speaker 4: existing non competes with workers, two entering into new non
Speaker 4: competes with workers, and three representing that workers are subjects
Speaker 4: to non compete clauses. The rule also has a notice
Speaker 4: requirement that essentially requires employers to give notice, by the
Speaker 4: rule of effective dates to every effective worker who's found
Speaker 4: by an existing non compete that the non compete won't
Speaker 4: be enforced in the future.
Speaker 1: Is this ban expected to have a widespread effect on
Speaker 1: the workforce.
Speaker 4: Yes, certainly if you read the FDC's rule and company guidance.
Speaker 4: The FDC's intention is for it to apply to all workers,
Speaker 4: including employees, independent contractors, externs, interns, volunteers, really anyone who
Speaker 4: works for someone, whether paid or unpaid, with certain limited exceptions.
Speaker 4: And the rule is also intended to apply to all employers,
Speaker 4: regardless of size, regardless of whether they're private or public,
Speaker 4: really all people, partnership and companies that are within the
Speaker 4: SEC's jurisdiction. While there's an exception for senior executives with
Speaker 4: existing non competes, the FTC estimates, but that will apply
Speaker 4: to less than one percent of workers.
Speaker 1: President Biden and the Biden administration has been pushing for
Speaker 1: non competes, and we've heard a lot about the positive effects.
Speaker 1: I mean, what are the downsides of this ban?
Speaker 4: I think there's a lot of concern at the business
Speaker 4: level about how companies can continue to protect trade secrets,
Speaker 4: client goodwill, employee goodwill, their investment in human capital in
Speaker 4: the absence of noncompete. So that's certainly a concern. And
Speaker 4: you see that reference in the handful of legal challenges
Speaker 4: that have been filed for the rule so far, including
Speaker 4: by the US Chamber of Commerce. There are, of course
Speaker 4: other contractual and legal mechanisms to protect those sorts of interest,
Speaker 4: and the sec itself pointed out some of them, and
Speaker 4: so that's what a lot of the discussion and focus
Speaker 4: has down at the business level that I've been seeing.
Speaker 1: You mentioned the lawsuit the Chamber of Commerce and other
Speaker 1: business groups are suing explain the grounds for their lawsuit.
Speaker 4: So the US Chamber of Commerce has filed the lawsuit
Speaker 4: in federal court in Texas challenging the rule. They're asking
Speaker 4: the court to issue in order staying the rules effective, dates,
Speaker 4: in joining the FTC's enforcement of the rule, or both,
Speaker 4: and they've raised various arguments in support, including that the
Speaker 4: non compete exceeds the spc's statutory authority. They've argued that
Speaker 4: the STC doesn't have the authority to prohibit unfair methods
Speaker 4: of competition through rulemaking. They've also argued that the rule
Speaker 4: is unlawfully retroactive, and they've also taken issue with the
Speaker 4: evidence that the SPC has cited in support of the rule.
Speaker 4: The retroactivity point is interesting. I've seen as an employment
Speaker 4: litigator and advisor to companies that are looking at what
Speaker 4: this rule means for their business. A lot of discussions
Speaker 4: and focused on the retroactivity point. I will say that
Speaker 4: the rule, once effective, will apply not only to future
Speaker 4: non compete but also non competes already in existence as
Speaker 4: of the effective date. The rule says that pretty expressly.
Speaker 4: There is, however, an express carve out for claims that
Speaker 4: accrued before the effective date of the rule. So what
Speaker 4: that means is if a lawyer is alleging that a
Speaker 4: worker accepted employment in breach of a nine compete and
Speaker 4: the breach occurred before the effective date of the rule,
Speaker 4: that will be outside the scope of the rule. And
Speaker 4: because of that carve out, the FDC has said in
Speaker 4: the rulemaking guidance that they think that the rule is
Speaker 4: not impermissively retroactive, but you know, business groups in the
Speaker 4: Chamber of Commerce disagree.
Speaker 1: Is this a strong challenge to the ban?
Speaker 4: From what I've seen, a lot of practitioners in the
Speaker 4: space anticipate that there could be a stay or injunction
Speaker 4: of the rule tending these lawsuits, including the Chamber of
Speaker 4: Commerce's challenge, which could delay the rule out and timeline
Speaker 4: of compliance for the rule.
Speaker 1: I want to talk more about the rule. You know,
Speaker 1: we've had a story on Bloomberg that Wall Street traders
Speaker 1: and money managers could be in for disappointment if they're
Speaker 1: hoping that this rule will clear the way for them
Speaker 1: to go to higher paying competitors. Tell us about garden leaves.
Speaker 4: So there is express language in the rule that says
Speaker 4: that the rule does not apply to garden lease agreements.
Speaker 4: A garden leave agreement is essentially an agreement whereby the
Speaker 4: worker is still employed and still being paid for some
Speaker 4: period after they've given notice of resignation. So during that period,
Speaker 4: there's still an employee, they're still getting paid, they still
Speaker 4: have contractual and produciary duties. And the SEC has advised
Speaker 4: that that type of garden leave agreement is not an
Speaker 4: impermissible non compete under the rule. And that's because non
Speaker 4: competes really govern the period after your employment ends, whereas
Speaker 4: a garden leave agreement is not a post employment restriction.
Speaker 4: That is a period where you're still an employee. So
Speaker 4: for the bankers out there, to the extent their employer
Speaker 4: is covered and under FTC jurisdiction, and they're looking at
Speaker 4: garden leave arrangements those are expressly outside the scope of
Speaker 4: the non compete.
Speaker 1: Band have been litigated because it does seem like it's
Speaker 1: preventing a worker from going somewhere else.
Speaker 4: You know, it's an interesting question. It doesn't come up
Speaker 4: a lot. I do a lot of research of covenant
Speaker 4: litigation all over the country and contractual notice of termination
Speaker 4: periods where you have to say, you know, give sixty
Speaker 4: or ninety day notice that you're leaving, or garden leave
Speaker 4: agreements where you know your termination, your your resignation is
Speaker 4: not effective for some period. Those are not often litigated.
Speaker 4: I think there's a notion of fairness because employees are
Speaker 4: being paid to sit on the beach for that period
Speaker 4: and essentially cooperate with transition requirements, So those aren't litigated
Speaker 4: as frequently as post employment restrictions. That said, I think
Speaker 4: that you know, if an employee is inclined to say,
Speaker 4: I want my resignation to be effective immediately, I'm not
Speaker 4: going to accept compensations for my notice period or my
Speaker 4: garden leaf period. I want to get immediately to work.
Speaker 4: That could be an interesting question for adjudication court, but
Speaker 4: that doesn't come up very often in my practice.
Speaker 1: So yeah, they're paid to sit on the beach, not
Speaker 1: paid to sit in the garden. This name seems a
Speaker 1: little bit odd to me. Do you know where that
Speaker 1: name came from?
Speaker 4: My understanding has always been that it's a British concept.
Speaker 1: Okay, all right, they're sitting in the garden and we're
Speaker 1: sitting on the beach. Yeah, so this is a national
Speaker 1: band by the FTC. Some states also have bands, I
Speaker 1: mean do A lot of states have bands on non competes.
Speaker 4: A lot of states have restrict of covenant statutes, and
Speaker 4: that trend has been increasing over the years. Obviously, when
Speaker 4: you think about the state bans, the first state that
Speaker 4: comes to mind is California. They have probably the strongest
Speaker 4: language and their various statutes restricting post employment restrictions. But
Speaker 4: there are several other states that are relatively hostile to
Speaker 4: enforcing restrict of covenants. And then there are many other
Speaker 4: states that have some limits on research of covenance. For example,
Speaker 4: you know, states might ban them for low wage workers.
Speaker 4: In terms of how this rule interacts with state statutes
Speaker 4: and regulations, the rule doesn't limit or affect enforcement of
Speaker 4: state laws that restrict none competes, where those state laws
Speaker 4: don't conflict with the rule. However, if state laws do conflict,
Speaker 4: so for example, state laws permit none competes, then the
Speaker 4: FTC's rule would would preheunce them.
Speaker 1: Some have predicted that the FTC's nationwide ban will spur
Speaker 1: more states to pass laws limiting restrictive covenants. I mean,
Speaker 1: do you think that's likely. If there's a federal ban,
Speaker 1: why would the states need their own bans?
Speaker 4: I think that's right. I think states would only need
Speaker 4: to have legislation to the extent they're interested in, even
Speaker 4: broader restrictions than the FDC ban. The FDC ban, on
Speaker 4: its faces is pretty broad. I think that over the
Speaker 4: last few years you have seen growing interest at the
Speaker 4: state level in restrict of covenant limits, and this national
Speaker 4: rule that was supposed over a year ago has certainly,
Speaker 4: I think changed the tone of that discourse. That said,
Speaker 4: given the various legal challenges to the spc's rule and
Speaker 4: uncertainty about when it will go into effects and whether
Speaker 4: it will be stayed or enjoined by a court, could
Speaker 4: still you know, inspire states to take their own actions
Speaker 4: with respects to retrich of covenant limits or bans.
Speaker 1: So employers in states that don't have these bands in place.
Speaker 1: Do they have some time now, sort of like an
Speaker 1: interim time to still leave the non competes in and
Speaker 1: see what happens.
Speaker 4: Yeah, so the rule is not effective yet. The rule
Speaker 4: says that it will become effective one hundred and twenty
Speaker 4: days after it's published in the Federal Register, but as
Speaker 4: of now, it's not likely to take effects before September
Speaker 4: twenty twenty four. That means compliance isn't required until at
Speaker 4: the earliest September twenty twenty four. And has discussed that
Speaker 4: devine could get pushed as the results of court challenges.
Speaker 4: So in the meantime, companies do have time right now
Speaker 4: to assess the rule, talk to lawyers about what it
Speaker 4: does and doesn't require, consider how the rule might impact
Speaker 4: their business, do an assessment of workers with non compete
Speaker 4: workers that may or may not fall in the senior
Speaker 4: executive exception, and really start to plan for how they
Speaker 4: want to handle this going forward, how they might notify
Speaker 4: workers when and if it becomes effective, Whether they might
Speaker 4: want to incorporate alternative contractual mechanisms in their contracts with
Speaker 4: employees to protect trade secrets. Those are all things that
Speaker 4: I think employers should be thinking about right now as
Speaker 4: we approach the effective date over the summer.
Speaker 1: And we'll be watching to see if that judge in
Speaker 1: Texas issues of preliminary injunction stopping the rule from going
Speaker 1: to effect until the litigation is complete. Thanks so much, Kim.
Speaker 1: That's Kimberly Carson, a partner at Quinn Emmanuel. I'm June Grosso.
Speaker 1: When you're listening to Bloomberg. The jury in Donald Trump's
Speaker 1: hush money trial heard the most vivid testimony yet about
Speaker 1: payments to silence a former playboy playmate and an adult
Speaker 1: film star before the twenty sixteen election. Both claim to
Speaker 1: have had affairs with the billionaire developer. Los Angeles attorney
Speaker 1: Keith Davidson took the witness stand to recount how he
Speaker 1: represented the former playmate Karen McDougall, who was paid one
Speaker 1: hundred and fifty thousand dollars, and Stormy Daniels, who got
Speaker 1: one hundred thirty thousand dollars to keep quiet. Before Davidson
Speaker 1: took the stand, Judge Van Mrschan find the former president
Speaker 1: one thousand dollars for each of nine violations of the
Speaker 1: gag order he said defended is hereby warned that the
Speaker 1: Court will not tolerate continued wilful violations of its lawful orders,
Speaker 1: and that, if necessary and appropriate under the so circumstances,
Speaker 1: it will impose an incarceratory punishment. Trump's use of social media,
Speaker 1: news interviews, and campaign speeches has created a challenge for
Speaker 1: judges overseeing his many legal cases as they weigh the
Speaker 1: impact of his public comments on the proceedings against his
Speaker 1: free speech rights things against his free speech rights. Joining
Speaker 1: me is Bloomberg legal reporter Patricia Hurtado, who's covering the
Speaker 1: trial for US pat tell us about the judges finding
Speaker 1: Trump nine thousand dollars and warning him about prison time.
Speaker 3: Judge Murshawn has had a pending request from the district
Speaker 3: attorney to basically find Trump in contempt for repeatedly violating
Speaker 3: his gag order, and today Judge Murshan found that nine
Speaker 3: violations of the gag by making comments about Stormy Daniels
Speaker 3: and Michael cowen Her.
Speaker 1: Both.
Speaker 3: Proposed key prosecution witnesses a against him, commenting about them,
Speaker 3: commenting on their veracity, making comments about David Pecker, the
Speaker 3: former basically publisher of a national inquirer, saying he was
Speaker 3: a good candidate, who is basically finding he's repeatedly violated it.
Speaker 3: But in the meantime, the DA's asked for four additional
Speaker 3: penalties that Trump is additionally violated. So there's another contempt
Speaker 3: hearing on Thursday about this. So Trump's been fining nine
Speaker 3: thousand dollars and the judge's warning him he better behave
Speaker 3: or he could say possible Jaily.
Speaker 1: And as far as signs, that's the maximum the judge
Speaker 1: can impose.
Speaker 3: It's a maximum one thousand dollars per fine. So that's
Speaker 3: under the statute the max the judge can impose. But
Speaker 3: on the other side, what the judge has warrened Trump
Speaker 3: he wants to balance his rights to speak freely in
Speaker 3: his First Amendment rights that he can pains to return
Speaker 3: to the White House, but he also wants to make
Speaker 3: sure that trunk doesn't impair and you know, impact the trial.
Speaker 1: So now the first witness on the stand today was
Speaker 1: on the stand Friday, Michael Cohen's ex banker, tell us
Speaker 1: what his testimony was about.
Speaker 3: His testimony is basically setting up how these transfers happened
Speaker 3: and how does Stormy Daniels get paid off. The story
Speaker 3: of the DA alleges that Michael Cohen paid her. He
Speaker 3: took out a home equity line of credit, funded this
Speaker 3: LLC he created, and then paid her off. Stormy off
Speaker 3: the one hundred and thirty thousand dollars on his own.
Speaker 3: Prior payments were made, if you remember, by AMI and
Speaker 3: National Inquirer had paid off Karen McDougal and a doorman,
Speaker 3: a Trunk Power doorman had been paid off as well
Speaker 3: by AMI, but this time David Pecker had refused. So
Speaker 3: now we get to the stage of the paper trail
Speaker 3: time he's a hush funny payment to Stormy Daniel. And
Speaker 3: we see how the banker said that the accounts were created,
Speaker 3: you know, he was already Michael Cohen's banker, and that
Speaker 3: Michael Cohen calls him an a frantic that he needs
Speaker 3: to set up this new LLC, comes up with the
Speaker 3: alternative names, funds it, and then pays makes the money payments.
Speaker 1: On cross examination. Was the defense trying to show that
Speaker 1: Trump had nothing to do with this.
Speaker 3: Well, so that's not the story. The story is that
Speaker 3: Michael Cohen paste it, and so the BA is never
Speaker 3: alleged that Michael Cohen is doing this out of the
Speaker 3: goodness of his own heart, and he either did the
Speaker 3: US attorneys in the Southern District of New York. When
Speaker 3: Michael Cohen pled guilty to finance campaign finance violation, he
Speaker 3: wasn't doing that out was goodness of his own heart.
Speaker 3: He was making these payments on Donald Trump's behalf. That's
Speaker 3: what the DA says, and that's what Michael Cohen says.
Speaker 3: You see him paying. I mean, it's not Stormy Daniels
Speaker 3: does not his the silence. It's Donald Trump's trouble.
Speaker 1: So what did the defense try to do on Cross.
Speaker 3: Well, the defense was trying to ask these questions that
Speaker 3: made it seem like Donald Trump had nothing to do
Speaker 3: with this. And yes, that's true, but that's only half
Speaker 3: the story. The doesn't allege that the DA doesn't allege
Speaker 3: that the bank that provided these loans was Donald Trump's account. No,
Speaker 3: this is Donald Trump's banker. It's not a bank account.
Speaker 3: The money didn't come from these accounts Michael Cohen, and
Speaker 3: the DA says the money came from Michael Cohen because
Speaker 3: Trump wanted him to pay it. And we can expect
Speaker 3: Michael Cohen to take the stand and describe it this way.
Speaker 3: So what we heard later today was very interesting witness.
Speaker 3: He's probably the most compelling. This guy's Keith Davidson. He's
Speaker 3: an LA lawyer who represented not only Stormy Daniels but
Speaker 3: also Karen McDougall. So we hear from his perspective of
Speaker 3: he's the lawyer who's got a hot story. He called
Speaker 3: it a blockbuster story that was worth selling, and they
Speaker 3: were going to try to sell Stormy Daniel's story, and
Speaker 3: then it come up that they try to get its soul.
Speaker 3: So first you have Karen mcgougall's story and he's negotiating
Speaker 3: with Trump, but he's also talking to ABC News. Karen mcgougaal,
Speaker 3: the former Playboy model, wanted to keep it quiet. She
Speaker 3: had said she had an intimate sexual relationship, she claimed,
Speaker 3: with Trump, and so they were talking about possibly selling
Speaker 3: it to ABC News, but she said she didn't want
Speaker 3: to be the scarlet letter woman and she didn't want
Speaker 3: to be like, you know, Monica Lewinsky branded as a harlet,
Speaker 3: so she would rather keep it quiet. So she agreed
Speaker 3: to keep it quiet for the hushmany payment which she got, and.
Speaker 1: Tell us about this sort of side story.
Speaker 3: This is in June twenty sixteen. And then suddenly comes
Speaker 3: this alert that there's another woman. And Keith Davidson said
Speaker 3: he had talked to Michael Cohen way back in twenty
Speaker 3: eleven because Michael Cohen had called him up and demanded
Speaker 3: there was some kind of website and they had published
Speaker 3: this anonymous story saying that Donald Trump had had an
Speaker 3: affair with this porn star named Stormy Daniels, and Cohen
Speaker 3: called Davidson up and says, you better I'm threatening you
Speaker 3: right now, and you better say he was accusing Stormy
Speaker 3: of being the source of this story. Keith Davidson says
Speaker 3: he wrote a piece and assist letter to the website
Speaker 3: saying take that story down, and they did, and then
Speaker 3: here we are five years later. It's now July, August, September,
Speaker 3: and the Stormy Daniels story was burbling along and then boom,
Speaker 3: the Access Hollywood tape comes out. And that's when suddenly
Speaker 3: Davidson says, there's a whole new focus on this story
Speaker 3: getting caught all over again, and Stormy story could get out.
Speaker 3: So suddenly the Trump campaign and Cohen started calling him.
Speaker 3: There were negotiations that went on between Keith Davidson, the
Speaker 3: lawyer representing Army am I and the editor's name is
Speaker 3: Dylan Howard and then Michael Cohen, and you could see
Speaker 3: Dylan Howard and Keith Davidson had worked together on other
Speaker 3: stories in the past. He represented a lot of celebrity clients.
Speaker 3: So he gets reached out to and they start negotiating
Speaker 3: a deal. But then it becomes unclear who's going to
Speaker 3: pay for Stormy's story, and that's when Michael Cohen comes
Speaker 3: in and there's some discussions about how she's going to
Speaker 3: get paid. And there was a deal worked out where
Speaker 3: it was basically an agreement between Cohen and Davidson that
Speaker 3: Cohen and Trump would buy the story, that Trump was
Speaker 3: going to buy this story from Stormy Daniels keep her quiet.
Speaker 3: But then it turns out.
Speaker 1: And the lawyer testified about how he started get frustrated
Speaker 1: with the whole thing.
Speaker 3: Keith Davidson started getting very frustrated because he said he
Speaker 3: started getting the run around from Michael Cohen that there
Speaker 3: was no money, There was no money, there was no money,
Speaker 3: and he kept saying, if Joh I'm Kapoor, I can't
Speaker 3: pay you and send me your wire information so I
Speaker 3: can transfer you the funds and September goes into October
Speaker 3: and it's still getting the run around. Eventually, Keith Davidson
Speaker 3: begins to think that maybe Trump was tight with his
Speaker 3: money and Cohen didn't have the authority. He said the
Speaker 3: entire matter was very frustrating to me, and that it
Speaker 3: was on again and off again, and there were cancelations
Speaker 3: and disengaging from clients and re engaging with clients. Dylan
Speaker 3: meaning Dylan Howard of the National Inquirer, said he reached
Speaker 3: out to Pecker, who's the publisher of the National Inquirer,
Speaker 3: and that everything was keed up. He's basically telling me
Speaker 3: to call Cohen, and Cohen says, I'm not paying anything,
Speaker 3: a AMI is paying. It was just one more natoo.
Speaker 3: So eventually Davidson confronts Cohen and there's more discussion. He
Speaker 3: called Cohen highly excitable, sort of a chance on fire
Speaker 3: kind of guy, and he said he had a lot
Speaker 3: of things going on. He had two phone and talking
Speaker 3: out of each of his two ears, sort of like
Speaker 3: that movie up where the dog says whirl whirl. So
Speaker 3: then Michael Cohen with this excitable character, and that Michael
Speaker 3: Cohen had promised that don't worry Trump's going to come clean.
Speaker 3: And there's basically a discussion between Dylan Howard, the National
Speaker 3: Inquirer editor, and Davidson, the lawyer for Stormy, basically like
Speaker 3: they can't understand. I can't use the words but their
Speaker 3: blue language. He fed it up and why was this
Speaker 3: And that was a discussion that Trump was tight with
Speaker 3: money that they had to feel on a silver platter
Speaker 3: and it was there for the taking and the only
Speaker 3: reason it didn't close was because they didn't want to
Speaker 3: fund it. And the only reason they didn't fund it
Speaker 3: is they didn't want to spend the money.
Speaker 1: I'm sure this testimony kept the jar attention and tomorrow
Speaker 1: he'll be back on the stand. Thanks so much, Pat.
Speaker 1: That's Bloomberg Legal reporter Patricia Hurtado, and that's it for
Speaker 1: this edition of the Bloomberg Law Podcast. Remember you can
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Speaker 1: dot com, Slash podcast, Slash Law. I'm June Grosso and
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