November 20, 2024 • 36 mins
Chris Dolmetsch, Bloomberg legal reporter, discusses the sentencing of Archegos founder Bill Hwang. Stephen Gillers, a professor of legal ethics at NYU Law School, discusses Trump’s vow to get revenge on his enemies. Emily Siegel, a senior reporter at Bloomberg Law, discusses some problems mass tort lawyers are facing. June Grasso hosts.
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Speaker 1 (00:03):
This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2 (00:10):
Former billionaire investor Bill Huang was sentenced to eighteen years
in federal prison today over the stunning collapse of Arcago's
capital management, which the prosecutor called a national calamity. In July,
a jury convicted h Wong on ten criminal charges, including
wire fraud, securities fraud, and market manipulation for orchestrating a
(00:32):
scheme to mislead banks into providing Arkagos with billions of
dollars in trading capacity, which ultimately led to the collapse
that cost Wall Street Banks more than ten billion dollars.
Joining me as Bloomberg Legal reporter Chris Domesh who covered
the trial and was in the courtroom for the sentencing. Chris,
this sentencing didn't follow this sort of normal script or procedures.
Speaker 3 (00:57):
It was really just very bisarreble knowing procedures are very
straightforward and move it a very time capted script. You know,
the two sides get up, they argue over sentencing guidelines
and other things in the presending report, and then you know,
the government gets up, they make their arguments for whatever
their recommendation is. The defense gets up and they make
their recommendation. In this case, it kind of proceeded very slowly,
(01:20):
in an odd way, and the judge said at the beginning, oh, well,
this might take all day long. We might have to
come back tomorrow morning, which everyone was like, that's very bizarre.
We don't see many two day sentencing hearings. In the end,
that is what happened. But he did pronounce sentence today,
and there was a lot of back and forth between
the judge and the defense lawyers.
Speaker 4 (01:38):
It just didn't go, you know, by scripts.
Speaker 3 (01:41):
As it usually does, and in the end, the judge
pronounced sentence without kind of making this the soliloquy that
he usually does when when they're pronouncing sentences, which is
to repeat all the factors they have to take into consideration, deterrence,
the seriousness of the offense, all those things, and instead
he just kind of pronounced them in a very succinct,
(02:01):
quick manner. And they're coming back tomorrow morning to talk
about some remaining issues, which include forfeiture and possible bail
pending appeal.
Speaker 2 (02:09):
The prosecutors had asked for twenty one years, which is
a heavy sentence in a white collar case, and the
judge gave them close to what they wanted. Eighteen years.
That's a long sentence, especially considering that he's sixty years old.
Speaker 3 (02:25):
Yes, the one thing you can kind of take from
that his attorneys that asked for no jail time, and
the judge called that ridiculous. He took the defense attorneys
to task on that request and kind of drilled down
on them to get them to come up with what
they thought was a more reasonable sentencing recommendation, which in
the end was forty six to fifty seven months.
Speaker 4 (02:42):
And clearly the judge felt that.
Speaker 3 (02:45):
Given the amount of losses in this case, he didn't
really have the opportunity to send a lesser sentence here.
If you get more than I think it's eleven and
a half years, you have to go basically a higher
security prison that leads to all kinds of others, whereas
a lesser sentence would maybe send him to a minimum
security or a camp or something like that.
Speaker 4 (03:05):
So that's what they.
Speaker 3 (03:05):
Wanted, but in the end the judge clearly was not
swayed by any of that. And this is a pretty
heavy sentence for a sixty year old man.
Speaker 2 (03:12):
Hwang is a devout Christian and his nonprofit foundation has
donated something like six hundred million dollars to different causes
like homelessness.
Speaker 5 (03:23):
Did the judge take that into consideration.
Speaker 3 (03:26):
Well, he did to actually take that into consideration, he
just didn't seem to give it much weight, and he
said essentially that a lifetime of good work doesn't offset
the massive clauses in this case. You know, one of
the factors that the judges have to consider when they're
sentencing people is specific deterrence as to whether the individual
would you do it again? And clearly the judge said, look,
(03:46):
I'm not worried about that year. You know, he's a
sixty year old man. He's probably not going to commit
another crime. But he's a little worried about, you know,
his indifference towards what happened to him in the past
when his former firm, Tigler Global pleaded guilty and that
led to the formation Barkingos. But like I said, in
the end, the judge was not swayed by that. Look,
Bill has a great reputation in terms of outside of
(04:08):
these allegations. You know, he's well liked by his friends,
he's known for his charitable works, he's a religious man.
But just those things alone don't offset a thirty six
billion dollar loss.
Speaker 2 (04:19):
What was the prosecutor's argument for why they wanted so
much jail time?
Speaker 5 (04:24):
Was it under the sentencing guidelines.
Speaker 3 (04:27):
The sentencing guidelines are actually much more draftonian than that.
They would call for him to serve two hundred years
in prison, and that's the kind of sentences that are
normally reserved for people who commit mass murder or terrorists
or things like that. So they were well within their
bounds to argue for this, And there arguments that are really
driven by the losses and the fact that other people
(04:49):
were hurt by this, not just the banks, including his employees,
some of whom lost millions of dollars into third compensation
and lost their job. The prosecution clearly wanted him to
go to jail for a long time.
Speaker 4 (05:00):
Seeded.
Speaker 3 (05:00):
Usually in white collar crime we see much lower sentences
just because the losses tend to drive up the guidelines
and what they recommend. You don't usually see the government
get close to what it wants when it wants to
draw cunning and.
Speaker 2 (05:14):
That's what made it surprising when I saw the number.
What was Wong's reaction?
Speaker 3 (05:19):
He really didn't react, which is kind of keeping with
how he's been throughout the trial, very stoic and drinking
water throughout, staring straight ahead, and you know, presumably he
thinks he has a shot on appeal. They've asked for
bail pending appeals. You know, the judge himself acknowledges their
issues that are right for appeal. The one thing he
kind of took the prosecution it's pasked for, is the
argument that he is unrepentant. And the judge said, he's
(05:41):
always kind of uncomfortable with arguments like that by the
prosecutors because people have a right to fight the charges
against them. And he said, vastly maintain he's not guilty here,
so he has that right. And the judge said, you know,
he doesn't really like this kind of arguments. Whether that
appeal will be successful is obviously something at it for
the future.
Speaker 5 (06:02):
On that point.
Speaker 2 (06:03):
That's what makes it difficult sometimes for these defendants who
are appealing to then speak to the judge and tell
them they're remorseful.
Speaker 5 (06:11):
What did Wang say.
Speaker 3 (06:14):
Yeah, he stopped short of that, for sure. That's a
good question. Often you see defendants kind of, you know,
make their case to the judge, get emotional Bill thanks
the judge for taking the time to be thorough in
reading his sentencing letters that his friends and family sent
to him, and he praised his friends and family for
writing the sentencing them most and he said he felt
(06:34):
bad for the people who suffered. But I would say
that the statements stopped short of admitting that he did
something wrong. And maybe that is because of the appeal.
And certainly, you know, we see that often.
Speaker 2 (06:45):
Not during the trial. A lot of his supporters came
every day. Did they have any reaction to the sentence?
Speaker 3 (06:51):
They seem to hang their heads. They were here every day.
They spent a lot of time in the courtroom, in
the cafeteria, in the courthouse, and they were there for
him the whole time. And he thanked them and he
greeted them today just like he did every day of
the trial.
Speaker 2 (07:06):
Did the defense ever tell his story, I mean, he
has an amazing story, really a rags to Riches's story.
He came here from Korea and had nothing.
Speaker 3 (07:15):
They did go into that. That was kind of the
heart of their initial argument, is that you know that
he came here when he was a teenager. His father
had gotten a job as a pastor, and he emigrated
when he was nineteen, came here seeking better, you know,
treatment options for a legally blind brother, and then his
father died within years of him arriving here, and they
(07:37):
had to find a way to survive because a job
as a line cook a McDonald's worked at swap meets,
and then moved to la with three thousand dollars to
his name and lived in the shed in the back
of a church with his family. They played up the charity,
you know, they said this was not a scheme. Really,
it was an effort to help people. They don't want
to make everything he did seem like some sort of
(07:59):
nefarious when they argued these were just for you know,
he's a god fearing man and these were his attempts
to do good by his community.
Speaker 5 (08:08):
What about restitution?
Speaker 2 (08:10):
How much do the prosecutors say was lost here and
how much restitution do they expect? I understand he says
he's not a billionaire anymore.
Speaker 3 (08:19):
Yeah, he says he only has fifty five million dollars,
some of which are in enjoying assets with his wife. Yeah. Actually,
restitution is being deferred for a little while. They're going
to talk about forfeiture tomorrow and possibly any other issues
like bail, pending appeal and maybe you know, reporting dates,
the kind of things that come at the end of
sentencing hearings. After somebody's been pronounced with.
Speaker 2 (08:40):
Forfeiture, would they have to trace it back to his
alleged misdeeds somehow? I mean, how would they decide forfeiture?
Speaker 4 (08:47):
So that's probably the most difficult proposition here.
Speaker 3 (08:50):
The defense says there should be no forfeiture. That argument
seems to be a little less forceful than they're one
about restitution. But the government is seeking nine point eight
billion dollars in restitution as reimbursement for the victims the
counterparty banks, and they're seeking more than twelve billion dollars
in forfeiture. Now, the government acknowledges here that he doesn't
(09:14):
have the money.
Speaker 4 (09:15):
They say that regardless of the fact.
Speaker 3 (09:17):
That he doesn't have the money, these shills should be
subject to the forfeiture amount, just like say drug dealers
who are convicted, who do a drug deal and lose
the drugs. It was a very interesting artist, you know
it often that often is a confusing proposition for people.
Why are you going to ask somebody to forfeit money
they don't have, But I guess it's a tempting to
(09:40):
establish a framework for anyone who would would seek to
recover money in the kid.
Speaker 2 (09:45):
Does the judge think he has more money than he's saying,
because I noticed the judge said something about Huong buying
a new condo in Hudson Yards.
Speaker 3 (09:55):
Yes, he did, note that it's hard to say the
judge did. There's an extended question on that, so he's
definitely not clear on what he needs to do here
or how it could be done. So that that is
going to be the meat of tomorrow's argument.
Speaker 2 (10:09):
And as far as appellet issues, do we already know
one of the issues because the judge kirktailed Wong's defense.
Speaker 3 (10:17):
Yeah, that's certainly one of the issues that they're going
to raise. You know, they certainly raised it in some
of their post trial briefings, in their in their applications
for bail pending appeal, they've noted that they call out
some of the expert testimony for the prosecution's expert when
she calculated that some of the the trading losses were
directly attributable to to Wong conduct or misrepresentations, and they
(10:43):
say that that can't be proven. So, you know, whether
or not he actually they can they can attribute that there.
That might be one of the main things for appeal.
Speaker 2 (10:53):
So a lot more to come, Chris, and I know
you'll be there tomorrow to tell us about it. Thanks
so much. That's bloom Our legal reporter Christopher Domesh coming
up next on the Bloomberg Law Show. Donald Trump has
vowed to get revenge on a long list of prosecutors,
political opponents, and private citizens. Will he use the Justice
Department to do that? I'm June Grosso and you're listening
(11:17):
to Bloomberg.
Speaker 1 (11:18):
It's the enemy from within, all the scum that we
have to deal with that hate our country. That's a
bigger enemy than China and Russia.
Speaker 2 (11:29):
Donald Trump has long railed against his perceived enemies from
within and vowed to get revenge on a long list
of prosecutors, political opponents, and private citizens. And there seems
to be little doubt that the President elect intends to
use the Justice Department to help him get his revenge.
Speaker 1 (11:47):
We will completely overhaul Kamala's corrupt Department of Injustice.
Speaker 2 (11:51):
And now Trump is putting together a team of loyalists
at the Justice Department that would be positioned to carry
out his vows of retribution. Joining me is Steven Gillers,
an ethics professor at NYU Law School. What does the
choice of Matt Gates as Attorney General signal to you?
Speaker 4 (12:12):
Well, a lot of things. His selection has created a
kind of apocalyptic response in the American bar. He is
subsingularly inappropriate to serve as Attorney General by experience or
temperament or knowledge that the only explanation for this election
(12:32):
is that Trump wants someone heading Justice who will be
devoted to Trump over any other consideration, and who will
follow Trump's instructions about targeting what Trump views as his enemies.
Speaker 2 (12:48):
Trump has been very open on the campaign trail about
getting revenge against those who supposedly wronged him, and reportedly
some current and former Justice depart and FBI officials are
already contacting lawyers in anticipation of being investigated. I mean,
do you think that they need to be worried even
(13:08):
if they don't think they did anything wrong.
Speaker 4 (13:11):
Yeah, they need to be worried because even if they
did nothing wrong, and even if they are vindicated in
any civil or criminal case that the Justice Department brings
against them, the cost of the vindication can be enormous
in terms of lawyer fees, anxiety, lost time at their job.
(13:33):
So yeah, they should be worried. They should lawyer up.
They should take Trump at his word. They should expect
to be a subject of investigation. Remember back in the
first Trump administration, there was an IRS investigation of James Comy.
Now that's the IRS, not the Justice Department, but a
(13:55):
full IRS Audit is I'm consuming expensive. It has been
described as the legal equivalent of a colonoscopy. It's very
dispiriting to have to go through that, and Komi had
to go through that. As it happened, it turned out
that the RS found that he overpaid his taxes. But nonetheless,
(14:19):
the cost of getting to that point for Coombe in
money and anxiety would have been enormous. Well, the same
thing can happen in civil or criminal investigations by the
Justice Department.
Speaker 2 (14:31):
Also, if you investigate someone long and hard enough, you
can find other things in their past that may be
illegal but not connected to the investigation, like tax infractions
or smoking marijuana where it isn't legal. Special Counsel John
Durham conducted years and years of investigations and the only guilty.
(14:52):
Ply he got was from an FBI lawyer who had
lied on some documents. So something not related to the
purpose of an investigation, right.
Speaker 4 (15:02):
You know, a thorough investigation can turn up evidence or
a parent evidence of wrongdoing civil or criminals that wasn't
on your radar screen when you started the investigation. When
you turn over every document, when you look at every email,
you could find things that arguably indicate some basis for
(15:24):
a lawsuit or an indictment that you didn't know about
at the beginning. But again, you know, if someone is
charged with a crime in fact or suits civilly, ultimately
there's a trial. If there's no settlement and there's a judge,
the government can cause a lot of pain without ever
having to prove a case a trial. Just by conducting
(15:48):
the investigation. It can bring a case to trial and
drop the case. So vindication is not a victory for
the target of the government. Hostility and eviction or a
money judgment is not necessarily the goal of a justice
department that is out for revenge. The cost in money,
(16:13):
time and anxiety alone can be extremely punishing.
Speaker 2 (16:18):
Special Counsel Jack Smith is one of the people that
Trump has mentioned over and over and over again. What
kind of investigation or prosecution of Smith.
Speaker 5 (16:29):
Can they do well?
Speaker 4 (16:31):
Smith is an interesting situation and from Trump's point of
view judgment from what he has said, Smith is Trump
Enemy number one. He must be in the President's site
as the dominant person to terrorize with legal remedies and
legal threats. Now anything Jack Smith did to antagonize the President,
(16:54):
as Trump saw it, he would have done as an
employee the Justice Department. Jack Smith is in a summer
different positions than other potential alleged enemies. He would have
to be defended by the government. That is, a Justice
Department lawyer who is accused of wrongdoing after leading government
is entitled to a government defend. There are some exceptions,
(17:15):
but if the wrongdoing or the alleged wrongdoing is within
the scope of the lawyer's job, the government will defend him.
Now Here, that's not possible because there will be the
government itself that is targeting Jack Smith. So the Justice
Department can't be both the prosecutor and the defense lawyer,
(17:36):
and so Jack Smith will have to be provided with
the cost of a highly skilled defense law firm to
respond to any DOJ effort to investigate or prosecute him.
That may be good for Jack Smith in the sense
that he doesn't have to pay out of his own pocket,
(17:57):
although even there I imagine that DOJ might argue that
Smith is not entitled to the cost of a defense
for some reason that justice comes up with, and then
that question has to be litigated, and Smith will need
a lawyer to represent him on the question of whether
or not the government has to defend him or pay
(18:18):
for his defense when the charge comes from the government itself.
Speaker 2 (18:23):
So litigation before the litigation. What about Manhattan District Attorney
Alvin Bragg, who brought the hush money case, the only
case against Trump to actually go to trial. Trump has
excoriated him, and also New York Attorney General Letitia James,
who won that four hundred and fifty million dollar verdict
against Trump.
Speaker 4 (18:43):
Well, Bragg and James are also in the Trump target range.
Both of them will get a defense from New York States,
so neither of them would expect to have to pay
out of their own profit for the court of a defense. Indeed,
the state might defend them through a state agency, or
it might pay for private counsel, so that's beneficial for them.
(19:08):
They don't have to bankrupt themselves defending themselves. But again,
the anxiety and the time commitment of fighting the government
can be extremely painful, even if the cost of the
defense is borne by the government itself.
Speaker 2 (19:26):
I'm trying to think of what kind of prosecution the
Justice Department could bring against either one of them. I mean,
Trump has said over and over again that they brought
these cases for political reasons. That claim fail before the
trial judges. I mean, is any of that actionable?
Speaker 4 (19:45):
There is no doubt that Trump lawyers, be the publical
private would be able to articulate a remotely plausible theory
for targeting James or Bratt, a theory that will fail
in court. But all you need to do to get
revenge is to conduct the investigation. Now, it is unlikely
that the Justice Department will ever represent Trump against Bragg
(20:10):
or James. Trump would have to get private counsel to
bring those cases. I don't see how the investigations by
Bragg and James can be turned into a DOJ case
as opposed to a private case brought by Trump himself.
He may do that. Another option for Trump if he
(20:33):
wants to get even with Bragg and James. He doesn't
have to pursue his own claims. He can just call
up any of the relevant regulatory agencies. Of course, the
irs is the most obvious, but truly not the only
to look into their behavior in going after him, and
that could be enough to cause them a great deal
(20:55):
of anguish even if nothing comes of it.
Speaker 2 (20:58):
I assume out the wind though, is the idea of
the Justice Department being nonpartisan and being independent of the
White House.
Speaker 4 (21:09):
Yeah, you know at Bonham. The problem here is that
the Supreme Court has told us that the president controls
all power of the executive branch, all of it. That's
a direct quote, all of it, And so Trump can
control the agenda for DJ There's no check and balance
(21:31):
within the executive branch, and Trump is the decider all
by himself about what the executive branch will will not
do in the way of exercise of executive power. So
the tradition of norms by which the Justice Department operates
independently of the president, that tradition is not legally mandated,
(21:55):
and Trump did change it by an effect through Gates
taking control of the decisions of the Justice Department that
are of particular interest to him. Ninety nine point ninety
nine percent of what DOJ does will be of no
interest in Trump at all, But a sliver of matters
(22:16):
will be of great interest to him because they benefit
him or friends of his, or because they target his enemies.
And where those matters arise or could rise, Trump is
the decider. And so what we've done is flip the
switch so that at one time the Attorney General was
(22:37):
the decider and the executive the White House stayed away
from those decisions. Now, for a very small but important
sliver of DOJ decisions, the White House will be the decider.
And there's nothing that DOJ lawyers can do to resist that,
and the ones that Trump has chosen may not wish
(22:59):
to reap.
Speaker 2 (23:01):
Trump also has chosen two of his personal lawyers who
represented him at the Hushbunny trial for top positions at
the Justice Department, with his attorney Todd Blanche taking the
number two spot at DOJ.
Speaker 5 (23:16):
Does that raise alarms or is it concerning?
Speaker 4 (23:19):
Yeah? It is concerning because you want people running Justice
Department who have no sense of loyalty to the president
other than the loyalty of following the law. But there's
a personal relationship there you know, this goes way back
to President Kennedy chose his brother to be Attorney General,
and there was a lot of criticism of that selection
(23:40):
because Robert Kennedy would not be independent, or so it
was seen of his president brother. Well, there's an analogy here.
The relationship between Trump and his former defense lawyers could
be seen to give rise to a sense of loyalty
to Trump that will undermine the need for distance and
(24:07):
independence on the part of the people who run Justice.
Speaker 2 (24:11):
The Finally, Professor, can you think of a president in
the past who used the Justice Department in a similar
way or in a way that Trump seems to want to.
Speaker 4 (24:20):
Well, there's some reason to believe that Nixon did had
his enemies list and did use the department that way.
There has never been the kind of overt threats of
retaliation against enemies that Trump has prominently anticipated, even during
the Nixon years when John Mitchell was Attorney General. We
(24:41):
don't have the same degree of evidence of a tent
in the Nixon Mitchell years that we have exclicitly in
Trump's threats.
Speaker 5 (24:51):
Thanks so much for being on the show.
Speaker 2 (24:53):
That's Professor Steven Gillers of NYU Law School, mass tourt
lawyers and their investors have a problem. The pay add
on some huge cases is taking longer than expected, and
the hunt to find the next big case has not
been fruitful. So those high interest loans that law firms
use to fund their work are coming due, forcing firms
(25:16):
to refinance under less than optimal conditions. Joining me is
Emily Siegel, senior Bloomberg Law reporter who's written about this.
Mass tort lawyers typically work on contingency. Explain how they
fund these huge cases that go on for years and years.
Speaker 6 (25:34):
Sometimes math tort firms will have their own money that
they can put towards cases, but as these cases take
longer and longer, litigation funders have come in and sort
of like filled this gap for them. So while they
wait and they pay all the fees to litigate these cases,
they can get funding from a litigation funder, and that
(25:54):
has been an increasingly more popular alternative in the math
tort and like plan.
Speaker 2 (26:00):
It's laws based, and these are not necessarily based on
the outcome of the case.
Speaker 5 (26:06):
They're more like regular loans.
Speaker 6 (26:08):
They're not based on the outcome in the traditional sense
of litigation funding, but they do evaluate the case docket
before they fund them, so that's how the pricing is based.
So they'll look at a law firms like list of cases,
go through them, see what stages they're in. And you know,
some of these mass tort firms have thousands of cases,
(26:29):
so they may not be looking at every single one,
but they do want to get a sense of them
and how far along they are and what torts they're
involved in and how diverse it is, and that is
how they determine the total amount of the loans. So
it does still relate to the actual the lawsuits that
they're funding.
Speaker 2 (26:48):
And the interest rates are high, double digits.
Speaker 6 (26:50):
Sometimes, yeah, I think because these are high risk, they're
often double digit interest rates. You know, in the teens
and twenties. As years go on, the interest rates can
go up.
Speaker 2 (27:00):
Two of the largest multi district tort cases are against
Jay and Jay and Bayer, and they're hitting the ten
year mark with no resolution in sight.
Speaker 5 (27:08):
Tell us about a little about those cases, sure well.
Speaker 6 (27:11):
Johnson and Johnson is one of the ones that we
often hear about. They've filed for bankruptcy three times now
to try to resolve these cases. It's just been dragging
along the allegations are their calculm powder caused cancer and
its users. So that is the gist of the case,
and it has been going on for ten years. They
just filed for bankruptcy again, I think earlier this year,
(27:34):
and they have proposed global settlements that haven't been approved yet.
So there's a lot of disagreement amongst even the attorneys
about whether they should approve the bankruptcy proceedings. It's just
become a totally different type of tort because of that.
So they're really tied up in the bankruptcy proceedings and
(27:55):
the infighting amongst the lawyers. It's just been delayed and
there's not really a clear timeline on when it's going
to be resolved. So that's one of the main ones.
And then another one that has sort of a different
set of issues is against there for its roundup product
and also I believe causing cancer. And that one that
there has been three circuits that have had differing opinions
(28:17):
on it, which is called the circuit split, so two
are in one direction and one is in the other.
So because of that there can be some delays in
dispersing settlements, and it could be something that the Supreme
Court has to rule on.
Speaker 2 (28:31):
Brendan Barreff contingency capital at a litigation finance conference said
there's a degree of stress and distress in the space.
Speaker 5 (28:40):
What was he talking about?
Speaker 6 (28:42):
So there are two things going on, and I think
they're related. One is that a lot of these law
firms are sed up in these loans that are reaching
maturity dates and there is not a payout yet on
the cases that they were expecting to be paid on,
So then they refinance their loans either with the same
thunder or a different thunder, and they have to take
(29:04):
confessions when they do that. So that sort of creates
this environment of constant refinancing from investors, and the money
is not necessarily coming from the cases, it's coming from
other investors in the space. And on top of that,
there's not another calcum powder right now. There's not another roundup,
there's not another camp lasions. There are lots of mass
(29:27):
torts that are going on, but there's not this like
gigantic one that they're all looking towards or that's farther along.
So there are two things going on, and that the
firms are refinancing rates more often than they expected to
be and also there's not this big tort that everyone
is putting their money towards, or at least you know,
a lot of these law firms are really excited about
(29:50):
and thinks could be you know, could be helpful to
their clients, but also you know, result in a big payout.
Speaker 2 (29:57):
I found that fascinating that as they're liv getting these cases,
they're looking for the next big tort that they can
go after.
Speaker 6 (30:06):
Yes, I mean, they always are, I think to some extent.
And there was one I believe it was last year
that was against thail and All, alleging that Thailand All
when taken by a pregnant person would cause autism and ADHD,
and it ended up going to a Dowbert hearing, which
you know, would test the science of the claims, and
(30:28):
it failed. So that was one that I think some
had thought could be the next big one because a
lot of women take tail and All when pregnant. It's
approved and it could have been really massive group of people.
But then since it failed, it did not become a
multi district religation, and that was something I think not everyone,
(30:48):
I think there were some skepticism around it, but they
were intrigued by that one and so there isn't something
like that. I mean, one of the ones that's referenced
in the piece is Deco Privera, which is a contraceptive injection,
and that is one that they think will be like
a big tourt because there are a lot of injuries.
But you know, I haven't heard of others.
Speaker 2 (31:09):
At this point, some of the experienced tourt lawyers are
blaming the new players and firms. One told you the
market has blown up exponentially, so they're blaming the new guys.
Speaker 4 (31:22):
I think so.
Speaker 6 (31:23):
I think that some of the mass tort or some
of the plaintiffs attorneys believe that there are other law
firms that are entering the space because they want to
get rich and they want to build up their case book,
and the way they want to do that is through
litigation funding. So they get all these cases, they use
the money to market and put out commercials, They retain
(31:44):
a lot of different claimants, and then they have to
work up those cases and they're not really at least
this is what those attorneys are saying. They're not prepared
for the work that goes into working up each individual case.
So if you're a law firm of two people and
you have thousands of cases because of your litigation funding,
how how do you attend to all of those clients.
(32:05):
So that's what they are saying that there's just a
lot of new firms, not necessarily new lawyers, but new
to the space coming in and wanting to be part
of this, and it's creating an environment where there's a
lot of lending going on and also making it more crowded.
Speaker 2 (32:21):
So it's a difficult area of litigation. It takes a
lot of money, it takes a lot of time. But
if you win, are the rewards for lawyers, would you
say astronomical?
Speaker 4 (32:33):
It can be.
Speaker 6 (32:34):
I think it depends on the quality of the cases
that you have. Are they quality, meaning are the injuries
within like the defined realm for the MDL, you know,
and if you have a lot of cases like that,
you know a lot of these mass toward lawyers are
quite wealthy. So yes, but it's also not easy to
(32:54):
find good cases and to work them up. So I
think there's that sort of tension going on right now.
Speaker 2 (33:00):
Let's say the inexperienced lawyers or the lawyers that are
new to this field have a lot of clients they
benefit if there's a settlement, right, sort of writing on
the coattails of the more experienced lead lawyers.
Speaker 6 (33:16):
They could be. It sort of depends on what they're
putting their money towards, right, So if they get a
lot of funding and they put it towards marketing, but
they hire a marketing company that's not doing a great
job getting calls as they come in, you could end
up with thousands of cases that are not very valuable.
(33:37):
Or you can do your research, you can put them
towards marketing with the companies that you trust, and you
can be working them up as they're coming in, And
there's just different approaches. But I think the concern is
that some of these firms may have lots of cases
that actually don't qualify for the tourt. Maybe like for instance,
(33:57):
if we talk about Camp La June, which I wrote
a peace on this last year, you know, some of
the law firms had clients who were faked, like they
gave them a fake address. They just wanted to get
in on potential settlement because they see these advertisements. So
I think, yes, they could be a big part of
the settlement, but their cases still have to qualify. It's
all to have used the product and been injured by
(34:18):
it in a specific way.
Speaker 2 (34:20):
And is there any concern that the lawyers are thinking
about their investors and their investment before their clients' concerns.
Speaker 6 (34:29):
Some attorneys believe that that is the case. It's hard
to know really what's going on behind closed doors, but
there have been allegations of that. In particular and the
Johnson and Johnson talcum powder cases, there have been law
firms accusing other law firms of wanting to accept the
bankruptcy proposal, but then only because they're motivivated by having
(34:51):
to pay back their loans and they're to the investors.
So that's definitely alleged a lot. Whether it's actually happening,
it's hard to say. I know that a lot of
lawyers are concerned that that's happening.
Speaker 2 (35:02):
Are there firms that have decided to get away from
mass torts because of the length of time involved in
these cases?
Speaker 6 (35:10):
I think that there are some, at least on the
funding side. There are litigation funders that try to have
a more diverse portfolio. So if they're going to invest
in firms that have mass torts, they also want those
firms to be handling other personal injury cases because those
are shorter term, and you know that can sort of
keep money coming in while they wait on these big torts.
(35:32):
I think that as they enter this period where they're
looking for another sport, they're just looking for firms that
are really aware of that and are just trying to
be as diverse as possible. There are many funders who
don't do mass torts at all because they do not
like the duration issues. You know what I heard from
Andrew at s Fire Bank. You know, he saw this
(35:53):
happening years ago and thought I need to move farther
away from this while still having some money closure in
mass tours but also the smaller single cases.
Speaker 2 (36:04):
Well, your story is really fascinating. Emily, thanks so much.
That's Emily Siegel, Bloomberg Law Senior Reporter, and that's it
for this edition of The Bloomberg Law Show. Remember you
can always get the latest legal news on our Bloomberg
Law Podcast. You can find them on Apple Podcasts, Spotify,
and at www dot Bloomberg dot com, slash podcast Slash Law,
(36:26):
and remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. I'm June Grosso
and you're listening to Bloomberg
This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2 (00:10):
Former billionaire investor Bill Huang was sentenced to eighteen years
in federal prison today over the stunning collapse of Arcago's
capital management, which the prosecutor called a national calamity. In July,
a jury convicted h Wong on ten criminal charges, including
wire fraud, securities fraud, and market manipulation for orchestrating a
(00:32):
scheme to mislead banks into providing Arkagos with billions of
dollars in trading capacity, which ultimately led to the collapse
that cost Wall Street Banks more than ten billion dollars.
Joining me as Bloomberg Legal reporter Chris Domesh who covered
the trial and was in the courtroom for the sentencing. Chris,
this sentencing didn't follow this sort of normal script or procedures.
Speaker 3 (00:57):
It was really just very bisarreble knowing procedures are very
straightforward and move it a very time capted script. You know,
the two sides get up, they argue over sentencing guidelines
and other things in the presending report, and then you know,
the government gets up, they make their arguments for whatever
their recommendation is. The defense gets up and they make
their recommendation. In this case, it kind of proceeded very slowly,
(01:20):
in an odd way, and the judge said at the beginning, oh, well,
this might take all day long. We might have to
come back tomorrow morning, which everyone was like, that's very bizarre.
We don't see many two day sentencing hearings. In the end,
that is what happened. But he did pronounce sentence today,
and there was a lot of back and forth between
the judge and the defense lawyers.
Speaker 4 (01:38):
It just didn't go, you know, by scripts.
Speaker 3 (01:41):
As it usually does, and in the end, the judge
pronounced sentence without kind of making this the soliloquy that
he usually does when when they're pronouncing sentences, which is
to repeat all the factors they have to take into consideration, deterrence,
the seriousness of the offense, all those things, and instead
he just kind of pronounced them in a very succinct,
(02:01):
quick manner. And they're coming back tomorrow morning to talk
about some remaining issues, which include forfeiture and possible bail
pending appeal.
Speaker 2 (02:09):
The prosecutors had asked for twenty one years, which is
a heavy sentence in a white collar case, and the
judge gave them close to what they wanted. Eighteen years.
That's a long sentence, especially considering that he's sixty years old.
Speaker 3 (02:25):
Yes, the one thing you can kind of take from
that his attorneys that asked for no jail time, and
the judge called that ridiculous. He took the defense attorneys
to task on that request and kind of drilled down
on them to get them to come up with what
they thought was a more reasonable sentencing recommendation, which in
the end was forty six to fifty seven months.
Speaker 4 (02:42):
And clearly the judge felt that.
Speaker 3 (02:45):
Given the amount of losses in this case, he didn't
really have the opportunity to send a lesser sentence here.
If you get more than I think it's eleven and
a half years, you have to go basically a higher
security prison that leads to all kinds of others, whereas
a lesser sentence would maybe send him to a minimum
security or a camp or something like that.
Speaker 4 (03:05):
So that's what they.
Speaker 3 (03:05):
Wanted, but in the end the judge clearly was not
swayed by any of that. And this is a pretty
heavy sentence for a sixty year old man.
Speaker 2 (03:12):
Hwang is a devout Christian and his nonprofit foundation has
donated something like six hundred million dollars to different causes
like homelessness.
Speaker 5 (03:23):
Did the judge take that into consideration.
Speaker 3 (03:26):
Well, he did to actually take that into consideration, he
just didn't seem to give it much weight, and he
said essentially that a lifetime of good work doesn't offset
the massive clauses in this case. You know, one of
the factors that the judges have to consider when they're
sentencing people is specific deterrence as to whether the individual
would you do it again? And clearly the judge said, look,
(03:46):
I'm not worried about that year. You know, he's a
sixty year old man. He's probably not going to commit
another crime. But he's a little worried about, you know,
his indifference towards what happened to him in the past
when his former firm, Tigler Global pleaded guilty and that
led to the formation Barkingos. But like I said, in
the end, the judge was not swayed by that. Look,
Bill has a great reputation in terms of outside of
(04:08):
these allegations. You know, he's well liked by his friends,
he's known for his charitable works, he's a religious man.
But just those things alone don't offset a thirty six
billion dollar loss.
Speaker 2 (04:19):
What was the prosecutor's argument for why they wanted so
much jail time?
Speaker 5 (04:24):
Was it under the sentencing guidelines.
Speaker 3 (04:27):
The sentencing guidelines are actually much more draftonian than that.
They would call for him to serve two hundred years
in prison, and that's the kind of sentences that are
normally reserved for people who commit mass murder or terrorists
or things like that. So they were well within their
bounds to argue for this, And there arguments that are really
driven by the losses and the fact that other people
(04:49):
were hurt by this, not just the banks, including his employees,
some of whom lost millions of dollars into third compensation
and lost their job. The prosecution clearly wanted him to
go to jail for a long time.
Speaker 4 (05:00):
Seeded.
Speaker 3 (05:00):
Usually in white collar crime we see much lower sentences
just because the losses tend to drive up the guidelines
and what they recommend. You don't usually see the government
get close to what it wants when it wants to
draw cunning and.
Speaker 2 (05:14):
That's what made it surprising when I saw the number.
What was Wong's reaction?
Speaker 3 (05:19):
He really didn't react, which is kind of keeping with
how he's been throughout the trial, very stoic and drinking
water throughout, staring straight ahead, and you know, presumably he
thinks he has a shot on appeal. They've asked for
bail pending appeals. You know, the judge himself acknowledges their
issues that are right for appeal. The one thing he
kind of took the prosecution it's pasked for, is the
argument that he is unrepentant. And the judge said, he's
(05:41):
always kind of uncomfortable with arguments like that by the
prosecutors because people have a right to fight the charges
against them. And he said, vastly maintain he's not guilty here,
so he has that right. And the judge said, you know,
he doesn't really like this kind of arguments. Whether that
appeal will be successful is obviously something at it for
the future.
Speaker 5 (06:02):
On that point.
Speaker 2 (06:03):
That's what makes it difficult sometimes for these defendants who
are appealing to then speak to the judge and tell
them they're remorseful.
Speaker 5 (06:11):
What did Wang say.
Speaker 3 (06:14):
Yeah, he stopped short of that, for sure. That's a
good question. Often you see defendants kind of, you know,
make their case to the judge, get emotional Bill thanks
the judge for taking the time to be thorough in
reading his sentencing letters that his friends and family sent
to him, and he praised his friends and family for
writing the sentencing them most and he said he felt
(06:34):
bad for the people who suffered. But I would say
that the statements stopped short of admitting that he did
something wrong. And maybe that is because of the appeal.
And certainly, you know, we see that often.
Speaker 2 (06:45):
Not during the trial. A lot of his supporters came
every day. Did they have any reaction to the sentence?
Speaker 3 (06:51):
They seem to hang their heads. They were here every day.
They spent a lot of time in the courtroom, in
the cafeteria, in the courthouse, and they were there for
him the whole time. And he thanked them and he
greeted them today just like he did every day of
the trial.
Speaker 2 (07:06):
Did the defense ever tell his story, I mean, he
has an amazing story, really a rags to Riches's story.
He came here from Korea and had nothing.
Speaker 3 (07:15):
They did go into that. That was kind of the
heart of their initial argument, is that you know that
he came here when he was a teenager. His father
had gotten a job as a pastor, and he emigrated
when he was nineteen, came here seeking better, you know,
treatment options for a legally blind brother, and then his
father died within years of him arriving here, and they
(07:37):
had to find a way to survive because a job
as a line cook a McDonald's worked at swap meets,
and then moved to la with three thousand dollars to
his name and lived in the shed in the back
of a church with his family. They played up the charity,
you know, they said this was not a scheme. Really,
it was an effort to help people. They don't want
to make everything he did seem like some sort of
(07:59):
nefarious when they argued these were just for you know,
he's a god fearing man and these were his attempts
to do good by his community.
Speaker 5 (08:08):
What about restitution?
Speaker 2 (08:10):
How much do the prosecutors say was lost here and
how much restitution do they expect? I understand he says
he's not a billionaire anymore.
Speaker 3 (08:19):
Yeah, he says he only has fifty five million dollars,
some of which are in enjoying assets with his wife. Yeah. Actually,
restitution is being deferred for a little while. They're going
to talk about forfeiture tomorrow and possibly any other issues
like bail, pending appeal and maybe you know, reporting dates,
the kind of things that come at the end of
sentencing hearings. After somebody's been pronounced with.
Speaker 2 (08:40):
Forfeiture, would they have to trace it back to his
alleged misdeeds somehow? I mean, how would they decide forfeiture?
Speaker 4 (08:47):
So that's probably the most difficult proposition here.
Speaker 3 (08:50):
The defense says there should be no forfeiture. That argument
seems to be a little less forceful than they're one
about restitution. But the government is seeking nine point eight
billion dollars in restitution as reimbursement for the victims the
counterparty banks, and they're seeking more than twelve billion dollars
in forfeiture. Now, the government acknowledges here that he doesn't
(09:14):
have the money.
Speaker 4 (09:15):
They say that regardless of the fact.
Speaker 3 (09:17):
That he doesn't have the money, these shills should be
subject to the forfeiture amount, just like say drug dealers
who are convicted, who do a drug deal and lose
the drugs. It was a very interesting artist, you know
it often that often is a confusing proposition for people.
Why are you going to ask somebody to forfeit money
they don't have, But I guess it's a tempting to
(09:40):
establish a framework for anyone who would would seek to
recover money in the kid.
Speaker 2 (09:45):
Does the judge think he has more money than he's saying,
because I noticed the judge said something about Huong buying
a new condo in Hudson Yards.
Speaker 3 (09:55):
Yes, he did, note that it's hard to say the
judge did. There's an extended question on that, so he's
definitely not clear on what he needs to do here
or how it could be done. So that that is
going to be the meat of tomorrow's argument.
Speaker 2 (10:09):
And as far as appellet issues, do we already know
one of the issues because the judge kirktailed Wong's defense.
Speaker 3 (10:17):
Yeah, that's certainly one of the issues that they're going
to raise. You know, they certainly raised it in some
of their post trial briefings, in their in their applications
for bail pending appeal, they've noted that they call out
some of the expert testimony for the prosecution's expert when
she calculated that some of the the trading losses were
directly attributable to to Wong conduct or misrepresentations, and they
(10:43):
say that that can't be proven. So, you know, whether
or not he actually they can they can attribute that there.
That might be one of the main things for appeal.
Speaker 2 (10:53):
So a lot more to come, Chris, and I know
you'll be there tomorrow to tell us about it. Thanks
so much. That's bloom Our legal reporter Christopher Domesh coming
up next on the Bloomberg Law Show. Donald Trump has
vowed to get revenge on a long list of prosecutors,
political opponents, and private citizens. Will he use the Justice
Department to do that? I'm June Grosso and you're listening
(11:17):
to Bloomberg.
Speaker 1 (11:18):
It's the enemy from within, all the scum that we
have to deal with that hate our country. That's a
bigger enemy than China and Russia.
Speaker 2 (11:29):
Donald Trump has long railed against his perceived enemies from
within and vowed to get revenge on a long list
of prosecutors, political opponents, and private citizens. And there seems
to be little doubt that the President elect intends to
use the Justice Department to help him get his revenge.
Speaker 1 (11:47):
We will completely overhaul Kamala's corrupt Department of Injustice.
Speaker 2 (11:51):
And now Trump is putting together a team of loyalists
at the Justice Department that would be positioned to carry
out his vows of retribution. Joining me is Steven Gillers,
an ethics professor at NYU Law School. What does the
choice of Matt Gates as Attorney General signal to you?
Speaker 4 (12:12):
Well, a lot of things. His selection has created a
kind of apocalyptic response in the American bar. He is
subsingularly inappropriate to serve as Attorney General by experience or
temperament or knowledge that the only explanation for this election
(12:32):
is that Trump wants someone heading Justice who will be
devoted to Trump over any other consideration, and who will
follow Trump's instructions about targeting what Trump views as his enemies.
Speaker 2 (12:48):
Trump has been very open on the campaign trail about
getting revenge against those who supposedly wronged him, and reportedly
some current and former Justice depart and FBI officials are
already contacting lawyers in anticipation of being investigated. I mean,
do you think that they need to be worried even
(13:08):
if they don't think they did anything wrong.
Speaker 4 (13:11):
Yeah, they need to be worried because even if they
did nothing wrong, and even if they are vindicated in
any civil or criminal case that the Justice Department brings
against them, the cost of the vindication can be enormous
in terms of lawyer fees, anxiety, lost time at their job.
(13:33):
So yeah, they should be worried. They should lawyer up.
They should take Trump at his word. They should expect
to be a subject of investigation. Remember back in the
first Trump administration, there was an IRS investigation of James Comy.
Now that's the IRS, not the Justice Department, but a
(13:55):
full IRS Audit is I'm consuming expensive. It has been
described as the legal equivalent of a colonoscopy. It's very
dispiriting to have to go through that, and Komi had
to go through that. As it happened, it turned out
that the RS found that he overpaid his taxes. But nonetheless,
(14:19):
the cost of getting to that point for Coombe in
money and anxiety would have been enormous. Well, the same
thing can happen in civil or criminal investigations by the
Justice Department.
Speaker 2 (14:31):
Also, if you investigate someone long and hard enough, you
can find other things in their past that may be
illegal but not connected to the investigation, like tax infractions
or smoking marijuana where it isn't legal. Special Counsel John
Durham conducted years and years of investigations and the only guilty.
(14:52):
Ply he got was from an FBI lawyer who had
lied on some documents. So something not related to the
purpose of an investigation, right.
Speaker 4 (15:02):
You know, a thorough investigation can turn up evidence or
a parent evidence of wrongdoing civil or criminals that wasn't
on your radar screen when you started the investigation. When
you turn over every document, when you look at every email,
you could find things that arguably indicate some basis for
(15:24):
a lawsuit or an indictment that you didn't know about
at the beginning. But again, you know, if someone is
charged with a crime in fact or suits civilly, ultimately
there's a trial. If there's no settlement and there's a judge,
the government can cause a lot of pain without ever
having to prove a case a trial. Just by conducting
(15:48):
the investigation. It can bring a case to trial and
drop the case. So vindication is not a victory for
the target of the government. Hostility and eviction or a
money judgment is not necessarily the goal of a justice
department that is out for revenge. The cost in money,
(16:13):
time and anxiety alone can be extremely punishing.
Speaker 2 (16:18):
Special Counsel Jack Smith is one of the people that
Trump has mentioned over and over and over again. What
kind of investigation or prosecution of Smith.
Speaker 5 (16:29):
Can they do well?
Speaker 4 (16:31):
Smith is an interesting situation and from Trump's point of
view judgment from what he has said, Smith is Trump
Enemy number one. He must be in the President's site
as the dominant person to terrorize with legal remedies and
legal threats. Now anything Jack Smith did to antagonize the President,
(16:54):
as Trump saw it, he would have done as an
employee the Justice Department. Jack Smith is in a summer
different positions than other potential alleged enemies. He would have
to be defended by the government. That is, a Justice
Department lawyer who is accused of wrongdoing after leading government
is entitled to a government defend. There are some exceptions,
(17:15):
but if the wrongdoing or the alleged wrongdoing is within
the scope of the lawyer's job, the government will defend him.
Now Here, that's not possible because there will be the
government itself that is targeting Jack Smith. So the Justice
Department can't be both the prosecutor and the defense lawyer,
(17:36):
and so Jack Smith will have to be provided with
the cost of a highly skilled defense law firm to
respond to any DOJ effort to investigate or prosecute him.
That may be good for Jack Smith in the sense
that he doesn't have to pay out of his own pocket,
(17:57):
although even there I imagine that DOJ might argue that
Smith is not entitled to the cost of a defense
for some reason that justice comes up with, and then
that question has to be litigated, and Smith will need
a lawyer to represent him on the question of whether
or not the government has to defend him or pay
(18:18):
for his defense when the charge comes from the government itself.
Speaker 2 (18:23):
So litigation before the litigation. What about Manhattan District Attorney
Alvin Bragg, who brought the hush money case, the only
case against Trump to actually go to trial. Trump has
excoriated him, and also New York Attorney General Letitia James,
who won that four hundred and fifty million dollar verdict
against Trump.
Speaker 4 (18:43):
Well, Bragg and James are also in the Trump target range.
Both of them will get a defense from New York States,
so neither of them would expect to have to pay
out of their own profit for the court of a defense. Indeed,
the state might defend them through a state agency, or
it might pay for private counsel, so that's beneficial for them.
(19:08):
They don't have to bankrupt themselves defending themselves. But again,
the anxiety and the time commitment of fighting the government
can be extremely painful, even if the cost of the
defense is borne by the government itself.
Speaker 2 (19:26):
I'm trying to think of what kind of prosecution the
Justice Department could bring against either one of them. I mean,
Trump has said over and over again that they brought
these cases for political reasons. That claim fail before the
trial judges. I mean, is any of that actionable?
Speaker 4 (19:45):
There is no doubt that Trump lawyers, be the publical
private would be able to articulate a remotely plausible theory
for targeting James or Bratt, a theory that will fail
in court. But all you need to do to get
revenge is to conduct the investigation. Now, it is unlikely
that the Justice Department will ever represent Trump against Bragg
(20:10):
or James. Trump would have to get private counsel to
bring those cases. I don't see how the investigations by
Bragg and James can be turned into a DOJ case
as opposed to a private case brought by Trump himself.
He may do that. Another option for Trump if he
(20:33):
wants to get even with Bragg and James. He doesn't
have to pursue his own claims. He can just call
up any of the relevant regulatory agencies. Of course, the
irs is the most obvious, but truly not the only
to look into their behavior in going after him, and
that could be enough to cause them a great deal
(20:55):
of anguish even if nothing comes of it.
Speaker 2 (20:58):
I assume out the wind though, is the idea of
the Justice Department being nonpartisan and being independent of the
White House.
Speaker 4 (21:09):
Yeah, you know at Bonham. The problem here is that
the Supreme Court has told us that the president controls
all power of the executive branch, all of it. That's
a direct quote, all of it, And so Trump can
control the agenda for DJ There's no check and balance
(21:31):
within the executive branch, and Trump is the decider all
by himself about what the executive branch will will not
do in the way of exercise of executive power. So
the tradition of norms by which the Justice Department operates
independently of the president, that tradition is not legally mandated,
(21:55):
and Trump did change it by an effect through Gates
taking control of the decisions of the Justice Department that
are of particular interest to him. Ninety nine point ninety
nine percent of what DOJ does will be of no
interest in Trump at all, But a sliver of matters
(22:16):
will be of great interest to him because they benefit
him or friends of his, or because they target his enemies.
And where those matters arise or could rise, Trump is
the decider. And so what we've done is flip the
switch so that at one time the Attorney General was
(22:37):
the decider and the executive the White House stayed away
from those decisions. Now, for a very small but important
sliver of DOJ decisions, the White House will be the decider.
And there's nothing that DOJ lawyers can do to resist that,
and the ones that Trump has chosen may not wish
(22:59):
to reap.
Speaker 2 (23:01):
Trump also has chosen two of his personal lawyers who
represented him at the Hushbunny trial for top positions at
the Justice Department, with his attorney Todd Blanche taking the
number two spot at DOJ.
Speaker 5 (23:16):
Does that raise alarms or is it concerning?
Speaker 4 (23:19):
Yeah? It is concerning because you want people running Justice
Department who have no sense of loyalty to the president
other than the loyalty of following the law. But there's
a personal relationship there you know, this goes way back
to President Kennedy chose his brother to be Attorney General,
and there was a lot of criticism of that selection
(23:40):
because Robert Kennedy would not be independent, or so it
was seen of his president brother. Well, there's an analogy here.
The relationship between Trump and his former defense lawyers could
be seen to give rise to a sense of loyalty
to Trump that will undermine the need for distance and
(24:07):
independence on the part of the people who run Justice.
Speaker 2 (24:11):
The Finally, Professor, can you think of a president in
the past who used the Justice Department in a similar
way or in a way that Trump seems to want to.
Speaker 4 (24:20):
Well, there's some reason to believe that Nixon did had
his enemies list and did use the department that way.
There has never been the kind of overt threats of
retaliation against enemies that Trump has prominently anticipated, even during
the Nixon years when John Mitchell was Attorney General. We
(24:41):
don't have the same degree of evidence of a tent
in the Nixon Mitchell years that we have exclicitly in
Trump's threats.
Speaker 5 (24:51):
Thanks so much for being on the show.
Speaker 2 (24:53):
That's Professor Steven Gillers of NYU Law School, mass tourt
lawyers and their investors have a problem. The pay add
on some huge cases is taking longer than expected, and
the hunt to find the next big case has not
been fruitful. So those high interest loans that law firms
use to fund their work are coming due, forcing firms
(25:16):
to refinance under less than optimal conditions. Joining me is
Emily Siegel, senior Bloomberg Law reporter who's written about this.
Mass tort lawyers typically work on contingency. Explain how they
fund these huge cases that go on for years and years.
Speaker 6 (25:34):
Sometimes math tort firms will have their own money that
they can put towards cases, but as these cases take
longer and longer, litigation funders have come in and sort
of like filled this gap for them. So while they
wait and they pay all the fees to litigate these cases,
they can get funding from a litigation funder, and that
(25:54):
has been an increasingly more popular alternative in the math
tort and like plan.
Speaker 2 (26:00):
It's laws based, and these are not necessarily based on
the outcome of the case.
Speaker 5 (26:06):
They're more like regular loans.
Speaker 6 (26:08):
They're not based on the outcome in the traditional sense
of litigation funding, but they do evaluate the case docket
before they fund them, so that's how the pricing is based.
So they'll look at a law firms like list of cases,
go through them, see what stages they're in. And you know,
some of these mass tort firms have thousands of cases,
(26:29):
so they may not be looking at every single one,
but they do want to get a sense of them
and how far along they are and what torts they're
involved in and how diverse it is, and that is
how they determine the total amount of the loans. So
it does still relate to the actual the lawsuits that
they're funding.
Speaker 2 (26:48):
And the interest rates are high, double digits.
Speaker 6 (26:50):
Sometimes, yeah, I think because these are high risk, they're
often double digit interest rates. You know, in the teens
and twenties. As years go on, the interest rates can
go up.
Speaker 2 (27:00):
Two of the largest multi district tort cases are against
Jay and Jay and Bayer, and they're hitting the ten
year mark with no resolution in sight.
Speaker 5 (27:08):
Tell us about a little about those cases, sure well.
Speaker 6 (27:11):
Johnson and Johnson is one of the ones that we
often hear about. They've filed for bankruptcy three times now
to try to resolve these cases. It's just been dragging
along the allegations are their calculm powder caused cancer and
its users. So that is the gist of the case,
and it has been going on for ten years. They
just filed for bankruptcy again, I think earlier this year,
(27:34):
and they have proposed global settlements that haven't been approved yet.
So there's a lot of disagreement amongst even the attorneys
about whether they should approve the bankruptcy proceedings. It's just
become a totally different type of tort because of that.
So they're really tied up in the bankruptcy proceedings and
(27:55):
the infighting amongst the lawyers. It's just been delayed and
there's not really a clear timeline on when it's going
to be resolved. So that's one of the main ones.
And then another one that has sort of a different
set of issues is against there for its roundup product
and also I believe causing cancer. And that one that
there has been three circuits that have had differing opinions
(28:17):
on it, which is called the circuit split, so two
are in one direction and one is in the other.
So because of that there can be some delays in
dispersing settlements, and it could be something that the Supreme
Court has to rule on.
Speaker 2 (28:31):
Brendan Barreff contingency capital at a litigation finance conference said
there's a degree of stress and distress in the space.
Speaker 5 (28:40):
What was he talking about?
Speaker 6 (28:42):
So there are two things going on, and I think
they're related. One is that a lot of these law
firms are sed up in these loans that are reaching
maturity dates and there is not a payout yet on
the cases that they were expecting to be paid on,
So then they refinance their loans either with the same
thunder or a different thunder, and they have to take
(29:04):
confessions when they do that. So that sort of creates
this environment of constant refinancing from investors, and the money
is not necessarily coming from the cases, it's coming from
other investors in the space. And on top of that,
there's not another calcum powder right now. There's not another roundup,
there's not another camp lasions. There are lots of mass
(29:27):
torts that are going on, but there's not this like
gigantic one that they're all looking towards or that's farther along.
So there are two things going on, and that the
firms are refinancing rates more often than they expected to
be and also there's not this big tort that everyone
is putting their money towards, or at least you know,
a lot of these law firms are really excited about
(29:50):
and thinks could be you know, could be helpful to
their clients, but also you know, result in a big payout.
Speaker 2 (29:57):
I found that fascinating that as they're liv getting these cases,
they're looking for the next big tort that they can
go after.
Speaker 6 (30:06):
Yes, I mean, they always are, I think to some extent.
And there was one I believe it was last year
that was against thail and All, alleging that Thailand All
when taken by a pregnant person would cause autism and ADHD,
and it ended up going to a Dowbert hearing, which
you know, would test the science of the claims, and
(30:28):
it failed. So that was one that I think some
had thought could be the next big one because a
lot of women take tail and All when pregnant. It's
approved and it could have been really massive group of people.
But then since it failed, it did not become a
multi district religation, and that was something I think not everyone,
(30:48):
I think there were some skepticism around it, but they
were intrigued by that one and so there isn't something
like that. I mean, one of the ones that's referenced
in the piece is Deco Privera, which is a contraceptive injection,
and that is one that they think will be like
a big tourt because there are a lot of injuries.
But you know, I haven't heard of others.
Speaker 2 (31:09):
At this point, some of the experienced tourt lawyers are
blaming the new players and firms. One told you the
market has blown up exponentially, so they're blaming the new guys.
Speaker 4 (31:22):
I think so.
Speaker 6 (31:23):
I think that some of the mass tort or some
of the plaintiffs attorneys believe that there are other law
firms that are entering the space because they want to
get rich and they want to build up their case book,
and the way they want to do that is through
litigation funding. So they get all these cases, they use
the money to market and put out commercials, They retain
(31:44):
a lot of different claimants, and then they have to
work up those cases and they're not really at least
this is what those attorneys are saying. They're not prepared
for the work that goes into working up each individual case.
So if you're a law firm of two people and
you have thousands of cases because of your litigation funding,
how how do you attend to all of those clients.
(32:05):
So that's what they are saying that there's just a
lot of new firms, not necessarily new lawyers, but new
to the space coming in and wanting to be part
of this, and it's creating an environment where there's a
lot of lending going on and also making it more crowded.
Speaker 2 (32:21):
So it's a difficult area of litigation. It takes a
lot of money, it takes a lot of time. But
if you win, are the rewards for lawyers, would you
say astronomical?
Speaker 4 (32:33):
It can be.
Speaker 6 (32:34):
I think it depends on the quality of the cases
that you have. Are they quality, meaning are the injuries
within like the defined realm for the MDL, you know,
and if you have a lot of cases like that,
you know a lot of these mass toward lawyers are
quite wealthy. So yes, but it's also not easy to
(32:54):
find good cases and to work them up. So I
think there's that sort of tension going on right now.
Speaker 2 (33:00):
Let's say the inexperienced lawyers or the lawyers that are
new to this field have a lot of clients they
benefit if there's a settlement, right, sort of writing on
the coattails of the more experienced lead lawyers.
Speaker 6 (33:16):
They could be. It sort of depends on what they're
putting their money towards, right, So if they get a
lot of funding and they put it towards marketing, but
they hire a marketing company that's not doing a great
job getting calls as they come in, you could end
up with thousands of cases that are not very valuable.
(33:37):
Or you can do your research, you can put them
towards marketing with the companies that you trust, and you
can be working them up as they're coming in, And
there's just different approaches. But I think the concern is
that some of these firms may have lots of cases
that actually don't qualify for the tourt. Maybe like for instance,
(33:57):
if we talk about Camp La June, which I wrote
a peace on this last year, you know, some of
the law firms had clients who were faked, like they
gave them a fake address. They just wanted to get
in on potential settlement because they see these advertisements. So
I think, yes, they could be a big part of
the settlement, but their cases still have to qualify. It's
all to have used the product and been injured by
(34:18):
it in a specific way.
Speaker 2 (34:20):
And is there any concern that the lawyers are thinking
about their investors and their investment before their clients' concerns.
Speaker 6 (34:29):
Some attorneys believe that that is the case. It's hard
to know really what's going on behind closed doors, but
there have been allegations of that. In particular and the
Johnson and Johnson talcum powder cases, there have been law
firms accusing other law firms of wanting to accept the
bankruptcy proposal, but then only because they're motivivated by having
(34:51):
to pay back their loans and they're to the investors.
So that's definitely alleged a lot. Whether it's actually happening,
it's hard to say. I know that a lot of
lawyers are concerned that that's happening.
Speaker 2 (35:02):
Are there firms that have decided to get away from
mass torts because of the length of time involved in
these cases?
Speaker 6 (35:10):
I think that there are some, at least on the
funding side. There are litigation funders that try to have
a more diverse portfolio. So if they're going to invest
in firms that have mass torts, they also want those
firms to be handling other personal injury cases because those
are shorter term, and you know that can sort of
keep money coming in while they wait on these big torts.
(35:32):
I think that as they enter this period where they're
looking for another sport, they're just looking for firms that
are really aware of that and are just trying to
be as diverse as possible. There are many funders who
don't do mass torts at all because they do not
like the duration issues. You know what I heard from
Andrew at s Fire Bank. You know, he saw this
(35:53):
happening years ago and thought I need to move farther
away from this while still having some money closure in
mass tours but also the smaller single cases.
Speaker 2 (36:04):
Well, your story is really fascinating. Emily, thanks so much.
That's Emily Siegel, Bloomberg Law Senior Reporter, and that's it
for this edition of The Bloomberg Law Show. Remember you
can always get the latest legal news on our Bloomberg
Law Podcast. You can find them on Apple Podcasts, Spotify,
and at www dot Bloomberg dot com, slash podcast Slash Law,
(36:26):
and remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. I'm June Grosso
and you're listening to Bloomberg
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