Tesla Securities and Wire Fraud Investigation:
The episode kicks off with a deep dive into the ongoing investigation surrounding Tesla's marketing efforts and statements made by its CEO, Elon Musk, regarding the company's self-driving capabilities. The Department of Justice and the SEC are scrutinizing Tesla's claims about full self-driving features and the timeline for their release. The investigation raises questions about market manipulation and the impact of Musk's statements on Tesla's stock price.
DOJ Settlement in Larry Nassar Case:
The episode also covers a $138.7 million settlement reached by the Justice Department over the FBI's failures in the Larry Nassar case. Nassar, a former doctor, was accused of sexually abusing hundreds of women and girls, including athletes. The settlement covers 139 claims from survivors who alleged that the FBI failed to investigate or take action despite being aware of Nassar's crimes. The settlement aims to provide some compensation to the survivors and highlights the need for accountability and systemic changes within law enforcement.
Analysis and Reflection:
The hosts delve into the complexities of these legal cases, discussing the challenges of proving liability and the implications of the settlements. They explore the impact on the victims, the government's response, and the potential for improved training and protocols to prevent similar failures in the future. The episode concludes with a reflection on the importance of recognizing and addressing systemic failures in the legal system.
Tune in to Litigation Nation for insightful discussions on the latest legal issues and updates across the nation. Subscribe to get the latest episodes, and stay informed with the ever-changing legal landscape.
- (00:00) - - Intro
- (00:50) - - Tesla Under Investigation for Securities Fraud
- (05:30) - - Tesla's Full Self-Driving Claims
- (09:30) - - Shareholder Suits Against Tesla
- (16:45) - - DOJ Settlement Over Larry Nassar Case
- (22:30) - - Impact of Settlement on Nassar Survivors
- (28:50) - - Comparison with Other DOJ Settlements
- (38:27) - - Outro
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Danessa Watkins (00:05):
Welcome to Litigation Nation. I'm your
host, Danessa Watkins, here withmy co host, Jack Sanker. And as
a reminder, this is the showwhere we cover the hot exciting
legal issues across the nation,and keep you updated on what's
going on. So, Jack, what are youcovering today?
Jack Sanker (00:21):
So Tesla is in the news again, this time for
potential securities and wirefraud investigations relating to
the advertising of its full selfdriving features.
Danessa Watkins (00:32):
And I'm also actually covering a DOJ case.
Recently, the justice departmententered into a $138,700,000
settlement over the FBI'sfailures in the Larry Nassar
case. All that and more, here'swhat you need to know.
Jack Sanker (00:55):
As I mentioned in the intro, Tesla is back in the
headlines. It seems to alwaysbe. And, this time over the
ongoing investigation from theDepartment of Justice and the
SEC relating to its marketingefforts and some of the
statements made by its executiveand, founder, Elon Musk,
specifically as to Tesla's selfdriving capabilities, which is a
(01:19):
a key element of their,marketing for the automobiles
that they sell. According to anarticle that was published in
The Verge just a couple daysago, Tesla is under scrutiny
from the DOJ for its claims thatits vehicles would be self
driving within a set amount oftime. And and I should note that
on this particular claim byTesla, it's it's always been a
(01:39):
moving target, based on thepublic statements of its founder
and CEO, Elon Musk.
For example, in 2016, he claimedin an interview that full self
driving status would be, youknow, quote, no more than 2
years away. That's 2016. We'rerecording this in May of 2024,
and, obviously, we're not thereyet. He's made a lot of other
claims along the way to theeffect that full self driving
(02:02):
capabilities will be forthcomingover the past few years. And in
my observation, in my opinion,usually those statements come
out around the time of biginvestor actions or shareholder
votes or, you know, earningscalls, things like that.
So that's the kind of the cruxof this investigation is,
(02:24):
broadly speaking, whether themarket is being manipulated by
these statements, this this kindof optimism around Tesla, around
a product that it may or may notreally be close to putting out.
So going back to the Vergestory, quote, according to
Reuters, the probe is lookinginto statements made by Tesla
CEO Elon Musk in particular. Foryears, Musk has been promising
(02:46):
fully autonomous Tesla vehiclesare just around the corner while
also admitting that he oftensets overly optimistic
deadlines. Meanwhile, thecompany's advanced driver assist
features, autopilot and fullself driving, do not make the
vehicles autonomous and requiredrivers to keep their hands on
the steering wheel and eyes onthe road, unquote. Now the verge
(03:06):
report was published, just a dayago on May 8th.
We're recording here on May 9,2024, and the verge report
relies pretty heavily on Reutersreporting going all the way back
to 2022 when the criminalinvestigation by the DOJ was
actually launched. The reasonit's back in the news is based
on, some insider and, sourcesthat have been leaking some
(03:30):
things to Reuters and also somenews about new subpoenas and
document requests and thingslike that. Quoting from the
Reuters report from earlier thismonth, quote, there are Tesla
videos demonstrating thetechnology that remained
archived, opens on the Teslawebsite in a new tab, which says
the person in the driver's seatis only there for legal reasons.
(03:53):
He is not doing anything. Thecar is driving itself.
A Tesla engineer in 2022 in alawsuit over a fatal crash
involving autopilot thattestified that one of the videos
posted in October of 2016intended to show the
technology's potential and didnot accurately portray its
capabilities at the time. Musk,nevertheless, posted the video
(04:15):
on social media writing, quote,Tesla drives itself, no human
input at all, through urbanstreets to highway streets, then
finds a parking spot. In aconference call with reporters
in 2016, Musk describedautopilot as probably better
than a human driver. And duringan October 2022 call, Musk
addressed a forthcoming, FSDupgrade, and parenthetical f FSD
(04:37):
means full self driving. Aforthcoming f s FSD upgrade that
he said would allow customers totravel to your work, your
friend's house, or to thegrocery store without you
touching the wheel, unquote.
As my own personal experience,I've I've been in a Tesla
before. They are pretty coolvehicles. But in what I think
(05:03):
the consensus is that they arefar short of this, you know,
full self driving capability.They seem to have, the autopilot
system is is pretty neat, to toexperience firsthand. But it's
not far off from what a lot ofcompetitors are have already
been including in their vehiclesfor a long time, and they don't
market market those things asfull self driving.
Things like lane assist, smart,cruise control, things like
(05:28):
that. Those are all featuresthat a lot of other vehicles
have, even my, like, 2018 Subarudoes. So it's just anecdotally,
it it doesn't seem to it it doessell set itself apart from what
other folks are doing, but Ithink we'll get into it in a
(05:49):
moment what some competitorshave already put out there that
they're not calling full selfdriving is in some ways
exceeding what Tesla is able todo at this point. So on the
investigation itself, theReuters report summarizes some
of the goals and challenges thatthe probe may have pretty
nicely. Quoting back fromReuters quote, the investigators
will need to demonstrate thatTesla's claims crossed the line
(06:12):
from legal salesmanship tomaterial and knowing false
statements that unlawfullyharmed consumers or investors, 3
legal experts uninvolved in theprobe told Reuters.
US courts have ruled thatpuffery or corporate optimism
regarding the product claims didnot amount to fraud. In 2008,
federal appeals court ruled thatstatements of corporate optimism
(06:33):
alone do not demonstrate that acompany official intentionally
misled investors. Justicedepartment officials will likely
seek internal TeslaCommunications as evidence that
Musk or others knew that theywere making false statements,
said Daniel Richmond, a ColumbiaLaw School professor and former
federal prosecutor. That is achallenge, Richmond said, but
safety risks involved inoverselling self driving systems
(06:56):
also speaks to the seriousnesswith which prosecutors, a judge,
and a jury would take thestatements, unquote. So this is
a kind of a classic case of, theexecutive as a salesperson for
the company and his cheerleaderfor the company, maybe making
some claims that aren't gonna bebacked up by what the company
can actually do here.
(07:17):
And that's a problem foreveryone involved, lest you
think that this is, you know, aTesla hater podcast, which it's
not. But it's a problem for evenfor anyone listening because of
the way in which Tesla has beenintegrated to the US economy and
the size of the company. So it'shas a market cap of, I think,
close to a $1,000,000,000,000,if not more. I have checked
(07:39):
recently. It wasn't one pointthe most valuable company
company on the planet despitethe fact that it's selling
significantly less vehicles thaneven a company like, you know,
say, Toyota or or GM orwhatever.
So that the share price and theinvestor optimism around this is
(08:00):
based almost entirely on thisclaim that the vehicles are
gonna be self driving sometimein the very near future. And
that's been driving Teslainvestment for the past, you
know, 10 years. If indeed it'snot the case that Tesla is
really even close, and I I Idon't know one way or the other.
I mean, maybe they'll launch ittomorrow. You know?
(08:20):
Who knows? But if they're notclose, that's gonna hurt the
share price pretty dramaticallybecause what's priced into that
share price, obviously, is thefull self driving capability.
Without that, it's just anelectric car company. And and,
you know, it was pretty early tothe market for electric
vehicles, but there are a lotof, EV competitors out there now
(08:44):
and many of whom are, offering,the same capabilities from just
the electric vehicleperspective. It seems like every
automobile automobilemanufacturer is doing that
already.
So the issue and the real harmhere that the DOJ is
investigating is how that'sgonna how these statements from
(09:06):
Musk and and probably otherswithin the company have maybe
inflated and maybe illegallyinflated, the share price. And
as I mentioned, it does seemlike these statements tend to
come out whenever there is ashareholder vote, whether it's
to do with executivecompensation for Elon,
specifically or, the theissuance of more shares or
(09:27):
around earnings calls, thingslike that.
Danessa Watkins (09:30):
So when I was listening to you talk, Jack, I I
was gonna ask you if this isgonna potentially lead to
shareholder suits, but I justjumped on Google real quick and
found that, well, Forbes inFebruary of this year was
reporting on an update about theshareholder suits. So there have
been suits filed. One seems tobe related to these
(09:54):
mischaracterizations by the CEOand other higher ups in the
company. But it looks like thiswas filed in, I think,
California. But because that's Iguess, couple of plaintiffs, the
the contracts that they signedhave an arbitration clause.
(10:16):
It looks like the judge is notapproving the class action suit,
and it's gonna have to go toarbitration. The other ones are
focused on injuries. Let's see.There was a return in April of
2023, finding that Tesla was notresponsible for a crash that
occurred in 2019 where thedriver died. There's been a
(10:39):
couple other suits like that,and it looks like Tesla has not
been held liable.
But, yeah, there's certainlyboth, the Department of Justice
and shareholders payingattention to these potential
misstatements.
Jack Sanker (10:55):
Yeah. I mean, I know that Tesla gets a lot of
attention. And every timethere's a crash involving Tesla
and and maybe involvingautopilot, there's a lot of
media scrutiny around it one wayor the other. And whether that's
fair or not, you know, I don'tknow because I'm not tracking,
you know, how often there's amanufacturing issue with, you
know, a Toyota or a Subaru orwhatever that that leads to a
(11:16):
car crash, you know, to compareit to to the frequency that's
happening with Tesla. You know,I I don't know, whether it's
higher or lower than what youthan the margin of error that we
kind of all accept.
So I don't I don't wanna, like,dwell on the specific instance.
Since, although we have coveredthem in the past of the, the
crashes involving Tesla, thingslike that. I know there have
(11:37):
been a bunch of interestingallegations. One one which is
that when a Tesla isn't engagedin autopilot and is involved in
a crash, it's, it automaticallyturns off the autopilot, like,
in the split second before thecrash so that when you go and
look at the, like, black boxdata, it'll show that autopilot
was not engaged.
Danessa Watkins (11:58):
My gosh.
Jack Sanker (11:59):
Yeah. I mean, I don't I don't know if it's been
substantiated, but that was anallegation. So, yeah, the point
is, the if, you know, if Teslaself driving cars were a thing,
right, tomorrow, it would be ahuge deal. Right? It would the
roads would be wouldtheoretically be safer.
(12:19):
Everyone would go buy a Tesla ifthey could afford it. It it
would change, you know, the wayour relationships with our
vehicles. I mean, this is theoptimism case for Tesla. It's
it's it would be a legitimatelyhuge deal, which is why everyone
has been buying, equity in Teslafor as for the last, you know,
10 years because it it wouldchange the economy. Mhmm.
(12:45):
But if it's all kind of fluffand, you know, BS, that's a big
problem.
Danessa Watkins (12:50):
What I think you can't I I know we are not
gonna be experts on this subjectas far as safety concerns, but,
you know, you can't minimize thethe obvious safety issues when
you have the CEO makingstatements like side mirrors
won't be needed. You know,that's making some pretty big
promises.
Jack Sanker (13:09):
Yeah. And and the thing about full self driving in
in which, like, the opponents orkind of Tesla, negativists would
would point out is, like, whenyou say that to a driver and
they take you at face value, theunderstanding is I can I can
take a nap now? You know? Idon't have to have I don't even
have to have my eyes open. AndRight.
(13:29):
So now the margin of error is ifthis thing fails, it's a
catastrophic failure because thedriver is completely disengaged,
which is why the law so far hasrequired, drivers to, you know,
keep their hands on the steeringwheel and to, like, you know,
ostensibly pay attention. Nowyou can go on YouTube and find
videos of people doing all kindsof crazy stuff in their Teslas,
(13:51):
while self self driving isengaged. And, like, none of that
is, like, good or or safe orprobably legal. But, yeah,
that's that's that's the bigissue is is if this is if people
are trusting in this software,to operate and it doesn't, well,
you know, the downsides arepretty significant. I'm sure if
you asked Tesla, that, you know,whether they had this
(14:15):
capability, they'd say yes.
But when push comes to shove, ifthat were the case, they would
say, you know what? We'll we'llwe'll go ahead and assume
liability for these crashes orfor these, you know,
malfunctions or whatever, andthey haven't. You know? So I
think that that is, a prettysignificant, indicator of how
much faith they have in theirown product, for example. And,
(14:37):
based on yeah.
You know, I I it doesn't to meand people who have listened to
the show, I'm a bit of a techpessimist. You know, I I I think
over the past couple of years,we've learned a lot about, when
Silicon Valley makes claims likethis, like, what to actually
expect. So I I don't know. I Ithink maybe the folks in
(14:58):
Washington are getting wise tothat as well. And it matters
because of the amount ofsubsidies that companies like
Tesla get from the taxpayers,the state, and federal levels.
It matters from, you know, theinvestor perspective. But the
DOJ is is at this point pretty,focused on the market
manipulation aspect of it. Ialso think the the SEC, I
(15:22):
believe, is also involved. LikeI said, I don't wanna see Tesla
stock tank because that'll, youknow, that'll hurt my retirement
account, you know, and and thenprobably most people that are
listening in one way, shape, orform. It had hurt the US economy
pretty pretty badly.
But, at some point or another,they're gonna have to make good
on this promise or else they'rejust an electric car company.
(15:43):
And that's nothing wrong withthat. That's fine. But it's not
it doesn't justify, you know, a$1,000,000,000,000 market cap
when a company like Toyotasells, I don't know, 50 times as
many vehicles, and is valuedmuch much smaller, by the by the
market.
Danessa Watkins (16:03):
Yeah. Yep. Wow. Yeah. That's interesting.
And you said that they've beeninvestigating them since 2022 on
this?
Jack Sanker (16:11):
Yes. So the DOJ's perspective is that they would
they would be claiming that,investors and consumers were
defrauded or were induced, to bedefrauded by these statements.
The SEC will talk more aboutspecific, you know, elements of,
like, market manipulation andsecurities, etcetera. But the
long and short of it is they'vegot a lot to prove, and I think
(16:34):
that it needs to be donequickly, from the Tesla
shareholder perspective and andgovernment regulatory
perspective as well.
Danessa Watkins (16:46):
Alright. Another Department of Justice
case. There was a recentsettlement that was reached, a
138 $700,000 to be exact. Andthis was over the Larry Nassar
scandal, and allegations thatthe FBI failed to protect the
(17:07):
the victims of Nassar over anumber of years. So this
settlement is pretty farreaching.
It covers a 139 claims fromdifferent women, essentially
claiming that they were victims,now survivors, of sexual assault
from Larry Nassar and that theFBI not only had notice of this
(17:30):
but ignored it. You know,completely dropped the ball,
failed to talk to localauthorities, failed to conduct
any sort of investigation, whichcould have saved as many as
potentially 70 of his victims.So Nassar has been accused just
a little bit of background incase you've been living under a
rock. Larry Nassar has beenaccused of abusing hundreds of
(17:53):
women and girl athletes as youngas 8 years old while working at
Michigan State University withUSA Gymnastics and also local
schools and teams. So in 2017,Nassar pled guilty in federal
court to charges of possessingchild pornography and also
destroying and concealingevidence when he believed,
(18:13):
correctly so, that there was aninvestigation by law enforcement
that would reveal his childpornography activities.
So for that, he was sentenced to60 years in federal prison. And
then in Michigan State Court, hepled guilty to 10 counts of
criminal sexual assault. Andbefore his sentencing, a 156
(18:34):
victims spoke over 7 days,really recounting similar
stories over and over aboutgoing to this doctor for for
treatment related to sportsinjuries only to be sexually
assaulted under the guise thatit was a form of treatment. So
as a result of that, Nassar wassentenced to 40 to a 175 years
in prison. And just because I'mthis story hits home for me, and
(18:59):
I'm a I'm a firm believer in theprotection of of sexual assault
victims.
I just love this judge'scomments during the sentencing.
She said, quote, as much as itwas my honor and privilege to
hear the sister survivors, itwas my honor and privilege to
sentence you because, sir, youdo not deserve to walk outside
of a prison ever again. You havenot owned yet what you did. I
(19:22):
wouldn't send my dogs to you,sir. I've just signed your death
warrant, end quote.
Jack Sanker (19:26):
This is this is the judge who I think ripped up the,
was it the sending sending theseguidelines? Because I think it
was it might be confusing withsomeone else, but it was a
televised sentencing, and thejudge, like, stood up and, like,
ripped up a piece of paper andmade a big show of it, I think.
Danessa Watkins (19:41):
I yeah. I remember that. I'm not sure if
this was her. This is the thequote I just gave you is from,
Judge Rosemarie Aquilina, but,but it would make sense. Okay.
So now how does the how does theFBI come into play here? Well,
in 2021, the inspector generalfor the justice department, he
issued a report revealing thatagents at multiple FBI field
(20:05):
offices were tipped off toNassar's crimes, but failed to
adequately investigate or notifylocal authorities. One of the
most prominent examples is thatthe FBI's field office in Indian
Indianapolis. They receivedcomplaints about Nassar as early
as 2015, and the reportconcluded that senior FBI
officials in that office failedto respond to allegations with
(20:28):
the utmost seriousness andurgency that they deserved and
require. The office also madenumerous and fundamental errors
when they did respond,including, like I mentioned,
failing to notify localauthorities.
So the result of thismishandling or, guess, better
described as a complete absenceof any semblance of competency,
those are my words, is thatNassar continued to abuse 70 or
(20:52):
more athletes from the time thatthe FBI was first notified until
August of 2016 when the MichiganState University Police
Department received a separatecomplaint. So despite all of
this, the DOJ said that it wouldnot be bringing charges against
those agents who miss mishandledthe investigation, and,
actually, some of themsubsequently lied to cover up
(21:13):
their mistakes. So in 2022, 90survivors of Nassar's abuse
brought a suit against the FBI,and their suit included a prayer
of damages for $1,000,000,000Now these claims were filed
under the Federal Tort ClaimsAct, which gave the government 6
(21:33):
months to respond to the injuredparties before they could file
suit. So I believe during thattime, they started to negotiate
potential settlement, becausethe outline of the agreement was
actually reached last year. Andthen over the past few months,
lawyers on both sides have justbeen determining the specific
payouts.
(21:53):
So the awards that each claimantwill get will vary based on the
abuse, but the reports indicatethat the settlement will result
in approximately $1,000,000 paidto each survivor. So as much as
this settlement serves as asuccessful resolution
potentially for the survivors,Mick Gruel, who is one of the
(22:14):
attorneys for 44 of theclaimants, including actually
one who died of suicide, hassaid that this offering by the
government is just really toolittle too late. New York Times
quoted attorney Gruel asfollows. These women were
assaulted because of the FBI'sfailure, and there's no amount
of money that will make themwhole again. Their goal with all
(22:37):
of this was to make sure thatthis never happens again.
He hopes this deal will closethe book on this and will help
lead them to a path of healing,unquote. Now I read the story of
one of those survivors, AlexisHazen, who first reported abuse
by Nassar in 2016. She claimsthat she endured his abuse from
ages 12 to 18, and she is now26, married, and a mother of 3
(23:02):
boys. So she gave a phoneinterview to The New York Times,
and she said, quote, I'mrelieved but disappointed that
no one is being held accountablefor failing to report the abuse
and for sweeping it under theunder the rug. In a way, this
helps me be able to move pastthis, but it's always in the
back of my mind that, wow, Ifthe FBI didn't protect me, could
something like this happen to mychildren?
(23:24):
And that makes me really, reallymad. I definitely have no trust
in that institution anymore. So,in case you're wondering, mister
Nassar is currently serving outhis sentence in federal prison
in Florida. And in July of 2023,he was stabbed multiple times in
the chest, back, and neck byanother inmate, suffered a
(23:48):
collapsed lung, was lucky tosurvive, but he did, in fact,
survive. So, I mean, just, youknow, looking at settlements
like this, it it's reallyimpossible.
I mean, how much is enough? Noamount will ever be enough. You
know, for many of thesesurvivors, this this is really
bigger than them. You know, theythey're seeking change for the
(24:11):
future so that this neverhappens to another athlete. And
how do you ensure that?
You know, on on the one hand,yes, we should give some credit
to the DOJ for admitting thatthe agency was at fault and and
had shortcomings. You know, it'snot often that we see
organizations like this come outand say, yeah. We got this
(24:31):
wrong. But, you know, some havesuggested here, why are there
not consequences on anindividual level? Like, why are
we not holding those specificFBI agents that didn't take
these athletes' complaintsseriously?
Why aren't they personallyliable? I did look a little
deeper into that just to see ifthere was anything. And, the 2,
(24:54):
the 2 agents that were mentionedmost prominently in the
inspector general reports. Oneof them was the head of the
Indianapolis field office. Heretired shortly after the came
out.
And then another one, he wasfired and then ended up suing
the FBI in federal court tooverturn his his firing. He lost
(25:15):
that, by the way. But I so therereally were no repercussions on
a, you know, local level. So I Idon't know if, you know, I don't
know what the answer is here. Imean, yes, it's it's great that
the government is takingaccountability, but is this
really gonna change things inthe future for, you know, future
(25:36):
potential victims?
Jack Sanker (25:38):
You know, I don't wanna say that it it's a small
settlement. I mean, it's not.It's a 138,000,000, which is a
weird number because there's a139 claimants claimants. So I I
wonder Mhmm. That, you know,it's not a one for $1,000,000
per.
(25:58):
And they suit for a1,000,000,000. And some of the
individuals in that class, Ithink, are pretty high profile
people. Some, you know,collegiate athletes, I think
some Olympians, for example. Onething that Yeah.
Danessa Watkins (26:14):
Some that will be actually competing Olympics
coming up. So Yeah. And
Jack Sanker (26:19):
Yes. Yeah. I know
Danessa Watkins (26:20):
it's Ali. Yeah. Mhmm. Yeah.
Jack Sanker (26:23):
What's what's interesting to me, and this is,
you know, not as a right andwrong thing, but as, you know,
as an attorney, I it it it seemslike it's a settlement that is
maybe being reached in ininterest of, you know, maybe
doing the right thing. Toolittle, too late, of course. But
(26:44):
because I mean, correct me ifI'm wrong, but, I mean, claims
under the the FDA, FTCA rather,I mean, there's a still
approximate cause element here.And, you know, I I don't know.
Failure to investigate,typically, at least in the local
(27:04):
context, police officers, thingslike that is usually not
actionable, or at least notsuccessfully actionable.
You know, law enforcement hasbroad discretion to decline
taking on investigations, thatfor one reason or another, they
don't want to. And and thatcould be for a number of
reasons. It could be, you know,in this case, it seems like,
(27:27):
whatever bias or lack of oftaking it seriously with respect
to these claimants. I mean, whoknows? I have no idea.
But there is approximate causeelement that I think maybe would
have given the claimants aproblem down the road, because
(27:47):
they they still have to show,the elements of the FTCA are are
broadly similar to what youwould see in, you know, standard
tort action. You know, injury,the employee has to have been
acting within the scope of theirauthority as a government agent.
(28:08):
The the employee would have hadto have been, you know,
negligent or or wrongful orintentionally or otherwise. And
then there has to be theproximate cause. I mean, the
proximate cause proximate cause,not cause in fact, but proximate
cause of the injuries here is isNassar.
Right? Mhmm. So this does seemlike a negotiated piece between
(28:28):
the parties, which is good, ofcourse, for the for the
claimants. But I think it doesreflect probably a a real risk
of ruling down the road, whichwould bar the whole thing. At
least that's my 2¢ as a tortlitigator, in in just spotting
the issues here.
Danessa Watkins (28:50):
Yeah. I mean, it's an interesting point, and
I, you know, try to put myemotions aside on the issue,
because I I certainly think thatwhen it comes to sexual assault
claims, you know, they they arein a different category than
just, you know, a a failure toinvestigate a a robbery or
(29:10):
something like that. I mean, thefact that we have these figures,
and I found them in multiplereports that between the time
that the FBI was first notifiedof this until the time where the
the Michigan police took itseriously. I mean, they have a
firm number. There were 70, ifnot more, victims that, that
(29:32):
were abused during that periodof time.
So, I mean, you know, what whatevidence they have of that, I I
can't tell you firsthand. Butlet's also keep in mind, like
you said, the, you know, theclimate of what's going on now.
Obviously, we've had the Me Toomovement. The US Center For
(29:52):
Safesport was developed in Ithink March of 2017 is when it
officially opened its doors. Andthat was in large part because
of the Nassar scandal becomingpublic.
There were a lot ofcongressional hearings about
this, certainly a ton ofattention. So, yes, maybe to
some extent, this is a result ofof the media that was that was
(30:16):
put on this issue. I mean andrightly so. It brought about
some some real change and somegood change in protecting our
young athletes. It's justunfortunate, obviously, that so
many people had to to be injuredin order for us to get this
change.
But it but you brought up, youknow, that interesting point of
(30:37):
just how do you prove proximatecause in these type of cases.
And I I did dig a little bitfurther into this because I
think it is kinda monumentalthat the Department of Justice
will enter into a settlementthis big, but this isn't the
first one. And there have beenmore recently settlements,
involved with the victims ofmass shootings. So in, yeah, in
(31:01):
in 2023, the victims andfamilies of the 26 people that
were killed in the 2017 shootingat a church in Texas, They
received 144,500,000 in asettlement with the DOJ. Now
this was after a federaldistrict judge in Texas ruled
(31:22):
that the the Air Force was 60%liable for the attack that
occurred.
Officials had failed to submitcrucial records that would have
prevented the suspect in theSutherland Spring shooting from
obtaining, from a licensed gundealer, the semiautomatic rifle
that he used in the attack. Thisis the findings of the judge.
(31:44):
The judge also found that airforce officials were aware that
the gunman had previouslyresearched and threatened a mass
shooting and had a history ofsevere mental health issues that
had led officials to declare himto be, quote, dangerous and,
quote, a threat. He also had adomestic violence conviction by
a military court. So based onall that evidence and and the
(32:07):
air force's failure to to passthat along, the judge awarded
originally 230,000,000 to thefamilies.
And, shockingly, the justicedepartment appealed. They
argued, quote, there is nodispute that the US Air Force
personnel failed to transmit tothe National Instant Criminal
Background Check Systeminformation about the gunman
(32:30):
that would have identified himas ineligible to purchase that
firearm. But that mistake is nota legally proper basis for
imposing liability on the UnitedStates or for finding the Air
Force more culpable for thedeadly massacre than the shooter
end quote. So that's exactlywhat you were just talking
about, Jack, of, you know, howhow do we have this judge saying
(32:51):
that the government is 60%liable for the attack when, you
know, it's it's not the one thatactually carried out the the
shooting. Yeah.
So so those were the argumentsthat went up on appeal. And and
while it was pending in the 5thdistrict, the the government did
settle for that $144,500,000figure. So certainly less than
(33:12):
than what the judge found at thedistrict court level, but still
a very sizable settlement,especially after having heard,
you know, what I just read toyou, their position that they
they couldn't be held proximateas the proximate cause.
Jack Sanker (33:26):
Yeah. And and I know that the victims in this
case, also had, they've theyhave prosecuted their claims
against, they prosecuted theirclaims against Michigan State,
you know, against Nassarindividually. There's a lot of
civil civil remedies.
Danessa Watkins (33:44):
USA Gymnastics also. They brought claims
against. So
Jack Sanker (33:47):
Yeah. I mean and to some extent, not to not at all
to make an excuse here. But ifyou're at the FBI field office
and you get a phone call about,an an individual, you know, on a
college campus, a collegeemployee who's who's doing
something wrong or the other. 1or 2 of of those phone calls,
(34:09):
you you may think to yourselfI'm trying to just rationalize
this. Well, that's a universityissue or that's a state police
issue.
You know, bring it to theuniversity. Bring it to the
cops. Like, we're the FBI here.You know? It's, we've got
terrorists to chase and and allsorts of other things to to
worry about.
But they're you crush a athreshold pretty quick when
(34:33):
you've ignored the volume ofcomplaints that they seemingly
did. And we haven't talked aboutthe real issue, which is the
cover up aspect of this, which Ithink I think you know, I'm sure
that the settlement release, inthis includes release of claims
for that element, to the extentthat there is one. But, like,
(34:54):
that is that in of itself is, Ithink, signifies that these
folks knew they they crossed thepoint where they knew they had
screwed up and then were tryingto, keep themselves clean here.
And that's obviously someevidence of, you know, of intent
or or at least evidence of, youknow, knowingly wrongdoing at a
certain point or another. So,yeah, it's it's it's tough.
(35:18):
I I think that the thesettlement amount here is
reflective of of the both sidesrecognizing some risk here and
not to be, you know, cynical,but, Simone Biles, you know,
isn't a national icon. She's atreasure. The a sexual assault
(35:39):
claim filed by someone of herstar caliber, individually, for
example, would would woulddemand a larger settlement than
$1,000,000. Right?
Danessa Watkins (35:51):
Right.
Jack Sanker (35:51):
So, you know, for it to be split this way among
the parties and everyone, youknow, thankfully, it seems like
everyone in the in the thatbrought the claims are being
compensated along witheverything else, and and that
doesn't, you know, make themwhole at all. But it it does
reflect some recognition onbehalf of probably the
plaintiff's lawyers that gettinga judgment might might might be
(36:15):
less than a sure thing, which iswhich is good. I mean, that's
that's also point of of thistype of settlement arrangement.
Danessa Watkins (36:22):
Yeah. That. And I think, I mean, like I said
before, I think a lot of theseathletes are are not doing this,
you know, to line their pockets.I don't I don't think it's about
money. You know?
And it it's more about therecognition that there was a
extreme, you know, failure inthe system and breakdown that
(36:43):
should never happen again. Ofcourse, this is gonna take a hit
on the on the government from amonetary standpoint, but also
from a reputational standpoint.I mean, when you, like you say,
have one of our nation'streasures saying she can't rely
on the FBI, I mean, you know,that that's serious, and and
(37:05):
it's something that I'm gladthat the government took
seriously.
Jack Sanker (37:08):
Yeah. And the last thing is this, undoubtedly, at
least hopefully, is gonna comewith, you know, remedial
training and protocols andinternal procedures at the FBI,
for if and when this, you know,hopefully never happens again,
but something like it does toprevent this catastrophe from,
you know, from unfolding the wayit did. And I think that's the
(37:28):
real benefit to the public here.
Danessa Watkins (37:32):
Absolutely. And even on just the most basic
level, understanding thatcertain crimes are should be
treated differently. You know,for someone to come forward
about sexual assault is a verydifferent thing than someone
coming forward about, you know,their TV was stolen or whatever
the case may be. And so, yeah,training officers too. You can't
(37:55):
just tell someone to call thelocal police.
You need to actually take thestep of referring it to the
local police yourself.
Jack Sanker (38:01):
Yes.
Danessa Watkins (38:02):
You know, you can't expect victims to come
forward multiple times tomultiple different agencies.
Right. So so good for, I don'tknow, good for the government
for taking a serious look atthis and admitting fault. And,
yeah, hopefully, they improveimprove their training and do
(38:22):
better. Yeah.
Do better next time, please.
Jack Sanker (38:30):
Thanks everyone for listening. As a reminder, this
show comes out every otherTuesday, roughly twice a month.
You can find us on ApplePodcasts, YouTube, Spotify,
wherever you get your shows. Ifyou have any questions or you
wanna follow-up on any of thestories that we've covered or
figure out kinda who Danessa andI are, you can drop a comment,
(38:51):
and we'll do our best to getback to you. Otherwise, you'll
hear from us in 2 weeks.
Welcome to Litigation Nation. I'm your
host, Danessa Watkins, here withmy co host, Jack Sanker. And as
a reminder, this is the showwhere we cover the hot exciting
legal issues across the nation,and keep you updated on what's
going on. So, Jack, what are youcovering today?
Jack Sanker (00:21):
So Tesla is in the news again, this time for
potential securities and wirefraud investigations relating to
the advertising of its full selfdriving features.
Danessa Watkins (00:32):
And I'm also actually covering a DOJ case.
Recently, the justice departmententered into a $138,700,000
settlement over the FBI'sfailures in the Larry Nassar
case. All that and more, here'swhat you need to know.
Jack Sanker (00:55):
As I mentioned in the intro, Tesla is back in the
headlines. It seems to alwaysbe. And, this time over the
ongoing investigation from theDepartment of Justice and the
SEC relating to its marketingefforts and some of the
statements made by its executiveand, founder, Elon Musk,
specifically as to Tesla's selfdriving capabilities, which is a
(01:19):
a key element of their,marketing for the automobiles
that they sell. According to anarticle that was published in
The Verge just a couple daysago, Tesla is under scrutiny
from the DOJ for its claims thatits vehicles would be self
driving within a set amount oftime. And and I should note that
on this particular claim byTesla, it's it's always been a
(01:39):
moving target, based on thepublic statements of its founder
and CEO, Elon Musk.
For example, in 2016, he claimedin an interview that full self
driving status would be, youknow, quote, no more than 2
years away. That's 2016. We'rerecording this in May of 2024,
and, obviously, we're not thereyet. He's made a lot of other
claims along the way to theeffect that full self driving
(02:02):
capabilities will be forthcomingover the past few years. And in
my observation, in my opinion,usually those statements come
out around the time of biginvestor actions or shareholder
votes or, you know, earningscalls, things like that.
So that's the kind of the cruxof this investigation is,
(02:24):
broadly speaking, whether themarket is being manipulated by
these statements, this this kindof optimism around Tesla, around
a product that it may or may notreally be close to putting out.
So going back to the Vergestory, quote, according to
Reuters, the probe is lookinginto statements made by Tesla
CEO Elon Musk in particular. Foryears, Musk has been promising
(02:46):
fully autonomous Tesla vehiclesare just around the corner while
also admitting that he oftensets overly optimistic
deadlines. Meanwhile, thecompany's advanced driver assist
features, autopilot and fullself driving, do not make the
vehicles autonomous and requiredrivers to keep their hands on
the steering wheel and eyes onthe road, unquote. Now the verge
(03:06):
report was published, just a dayago on May 8th.
We're recording here on May 9,2024, and the verge report
relies pretty heavily on Reutersreporting going all the way back
to 2022 when the criminalinvestigation by the DOJ was
actually launched. The reasonit's back in the news is based
on, some insider and, sourcesthat have been leaking some
(03:30):
things to Reuters and also somenews about new subpoenas and
document requests and thingslike that. Quoting from the
Reuters report from earlier thismonth, quote, there are Tesla
videos demonstrating thetechnology that remained
archived, opens on the Teslawebsite in a new tab, which says
the person in the driver's seatis only there for legal reasons.
(03:53):
He is not doing anything. Thecar is driving itself.
A Tesla engineer in 2022 in alawsuit over a fatal crash
involving autopilot thattestified that one of the videos
posted in October of 2016intended to show the
technology's potential and didnot accurately portray its
capabilities at the time. Musk,nevertheless, posted the video
(04:15):
on social media writing, quote,Tesla drives itself, no human
input at all, through urbanstreets to highway streets, then
finds a parking spot. In aconference call with reporters
in 2016, Musk describedautopilot as probably better
than a human driver. And duringan October 2022 call, Musk
addressed a forthcoming, FSDupgrade, and parenthetical f FSD
(04:37):
means full self driving. Aforthcoming f s FSD upgrade that
he said would allow customers totravel to your work, your
friend's house, or to thegrocery store without you
touching the wheel, unquote.
As my own personal experience,I've I've been in a Tesla
before. They are pretty coolvehicles. But in what I think
(05:03):
the consensus is that they arefar short of this, you know,
full self driving capability.They seem to have, the autopilot
system is is pretty neat, to toexperience firsthand. But it's
not far off from what a lot ofcompetitors are have already
been including in their vehiclesfor a long time, and they don't
market market those things asfull self driving.
Things like lane assist, smart,cruise control, things like
(05:28):
that. Those are all featuresthat a lot of other vehicles
have, even my, like, 2018 Subarudoes. So it's just anecdotally,
it it doesn't seem to it it doessell set itself apart from what
other folks are doing, but Ithink we'll get into it in a
(05:49):
moment what some competitorshave already put out there that
they're not calling full selfdriving is in some ways
exceeding what Tesla is able todo at this point. So on the
investigation itself, theReuters report summarizes some
of the goals and challenges thatthe probe may have pretty
nicely. Quoting back fromReuters quote, the investigators
will need to demonstrate thatTesla's claims crossed the line
(06:12):
from legal salesmanship tomaterial and knowing false
statements that unlawfullyharmed consumers or investors, 3
legal experts uninvolved in theprobe told Reuters.
US courts have ruled thatpuffery or corporate optimism
regarding the product claims didnot amount to fraud. In 2008,
federal appeals court ruled thatstatements of corporate optimism
(06:33):
alone do not demonstrate that acompany official intentionally
misled investors. Justicedepartment officials will likely
seek internal TeslaCommunications as evidence that
Musk or others knew that theywere making false statements,
said Daniel Richmond, a ColumbiaLaw School professor and former
federal prosecutor. That is achallenge, Richmond said, but
safety risks involved inoverselling self driving systems
(06:56):
also speaks to the seriousnesswith which prosecutors, a judge,
and a jury would take thestatements, unquote. So this is
a kind of a classic case of, theexecutive as a salesperson for
the company and his cheerleaderfor the company, maybe making
some claims that aren't gonna bebacked up by what the company
can actually do here.
(07:17):
And that's a problem foreveryone involved, lest you
think that this is, you know, aTesla hater podcast, which it's
not. But it's a problem for evenfor anyone listening because of
the way in which Tesla has beenintegrated to the US economy and
the size of the company. So it'shas a market cap of, I think,
close to a $1,000,000,000,000,if not more. I have checked
(07:39):
recently. It wasn't one pointthe most valuable company
company on the planet despitethe fact that it's selling
significantly less vehicles thaneven a company like, you know,
say, Toyota or or GM orwhatever.
So that the share price and theinvestor optimism around this is
(08:00):
based almost entirely on thisclaim that the vehicles are
gonna be self driving sometimein the very near future. And
that's been driving Teslainvestment for the past, you
know, 10 years. If indeed it'snot the case that Tesla is
really even close, and I I Idon't know one way or the other.
I mean, maybe they'll launch ittomorrow. You know?
(08:20):
Who knows? But if they're notclose, that's gonna hurt the
share price pretty dramaticallybecause what's priced into that
share price, obviously, is thefull self driving capability.
Without that, it's just anelectric car company. And and,
you know, it was pretty early tothe market for electric
vehicles, but there are a lotof, EV competitors out there now
(08:44):
and many of whom are, offering,the same capabilities from just
the electric vehicleperspective. It seems like every
automobile automobilemanufacturer is doing that
already.
So the issue and the real harmhere that the DOJ is
investigating is how that'sgonna how these statements from
(09:06):
Musk and and probably otherswithin the company have maybe
inflated and maybe illegallyinflated, the share price. And
as I mentioned, it does seemlike these statements tend to
come out whenever there is ashareholder vote, whether it's
to do with executivecompensation for Elon,
specifically or, the theissuance of more shares or
(09:27):
around earnings calls, thingslike that.
Danessa Watkins (09:30):
So when I was listening to you talk, Jack, I I
was gonna ask you if this isgonna potentially lead to
shareholder suits, but I justjumped on Google real quick and
found that, well, Forbes inFebruary of this year was
reporting on an update about theshareholder suits. So there have
been suits filed. One seems tobe related to these
(09:54):
mischaracterizations by the CEOand other higher ups in the
company. But it looks like thiswas filed in, I think,
California. But because that's Iguess, couple of plaintiffs, the
the contracts that they signedhave an arbitration clause.
(10:16):
It looks like the judge is notapproving the class action suit,
and it's gonna have to go toarbitration. The other ones are
focused on injuries. Let's see.There was a return in April of
2023, finding that Tesla was notresponsible for a crash that
occurred in 2019 where thedriver died. There's been a
(10:39):
couple other suits like that,and it looks like Tesla has not
been held liable.
But, yeah, there's certainlyboth, the Department of Justice
and shareholders payingattention to these potential
misstatements.
Jack Sanker (10:55):
Yeah. I mean, I know that Tesla gets a lot of
attention. And every timethere's a crash involving Tesla
and and maybe involvingautopilot, there's a lot of
media scrutiny around it one wayor the other. And whether that's
fair or not, you know, I don'tknow because I'm not tracking,
you know, how often there's amanufacturing issue with, you
know, a Toyota or a Subaru orwhatever that that leads to a
(11:16):
car crash, you know, to compareit to to the frequency that's
happening with Tesla. You know,I I don't know, whether it's
higher or lower than what youthan the margin of error that we
kind of all accept.
So I don't I don't wanna, like,dwell on the specific instance.
Since, although we have coveredthem in the past of the, the
crashes involving Tesla, thingslike that. I know there have
(11:37):
been a bunch of interestingallegations. One one which is
that when a Tesla isn't engagedin autopilot and is involved in
a crash, it's, it automaticallyturns off the autopilot, like,
in the split second before thecrash so that when you go and
look at the, like, black boxdata, it'll show that autopilot
was not engaged.
Danessa Watkins (11:58):
My gosh.
Jack Sanker (11:59):
Yeah. I mean, I don't I don't know if it's been
substantiated, but that was anallegation. So, yeah, the point
is, the if, you know, if Teslaself driving cars were a thing,
right, tomorrow, it would be ahuge deal. Right? It would the
roads would be wouldtheoretically be safer.
(12:19):
Everyone would go buy a Tesla ifthey could afford it. It it
would change, you know, the wayour relationships with our
vehicles. I mean, this is theoptimism case for Tesla. It's
it's it would be a legitimatelyhuge deal, which is why everyone
has been buying, equity in Teslafor as for the last, you know,
10 years because it it wouldchange the economy. Mhmm.
(12:45):
But if it's all kind of fluffand, you know, BS, that's a big
problem.
Danessa Watkins (12:50):
What I think you can't I I know we are not
gonna be experts on this subjectas far as safety concerns, but,
you know, you can't minimize thethe obvious safety issues when
you have the CEO makingstatements like side mirrors
won't be needed. You know,that's making some pretty big
promises.
Jack Sanker (13:09):
Yeah. And and the thing about full self driving in
in which, like, the opponents orkind of Tesla, negativists would
would point out is, like, whenyou say that to a driver and
they take you at face value, theunderstanding is I can I can
take a nap now? You know? Idon't have to have I don't even
have to have my eyes open. AndRight.
(13:29):
So now the margin of error is ifthis thing fails, it's a
catastrophic failure because thedriver is completely disengaged,
which is why the law so far hasrequired, drivers to, you know,
keep their hands on the steeringwheel and to, like, you know,
ostensibly pay attention. Nowyou can go on YouTube and find
videos of people doing all kindsof crazy stuff in their Teslas,
(13:51):
while self self driving isengaged. And, like, none of that
is, like, good or or safe orprobably legal. But, yeah,
that's that's that's the bigissue is is if this is if people
are trusting in this software,to operate and it doesn't, well,
you know, the downsides arepretty significant. I'm sure if
you asked Tesla, that, you know,whether they had this
(14:15):
capability, they'd say yes.
But when push comes to shove, ifthat were the case, they would
say, you know what? We'll we'llwe'll go ahead and assume
liability for these crashes orfor these, you know,
malfunctions or whatever, andthey haven't. You know? So I
think that that is, a prettysignificant, indicator of how
much faith they have in theirown product, for example. And,
(14:37):
based on yeah.
You know, I I it doesn't to meand people who have listened to
the show, I'm a bit of a techpessimist. You know, I I I think
over the past couple of years,we've learned a lot about, when
Silicon Valley makes claims likethis, like, what to actually
expect. So I I don't know. I Ithink maybe the folks in
(14:58):
Washington are getting wise tothat as well. And it matters
because of the amount ofsubsidies that companies like
Tesla get from the taxpayers,the state, and federal levels.
It matters from, you know, theinvestor perspective. But the
DOJ is is at this point pretty,focused on the market
manipulation aspect of it. Ialso think the the SEC, I
(15:22):
believe, is also involved. LikeI said, I don't wanna see Tesla
stock tank because that'll, youknow, that'll hurt my retirement
account, you know, and and thenprobably most people that are
listening in one way, shape, orform. It had hurt the US economy
pretty pretty badly.
But, at some point or another,they're gonna have to make good
on this promise or else they'rejust an electric car company.
(15:43):
And that's nothing wrong withthat. That's fine. But it's not
it doesn't justify, you know, a$1,000,000,000,000 market cap
when a company like Toyotasells, I don't know, 50 times as
many vehicles, and is valuedmuch much smaller, by the by the
market.
Danessa Watkins (16:03):
Yeah. Yep. Wow. Yeah. That's interesting.
And you said that they've beeninvestigating them since 2022 on
this?
Jack Sanker (16:11):
Yes. So the DOJ's perspective is that they would
they would be claiming that,investors and consumers were
defrauded or were induced, to bedefrauded by these statements.
The SEC will talk more aboutspecific, you know, elements of,
like, market manipulation andsecurities, etcetera. But the
long and short of it is they'vegot a lot to prove, and I think
(16:34):
that it needs to be donequickly, from the Tesla
shareholder perspective and andgovernment regulatory
perspective as well.
Danessa Watkins (16:46):
Alright. Another Department of Justice
case. There was a recentsettlement that was reached, a
138 $700,000 to be exact. Andthis was over the Larry Nassar
scandal, and allegations thatthe FBI failed to protect the
(17:07):
the victims of Nassar over anumber of years. So this
settlement is pretty farreaching.
It covers a 139 claims fromdifferent women, essentially
claiming that they were victims,now survivors, of sexual assault
from Larry Nassar and that theFBI not only had notice of this
(17:30):
but ignored it. You know,completely dropped the ball,
failed to talk to localauthorities, failed to conduct
any sort of investigation, whichcould have saved as many as
potentially 70 of his victims.So Nassar has been accused just
a little bit of background incase you've been living under a
rock. Larry Nassar has beenaccused of abusing hundreds of
(17:53):
women and girl athletes as youngas 8 years old while working at
Michigan State University withUSA Gymnastics and also local
schools and teams. So in 2017,Nassar pled guilty in federal
court to charges of possessingchild pornography and also
destroying and concealingevidence when he believed,
(18:13):
correctly so, that there was aninvestigation by law enforcement
that would reveal his childpornography activities.
So for that, he was sentenced to60 years in federal prison. And
then in Michigan State Court, hepled guilty to 10 counts of
criminal sexual assault. Andbefore his sentencing, a 156
(18:34):
victims spoke over 7 days,really recounting similar
stories over and over aboutgoing to this doctor for for
treatment related to sportsinjuries only to be sexually
assaulted under the guise thatit was a form of treatment. So
as a result of that, Nassar wassentenced to 40 to a 175 years
in prison. And just because I'mthis story hits home for me, and
(18:59):
I'm a I'm a firm believer in theprotection of of sexual assault
victims.
I just love this judge'scomments during the sentencing.
She said, quote, as much as itwas my honor and privilege to
hear the sister survivors, itwas my honor and privilege to
sentence you because, sir, youdo not deserve to walk outside
of a prison ever again. You havenot owned yet what you did. I
(19:22):
wouldn't send my dogs to you,sir. I've just signed your death
warrant, end quote.
Jack Sanker (19:26):
This is this is the judge who I think ripped up the,
was it the sending sending theseguidelines? Because I think it
was it might be confusing withsomeone else, but it was a
televised sentencing, and thejudge, like, stood up and, like,
ripped up a piece of paper andmade a big show of it, I think.
Danessa Watkins (19:41):
I yeah. I remember that. I'm not sure if
this was her. This is the thequote I just gave you is from,
Judge Rosemarie Aquilina, but,but it would make sense. Okay.
So now how does the how does theFBI come into play here? Well,
in 2021, the inspector generalfor the justice department, he
issued a report revealing thatagents at multiple FBI field
(20:05):
offices were tipped off toNassar's crimes, but failed to
adequately investigate or notifylocal authorities. One of the
most prominent examples is thatthe FBI's field office in Indian
Indianapolis. They receivedcomplaints about Nassar as early
as 2015, and the reportconcluded that senior FBI
officials in that office failedto respond to allegations with
(20:28):
the utmost seriousness andurgency that they deserved and
require. The office also madenumerous and fundamental errors
when they did respond,including, like I mentioned,
failing to notify localauthorities.
So the result of thismishandling or, guess, better
described as a complete absenceof any semblance of competency,
those are my words, is thatNassar continued to abuse 70 or
(20:52):
more athletes from the time thatthe FBI was first notified until
August of 2016 when the MichiganState University Police
Department received a separatecomplaint. So despite all of
this, the DOJ said that it wouldnot be bringing charges against
those agents who miss mishandledthe investigation, and,
actually, some of themsubsequently lied to cover up
(21:13):
their mistakes. So in 2022, 90survivors of Nassar's abuse
brought a suit against the FBI,and their suit included a prayer
of damages for $1,000,000,000Now these claims were filed
under the Federal Tort ClaimsAct, which gave the government 6
(21:33):
months to respond to the injuredparties before they could file
suit. So I believe during thattime, they started to negotiate
potential settlement, becausethe outline of the agreement was
actually reached last year. Andthen over the past few months,
lawyers on both sides have justbeen determining the specific
payouts.
(21:53):
So the awards that each claimantwill get will vary based on the
abuse, but the reports indicatethat the settlement will result
in approximately $1,000,000 paidto each survivor. So as much as
this settlement serves as asuccessful resolution
potentially for the survivors,Mick Gruel, who is one of the
(22:14):
attorneys for 44 of theclaimants, including actually
one who died of suicide, hassaid that this offering by the
government is just really toolittle too late. New York Times
quoted attorney Gruel asfollows. These women were
assaulted because of the FBI'sfailure, and there's no amount
of money that will make themwhole again. Their goal with all
(22:37):
of this was to make sure thatthis never happens again.
He hopes this deal will closethe book on this and will help
lead them to a path of healing,unquote. Now I read the story of
one of those survivors, AlexisHazen, who first reported abuse
by Nassar in 2016. She claimsthat she endured his abuse from
ages 12 to 18, and she is now26, married, and a mother of 3
(23:02):
boys. So she gave a phoneinterview to The New York Times,
and she said, quote, I'mrelieved but disappointed that
no one is being held accountablefor failing to report the abuse
and for sweeping it under theunder the rug. In a way, this
helps me be able to move pastthis, but it's always in the
back of my mind that, wow, Ifthe FBI didn't protect me, could
something like this happen to mychildren?
(23:24):
And that makes me really, reallymad. I definitely have no trust
in that institution anymore. So,in case you're wondering, mister
Nassar is currently serving outhis sentence in federal prison
in Florida. And in July of 2023,he was stabbed multiple times in
the chest, back, and neck byanother inmate, suffered a
(23:48):
collapsed lung, was lucky tosurvive, but he did, in fact,
survive. So, I mean, just, youknow, looking at settlements
like this, it it's reallyimpossible.
I mean, how much is enough? Noamount will ever be enough. You
know, for many of thesesurvivors, this this is really
bigger than them. You know, theythey're seeking change for the
(24:11):
future so that this neverhappens to another athlete. And
how do you ensure that?
You know, on on the one hand,yes, we should give some credit
to the DOJ for admitting thatthe agency was at fault and and
had shortcomings. You know, it'snot often that we see
organizations like this come outand say, yeah. We got this
(24:31):
wrong. But, you know, some havesuggested here, why are there
not consequences on anindividual level? Like, why are
we not holding those specificFBI agents that didn't take
these athletes' complaintsseriously?
Why aren't they personallyliable? I did look a little
deeper into that just to see ifthere was anything. And, the 2,
(24:54):
the 2 agents that were mentionedmost prominently in the
inspector general reports. Oneof them was the head of the
Indianapolis field office. Heretired shortly after the came
out.
And then another one, he wasfired and then ended up suing
the FBI in federal court tooverturn his his firing. He lost
(25:15):
that, by the way. But I so therereally were no repercussions on
a, you know, local level. So I Idon't know if, you know, I don't
know what the answer is here. Imean, yes, it's it's great that
the government is takingaccountability, but is this
really gonna change things inthe future for, you know, future
(25:36):
potential victims?
Jack Sanker (25:38):
You know, I don't wanna say that it it's a small
settlement. I mean, it's not.It's a 138,000,000, which is a
weird number because there's a139 claimants claimants. So I I
wonder Mhmm. That, you know,it's not a one for $1,000,000
per.
(25:58):
And they suit for a1,000,000,000. And some of the
individuals in that class, Ithink, are pretty high profile
people. Some, you know,collegiate athletes, I think
some Olympians, for example. Onething that Yeah.
Danessa Watkins (26:14):
Some that will be actually competing Olympics
coming up. So Yeah. And
Jack Sanker (26:19):
Yes. Yeah. I know
Danessa Watkins (26:20):
it's Ali. Yeah. Mhmm. Yeah.
Jack Sanker (26:23):
What's what's interesting to me, and this is,
you know, not as a right andwrong thing, but as, you know,
as an attorney, I it it it seemslike it's a settlement that is
maybe being reached in ininterest of, you know, maybe
doing the right thing. Toolittle, too late, of course. But
(26:44):
because I mean, correct me ifI'm wrong, but, I mean, claims
under the the FDA, FTCA rather,I mean, there's a still
approximate cause element here.And, you know, I I don't know.
Failure to investigate,typically, at least in the local
(27:04):
context, police officers, thingslike that is usually not
actionable, or at least notsuccessfully actionable.
You know, law enforcement hasbroad discretion to decline
taking on investigations, thatfor one reason or another, they
don't want to. And and thatcould be for a number of
reasons. It could be, you know,in this case, it seems like,
(27:27):
whatever bias or lack of oftaking it seriously with respect
to these claimants. I mean, whoknows? I have no idea.
But there is approximate causeelement that I think maybe would
have given the claimants aproblem down the road, because
(27:47):
they they still have to show,the elements of the FTCA are are
broadly similar to what youwould see in, you know, standard
tort action. You know, injury,the employee has to have been
acting within the scope of theirauthority as a government agent.
(28:08):
The the employee would have hadto have been, you know,
negligent or or wrongful orintentionally or otherwise. And
then there has to be theproximate cause. I mean, the
proximate cause proximate cause,not cause in fact, but proximate
cause of the injuries here is isNassar.
Right? Mhmm. So this does seemlike a negotiated piece between
(28:28):
the parties, which is good, ofcourse, for the for the
claimants. But I think it doesreflect probably a a real risk
of ruling down the road, whichwould bar the whole thing. At
least that's my 2¢ as a tortlitigator, in in just spotting
the issues here.
Danessa Watkins (28:50):
Yeah. I mean, it's an interesting point, and
I, you know, try to put myemotions aside on the issue,
because I I certainly think thatwhen it comes to sexual assault
claims, you know, they they arein a different category than
just, you know, a a failure toinvestigate a a robbery or
(29:10):
something like that. I mean, thefact that we have these figures,
and I found them in multiplereports that between the time
that the FBI was first notifiedof this until the time where the
the Michigan police took itseriously. I mean, they have a
firm number. There were 70, ifnot more, victims that, that
(29:32):
were abused during that periodof time.
So, I mean, you know, what whatevidence they have of that, I I
can't tell you firsthand. Butlet's also keep in mind, like
you said, the, you know, theclimate of what's going on now.
Obviously, we've had the Me Toomovement. The US Center For
(29:52):
Safesport was developed in Ithink March of 2017 is when it
officially opened its doors. Andthat was in large part because
of the Nassar scandal becomingpublic.
There were a lot ofcongressional hearings about
this, certainly a ton ofattention. So, yes, maybe to
some extent, this is a result ofof the media that was that was
(30:16):
put on this issue. I mean andrightly so. It brought about
some some real change and somegood change in protecting our
young athletes. It's justunfortunate, obviously, that so
many people had to to be injuredin order for us to get this
change.
But it but you brought up, youknow, that interesting point of
(30:37):
just how do you prove proximatecause in these type of cases.
And I I did dig a little bitfurther into this because I
think it is kinda monumentalthat the Department of Justice
will enter into a settlementthis big, but this isn't the
first one. And there have beenmore recently settlements,
involved with the victims ofmass shootings. So in, yeah, in
(31:01):
in 2023, the victims andfamilies of the 26 people that
were killed in the 2017 shootingat a church in Texas, They
received 144,500,000 in asettlement with the DOJ. Now
this was after a federaldistrict judge in Texas ruled
(31:22):
that the the Air Force was 60%liable for the attack that
occurred.
Officials had failed to submitcrucial records that would have
prevented the suspect in theSutherland Spring shooting from
obtaining, from a licensed gundealer, the semiautomatic rifle
that he used in the attack. Thisis the findings of the judge.
(31:44):
The judge also found that airforce officials were aware that
the gunman had previouslyresearched and threatened a mass
shooting and had a history ofsevere mental health issues that
had led officials to declare himto be, quote, dangerous and,
quote, a threat. He also had adomestic violence conviction by
a military court. So based onall that evidence and and the
(32:07):
air force's failure to to passthat along, the judge awarded
originally 230,000,000 to thefamilies.
And, shockingly, the justicedepartment appealed. They
argued, quote, there is nodispute that the US Air Force
personnel failed to transmit tothe National Instant Criminal
Background Check Systeminformation about the gunman
(32:30):
that would have identified himas ineligible to purchase that
firearm. But that mistake is nota legally proper basis for
imposing liability on the UnitedStates or for finding the Air
Force more culpable for thedeadly massacre than the shooter
end quote. So that's exactlywhat you were just talking
about, Jack, of, you know, howhow do we have this judge saying
(32:51):
that the government is 60%liable for the attack when, you
know, it's it's not the one thatactually carried out the the
shooting. Yeah.
So so those were the argumentsthat went up on appeal. And and
while it was pending in the 5thdistrict, the the government did
settle for that $144,500,000figure. So certainly less than
(33:12):
than what the judge found at thedistrict court level, but still
a very sizable settlement,especially after having heard,
you know, what I just read toyou, their position that they
they couldn't be held proximateas the proximate cause.
Jack Sanker (33:26):
Yeah. And and I know that the victims in this
case, also had, they've theyhave prosecuted their claims
against, they prosecuted theirclaims against Michigan State,
you know, against Nassarindividually. There's a lot of
civil civil remedies.
Danessa Watkins (33:44):
USA Gymnastics also. They brought claims
against. So
Jack Sanker (33:47):
Yeah. I mean and to some extent, not to not at all
to make an excuse here. But ifyou're at the FBI field office
and you get a phone call about,an an individual, you know, on a
college campus, a collegeemployee who's who's doing
something wrong or the other. 1or 2 of of those phone calls,
(34:09):
you you may think to yourselfI'm trying to just rationalize
this. Well, that's a universityissue or that's a state police
issue.
You know, bring it to theuniversity. Bring it to the
cops. Like, we're the FBI here.You know? It's, we've got
terrorists to chase and and allsorts of other things to to
worry about.
But they're you crush a athreshold pretty quick when
(34:33):
you've ignored the volume ofcomplaints that they seemingly
did. And we haven't talked aboutthe real issue, which is the
cover up aspect of this, which Ithink I think you know, I'm sure
that the settlement release, inthis includes release of claims
for that element, to the extentthat there is one. But, like,
(34:54):
that is that in of itself is, Ithink, signifies that these
folks knew they they crossed thepoint where they knew they had
screwed up and then were tryingto, keep themselves clean here.
And that's obviously someevidence of, you know, of intent
or or at least evidence of, youknow, knowingly wrongdoing at a
certain point or another. So,yeah, it's it's it's tough.
(35:18):
I I think that the thesettlement amount here is
reflective of of the both sidesrecognizing some risk here and
not to be, you know, cynical,but, Simone Biles, you know,
isn't a national icon. She's atreasure. The a sexual assault
(35:39):
claim filed by someone of herstar caliber, individually, for
example, would would woulddemand a larger settlement than
$1,000,000. Right?
Danessa Watkins (35:51):
Right.
Jack Sanker (35:51):
So, you know, for it to be split this way among
the parties and everyone, youknow, thankfully, it seems like
everyone in the in the thatbrought the claims are being
compensated along witheverything else, and and that
doesn't, you know, make themwhole at all. But it it does
reflect some recognition onbehalf of probably the
plaintiff's lawyers that gettinga judgment might might might be
(36:15):
less than a sure thing, which iswhich is good. I mean, that's
that's also point of of thistype of settlement arrangement.
Danessa Watkins (36:22):
Yeah. That. And I think, I mean, like I said
before, I think a lot of theseathletes are are not doing this,
you know, to line their pockets.I don't I don't think it's about
money. You know?
And it it's more about therecognition that there was a
extreme, you know, failure inthe system and breakdown that
(36:43):
should never happen again. Ofcourse, this is gonna take a hit
on the on the government from amonetary standpoint, but also
from a reputational standpoint.I mean, when you, like you say,
have one of our nation'streasures saying she can't rely
on the FBI, I mean, you know,that that's serious, and and
(37:05):
it's something that I'm gladthat the government took
seriously.
Jack Sanker (37:08):
Yeah. And the last thing is this, undoubtedly, at
least hopefully, is gonna comewith, you know, remedial
training and protocols andinternal procedures at the FBI,
for if and when this, you know,hopefully never happens again,
but something like it does toprevent this catastrophe from,
you know, from unfolding the wayit did. And I think that's the
(37:28):
real benefit to the public here.
Danessa Watkins (37:32):
Absolutely. And even on just the most basic
level, understanding thatcertain crimes are should be
treated differently. You know,for someone to come forward
about sexual assault is a verydifferent thing than someone
coming forward about, you know,their TV was stolen or whatever
the case may be. And so, yeah,training officers too. You can't
(37:55):
just tell someone to call thelocal police.
You need to actually take thestep of referring it to the
local police yourself.
Jack Sanker (38:01):
Yes.
Danessa Watkins (38:02):
You know, you can't expect victims to come
forward multiple times tomultiple different agencies.
Right. So so good for, I don'tknow, good for the government
for taking a serious look atthis and admitting fault. And,
yeah, hopefully, they improveimprove their training and do
(38:22):
better. Yeah.
Do better next time, please.
Jack Sanker (38:30):
Thanks everyone for listening. As a reminder, this
show comes out every otherTuesday, roughly twice a month.
You can find us on ApplePodcasts, YouTube, Spotify,
wherever you get your shows. Ifyou have any questions or you
wanna follow-up on any of thestories that we've covered or
figure out kinda who Danessa andI are, you can drop a comment,
(38:51):
and we'll do our best to getback to you. Otherwise, you'll
hear from us in 2 weeks.
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