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FBI Crypto Sting & Michael Madigan Trial · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:10
Speaker 1: In what was an elaborate sting operation in which the
0:13
Speaker 1: FBI created its own crypto tooken. Fifteen crypto promoters and
0:18
Speaker 1: traders were charged with market manipulation and fraud, the first
0:22
Speaker 1: ever criminal charges against financial services firms for market manipulation
0:27
Speaker 1: and wash trading in the cryptocurrency industry. The acting US
0:32
Speaker 1: Attorney for Massachusetts, Joshua Levy, said, these are cases where
0:37
Speaker 1: an innovative technology cryptocurrency met a century old scheme, the
0:43
Speaker 1: pump and dump. The sting operation also led to the
0:46
Speaker 1: seizure of more than twenty five million dollars in cryptocurrency,
0:50
Speaker 1: and multiple trading bots responsible for wash trades for about
0:54
Speaker 1: sixty different cryptocurrencies were deactivated. Joining me is former federal
0:59
Speaker 1: process computer Seth Gertz, a partner at Dorsey and Whitney,
1:03
Speaker 1: tell us about this sting operation.
1:05
Speaker 2: Set A sting operation is a good way to put it, actually,
1:09
Speaker 2: and it's not something you often see in a context
1:12
Speaker 2: of investment frauds. And it's an interesting example where I
1:16
Speaker 2: can sort of think of the analogy of what is
1:18
Speaker 2: good for the goose is apparently also good for the gander,
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Speaker 2: and in this case, the FBI created their own cryptocurrency token,
1:26
Speaker 2: next fund Ai. Marketed as a novel security related cryptocurrency token.
1:33
Speaker 2: It was on the Ethereum blockchain. And actually what the
1:37
Speaker 2: FBI did was quite clever, working with the SEC and
1:41
Speaker 2: other law enforcement agencies, was they was held a large
1:44
Speaker 2: balance of the tokens themselves, and so it was almost
1:48
Speaker 2: from its outset, appeared to be a lucrative, novel, unique
1:53
Speaker 2: token that attracted a lot of interest from the market
1:56
Speaker 2: and in particular to unscrupulous market participants in other cryptocurrency traders.
2:03
Speaker 2: And so that was the basic format and the programming
2:05
Speaker 2: of the token that the goal was then obviously to
2:08
Speaker 2: see how improper traders or cryptocurrency fraudsters were going to
2:13
Speaker 2: use and utilize the token. And what's unique in this
2:17
Speaker 2: space is that because the token was being traded on
2:20
Speaker 2: this Ethereum blockchain, every transaction that occurs for each one
2:25
Speaker 2: of these tokens is viewable and can be seen and
2:28
Speaker 2: tracked and followed, and so that allows law enforce in
2:31
Speaker 2: the FBI an incredible window and to see how the
2:36
Speaker 2: coin was going to be utilized and in this case
2:39
Speaker 2: manipulated and.
2:40
Speaker 1: Tell us about the charges against the defendants here, and
2:44
Speaker 1: so they.
2:44
Speaker 2: Are alleged to have done what is called wash trading
2:48
Speaker 2: that facilitate a pump and dump scheme, and that those
2:51
Speaker 2: are the technical investment fraud terms. Wash trading is typically
2:56
Speaker 2: traditionally when the same firm or entity buys and sells
3:00
Speaker 2: the same instrument like a stock or a bond repeatedly
3:04
Speaker 2: to artificially inflate its value and to demonstrate additional trading
3:09
Speaker 2: activity to make it team more lucrative, but the entity
3:11
Speaker 2: itself suffers no risk or market adjustment because it's simply
3:17
Speaker 2: buying and reselling the same instrument. What was interesting about
3:20
Speaker 2: this case is that some of the defendants, the cryptocurrency
3:24
Speaker 2: markets here had utilized bots to buy and sell the token,
3:29
Speaker 2: this token, the next fund Ai token, along with sixty
3:32
Speaker 2: others repeatedly, and because it was a bot and realizing bots,
3:37
Speaker 2: some of these tokens were being bought and sold like
3:40
Speaker 2: ten times a minute, and that activity, that trading activity
3:45
Speaker 2: artificially inflated the value of the coins, and one of
3:48
Speaker 2: the coins that issue went up to multi billion dollars
3:51
Speaker 2: worth of value. And then when they reached the apex
3:54
Speaker 2: of value. Defendants then sold off the token, causing their
3:58
Speaker 2: value to then plummet, and so that's sort of the
4:01
Speaker 2: wash trading was the quick buying and selling. It reaches
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Speaker 2: its apex, and then it's sort of part of the
4:07
Speaker 2: pump and dump and then is sold off kind of
4:10
Speaker 2: in a fire sale. And because all of this is
4:13
Speaker 2: occurring on a public ledger, this blockchain, the FBI was
4:18
Speaker 2: able to witness all of it, and in some cases
4:21
Speaker 2: even there were allegations that there were complete sham transactions
4:24
Speaker 2: that were occurring. I mean, that's especially what was occurring,
4:27
Speaker 2: but even beyond that, some of the markets were trading
4:31
Speaker 2: created multiple different wallets, which is a sort of unique
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Speaker 2: cryptocurrency term, but allowed them to really facilitate completely sham
4:40
Speaker 2: transactions that would have otherwise likely got unnoticed. But for
4:44
Speaker 2: again the ability for the FBI to be almost completely
4:48
Speaker 2: embedded in every one of these transactions.
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Speaker 1: Were they targeting specific firms when they came up with
4:55
Speaker 1: this plan, You.
4:56
Speaker 2: Know, that's really interesting. I think it remains to be seen.
4:59
Speaker 2: We'll have to see how the case unfolds and what
5:01
Speaker 2: discovery shows us. Several defendants of already plead guilty which
5:04
Speaker 2: makes you think that perhaps they were at the same time. Though,
5:08
Speaker 2: what is so unique about like cryptocurrency is that and
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Speaker 2: that this was so novel, is that they postured this
5:14
Speaker 2: coin as a really unique security related token, and that
5:19
Speaker 2: from the outset was going to attract possible criminals. Criminals
5:24
Speaker 2: or their frausters were attempting to use a token with
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Speaker 2: other security measures to protect their trading activity, to protect
5:31
Speaker 2: their own finances, and so they think they certainly postured
5:34
Speaker 2: it in a way that would have been to hopefully
5:37
Speaker 2: attract possible bad actors. Whether they intentionally had specific ones
5:42
Speaker 2: in mind, I would think that would be a little
5:44
Speaker 2: bit difficult to do, just based upon the nature and
5:46
Speaker 2: the fluidity of cryptocurrency, But they were certainly posturing it
5:50
Speaker 2: from the outset in an attempt to sort of cast
5:54
Speaker 2: a broad net and hope to bring in some bad actors. Certainly,
6:00
Speaker 2: I mean.
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Speaker 1: They're selling this token. Didn't a lot of people buy it,
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Speaker 1: like average people or you know, people who didn't have
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Speaker 1: a criminal intent.
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Speaker 2: Absolutely, that's what's so fascinating about it. And if you
6:11
Speaker 2: look at the press release that came out, there's a
6:13
Speaker 2: link for anyone who bought this just part of the
6:16
Speaker 2: general public. It's still trading. I think I thought it's
6:19
Speaker 2: market value was somewhere like two hundred dollars a coin
6:21
Speaker 2: or something at least as of a sort of last week.
6:24
Speaker 2: So it's still trading. It's still out there. That is
6:27
Speaker 2: what's so unique in this case. One of the things
6:31
Speaker 2: unique about this the ability to create a cryptocurrency token.
6:34
Speaker 2: In this decentralized world of finance, where you can do this,
6:38
Speaker 2: it can still have its own independent value. It's being
6:40
Speaker 2: utilized for law enforcement purposes, but if I were to
6:44
Speaker 2: just go buy it, there's still a potential that I
6:46
Speaker 2: could derive some you know, independent value as a result
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Speaker 2: of of how it's set up. It is almost impossible
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Speaker 2: to think of an analogous situation in the financial world
6:57
Speaker 2: similar to this, Like the amount of work that would
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Speaker 2: be required they have we had to create a company
7:01
Speaker 2: to go public, to sell something on the stock exchange,
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Speaker 2: it's just completely inconceivable, really, Whereas in this unique financial
7:08
Speaker 2: contact that we have with cryptocurrency, this can be done
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Speaker 2: and it's both a value at the law enforcement and
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Speaker 2: even those of us who unwittingly bought it because we
7:16
Speaker 2: thought it was interesting perhaps are not really being harmed
7:20
Speaker 2: necessarily and so it is super interesting and this.
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Speaker 1: Also involves Cytoma. Tell me about the connection.
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Speaker 2: There, Well, Saitama was one of these coins that was
7:30
Speaker 2: also being utilized here and part of the pump and
7:33
Speaker 2: dumps game. The reason it is being talked about so
7:36
Speaker 2: much is because this activity caused that token loan to
7:40
Speaker 2: rise to be worth multi billion dollars, So to the
7:43
Speaker 2: extent there was sort of large dollar amounts of fraud.
7:47
Speaker 2: It relates to this Sitoma token.
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Speaker 1: Are the FEDS targeting cryptocurrency because they're seeing more crimes
7:54
Speaker 1: in the area or they're seeing a potential for more
7:57
Speaker 1: crimes in.
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Speaker 2: The area, Well, certainly, I mean you are saying increased
8:00
Speaker 2: heightened regulatory activity within cryptocurrency rit large. I mean you
8:05
Speaker 2: see the security is an exchange commission essentially going to
8:08
Speaker 2: war with various cryptocurrency exchanges, attempting to regulate all of
8:13
Speaker 2: cryptocurrency as a security. And you are seeing now the
8:16
Speaker 2: FBI more aggressively target cryptocurrency investment schemes and activities, and
8:23
Speaker 2: it is certainly drawing increased regulatory scrutiny. The more ways
8:27
Speaker 2: in which cryptocurrency gained mainstream attention and is utilized by
8:32
Speaker 2: regular investors, the more you're going to see regulators step
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Speaker 2: in to ensure the playing fielder is level and bad
8:39
Speaker 2: actors aren't exploiting it. It is one thing to use,
8:43
Speaker 2: and cryptocurrency has been used as a powerful money launering device,
8:48
Speaker 2: but when you are getting into straight up investment schemes
8:51
Speaker 2: and investment frauds, this is what you would hope to
8:53
Speaker 2: see from government regulators stepping into police this activity. And
8:58
Speaker 2: I think this is certainly a sign of things to come.
9:01
Speaker 2: So other bad actors, people with improper investment schemes, certainly,
9:07
Speaker 2: I think, are going to be on high alert and
9:10
Speaker 2: should be given the increased regulatory and law enforcement scrutiny
9:14
Speaker 2: in this space.
9:15
Speaker 1: So does the DOJ have a specific team deals with cryptocurrency.
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Speaker 2: They do, and they have they have several actually, so
9:22
Speaker 2: within DOJ's Made Justice component there is that what's called
9:26
Speaker 2: the National Cryptocurrency Enforcement Team, and they do a lot
9:30
Speaker 2: of cryptocurrency cyber related fraud. That actually that that team
9:35
Speaker 2: and set, as they're known, does not appear to have
9:37
Speaker 2: been involved in this investigation, though it's possible they were
9:40
Speaker 2: behind the scenes. It looked like there was a lot
9:42
Speaker 2: of different components that were helping. Within various US Attorney's
9:46
Speaker 2: offices and Department of Justice components, there are specific sections
9:51
Speaker 2: that work with financial crimes, cybercrimes, and cryptocurrency related activity.
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Speaker 2: And as cryptocurrency becomes more mainstream because we're part of
9:59
Speaker 2: the financi system, you are seeing greater capabilities within federal
10:04
Speaker 2: law enforcement to both trace cryptocurrency, to follow investment schemes,
10:09
Speaker 2: and in this case, a very sophisticated and novel effort
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Speaker 2: to really create exactly to describe it, an undercover sting
10:17
Speaker 2: operations related to cryptocurrency.
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Speaker 1: I mean you.
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Speaker 2: Would see stuff like this in like a drug dealer context,
10:22
Speaker 2: where you watch that you have an undercover agent deliver
10:25
Speaker 2: the drug. You see it sometimes in like money laundered investigations,
10:29
Speaker 2: where you have the government or federal agents attempt to
10:32
Speaker 2: launder clean funds through a money laundering organization to see
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Speaker 2: where the money goes. But even still you don't quite
10:39
Speaker 2: have the control and the visibility that you would have
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Speaker 2: with cryptocurrency. This is a real demonstration of sophisticated efforts
10:46
Speaker 2: by the DOJ to track and to follow cryptocurrency investment fraud.
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Speaker 1: Coming up, could the defense raise entrapment. This is Bloomberg.
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Speaker 1: We've been talking about an elaborate sting operation in which
10:59
Speaker 1: the FBI created its own crypto tokens, and as a result,
11:04
Speaker 1: prosecutors were able to bring the first ever criminal charges
11:07
Speaker 1: against financial services firms for market manipulation and wash trading
11:13
Speaker 1: in the cryptocurrency industry. I've been talking to former federal
11:16
Speaker 1: prosecutor Seth Kertz of Dorsey and Whitney. Do you think
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Speaker 1: that the defense will raise entrapment claims?
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Speaker 2: You know, entrapment is always a potential when you have
11:27
Speaker 2: undercover operations, when you have issues like this, But what
11:31
Speaker 2: you can always do to well, what the government will
11:34
Speaker 2: surely do is that the defendants were doing this with
11:37
Speaker 2: or without them anyway, and you show that by their
11:40
Speaker 2: repeated pattern of conduct. And so when you have sixty
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Speaker 2: other tokens that were being manipulated in the same manner
11:47
Speaker 2: that we're being washed, traded and then pumped and dumped
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Speaker 2: in the same way as next one, that's a very
11:52
Speaker 2: difficult argument to make in good faith the entrapment issue.
11:55
Speaker 2: I think one of them certainly will likely make it.
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Speaker 2: What becomes difficult cyber and cryptocurrency context is putting a person,
12:04
Speaker 2: an individual person behind the keyboard, behind the computer screen,
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Speaker 2: attributing specific conduct to an individual when it's occurring digitally,
12:12
Speaker 2: and so it will be interesting to see what contemporaneous emails,
12:16
Speaker 2: with contemporaneous text messages that the DOJ was able to
12:20
Speaker 2: get to attach specific individuals.
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Speaker 1: To this conduct because they use bots.
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Speaker 2: Because they use bots, because when it's an entity, when
12:29
Speaker 2: it's an online and essentially an online decentralized entity that
12:33
Speaker 2: is causing the activity to occur, it's hard to know
12:35
Speaker 2: which specific you know, human being was actually causing that occur.
12:38
Speaker 2: So you're exactly right, it's certainly these entities, these market
12:42
Speaker 2: platforms were doing the were guilty of the bad conduct,
12:45
Speaker 2: But which actual individuals have the specific criminal intent that
12:49
Speaker 2: were causing these activities to occur. That's where it becomes
12:53
Speaker 2: tricky in a cyber fraud cryptocurrency related criminal investigation. You know,
12:58
Speaker 2: the activities occurred, demonstrate that is no problem in this case,
13:01
Speaker 2: you see it, you can watch it. But actually attributing
13:04
Speaker 2: that to a specific human being and then demonstrating criminal
13:08
Speaker 2: intent to commit a fraud, that's where it becomes a
13:10
Speaker 2: little trickier. And so you will need you would think
13:13
Speaker 2: specific communications, other types of evidence to attach a person
13:18
Speaker 2: to the actual conduct.
13:20
Speaker 1: Has the DOJ done many trials involving cryptocurrency or do
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Speaker 1: they usually settle beforehand?
13:28
Speaker 2: No, the DOJ, this is an area in which they
13:30
Speaker 2: are definitely increasing their competence, their capabilities. They are in
13:34
Speaker 2: trial routinely on these issues. I think this is the
13:37
Speaker 2: first instance in which you have a full fledged undercover
13:41
Speaker 2: operations of the creation of their own token. So it
13:44
Speaker 2: will be interesting to see how the DOJ has to
13:46
Speaker 2: put on that evidence. That's to explain how they did it,
13:49
Speaker 2: how they created it, and communicate it in a way
13:51
Speaker 2: in which they don't lose the jury, in which they
13:53
Speaker 2: can demonstrate the activity of the curve. And there's a
13:56
Speaker 2: lot of different concepts going on here. You have cryptocurrency
13:59
Speaker 2: just on the one hand, explain that to a jury,
14:01
Speaker 2: explain the creation of a token, explaining that the issues
14:05
Speaker 2: with the type of investment fraud that was occurring here,
14:07
Speaker 2: explaining the crime that occurred, and then having to put
14:11
Speaker 2: specific individuals or tax specific individuals to that crime. So
14:15
Speaker 2: there is a lot of moving parts. You know, several
14:17
Speaker 2: defendants have already played guilty. They're likely going to cooperate
14:20
Speaker 2: against those who don't, and so that's going to be
14:22
Speaker 2: very powerful evidence. Having cooperating testimony, which will be I
14:26
Speaker 2: would imagine its hugely helped with the government here, But
14:29
Speaker 2: there is still a lot of moving parts and a
14:31
Speaker 2: lot that you would have to prove and a trial
14:33
Speaker 2: like this and so well, the dj certainly has experience
14:36
Speaker 2: in cybercrimes and cryptocurrency. This is novel, and it will
14:39
Speaker 2: be interesting to see how they put this evidence on
14:42
Speaker 2: at trials should one occur.
14:44
Speaker 1: In researching this, I saw some basically anonymous allegations that
14:49
Speaker 1: the FBI, in creating this token had violated the copyright laws,
14:55
Speaker 1: perhaps by not getting a license on the code.
14:59
Speaker 2: Oh that's interesting, well, you know, and that will be
15:02
Speaker 2: that's that's where this does become interesting, because how the
15:06
Speaker 2: FBI created its token and you know, the propriety of
15:11
Speaker 2: it doing so, and whether it was a you know,
15:14
Speaker 2: legally authorized token for any number of reasons. It's certainly
15:18
Speaker 2: an interesting question and possibly goes to an entrapment defense. Potentially,
15:22
Speaker 2: it is something I would think defense would certainly try
15:25
Speaker 2: to raise. But whether that was or not, I think
15:29
Speaker 2: the difficult to get defendants have in this case is
15:31
Speaker 2: that it wasn't just the FBI token that was manipulated.
15:35
Speaker 2: It was the FBI token along with sixty others. And
15:38
Speaker 2: what the FBI token allowed FBI to do was to
15:41
Speaker 2: get complete visibility into how these defendants were manipulating the
15:45
Speaker 2: cryptocurrency market through their activities. And so even if sort
15:50
Speaker 2: of there were issues with this FBI tokens, they still
15:53
Speaker 2: have all the evidence of the visibility of how they
15:55
Speaker 2: were manipulating fifty nine others. That's speculation of my part
16:00
Speaker 2: without sort of knowing too much of the weeds of
16:02
Speaker 2: how the token was created. But it is interesting, and
16:06
Speaker 2: the unique thing about cryptocurrency is once you can get
16:09
Speaker 2: a window into the activity that's occurring and you sort
16:12
Speaker 2: of get an ability to model it to understand it.
16:15
Speaker 2: The nature of a public ledger, a blockchain allows so
16:19
Speaker 2: much visibility into how activity is occurring that if you
16:23
Speaker 2: are doing it on a wide scale basis, as it
16:27
Speaker 2: appears these defendants were, law enforcement is given a tremendous
16:30
Speaker 2: amount of information as a result of that.
16:33
Speaker 1: And the acting US Attorney said, this is a case
16:36
Speaker 1: where an innovative technology cryptocurrency met a century old scheme
16:42
Speaker 1: to pump and dump.
16:43
Speaker 2: It's an interesting case and that you have in a
16:47
Speaker 2: lot of ways, these old school methods, old school types
16:50
Speaker 2: of investment fraud being brought forward into a more advanced
16:53
Speaker 2: digital age. And you have various investigative tools like undercover
16:57
Speaker 2: operations that have existed forever but being brought forward into
17:01
Speaker 2: again more advanced digital age. And you're seeing the interplay
17:05
Speaker 2: of those and you're seeing, you know, cryptocurrency so often
17:08
Speaker 2: hear about how it is utilized by criminals to obviouscate
17:12
Speaker 2: in the high activity. Well, the government has now entered
17:15
Speaker 2: the playing field, and he was using it in a
17:17
Speaker 2: way to hide and to allow a very sophisticated undercover
17:21
Speaker 2: operation to go forward.
17:22
Speaker 1: Perhaps this is the first of many. Thanks so much, Seth.
17:26
Speaker 1: That's Seth Gertz, a partner at Dorsey and Whitney. Turning
17:29
Speaker 1: to a trial now in which the jury is being
17:31
Speaker 1: selected in Illinois. The defendant's reign over Illinois politics is
17:36
Speaker 1: reflected in his nickname the Velvet Hammer, earned because of
17:40
Speaker 1: the way he led the Illinois House of Representatives and
17:44
Speaker 1: extracted fealty from its members. As the longest serving House
17:48
Speaker 1: leader of any state in US history, but now at
17:52
Speaker 1: eighty two. Michael Madigan is facing corruption charges for allegedly
17:56
Speaker 1: running a criminal enterprise for nearly a decade, a multimillion
18:01
Speaker 1: dollar racketeering and bribery scheme that included the state's largest
18:06
Speaker 1: utility comm ed and the case will test the government's
18:10
Speaker 1: ability to prosecute corruption after the Supreme Court case narrowing
18:15
Speaker 1: the scope of a federal bribery law last term. Joining
18:18
Speaker 1: me is former federal prosecutor Brian Klein, a partner Waymaker
18:23
Speaker 1: tell us about the charges here.
18:25
Speaker 3: Yeah, he's charged with racketeering, bribery, and wire fraud. And
18:29
Speaker 3: that's expected to be a ten week trial. Obviously, things
18:33
Speaker 3: have been going on for quite some time. There's been
18:35
Speaker 3: other trials of other defendants tied to these charges. He's
18:40
Speaker 3: charged with basically trading on his position as the leader
18:43
Speaker 3: of the state House of Representatives. I'm the chairman of
18:46
Speaker 3: the Democratic Party in Illinois as well as he's also
18:49
Speaker 3: I believe involved an award and he worked at a
18:52
Speaker 3: law firm to a tax firm, probably tax firm, So
18:55
Speaker 3: basically trading his position of power for financial benefits getting
19:00
Speaker 3: things through the legislature.
19:02
Speaker 1: How far back to the allegations.
19:04
Speaker 3: Go, they switched back to years and he was really
19:07
Speaker 3: like a living legend in the state of Illinois because
19:10
Speaker 3: of the power he accumulated at length time that he
19:13
Speaker 3: was in power. And this is obviously a very important
19:17
Speaker 3: case following the Supreme Court Snyder ruling that came out
19:20
Speaker 3: earlier this year, which essentially said that you know, just
19:25
Speaker 3: giving a politician to gratuity isn't enough to make it
19:29
Speaker 3: a federal crime. The federal bribery laws, you actually have
19:31
Speaker 3: to have a quid pro quote an exchange, so you
19:35
Speaker 3: give them some money or a watch or something in exchange,
19:38
Speaker 3: they are going to actually take an official act.
19:40
Speaker 1: The government here is alleging that there was this quid
19:43
Speaker 1: pro quote, that there was a deal in place before
19:47
Speaker 1: the alleged corruption.
19:50
Speaker 3: They are his lawyers. After the Snyder ruling came down,
19:53
Speaker 3: sought to have certain of the charges dismissed and challenge
19:55
Speaker 3: them and they lost that ruling, and they're in the
19:58
Speaker 3: Seventh Circuit. That circuit has its view of the bribery
20:03
Speaker 3: statutes and how briberry is effectuated, has this stream of
20:06
Speaker 3: payments theory, so it's not just one payment for one act.
20:10
Speaker 3: You can have an agreement that you reach and then
20:12
Speaker 3: over time, there can be these streams of payment, and
20:15
Speaker 3: it's I think potentially possible that, like you can't match
20:18
Speaker 3: up every payment with some act, but it's sort of
20:22
Speaker 3: the theory is there's this ongoing relationship where you're doing
20:26
Speaker 3: these quid pro quos and you're getting payments over time.
20:29
Speaker 3: So those are the focus of these allegations. Of course,
20:32
Speaker 3: his lawyers dispute this. You know, he's presumed innocent, found guilty,
20:37
Speaker 3: and you know there's been fighting very hard on his
20:40
Speaker 3: behalf before we.
20:41
Speaker 1: Get to his possible defenses. So is the heart of
20:45
Speaker 1: the prosecution's case, this informant former Chicago alderman appears to be.
20:51
Speaker 3: They also have a lot of tastes. Unclear who actually
20:54
Speaker 3: made all those tastes, at least right now, but there's
20:56
Speaker 3: a lot of you know what you call like secret
20:59
Speaker 3: recordings they plan introduced. I think there's hundreds of them.
21:02
Speaker 3: I don't know if they're prod uce all of them,
21:05
Speaker 3: but it does appear that, you know, their case is
21:08
Speaker 3: built on sort of peeking behind the curtain of what
21:11
Speaker 3: happened here with recordings, and presumably they're going to call
21:14
Speaker 3: witnesses who were around and actually witnessed them, whether they
21:17
Speaker 3: knew about them or just were asked to do.
21:20
Speaker 1: Something incline of waymaker. The government has already won convictions
21:25
Speaker 1: against several people since it started to investigate the former
21:30
Speaker 1: speaker and other Illinois politicians. Individuals known as the comment
21:34
Speaker 1: for for instance, were convicted of facilitating the hiring of
21:38
Speaker 1: Madigan associates for no work jobs. So jurors delivered guilty
21:43
Speaker 1: verdicts in those cases for conspiring to bribe Madigan. But
21:47
Speaker 1: then but the jury failed to reach a verdict in
21:51
Speaker 1: a case charging former at and T Illinois President Paul
21:55
Speaker 1: Lochiatza with bribing Madigan. So the government has had mixed
21:59
Speaker 1: verdicts having to do with these facts.
22:03
Speaker 3: Well, it's a little hard to say because each trial
22:05
Speaker 3: is so specific, you know, and Madigan's going to be
22:09
Speaker 3: He's the center point, you know, He's the big fish
22:12
Speaker 3: here what they're going after. So sometimes, and I'll just
22:16
Speaker 3: call it a little fish, trials go mix directions for
22:19
Speaker 3: various reasons. But it doesn't mean, you know, I wouldn't
22:23
Speaker 3: read too much into it about how successful they may
22:26
Speaker 3: be improving their charges against Madigan. Now, there's an advantage
22:29
Speaker 3: to the defense here, which is they learn a lot
22:32
Speaker 3: about the government theory of the case. They also have
22:35
Speaker 3: transcripts from those trials, So the defense has an advantage
22:40
Speaker 3: in that sense. It's not walking into you know, there's
22:44
Speaker 3: not going to be as many surprises for them, and
22:45
Speaker 3: allows them to prepare better for cross examination, exhibit, to
22:51
Speaker 3: think through how they're going to challenge the government's case.
22:55
Speaker 1: I mean, does the government have any advantage by having
22:57
Speaker 1: been through a presentation of something close to what they
23:02
Speaker 1: have against Madigan?
23:04
Speaker 3: Yeah, they had this. They had a like sort of
23:06
Speaker 3: the other side of that coin, which is they now
23:08
Speaker 3: can see what was resonating arguably with the jury and
23:11
Speaker 3: what wasn't. So in the hung trial hujury trial, they
23:15
Speaker 3: may they feel like they can recalibrate some of their
23:18
Speaker 3: presentation to deal with issues. They may. I don't know
23:21
Speaker 3: that they did, but it's possible they spoke with some
23:23
Speaker 3: of the jurors afterwards. Possible they learned things during the
23:27
Speaker 3: trial just because observe jurors, how they were responding, whether
23:30
Speaker 3: they were paying attention. So each side gains information. You know,
23:34
Speaker 3: the real question is who's going to be able to
23:36
Speaker 3: put its better use.
23:38
Speaker 1: So you mentioned that the Supreme Court has narrowed the
23:41
Speaker 1: scope of the federal bribery law. That's the federal bribery
23:45
Speaker 1: law that's at issue.
23:46
Speaker 3: Here, Snyder case. You know, it's far reaching implications, not
23:49
Speaker 3: just for this case with Madigan, but when the federal
23:52
Speaker 3: prosecutes are playing federal bribery statutes, you know, the courts
23:56
Speaker 3: are going to be looking at whether there was a
23:58
Speaker 3: quid pro qo and how that's viewed is open to
24:01
Speaker 3: interpretation by lower courts. But you know, not all of
24:05
Speaker 3: his charges relate to that either. So he has other
24:07
Speaker 3: charges fire fraud right as an example, So that's not
24:11
Speaker 3: going to be covered by that. So but you know,
24:14
Speaker 3: I think if you're a defense lawyer, and I'm sure
24:17
Speaker 3: his lawyers here are looking at them and saying, look,
24:19
Speaker 3: we want to maybe we can use those charges to
24:22
Speaker 3: help undermine the other charges too, So you know, we
24:25
Speaker 3: can knock out, you know, the bribery charges either with
24:29
Speaker 3: the jury or the judge at some point along the way,
24:32
Speaker 3: and that will expose deficiencies or cause the judge or
24:35
Speaker 3: the jury or both to question the government's case overall.
24:39
Speaker 3: So I think, you know, it's always helpful with the
24:41
Speaker 3: defense lawyer if you have Supreme court precedent coming out
24:44
Speaker 3: that generally is supportive or helps you.
24:50
Speaker 1: One of the defenses is something that we hear over
24:53
Speaker 1: and over again. I mean Eric Adams, who was just
24:55
Speaker 1: indicted in New York. The mayor of New York has
24:58
Speaker 1: said this, and his attorneys have said it basically, you know,
25:02
Speaker 1: this is what politicians do. We do favors for people.
25:06
Speaker 3: Yes, And I think that's a common defense in these
25:09
Speaker 3: types of cases. And also, frankly, a lot of jurors
25:12
Speaker 3: are going to understand or feel that politicians do trade
25:15
Speaker 3: on favors, right, that's just the practical reality and perception
25:19
Speaker 3: of politicians. Now, a lot of people also think that
25:22
Speaker 3: all or most politicians are corrupt, So that cuts both ways, right. Probably,
25:28
Speaker 3: you know they're going to get these twelve jurors plus
25:32
Speaker 3: six or whatever number of ultimates. They're going to have
25:34
Speaker 3: their own real life experiences understanding of politics and their
25:38
Speaker 3: views on it. This is going to be vetted during
25:41
Speaker 3: the jury selection process. But you know, you ask most
25:45
Speaker 3: people in the street, are politicians corrupt? Do they trade favors?
25:48
Speaker 3: The answer is going to be yes, A lot of
25:50
Speaker 3: them are. So I don't know how that's going to
25:54
Speaker 3: play out. With this jury. But I think, you know,
25:57
Speaker 3: they're because of these recordings, which is the presumably has
26:01
Speaker 3: listened to, and because they've seen a lot of the
26:02
Speaker 3: evidence because the government has to give it to him
26:04
Speaker 3: in advance. You know, they have to deal with the
26:06
Speaker 3: reality of some of the statements, some of the things
26:09
Speaker 3: that happened. They can't just pretend it didn't happen. My
26:12
Speaker 3: guess is that the government has a lot of proof
26:15
Speaker 3: of a number of these things. The question is, how
26:18
Speaker 3: do you, you know, look at it overall, like what happened?
26:21
Speaker 3: And I think the defense is going to say, Okay,
26:23
Speaker 3: each of these may be little trees, but let's look
26:25
Speaker 3: at the forest here, right, or maybe the opposite that say,
26:30
Speaker 3: government's trying to tell you this is one big forest,
26:32
Speaker 3: but let's look at each of these acts and look
26:34
Speaker 3: at the trees and it is so you know, that's
26:38
Speaker 3: going to be an interesting thing to see play out,
26:40
Speaker 3: is how the defense responds to the recordings, however, responds
26:45
Speaker 3: to the witnesses who come in. And you know, we
26:48
Speaker 3: will learn a lot with the opening statements, because that's
26:51
Speaker 3: both sides opportunity to frame the case for the jury
26:55
Speaker 3: at the very beginning and how they expect the evidence
26:58
Speaker 3: to come in, both witness testimonies and documents and recording.
27:02
Speaker 1: So I mean this is a kind of case if
27:04
Speaker 1: he loses, that the Supreme Court could take up as
27:08
Speaker 1: sort of the next And they're continuing cutting back on
27:12
Speaker 1: prosecutions of public corruption.
27:15
Speaker 3: Spreme Court has been very interested in public corruption cases
27:18
Speaker 3: in the last five to ten years. They've addressed a
27:20
Speaker 3: number of it. They've really narrowed prosecutors' views of the
27:25
Speaker 3: statutes and the cases. And I think that the defense
27:29
Speaker 3: is clearly aware of that. I think brief Snyder recently,
27:32
Speaker 3: there's no doubt thinking ahead of it. If our client
27:36
Speaker 3: gets convicted, we want to have a good record for appeal.
27:39
Speaker 3: We'd want this to be something the Seventh Circuit would
27:42
Speaker 3: decide in our favor, but if they don't, then we'd
27:44
Speaker 3: want something that the Supreme Court might bite at. Supreme
27:47
Speaker 3: Court takes very few cases nowadays, under one hundred cases
27:50
Speaker 3: a year typically, so it's very hard to assume the
27:55
Speaker 3: Supreme Court is going to take your case. The fact
27:59
Speaker 3: that this is a very prominent case, very prominent former politician,
28:03
Speaker 3: you know, a very high profile case makes it more likely.
28:06
Speaker 3: But it's just really impossible to predict this juncture.
28:09
Speaker 1: The Supreme Court's limiting of public corruption cases started quite
28:14
Speaker 1: a while ago with the McDonald case, but still, were
28:17
Speaker 1: you surprised by how far they went in the Snyder
28:21
Speaker 1: case last term?
28:23
Speaker 3: I mean, I wasn't surprising, since I think they were
28:25
Speaker 3: getting to the right of result, but you just never
28:28
Speaker 3: know where they're going to come down. I think this
28:31
Speaker 3: Supreme Court often reads statutes fairly narrowly and interprets them
28:38
Speaker 3: very narrowly overall because of the composition of them and
28:41
Speaker 3: their backgrounds and how they approached statutory interpretation. So I
28:46
Speaker 3: guess it wasn't that surprising in this sense, but you
28:49
Speaker 3: just really never know. Then the world of criminal defense,
28:53
Speaker 3: in the world of criminal law, prosecutors who do these cases,
28:56
Speaker 3: that obviously is a seminal case that's gotten a lot.
28:58
Speaker 1: Of attentions mentioned it in the Eric Adams case as well.
29:02
Speaker 1: So it seems like it's a tougher road for prosecutors
29:07
Speaker 1: these days to get someone on bribery.
29:09
Speaker 3: I would, says the Temple, It should always be a
29:11
Speaker 3: tough road. Proving criminal chargers should always should not be easy.
29:15
Speaker 3: I mean, you know, the burden of proof is on
29:17
Speaker 3: the government. They have a lot of power and it's
29:21
Speaker 3: really important that they be appropriately constrained. You know, both
29:24
Speaker 3: sides are going to be very mindful of Snyder and
29:26
Speaker 3: they're not going to want to trip over well, the
29:28
Speaker 3: government's not going to want to trip over it, and
29:30
Speaker 3: the defense is going to be opening that the government
29:32
Speaker 3: does right. So I think that's going to be an
29:35
Speaker 3: important overlay here.
29:36
Speaker 1: Thanks for being on the show. That's former federal prosecutor
29:40
Speaker 1: Brian Klein, a partner at Waymaker. And that's it for
29:43
Speaker 1: this edition of the Bloomberg Law Podcast. Remember you can
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Speaker 1: always get the latest legal news by subscribing and listening
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29:53
Speaker 1: dot com, slash podcast, Slash Law. I'm June Grosso and
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