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NYC Mayor Adams Closer to Having Case Tossed · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:08
Speaker 2: New York City Mayor Eric Adams was one of four
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Speaker 2: Democratic mayors of sanctuary cities who testified before the House
0:17
Speaker 2: Oversight Committee last week as the White House threatens to
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Speaker 2: pull federal funding from Boston, Chicago, Denver, and New York.
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Speaker 2: But the criminal corruption case against Adams took center stage
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Speaker 2: as the mayor was grilled by several Democratic lawmakers about
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Speaker 2: the allegations that the Justice Department agreed to dismiss the
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Speaker 2: charges in return for helping the Trump administration with its
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Speaker 2: deportation efforts. Representative Robert Garcia, a Democrat from California, questioned Adams.
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Speaker 3: And Mayor Adams, I also want to be very clear,
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Speaker 3: are you selling out New Yorkers to save yourself from prosecution?
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Speaker 4: No deal, no quick pro qual and I did nothing
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Speaker 4: wrong and anything dealing with this case. At a deference
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Speaker 4: to Judge Hoe, who's now addressing it, I'm going to
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Speaker 4: refer to his actions.
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Speaker 3: Well, mister Mary, it appears to me at least that
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Speaker 3: you are selling New Yorkers out. It appears that you
1:19
Speaker 3: are working with Tom Homan, who is clearly clearly focused
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Speaker 3: on family separation and deportations.
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Speaker 2: But it appears that Adams is a step closer to
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Speaker 2: getting the criminal charges dismissed. Paul Clement, the former US
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Speaker 2: Solicitor General appointed by Judge dale Hoe as a friend
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Speaker 2: of the Court to advise him, has recommended the case
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Speaker 2: be permanently dismissed. Joining me is former federal prosecutor Robert Mintz,
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Speaker 2: a partner maccarter In English, Bob explain why Judge Hoe
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Speaker 2: appointed Clement.
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Speaker 5: Judge dale Hoe took the very unusual step of appointing
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Speaker 5: Paul Clement, who had been the US Solicitor JAI during
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Speaker 5: the George W. Bush administration and has argued more than
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Speaker 5: one hundred cases before the Supreme Court, to give him
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Speaker 5: advice with regard to how to handle this dismissal motion,
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Speaker 5: essentially based upon his view that he was getting a
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Speaker 5: one sided argument. In other words, both the defense lawyer
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Speaker 5: and the government in this case were seeking to have
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Speaker 5: the indictment dismissed, and the judge wanted to hear the
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Speaker 5: other side of the argument. That's why he appointed Paul
2:29
Speaker 5: Clement to give him advice as to what issues he
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Speaker 5: should be considering. Really, what his options were here. With
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Speaker 5: regard to this motion.
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Speaker 2: Clement wrote a thirty three page brief in response for
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Speaker 2: the judge. One important point was that the executive branch
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Speaker 2: is the one that chooses when to prosecute and when
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Speaker 2: not to prosecute.
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Speaker 5: You're exactly right that Paul Clement did not really get
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Speaker 5: into the merits of these arguments from both sides. If
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Speaker 5: you were called, the acting Deputy Attorney General had ordered
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Speaker 5: the Southern District to dismiss the case, and there were
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Speaker 5: a series of prosecutors, including the acting US Attorney at
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Speaker 5: the time, who resigned rather than follow that order, saying
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Speaker 5: that the reasons for the dismissal were improper, that it
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Speaker 5: was about politics and not about the merits of the case.
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Speaker 5: But ultimately, mister Clement concluded that the judge here doesn't
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Speaker 5: really have much in the way of options. That essentially,
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Speaker 5: if the executive branch, meaning the prosecution and the Department
3:30
Speaker 5: of Justice, choose to dismiss the case, there's not much
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Speaker 5: the judge can do about it. He pointed out that ultimately,
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Speaker 5: even if the court were to order the case to
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Speaker 5: go forward, the government could simply run out the clock,
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Speaker 5: in other words, do nothing with the case. Until there
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Speaker 5: was what's called a speedy trial violation, and then the
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Speaker 5: defense would move to dismiss the case, so short of
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Speaker 5: appointing a special prosecutor, which is rarely done, as it's
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Speaker 5: possible that it's not even constitutional to do it. In
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Speaker 5: this circumstance, mister Clement recommended to the judge that there's
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Speaker 5: really nothing for him to do here but to grant
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Speaker 5: the dismissal. And that's why he didn't get into the
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Speaker 5: back and forth between the former Southern District prosecutors and
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Speaker 5: the Department of Justice as to the motivations behind this
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Speaker 5: motion to dismiss the indictment against Mayor Adam.
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Speaker 2: Clement didn't discuss the evidence against Adams, the strength of
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Speaker 2: the charges against him, he wrote, Private citizens and courts
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Speaker 2: can't force a prosecution, no matter how clearly someone has
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Speaker 2: violated a federal criminal statute. Of course, the Justice Department
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Speaker 2: didn't discuss the evidence when it first ordered the dismissal.
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Speaker 5: If you remember, it was made explicit by the acting
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Speaker 5: Deputy US Attorney Emo Beauvat that this directive to dismiss
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Speaker 5: the case was not done on the merits. He expressly
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Speaker 5: said that he was not looking at either the evidence
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Speaker 5: or the legal theory behind the case. Now, in a
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Speaker 5: more recent in filing by the Department of Justice last Friday,
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Speaker 5: they did mention the merits of the case, so they
5:07
Speaker 5: have shifted slightly to argue in papers they filed before
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Speaker 5: the court that the legal arguments underpinning the bribery charges
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Speaker 5: against Mayor Adams, they said, was weak. That is something
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Speaker 5: that is within the scope of the Department of Justice
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Speaker 5: certainly to consider in deciding whether or not to continue
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Speaker 5: to pursue the case. But it really wasn't the driving force,
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Speaker 5: and they again reiterated the earlier statement that the prosecution
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Speaker 5: of Mayor Adams would interfere with his ability to cooperate
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Speaker 5: with this administration moved to crack down on illegal immigration,
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Speaker 5: and that really was the basis to seek could dismiss
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Speaker 5: the indictment at this time.
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Speaker 2: Danielle says Soon in her letter said she was confident
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Speaker 2: in the case that the charges against Adams could be
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Speaker 2: proved and that's unusual to hear from a prosecutor.
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Speaker 6: Yeah.
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Speaker 5: In the letter that daniel Soon, the former US Attorney
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Speaker 5: for the Southern justic wrote to the Department of Justice
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Speaker 5: in response to that directive. She did discuss the merits
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Speaker 5: of the case, which is highly unusual. Prosecutors generally do
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Speaker 5: not talk about the merits of the case outside of
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Speaker 5: the context of the courtum itself. They don't make these
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Speaker 5: extra judicial statements. They don't talk about where the case
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Speaker 5: might be going. They let all of their talking take
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Speaker 5: place inside the courtroom, during legal arguments or in their briefs.
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Speaker 5: But she did mention that she believed that the case
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Speaker 5: against Mayor Adam was found. She pointed out that the
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Speaker 5: investigation had begun many, many years ago, before the outgoing
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Speaker 5: US Attorney, Damien Williams, had been involved in the case.
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Speaker 5: One of the things that the Department of Justice pointed
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Speaker 5: to was an op ed written by Damien Williams as
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Speaker 5: soon as he left the position of US Attorney for
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Speaker 5: the Southern District, in which he questioned the ethics of
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Speaker 5: the aministration. He didn't mention Mayor Adams by name, but
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Speaker 5: it was a clear reference to the current administration in
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Speaker 5: the sense that he made a comment about the current
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Speaker 5: administration having lost its moral compass. The Department of Justice,
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Speaker 5: in its filing on Friday, had gone through certain text
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Speaker 5: messages and emails from missus soon and from the prosecutor
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Speaker 5: who was leading the Adams case, where they commented upon
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Speaker 5: the op ed written by Damian Williams and how unhappy
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Speaker 5: they were with it, and they thought it was improper
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Speaker 5: and they wanted to distance themselves and the case from
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Speaker 5: those comments. And the Department of Justice pointed out that
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Speaker 5: even the prosecutors who are pursuing the case had some
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Speaker 5: questions about whether it was politically motivated, but in the end,
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Speaker 5: there was never really a discussion here, as you say,
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Speaker 5: about the merits of the case. The decision was made
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Speaker 5: simply based on the fact that they thought that the
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Speaker 5: prosecution would interfere with the mayor's ability to carry out
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Speaker 5: the administration immigration policy, and that that ultimately was enough
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Speaker 5: to dismiss the case.
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Speaker 2: The judge has concluded that Damian Williams hadn't violated any
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Speaker 2: professional obligations in writing the op ed. I mean that
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Speaker 2: was done after he left office, so I don't see
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Speaker 2: what relevance it has.
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Speaker 5: You're exactly right. The judge did conclude that mister Williams
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Speaker 5: hadn't violed any professional obligations. Clearly, as prosecutors, it's not
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Speaker 5: the kind of thing you want to see out there,
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Speaker 5: because it does inject an issue into your case that
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Speaker 5: you do not really want to deal with. But in
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Speaker 5: the end, as you said, Ms. Bethoon and the prosecutor
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Speaker 5: who is leading the case had no question in their
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Speaker 5: mind that this was a case that was found both
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Speaker 5: legally and based on the evidence, and the Department of
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Speaker 5: Justice has not really challenged that in any significant way.
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Speaker 5: Their position has been that it is appropriate for them
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Speaker 5: to have made the decision to dismiss the case. Now,
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Speaker 5: they asked for the case to be dismissed without presudice
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Speaker 5: so that it could possibly be reinstated after the election,
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Speaker 5: but they wanted the case dismissed so that Mayor Adams
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Speaker 5: could continue to focus on his ability to enforce the
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Speaker 5: Trump administration's immigration policy.
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Speaker 2: There is, i believe, just one line in the thirty
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Speaker 2: three pages where Clement says there's evidence that suggests the
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Speaker 2: decision to dismiss the indictment was undertaken in bad faith.
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Speaker 2: So that's one line dropped there, referring to, you know,
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Speaker 2: Emil Beauvey's order to dismiss the indictment being in bad faith.
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Speaker 2: Where does the judge weigh that.
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Speaker 5: Mister Clement did make mention that the evidence and he's
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Speaker 5: quoting here suggests the decision to dismiss the indictment was
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Speaker 5: undertaken in bad face. The Department of Justice has made
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Speaker 5: the argument that the prosecution was politically motivated. Ultimately, Paul
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Speaker 5: Klement decides that the judge does not have the weigh
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Speaker 5: in and it's unnecessary for him to determine whether or
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Speaker 5: not the case was politically motivated from the start, or
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Speaker 5: whether or not this dismissal was motivated by some kind
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Speaker 5: of improper political means. Mister Clement said, ultimately it was
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Speaker 5: unnecessary for Judge Hoe to settle that dispute.
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Speaker 1: Under either view.
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Speaker 5: He wrote, there was little justification for allowing a potential
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Speaker 5: reindictment of the mayor, and that's why he recommended to
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Speaker 5: the judge that he grant the motion to dismiss. But
10:31
Speaker 5: unlike what was requested by the Department of Justice, he
10:35
Speaker 5: said that that dismissal should be with prejudice. In other words,
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Speaker 5: it was going to be dismissed in a way that
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Speaker 5: the prosecution could never bring the case down the road,
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Speaker 5: and that would eliminate the potential for critics of this
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Speaker 5: decision to be able to argue that the Department of
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Speaker 5: Justice was trying to have it both ways, was trying
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Speaker 5: to have the case dismiss now, but leave the prospect
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Speaker 5: of bringing that indictment down the road in order to
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Speaker 5: try to continue to influence the mayor to cooperate with
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Speaker 5: the Trump administration's immigration policies.
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Speaker 2: Stay with me, Bob. Coming up next on the Bloomberg
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Speaker 2: Law Show is the judge likely to follow Clement's advice
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Speaker 2: and the new LA District Attorney does a one to
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Speaker 2: eighty on his predecessor in the Menendez brother's case. I'm
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Speaker 2: June Grosso and you're listening to Bloomberg. New York City
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Speaker 2: Mayor Eric Adams seems to be one step closer to
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Speaker 2: getting the criminal charges against him dismissed. That's because Paul Clement,
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Speaker 2: the former US Solicitor General appointed by the judge to
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Speaker 2: advise him on the dismissal motion, has recommended the case
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Speaker 2: be permanently dismissed. I've been talking to former federal prosecutor
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Speaker 2: Robert Mints of Macarter and English. Bob. Clement wrote that
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Speaker 2: if the charges weren't dismissed with prejudice, meaning they couldn't
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Speaker 2: be brought again, they would hang like the proverbial sort
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Speaker 2: of damocles over Adams. But if you have a public
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Speaker 2: official who's been charged with corruption and the chargers are
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Speaker 2: being dropped for political reasons, why should you give him
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Speaker 2: this free reign.
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Speaker 5: What I think what mister comment was getting at is
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Speaker 5: that one of the reasons that the Southern District Prosecutors
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Speaker 5: objected so strenuously to this dismissal is that they argue
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Speaker 5: that in meetings with the Defense Council there was discussions
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Speaker 5: that amounted to essentially a quid pro quo. In other words,
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Speaker 5: there were discussions about the mayor's ability to continue to
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Speaker 5: cooperate with the Trump administration in its immigration enforcement policies,
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Speaker 5: and whether or not the indictment and the trial that
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Speaker 5: would be upcoming would interfere as his ability to do that,
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Speaker 5: and in acknowledging that it would that obviously, any criminal
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Speaker 5: trial of an elected official is going to take away
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Speaker 5: their attention and their time from carrying out their public duties,
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Speaker 5: that that was a reason in order to dismiss the
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Speaker 5: indictment at this time, the Southern District prosecutor that that
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Speaker 5: was essentially a quid pro quot in agreement on the
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Speaker 5: part of the mayor to support the Trump administration in
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Speaker 5: exchange for a dismissal of the criminal charges, and the
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Speaker 5: Department of Justice, I think was responding to that by saying,
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Speaker 5: we're not asking for a dismissal that is permanent. We're
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Speaker 5: not asking to bar the prosecution forever. We're just saying
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Speaker 5: it should be dismissed at this time until after the election.
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Speaker 5: And that's why the Department of Justice was asking for
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Speaker 5: the dismissal without prejudice. But mister Clement said that the
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Speaker 5: quid pro quot that was hanging over this whole dismissal
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Speaker 5: was something that could only be eliminated if the dismissal
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Speaker 5: was with prejudice, and that way, the argument that the
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Speaker 5: mayor would be taking any actions in order to curry
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Speaker 5: favor with the Trump administration would be removed because there
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Speaker 5: would be no possibility that the Department of Justice could
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Speaker 5: indict him down the road if you failed to cooperate
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Speaker 5: with the Trump administration's immigration policies.
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Speaker 2: I mean talk about a get out of jail free
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Speaker 2: card for Adam because he was accused of agreeing to
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Speaker 2: a quid pro quote. Now the whole case is going
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Speaker 2: to be dropped against him. It doesn't seem like justice
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Speaker 2: is being done.
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Speaker 5: Well, that's a great question, and I think a lot
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Speaker 5: of people are very troubled by this whole scenario. Ultimately,
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Speaker 5: mister Clement concluded that the judge's hands were tied, that
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Speaker 5: he really had no ability to fight the dismissal. If
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Speaker 5: the Department of Justice had decided, almost for whatever reason,
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Speaker 5: to dismiss the case, the judge had no choice but
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Speaker 5: to do that, but to follow through and to dismiss
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Speaker 5: the case. And he even advised against an extensive judicial
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Speaker 5: investigation into the Department of Justice and actions. In other words,
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Speaker 5: he didn't even think it was necessary for the judge
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Speaker 5: to delve into the motivations behind the Department of Justice
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Speaker 5: to seek the dismissal, or likewise, the motivation for the
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Speaker 5: former Southern District prosecutors for refusing to follow that directive.
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Speaker 5: Mister Clement wrote in his submission to the judge, when
15:01
Speaker 5: the publicly available information is sufficient to inform judicial decision making,
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Speaker 5: there are sound reasons to avoid further inquiries. So he
15:10
Speaker 5: basically concluded that nothing good could come of digging into
15:14
Speaker 5: this further, and that the judge did not have discretion
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Speaker 5: here to refuse to dismiss the case, and there was
15:21
Speaker 5: really no reason to get into this dispute between the
15:24
Speaker 5: former Southern District prosecutors and the Department of Justice about
15:28
Speaker 5: who was right, who was wrong, who was insubordinate, and
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Speaker 5: who was acting properly within ethical guidelines and who was
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Speaker 5: acting based upon political motivations.
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Speaker 2: Adams and his attorneys agreed to sign a paper that
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Speaker 2: the charges could be brought against him again, so, in
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Speaker 2: other words, that the charges were going to be dismissed
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Speaker 2: without prejudice. But now his attorneys have come forward and
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Speaker 2: said no, they wanted to be dismissed with prejudice. So
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Speaker 2: they're going against what they promised the Justice Department.
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Speaker 5: Well, sure. What initially happened was the Department of Justice said,
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Speaker 5: we'll dismiss the case against their clients without prejudice, and
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Speaker 5: any defense lawyer is going to take that. They'd prefer
16:14
Speaker 5: to have it be dismissed with prejudice, but if they
16:17
Speaker 5: can only get a dismissal without prejudice, they'll take that
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Speaker 5: ruther than have the case go forward. What the Adams
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Speaker 5: defense team thereafter argued was that in the fallout from
16:28
Speaker 5: this dismissal order, where the Southern District prosecutors had made
16:31
Speaker 5: comments about the strength of the case and where the
16:35
Speaker 5: Department of Justice had attacked the strength of the case,
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Speaker 5: that all of that was highly prejudicial to their clients.
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Speaker 5: And now the situation had changed and there was no
16:45
Speaker 5: way for Mayor Adams to get a fair trial here,
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Speaker 5: and that's why they were seeking dismissal with prejudice.
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Speaker 2: So now Judge Ho doesn't have to take Paul Clement's suggestion, right,
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Speaker 2: he could decide something else.
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Speaker 5: Absolutely, Judge Ho was not legally bound to accept mister
17:01
Speaker 5: Clement's recommendation, but he did independently seek out his guidance,
17:06
Speaker 5: and it seems likely that he's going to follow the
17:09
Speaker 5: recommendation of mister Clement, certainly to the extent that he
17:12
Speaker 5: ultimately dismisses the case with prejudice. And I think again
17:16
Speaker 5: that resolves the question of the Trump administration or the
17:20
Speaker 5: Department of Justice using this dismissal as sort of a
17:24
Speaker 5: cudgel hanging over the mayor's head to stay to the mayor,
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Speaker 5: in so many words, if you don't follow our directive
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Speaker 5: and if you don't cooperate with the immigration policies of
17:33
Speaker 5: his administration. There's always the possibility that this indictment comes
17:38
Speaker 5: back again, that it gets reinstated, and that you're once
17:40
Speaker 5: again facing criminal charges. By dismissing the case with prejudice,
17:44
Speaker 5: that threat is essentially eliminated now.
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Speaker 2: A watchdog organization, Campaign for Accountability, is calling for an
17:53
Speaker 2: investigation into the acting Deputy Attorney General Emil Beauvet's order
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Speaker 2: to dismiss the charges, citing potential violations of New York
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Speaker 2: Attorney ethics rules and DOJ policies. But that complaint's been
18:07
Speaker 2: found with the Office of Professional Responsibility, which Bovey oversees.
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Speaker 5: As complicated and unprecedented. As this whole dispute is, I
18:17
Speaker 5: don't think it's ultimately going to be resolved in the
18:20
Speaker 5: world of ethics complaints. It's something that really goes beyond
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Speaker 5: that and really palls into question what motivations and what
18:29
Speaker 5: considerations are appropriate for the Department of Justice to take
18:33
Speaker 5: into account when deciding whether to prosecute a case in
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Speaker 5: the first place, or whether to dismiss an existing prosecution.
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Speaker 5: Bear in mind, the prosecutors do routinely engage in a
18:47
Speaker 5: quid pro quote in the sense that prosecutors will often
18:50
Speaker 5: turn to a defendant who's facing multiple charges and say,
18:54
Speaker 5: if you cooperate with us, we will recommend a lesser
18:57
Speaker 5: sentence to the court, or we will dismiss nine of
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Speaker 5: the ten charges against you. That is, in some sense
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Speaker 5: a quid pro quo, and that you're saying that if
19:07
Speaker 5: you cooperate in the criminal investigation, which means provide evidence
19:11
Speaker 5: about other crimes about other individuals, agree to testify at
19:14
Speaker 5: the trial. In some cases it amounts to wearing a
19:18
Speaker 5: wire and recording conversations. That is a tool prosecutors used
19:23
Speaker 5: all the time. It is incredibly common and almost invariably
19:27
Speaker 5: happens in every criminal case where there is a cooperating witness.
19:31
Speaker 5: That could be somebody who agrees to cooperate at the
19:33
Speaker 5: beginning of an investigation, or it could be somebody who
19:36
Speaker 5: only agrees to cooperate after they're facing criminal charges themselves.
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Speaker 5: But the difference between what's happened here and that type
19:44
Speaker 5: of quid pro quo arrangement, if you want to call it,
19:47
Speaker 5: that is that the cooperation is limited to the ability
19:51
Speaker 5: of the defendant or the person who might be charged
19:55
Speaker 5: to further the interests of the investigation itself. It's their
19:59
Speaker 5: ability to to help prosecutors make their case or expand
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Speaker 5: their prosecution. What we're seeing here is a Department of
20:06
Speaker 5: Justice staying to a defendant that we are willing to
20:10
Speaker 5: trade away a criminal case, not because you confer the
20:13
Speaker 5: criminal investigation, but for some other political reason that advances
20:18
Speaker 5: the ends of the administration. That's something we've really never
20:22
Speaker 5: seen before, and we're now going to have to see
20:24
Speaker 5: whether that becomes commonplace for the Department of Justice in
20:28
Speaker 5: handling political corruption prosecution.
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Speaker 2: Do you think Clement's recommendation was more about practicalities than
20:36
Speaker 2: about the law.
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Speaker 5: Ultimately, mister Clement's recommendation to the judge was really more
20:42
Speaker 5: practical than it was legal, in the sense that each
20:46
Speaker 5: side got something of a partial victory. The government will
20:49
Speaker 5: get its dismissal, albeit with prejudice. And those who were
20:55
Speaker 5: concerned about the threat that reindictment might mean for the
20:59
Speaker 5: man and how that might color his political decisions and
21:03
Speaker 5: how he serves his constituents as the mayor of New
21:05
Speaker 5: York going forward, whether or not to cooperate with the
21:08
Speaker 5: Trump administration's immigration policies or not. They get a victory
21:13
Speaker 5: because that has been removed by the dismissal with prejudice.
21:17
Speaker 5: So no longer is there the continuing threat to reindict
21:21
Speaker 5: the mayor if he doesn't cooperate. So what mister Clment
21:24
Speaker 5: really did here is he told the judge number one,
21:28
Speaker 5: you've got no practical solution here but to follow the
21:31
Speaker 5: Department of Justices requests that the case be dismissed. But
21:35
Speaker 5: in terms of how you effectuate that dismissal, we're going
21:38
Speaker 5: to do something that really gives each side a bit
21:41
Speaker 5: of victory. The government gets this dismissal. Those who are
21:44
Speaker 5: concerned about the quid pro core arrangement no longer has
21:48
Speaker 5: to worry about that because that threat has effectively been
21:51
Speaker 5: removed by the dismissal with prejudice.
21:54
Speaker 2: This case got very complicated, very fast. Thanks so much, Bob.
21:58
Speaker 2: That's Robert mens I'm maccarter and English. In other legal
22:02
Speaker 2: news today, the new district attorney in Los Angeles is
22:06
Speaker 2: doing a one to eighty on his predecessor. He's not
22:09
Speaker 2: advocating for the resentencing of Eric and Lyle Menendez. The
22:14
Speaker 2: Menendez brothers have served more than thirty five years of
22:17
Speaker 2: a life sentence for the murder of their parents.
22:20
Speaker 6: D A.
22:20
Speaker 2: Nathan Hackman said he believes the Menendez brothers do not
22:24
Speaker 2: meet the threshold to be released from prison, and that
22:27
Speaker 2: they've lied numerous times about the case and the timeline
22:31
Speaker 2: leading up to their parents' murders.
22:34
Speaker 6: While the Menendez brothers persist in telling these lies for
22:38
Speaker 6: the last over thirty years about their self defense defense
22:43
Speaker 6: and persist in insisting that they did not suborn any
22:46
Speaker 6: perjury or attempt to suborn perjury, then they do not
22:50
Speaker 6: meet the standards for Reed's sentencingke.
22:54
Speaker 2: Hawkman also said the brothers pose an unreasonable risk of
22:58
Speaker 2: danger to the community, but if they come clean, he'll
23:02
Speaker 2: reconsider his.
23:03
Speaker 6: Position unequivocal sincere acknowledgments of all the lives they have
23:09
Speaker 6: told for the past over thirty years.
23:12
Speaker 2: Family members of the brothers criticized Hawkmann's assertion that they
23:17
Speaker 2: don't meet the standards for resentencing Tomorrow. Goodall is a cousin.
23:21
Speaker 4: They have always taken ownership of what they chose to
23:25
Speaker 4: do given the circumstances of what went on in their
23:28
Speaker 4: household as they grow up as a family.
23:30
Speaker 1: We believe that they have served their time.
23:32
Speaker 2: The resentencing hearing granted by the judge will go forward
23:36
Speaker 2: later in March. In addition to pursuing resentencing, the Menendez
23:41
Speaker 2: brothers have also submitted a clemency plea to California Governor
23:45
Speaker 2: Gavin Newsom. Coming up next on the Bloomberg Law Show,
23:49
Speaker 2: a courtroom showdown between Pirella Weinberg Partners and a group
23:53
Speaker 2: of former partners who were fired a decade ago. I'm
23:57
Speaker 2: June Grosso. When you're listening to Bloomberg. The courtrooms showdown
24:02
Speaker 2: between Parrella Weinberg Partners and a group of former partners
24:06
Speaker 2: who were fired a decade ago has shown the gulf
24:10
Speaker 2: between M and A bankers and restructuring bankers. Parrella Weinberg
24:14
Speaker 2: claims that Michael Kramer and three others violated their partnership
24:19
Speaker 2: agreement by soliciting most of its restructuring group to leave
24:23
Speaker 2: in twenty fifteen, and subsequently launched the firm of Dussera,
24:28
Speaker 2: costing it tens of millions in lost fees. Kramer and
24:31
Speaker 2: his team claimed they were unjustly fired and denied sixty
24:36
Speaker 2: million dollars in with hell compensation. Joining me is Bloomberg
24:39
Speaker 2: legal reporter chrys Do Mesh tell us about Joseph Perella
24:43
Speaker 2: and Peter Weinberg. You described them as two Harvard Business
24:47
Speaker 2: School graduates who became Wall Street Royalty.
24:52
Speaker 1: I don't think a lot of people are necessarily aware of,
24:57
Speaker 1: you know, how important some of these boutique investments are.
25:01
Speaker 1: You know, even though they don't have a real high profile,
25:05
Speaker 1: they have their hands in a lot of deals. They're
25:08
Speaker 1: well known, and you know, they just know a lot
25:12
Speaker 1: about Wall Street in terms of what's going on with business,
25:16
Speaker 1: who's making deals, you know, who's in trouble, that sort
25:18
Speaker 1: of thing. They're advising on M and A and restructuring.
25:22
Speaker 1: You know, the two founders of the company are pretty
25:26
Speaker 1: legendary bankers. I mean, Joe Perella was he was head
25:29
Speaker 1: of of Morgan's Stanley's, you know, investment banking at one point,
25:34
Speaker 1: and Peter Weinberg was HEO Goldman Sachs. So these are
25:37
Speaker 1: you know, these guys came from very large banks. But
25:40
Speaker 1: around two thousand and six they set up their own
25:44
Speaker 1: boutique kind of firm together that you know, and almost
25:47
Speaker 1: immediately they bought this firm, Kramer Capital, which is the
25:52
Speaker 1: firm of Mike Kramer, who they later fired in twenty fifteen,
25:56
Speaker 1: for allegedly starting, you know, conspiring to form his own
26:00
Speaker 1: with a bunch of bankers from Parola Weinberg, and that's
26:02
Speaker 1: what led to this trial.
26:04
Speaker 2: Were these sort of two separate businesses within the firm.
26:10
Speaker 1: Not really they were all partners, but you know, some
26:12
Speaker 1: partners were responsible for certain areas of the business and
26:14
Speaker 1: some were responsible for others. Mike Kramer was brought in
26:18
Speaker 1: surely as a restructuring banker really because he knew that business.
26:22
Speaker 1: He had done it at other places like cool Hand
26:25
Speaker 1: and Green Hill, and you know, he was he was
26:29
Speaker 1: well known in that that niche kind of business. So
26:33
Speaker 1: in effect it was kind of a hedge in a
26:35
Speaker 1: lot of ways, because you know, there's the m and
26:37
Speaker 1: a business where you know, they consult companies on companies
26:41
Speaker 1: they're buying and acquisitions, and you know, everybody gets together
26:46
Speaker 1: and congratulates so other when it's done. But they also
26:48
Speaker 1: have on the other hand, these restructuring bankers who put
26:51
Speaker 1: the company's really in trouble. You know, they come along
26:54
Speaker 1: and they roll up their sleeves and they kind of
26:55
Speaker 1: helped them along. So they are distinct pieces of the business.
26:59
Speaker 1: But you know, they all kind of are contributing to
27:02
Speaker 1: the same pot.
27:03
Speaker 2: So Kramer when he testified, said that the restructuring team
27:08
Speaker 2: was a revenue engine that was subsidizing the M and
27:12
Speaker 2: A group.
27:13
Speaker 1: Yeah, so they felt that in some of the lean
27:15
Speaker 1: times when M and A wasn't as big, you know,
27:18
Speaker 1: especially after the financial crisis and things like that, the
27:22
Speaker 1: restructuring group was bringing in lots of money and helping
27:27
Speaker 1: shore up the revenues in a way that the M
27:30
Speaker 1: and A wasn't bringing in. And I think the way
27:33
Speaker 1: that the restructuring group looked at it in a lot
27:35
Speaker 1: of ways that they were kind of scrappy entrepreneur like,
27:38
Speaker 1: you know, they had built up the business at a
27:40
Speaker 1: small shop. They were willing to go in and get
27:43
Speaker 1: their hands dirty, and a lot of these kind of partners,
27:46
Speaker 1: you know, weren't driven by production. The results didn't necessarily
27:51
Speaker 1: line up with what, at least Kramer thought that they should.
27:54
Speaker 1: So he was always constantly trying to get the business
27:56
Speaker 1: to improve, trying to get more revenue in, trying to
27:59
Speaker 1: find new ways of getting business in. And he had
28:02
Speaker 1: a lot to.
28:03
Speaker 2: Say, you know, I thought it was interesting that he
28:05
Speaker 2: talked about the different attitudes of the two groups, right.
28:10
Speaker 1: I mean, you know, these are guys who go in
28:12
Speaker 1: when companies are in a lot of trouble, you know,
28:15
Speaker 1: talk frank to them. They're well respected for their ability
28:19
Speaker 1: to kind of counsel these companies through very troubled times.
28:23
Speaker 1: You know, things are very tense. It's you have to
28:25
Speaker 1: be able to kind of talk to these guys when
28:28
Speaker 1: they're in that position. And you know, they had the
28:31
Speaker 1: former general counsel of Montanto come in and say he
28:34
Speaker 1: had hired them kind of exclusively to get access to
28:38
Speaker 1: Mike Kramer and his group, and he was pretty upset
28:40
Speaker 1: that they had gotten rid of them. So, you know,
28:43
Speaker 1: it's a very interesting relationship when it comes to the
28:47
Speaker 1: way that they do restructuring and how they speak to
28:50
Speaker 1: these companies because they're in big trouble when when they
28:53
Speaker 1: generally are there.
28:54
Speaker 2: Did Kramer say they had different backgrounds?
28:57
Speaker 1: I mean, that wasn't like the whole focus, but there
28:59
Speaker 1: was definitely a thread that you know, there were these
29:02
Speaker 1: kind of pedigreed bankers who had worked at these big
29:05
Speaker 1: places on Wall Street, you know, and didn't really come
29:08
Speaker 1: from this kind of entrepreneurial roll your sleeves up and
29:12
Speaker 1: kind of work with the company's kind of attitude That
29:14
Speaker 1: was definitely something that they felt like. Kramer went to
29:17
Speaker 1: cal State Northridge. You know, he's he's well known at
29:21
Speaker 1: that school for being, you know, an unusual for going
29:25
Speaker 1: to Wall Street and being such a prominent deal maker.
29:29
Speaker 1: So I think there was just a little bit of
29:32
Speaker 1: tension between you know, what they did and you know,
29:36
Speaker 1: having these big names on the door and being in
29:39
Speaker 1: conflict with them.
29:41
Speaker 2: Was Kramer unhappy with the amount of money that he
29:43
Speaker 2: was making, because apparently he made one hundred million dollars
29:47
Speaker 2: during his time at the firm, which was less than
29:50
Speaker 2: ten years.
29:52
Speaker 1: What he said was he never asked for more money.
29:54
Speaker 1: He said he was not necessarily happy with his compensation.
29:58
Speaker 1: He felt like he should have been paid more. He
30:00
Speaker 1: clearly wanted to be a bigger part of the firm.
30:02
Speaker 1: He was at one point co head of the advisory business,
30:05
Speaker 1: but they took him out of several managerial positions because
30:08
Speaker 1: they kind of felt that his personality kind of graded
30:11
Speaker 1: on others at the firm. But to his team, that
30:15
Speaker 1: personality was necessary for the way he did business and
30:19
Speaker 1: necessary to do restructuring and that kind of nitty gritty
30:22
Speaker 1: kind of corporate work.
30:23
Speaker 2: What did Perella and Weinberg say when they were on
30:26
Speaker 2: the stand, So.
30:27
Speaker 1: Weinberg was first. He was pretty matter of fact, he
30:31
Speaker 1: was very upset, you know, at learning that they had
30:34
Speaker 1: had a meeting at Kramer's house in January twenty fifteen.
30:39
Speaker 1: Pirella Weinberg says that meeting was ostensibly to form the
30:43
Speaker 1: new firm, to decide on, you know, how the revenue
30:46
Speaker 1: would be distributed in equity and that sort of thing.
30:50
Speaker 1: Kramer and the others testified that this was more of
30:52
Speaker 1: a gripe session just because they were all so unhappy
30:56
Speaker 1: at the end of the year in twenty fourteen. So
30:58
Speaker 1: really what happened that meaning is kind of the heart
31:01
Speaker 1: of what the judge has to decide here. He didn't
31:04
Speaker 1: necessarily tip his hand, you know, you have to be
31:06
Speaker 1: careful about the way you interpret judges comments during a
31:10
Speaker 1: trial or before they've put out an opinion. But he
31:13
Speaker 1: clearly said that he thought that Mike Kramer kind of
31:15
Speaker 1: had a greater duty as a partner and as head
31:19
Speaker 1: of this group to kind of avoid having meetings like
31:24
Speaker 1: that that at the very least the appearance of it
31:27
Speaker 1: was problematic is the word he used.
31:30
Speaker 2: They fired him for cause what was the cause.
31:35
Speaker 1: The cause was violating the solicitation the non solicitation covenants
31:40
Speaker 1: of his contract with the firm. He was not supposed
31:43
Speaker 1: to solicit any clients or any other employees of the firm.
31:49
Speaker 1: If he was fired for cause, he would have had
31:50
Speaker 1: garden leave, which would have taken, you know, probably up
31:53
Speaker 1: to a year or something like that. They say he
31:55
Speaker 1: was soliciting employees all the way back in October of
31:58
Speaker 1: twenty fourteen.
31:59
Speaker 2: How many were fired with him.
32:02
Speaker 1: So terminated for cause. There were three others, two partners
32:05
Speaker 1: and a managing director who had worked on the thing,
32:09
Speaker 1: all of whom went to his new firm eventually, and
32:12
Speaker 1: a bunch of managing directors quit right after they were
32:15
Speaker 1: terminated for cause, most of whom also went to his
32:18
Speaker 1: new firm. Parella is suing Essentially, they want to keep
32:23
Speaker 1: the deferred compensation and equity that was taken from them,
32:26
Speaker 1: but they also want damages above and beyond that. But
32:30
Speaker 1: they also want punitive damages. But that does not seem
32:34
Speaker 1: to be something the judge is considering, given that he
32:37
Speaker 1: said a lot of this was of the firm' zone creation.
32:40
Speaker 1: The other side claims defamation interference with prospective employment prospects.
32:46
Speaker 5: Is it just.
32:47
Speaker 2: About this particular incident or does it show anything larger
32:51
Speaker 2: about you know, boutique investment banks.
32:54
Speaker 1: And I think it kind of opens a window and
32:57
Speaker 1: kind of just you know, the turmoil that can take place,
33:00
Speaker 1: you know, when there are difficult you know, compensation conversations
33:05
Speaker 1: and conversations about you know, between partners and management about
33:10
Speaker 1: who's gonna run what. It doesn't really matter whether it's
33:13
Speaker 1: an investment a big investment bank or a boutique. You know,
33:16
Speaker 1: on Wall Street, you have big personalities. They clash and
33:19
Speaker 1: when they clash like that, things get tense and can
33:24
Speaker 1: kind of break down a little bit. And this is
33:26
Speaker 1: like an extreme example of you know, you can see
33:30
Speaker 1: a ten year old fight that in terms of the
33:32
Speaker 1: amount of money here and you know, Wall Street, this
33:36
Speaker 1: is not this is not a huge chunk of change, right.
33:39
Speaker 1: I mean, we talk about a lot of money on
33:41
Speaker 1: Wall Street all the time. But what's most interesting about
33:45
Speaker 1: this is that these people are so upset with each
33:48
Speaker 1: other that they are willing to, you know, over a
33:52
Speaker 1: month without a jewelry. Ten years after the fact, still
33:56
Speaker 1: their gripes on the stand. And you know whether or
34:00
Speaker 1: not one side wins or loses. I don't know, you know,
34:04
Speaker 1: I'm sure they will claim victory. But in the end,
34:06
Speaker 1: like this is, this is a feud, and this finally
34:11
Speaker 1: kind of gave them both sides. I mean, look, of
34:13
Speaker 1: course both sides are going to say they want to
34:15
Speaker 1: win the case. Of course they wouldn't win the case.
34:17
Speaker 1: But in a lot of ways you could just see,
34:21
Speaker 1: you know that these both sides of this wanted to
34:24
Speaker 1: clear the air and at least, you know, get up
34:26
Speaker 1: in public and make their you know, make their side known.
34:30
Speaker 2: Why did it take ten years to come to trial?
34:33
Speaker 1: Well, that's a that's a story of New York State
34:36
Speaker 1: Court and a judge that there was another judge that
34:41
Speaker 1: was on it. There are a number of appellate rulings
34:45
Speaker 1: in the case. It can just take a long time
34:49
Speaker 1: for these cases to go to trial. And it would
34:52
Speaker 1: have gone to trial actually last year and kind of
34:55
Speaker 1: the last minute. The partners Kramer and all wanted a
34:58
Speaker 1: wanted a jury trial, and that eventually was shut down.
35:01
Speaker 1: So now it's just up to Judge Robert Reid.
35:04
Speaker 2: How did they shoot down the jury trail? As far
35:07
Speaker 2: as the testimony over a month, what was the testimony
35:10
Speaker 2: that struck you the most.
35:11
Speaker 1: You know, it was all very interesting. Mike Ramer's was
35:15
Speaker 1: probably the most informative of you know. Of course, Perrella
35:18
Speaker 1: will claim that he lied throughout the time on the
35:21
Speaker 1: stand that this was, you know, an effort to form
35:24
Speaker 1: a new firm. Mike consistently said, no, we were just unhappy.
35:29
Speaker 1: You know, we hadn't taken any of the real necessary
35:32
Speaker 1: steps to form a new firm, like setting up an
35:35
Speaker 1: LLC or any of the you know, kind of technical
35:37
Speaker 1: things that needed to be done. But there was clearly
35:40
Speaker 1: moves being made of some sort. Whether or not they
35:43
Speaker 1: violated the four corners of their contract, you know, it's
35:46
Speaker 1: really goes as to whether or not they actually violated
35:49
Speaker 1: this clause or this provision, and that's that's a very
35:52
Speaker 1: difficult question that really has to be done with an
35:55
Speaker 1: analysis of the document.
35:56
Speaker 2: And the trial ends with closing arguments on Friday, then
36:00
Speaker 2: it will be up to the judge. Thanks so much, Chris.
36:03
Speaker 2: That's Bloomberg Legal reporter Chris dol Mesh, And that's it
36:06
Speaker 2: for this edition of the Bloomberg Law Show. Remember you
36:09
Speaker 2: can always get the latest legal news on our Bloomberg
36:12
Speaker 2: Law podcast. You can find them on Apple Podcasts, Spotify,
36:15
Speaker 2: and at www dot bloomberg dot com, slash podcast, Slash Law,
36:21
Speaker 2: and remember to tune into The Bloomberg Law Show every
36:23
Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso
36:28
Speaker 2: and you're listening to Bloomberg