Bloomberg Businessweek Weekend - December 17th, 2021

edition of Bloomberg Business Week. This past week highlighted by the fomc's final meeting of Federal Reserve Chairman Jerome Powell calling inflation the biggest threat to America's economic recovery, and the Central Bank signaling a series of interest rate hikes on the horizon, the latest market twist, and what our Business Week team is dubbing investing's wildest year ever. That's the subject of our cover story, which we'll get to in just a moment, And ahead on the broadcast, we're

gonna sit down with Raj Rajer Rottenham. He once ran a seven billion dollar hedge fund before receiving the longest prison sens ever handed out for insider trading. Now he's defending his actions that put him behind bars in a new book, Uneven Justice. The plot to sink Gallia plus the head of the World Valent Tourism Council on what the Akron variant means for a multi trillion dollar industry. All of that to come. We begin with our cover story this week, a takeover in the finance section of

the magazine. It's a detailed look at a year that's market headlines dominated by retail traders, meme stocks, cryptocurrency SPACs. We got some celebrities in there as well, Delvis breakdown one filled with fear, fascination, and greed. We turned to Bloomberg Market senior editor Mike Reagan and Personal Finance reporter Mr Lena got Fapolu. Alright, Mike, let's start with you. How do we make sense of the convergence of popular culture and modern finance. I gotta say, it feels like

it was a year like no other. Yeah, it really was a unique year, A crazy year. I guess that's why they got me involved. A good fit, right, But you know, I do think that the fascinating thing is how investing, especially in sort of the crypto and the real speculative parts of the stock market, sort of overtook pop culture to some degree this year. I mean, there's a lot of things that kind of led up to that. I think the elimination of commissions at the online brokerages

a couple of years ago played a part of the role. Obviously, this kind of helicopter money coming from the government and people being forced to save rather than spend gave people a lot of free cash. But to me, the really fascinating thing is, you know, look that we basically forced everyone to go home and isolate themselves. And you'd think, well, what would that cause people to do. You'd think you would cause them to kind of become loners and and

sort of self reflective. But instead, all these online communities really just grew and grew and grew and started thriving. So to me, I think when you invest now you have to sort of consider this as a fundamental driver of investing is how powerful are the communities that are backing some of this assets, you know, whether it be a MC a cult stock stock like that, or something

like shiba, you know, or doge coin. If you get enough people tweeting about it and posting on Reddit about it and telling their friends about it, that fundamental value of that community suddenly is what it's the price of the asset one thing that I find so fascinating about this is it's it's it's not just you know, the retail traders, the people who are new to this, who entered the market this year, that are that are having

an impact. Mr Lanny Gofapulu, come on in here, because you've spent a good part of the past year talking to retail investors and talking to people who perhaps even left careers on Wall Street to pursue the n f T boom. Tell us about one of these folks. You talked to, Sergio Silva, who worked at Barclay's in equity

sales before he left to get into crypto. Yeah, he's just one of the many examples of people that you know, we've spoken to this year, and when Business came to me and asked me to find some voices to sort of portray what Mike explained earlier has happened this year. Really it was just a plethora of folks. There are so many stories out there of people who have come in contact with all of these obscure financial vehicles that

came into play this year. In Sergio is just one example of the many folks who chose to leave their traditional Wall streets you know, banking jobs and turn to you know, ride this this this wave um of of n f t s of crypto full time. And so Sergio was basically sitting at home during the pandemic and he was, you know, in all these Twitter discord telegram chats of people talking. He stumbled upon a crypto punk

project and he decided to buy one. And for those who don't know what crypto punks are, it's these small, pixelated uh n f t s that are human like um pixelated characters, and they are used as digital avatars for anyone who you know, spend a lot of time online. He bought one of those very very you know, cheap worth you know, a couple of hundred dollars, and the value of those crypto punks now is, you know, the

cheapest one is around three hundred thousand dollars. And so after that, for him, it was, you know, off to the races. But Mike, I think about like traditional Wall to who are like you know, puffing and huffing and whatever, you know, to catch up with like this new wave of investing, they've got to be watching. I mean, I think about the Wall Street ros are like, wait, I don't get it, but I gotta get in. Yeah, absolutely,

And there's been this evolution of thought. You know. Originally, I think most of Wall Street sort of rolled their eyes at the notion of crypto and thought it was a scam and thought Google. And he's the best example. You follow his comments through the years, and the next thing he's like, all right, well, if our clients want to trade it, will trade it, you know. And and Wall Street has sort of been pulled along by this movement.

And to me, I think, you know, there's something to be said about knowing, being honest with yourself and knowing what you don't know about the future. And it's it's easy to roll your eye at something like a crypto punk or an f T, but when you start to think about what's possible in the n f T space. The one example I always give is this thing called

z racing. And I this isn't in the story, but you know there are n f T s that are basically digital thoroughbred race horses, right, so you can raise them against each other, you can breathe them, there's prize money, you put up stakes, so you know, an n f T isn't just a jpeg of a funny picture. There's there's a lot that can be packaged into an R and I think where that's really going, that smart contract

idea of it. So the crypto punks that the board apes, you know, I think they they're kind of the ground floor and people thinking, well, maybe this is sort of will be sort of the nostalgia of the future where people realize the value of n f T s and and you know, look back at these as sort of the collector's item of this beginning of this movement. Well, big thank you to Mr Lanna you got Fapulu. She's our personal finance reporter here at Bloomberg News. Also thanks

to Bloomberg Market Senior editor Michael Reagan. They worked on this week's cover story, a finance section takeover. Check it out at Bloomberg dot com on the terminal and of course in Business Week magazine. Coming up next, which region of the globe will be the first to see business travel return and force. You're listening to Bloomberg Business Week, This is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stenovik from Bloomberg Radio.

Shares of hotels restaurants and leisure stocks. We know they have bounced around this year. Their volatility often dependent on the pandemic headlines at any given day. Tim Well, to give us a global snapshot of the travel and tourism industry, we turned to Julia Simpson. She's President and CEO of the World Travel and Tourism Council. It's a volunteer organization of business leaders and companies. It's actually chaired by someone

who we've spoken to in the past, Carnival CEO Arnold Donald. Yeah, we have indeed now Julia she joined us from London, where the w TTC is based, just as we were beginning to digest the potential impact of the omicron variant on a sector, as we said, already ravaged by COVID. Probably while global GDP went down maybe about five point four percent in travel and tourism, we were hit by nearly fifty percent. So an industry that was worth nine trillion as globally was cut down to about four point

six billion. That's last year. Now, we do a lot of researcher economic research with Oxford Economics, and we've been charting where this might go to. And I'm going to give you some usig again in a minute, but pre the latest strain of covid um, we were looking at getting back to maybe globally eighty five percent eighty percent recovery if there aren't further restrictions by the end of twenty twenty two. UM. In the US, actually the picture

is looking a bit brighter UM. TIM. The the actual value of travel and tourism to the US pre the pandemic, taking twenty nineteen as a baseline, was about one point eight billion dollars. You took slightly less of a hit at around minds forty one in twenty that's mostly because of the strength of your domestic traveling to is a market, and so you sort of got fled down to about

one point one billion dollars. Now, the good news is UM this year you're expected to grow slightly ahead of the global picture by about thirty six percent, So that's slightly better. And then if things were to continue and this I think there's big messages for governments here, but if things were to continue benignly or in the way we're seeing them now, you could get back to actually in a good time exceed your pre pandemic g d

P well you do. That's the kind of numbers if you like, right, Julia, And you do think about the pent up demand because you know, people can't can't retake the trips that they missed during the pandemic, but they can certainly go out and take a talent trims once they feel confident about moving forward. You mentioned government. I mean, the w TTC works with governments to raise issues and some of the industry's concerns when it comes to travel.

And these are what are or what is the top one or two concerns of the industry right now that you all are bringing to global government officials. Yeah, exactly, we've been raising the government's globally. First of all, a total lack of international coordination surrounding travel within the pandemic. You understand, when a pandemic hits the country, governments naturally look inwards. They're worried about their own citizens. This is

completely natural and normal. But as we sort of look up above the parapet and reach hands across the ocean, again, the severe lack of international coordination in terms of, you know, what is accepted and what the rules are. So that's one problem. Another problem is we see these severe travel restrictions suddenly coming down. So I'll give you a really

good example. When the new variant was identified in South Africa, a lot of countries immediately left to barring anybody from certain countries in the southern parts of Africa coming to

Europe and coming to other parts of the world. But the irony is that the very own World Health Organization w h O as we call it, um they were saying, yeah, it was a variant of concern, but they said that closing Frances has absolutely no impact and they shouldn't be doing it, and the economic costs of livelihoods and people can actually far outstrip the impact of the pandemics. So

lack of coordination, severe travel restrictions. And also obviously the golden the golden bullet he or the silver bullet is the vaccination levels. You know, sooner we can get the world vaccinated, can all get vaccinated? That is our greatest

um uh, you know, prevention to this illness. So yeah, just in about a minute and a half, what is going on in Larding because we all were watching the UK Prime Minister Boris Johnson his press conference yesterday and covid takening of restrictions once again in the UK mandating masks, encouraging homeworking. Um, what are you hearing from your members of your community about that specifically and London specifically, because

I know you're concerned about those those travel restrictions. Yes. Absolutely, the good news for travel and tourism is there haven't been any further restrictions are emanating from the UK government. So I think they've recognized what I was saying earlier that once variant of this of COVID is actually in your community, it's absolutely pointless trying to put in front. Is so good news for travel and tourism. No, no

further restrictions there, which is great. Um. I think what they want to do is to try and restrict a little bit gatherings of people. And they're saying that you can go to work if you you have to be there in person, but if you can find an alternative and work from home. They're just saying for a period because as we know that the latest variants seems to be slightly more infectious and travel faster. Um, so they're

just being cautious. I think it's more cautious and dramatic, if I'm completely honest, because life is still carrying on pretty normally. You know, I can get on the Metro, the underground, tubes and trains. Do people wear masks on the underground, you wear masks, So that's what you do on public, on any kind of transport, you wear a mark. Well, if you go into a shop, football stadiums, in fact, I'm going to see you. Well we call it soccer

here my soccer. I'm going to a soccer matcher this weekend and I will be able to join you know a lot of tens of thousands of people, but I'd be wearing a mask, and I'm probably going to be for my COVID vaccination certificate. Julia. You before you had this role, you were at i A g Or International Airlines Group. It's the parent company of British Airways, Iberia air Linguists Welling. And it was just a few months

ago that you that you left that company. And I want you to take us back to March when the world fell apart because of COVID, but also international travel in domestic travel just dried up. Take us back to what it was like to be at a large airline. Yeah, well it was. It was pretty horrific really to be honest with you, because we actually saw all business almost come to a stand still. And I think aviation is very adaptable and it's very good at dealing with crisis.

I mean, it's obviously had the most tragic and horrendous crisis of nine eleven, but then you know, we've had financial crisis and we're really really resilient. And what I thought was great about I a G is, you know, we made sure that we had good, strong capital behind us.

And I'm not, you know, up to date with all their numbers now, but I know that you know, when I was there, there was ten billions UK sterling in the bank, and we make sure that we were resilient with stand That was Julia Simpson, President and CEO of the World Travel and Tourism Council. Still at a Bloomberg Business Week and insane look at what happens when a hospital system is stretched beyond its limits. The ripple effects

of an under vaccinated population in America's heartland are detailed. Next, this is Bloomberg broadcasting from the financial capital of the World, Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one to San Francisco, Bloomberg nine sixty to the Country Sirius XM Chado one nineteen and around the globe, the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week. Business Week has had many covers this year on a pandemic.

It's been incredible to coverage now. A story that caught our attention this week was a Bloomberg big take. It was also one of our most read stories on the Bloomberg terminal throughout the week. It took us to Kentucky and that state's hospital system, illustrating how unvaccinated Americans are fueling the country's latest wave of COVID infections. Bloomberg News US Healthcare Senior editor Drew Armstrong tells us it's pushing

some medical facilities past the brink. He visited three different ones across the Bluegrass state during the summer as it was coming off its biggest surge in cases, the Delta variant. He saw some really startling things. Drew joined us in studio to give us a sense of how bad it can get when areas with fewer healthcare resources and low inoculation rates get bombarded by the virus. What you see is, you know, first of all, they still have COVID patients

who are in the hospital there. And and these people are very, very sick. I mean, you know, Um, they had a patient code, which means either they're harder the long stopped working. Um while I was there finishing open interview with one of the doctors, she went sprinting down the hall to take care of her patient. Um. You

see these people and how ill they are. I mean, I you know, set outside a room, one of the isolation rooms, and watch demand on a high flow oxygen mask and he is, you know, gasping for breath into this thing. Um, you know, but he's taking these little gulps of air. And and there's no way other to say it is that it looks like this person is suffocating to death right in front of your eyes. And

and that is what this disease does. And he saw patients on ventilators, patients on heartlong bypass Machi means it is really horrific. And then outside the hospital it's like nothing's ever happened. I got I have a million questions. First of all, it reminds us that, you know, we're far from being over this pandemic, right, and it still impacts these people largely in vaccinated people. Yeah, almost all

of them are um. I mean, you know, it was interesting to talk to the caregivers in this case because they said the first wave that they dealt with pretty much everybody in the hospital old, frail, exactly the people you would think would be part hit virus. Yeah, this is over the win. This is the last winter about a year ago when when the whole yeah, exactly pre

vaccine vulnerable population. This time around, they said, these are the young people thirties, forties, fifties, you know, type of relatively healthy people, typical Americans you'd see walking around there in the Walmart or the Kroger. And those were the people that were in the hospital this time. And because that's really who the unvaccinated are in Kentucky as well.

I mean, you look at the vaccination rates. You have a county, let's say it as a vaccination rate, it's really a lie because that's almost all the older population. The younger groups are very very unvaccinated there. When I was reading this piece, drew one big takeaway from me was what happens to a health system when it is overwhelmed. You write about a policy that has only been invoked a few times at one of the hospitals where they essentially tell an incoming ambulance that, hey, we don't have

any room here for your patient. You have to take this patient somewhere else. Talk a little bit about the toll this takes on healthcare workers that hold this takes on on hospitals, and how somebody who may have a heart attack, who may have a stroke, something completely unrelated to COVID might actually die as a result of a

hospital being overwhelmed from COVID patients who potentially are't vaccinated. Yeah, just to set this up, I mean, I think it's important to remember that, you know, US healthcare and hospitals in particular, it's not like they have a ton of excess capacity. I mean, these are businesses, whether they're nonprofits

or for profits, I mean, these are businesses. They run pretty lean, and we run an assumption that if we walk into a hospital, we're gonna be taking care and you typically will be I mean, you know, but they but they do that by kind of very carefully running it around, you know, eighty or nine percent capacity all the time. There is not a lot of extra room.

The system is built for a disaster, but it's built for a disaster like a chemical plant explosion or a big crash on the interstate where it's you know, people come in, they get hurt, and they're out. And it's also built for patients who come in the hospital and then leave the hospital. And that's really critical because you know, a patient who get sick and comes into the su

typically in there for you know, a few days. These COVID patients sit in these beds for weeks, and so you know, you have hospitals do have an option when things are getting really bad as to mention they go they do what's called going on divert sending a message to all the local ambulances. He don't come here, go to the hospital thirty minutes down the road, now, you know. And and that's a case where d e R is so backed up there saying we can't take anybody, gotta

we gotta hit pause for a few hours. Now. What happens though, when your e R is overwhelmed with COVID patients, e er down the road is overul with COVID patients. They are down the road from that is overworld with COVID patients, because that's what happened there, and they went on you know, this is a hospital in London, Kentucky's about seventy five miles south of Lexington. They serve a lot of Appalachian counties, and they had gone on diverts the third or fourth time that they'd gone on divert

in August. Before that, twenty years, they only got to divert twice. Once it was a bomb throughout the other time it's a tornado. And they were on DIVERT once again because they had thirty people backed up in the waiting room and they had another you know, twenty or thirty people in the yard waiting for beds upstairs who needed to be admitted. They went to divert and then they did it for two hours, and they looked around

the rest of the region. They said, all the hospitals around us starting divert as well because they're overwhelmed with quote patients. That was Bloomberg News US Healthcare Senior editor Drew Arms draw some graphic details as America continues to deal with the latest rise in COVID cases. We're listening to Bloomberg Business Week coming up next, we turn our attention to a success story born out of the nation's ongoing health crisis and the pandemic fixes that made a

beloved New York restaurant more profitable than ever. It's a tale of small business triumph. We'll get that on the other side. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. It has not been easy running a restaurant during the pandemic. We know that, and yet one dining establishment on New York City's Lower East Side is not only surviving COVID, Tim, it's becoming more profitable than ever.

Here with that story is Joshua Breustein Technology editor at a Business Week. He's got a feature in this week's issue of the magazine about the popular vegetable only eatery Dirt Candy. They're also very pleased to have the restaurant's owner and chef, Amanda Cohen with us as well. So Josh, let's get it off with you. How did you discover

dirt Candy and why did you write this piece? I'm just curious about like the pitch to Joe Weber the technology or exactly well, I'm I'm a technology editor but also New Yorker, and I was really interested, as the pandemic looked like it was waning this spring, to see how restaurants would, after all they had been through, kind of get back on track. UM. I'm a vegetarian, so

dirt Candy was very much on my radar screen. And I was also interested in talking to Amanda about UM about her experiences, because she's been out in the forefront talking about labor issues, UM in the industry, UM and kind of pushing the business model in various ways. And so I thought that, you know, she'd have some really interesting things to say about sort of reshaping a restaurant at this interesting time. And also I could you know,

go there and get to eat some good foods. Say it was this really just about getting some really great meals. Let's bring amand in. I thought a good place to start would be, you know, when we first UM, when we first started talking, you you know, you were just coming out of what seemed to be, you know, one

stage and into the next one. And over the last couple of months, it seems like UM thing has worked out maybe surprisingly well for you in certain ways, And I'm wondering if you could talk about just the factors that went into where you find yourself now and and how things ended up being maybe better than expected and also continue to be a challenge. Yeah. I mean, I had no idea that this is where I was gonna

end up. Um, you know, I started, Uh, I don't know, part five my pandemic experience, with the idea that we had to change the restaurant. We weren't going to survive, and we were, we were surviving pre pandemics, but always on the edge. And I had sort of made a promise to myself and my staff that we were gonna start trying to figure out how to actually run the restaurant like a business and a passion project that was

always petering on the edge. And uh, we changed how we paid our staff, we changed our pricing, we changed the culture of the restaurant, and in a huge surprise, I think that all of us we are still here and we are actually doing really well. It's the first time in my thirteen years of running this restaurant, but I actually feel like I'm running a business. The changes that you've made They're not the conventional ones that we see with a lot of restaurants that have survived and

thrived during the pandemic. It's not like you went all in on delivery or you know, everyone's eating outside, right, these are these are changes that aren't conventional. I think we went against the wisdom and breathe their prices and um, we really sorted double down on changing how we involved our staff in the restaurant and how we paid them. And for a restaurant my size, we now offer health insurance and all kinds of extra funest benefits like extra

sixt days and extra um holidays. And because of that, unlike most restaurants, we don't see this labor shortage in the restaurants that we aren't having a problem getting staff, and we're also not getting having a problem getting customers. Which is probably the biggest surprise of all is that

customers have really embraced these changes. Well, that's interesting too, and I'm curious, like, what was the kind of feedback you were getting from your workers, from your customers, you know, in terms of helping you shape the way to move forward during this pandemic. Well, I think what we realized during the last year and a half eighteen months with that, customers actually liked us, but also they really wanted to support restaurants, and um, you know, the last year, everybody

learns a lot more about restaurants. There were tons of articles and news pieces and um, you saw like sort of chefs and restaurant turns and the news constantly talk to me about what it meant to run a restaurant and how much it costs. And I think from what that fourth wall of restaurants got broken down a little, uh, and so customers were I think customers sort of for the first time, really wanted to spend their money somewhere where it can do it can make a difference, and

it's not just about the food. But they were there to really support the people who worked in the restaurant and people who ran the restaurant. And great pandemic. We were often called overpriced. We're an expensive vegetarian restaurant, and now we're called expensive, And to me, that's this huge difference of how sort of guests are looking at us and they want to spend that money at our restaurant.

We are busier than we have ever been. Amanda, you said that you haven't had trouble with the labor shortages we've heard about, um, you know throughout the restaurant industry and beyond. I was interested in when you said, you know, obviously you you laid off basically your entire staff at the beginning of the pandemic and then came back to all of them and said, you know, we're gonna offer you a lot more money. We're going to offer you

the chance to find a health insurance um. But it wasn't actually them who came back to staff the restaurant, right, Like, basically your previous staff just kind of disappeared to the winds. Can you talk about that a little bit? So I was fortunate enough to keep my managers on, and if I hadn't been able to keep them on, I think we would have closed because I couldn't even really reopen

this restaurant from scratch. Did everybody the twenty nine others who I laid off, they they did sort of decide to either leave the restaurant industry or a lot of them moved home. They were quite young. Um, we've always had a pretty young staff, and this time around we

did hire again very young and almost three workers. But who were really interested in sort of working at a place so that didn't feel just like a job, that felt that they could contribute something more than just their labor too, And that is their voice and how we run the restaurant. Your experience. Is it changing? You're thinking about what really makes a profitable restaurant? Um, maybe for the future, do we have to kind of readjust are

thinking about what works really in the restaurant industry. I think we do, and I think if restaurants are going to survive, UM, we all have to sort of start contributing a lot more to them. They can't be looked at it just these disposable places, um that are always going to be there, because we learned throughout the pandemic they're not. And it you know, so many restaurants closed, so many people lost their life savings with their restaurants.

And the only way that this industry can go forward. And you know, pre pandemic, we talked about it as an industry certainly, you know, restaurants did, but it wasn't really It was very disjointed. And the pandemic really brought restaurant together. And I think everybody sort of read thinking what it means to run a restaurant, how to be

more financially stable for everybody. And that's a two way conversation for maybe a three way conversation between you, your employees, and your customers, because customers have to buy into this idea that restaurants aren't disposable. They you can't. They have to start paying more for the ability to eat out

in restaurants and on all restaurants. UM, I think there's like, uh, certainly like food desserts where restaurants should be cheap and uh, you should be able to always have access to food, but like a restaurant like mine, which I considered more of a luxury, uh, you have to be willing to pay for it. Even before the pandemic, you were doing supplemental work to make ends meet and because the restaurant

wasn't actually doing that. And I'm wondering if even in the story he talks about you're you're working on a menu for for a college as as some consulting work. I'm wondering, if you envision moving forward with this new model, you can make dirt candy totally sustainable and you can drop that consulting work. Well, I could or why would I want to. I don't know. You sound busy, but yeah, I actually think that. UM, certainly, for the next couple of years, I don't have to put in any extra

money to the restaurant. It is fully sustainable on its own. You know, pre pandemics, we were probably maybe if we were lucky, at like a one percent margin or zero percent profits, maybe sometimes negative profits. We always sort of had enough money in the bank and I was always able to put enough in to make sure that we were able to survive. But right now we're working in around five to seven percent in our profit margin, which

is huge. It's such a difference. So you read your prices, but you also raised wages and there were other things that you managed to figure out that sort of tinkered with your formula and made you more profitable. UM. Can you talk a little bit more about those things, Amanda, and what other ways you were able to, you know, squeeze more out of out of the business. We started squeezing a lot more out of the business as as opposed to our employees. And the number one factor that

I changed was our our food costs. So before the year and a half ago free pandemic, UM, we were probably hovering around, which actually in the restaurant industry isn't bad. And your costs were on food. Yeah, um, and now we're dying around, which is that that's where we're making our money. That's the huge savings every month, and out of that, I'm able to pay my staff so much more than i was beforehand. It's really great to hear

what you say. Because we talk about being more sustainable, more efficient, you really have figured it out and as a result have become more profitable. What a great story. It's featured in this week's issue of Bloomberg Business Week magazine. Comes courtesy of technology editor slash food ficionado Joshua Boosting, and of course our thanks to uh the owner and chef of New York City restaurant Dirt Candy Amanda Cohen. Really great to have you both, Thanks so much. Hey,

let's tell do it at the next restaurant next time. Exactly. I'm into cucumbers, tasty menu. Let's do it all right. That wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser and I'm Tim Stanebeck. Ahead of our next hour. Raj Roger Ottenham received the longest prison sentence ever handed out for insider trading. Now he's a free man and he says prosecutor has got his case all wrong. We talked to the former head of Galleon Group and you do

not want to miss the conversation. And also the CEO of online mental health care startups Cerebral, joining us on the heels of the company's latest funding round. It's now valued at almost five billion dollars plus. The federal government's efforts to counter Chinese espionage in America CAB not only produced a few convictions, they've also drawn complaints about racism

and FBI misconduct. That story ahead. This is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news As it happened. Sloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on

Bloomberg Radio. I am Carol Masser and I'm Tim stun Plennyhead in our second hour of the weekend edition of Bloomberg Business Week, including an in depth conversation with Raj Raj Rottenham. He's the former hedge fund titan who spent seven and a half years in prison for his role in a landmark insider trading scheme. Now he's here to tell his side of the story. Plus a conversation with the CEO of Cerebral, an online mental health start up with backing from soft Bank that's valued and nearly five

billion dollars. First up this hour a story you'll find online at business Week dot com and of course, on the Bloomberg terminal. It's about a three year old Department of Justice program that's produced a few convictions lots of complaints, though about racism and FBI misconduct. Bloomberg News senior investigations writer Sheridan Prosso wrote the story on the dj so

called China Initiative. She joined us along with business Week editor Joel Weber to explain why attempts to root out Chinese spies inside American corporations and research labs have often been futile. I looked at the indictments that had been announced or unsealed since the China INITIPI was launched, and this was a big sweeping effort. Uh, you know, the FBI got up, the FBI director got up, ahead of the Department of Justice got up. They all said, we

this is a huge problem. China is stealing our state secrets and taking the back to China. We're going to root this out of America with a big sweeping effort to do so. Now, only about fifty fifty or so announcement indictments have been announced since then. Took to look closely at the cases. They've hardly found any spies at all.

The largest number of cases, it's about thirty eight percent of the total, have been against professors, researchers, academics who do research in laboratories, who also, you know, may teach a class in China or go give some lectures there. Uh, they've been charged with fraud for not disclosing, not checking off a box that they have done that. And yet the disclosure violence, the disclosure rules are very unclear as to who they were supposed to disclose that too, and

and and how and so. In the cases that have actually been charged of been virtually none of them has been charged with spying. There's only twenty of those cases that actually do allege any economic espionage of whatsoever. One of those professors is Franklin Tower. You profile in the piece, explain why you chose his story and what he's been

charged with. So, Franklin Tower was the very first professor to be dieted under the initiative, and he is charged with fraud for failing to take off a box that says he had a conflict of interest. What he actually did do, according to his defense attorney, is that he was looking for a job in China and he was emailing back and forth with a university he's teaching at the University of Kansas, and he's, uh, he actually just was kind of, you know, exploring, gee, what what would

be the possibility as if I went back to China. Now, according to his defense, he never signed any contract, he never actually did teach in China, and he decided not to take the job. He just, you know, resumed his

teaching duties in Kansas. But when the FBI actually conducted a search of his emails, and that search, the defense attorneys tried to get ruled out because in fact it was they've charged that the FBI actually engaged in his conduct and actually doing a search of his emails because there was he was accused he got into a dispute with a co author over in a research paper, was accused by the co author of not giving proper credit and then the co author said, I'm going to report

you as a spy to the FBI. She said about an email that was revealed in the court cases. And so as a result of that, the FBI got a warrant, found that the that the professor had had this correspondence with the university back in China, and now he's being charged with a felony fraud, which carries a sentence of

twenty years in prison. So you you mentioned of fraud there um and in general almost uh none of these individuals have been accused of spying, but there have been cases of academic researchers and professors just failing to disclose

their affiliations. So so walk us through. You know what, how the Department of Justice is actually dealt with what they what they've actually found for the first place, to go to trial of all of these cases against researchers, there was there were six cases dropped in uh In over the summertime. A number of the case is just simply haven't held up when they've gone to court. The very first one that did go to court in June, that was a professor at the University of Tennessee in Knoxville.

He actually was the first trial ended in a mistrial. The Deparmanent of Justice decided to rebring the case, and then the judge actually didn't even let that go to a jury. He just issued a directed verdict in September that basically said, look, this guy didn't do anything wrong.

There's no evidence of fraud here. He was supposed to have disclosed if he made more than ten thousand dollars in outside lecturing from universities in China, which he had done over a summer when he wasn't teaching the He actually earned only three thousand dollars, and yet he was charged anyway. So that case actually was the judge issued a rebuke essentially to the prosecutor's end to the FBI that there wasn't enough evidence here to to charge this

person with fraud whatsoever. And virtually half of the cases that have been brought against these researchers have been dropped, so they're just really not standing up in court. We have. The latest case actually to go to trial is that of Charles Leeward at Harvard University. His trial started yesterday and that is going to be ongoing in the coming weeks. It's going to be very interesting to see what happens

in that case. He's accused of lying to Harvard University about some teaching and research that he was doing at a university back in China. That was Bloomberg New Senior Investigations writer shared in Prosso along with Business We Get It or Joel Webber. Sherry's story can be found on the Bloomberg terminal and online at business week dot com.

You're listening to Bloomberg business Week. Coming up, a mental health services startup is now worth nearly five billion dollars thanks to the latest funding round led by soft Bank Vision Fund. Too, we'll talk with Cerebral's founder and CEO, Kyle Robertson and later convicted insider trader Raj ros Rottenham defends the actions that sent him to prison. We have a conversation with him just ahead. This is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick

Takes Tim Stenovan from Bloomberg Radio. Early this month, Bloomberg Senior reporter Jillian Tan brought us a story about Cerebral. It's a startup that provides mental health services all online. The company said its valuation roughly quadruple to four point eight billion dollars after raising three million dollars in an equity funding round led by soft Bank Vision Fund Too. Yeah, that'll get your attention. We caught up a Cerebral founder

and CEO, Kyle Robertson. He says the goal is to make Cerebral and in network provider with every health plan in all fifty states. He's already lined up a bunch of partnerships and also to become a one stop shop for mental healthcare across the globe. I think the historical stigma around access to high quality mental health care has

been really problematic. Right, Um, you have millions, really tens of millions of Americans who historically have suffered from mental health challenges and the vast majority of them haven't and the help that they deserved and need it right, And I think that the pandemic, coupled with a cultural shift and recognition that anyone can face mental health challenges and there shouldn't be a stigma around it, has been really powerful, and so I think you know Naomi Osaka, the famous

tennis players, while Simone Biles is now our chief impact officer. It's a rebrawl UM coming out and saying, hey, you know, I'm not okay, right, I can't continue doing this. And and seeing public figures like that say hey, it's okay to not be okay and it's okay to get the help you deserve and need has been really really powerful UM from a de sigmatization perspective, and that's really a

big part of our mission. It's a rebrawl. It's destigmatizing access to high quality mental health care so that everyone will get the care they deserve a need. So we're really excited. Go ahead. No, And what I was curious about, So, Kyle, what's your approach? I mean, we all know kind of the traditional pro to guests to getting UM mental mental care, mental healthcare. What's your approach specifically? How is it different? Yes? I think for us, it's really about building the one

stop shop for high quality mental healthcare. So whether you need you know, wellness, meditation, clinical care, whether that be medication management, therapy, counseling, being able to access that from home right via telemedicine is really what Cerebral is fundamentally about an unlocking supply of clinicians and lock stuff with demands such that we can take way times from traditional way times up two three months to quite literally minutes. Right.

So we have something called instant live visits where we're able to know exactly how many clinicians we need at a given time, with what licenses, with what specialization, such that a client or consumer of behavioral healthcare can come on too Cerebral sign up and actually be seen by a licensed clinician within fifteen minutes. What are the guardrails that are up because if if you're talking about prescribe medication as well, UM, what are the ways that you

know you avoid abuse? Yeah? I think I think one important thing to think about, right is the distinction between

telemedicine and in person care, right. And I think historically there has been a bias against telemedicine despite the fact that all of the clinical research supports that telemedicine outcomes are equal are actually better UM and our chief medical officer, Dr David Moe Harvard Tain Psychiatrists actually recently published a white paper highlighting our outcomes and highlighting the fact that you know outcomes as measured by symptom based rating scales like the PHQ, the Gods, the I s I are

actually equal or better with telemedicine. UM. There absolutely need to be guard rails in place, and there absolutely are for Cerebroll and other telemedicine organizations. But I think it's important this recognition supported by clinical research that telemedicine actually leads to equal or better outcomes. The most importantly that

are access to care. Jillian's story has this great picture of you there with Simone Biles, Olympic gymnast, incredible UM athlete who walked away from the Olympics putting her mental health above her crust for gold. Uh. It really stood out and she you know, I think it created and

sparked a lot of conversations. I know, certainly for us in our newsroom, talk us about the interactions and conversations you've had with her and understanding maybe as somebody who's running a company, but really understanding you know, what's involved and what's needed really by those who are trying to improve their mental well being. Absolutely, you know, I think I think Simone's voice when in Tokyo she said I'm going to stop here right, my mental health is more

important than gold medals. It was really powerful, right, It was really powerful for a lot of people, myself included as the CEO of a mental health company. Right. I actually was sitting in a hospital bed this summer, um because I was suffering from a mersa pneumonia infection when I was watching the Olympics, and my mental health was suffering. Right, Being locked up in a hospital bed, right, not knowing

what was going to happen. And seeing her say, right, um, my mental health is more important here and I'm going to stop was so powerful for me. And I think when I saw that, and when our organization saw that, we knew we had to partner with Simone, Right. We knew we had to partner with Simone to tell the world that taking care of your mental health is more important than anything, right, and that it needs to be prioritized, it needs to be distigmatized, and people need to get

access to the care they deserve. And me, and that's what our organization is all about. That's what's the Rude role is about. Um. So we're we're really excited to be partnered with Simone as our Chief Impact Officer. And you know, even though we've only been working with her

for a few months, she's had an incredible impact. So curious about the relationships that you have with clinicians, with with providers, and how you're able to treat people in different parts of the country because there are there is this patchwork of rules and regulations. I mean, correct me if I'm wrong. Doctor has to be licensed in a

certain state? Correct, that's right. Yes, so there are licensing requirements, but one of the benefits of telemedicine is that particularly in rural areas where there's not a lot of access to high quality mental health care. Right. A small town in Appalachia may not even have a psychiatrist, right, Um, so we can get folks connected to the right level of care for them. Does the clinician need a state license?

Generally the answer to that is yes. However, our clinicians are largely cross licensed across multiple states, so they may not have to sit in the same state that the patient that they're providing care to is sitting in, right,

but they do have to be licensed. That said, there isn't a movement today towards universal license ar right, you know, we believe that it is a positive movement and that it would be good for society right because it is a lot more efficient um and there's no reason that with the proliferization of telemedicine that a clinician who's licensed in California but not licensed in New York or Georgia shouldn't be able to provide care to a patient there, right,

So it's definitely something we believe in, but we do take advantage of licensing clinicians up in states that they're not physically nonstiled it. That's Kyle Robertson. He's the founder and CEO of the online mental healthcare platform Cerebral. Still to comme on Bloomberg Business Week. A group that can get overlooked when it comes to gaining access to healthcare

and other services. We're talking about the nation's homeless. Our next guest is the driving force behind an organization that seeks to help those in need with basic hygiene, and the story behind the organization is one you've got to hear.

This is Bloomberg Broadcasting from the financial capital of the World, Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one does San Francisco, Bloomberg nine sixty to the country, Sirius XM Chado one nineteen and around the globe of Bloomberg Business app and Bloomberg Radio dot com. This is Bloomberg Business Week. Late last month, we talked with Ali Goldstein, Laureal Paris USA President,

about the company's Women of Worth program. It highlights women who are agents of change and addressing some of our most pressing social issues, sometimes because it's something they experienced firsthand. Yeah, we were lucky enough to have one of those women join us in studio as part of our Bloomberg Business Week radio and YouTube simulcast Women of Worth. Honorie Brianna Daniel. She's the founder of the Street Team movement, so tim

It's a nonprofit. It provides free items related to personal hygiene, so we're talking about things like soap and laundry detergent. This goes to homeless people and it all happens using vending machines. Brianna actually decided to take action after voluntarily living on the streets of Orlando for more than a month. She did this quite a few years ago, and she did this with the idea to to better understand what homeless people experience each and every day. Consistent programming was

something that was needed, specifically for hygiene. There was no one that was out there providing laundry services. We didn't have consistent access to showers. There was something that was there was a gap. So Street Team Movement ultimately did become a gap filler because we saw a need and we went in there just dominated Brianna. I always think people people often think, well, the solution is put people in shelters or have them to shelters, and that that's

how they do. But there's a lot of people who don't because a lot of times shelters aren't a great place to be. They're they're not a great place to be, especially for a homeless woman with children. There are oftentimes people with criminal records in there. There's oftentimes people that are their their pedophiles in there, and it's it's tough um first being in the situation of being homeless, but also trying to protect your family, trying to protect the

innocence of your kids. So oftentimes you know you're you're uh lad to make tough choices when you're out on the street's, especially as a woman talk a little bit about the Women of Worth and being an honor ee there because, as Carol mentioned, when we did speak to the folks from Loreal just a couple of weeks ago, we learned about this amazing network of people who come together and you know, in the more than fifteen years that the that Loreal has been doing this, it sort

of turns into this idea of staying in touch with this this amazing group of women and people all over the country who create this network. Absolutely and you use the correct word to it's it's the network. It's it's

absolutely amazing, over a hundred and sixty women strong. So to be a part of this fantastic uh, not just the Woman of Worth organization, but just the Loreal Paris previous honorees and really just being able to connect with them, seeing what they have taken away from the program and what they're doing, it's just, honestly, it's is such an honor all right. I want to take you back though, I tell me about you know, you said you've lived

alongside Florida's homeless population for more than a month. How do you do something like that and and and how do you do that without being offensive or it's uncomfortable for people who are are living on the street, Like, how do you do that? Tell me about that? So, honestly, Carol, it's it was more so I was young. So at the time, I was twenty years old when this happened, and our homeless friends just wrote me off. I thought it was a teenage runaway. So I just I kept

to myself a lot of times. I asked a lot of questions, but more so came from a place of just ignorance. I didn't know what I didn't know, and there were people that were willing to come alongside me and help me. Let me know what time of certain organizations are coming out and they're providing food, or what shelters are providing showers, what days is happening. Uh, when is someone doing haircuts or anything? You know. So they really were able to come in and and let me

know the ropes, so to say. While I was out there, and it was it was incredibly scary, especially being a single woman on the streets, just because you were there at night. Yes, that first I didn't sleep. I want to say the first two and a half days I didn't sleep until I found a place to actually sleep.

So it was really great in theory until it gets dark and downtown is completely deserted and it's it's just you standing there with a backpack and no plan, and that's what it becomes completely real to you that you have some you have some choices to make, and thankfully ended up finding a really safe place to sleep during the rest of the time that I was out there. But it was it was incredibly, incredibly scary. What did you learn about? Look, this is a crisis happening throughout

our country. What are some policies, What are some messages for policymakers about understanding homeless, the homeless population, and how we can actually combat it. Yeah, that's a really great question. And that was actually one of the biggest struggles for us our first year's UM What Street Team Movement, inc. And it was speaking to our policymakers and letting them know that what we provide as hygiene, it's not a luxury,

it is a necessity. And I remember standing in a council's amazing that you even have to say that, right, it was it was so insane and I and I said, okay, show of hands, who showered today? And every hand went up and I said, stop showering. If it's such a luxury, just stop doing it. You can't because you know you need to do it. You know you have to brush your teeth. You know there's things that you need to have access to. And it's not just a health issue,

it's not just a health crisis. It's confidence, it's self worth. That's Brianna Daniel. She's the founder of Street Team Movement. Also a loreal Paris USA Women of Worth honoree for really loved that program. You're listening to Bloomberg Business Week. Coming up, the man who prosecutors say was in the middle of the largest hedge fund insider trading ring in

US history. He wants to set the record straight. Raj Rogeratum, the former CEO and co founder of the Galleon Group, tells us what he thinks the SEC got wrong and how he survived behind bars. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich from Bloomberg Radio. Roj Roger Rottenham was the co founder of the technology hedge fund Galleon Group, which at one time managed more than seven billion dollars.

He was really, you know, near the top of his world, really though until he wasn't. I mean, think back to a few years ago. You remember the headlines. He was arrested in charge with insider trading back in October of two thousand nine. Later, he was found guilty of fourteen counts stemming from a seven year plot to trade on inside information from corporate executives, bankers, consultants, traders, and others.

And then he did jail time. He served seven and a half years of an eleven year prison sentence for his role in what prosecutors say was one of America's largest ever hedge fund insider trading rings. Roger Rottenham was released in twenty nineteen. He's now out with a book that details his experience and what he says authorities got wrong in the case. It's called uneven Justice. Plot to sink Galllean Rods joined us at our Bloomberg interacted Broker's studio.

He began by recounting the day he was first taken into custody. It was on his son's thirteen birthday. If you had asked me that morning, one of the hundred things you worry about inside the trading was not one of them. If you had asked me the FBI guys doing a good job, but the prosecutors are doing a job, good job, I would have said yes. I didn't know anybody who went to prison, nor did I know anybody

who knew anybody who went to prison. So when I got that knock on the door at approximately six or seven o'clock, kids, kids in the house, I opened it and I saw this sea of blue um jackets with the FBI with guns drawn, and they said are you Raj Rader Ratnam And I said yes, and they said you're on the rest. I said what for? And they said, we can't tell you, and then started the first in a series of misconduct. They told me that I couldn't I won't see my son for twenty five years. They said,

take a good look at your wife. She looks happy because she can spend all the money, and then handcuffed me and took me down in their car to the FBI offices. We were talking when you came in, Raj, about when you actually had time to write this book, and you said you wrote some of that and you wrote it when when you were in prison? What what?

What was it like, you know, I wrote of the book by hand in prison, and as I told you, I have tremendous respect for Shakespeare and authors of that generation because you couldn't move paragraphs around, you couldn't do spell checks, you know. But when it's a project that you're passionate about, uh, it's easy. I started writing one hour a day, then two hours and three hours, and

I was exhausted after four hours. It's it's most authors will say that, I have to say, just picking back on what Tim asked, one of the things that as our newsroom knows that you were coming in to talk with us, one of the questions that so many people ask me is that, you know, ask him, what was

jail like? Jail was? I would say, if I had to say it in one with spartan, um, you know I went to boarding he mistreated at all, Well not really, but you know I went to boarding school in a different country, foreign country, at the age of eleven, and that life was spartan. But you get used to it. Now. You have to be smart because in jail, like in the jungles of Africa, there are predators that tried to prey on you, try to get money from you, and you have to stand your ground and you know, give

the impression that you're not going to be bullied. Did you ever run into um Rah Grypta because he he was the former government sex director. He was convicted of insider trading, of passing illegal tips to you. He went to that same Massachusetts prison. Did you run into him? Did you guys have conversations? You know, we had breakfast

every day. Did we played scrabble? We played bridge? So I wonder as you look back at what happened, how it evolved, would you have done anything differently in terms of how you ran your fund um and how you ran things there? No, caroll I, I don't regret anything. Let me just explain. The SEC interviewed twenty four Galleon analysts, and all of them said, we didn't see anything that's wrong. When you run a company with hundred and eighty people,

somebody would see something if you did something wrong. I think what happened was the law enforcement people did not understand the hedge fund industry or the investment industry. What we do all day long is talk about stocks. I had thirty five analysts, really highly educated, highly skilled, that we were spending a forty million dollars a year. That was the a drock of my analysis and my trading. Now you might ask me why do you talk to

other people. You talk to other people because you want to know what's in the market, What are people chatting about? And is your view different from that of my trades that they alleged. We had an existing pre positions before the alleged trip. At that time, the U S Attorney, Mr pret Barara came up with his own theory of what insided trading should be or that even he prosecuted.

Five years after my conviction, the second Circuit firmly rejected his theory, saying that the person who did the trade or the tip should have known the tipper should have known that the tipper was violating a fiduciary responsibility and should have given a benefit. Soon after that, we've had a very few inside a trading cases. Rush. Might be some listening right now and just asking the question why

why we are interviewing you? You do, of course I have a book out, But what would you say to somebody who says, you know, even after these convictions, why why should people listen to you? Okay, let me just take a step back, and then I'll answer your question. Number One, all proceeds of the book are going to charity, so I'm not trying to get richer. I'm not getting rich out of it. Number two, this is not about rach Rach Ratnam. This is about a bigger issue. It's

social justice. And I had a front row seat. I was. They came into my apartment early in the morning. They arrested me. I went to trial. You know that of the people who are alleged plea bargain, I knew there was a trial penalty, which is too exces sentence when you if you, if you pre bargain, and I spend time in prison. Right. The reason I'm writing this book is to begin to discus on the biggest social justice issue.

Number One, the FBI lied in the affricat to get a white tap on me, right, and the judge allowed it. The FBI lied and the judge allowed it. Every single American should be concerned, You, Tim and Cattle, you should be concerned that the FBI can lie and listen on to you. The second point is there are no checks and balances for law enforcement with its prosecutors or FBI agents. I want to jump in because hence this really explains and you go into it all of this in your

book on even justice, hence the title UM. And I think we could probably go for hours, and I think it's productive that we do UM, certainly as journalists and just as society, to look into measures in terms of how law enforcement operates. We certainly had a lot of conversations coming off of George Floyd over the last couple of years and just others, case after case on Wall Street or elsewhere. I guess the point is bottom line. You know, many would argue that the case against you

was solid. Uh, we've seen another to go to jail right as a result connected with it. We think about a nil kumar um and I'm just wondering, I mean, do you argue in the end that you were innocent, that you that there wasn't something, There wasn't insider trading, there wasn't information that was going on, or are you concerned about the process good or bad. But that got to a case that many said was very solid against you, and you were convicted, and you tried to appeal it

and it it still was undone. It was a great questions and let me answer right. As an American, I accept the jury's verdict. Number Two. Three years later, in a case against a co conspirator of mine, with the same stocks, the same district, southern district, the same cooperating witnesses, a jury found that person innocent. A different jury M

I'm sure you're gonna ask me why. That's because Alma, the government's chief witnessed, totally recanted on his testimony and said I didn't give large any information that was useful, and that's in the court documents. Five years later, as I said, the second circuit reversed pre Barara's position, and one last point, Mr Barrara himself in assembled the task force with some of the same judges in my case and some prosecutors, and the conclusion was the loss of

Monkey and this tremendous confusion of the market participants. Now, as a market participant, I welcome rules. I want the rules to be followed not only by the market participants, but the authorities. Do you feel like regulators, you know, don't really have enough information, don't really understand the way markets work. Are they just getting so complicated and intricate that it is tough to regulate? Well, I think I can already talk about case. I don't think they understood

the rules and the life of an investor. Number two in the enthusiasm to bring a lot of cases, because remember this was in the aftermarket of the financial crisis, correct and made off and all of that. They wanted somebody that because the public was crying for blood. They didn't go after any of the big banks criminally, although they tried. Many would argue that the prosecute you prosecutors were looking certainly into the big banks, they didn't look

hard enough. That was Raj Raj Rodam, the former CEO and co founder of the Galleon Group. His new book, Uneven Justice, The Plot to Saint Galllean is out now, really working on getting his side out there, but also interesting to hear that, yeah he's an investor, he's uh and in crypto too, Yeah exactly. All right. That wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. I'm Carol Masser and

I'm Tim Stanovik. Be sure to tune into Bloomberg Business Week Monday through Friday. It starts at two pm Wall Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube, Just searched Bloomberg Global News, and check out our Bloomberg Business Week podcast. You can find it at Bloomberg dot com, Apple, or wherever you get your podcast. Bloomberg Business Week is available on newsstands now at Bloomberg dot com, business week dot com, and on

the Bloomberg Terminal. You can also see me on Bloomberg Quick Take available at Bloomberg dot com, slash Qt, and streaming platforms like Roku, Apple TV, Samsung TV, and more. Have a great weekend. Stay safe everyone. This is Bloomberg