This is Bloomberg Law with June Brusso from Bloomberg Radio.
Donald Trump was on and off the witness stand in less than four minutes today at the defamation trial by e. Gene Carroll, the writer who won a related sexual abuse case against him last year. Federal Judge Lewis Kaplan, who's overseeing the trial, has already held Trump libel for defaming Carroll, and now the jury in this second trial will decide the damages shall be awarded. Joining me from the courthouse is Bloomberg Legal reporter Patricia Hurtado, who was in the
courtroom for Trump's testimony. So Patty tell us about this brief appearance on the stand by Trump.
Donald Trump is on the stand unbelievably brief, four minutes at most, unlike the four hours he spent railing at the system in the New York State Civil FRAU trial in November when he testified. The judge took great pains to strictly limit what Trump was allowed to say, and he made Trump's lawyer, Elena Hobbock, answer specifically what was the question she was going to ask him and what was the answer Trump was going to get. So the judge wanted to put the guardrails out there, and no
strain off of reservation on this one. Don't go off on the off land, you're not allowed. So you could hear some grumbling going on because Trump was muttering to himself and to his lawyers and Sean Crowley, she's another Carol lawyer. She said, mister Trump is making statements such as, I don't know who this woman is. I never met her, I don't know who this woman is before this trial. And so the judge basically shot a grant at Trump, like, you know, cool it, and then that the judge continued
to ask Trump's lawyer these questions. He said, very pointedly, will mister Trump comply basically to his lawyer? Of course, Trump is not supposed to speak, and Trump started mouthing off and saying something, and the judge shot him down and said, quote, I'm sorry, mister Trump, you're talking as your lawyer is talking. But he really stern with him, and then Trump looked grumpy and annoyed and stopped talking.
So basically the judge put these rules on and the judge ruled before trial in September that the statements that Trump has made about miss Carroll are as infanatory. So now this story is just determining damages, right, So it's sort of game over. So Trump was not allowed to get on the stand and claim I never said this, she's a liar. He couldn't say any extra stuff. He had to limit it very carefully to you know, like
why did you make these statements? And Olena Habba tried to get in the judge to allow Trump to testify what was his state of mom when he made the statements originally back in twenty nineteen that our defanatory and the judge shut that down. So I think it was a grand total of four minutes Trump was on the stand.
Judge Kaplin does run a tight courtroom. So what exactly did Trump testify to in those four minutes?
For example, do you stand by your testimony and your deposition answer one hundred percent? Yet did you make these statements? Yes, she said some things I took as falsely accusatory, and then the judge said sustained because it's not false anymore. The judges found them not to be false. Did you ever?
And ten? And basically Carol alleges that she was just saying because Trump's comments from the White House triggered a barrage of hate speech at her from Trump's followers, and that she got death threats, and so Alena Haba, Trump flayer was able to ask did you ever intend for anyone to harm her? And he said no, I just wanted to defend myself, my family, and in fact the presidency. The judge shot back part of this, answered is stricken.
I just wanted to defend myself. It was the only part he was allowed, and the judge told the jury ignore, I wanted to defend my family, and then back the presidency.
That was it.
That was it for direct and then cross Ervererta Catlan. Carol's lawyer said, you gave a deposition in October twenty twenty two, didn't you, And he goes, I believe so, yes. And after that, months after that, there was a trial that took place in this very courtroom, and then from Claire objected and the judge sustained it, so that jury to ignore them. She literally got four questions off, two of which were sustained, and the jury was told to
ignore them. Are you aware that was another trial? And then Trump answered yes, But then Lena Haba objected, and then the judge said, yes, sustained, and and Lena always wants to have the last word, and she said, thank you, judge. And then Carol lawyer, the final question is is this the first time you've been at a trial that's involving Miss Carol that you've actually attended And he said yes, and that was it. So it was very very limited.
This is about the damages. How effective was it when the jury was shown a video of Trump bragging about his wealth in a deposition.
Very powerful, and you have to remember, this jury is sort of like a clean slate. They don't know what the earlier jury and the first Carol trial saw, but the jury saw a videotape deposition that Trump gave in the State simple broadcase in which he's asked how much money or you were, and Trump brags that he has at least four hundred million dollars in cash, and he also claimed that he's worth quote unquote billions of dollars, and he said that his brand is almost like Coca cola.
It's worth billions of dollars. So that money isn't even counting the billions of dollars the Trump name is worth. So now the jury has bat to rollover that Trump's worth quite a chunk of change in his own estimation, he's like a billionaire.
And then the.
Jury saw the deposition he gave in the Eging Carol case, where you know, it's quite powerful, where he says, this woman's not my type. I've never met her. So then ROBERTA. Kaplan, Carol's lawyer, shows Trump a black and white photo from the nineteen eighties or early nineties of Egen Carrol as a young woman, her then husband, and there's Evanna Trump, Trump's first wife, and Donald Trump in some kind of black tie event and everyone's wearing foremost and he goes, oh,
in fact, that's my second wife. That's Marlon Marla Maple. And then his own lawyer has to correct Trump and go, that's Eging Carroll Trump and mistook eg and Carroll for Marlon Mabeles, his second wife.
Why did the judge let that in that seems like that's already been determined. Why did he let this jury hear that?
Because this jury gets to see it again to show that there is the lie to Trump saying that none of this is true. Because they have to determine damages and if there's any doubt in their mind. There is that very limited portion of the deposition that wasn't long. It's limited to very brief statements that Trump made while president of the United States. I've never met this woman. She's not my type. And there's the lie to those two. Right, he had met her before and she looked, according to him,
like his second wife. So that's why it was allowed in to basically in case the jury needed any kind of comfort that yes, he had met her before, and here's exhibit A that they had met.
In an attempt to limit damages, the defense brought out testimony that Carol enjoyed the fame that came with coming forward. How did that go over?
It's kind of a very hard argument to believe, because you know, she says she basically lost jobs after she accuses Trump. She loses her job, as they asked Egene Carroll, columns in El magazine and all of her TV appearances and writing assignments all dry up only for the limited purposes of what do you have to say about Donald Trump? And that's the only time she's ever been on TV or been asked to write an article. Is please tell us again about what happened? To you with Donald Trump.
So the harm that her expert was testifying about is, you know, how do you repair your reputation when the President of the United States on the lawn of the White House has is getting into the President's helicopter to go to Camp David and calls her a liar. How do you repair the reputation from the statement that is made by one of the most powerful men in the world who calls you a liar? And how do you
repair it? So that's what she's alleged. And so the argument you could say is your name gets out there, but you're not popular. Your name gets out there because people are talking trash about you. So you're mentioned seventy five thousand times, but it's not in a good way. And that's what she was saying. You know, you can't make money off Twitter, and she has no job anymore. She can't really make money off substat columns she's writing,
but she's everything is basically dried up for her. What was her testimony like, it's a much more muted eging Carol. You know, she tells the story of I didn't want it, saying I wanted to be the truth teller about what women. You know that she writes this book describing different time she's been assaulted by men and do women really need men?
What are meant for?
As the book is titled. So, I mean, she comes off as kind of like a freewheeling, total New York woman who was for a brief period Saturday night live television show writer, and then she worked at, you know, a bunch of different magazines and whittled out a career for herself of being this advice columnist for Elle magazine.
They just had the editor. Her former boss, Robbie Myers, testified about how she thought Eging Carroll was very, very popular with their readers, and she left EL in twenty seventeen, and she said that she had given Eging Carroll a raise because she thought she was so popular that people went to the magazine to read.
Trump couldn't hold any press conferences in the halls of this federal courthouse. But I understand he had a mess for the media.
As he was leaving the courtroom, he sauntered out of the courtroom. He knew their spectators in the audience, that there were reporters, and he turns to us and he muttered, this is not America. Not America. This is not America. And then he sauntered out. So he really wanted to have his stay to tell everybody in the courtroom, that included, you know, the likes of famous journalists that have covered him at the White House, that he didn't think that this trial is there.
They'll be closing arguments tomorrow morning, and then the case will go to the jury, possibly as early as tomorrow afternoon. Egene Carol is asking for ten million dollars in damages plus punitive damages. So we'll see how the jury comes out. I know you'll be there, Patty. Thanks so much. That's Bloomberg Legal reporter Patricia Hurtado. Coming up next on the Bloomberg Law Show, a challenge to the SEC's controversial policy of silencing defendants who agree to settlements with the agency.
I'm June Grosso and you're listening to Bloomberg. Billionaire Mark Cuban famously refused to settle the SEC's case against him for insider trading, instead going to trial, where a Texas jury cleared him in twenty thirteen, a rebuke to the SEC. Cuban described the trauma of that legal fight in an interview at CNBC.
When you get accused of this, it isn't just about the money. It isn't just a fight. It's about your family, trying to explain to your kids during those eight years when I was fighting there, waking up in the middle of the night, sending emails, doing searches, looking for things, trying to find more information. It just consumes you when the government is fighting you on justly.
And now a controversial SEC policy of silencing defendants who settle that's been challenged before by Cuban and Elon Musk is under fire again, and this time before a federal appeals court that's shown a willingness to strike down law
longstanding practices of the agency. Christopher Novinger, a financial planner and radio host from Texas who settled with the SEC after he was accused in twenty fifteen of fraudulently selling securities, is making a constitutional challenge to the agency's policy of requiring defendants who settle to promise not to publicly deny
the SEC's allegations. Joining me, a securities law expert, Anthony Sabino, a professor in the Department of Law at the Peter J. Tobin College of Business at Saint John's University tell us about the SEC's policy on settlements and this no deny policy, which is sometimes referred to as the gag rule.
This is a policy that the Securities and Exchange Commission has had in place for many decades June. And basically what it says is here, we are the SEC. We have charged you, we have investigated you, we have brought an enforcement action, in other words, charging you with various wrongdoing under the federal securities laws. Now we've reached a
settlement whereby you're going to pay money. Because once again, the SEC's jurisdiction is to bring civil actions seeking monetary relief and sometimes injunctive relief enjoined people from being in the industry and so forth, whereas the Department of Justice will bring criminal cases that involve prison time. And the SEC says, okay, fine, we've reached the settlement with you without going to trial. You're going to pay money, all right.
And the benefit of this to the accused is that they get to say that we settle this case neither admitting nor denying. We don't admit anything, we don't deny anything with respect to our liability. However, says the SEC. Here's one more condition, and that is once this is done, you cannot comment on this publicly. You cannot issue press releases,
you can't say anything. And the counterpointing might say, well, gee, for how long, and the sec says until the end of time okay, in other words, forever and ever and
really June. What this comes down to with this present case here that we're talking about today with novndury is the fact that from my perspective, that it's a matter of expediency on the government side and the Constitution with respect to the first memory and speech on the other, and in the vast majority of cases, the Constitution wins as well it should, which is what makes this case so interesting and sure to make for a rollicking opinion from the Fifth Circuit which is hearing it, and in
all likelihood, because of the dissonance and the circuits, I think the Supreme Court not only will hear this case, I think they should and finally resolve it.
Well, it seems like the parties being sued are giving up something, but they're getting something as well. They don't have to fight the case in court, and they don't have to say they were wrong, but they can't say they were right.
That is correct, okay, And essentially to the SEC's point of view, which is saying, look, of all sides are giving up the right to go to trial where the SEC could win big, or to the converse, you could win big accused party and therefore walk away without paying any money. All right, we've reached the settlements, which is fairly common in SEC cases and frankly very common in court rooms across the land on all sorts of cases.
So the quick pro quot the something for something is, look, you don't have to admit anything, you don't have to deny anything. You basically are silent.
You just pay money. But as a condition of that, so not to undercut.
Our enforcement efforts, we don't want you at any time, okay until the end of the world, to make any sort of comment whatsoever. And the Commission's point of view, and there's some grains of truth in this, I must admit, is the fact that the Commission doesn't want any let's call it contrary opinions, contrary information coming out after the fact, whereby the party says, well, yeah, we settled and we
didn't admit or deny anything, We just paid money. But isn't it true to some extent that if afterwards you issue a press released saying, yes, we settled, but we think the SEC was all wet and the accusations were meritless, then aren't you in a way reciting a denial. So one can see again the reasoning behind the SEC's position.
But on the other hand is the fact that when the SEC issues its press release, and they always do j okay, they always issue a long press release that says okay, SEC had put investigation and file charges in enforcement action against XYZ Corp. For failure to disclose material information,
whatever it may be under the filal securities laws. And then the SEC goes on and it describes in detail, and many times exquisite detail, the nature of the charges, the who's, the what's, the whares, they name names, and so forth, and then at the end is one little paragraph whereby it states XYZ Corporation as it's agreed to settle this case, admit nor deny guilt and its pain
and the amount of XYZ. So when you look at that press release, both quantitatively and qualitatively, the vast bulk of it is the SEC espousing its position, whereas the accused the settling party is saying we neither admit nor denied liability, but then they're foreclosed.
Till the end of time from saying anything.
And isn't that a little bit unfair? And that is certainly the argument that's being made by mister Norbyn during this case and by other folks who've been in similar situations with various results, which is one of the reasons why they should go to the Supreme Court eventually. And also I think any America would say, well, isn't that a little bit unfair? Because the government here has the heavy hand. The government has the hammer, I few will.
They're saying we're going to drag you through court like they did with more Cuban on those inside of trading charges many years ago, just the way they're doing now with Elon Musk and so on and so forth. So we at the edge and now we're going to use that to our advantage by saying all the things we want to say. But what do you get to say nothing?
And this is a First Amendment challenge, right.
I am not a First Amendment scholar, but I don't have to be, because this clearly falls within the purview of what we call prior restraint of speech, which in the legion of cases and with extremely rare exceptions, the Supreme Courters said, no, okay, no one can issue a prior restraint of someone's speech, especially the government. So again we can see the SEC's point, and I admit to some rationality to it, but once again we're talking about
someone's constitution right to say, Look, yeah, I settled. Yeah, I have the benefit of neither admitting nor to nine guild. But you're taking away one of my more precious liberties, which is the ability.
To comment after the fact and June.
Without naming names, because I don't want to get anywhere near that. But as we well know, in America today, there are many celebrated cases where the parties involved are highly critical and very vocal about criticizing the government, the prosecutor,
and even the judge. So if they can do that, basically the parties in these kinds of situations with the SEC are saying, Gee, we want to be exercised all rights, just like any other American And why does the government have the ability to be so heavy handed and able to silence us for the rest of time.
This no deny policy has been criticized by legal scholars and federal judges as potential First Amendment violations. Well known judge Jed Rakeoff in the Southern District of New York Manhattan said it created a stew of confusion and hypocrisy unworthy of such a proud agency as the SEC and Fifth Circuit Judge Edith Jones said a more effective prior restraint is hard to imagine is the weight of legal scholarship against this no deny policy.
To some extent it is, although some cases also favored the SEC as well, and basically just dealing with the two individuals who you've mentioned, who I hold in high esteem and Jed Raykoff is one of the stars, the true stars of the securities law area. And also he is in the Southern District of New York where he has sat on many, many cases to citing securities law issues. He's acknowledges probably even the top three, if not number one, of securities law scholars in the terms of judges and
also lets him. The Southern District of New York sits within the Second Circuit, renowned by no less than the Supreme Court as the mother court of federal securities law. Judge the Duplan Jones of the Fifth Circuit, again an extremely erudite and astute judge and very highly regarded in years past. She is on the very short list to be a nominee for the US Supreme Court, and their voices lend a great deal of waiting credibility to these
criticisms against the agency. But one of the interesting things is is that, as I said, there are cases that also cut in the favor of the agency, and one of those is sec versus Romero. That's where the Second Circuit, which presides over Judge Raycot, and therefore he really can't take issue with them. He has to follow their precedence.
They said, no, no, no, this policy's perfectly fine. And once again the Second Circuit states, similar to the comments you made earlier June, is that it's part of the quid pro quote. Okay, here's X y Z Corporation. They are accused of wrongdoing by the Securities and Exchange Commission. They agree to settle, they pay a monetary fine, they avoid the course and expense and even possibly the embarrassment of trial, and now they have the benefit of neither
admitting nor denying linability. But on the other hand, there's silence. But again they voluntarily gave up their right. And that's essentially what the second Circuit has offended, its hopes upon the essence of its rationale is when you settle with the SEC it's just like any other settlement, whereby you are agreeing to give up when you're right and in this instance, the right to talk about these settlements after the fact.
And I think this was a very.
Interesting contrast June, as follows certainly in civil litigation all across the land. Okay, even as you and I are
speaking right now. The bottom line is that people all across America settle cases all the time, and it is fairly common and becoming even more pervasive for people to put in non disparagement clauses, and basically are the provisions that call for the parties to not disclose publicly the terms of the settlements, to not disparage each other after the settlement, to basically settle the case, pay the money, reach the resolution, and then close the book. And both
sides are absolutely completely silent. So that same logic applies here. But on the other hand, let's remember the situation I just described is private parties in private litigation, saying okay, we mutually agree we're both going to be silent about this. In the instance we're talking about with mister Nabringer, in cases yet to come, we're talking about a private citizen dealing with the government, and this is where the government
is basically making you be silenced. And that very much falls within what Judge Ronnie Abrams has characterized as in prior restraint of speech, which has always been looked at with great abhorrence in our judicial system.
What bothers a lot of people is that while the defendant is silenced, the SEC is not. As you mentioned before, we have the point of oh, well.
Wait a minute, all right, I have to be silenced. But when this settlement is reached and it's finalized, the SEC, as I mentioned before, puts out a press release in great detail talking about their side. So really that's the inherent imbalance, if you will, Okay, is it unfair? That's yet to be decided or though I think it is.
But at the very least there's the imbalance.
The SEC gets tell you all about the charges they brought, and they go on for a few pages. Then you get to basically say, in one little paragraph yeah, we neither admit nor denyal liability, and yeah, we're gonna pay x amount of money, and no, we can't say anything else. And I think that's the thing that rankles various judges, Judges Raykoff, Jones, and probably the Fifth Circuit, which, again, as you know, is right now in the epicenter of
litigation challenging the power of the SEC. For example, the Charcasy case where I have to fire to make us brief. Again, different issues coming up next on.
The Bloomberg Law Show. I'll continue this conversation with Professor Anthony Sabino. Is the SEC sort of in the hot seat with the Supreme Court. I'm June Grosso and you're listening to Bloomberg. A controversial SEC policy is being challenged before a federal appeals court that's shown a willingness to strike down long standing practices of the agency for constitutional reasons. The challenge is to the SEC policy of requiring defendants who settle with the agency to promise not to publicly
deny the SEC's allegations. I've been talking to Anthony Sabino, a professor in the Department of Law at the Peter J. Tobin College of Business at Saint John's University, tell us how the SEC is in the hot seat with the Supreme Court and how it could get even worse.
For example, the DARCAESA case where I have to fire to make us brief. Again, different issues, but the bottom line is late November, the Supreme Court did hear the appeal of the DRCASA case where they sharply questioned the power of the SEC to bring enforcement actions against individuals and companies but doing so administratively and denying them the right to a jury trial. And the SEC is in many respects on the hot seat right now with the
Supreme Court. Which is why, as I said, I firmly believe the Supreme Court should hear this case.
Assuming the Fifth Circuit.
Rules against the Commission, I feel very strong the Supreme Court will take the case because they've not shied away from challenges to administrative agent see authority recently getting it mildly.
Yes, some people say it's a war on the administrative state.
It definitely is. Oh yeah, and the battle has been joined. Okay, there's a warrant administrative state, and as you well know, there's the Local Bright case challenging the Chevron doctrine of deference to administrative agency rulings. Right now, Basically, you've already got teed up lower Bright challenging Chevron deference. You've got the Trakzy case challenging the SEC's power to hold administrative hearings and deny people the right to a jury trial with the SEC accuses.
You're wrong doing.
Okay, why not go for the trick? Why not fill this out at some future pointing and could be probably would be a year away for the twenty twenty fourth term. And remember the Fifth Circuit decided Tarchesy and basically said to the SEC, you're wrong. It's unconstitutional for you deny accused parties are right to a jury trial when you
accuse them of securities fraud and such. So I'm not a betting man, but if this is the kind of thing you saw on draftings, yeah, I would put some money down in favor that the Fifth Circuit is going to rule against the Commission. And again that primes it because of the Rameral case.
As we mentioned, the.
Second Circuit decided in favor of the Commission on this and said, oh yeah, these gig orders are just fine. Again, it's it's been sharpened up enough for a Supreme Court review. So I think that's going to happen, and frankly I welcome it, no matter what the outcome may be.
I think that's a very safe bet you're making on the Fifth Circuit, the most conservative appellate court in the country. As I always say, I have any other circuit courts besides the Second Circuit.
Ruled on this or something like this, Yes, I believe, so. I don't recall all the decisions per se. But again I think a few of the other circuits have come out against it. It might be the third and one other, so there is again, there is a dissonance there with
respect to the various circuits here. Certainly, it's interesting because you have, as you say, and rightly so I completely agree, the Fifth Circuit is one of the most probably, yes, I would say, the most conservative court among the numbered circuit courts of appeals in the federal system, but especially on issues of limiting the power of governments, Okay, limiting the power of the ministry. Invasion sees against your casey
being a prime example of that, a paramount's example. The Second Circuit, of course, has the weight of history behind it, and being again as the Supreme Court is characterized that the mother court of federal securities laws, because let's face it, bad stuff allegedly happens on Wall Street, it goes to the Southern District to judges like Jed Raykoff and Ronnie Abrams, and then it gets appealed literally in the same building,
to the Second Circuit. So they have tremendous expertise. So while I'm leaning towards disagreeing with the Second Circuit in the Ramoluh case, the bottom line is that again their wisdom in this area carries a lot of weight. So once again that simply makes it all the more imperative that the Supreme courts they find. Okay, we have the circuit conflict, which is in many ways the raison detch why we have a Supreme Court to resolve these inter circuit conflicts. So let's get to this.
So the sec besides saying that you know, the parties who enter these agreements voluntarily weigh their First Amendment rights, it defends this as necessary. It says the no deny provision ensures that if defendants were to publicly deny the allegations after settling without admissions, the Commission can seek to have its day in court and obtain findings of fact and conclusions of law.
That is basically a conditional statement. There Robert saying, okay, look, we truncate the proceedings, the proceedings come to an end. You pay us money. You don't have to admit liability, you don't have to deny liability, and you I'm making any kind of confession. And this is very important for companies, especially in the financial sector and on Wall Street Journal, for Corporate America as a whole. Okay, financial as well as industrial to say that, look, if we admitted liability,
Oh okay, here we go. Now here come the plaintiffs, lawyers representing shareholders, and now we have just engendered dozens of lawsuits and class actions and what have you. So the companies and the individuals definitely benefit by having the ability to neither admit nor deny it basically forestalls further litigation. But the SEC also says, well, okay, the other condition, as we've been discussing, is you cannot comment on this.
Here the fact all right, and again one can see the grains of truth, the grains of realism in the SEC's position is that they're saying, look, we don't want other folks to come around and say opposing things. You've settled and we've asked you to keep your mouth shut and day, and that's why the SEC reserves the right. They say, Look, the conditions were you pay the money and you keep your mouth shut. Well, if you open your mouth, now you blow up the settlements, and now
we get to sue you. And now you're back to exactly where you started. And by the way, I've never heard of the situation where the commissioners said, okay, oh, we'll also refund you the settlement money and then we'll sue for it.
Now I don't think so.
I think they owe the Hunts of money. And then they still so anyway to get more money because obviously you're going to settle for less than the amount the SEC was originally seen to denolize you for. And then once again the question I have, June, is is it right again? Remember the SEC gets to say you can't talk about this, but we can. You see, that's why it's a gig order that only gags one side, and there's an inherent injustice in that in my opinion. And
also let's remember the fact that look the street. They're sophisticated investors, they're sophisticated business people.
All right.
So when they see SEC versus X y Z, and they see the settlements and they see the SEC gives, well, we brought these charges, blah blah blah. Came the company neither settles without neither admitting nor to nine liability. Okay, if the company comes out and issues oppressibly saying yes we settled, we neither admit nor denial liability, but we thought this suit had no merit. Yeah, that's what you expect people to say. And really, what's the harm in that?
The market, the investment community, the business community, they're intelligent enough to say, look, the SEC says this, the other side says that.
And you know, June, it's just a.
Play on the age, old adage, these two sides to every story. And once again in America, don't we want to hear both sides? Don't we want to hear the accused say, yeah, I settled, I paid money. But you know what, this was really a meritless case. This was a stupid case. And that's essentially what more Cuban and Elon Musk have said in their cases, and also they are amiga spreaks.
Mister Cuban basically.
Now ever since he defeated the SEC on the inserted traded charges, oh my gosh, I see him. I saw him in jor casey, I see him in every case. He and his very competent lawyers file a brief against the SEC at the drop of the act.
And you know what, lover hate Mark Cuban. It doesn't matter. He's an American.
He's got a right to file an amigas brief just the way I do or you do, and so all to the better. Okay, That's how justice gets done in this country, Okay, by debate, discussion, and then intelligent deliberation.
Let's say the Supreme Court takes this. Let's say the Supreme Court decides that the no denied condition is unconstitutional. How would that affect the SEC's policing of financial markets? I mean, would there be less settlements? What do you think the ramifications would be.
It's difficult to quantify that, because there's really an absence, a vacuum of empirical data that would lead to affward looking conclusion like that. But in all honesty, my prediction would be it's not going to affect it a lot, because the key point about these settlements Trewn is this. The SEC brings charges llegius Securities for violations by Xyz Corporation. They discuss, they start to do discovery whatever, and then both sides say, all right, let's settle this. The SEC
extracts money. And we all know that the best way to tail wrongful activity is to hit somebody where it hurts most in business, which is the wild So the SEC extracts the fine. The company is injured by that, and still the shareholders, while they don't have any further information, we're going to be angry. It's the mere fact that there were charges and the settlement because that sharehold of
money flying out the window in the government's hands. The accused benefits by being able to state we neither admit nor deny liability. The fact that the accused now gets to talk about say, well, you know, we thought this case was always maryerless. We just settled it because it was expedient. It was in the best interests of shareholders to bring us to a conclusion, have a resolution.
All right. I don't think that's going to deter the.
SEC in the least from bringing these cases, and in fact, to some extent, I think it might help promote settlements of cases, because no doubt there are some parties out there who have been reluctant to settle because of the gag rule. But now if they say, okay, look all right, we pay the SEC money, fine, we neither admit nor deny liability. And afterwards, if we want to criticize the SEC, nothing's.
Going to stop us.
And once again, both the SEC and the private parties involved should recognize the fact your investors, your shareholders, your creditors, your counterparties and contracts, the market in general, they're going to make their own decisions. They're going to read the SEC press release if they care to. They're going to read your press release if they care to, and they're going to give each the weight that they feel it deserves,
and they're going to make their own decisions. And while some folks would say, oh, okay, I don't want to own stock in this company anymore, I don't want to do this with it. That's fine, But other people say, it's for the course.
This happens in business, this happens with the SEC.
So what's the big deal. The SEC's major concern as they've particulated the cases, as you've been discussing gim is the fact that they are concerned that if it were not for the gag order, this would mean that they could be potential misinformation confusion about the nature of the charges on and so forth. Well, forgive me, but I have to be very critical of the Commission in that regard. I think that statement does not hold water at all.
I think basically what the SEC is not saying is, well, again, they're not realizing the realities of the marketplace, and that again, the market is an intelligent, impersonal beast, if you will. It analyzes all the data points and reaches its own conclusions. Certainly, that argument is very convenient for the SEC because it basically supports their position to say, wellkay, we get to talk about why we brought the case and the charges that we're going to make that were eventually settled, but
you don't get to talk about it, okay. And I think that's the issue. Is this the SEC, and my estimation with all the respect is dead wrong. What it says that oh, we need to gag go over to prevent misinformation confusion out there, I say, no, it's the exact opposite. The gag order should be non existent because you need the other side to have its day to say in its press release. Okay, we settled both. We thought these charges were meritless and full of nonsense to
start with, so let both sides speak again. The gay order prevents one side from speaking, whereas the other side is at liberty to speak all at once. To me, that's very unfair and basically on American, and also in a way it denies the market the material information that it needs to make its own analysis.
I'll be listening to those Fifth Circuit arguments come February eighth, as I'm sure you will too. Anthony, thanks so much. That's Anthony Sabino, a professor in the Department of Law at the Peter J. Tobin College of Business at Saint John's University,