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Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Preet Bharara, U.S. Attorney for the Southern District of New York, today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000481147.
All references must be sourced to CNBC.
Sorkin: We are here with Preet Bharara the US Attorney for the Southern District thank you for being here.
Bharara: Thank you for having me.
Sorkin: We are at NYU you just finished moderating a panel and giving a talk on cyber security which is the hottest issue in town and one of the things you advocated for was businesses to come to you effectively to try to work with law enforcement earlier than they normally do how are they supposed to do that when so many of them in truth are scared of you?
Bharara: Yeh well look if in the particular circumstance you are not committing a crime there is nothing to be scared of and in fact I think people have a misperception in what we do. We don't target any particular sector what we do is we enforce the law and we uphold the rule of law so sometimes there are people or individuals you investigate because they are committing crimes and you prosecute them as appropriate and sometimes those very same individuals or institutions are victims of crimes and as we found the most vulnerable and perhaps the most important area in which you have to worry about the cyber threat is in the financial sector and a lot of your viewers who are traders or work at trading firms and hedge funds and are in any other way involved in the financial sector need to be extremely worried about the cyber threat and that's why we had almost 500 people here at NYU today including the president of the NYSE Tom Farley, the CEO of MasterCard and a whole bunch of other folks talking about what companies should do to make sure that they are ok.
Sorkin: If you are a CEO watching this right now practically and something happens and you think that you have been hacked what are you supposed to do? Who are you supposed to call?
Bharara: Not Ghost Busters. Look you are supposed to call as we said in the conference today you should call law enforcement among the other things that you do. Obviously you have interests in taking care of your shareholders and your reputation and your customer base making sure that all of that is ok and getting to the bottom of the problem but over the course of time I think the FBI and the secret service and other law enforcement agencies have shown that they have a lot of expertise. They are not going to revictimize a company or a corporation that has been a victim of a cyber hack whether it is from an individual or a group or from a nation state and coordinate with them so that we can get the bad guys and they can remediate their problems as well.
Sorkin: What happens if you get invited in if you will and in the process find something that you don't like?
Bharara: Diego Rodriguez who is the assistant director in charge of the FBI in New York who oversees all of these things and is terrific answered that question and said look if you are a victim company with respect to a hack and customer information has been taken our responsibility in that case is to narrowly take a look at what problem has occurred in your system and on your servers so that we can protect you as a victim. Now separate and apart from that if there are other investigations going on that is a different matter but people should be able to trust that when they bring in the FBI in particular on something like this that their goal is to make sure that they are trying to get the bad guy and they are trying to get to the bottom of what they extent of the intrusion is to help the company not to revictimize it.
Sorkin: One of the other topics of conversation was encryption and the way Silicon Valley is approaching encryption which is to say Apple, Google and others are trying to close the back door effectively to make it almost impossible if not impossible for the government to have access. What do you make of what companies like Apple have done?
Bharara: I think there is a very robust debate going on with respect to encryption and I think director Comey has a point, the FBI director when he talks about how we need to have a proper debate on this issue because it is absolutely understandable that there are people who want to have their conversations and their messages encrypted, end to end encryption they are not breaking the law and they just want to keep their messages private and that's totally understandable and they want to do it in good faith just like in good faith some people want to use virtual currency but it is also true in modern America and in the modern world that there are some people who want to take advantage of those evolving technologies that can be encrypted and kill us and bring our buildings down and destroy capitalism as we know it and destroy the very companies that are talking about this sometimes in a way that is a little bit extreme so that issue will be worked out at a pay grade higher than mine but I think that people need to understand that law enforcement and the FBI also in good faith has a reason why it wants the ability after meeting a high threshold of probable cause with a judge who is appointed in a separate branch of government after meeting that burden it is not unreasonable for law enforcement to want to have a way to get a communication that are recurring to further the purpose of killing Americans.
Sorkin: Do you think it is more likely that there will be terrorist attacks because of some of the actions these companies in Silicon Valley have taken?
Bharara: I don't know what is going to happen in the future all I am saying is that this is an important debate to have and there needs to be a reasonable way as we have always found in America a reasonable way to balance security and privacy and this is an age old question which began at the start of the republic and technology may have changed and evolved but the basic tenants and the intersection of those two issues I think is capable of being resolved by reasonable and thoughtful people.
Sorkin: But just to put a fine point on it Tim Cook goes on 60 Minutes and says that you have to have encryption. If you let the good guys in the bad guys are going to get in too by closing it is he enabling terrorism? Or other crimes?
Bharara: As I said I think reasonable and thoughtful can come up with a way and I think the head of these companies are reasonable and thoughtful and good Americans and care about national security not just about privacy because it is not just about privacy and can come up with a way as we always have again there used to be no such thing as cell phones and people figured out a way to guard privacy and balance it against national security and I think the same is true even though you have new technologies now.
Sorkin: Right. I want to ask you about insider trading. Obviously there was a big headline in the past week about Steve Cohen settling with the S.E.C. He is going to go from, potentially, having a family office to being able to take public money. What do you think of that decision?
Bharara: The S.E.C. is an independent agency and it makes its decisions the same way we do. So, I don't have a comment on it.
Sorkin: But given the cases that you brought, do you look at that as a loss?
Bharara: We bring cases that we think are appropriate to make. And any time you bring a case that is appropriate to make, you don't bring a case that is not appropriate to make and there's not to prove, we don't consider it to be a loss. We consider that to be our job. Enforcing the law as it exists.
Sorkin: Given the Supreme Court ruling, how much harder is it for you today to bring an insider trading case?
Bharara: You mean the Second Circuit ruling?
Sorkin: Yes I apologize.
Bharara: In the Newman case.
Sorkin: Yes. Given the appellate court's decision, how much harder is it to bring an insider trading case today?
Bharara: Certain kinds of insider trading cases are able to brought in the same way that they were before. And some of the most prominent cases that we brought in the past absolutely stand not withstanding that Newman decision, which we think was wrong, we think changed the law, including the conviction of Raj Rajaratnam and the conviction of Rajat Gupta and the conviction of SAC Capital as an institution. It will make it hard and arguably, very, very hard if not impossible to bring a certain kind of insider trading case. For example, if you have the CEO of a company, who has in advance knowledge about what the numbers are going to be for the quarter and decides to gift that information to a college buddy, or a nephew, or a son, and say, "You know, we are going to beat the numbers by a dollar. Knock yourself out." And arguably, under the Newman decision, which has changed the law, that person can basically gift 50, $60 million of profit on a relative or a friend if he is not getting something of pecuniary benefit back – and I'm not sure that reasonable people will think that is a good state of affairs.
Sorkin: Do you think that Congress should actually write an insider trading law and put a bright line on exactly what it is and what it isn't?
Bharara: I don't presume to tell Congress what to do. I worked as a staffer in the Congress for four-and-a-half years. I don't think it would necessarily be a bad thing. You know, a judge – recently a prominent judge in the Southern District of New York gave a speech recently about his view that maybe Congress should act on this. And you know, clarity is always good. The reason we saw Supreme Court review of the Newman case that you referred to a minute ago is, you know, win or lose, we think clarity is a good thing.
Sorkin: Do you regret any of those cases? Bringing in any of those cases that ultimately got overturned?
Bharara: No, absolutely not. The law at the time that we brought those cases was, in our view, crystal clear. And in fact, it was so clear that the defense lawyers for the people who urged their clients to plead guilty under that law also viewed the law the same way that we did. And they are very able people.
Sorkin: Right. One of the other questions I wanted to ask you is how investors speak about companies. We have a number of big examples of big hedge fund managers coming out and shorting companies saying things about them. I'm thinking of Herbalife, for example. What is protected by free speech and when does it become market manipulation? How do you think about that?
Bharara: I don't want to give an advisory opinion to people on how they should talk about – you know, look, generally speaking on this issue – not to take it out of the legal question even though we are sitting in a law library – people know when they are speaking about a company, or when they are taking positions in a company, or they are giving information, or taking information about a company, they know when it is right or wrong. And those are the only kinds of cases when you gallop over the line in that regard, that we can prosecute.
Sorkin: Can I ask what the state of this Herbalife investigation is?
Bharara: You can ask.
Sorkin: And you won't answer. Two other quick questions. There was a report in the New York Post that you were investigating Sean Penn and El Chapo. Can you give us the state of play if there is a state of play?
Bharara: I guess what I will say is people shouldn't always believe everything they read in the newspaper. There are lots of reasons why. People look at information with respect to investigating something including trying to get a bad guy. Or for the purpose of assisting another law enforcement agency or country. That is all I will say.
Sorkin: Alright. You have been in this job now six years?
Bharara: Six-and-a-half years.
Sorkin: How long do you think you will do this for?
Bharara: I'd like to do it forever if I could. I don't know if that is possible.
Sorkin: I was going to say what are you going to do next.
Bharara: You know, probably get lunch.
Sorkin: Good answer.
Sorkin: And finally, you had lunch – actually, I think you had dinner with Paul Giamatti. What did you advise him?
Bharara: What did I advise him?
Bharara: I didn't give him a lot of advice. You know, he is a lovely guy. And he understands he is playing a highly fictionalized character in a lot of different ways. We just had a – I just explained a little bit about what we do. You know, we don't just do one thing in our office. And I guess I tried to suggest that even though that is your show – congratulations – focuses on the financial sector and your viewers care mostly about what we do with respect to the financial sector, that the job of the U.S. Attorney's office and our office is to do a lot of other things including dealing with terrorism and gangs and narcotics trafficking and arms trafficking and just to remember that the thing that is focused on, often on this network and that show, is just a small part of what we do.
Sorkin: Preet Bharara, thank you very much.
Bharara: Thanks very much.
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