>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm emily chang. on bloomberg west this hour, experience and big lines all that up to record breaking sales for apple. the company sold more than 10 million iphones 6 and six pluses, beating the old record. they did this without selling the phone in china. inbaba shares pull back their secondary trading, in what has now become the largest ipo in global history. an banker has exercised

offer that boosted the deals with $5 million. we look at the risks they face as they try to live up to the hype. figuring out which health insurance plan to choose can be confusing. we speak with an hr startup designed to help employees choose the best health care coverage. to the lead, apple's new iphones are off to a fast start, setting a new record for opening weekend sales. apple sold more than 10 million iphone six and six pluses, beating the five and five c by a million. we manage the manufacturing rent better than before, we could've sold more iphones with better supply. we are working hard to fill orders as quickly as possible. the phones went on sale in nine countries, able go on sale in 20 additional countries later this week. one place that will not be happening yet as china, where the new phones are delayed. when will chinese consumers be able to get their hands on them?

joining us now, cory johnson. i have been playing with my new phone over the weekend. the iphone 6 in gold. i love it. this $10ou make of million cash 10 million? >> franco, we would have liked to see a slightly larger number. as tim cook said, they had manufacturing constraints. most likely that's on the six plus side. our indications were manufacturing start it later. start, 115 markets by the of this year. hopefully china will be among them. >> you think this is manufacturing, not marketing? we have been discussing the issue of does apple purposely hold back supply to increase the hype? >> and a believe apple does that. think they do the best they can. it is a phenomenal rep. less than two weeks from

announcement to wrap. samsung couldn't do that with the note four. we'll be waiting a month. marvel, andacturing some people will have to wait a bit longer, including a lot of people in north america. >> do think there is a particular component that is difficult? or is it that they push the design already up there, still working on it in weeks before the announcement? >> the speculation is the larger screen sizes on the iphone 6 plus were problematic from a yield perspective. >> the yield of the sapphire -- is it sapphire? >> sapphire protection. >> they are not able to successfully make enough of the stuff. >> j&b securities hasn't been able to confirm that ourselves. that's widely believed to be the case. >> it's unclear which is more popular. it seems the six pluses sold out in more places. that doesn't necessarily mean

that's the phone people are buying more. >> i think there are fewer of them to be bought. there are indications that there have been outsized demand for the larger screen phone. when we get to launching in china, i expect those to be extremely popular in china as well. -- there have been unconfirmed reports that the chinese government has not approved the phone. and they might not improve the phone -- approve the phone for a while. china is supporting local manufacturers, whether it is lenovo, or you name it. what isyou know about going on in china in terms of religion or a approval, ability to sell the phone not demand for the phone? >> china is going to happen. it's a question of when not if. we already have the five s on sale in china. china was a great geography for apple last quarter. china mobile is working hand over fist to install it for structure. forupside of their targets

4g basis. i think they're getting ready. >> that's good for apple, and other companies for x volterra is a company that jp security should be bought. >> with stock. >> apple is going to come after that. i think it is wise for apple to wait until it has sufficient supply to go after that markets. is there a regulatory portion of this? probably, but it's not insurmountable. >> when it comes other country, how do you expect the sale to play out? >> very strong. othernorth america, the geographies have been starved for larger screen iphones. there are a lot of geographies where people can afford a phone and a tablet. a hybrid device that can serve both roles is very advantageous.

there also nations were there's a greater degree of commuting were larger screens come into play. we think it will be a very strong international rollout. year, after the release, they said the quarter looks even better than we expected. today.re mum does that mean things are just as expected? when you make of that? >> we haven't had them talk about the preorders and initial weekend sales. there is actually more information the sheer than there was last year to feed off of. perhaps they are just teasing it out. we will have to see. all still have to rollout these. >> the ipad coming in october. what are you expecting there? >> we know that apple is working with ibm to increase their penetration of enterprises. we would like to see what these new ipad refreshes a little bit

more on strategy come on how they are going to do that. we know they can go a long way with replacing and modernizing the way people do business. part of the pay attractiveness can also bleed into the ipad. on thelked to sources sale cited ibm. i'm serious what you think. one was that the sales force is really stoked to have the ipad to offer their customers. instead of having to offer them subpar tablets or say something go get them yourself. but also the application development, they think will be a real driver. this coming from the bottom of sales field. >> we can look at pay. apple pay is a wonderful marriage between hardware and application, and bring along an ego structure. let that ibm to this equation. all of those fortune 500 relationships. they can now bring specific technology solutions with an

elegant hardware solution behind us. >> apple pay, we will discuss later in the show. i can't use it on here just yet, but next month, that is when it is coming. securities.f jmp thank you. you can use your phone to pay in october, but how secure that will be, that's next. ♪

>> welcome back to "bloomberg west," i'm emily chang. ipo on friday was the largest ever in the world. shares surging 30% on the company's trading debut. 38% on the copies trading debut. today it is down slightly. one of the risks with ali baba's to $90 a down

share. join me as cory johnson. what do you make? >> a lot of investors saw they ported to the ipo, they got it. i wish they had more. now that the stock is trading $93, it's a different value proposition. it gives us a chance to care about it. you do want to look at the business with a higher valuation. imagine what is it worth, what are the challenges to get -- to grow into the value it has now achieved in the market. and how might the business changed to grow to that valuation? it's trading in terms of operating profit. the price to operating rough it is 55 times the last four quarters.

it is trading at 55 times its operating profit. forou were to buy something 55 times its operating profit, if you were to buy an ice cream shop or a rickshaw on the street, 55 years of earnings is what is trading at right now. growth is at 52%. those earnings are growing really fast on a trailing basis. when you break it down to a quarter level, you see a dramatic slowdown in the growth from a year-to-year basis. it was growing at to enter percent, it's down to twice 6% last quarter. 22% the last quarter. a big slowdown for this company. that's not good enough for $93 share price. >> you have the biggest shareholder not selling anything. his son made it clear on friday he is still a believer, this is just the beginning. he told me. what's with hence did you get from jack ma about whether business goes next? he said he was hoping for a

joint venture with amazon. who knows how serious he was about that. but he really talked about helping small businesses expand in the u.s. and around the world. >> you know me. talking,elieve people especially when they are trying to sell me shares. when i look at the numbers, yeah, international revenues are going up. but the pace of growth, or the relevance alibaba is very small. the percentage of revenues, it was only 9%. that's a lot less than what we were looking at even three years ago. more like 26%. to paraphrase myself, international is an important. said, don't look and listen to the sound of his voice. look at the numbers. look at what they are excellent doing. >> that doesn't mean it couldn't be a greater portion of the business going forward. >> i think the things investors

are looking at right now is, there saying this business is going to get better. they are not looking at international as much as they are looking at china itself. i asked you about the nature of the chinese people. you lived in china. in the perspectives, it said that chinese people are spending 30% of gdp is that a real consumptive. in the u.s. at 60%. >> they spend more than we do. and yet 80% of the commerce that does happen in china goes through alibaba. >> u.s. investors are hoping that number changes. they might bump it up to 40% or even 60%. but also they are spending more frequently at alibaba. three years ago, the average 35ma consumer in china made purchases the year. last year was 32. their customers by something every single week. the investor in this deal, the hope further business is the

consumers generally will spend more of their income, and specifically will spend more at alibaba. at least one of those trends is an alibaba favor right now. >> we will watch growth in china internationally. cory johnson, our editor at large, thank you. we will be more back. ♪

>> i'm emily chang and this is "bloomberg west." one feature we will find a month's apple pay, allowing people to waive their phone or watch to make a purchase. this is chip and pin technology for credit cards is starting to penetrate the united states. how do all these technologies work together? for more now, i'm joined with cory johnson, and ellen ritchie

in new york. ellen, thanks for joining us. as a partner with apple, how does apple pay actually work? >> the way it works is, you provision your card onto an apple phone, sibley by taking a photo of it. in the background, these it technology, working with your bank that issues the card, will verify that it is really you adding the card. once you have done that, it all happens in the background. you sibley wave the phone -- simply wave the phone after pressing your fingerprint reader, and it will make the payment for you. >> from a risk perspective, obviously, we have seen major credit card reaches target and home depot recently. had apple pay been more mainstream, with those of happened? >> no one thing can ever solve the problem. we have very enterprising criminals attacking our financial system every day. but apple pay, and similar

technology that you can get soon on other phones, will be a big part of the solution along with the new chip cards you mentioned. >> specifically about these haveologies, does visa more cards using the chip technology than say using different while it formats -- wallet formats? >> most of our payments in the u.s. take place on plastic cards. the mobile technologies are relatively new. we think they will be taking off. right now, the overwhelming majority is on your plastic cards. they will be swapped out for those new chip cards over the next two or three years. >> how fast will you guys actually be swapping them out at visa? >> great question. visa itself doesn't put the cards out, it is our issuing bank partners. so whatever bank issues are card, they have told us that by the end of 2015, we should have

575 million chip cards in the u.s. market. huge numbers. thinkcifically, do you that the value proposition for apple is different because they have biometric id on the device? therefore they will have lot less risk? >> i think the apple proposition is a strong one from a security point of view. really about the fingerprints a much, as the technology that operates in the background. that includes chip technology, which generates a one-time code, can't be regulated -- applicator by criminals. it makes the data useless to criminals. it will be a big part of devaluing the data, making the system safer in the future. the same thing most chip cards do. >> i don't understand fundamental difference. >> right now, when you use your plastic card, the store reader will read the card, and it will have a series of numbers that could be used to make a fake

card. that is why they are stealing the data from places like target and home depot. once you have a one-time code, it won't matter whether that data is ever stolen. you can't use it without a new one-time code that is generated by that little chip either in the card over the phone. words, the retailer of creditthat cache cards. hackers can break and all they want, there is nothing in there. >> essentially correct. that is why we say that these can take the retail tech industry out of harms way. out of the line of sight of criminals. >> apple pay, the technology that integrated into apple pay allows you to waive your phone, that is different from chip and pin technology. how do you see these working together? if it's just adding layers of security to the actual transaction? >> is adding layers of security

to all the transactions. that important to know insecurity, the criminals will always go to the weakest link. you have to secure the physical point-of-sale, where you're are going to use your card in a terminal physically. and also the digital point-of-sale, whether that be mobile or electronic. the technology in the background will be operated on much the same principle. but it is implemented differently, depending on whether you were there with her carter transacting really. -- remotely. said they will have five or 75 million chip and pin cards out there by next year. will retailers have the hardware to accept these cards? >> retailers are coming along, perhaps more slowly. they have to take the trouble to swap out their terminals. i have done a lot of that work already. many of them are in the process right now of upgrading back and systems to read the chip information. we expect there will be significant numbers. i don't have an exact number.

some of the industry gurus are projecting that up to 30% of all ,ayments will be chip on chip chip card which took terminal, by the end of 2015. >> it explained for the credit card processing business is so hot right now. if i were apple, i would be visa, thebe set -- thumbprint is reducing your risk. we should get a piece of the transaction. explain to me what the thumbprint biometric is not reducing risk? >> let me start with the tokenization. that technology is what makes the data useless, by creating a single digital accountable -- account number. that is what is really reducing the risk. the thumbprint is a great thing. don't get me wrong. but it is what we call static data. it doesn't change from used to use. so in theory, our ingenious colonel minds could eventually be able to counterfeit that

thumbprint data as well. it is good, but it is the commendation of things that really makes it work. and especially the static data, illuminating the static data through tokenization. >> as either standard, apple is taking a portion of bank fees from the apple pay transactions. but it is not taking anything from the credit card companies. does your takeaway change? is apple taking any part of your cut? >> apple's arrangements are primarily directly with financial institutions. the economics for visa does not change. >> ellen ritchie, the chief and a prize risk officer. we will be back with more of "bloomberg west." ♪ >> it's 26 minutes after the hour, which means bloomberg is on the markets. i'm julie hyman. we are seeing declines across the board. a one-two punch of commons out from a chinese officials saying the chinese government may not pump as much stimulus into the

economy as the globe is expecting. that affecting stocks. an existing home sales reports here in the u.s. showing the first decline in five months for the measure. all of that combining to push stocks lower. more the markets later. more "bloomberg west." ♪

>> you are watching "bloomberg west," we focus on innovation, technology, and the future of business. i'm emily chang. the open enrollment period for healthcare.gov opens in a month. one company is helping sell totware for businesses handle employee benefits. parker conrad joins me here in the studio. this is a company that is getting a lot of buzz. what exactly is this? >> we solve this problem is coming to every business in the united states with less than 1000 employees. businesses have all of these

separate and disconnected systems related to human resources and their employees. , i cannotnefits think. it creates a problem when you have to hire or terminate someone, you have to set them up or remove them from 15 different places. someone has to do this work manually, often on paper. we take all that stuff, put in one place, we move it all on line, and we automate a tremendous amount of work so that you can focus on your work. >> you have an interesting personal story that i'm sure has upped inspired you to do this. you actually better -- battled cancer yourself. >> had cancer about 10 years ago. thatone of those things once you have a condition like that, you always have to be vigilant about health insurance. as a result, why started this company, i was looking around for what it wanted to do after my last job. i wanted to do something that was related to be a affordable care act, that was in some way

tied in with the health insurance market. i saw these broad changes coming as a result of that legislation. and potentially an opportunity for new companies to be more nimble and news -- move more quickly to grab market share. >> how does the science of via affordable care act, how does zenefits impact them? >> we think that everyone who is focused on the employer mandate, and what that is going to do to employees in 2015 is looking at the wrong thing. the employer mandate doesn't matter as much as people think. most employers already offer health insurance coverage, at least the ones who would be affected by this. mandate issue is the for employers to jump through a series of compliance hoops that the federal government imposes on them. the irs released guidelines on this a couple of weeks ago. the form that employers had to fill out is an entirely new tax return. it's incredible, >>, and no one is really focused on this.

it's helping businesses jump through all of these compliance hoops. there are more of those coming down the pipe as a result of the affordable care act. we think we can take all of that on for companies, so they don't have to deal with it at all. we do it all for them, and we do it all for free. >> a few numbers, you are valued at $5 million. , the businesses are using your benefits? >> 2000 comedies, 50,000 employees. markethealth insurance is worth $18 billion. how much of a piece of that can you get? >> one all of that. -- we want all of it. insurance brokers happen to sit in front of 18% of gdp, and take a 5% tax on it. we think it is a huge opportunity. we can provide more value than the existing folks in the market. >> you are back by jerry lehto. where does he fit in? , in addition to his

many other talents, a small business owner in his own right and an entrepreneur. he was really intelligent about a lot of this stuff. we wanted to have him on board. >> i know he was actually on stage at the latest big-box conference. who are your main competitors? >> we compete with a lot of companies. i think of our software is like a hub and spoke model. you have a central system that all of these other nodes connect to. we compete with a lot of guys for individual spokes. , --ould be with wage works we compete with wage works, different companies, but no one is taking this all in one integrated approach that we are taking. that is what i think is really powerful. >> you think you can make all these benefits cool? it really is kind of a pain to deal with. >> at some basic level, this stuff is tremendously unsexy.

i don't know that we can fix that, but it's a huge headache. >> you have been pretty forthright about the fires you were always putting out behind the scenes at a startup. always from one catastrophe to the next. talk to me about what it is like behind the scenes. give me a glimpse of that. >> growing or starting a business is somewhere between very very hard and absolutely impossible. behind the façade of every entrepreneur who is crushing it, i think there's someone who is worried about are they going to launch their product on time? how will they handle these customers? what will they do this whole thing fails and goes under? i think -- listen, this stuff is hard. i think everyone, including people who are doing well, has that kind of stress in their life. >> give me an example of a time you thought you were on the brink. >> we have been very fortunate to grow really quickly. that has created challenges on

operations. there was one point where the rate at which we could physically set up customers was just too slow. we could set up six customers a day, and we were getting 18 new customers into the system everything all day. there was a growing backlog, and it threatened to be this company ending attached a fee. -- catastrophe. we saw it as an engineering challenge, we threw engineers on this working day and night, weekends, and about seven days, we got a new solution that totally clear the backlog. but then that creates a bottleneck somewhere else in the organization. we are constantly stamping out these different issues. >> you are still your for now. parker conrad, ceo of zenefits. x for joining us. -- thanks for joining us. we are hosting the most influential summit, which brings together the most important people in global markets and finance. speaks with u.s. attorney for the southern district of new york, right now.

>> going after individuals and holding them accountable in a criminal matter, sometimes civilly. that is how you achieve a certain kind of deterrence. someone who sees there but for the grace of god go i, maybe i shouldn't engage in that activity. whether it's a ponzi scheme, or something else. that does not mean however, that you take other kinds of ways of holding institutions accountable off the table. sometimes it is the case that you can deter institutions from behaving in a certain way, and you can encourage institutions to have better safeguards in place and have better policies in place. and have better hiring policies in place, if you hold the it's usually counsel. sometimes, we are charged individuals only. sometimes we have charged the institution. sometimes we have done both. going back to insider trading, we charged and convicted eight or nine individuals. because of our sense that the wrongdoing that went on there was so pervasive, an

unprecedented in the history of insider trading cases, we felt it was appropriate to indict the actual hedge fund itself. that we thought made sense. in each case, you have to think about what the facts and circumstances are, and do what you think is appropriate. , people meetase our member. -- people may not member. we filed from the charges that are held in advance ring it. period of probation. no one individual at that place is necessarily responsible for making sure that the culture is one where proper disclosures are made, and investigating issues that one person is necessarily responsible for that. the impact of that case is felt by other auto companies when they see what could happen to them if they don't play by the rules. >> what is it they worry about? when the ultimate deterrent,

putting somebody in prison, is off the table, what changes behavior? the size of the fine? reputational hit, it's when shareholders get up in arms and say what is going on with this company? with respect to bmp, the largest bank in france, at $9 billion, even for the largest bank in france, that's not nothing. people in your audience know better. we know anecdotally that other ,anks, and other auto companies when they saw what was happening with respect to the investigation and the penalty that had to be paid, i know for a fact they begin to engage in some intersection. -- introspection. how do we keep that from having to us -- happening to us? at the heads of these companies, there are good people who want to do the right thing. they want to make sure they are

being proper corporate citizens, and obeying the rules. they are good, they may have integrity, and you want to make sure they have a system in place to catch other kinds of bad behavior that are going on. after the jpmorgan case, that off,lved bernie mad other similarly situated institutions have spent time, internalnd money with counsel, figuring out how they can make sure the what happened to those other places don't happen to them. that is the kind of deterrence that is important. you want to prevent bad things from happening, i just told accountable evil who engaged in bad conduct in the past. liableing institutions is not a substitute. for holding individuals liable. >> it depends on the case. is it -- in some cases, it was not possible, given that the statute of limitations had run.

and when the investigation began, and when some individuals were beyond the ability to compel testimony from -- >> you might have. >> sometimes it's not possible. view isa responsible just because you can't criminally charge an individual, even though there might have been individuals who we might've been able to have circumstances were different, you walk away from the enterprise. there is good the can be done, reform the can be put in place, examples that can be set for the folks also. , thefore the guilty pleas conventional wisdom was bringing a criminal case against the financial institutions was tantamount to a death sentence. obvious the, both of those companies are still very much in business. what is the lesson there? are there a lot of lessons there? i really never bought the argument that a lot of people

had an incentive to make over time. that iffor companies, any prosecutor had the temerity to indict a financial institution, that that was a death sentence. i think there is reason to be cautious, and reason to make sure you don't have unintended .ontribution -- consequences the pendulum can swing too far. in this case, the pendulum did swing too far. i made a point of saying this before. a lot of people began to scream from the hilltops that if you indict a financial institution, the sky is going to fall. it often didn't. people would claim this guy is going to fall if you only handed it a large agreements. -- you get fedup up. you get fed up with the chicken little talk. not to be overly dramatic, but it didn't come to pass.

with respect to some of the institution to mention, up until almost the moment the deal is thepeople are overstating dramatic consequences that would arise. i think it is important for prosecutors to behave responsibly. to consult with regulators, to consult with bankers. consult with banking relators, not just in this company, but also with french regulars, and asia, and all over the world, where some untold consequent could have followed. and we did that. everyone's understanding was you have to coordinate. the prosecutors and relators of , you had beenpes lost you on earlier, we courted with him. you have to do all that. what it showed is never take anyone's word. you have to take their words with a grain of salt. bank, no puno the intended, what a banker's lawyer might say.

bmpow that you have seen a absorb a $9 billion penalty, and the bank continued to do business, what you take away from that? could you have push harder? when you push harder the next time? is there more room between here and where that pendulum swings too far? >> the punishment is supposed to fit the crime. , and i'min bmp speaking for all the stake holders on the government side, the goal was not to put the bank out of business. sometimes that is an appropriate goal. we brought cases against smaller companies, where that was the result. no one shed any tears over them. the entire surprise was colonel. that happens from time to time. -- as in alln cases, you want to make sure the punishment is fit for the behavior. seriousshment was a

one, but the goal was not to exact the death penalty. >> but it was to make them feel pain. our view is it was a considerable amount of pain. if you ask them, i don't think they were happy about it. i think i'm billion dollars or present some thing like one year of revenue for them. that is substantial. once you have made the record that you are capable of going after an institution in that way, in a more serious way than has been done in a number of in theand doing it twice space of a few weeks, the next time one of those institutions engages in misconduct, they have less of an excuse. the punishment can be ratcheted up to match the conduct. >> are you developing cases now, similar cases, or we will see guilty pleas as well? >> i think so. i think regulars and prosecutors have learned the lesson that you have to be tough. you can't accept the

conventional wisdom from people who have a self-interest in promoting a bit of a false conventional wisdom. i think people were looking at those cases to see how the world would react. i think now, you are going to included, myself looking always to have on the table the possibility of a criminal charge, it makes sense. the trick will be not to go overboard and have the pendulum swing too far back in the other direction. where irresponsibly, without consultation with regulators, and in a way that is not proportional to the conduct, engaging in overly aggressive action. i think we have more options on the table now for holding individuals and institutions accountable. i think that is as it should be. >> clearly the question of going too far is an important one for you. and important one for the public. it is a question that has been raised concerning cases that you weren't involved with. your office didn't prosecute the mortgage settlements for example. the difference between what you

have done, and what justice has -- thereof washington are many differences. among them is the statement of facts. when you prosecuted the case against bmp, we could decide for yourselves whether the punishment was appropriate. we were made familiar with the facts. we don't get that in other cases. should we? >> i don't know all the circumstances of other cases. i don't know much of a difference there is. i think you are getting more and more regulators and prosecutors asking for robust statements of facts. had that in the toyota case, and of the jpmorgan case. it is absolutely essential. our task is not just a hold individuals accountable, and to exact penalties, but to engage in deterrence. part of our job is to get the truth. we are not private litigants. guns, and we file suit, and all we're looking for is a big payout.

and that every thing gets put under seal, like sometimes happens in other kinds of lawsuits and people sue companies. we want people to know that we took the time and effort, given our limited resources, to file a suit against the company with united states of america as the plaintiffs. in a case that people understand, if it settled at the end of the day, companies are not going to get away. so the public understands they are doing our jobs, and those are a property cases to bring. in the future, when that company in particular, but any other company engages in the same conduct, can't say you can hold his against us. we have no bad record here. they do have a bad record. is for what is important corporations, if they are engaging in serial bad conduct, to have something on the order rap sheet -- of a rap sheet. you can judge their blameworthiness overtime. every time a government suit was allowed to be swept under the

rug in terms of the facts, you don't get the proportional account ability going forward. >> every time the justice department settles with a financial institution, and the penalty involved is in many billions of dollars, there are people who call it any number of things. but shake down as one of the words i've heard. it is not just a negotiating tactic, but a strategy to fill government coffers. i know in the case of bmp, and others, your office gets nothing. >> tell me about it. [laughter] >> billions of dollars going to the new york state treasury. it also goes to the manhattan das office. wonder if the amount of money involved, because we are talking about billions, and for the das office, hundreds of millions of dollars -- that the money involved isn't a dangerous incentive. >> i can only speak for our office. orn we bring cases, whether

not there was any financial regeneration coming to us, the ethics of our office is that you bring cases that are appropriate to bring. the facts and the evidence and the law require it. i think it is the case that when these forfeiture sharing rules were promulgated, and a reasonable being made -- arrangement for being made, in the future we would have multibillion-dollar settlements. if the money is able to be put to good purpose, more power to folks. i think it would be a nice thing for the federal government in a way that is consistent with not creating bad incentives, and mercenary type incentives, but if there were some way to figure out -- for the federal government, who is bringing all of this money appropriate to the treasury, to directed to some good cause that is good for public safety. and for law enforcement. but again, that is above my paygrade. >> would help you if some of

that money go back to your office? a share of the booty? i'm only think about one kind of booty. [laughter] >> i was letting that go. [laughter] -- ithink that you need is appropriate for people to be concerned about not over incentivizing prosecutors to get money. ago, these offices were run in a way that offices got a substantial portion of the money they collected in fines and fees. you want be careful about that. i'm not making any comment about how he was engaging in investigations or spending money. what you want to strike the right balance between make you sure the right cases are gone after for the right reasons. and then making sure that the money is collected is going to a good cause. a lot of the money we collect goes to victims.

the billions of dollars we've collected in connection with the ponzi scheme is going back to victims. that is billions of dollars that is being restored to those folks a a case we had involving payroll system by a company , we got half $1 billion back in robust statements of facts. and deferred prosecution. every penny of that went back to the city. it was the city that had been defrauded to the tune of $500 million. there is good reason to have big penalties for that purpose also. >> corporate fraud, broadly speaking, which is that we have been talking about, is one of your priorities. public corruption is another one of your priorities. what role should the justice system pay in cleaning up politics? >> i think our track record speaks for itself. the roller office has played in not being afraid of going after bad conduct on the part of

-- corruptionals is corruption, whether it is on the part of wall street or banks , or companies that sell products, or on the part of officials who have sworn an oath to uphold constitution and serve the people who elected them. i think you have the worst of both economic policy and also democrats principle if you have politicians whose jobs are up for sale. we are particular proud of our office, as being independent. though for office, and all you was attorneys are reported by the president, and we serve at the pleasure of the president, you are not directed by the president. careke sure that we don't how big you are, how much money you have, how powerful you are, whether you are a hedge fund manager or a cabinet secretary, or governor of the state. if we see smoke, and we see evidence of wrongdoing, we are always going to take a look at

it. that is part of our job. the federal role is a particularly important one. cap repetition for independence. >> how hard is it to draw the line the twin corruption and promote conduct? -- terminal conduct? >> the thing that is appalling is not so much what is illegal but is legal. you need to be careful. we are not policymakers. as much as some people think we try to be. politicsy thinks aren't ugly business. but there are a lot of things that are involved in politics, and you can't be criminalizing politics as usual. >> even if it disgusts you? >> even if it disgusts you. if you could prosecute people for conduct that disgusts you, we would have no one in government. [laughter] >> if their entegris out there, maybe you would like that -- anarchists out there, maybe you

would b like that. when it is lawful in one context, to take money and then vote in a way it is in the interest of the part of the give you money, if that happened in an open and notorious way through firm adherence to campaign finance laws -- some people think that is disgusting. but that is not criminal. bag ofother hand, if a money is changing hands in the back of a car, outside of sparks steakhouse, nick change for official comment -- conduct, you arrest those people. view, was it easier or more difficult to decide to take up the investigation of cases dropped by the commission? >> i don't begin was hard at all. -- i don't think it was hard at all. it was established in large part because of the wave of cases that my office brought.

in particular, rest made in april of two dozen 13. -- 2013. there were people were trained an in skills of investigation. i think there was a lot of enthusiasm about following the money, and thinking about things like outside income on the parts of politicians. and personal use of campaign funds, and other things. people who care about democracy, and about good government, had a strong interest in making sure they were able to complete their work. for whatever reason, when it was disbanded, people who in our position, and people in my office and i had a discussion about it. we made some inquiries about what was going to happen to the investigation that seem to have been promising. there was a report that had been issued. we just decided if no one is going to do it, we could do it. the chairs thought it was in the best interest of everyone to

give us their file. i will not go into anything further on what we are looking at or why we are looking at it. but they had a lot of files that -- a lot of investigation that was undertaken that was being productive. since they were going to be out of business, we proceeded with it. >> which is the more challenging relationship for you to manage? that between your office and the governor's office or that between your office and main justice? it seems as though there is room for tension between both. >> we manage relationships beautifully. [laughter] >> i think we are getting along famously. >> i would agree. a show of hands? nationalt priority is security and terrorism. you have to catch the crooks before you can bring them to justice. what do you do about cases like target and jpmorgan, or the perpetrators are almost certainly overseas and possibly protected by foreign governments?

>> you raise two different things, the cyber threat and international security threat. the first priority of our office when residing in your district in manhattan is ground zero. the most high-profile terrorist if notin the country, the world. you have to be thinking about those things all the time it. and not only think about how you hold people accountable after the bomb goes off, or after the plane hits. but how you catch people who are plotting in the first place. we are very aggressive on that. a beasley, it is more port and when you have lives involved. bringing cyberin cases is high. not only are people operating from behind a cloak of anonymity theye internet, but also are in far-flung places. you have a double issue of complexity there in trying to go after them. part of the way you do it is you increase your ability to understand technology.

you work closely with the fbi and secret service who were at the forefront of dealing with the cyber threat. you were closely with business. interviews like this, people like talk about how we are going after and trying to hold accountable financial institutions on wall street. the one well-kept secret is there is an important area where law enforcement, prosecutor's office in particular, and financial institutions work for a well together. i need to work even better together. because they are the victims of crime. it affects everyone in a foreign power, or individuals acting at the behest of a foreign power, or acting individually, are figuring out a way into your accounts. figuring out a way to bring down financial and for structure, in respect to a bank or an exchange. we have all those threats. need toregard, we develop a better relationship of trust. we are not going to get the job done if we are not sharing information. lawsky toldy -- ben us what keeps him up at night is

that we will see some kind of cyber armageddon. there will be an attack perpetrated on the american financial system that will cause it to break down the wave broke down during the financial crisis. it would just be a different kind of breakdown. , what he effectively said was that there is a lot of talk and not enough action. people are too complacent about this threat the way they were complacent about the kind of risks posed by terrorist before 9/11. do you feel the same way? >> i thought it would say the latest fear is how to spend all the booty we have been giving him. you're a baking official, or an federal prosecutor like im, or a defense secretary, or the attorney general, or the treasury secretary, you're to be worrying about complacency.