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From Antitrust Law Daily, July 19, 2017

Convictions of former Rabobank employees in LIBOR manipulation case overturned

By Jeffrey May, J.D.

The fraud convictions of two former employees in the London office of Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. related to a scheme to manipulate the London InterBank Offered Rates (LIBOR) were overturned today by the U.S. Court of Appeals in New York on constitutional grounds. The government violated the Fifth Amendment rights of the two U.K. nationals when it used—in the form of tainted evidence from a cooperating witness—their own testimony compelled by a U.K. enforcement agency against them. Rejected were the government’s arguments that the testimony compelled by a foreign sovereign and used in a U.S. criminal prosecution did not implicate the Fifth Amendment and that, even if the Fifth Amendment did apply, evidence provided by the cooperating witness was untainted. The government also failed to convince the appellate court that the use of the tainted evidence was harmless error (U.S. v. Allen, July 19, 2017, Cabranes, J.).

Anthony Allen, Rabobank’s former Global Head of Liquidity & Finance in London, and Anthony Conti, a Rabobank derivative trader, were found guilty of conspiracy to commit wire and bank fraud and substantive counts of wire fraud for their roles in conspiracies to manipulate LIBOR for the U.S. Dollar (USD) and the Yen in November 2015. According to the appellate court, LIBOR is a "benchmark" and "reference" interest rate meant to reflect the available borrowing rates on any given day in the "interbank market"—in which banks borrow money from other banks. Allen was sentenced to 24 months in prison, and Conti was sentenced to 12 months and one day in prison. Their sentences were stayed pending appeal by the federal district court in New York City.

Allen and Conti had been charged in a 19-count superseding indictment that also named two other former Rabobank workers. In an earlier indictment, the government detailed the role of Paul Robson, a U.K. citizen who served as Rabobank’s primary submitter of Yen LIBOR. Robson pleaded guilty. He agreed to cooperate with the Department of Justice and substantially assisted the government’s case. According to the court, Robson was the sole source of certain material information supplied to the grand jury that indicted Allen and Conti and, after being called as a trial witness by the government, he provided significant testimony that convicted Allen and Conti.

Allen, Conti, and Robson were also subjects of a U.K. investigation into the manipulation of LIBOR. As part of their investigations, the U.K. Financial Conduct Authority (FCA) conducted interviews. The FCA’s interviews were compulsory; they were conducted under a grant of direct (but not derivative) use immunity, and a witness’s failure to testify under such terms could result in imprisonment, the appellate court explained. The FCA initiated an enforcement action only against Robson, and it disclosed to Robson the relevant evidence against him, including the compelled testimony of Allen and Conti, which Robson reviewed. The FCA ultimately dropped that case.

At the U.S. trial and on appeal, Allen and Conti took issue with Robson’s testimony. They contended that the U.S. government violated their Fifth Amendment rights by using their own compelled testimony against them. The defendants argued that the evidence supplied by Robson was tainted by his earlier review of their testimony of compelled in the United Kingdom under U.K. law.

Fifth Amendment. The appellate court agreed that the Fifth Amendment protections applied in this case in the "brave new world of international criminal enforcement." The protections applied even though a foreign sovereign compelled the testimony. The Self-Incrimination Clause prohibited the use and derivative use of compelled testimony in an American criminal case against the defendant who provided that testimony, the court held.

The appellate court also offered some insight on the appropriate legal standard for assessing whether evidence provided by a cooperating witness is tainted by that witness’s review of compelled testimony. The government must prove that the witness’s review of the compelled testimony did not shape, alter, or affect the evidence used by the government. That standard was not met in this case. A bare, generalized denial of taint, such as Robson’s conclusory responses to the government’s leading questions, was insufficient as a matter of law to sustain the prosecution’s burden of proof. Lastly, the use of the tainted testimony was not harmless because it provided the only first-hand eyewitness account that refuted the defendants’ central argument for acquittal, in the court’s view.

The case is Nos. 16-898-cr (Lead) 16-939-cr (con).

Attorneys: John M. Pellettieri and Margaret M. Garnett, U.S. Attorney's Office, for the United States. Michael Steven Schachter and Casey Ellen Donnelly (Willkie Farr & Gallagher LLP) for Anthony Allen. Aaron Williamson (Tor Ekeland, P.C.) for Anthony Conti.

Companies: Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.

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