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From Antitrust Law Daily, November 6, 2015

Former Rabobank employees found guilty in LIBOR manipulation case

By Jeffrey May, J.D.

In a major victor for the Department of Justice, a federal jury in New York City yesterday convicted two former employees of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) for their roles in conspiracies to manipulate the London InterBank Offered Rates (LIBOR) for the U.S. Dollar (USD) and the Yen. Anthony Allen, the bank’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. The case marks the first guilty verdict in the federal LIBOR probe (U.S. v. Allen, Criminal No. 1:14-cr-00272-JSR).

In October 2014, Allen and Conti were added as defendants in a 19-count superseding indictment that also charged two other former Rabobank workers. In addition to adding as defendants Allen and Conti, the superseding indictment alleged a broader conspiracy to manipulate both the USD LIBOR and the Yen LIBOR. These benchmark interest rates are used as the basis for the pricing of fixed-income futures, options, swaps, and other derivative instruments.

The government alleged that Allen, who managed Rabobank’s money market desk in London, put in place a system in which Rabobank employees who traded in derivative products linked to USD and Yen LIBOR regularly communicated their trading positions to Rabobank’s LIBOR submitters, who submitted Rabobank’s LIBOR contributions to the British Bankers’ Association (BBA) trade association. Allen occasionally acted as Rabobank’s backup USD and Yen LIBOR submitter. He also served on a BBA Steering Committee that provided the BBA with advice on the calculation of LIBOR as well as recommendations concerning which financial institutions should sit on the LIBOR contributor panel, according to the Justice Department. Conti, who was based in London and Utrecht, Netherlands, served as Rabobank’s primary USD LIBOR submitter and at times acted as Rabobank’s back-up Yen LIBOR submitter, the Justice Department alleged.

The indictment also charged Tetsuya Motomura of Japan and Paul Thompson of Australia. These two individuals were named, along with Paul Robson, a U.K. citizen, in an earlier indictment. Robson has since pleaded guilty to one count (a conspiracy count) of the 15-count indictment. Robson had worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London and also served as Rabobank’s primary submitter of Yen LIBOR.

Robson's plea followed a guilty plea to one count of conspiracy to commit wire fraud and bank fraud by another former Rabobank employee and Japanese national—Takayuki Yagami. Yagami, a Japanese Yen derivatives trader for Rabobank, pleaded guilty to one count of conspiracy to commit wire fraud and bank fraud in June 2014.

Motomura, Thompson, Yagami, and other traders entered into derivative contracts containing USD or Yen LIBOR as a price component and then asked Conti, Robson, Allen and others to submit LIBOR contributions consistent with the traders’ or the bank’s financial interests, to benefit the traders’ or the banks’ trading positions, according to the charges.

The jury heard from Robson and Yagami, as well as Lee Stewart, a former senior derivatives trader for Rabobank, who pleaded guilty in March to one count of conspiracy to commit wire and bank fraud. The three were cooperating witnesses.

Conti did not testify in the case; however, Allen did take the witness stand. The jury was instructed not to consider Conti's silence in the deliberations.

Antitrust chief’s reaction. “The department will continue to pursue aggressively those involved in illegal schemes that undermine the integrity of financial markets,” said Assistant Attorney General Baer in announcing the action. “And we will hold individuals criminally accountable for directing illegal corporate behavior.”

Deferred prosecution agreement. Rabobank previously settled charges against the company related to the investigation. The company reached a deferred prosecution agreement with the Department of Justice in 2013. It agreed to pay a penalty of $325 million to resolve the bank’s LIBOR submission violations. The bank has also agreed to pay $475 million to settle charges with the Commodity Futures Trading Commission, and has reached similar settlements with the Dutch Public Prosecutor’s Office and the U.K. Financial Conduct Authority.

Attorneys: Brian Young, U.S. Department of Justice. Michael Steven Schachter (Willkie Farr & Gallagher LLP) for Anthony Allen.

Companies: Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.

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