DOJ argues that ex-Deutsche Bank traders accused of LIBOR manipulation made material representations

Maria Nikolova

The US Government outlines its arguments that Matthew Connolly and Gavin Campbell Black made material representations to Deutsche Bank, the BBA and counterparties.

The case against Matthew Connolly and Gavin Campbell Black, former derivative product traders at Deutsche Bank who stand accused of LIBOR manipulation, has nearly concluded, but Court filings continue to come in. In a document, filed by the Department of Justice (DOJ) with the New York Southern District Court on October 8th, Monday, the Government clarified its intentions to present to the jury how the defendants made material misrepresentations.

According to the Government:

  • the defendants made material misrepresentations to the BBA when they caused the transmission of skewed LIBOR submissions;
  • the defendants made material misrepresentations directly to Deutsche Bank’s counterparties when entering into swaps and other derivative transactions; and
  • the defendants made material misrepresentations to counterparties, directly and through the BBA/Thomson Reuters acting as a conduit, when they skewed the LIBOR submissions that were then used to calculate LIBOR and to settle swaps and other derivative contracts.

The Government notes that each of this ways is based on the same underlying conduct set forth in the indictment.

The Government argues that, because each way the defendants made material misrepresentations is consistent with the “core of criminality” and essential elements of the indictment, there is no constructive amendment of the indictment and, accordingly, the government seeks jury instructions on materiality tailored to all three alternatives. But, in case the Court finds the government’s second way (misrepresentations made to the counterparties upon entering swap transactions) would be a constructive amendment, the government would seek to proceed on jury instructions that do not incorporate that alternative.

Let’s recall that, according to the indictment, the defendants were part of a scheme, carried out between 2004 and 2011, to cause Deutsche Bank, their employer-one of the sixteen “Submitter” banks whose estimated borrowing costs were used by the British Bankers’ Association (BBA) to set LIBORs in USD – to submit “false and fraudulent USD LIBOR submissions” to BBA. The Indictment charges that the LIBOR submissions were “false and fraudulent” because they were not “unbiased and honest”.

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