Ex-Deutsche Bank traders convicted of LIBOR manipulation seek acquittal or new trial

Maria Nikolova

Matthew Connolly and Gavin Campbell Black argue there was no evidence that any of the submitted rates were false.

Less than two months after a jury at the New York Southern District Court convicted former Deutsche Bank traders Matthew Connolly and Gavin Campbell Black for their participation in a scheme to manipulate the London Interbank Offered Rate (LIBOR), the defendants have requested acquittal or a new trial. On Monday, December 10, 2018, Connolly and Black submitted a raft of motions at the Court slamming the accusations against them.

Connolly was Deutsche Bank’s director of the Pool Trading Desk in New York, where he supervised traders who traded USD LIBOR-based derivative products. Black was a director on Deutsche Bank’s Money Market and Derivatives Desk in London, who also traded USD LIBOR-based derivative products.

On Monday, December 10th, Matthew Connolly argued that all counts of conviction against him have to be vacated in favor of acquittal.

According to Connolly, his prosecution is time-barred, as the government failed to prove that the alleged scheme “affected a financial institution.” The ten-year statute of limitations should not apply to this case.

Also, according to him, the government failed to prove that any of the submissions were actually false. The government presented no borrowing data against which any of the submissions could be measured, and no other evidence to show that the submissions at issue in this case deviated from the BBA’s LIBOR Instructions.

Furthermore, Connolly says that the government failed to prove any fraud on Deutsche Bank’s trade counterparties. The sole theory of convergent fraud available to the government was that USD LIBOR settings were false statements published or caused to be published by the defendants to counterparties in the market, via Thomson Reuters as a conduit. LIBOR, however, was the independent statement of the BBA, not the defendants; thus, Thomson Reuters was not a “conduit” for the defendants’ statements. Under the relevant case law, even if LIBOR reflected in part the allegedly false statements from the Defendants (i.e., the submissions), that does not alter its status as an independent statement of the BBA, which retained exclusive control and discretion in what settings to fix.

Connolly also claims that the government’s evidence on materiality was “woefully insufficient”. The counterparties were inadequately situated within their job functions to address materiality, and the government failed to present a BBA witness.

Also, according to Connolly, the evidence on fraudulent intent fell short. There simply was no evidence that he intended to deceive or defraud anyone. In addition, there was insufficient evidence in support of the substantive counts of wire fraud against Connolly, he says. The evidence of the charged conspiracy also was deficient, according to Connolly, as the government presented insufficient evidence to prove that he knowingly and willfully entered into an unlawful agreement.

Connolly also argues that (1) the Indictment was constructively amended; (2) the trial record worked a prejudicial variance; and (3) prosecutorial misconduct warrants dismissal of the Indictment.

Regarding Gavin Campbell Black, he also moves for judgment of acquittal because the Government failed to introduce sufficient evidence to establish numerous elements of each of the two remaining charges against him. According to Black, the Court should also dismiss the Superseding Indictment or, alternatively, vacate his convictions and order a new trial because the Government constructively amended the Indictment and committed a prejudicial variance through its evidence and argument at trial.

Black argues that evidence at trial demonstrated that the British Bankers’ Association owned LIBOR and made the rules governing a Panel Bank’s submission of LIBOR. Under the instructions issued by the BBA to Panel Banks, a Panel Bank was to submit an estimate of its hypothetical borrowing costs for loans in reasonable market size; there was no corresponding requirement to disclose the methodology used in the calculations of such costs. Both the BBA and the market understood that a Panel Bank often was able to borrow in a range of rates. The BBA Instructions gave a Panel Bank discretion to choose any rate within that reasonable range as its LIBOR submission.

The Government charged Black with knowingly and willfully violating the BBA’s Instructions based on his requests that Deutsche Bank’s LIBOR submitters – the ultimate decision-makers of the bank’s daily LIBOR submissions – consider his trading positions when determining the rates to submit to the BBA. Although the BBA’s Instructions were indisputably silent as to consideration of trading positions, the Government substituted a standard of wrongdoing that it created after the fact for the actual BBA Instructions in order to prosecute Black, he says.

The Government’s case had a defining characteristic – a paucity of evidence, Black argues. Among other things, there was no evidence that any of the submitted rates were false, meaning they did not reflect a reasonable and accurate estimate of Deutsche Bank’s borrowing costs. There was similarly no evidence that Black made a false statement to anyone or requested that Deutsche Bank’s submitters submit a false LIBOR rate. Nor was there any evidence that either the BBA or the market found any alleged misstatement material, as there was no testimony or other evidence that the BBA or the market expected that Panel Banks would not consider their trading positions in making their submissions.

Alike Connolly, Black argues that the Government constructively amended and prejudicially varied the Indictment because it proceeded on a theory of criminality at trial that was different from that alleged in the Indictment.

The case continues at the New York Southern District Court.

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