Jury convicts ex-Deutsche Bank traders of LIBOR manipulation
Matthew Connolly and Gavin Campbell Black have been convicted of conspiracy and wire fraud in a LIBOR-rigging case.
The Department of Justice (DOJ) announced on Wednesday that a jury 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 decision, made by a jury at the New York Southern District Court, follows a month long jury trial. The jury convicted former Deutsche Bank supervisor Matthew Connolly, 53, of Basking Ridge, New Jersey, of one count of conspiracy and two counts of wire fraud and former derivatives trader Gavin Campbell Black, 48, of London, of one count of conspiracy and one count of wire fraud. A sentencing date has not been set.
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.
In order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR, Connolly directed his subordinates to reach out to Deutsche Bank’s LIBOR submitters to ask them to submit false and fraudulent LIBOR contributions consistent with his traders’ or the banks’ financial interests, rather than the honest and unbiased costs of borrowing, the evidence showed.
The jury also heard evidence that Black asked Deutsche Bank’s cash traders who were responsible for submitting the bank’s LIBOR rates to ask that they adjust their submissions to favor his derivative trading positions. According to evidence at trial, several Deutsche Bank LIBOR submitters accommodated the defendants’ LIBOR manipulation requests.
In April 2015, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges and Deutsche Bank Group Services (UK) Limited pleaded guilty to one count of wire fraud, collectively agreeing to pay a $775 million fine, for the bank’s role in the scheme. Two Deutsche Bank traders pleaded guilty to fraud charges related to the LIBOR manipulation scheme.
During the trial, the defendants challenged the DOJ’s strategy. Early this month, Matthew Connolly argued that the Government was aiming to save its case by announcing a new interpretation of the Indictment. He accused the Government of undertaking another course correction, which departs from what the government asserted in its April 2018 in limine motions – namely, that the case was about two types of false and fraudulent pretenses and/or statements to trading counterparties.
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”.
The case was a rather complex one, with a raft of procedural delays and formalities along its way. Let’s recall, for example, that the start of the trial, which had been originally set for June 18, 2018, was postponed until September 2018.