US govt changes stance on BBA testimony in LIBOR-rigging case

Less than a fortnight after Judge Colleen McMahon of the New York Southern District Court told the United States Government to do more to convince her that Matthew Connolly and Gavin Campbell Black, former derivative product traders at Deutsche Bank, have committed wire fraud, the US authorities have reacted by changing their stance on the necessity of taking depositions from witnesses of the British Bankers Association (BBA).

Earlier this week, the Department of Justice (DOJ) submitted a Motion and an accompanying Memorandum asking for for an order permitting the US government to take depositions in a foreign country on an expedited basis. In particular, the US government seeks to depose:

• Sally Scutt, a former deputy chief executive of the British Bankers Association (BBA);
• one or more current BBA employees to authenticate and establish BBA documents as business records.

Let’s recall that on March 29, 2018, the Court issued thoughts regarding the government’s ability to prove the alleged counts of conspiracy and wire fraud against the ex-Deutsche Bank traders, which are accused of having schemed to manipulate LIBOR by making false and fraudulent submissions that were intended to increase the profits (or reduce the losses) owed to Deutsche Bank at the expense of the bank’s counterparties to the derivatives-based contracts.

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 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”.

But the US government has not called witnesses to testify to the BBA’s perspective. The Judge has found the Government’s assertion that it does not need to prove that defendants tried to deceive the BBA, and that it does not need to call a witness from the BBA in order to prove its case, troubling.

In its latest filings with the Court, the DOJ states that while maintaining its position on the BBA issue it believes that it would be prudent to elicit testimony along those lines.

The efforts by the DOJ to solicit testimony from the BBA, however, have not been very successful. Counsel for the BBA, after contacting Ms. Scutt and conferring with its client, reported back that Ms Scutt is unwilling to testify at trial in the United States and furthermore that current BBA employees would also not voluntarily come to the United States to testify at trial. However, Ms Scutt and BBA employees would sit for depositions in the UK if compelled by UK Authorities.

The DOJ requests that the Court grants the government’s motion to take the depositions proposed.

The defense response is expected by Monday, April 16, 2018.