CFTC, former HSBC exec secure extra time to pursue depositions
The lawsuit brought by the United States Commodity Futures Trading Commission (CFTC) against former HSBC executive Christophe Rivoire, who is charged with market manipulation and fraud, continues at the New York Southern District Court.
The parties in this case have not yet completed all depositions. This becomes clear from a document filed in the Court on January 20, 2022.
The parties agreed that it is necessary to extend the fact discovery deadline for the limited purpose of completing the depositions and limited document discovery. Let’s recall that the CFTC alleges in its complaint that Mr Rivoire violated certain provisions of the Commodity Exchange Act and its associated regulations.
The Complaint arises from a 2012 transaction between subsidiaries of HSBC and a Japanese bond issuer. In July 2012, HSBC served as co-underwriter and sole swap arranger on a $2 billion bond issuance and corresponding U.S. dollar interest rate swap with the Issuer.
The Complaint alleges that Mr Rivoire, the head of HSBC’s North American Rates business, engaged in a scheme to manipulate the prices of U.S. dollar interest rate basis swaps with five-year maturity, which were used as one of factors to price the interest rate swap component of the transaction.
The parties have engaged in substantial discovery to date. Since August 2020, each party has served three requests for production of documents and one set of interrogatories on the opposing party. In addition, Mr. Rivoire has requested documents from third parties including HSBC, former HSBC traders, the Issuer, and Intercapital Capital Markets LLC (ICAP), an interdealer broker that was involved in certain aspects of the Transaction.
To date, the parties have taken eight depositions, with one additional deposition scheduled to occur on January 25, 2022. The deponents include Mr. Rivoire, six former HSBC employees, and two former employees of ICAP.
In order to complete discovery, the parties request a two-month extension to the discovery deadline to pursue depositions and limited document discovery related to five additional witnesses:
- Stephen Tsang: Mr. Tsang is a former HSBC employee and citizen of Hong Kong. On September 24, 2021, Mr. Rivoire filed an Unopposed Motion for a Letter of Request to depose Mr. Tsang. As outlined in those motion papers, Mr. Tsang served as Co-Head of Rates in Asia for HSBC Holdings plc at the time of the Transaction. The Complaint refers to audio recordings between Mr. Rivoire and Mr. Tsang regarding the Transaction, and alleges that in these discussions, Mr. Rivoire told Mr. Tsang that traders could manipulate the market in connection with the Transaction. In Mr. Rivoire’s view, Mr. Tsang’s testimony regarding the Transaction and associated communications is highly relevant and critical to Mr. Rivoire’s defense.
- Mark Hamlin: Mr. Hamlin is a former HSBC employee and a citizen of Canada. On September 24, 2021, Mr. Rivoire filed an Unopposed Motion for the Issuance of a Letter Rogatory to depose Mr. Hamlin (As outlined in those motion papers, Mr. Hamlin assisted in managing HSBC’s risk associated with the Transaction and is copied on relevant communications with Mr. Rivoire about the Transaction, including communications cited in the Complaint. In Mr. Rivoire’s view, Mr. Hamlin’s testimony regarding the Transaction and associated communications is highly relevant and critical to Mr. Rivoire’s defense.
- Rule 30(b)(6) Witness from HSBC: Both Plaintiff and Defendant seek to depose a Rule 30(b)(6) witness from HSBC Bank, USA N.A. (“HBUS”). The parties believe that this testimony is critical to establish facts that are relevant to the case, including but not limited to: the structure and function of the business lines involved in the Transaction; the nature of the Bank’s role as a swap provider for issuer swaps related to bond issuances; the nature of the Bank’s legal relationships with interest rate swap counterparties; contracts between the Bank and the Issuer governing the Transaction; the structure of the Transaction and any internal fund transfers or subsidies made in connection with the transaction; the Bank’s knowledge of the roles and titles of the Bank’s employees who were involved in the Transaction; any complaints made by the Issuer to the Bank; the Bank’s policies governing risk management activity; and the phone recording system used on the Bank’s swaps trading desk. Given the breadth of topics about which the parties seek discovery, counsel for HBUS has indicated that a witness cannot be available and prepared until after January 2022.
- Rule 30(b)(6) Witness from IGDL: The CFTC seeks to depose a Rule 30(b)(6) witness from ICAP Global Derivatives Limited (IGDL). The CFTC’s proposed topics include: the visibility of the IGDL screens to the market; IGDL’s practices, policies and procedures about what should be displayed on broker screens; IGDL’s organizational structure; IGDL’s role in the swap market; and information related to the clients who subscribed to IGDL’s screens. In order to prepare for this deposition, Defendant is seeking limited document discovery from IGDL, or the CFTC, to the extent the CFTC has responsive material related to the CFTC’s proposed deposition topics.
- Stuart Taplin: The CFTC seeks to depose Stuart Taplin, an employee of ICAP who is a citizen of the United Kingdom. Mr. Taplin’s proposed testimony would include questions related to: the internal basis swap pricing platform used by ICAP brokers; calculation of the one-week forward price on broker screens; and the impact of curve slices on prices of different tenors. Defendant is evaluating whether to cross-notice the deposition. The parties are in communication with Mr. Taplin’s counsel, and understand that Mr. Taplin may submit to a voluntary deposition but that he is unavailable before the end of January.
Judge J. Paul Oetken has granted the requested discovery deadline extension. Hence, the CFTC and Rivoire will have until March 31, 2022 to complete depositions.