Ex-Deutsche Bank derivatives traders challenge LIBOR rigging conviction
Matthew Connolly, former Deutsche Bank’s director of the Pool Trading Desk in New York, and Gavin Campbell Black, former director on Deutsche Bank’s Money Market and Derivatives Desk in London, continue their fight against their LIBOR manipulation conviction.
Let’s recall that Connolly and Black managed to avoid prison term but were convicted of LIBOR rigging. They are now appealing from the verdict.
On December 18, 2020, Connolly and Black filed a set of documents with the Second Circuit U.S. Court of Appeals, seeking to show that their conviction was wrongful.
Connolly says that the Government presented zero evidence that he committed any crime. Connolly stresses that the Government has not presented evidence of any guidance by the British Bankers’ Association (BBA) that prohibited the consideration of trading positions in LIBOR submissions, much less evidence of any clear rule that would make Connolly’s actions criminal.
The Government’s assertion that the “plain language” of the BBA’s instructions established the fraudulent intent, falsity, and materiality of the alleged conduct belies what the instructions actually said and the open market practice at the time, Connolly explains.
Further, Connolly says that the Government’s contention ignores that the mere consideration of trading positions in a LIBOR submission (that Connolly was not responsible for) does not render that submission false or inaccurate, or mean that it was intended to be false or inaccurate. The Government, he says, did not prove that any of Deutsche Bank’s LIBOR submissions were false or were intended to be false.
Connolly notes that “there was no single, accurate number for a LIBOR submission on a given day”. Rather, the LIBOR submission was an opinion – an estimate in response to an intentionally vague question – for which there was a range of reasonable rates from which a submitter could choose, all of which accurately responded to the BBA’s LIBOR question. The evidence made clear that submitters considered a variety of factors when choosing their LIBOR submission, and that nothing prohibited a submitter from considering the Bank’s financial interests when choosing DB’s LIBOR submission from within the reasonable range of rates.
Also, Connolly argues that there was no evidence that Connolly knew that the LIBOR submissions were false under the BBA’s definition or that the alleged conduct was unlawful. There is no evidence that Connolly ever expressed concerns about the alleged conduct or directed anyone to conceal the alleged conduct, he says. Ultimately, the Government is left to rely on three email exchanges that make clear that Connolly was merely requesting a consideration within a reasonable range of accurate LIBOR submissions.
In addition, Connolly says the Government failed to identify any specific counterparty decision influenced by DB’s LIBOR submissions. In addition, the trial evidence made clear no counterparty even considered DB’s LIBOR submissions.
The evidence clearly demonstrated that the counterparties were not exposed to any new or increased risk of loss., Connolly notes. And even the District Court recognized that DB is not a victim in this case.
Gavin Black that his conviction for causing Deutsche Bank to submit allegedly false LIBOR submissions improperly holds him criminally accountable for violating a BBA rule that did not exist. The Government acknowledges that there existed a range of reasonable LIBOR submissions under the BBA’s rules. The Government, however, presented no evidence that any Deutsche Bank submission fell outside of the permissible range, he says.
There also was no evidence that Black, who had no involvement in making Deutsche Bank’s LIBOR submissions, ever requested a submission outside of that range or lied to anyone, including the counterparties with whom he traded.
According to Black, the Government asks the Court to rewrite the BBA’s rules and find that they prohibited substituting one reasonable estimate from within the permissible range for another based on a trading position. But the BBA placed no limitations on the selection of a rate from within the permissible range, despite being told that market participants understood the rules to give banks the unfettered discretion to select a rate from within this range.
Black sides with Connolly in noting that the BBA has also expressly stated that its LIBOR calculation methodology, which involved dropping half the LIBOR submissions it received before averaging the remaining submissions, prevented any one bank from materially impacting the ultimate rate. And the record reflects that Black at all times acted in accordance with the BBA’s rules, the training he received at Deutsche Bank, and in good faith.
That is why, Black says, the Court should conclude that the Government presented insufficient evidence of falsity, materiality, and fraudulent intent. He argues that the Government is making an after-the-fact attempt to rewrite the BBA’s rules in violation of his due process rights.
Accordingly, Black and Connolly argue that their conviction should be reversed without remand.