By Jeffrey May, J.D.
More than a year after Deutsche Bank AG entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in the manipulation of the U.S. Dollar London Interbank Offered Rate (LIBOR), two of its former employees have been indicted for their alleged participation in the scheme to rig the benchmark interest rate. A federal grand jury in New York City returned a 10-count indictment on May 31, charging Matthew Connolly and Gavin Campbell Black with one count of conspiracy to commit wire fraud and bank fraud and nine counts of wire fraud. The indictment was unsealed today (U.S. v. Connolly, Criminal No. 16 CRIM 370).
According to the indictment, Connolly worked as the Director of Deutsche Bank’s Pool Trading Desk in New York, supervising derivatives traders, from about January 2005 through March 2008. Black was a Director on Deutsche Bank’s Money Market Derivatives and Pool Trading Desks in London from February 1997 through early 2015.
The government alleged that between 2005 and 2011, Connolly, Black, and Michael Ross Curtler—another ex-Deutsche Bank trader who last October agreed to plead guilty to a related charge—as well as six unnamed traders, asked Deutsche Bank LIBOR submitters to make LIBOR submissions that were fraudulent and designed to benefit the traders’ positions rather than reflecting an unbiased and honestly held estimate of the rate at which Deutsche Bank could borrow unsecured funds. The published LIBORs were used as the basis for the pricing of fixed-income futures, options, swaps, forward rate agreements, and other derivative instruments, according to the Justice Department. The defendants allegedly used wire communications to execute the scheme.
Ongoing LIBOR probe. In April 2015, Deutsche Bank agreed to pay more than $2.5 billion in settlements with U.S. and U.K. agencies, resolving investigations into the company's role in the manipulation of interbank offered rates benchmarks across a range of currencies. Deutsche Bank entered into a deferred prosecution agreement (DPA) with the Justice Department to resolve wire fraud and antitrust charges, admitting that the conduct affected the resulting LIBOR fix on various occasions. Under the DPA, the bank agreed to pay a $625 million monetary penalty and to retain an independent compliance monitor for three years. Deutsche Bank's wholly-owned subsidiary Deutsche Bank Group Services (UK) Limited pleaded guilty to one count of wire fraud and agreed to pay a $150 million fine.
Five other banks have settled with the Justice Department for their roles in the manipulation of benchmark interest rates. These banks are Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank), and Lloyds Banking Group plc.
More than a dozen individuals also have been charged in the ongoing Justice Department probe. In addition to three individuals who have agreed to plead guilty, including Curtler, two former derivatives traders at Rabobank—Anthony Allen and Anthony Conti—were convicted in November 2015 for their roles in the manipulation scheme. Allen, Rabobank’s former global head of liquidity and finance in London, was sentenced to 24 months in prison, and Conti, a former senior trader on the bank’s money markets desk in London, was sentenced to 12 months and one day in prison.
In announcing the charges against Connolly and Black, Brent Snyder, Deputy Assistant Attorney General in charge of the Justice Department’s Antitrust Division, said that the Justice Department was "committed to holding individuals accountable for the roles they play in committing complex financial crimes."
Companies: Deutsche Bank AG; DB Group Services UK Ltd.
MainStory: TopStory Antitrust AntitrustDivisionNews
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