According to Matthew Connolly, the Government is presenting a case nowhere charged in the Indictment.
A day after the Department of Justice stated its intentions to present to the jury how the defendants in a LIBOR-rigging lawsuit made material misrepresentations to Deutsche Bank, the BBA and counterparties, it faced objections to such an approach.
On Tuesday, October 9th, Matthew Connolly a former Deutsche Bank trader who is one of the defendants in this case, made it clear that he objects to the government’s submission, arguing that it contains fundamental flaws.
“In short, after shifting course repeatedly and presenting a case nowhere charged in the Superseding Indictment, the government should not be granted preemptive relief”, Connolly argued.
According to the defendant, the Government seeks to save its case by announcing a new interpretation of the Indictment. He says that the Government’s letter represents another course correction, which departs from what the government asserted in its April 2018 in limine motions – namely, that this case was about two types of false and fraudulent pretenses and/or statements to trading counterparties. And it also clashes with the May 29 Letter, in which the government indicated its decision not to depose BBA employee Sally Scutt, and to pursue a convergent theory based upon two types of false statements to Deutsche Bank’s counterparties.
According to Connolly, the Court should not indulge the government’s request to save it from the consequences of its own strategic decisions in this case.
Let’s recall that, in May this year, Judge Colleen McMahon decided to postpone the start of the trial against the defendants because of the stark difference in the allegations made by the Department of Justice (DOJ) in the indictment and the documents submitted after that with the Court.
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”.
But afterwards, the Government described the charged conspiracy differently. It contended that the defendants made, not one, but two different types of false and misleading statements or representations in furtherance of their conspiracy to obtain money and property from their counterparties by manipulating LIBOR. Neither consists of a false and fraudulent submission made to the BBA (via Thomson Reuters).
Rather, the Government’s new theory relied on statements allegedly made (or omitted to be made) directly to the victims of the fraudulent scheme – the counterparties to Deutsche Bank’s trades. To be specific, the Government argued that “For both categories of false and misleading representations, the defendants and their co-conspirators intended to mislead the counterparties by the statements transmitted to them”.
Under the (new) theory, the materially false representations are not the submissions but rather the representation that the trades would be settled at LIBOR when it was Deutsche Bank’s intention to settle at something the Government calls the “manipulated LIBOR”. The second part of the allegedly false statements is the retransmission of the LIBORs and the underlying submissions into the marketplace, which marketplace included Deutsche Bank’s counterparties.
Neither of these arguments is apparent from the face of the indictment, the Judge said in its May order.
Whether the latest change of tactics by the Department of Justice will have any effect on the case remains to be seen.
The case is captioned USA v. Connolly (1:16-cr-00370).