Speaker 1: The foremost senior United Kingdom bank executives to face criminal
Speaker 1: charges since the financial crisis, were in court in London. Recently,
Speaker 1: Barclay's former City of Britain Serious Fraud officers charged Barkley's
Speaker 1: former CEO, John Varley, along with Roger Jenkins, Thomas Collaris
Speaker 1: and Richard both with conspiracy to commit fraud by false
Speaker 1: representation in connection with fundraising from the Nation of Cutter
Speaker 1: during the two thousand eight financial crisis. The bank itself, meanwhile,
Speaker 1: along with Varley and Jenkins, was charged with providing unlawful
Speaker 1: financial assistance. The executives have all pleaded not guilty. Here
Speaker 1: to talk with us about the case today is Peter Henning,
Speaker 1: a professor at Wayne State University. Peter um this is
Speaker 1: a big case for the for the UK arising out
Speaker 1: of the two thousand eight crisis. Explain what it is
Speaker 1: exactly that the British authorities are charging these executives with. Well,
Speaker 1: it's an interesting case because what they are accused of
Speaker 1: doing is not making the opera disclosures about their dealings
Speaker 1: with Cutter. That there was I guess about a three
Speaker 1: hundred and thirty million dollar um payment that was made
Speaker 1: and then a loan facility for the Cutter government or
Speaker 1: one of its ministries was arranged through Barclays. And essentially
Speaker 1: what the executives are being accused of is engaging in
Speaker 1: more or less a quid pro quo arrangement to get
Speaker 1: the investments to keep the bank afloat UM. But really
Speaker 1: the underlying charges you didn't disclose it. You engage in
Speaker 1: a fraud by misrepresenting UH. It's an interesting case because
Speaker 1: that money kept Barclays afloat. It didn't go under like
Speaker 1: we saw any number of banks in the United States
Speaker 1: go under UH and even in the UK at that time.
Speaker 1: So it's an interesting charge because Barkley survived. Yet now
Speaker 1: these executives are accused of fraud. Joining us is Robert Hockett, Professor,
Speaker 1: Cornell University Law School, Bob so the former chief executive
Speaker 1: of Barclay's John Varley, is the most prominent and most
Speaker 1: senior banker to be charged with crimes relating to the
Speaker 1: global financial crisis nine years later. What message does that send? Well, um,
Speaker 1: I suppose it confirms the message. I think it's been
Speaker 1: set many times and that many people have sort of
Speaker 1: gleaned over the last number of years, and that is
Speaker 1: that it's apparently rather easier to go after the banking
Speaker 1: institutions themselves than to go after the individuals who make
Speaker 1: the actual decisions ultimately that that get the banks into trouble. Well, Peter, so,
Speaker 1: how I mean this did keep Barclay's afloat and that
Speaker 1: would see, I mean, it would seem as though that's
Speaker 1: kind of a success story given the nature of you know,
Speaker 1: what happened with some other banks and what the government's
Speaker 1: had to do for them, is it really appropriate to
Speaker 1: be charging them here? Well, I think that the point
Speaker 1: here that the Serious Fraud Office is making is that, um,
Speaker 1: you know that the end doesn't justify the means, So
Speaker 1: that if you're going to play fast and loose with
Speaker 1: the disclosure rules and also make up a loan that
Speaker 1: appears to have been based on just the fact that
Speaker 1: Cutter made the investment, um, I think they're concerned about that.
Speaker 1: But you know, if I'm looking at the pantheon of
Speaker 1: bad bank conduct back in two thousand seven and two
Speaker 1: thousand and eight, I'm not sure I would put this
Speaker 1: at the top of the list, Bob. In recent years,
Speaker 1: the UK Serious Fraud Office has failed to successfully prosecute
Speaker 1: a number of high profile bribery and corruption cases. How
Speaker 1: much is this a test for that office? Well, I
Speaker 1: guess a couple of things I want to say there.
Speaker 1: I mean, the first is that you know, we talked
Speaker 1: about the Barkley's case before, or you might remember a
Speaker 1: few weeks back, and I think there's potentially something more
Speaker 1: serious going on here. I think one thing that the
Speaker 1: Serious Fraud Office is worried about is that essentially what
Speaker 1: Barkley's is said to have done is you know that
Speaker 1: the significance of the quid pro quo is such that
Speaker 1: the capitalization that Barkley's got in the midst of the
Speaker 1: crisis could be argued to have been a kind of
Speaker 1: bootstrapped capitalization, because if you're essentially lending money to the
Speaker 1: very people who are now investing in you to recapitalize you,
Speaker 1: then you are in effect creating your own capital out
Speaker 1: of thin air, as it were. Right, That's the concerns
Speaker 1: as a kind of a bootstrapping there, And for that reason,
Speaker 1: I think this particular case has some real teeth and
Speaker 1: I think that the Serious Fraud Office might very well
Speaker 1: succeed with this one. On the other hand, there are
Speaker 1: other cases, and of course you might be alluding to
Speaker 1: the UH Foreign Exchange scandal other cases where it's more difficult,
Speaker 1: I think, to get the evidence that you need in
Speaker 1: order to sort of make a criminal charge stick. Um,
Speaker 1: that's of course what happened with the SFO in connection
Speaker 1: with the currency manipulation scandals. They had lots and lots
Speaker 1: of evidence, and they actually still maintained that they believe
Speaker 1: that a fraud was committed, or that frauds were committed
Speaker 1: in connection with the four X scandal, but they don't
Speaker 1: think they have quite the right amount of evidence of
Speaker 1: the quite the right quality of evidence to stay in
Speaker 1: a criminal conviction, of course, because the the it's much
Speaker 1: more difficult to do that, right, The burden of proof
Speaker 1: that has to be met in order to deprive somebody
Speaker 1: of their rights and put them in prison or find
Speaker 1: them in in a criminal penalty sense of finding, is
Speaker 1: just a very difficult burden to sustain. And so I
Speaker 1: think this is this sort of connects up with your
Speaker 1: first question to me a few minutes ago, and it's
Speaker 1: just much more difficult, they think, to bring these cases
Speaker 1: and prevail on them, and it is to prevail on
Speaker 1: regulatory cases. In January, during the waning days of the
Speaker 1: Obama administration, the United States government charged British foreign exchange
Speaker 1: traders Richard Usher firmly of JP, Morgan Chase Rohan, Rom Chaddon,
Speaker 1: who is with City Group, and Chris Ashton, firmly of Barclays,
Speaker 1: with conspiracy. The three allegedly used a chat room they
Speaker 1: called the Cartel to manipulate the price of currencies, and
Speaker 1: now the three have flown to New York to face
Speaker 1: the charges, even though British authorities had to had declined
Speaker 1: to charge them under UK law. The traders pled not
Speaker 1: guilty and were released on bail pending for their proceedings.
Speaker 1: With us. To talk about this case are Peter Henning,
Speaker 1: a professor at Wayne State University, and Bob Hockett of
Speaker 1: the Cornell University Law School. Bob, this case was a
Speaker 1: big deal for the Obama administration, that kind of It
Speaker 1: was one of the last things that they did they
Speaker 1: charged these traders. Why was this case such a big
Speaker 1: deal for them? Well, I think it was big for
Speaker 1: a couple of reasons. One is that the Obama administrations
Speaker 1: have been criticized quite roundly and quite frequently in the
Speaker 1: wake of the crisis for not having gone after individuals
Speaker 1: who were thought to have been at least in part
Speaker 1: responsible for this scandal or that scandal, or for this
Speaker 1: crash or for that crash. There has been plenty of
Speaker 1: settlements reached with various banking institutions and other financial institution,
Speaker 1: but no really serious convictions or even pursuits up to
Speaker 1: that point of individuals. UM. And with the outbreak of
Speaker 1: the London Whales scandal in and then the four X
Speaker 1: scandal and under precious medals and other commodities scandals following those, um,
Speaker 1: I think the Obama administration was probably really beginning to
Speaker 1: feel that heat, thinking, you know, we really want to
Speaker 1: charge at least some individuals here, given that finding the
Speaker 1: finding the banks doesn't seem to do the job. So
Speaker 1: I'm guessing that that's why they decided to kind of
Speaker 1: go out with this particular bang, Peter. This follows months
Speaker 1: of negotiations with prosecutors over the terms of their surrender
Speaker 1: and the fact that they can return to the UK
Speaker 1: until uh, there's a trial here. Could they have fought extradition, yes,
Speaker 1: the answers, but could they have one if they fought extradition? Well, yeah,
Speaker 1: you can always fight, but UM, the treaty, the extradition
Speaker 1: treaty between the U S and the U k H
Speaker 1: is really quite broad and permissive. And so there was
Speaker 1: a fight back around two thousand four, two thousand five
Speaker 1: related to three investment bankers from nat West UM and
Speaker 1: they were got the nickname the Thatt West three related
Speaker 1: to Enron, and they fought all the way to the
Speaker 1: highest court in Britain and lost and ended up getting
Speaker 1: extradited into the US. I think what these three traders
Speaker 1: figured out was and their attorneys figured out, was, look,
Speaker 1: let's work out an accommodation, will come, will surrender, and
Speaker 1: then maybe we'll be allowed to return to the US.
Speaker 1: Then that West three had to go find apartments in Houston,
Speaker 1: UM and sit around there and wait for their trial.
Speaker 1: So this is really UM, if you're not going to
Speaker 1: win the fight, try to work out the best deal
Speaker 1: that you can. And I suspect that's what they did, Bob.
Speaker 1: This was as we were discussing a big deal for
Speaker 1: the Obama administration in this case. And you know now
Speaker 1: the Justice Department has negotiated these voluntary array tachments for
Speaker 1: the defendants to come and appear in US Court, which
Speaker 1: they now have. But you know, a lot of people
Speaker 1: have wondered if the Trump administration would take the same
Speaker 1: sort of approach to these kinds of issues as the
Speaker 1: Obama administration did, at least at the end. Um, can
Speaker 1: we expect that the Trump administration is going to prosecute
Speaker 1: this as vigorously as the Obama people would have done. Yeah,
Speaker 1: that's a great question, and I honestly think it's a
Speaker 1: tough call in this particular case for several reasons. Uh.
Speaker 1: One is that the traders in question or not American,
Speaker 1: and so it could be one could imagine at least
Speaker 1: the Trumpet administration being a little bit less solicitous of
Speaker 1: non American defendants. Another reason is that Mr Trump of
Speaker 1: course campaigned on at least partly a sort of anti
Speaker 1: Wall Street platform, and while that's turned out to be
Speaker 1: somewhat let's say questionable, or let's say, well, his commitment
Speaker 1: to that particular aspect of his platform Wall campaigning has
Speaker 1: has come into question, of course, in recent months, it's
Speaker 1: not clear that it's been entirely a bad So my
Speaker 1: guess would be that they'll prosecute this, maybe not with
Speaker 1: quite the same vigor that the Obomba administration seemed to
Speaker 1: want to do at the end of its time, but
Speaker 1: that it will still probably try to treat this fairly seriously, Peter.
Speaker 1: They've frequently pointed to the fact that the Serious Fraud Office,
Speaker 1: which we were talking about, decided in to close its
Speaker 1: investigation into this without filing any charges, and they've pointed
Speaker 1: to that as evidence that they did nothing wrong. Is
Speaker 1: it any kind of evidence. Well, it's certainly a good
Speaker 1: talking point. Whether it comes in at trial is another issue.
Speaker 1: I can't see an American federal district court judge allowing
Speaker 1: defendants to argue, well, the British authority said what we
Speaker 1: did wasn't a crime, therefore you shouldn't prosecute us, or
Speaker 1: even that that's somehow a defense. So I think that's
Speaker 1: more of something that they can try to use in
Speaker 1: the media rather than having any real impact on the trial.
Speaker 1: This is going to be a case about um, the
Speaker 1: the I M s and talking back and forth, and
Speaker 1: then looking at how they were able to nudge Libar
Speaker 1: up a little bit, down a little bit to help
Speaker 1: their positions. So that's really going to be the focus
Speaker 1: here in the case. Bob in about thirty seconds. Given
Speaker 1: that that's the focus of the case, how strong is
Speaker 1: the government's case here? I think it's actually quite strong.
Speaker 1: I mean, when you call yourselves the cartel and when
Speaker 1: you're acting definitely to manipulate foreign foreign exchange rates, Uh,
Speaker 1: it doesn't get much better than that. And it's important
Speaker 1: that the SFO in Britain didn't actually decide that there
Speaker 1: was no wrong doing. They just decided they said, actually,
Speaker 1: we think the fraud was committed. We just don't have
Speaker 1: enough evidence to prevail in trial. With a burden of
Speaker 1: group is quite heavy, the American Justice Department might be
Speaker 1: more competent. Well. Our thanks to Bob Hockett of Cornell
Speaker 1: University Law School and Peter Henning of Wayne State University
Speaker 1: for being with us here to talk about all this
Speaker 1: legal news coming out of the UK and and British
Speaker 1: traders on Bloomberg Law