WEBVTT - FX Cartel Arrives in U.S. After Avoiding UK Charges (Audio)

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<v Speaker 1>The foremost senior United Kingdom bank executives to face criminal

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<v Speaker 1>charges since the financial crisis, were in court in London. Recently,

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<v Speaker 1>Barclay's former City of Britain Serious Fraud officers charged Barkley's

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<v Speaker 1>former CEO, John Varley, along with Roger Jenkins, Thomas Collaris

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<v Speaker 1>and Richard both with conspiracy to commit fraud by false

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<v Speaker 1>representation in connection with fundraising from the Nation of Cutter

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<v Speaker 1>during the two thousand eight financial crisis. The bank itself, meanwhile,

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<v Speaker 1>along with Varley and Jenkins, was charged with providing unlawful

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<v Speaker 1>financial assistance. The executives have all pleaded not guilty. Here

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<v Speaker 1>to talk with us about the case today is Peter Henning,

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<v Speaker 1>a professor at Wayne State University. Peter um this is

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<v Speaker 1>a big case for the for the UK arising out

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<v Speaker 1>of the two thousand eight crisis. Explain what it is

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<v Speaker 1>exactly that the British authorities are charging these executives with. Well,

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<v Speaker 1>it's an interesting case because what they are accused of

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<v Speaker 1>doing is not making the opera disclosures about their dealings

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<v Speaker 1>with Cutter. That there was I guess about a three

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<v Speaker 1>hundred and thirty million dollar um payment that was made

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<v Speaker 1>and then a loan facility for the Cutter government or

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<v Speaker 1>one of its ministries was arranged through Barclays. And essentially

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<v Speaker 1>what the executives are being accused of is engaging in

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<v Speaker 1>more or less a quid pro quo arrangement to get

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<v Speaker 1>the investments to keep the bank afloat UM. But really

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<v Speaker 1>the underlying charges you didn't disclose it. You engage in

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<v Speaker 1>a fraud by misrepresenting UH. It's an interesting case because

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<v Speaker 1>that money kept Barclays afloat. It didn't go under like

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<v Speaker 1>we saw any number of banks in the United States

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<v Speaker 1>go under UH and even in the UK at that time.

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<v Speaker 1>So it's an interesting charge because Barkley survived. Yet now

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<v Speaker 1>these executives are accused of fraud. Joining us is Robert Hockett, Professor,

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<v Speaker 1>Cornell University Law School, Bob so the former chief executive

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<v Speaker 1>of Barclay's John Varley, is the most prominent and most

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<v Speaker 1>senior banker to be charged with crimes relating to the

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<v Speaker 1>global financial crisis nine years later. What message does that send? Well, um,

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<v Speaker 1>I suppose it confirms the message. I think it's been

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<v Speaker 1>set many times and that many people have sort of

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<v Speaker 1>gleaned over the last number of years, and that is

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<v Speaker 1>that it's apparently rather easier to go after the banking

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<v Speaker 1>institutions themselves than to go after the individuals who make

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<v Speaker 1>the actual decisions ultimately that that get the banks into trouble. Well, Peter, so,

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<v Speaker 1>how I mean this did keep Barclay's afloat and that

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<v Speaker 1>would see, I mean, it would seem as though that's

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<v Speaker 1>kind of a success story given the nature of you know,

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<v Speaker 1>what happened with some other banks and what the government's

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<v Speaker 1>had to do for them, is it really appropriate to

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<v Speaker 1>be charging them here? Well, I think that the point

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<v Speaker 1>here that the Serious Fraud Office is making is that, um,

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<v Speaker 1>you know that the end doesn't justify the means, So

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<v Speaker 1>that if you're going to play fast and loose with

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<v Speaker 1>the disclosure rules and also make up a loan that

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<v Speaker 1>appears to have been based on just the fact that

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<v Speaker 1>Cutter made the investment, um, I think they're concerned about that.

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<v Speaker 1>But you know, if I'm looking at the pantheon of

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<v Speaker 1>bad bank conduct back in two thousand seven and two

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<v Speaker 1>thousand and eight, I'm not sure I would put this

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<v Speaker 1>at the top of the list, Bob. In recent years,

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<v Speaker 1>the UK Serious Fraud Office has failed to successfully prosecute

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<v Speaker 1>a number of high profile bribery and corruption cases. How

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<v Speaker 1>much is this a test for that office? Well, I

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<v Speaker 1>guess a couple of things I want to say there.

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<v Speaker 1>I mean, the first is that you know, we talked

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<v Speaker 1>about the Barkley's case before, or you might remember a

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<v Speaker 1>few weeks back, and I think there's potentially something more

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<v Speaker 1>serious going on here. I think one thing that the

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<v Speaker 1>Serious Fraud Office is worried about is that essentially what

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<v Speaker 1>Barkley's is said to have done is you know that

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<v Speaker 1>the significance of the quid pro quo is such that

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<v Speaker 1>the capitalization that Barkley's got in the midst of the

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<v Speaker 1>crisis could be argued to have been a kind of

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<v Speaker 1>bootstrapped capitalization, because if you're essentially lending money to the

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<v Speaker 1>very people who are now investing in you to recapitalize you,

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<v Speaker 1>then you are in effect creating your own capital out

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<v Speaker 1>of thin air, as it were. Right, That's the concerns

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<v Speaker 1>as a kind of a bootstrapping there, And for that reason,

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<v Speaker 1>I think this particular case has some real teeth and

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<v Speaker 1>I think that the Serious Fraud Office might very well

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<v Speaker 1>succeed with this one. On the other hand, there are

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<v Speaker 1>other cases, and of course you might be alluding to

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<v Speaker 1>the UH Foreign Exchange scandal other cases where it's more difficult,

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<v Speaker 1>I think, to get the evidence that you need in

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<v Speaker 1>order to sort of make a criminal charge stick. Um,

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<v Speaker 1>that's of course what happened with the SFO in connection

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<v Speaker 1>with the currency manipulation scandals. They had lots and lots

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<v Speaker 1>of evidence, and they actually still maintained that they believe

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<v Speaker 1>that a fraud was committed, or that frauds were committed

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<v Speaker 1>in connection with the four X scandal, but they don't

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<v Speaker 1>think they have quite the right amount of evidence of

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<v Speaker 1>the quite the right quality of evidence to stay in

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<v Speaker 1>a criminal conviction, of course, because the the it's much

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<v Speaker 1>more difficult to do that, right, The burden of proof

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<v Speaker 1>that has to be met in order to deprive somebody

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<v Speaker 1>of their rights and put them in prison or find

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<v Speaker 1>them in in a criminal penalty sense of finding, is

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<v Speaker 1>just a very difficult burden to sustain. And so I

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<v Speaker 1>think this is this sort of connects up with your

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<v Speaker 1>first question to me a few minutes ago, and it's

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<v Speaker 1>just much more difficult, they think, to bring these cases

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<v Speaker 1>and prevail on them, and it is to prevail on

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<v Speaker 1>regulatory cases. In January, during the waning days of the

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<v Speaker 1>Obama administration, the United States government charged British foreign exchange

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<v Speaker 1>traders Richard Usher firmly of JP, Morgan Chase Rohan, Rom Chaddon,

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<v Speaker 1>who is with City Group, and Chris Ashton, firmly of Barclays,

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<v Speaker 1>with conspiracy. The three allegedly used a chat room they

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<v Speaker 1>called the Cartel to manipulate the price of currencies, and

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<v Speaker 1>now the three have flown to New York to face

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<v Speaker 1>the charges, even though British authorities had to had declined

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<v Speaker 1>to charge them under UK law. The traders pled not

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<v Speaker 1>guilty and were released on bail pending for their proceedings.

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<v Speaker 1>With us. To talk about this case are Peter Henning,

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<v Speaker 1>a professor at Wayne State University, and Bob Hockett of

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<v Speaker 1>the Cornell University Law School. Bob, this case was a

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<v Speaker 1>big deal for the Obama administration, that kind of It

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<v Speaker 1>was one of the last things that they did they

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<v Speaker 1>charged these traders. Why was this case such a big

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<v Speaker 1>deal for them? Well, I think it was big for

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<v Speaker 1>a couple of reasons. One is that the Obama administrations

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<v Speaker 1>have been criticized quite roundly and quite frequently in the

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<v Speaker 1>wake of the crisis for not having gone after individuals

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<v Speaker 1>who were thought to have been at least in part

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<v Speaker 1>responsible for this scandal or that scandal, or for this

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<v Speaker 1>crash or for that crash. There has been plenty of

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<v Speaker 1>settlements reached with various banking institutions and other financial institution,

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<v Speaker 1>but no really serious convictions or even pursuits up to

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<v Speaker 1>that point of individuals. UM. And with the outbreak of

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<v Speaker 1>the London Whales scandal in and then the four X

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<v Speaker 1>scandal and under precious medals and other commodities scandals following those, um,

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<v Speaker 1>I think the Obama administration was probably really beginning to

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<v Speaker 1>feel that heat, thinking, you know, we really want to

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<v Speaker 1>charge at least some individuals here, given that finding the

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<v Speaker 1>finding the banks doesn't seem to do the job. So

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<v Speaker 1>I'm guessing that that's why they decided to kind of

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<v Speaker 1>go out with this particular bang, Peter. This follows months

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<v Speaker 1>of negotiations with prosecutors over the terms of their surrender

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<v Speaker 1>and the fact that they can return to the UK

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<v Speaker 1>until uh, there's a trial here. Could they have fought extradition, yes,

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<v Speaker 1>the answers, but could they have one if they fought extradition? Well, yeah,

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<v Speaker 1>you can always fight, but UM, the treaty, the extradition

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<v Speaker 1>treaty between the U S and the U k H

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<v Speaker 1>is really quite broad and permissive. And so there was

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<v Speaker 1>a fight back around two thousand four, two thousand five

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<v Speaker 1>related to three investment bankers from nat West UM and

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<v Speaker 1>they were got the nickname the Thatt West three related

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<v Speaker 1>to Enron, and they fought all the way to the

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<v Speaker 1>highest court in Britain and lost and ended up getting

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<v Speaker 1>extradited into the US. I think what these three traders

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<v Speaker 1>figured out was and their attorneys figured out, was, look,

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<v Speaker 1>let's work out an accommodation, will come, will surrender, and

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<v Speaker 1>then maybe we'll be allowed to return to the US.

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<v Speaker 1>Then that West three had to go find apartments in Houston,

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<v Speaker 1>UM and sit around there and wait for their trial.

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<v Speaker 1>So this is really UM, if you're not going to

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<v Speaker 1>win the fight, try to work out the best deal

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<v Speaker 1>that you can. And I suspect that's what they did, Bob.

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<v Speaker 1>This was as we were discussing a big deal for

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<v Speaker 1>the Obama administration in this case. And you know now

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<v Speaker 1>the Justice Department has negotiated these voluntary array tachments for

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<v Speaker 1>the defendants to come and appear in US Court, which

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<v Speaker 1>they now have. But you know, a lot of people

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<v Speaker 1>have wondered if the Trump administration would take the same

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<v Speaker 1>sort of approach to these kinds of issues as the

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<v Speaker 1>Obama administration did, at least at the end. Um, can

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<v Speaker 1>we expect that the Trump administration is going to prosecute

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<v Speaker 1>this as vigorously as the Obama people would have done. Yeah,

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<v Speaker 1>that's a great question, and I honestly think it's a

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<v Speaker 1>tough call in this particular case for several reasons. Uh.

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<v Speaker 1>One is that the traders in question or not American,

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<v Speaker 1>and so it could be one could imagine at least

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<v Speaker 1>the Trumpet administration being a little bit less solicitous of

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<v Speaker 1>non American defendants. Another reason is that Mr Trump of

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<v Speaker 1>course campaigned on at least partly a sort of anti

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<v Speaker 1>Wall Street platform, and while that's turned out to be

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<v Speaker 1>somewhat let's say questionable, or let's say, well, his commitment

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<v Speaker 1>to that particular aspect of his platform Wall campaigning has

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<v Speaker 1>has come into question, of course, in recent months, it's

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<v Speaker 1>not clear that it's been entirely a bad So my

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<v Speaker 1>guess would be that they'll prosecute this, maybe not with

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<v Speaker 1>quite the same vigor that the Obomba administration seemed to

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<v Speaker 1>want to do at the end of its time, but

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<v Speaker 1>that it will still probably try to treat this fairly seriously, Peter.

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<v Speaker 1>They've frequently pointed to the fact that the Serious Fraud Office,

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<v Speaker 1>which we were talking about, decided in to close its

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<v Speaker 1>investigation into this without filing any charges, and they've pointed

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<v Speaker 1>to that as evidence that they did nothing wrong. Is

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<v Speaker 1>it any kind of evidence. Well, it's certainly a good

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<v Speaker 1>talking point. Whether it comes in at trial is another issue.

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<v Speaker 1>I can't see an American federal district court judge allowing

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<v Speaker 1>defendants to argue, well, the British authority said what we

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<v Speaker 1>did wasn't a crime, therefore you shouldn't prosecute us, or

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<v Speaker 1>even that that's somehow a defense. So I think that's

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<v Speaker 1>more of something that they can try to use in

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<v Speaker 1>the media rather than having any real impact on the trial.

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<v Speaker 1>This is going to be a case about um, the

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<v Speaker 1>the I M s and talking back and forth, and

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<v Speaker 1>then looking at how they were able to nudge Libar

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<v Speaker 1>up a little bit, down a little bit to help

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<v Speaker 1>their positions. So that's really going to be the focus

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<v Speaker 1>here in the case. Bob in about thirty seconds. Given

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<v Speaker 1>that that's the focus of the case, how strong is

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<v Speaker 1>the government's case here? I think it's actually quite strong.

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<v Speaker 1>I mean, when you call yourselves the cartel and when

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<v Speaker 1>you're acting definitely to manipulate foreign foreign exchange rates, Uh,

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<v Speaker 1>it doesn't get much better than that. And it's important

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<v Speaker 1>that the SFO in Britain didn't actually decide that there

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<v Speaker 1>was no wrong doing. They just decided they said, actually,

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<v Speaker 1>we think the fraud was committed. We just don't have

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<v Speaker 1>enough evidence to prevail in trial. With a burden of

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<v Speaker 1>group is quite heavy, the American Justice Department might be

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<v Speaker 1>more competent. Well. Our thanks to Bob Hockett of Cornell

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<v Speaker 1>University Law School and Peter Henning of Wayne State University

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<v Speaker 1>for being with us here to talk about all this

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<v Speaker 1>legal news coming out of the UK and and British

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<v Speaker 1>traders on Bloomberg Law