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Speaker 1: Bloomberg Laws, brought you by Commonwealth Financial Network, the broker

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Speaker 1: dealer r I, a that's been putting relationships first since

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Speaker 1: nineteen nine. Find out why the industry's most satisfied advisors

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Speaker 1: are head over heels about them. Visit Commonwealth dot com. Well,

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Speaker 1: it's a major setback in a seven year government investigation

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Speaker 1: of rigging in the library market, and it already seems

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Speaker 1: to be undermining prosecutions of cross border crimes. The case

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Speaker 1: against former London Rebel Bank traders Anthony Allen and Anthony

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Speaker 1: Conti was the first time US prosecutors put bankers on

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Speaker 1: trial for manipulating the Liebord ban, but will it be

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Speaker 1: the last. A jury convicted the men of conspiracy and fraud,

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Speaker 1: but the Second Circuit Court of Appeals has tossed their convictions,

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Speaker 1: saying their Fifth Amendment rights were violated when prosecutors used

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Speaker 1: testimony they were forced to give to a UK financial

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Speaker 1: regulator to former Deutsche Bank traders are already using the

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Speaker 1: decision to challenge charges against them for library rigging, joining US.

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Speaker 1: It's professor Peter Henning of Wayne State University Law School.

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Speaker 1: Peter first tell us about this testimony they were forced

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Speaker 1: to give to the UK's Financial Conduct Authority and how

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Speaker 1: it was used at trial. Well, this is something we're

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Speaker 1: not used to here in the United States, that a

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Speaker 1: regulator can force any UK citizen to come in and

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Speaker 1: give testimony. If the deal, though, is that you then

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Speaker 1: receive immunity from having that testimony used against you. They

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Speaker 1: were required to come in. What ended up happening is

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Speaker 1: the testimony of the two defendants was shown to a

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Speaker 1: cooperating witness who reviewed their testimony and then testified at

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Speaker 1: their trial. In the United States and in the US,

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Speaker 1: if you're given immunity, your testimony can't be used against you.

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Speaker 1: But the Second Circuits that is this is the same rule.

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Speaker 1: We're going to apply it here as if you were

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Speaker 1: given immunity by the US government. In this case that

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Speaker 1: was given by the Financial Conduct Authority. It's treated as

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Speaker 1: the same and therefore violated their Fifth Amendment rights. Peter,

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Speaker 1: what was the argument the other way? Judge Rakoff upheld

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Speaker 1: these convictions, and I gather he disagreed with with the

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Speaker 1: appeal's quard on that issue. Well, certainly on two grounds. First,

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Speaker 1: he said that the community granted by another jurisdiction doesn't

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Speaker 1: apply in the US. But even if it does, the

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Speaker 1: government's key cooperating witness testified that I was not affected

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Speaker 1: by the review of their statements that they gave in

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Speaker 1: um Great Britain. Now with the Court of Appeal said

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Speaker 1: was that didn't hold any water. They disagreed rather strongly,

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Speaker 1: with Judge Rakoff saying you came to the wrong conclusion

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Speaker 1: that in fact his testimony was affected by the immunized

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Speaker 1: statements that the two defendants made and therefore the convictions

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Speaker 1: got reversed. Let's talk about the fallout from this decision,

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Speaker 1: immediate and long term. Immediately, two former Deutsche Bank traders

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Speaker 1: are already trying to use the decision to challenge charges

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Speaker 1: against them for library rigging. Is that likely to be successful? Well,

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Speaker 1: only one of the two defendants made a statement of

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Speaker 1: the Financial Conduct Authority, so it will only directly affect

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Speaker 1: his case, and it's not clear whether that statement was

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Speaker 1: used by investigators or any witnesses in the case. So

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Speaker 1: we're still at a preliminary stage in that case. It's

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Speaker 1: not clear what the impact will be, but it's certainly

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Speaker 1: is going to raise a question for prosecutors of what

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Speaker 1: prosecutors hate to have to deal with is going after

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Speaker 1: someone who has been immunized. And so now whenever you

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Speaker 1: have one of these situations, they're going to have to

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Speaker 1: be very very careful about their evidence to make sure

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Speaker 1: they avoid the impact of the immunized testimony, Peter one

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Speaker 1: other immediate consequence or potential consequence. How about the cooperate

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Speaker 1: cooperating witnesses in this case, Um, they testified against Allen

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Speaker 1: and County Uh in exchange for and they pleaded guilty.

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Speaker 1: Is that deal? Are those deals likely to be scuttled

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Speaker 1: because of this decision? Well, certainly that there's a reasonable

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Speaker 1: chance that they'll challenge them. Now that the Justice Department

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Speaker 1: could refile the charges against Allen and CONTI with the

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Speaker 1: Second Circuits, that is that the indictment was painted by

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Speaker 1: the immunized testimony and therefore dismissed the indictment. The government

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Speaker 1: could reindice I. That's going to be tough to do

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Speaker 1: because their key witness appears to now be knocked out. Um,

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Speaker 1: if that is in fact the case and the Justice

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Speaker 1: Department doesn't refile the charges, I think there's a reasonable

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Speaker 1: chance you'll see that other cooperating witnesses are going to

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Speaker 1: have to have their guilty please canceled and um, there's

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Speaker 1: a real possibility that everyone relays go to the rabble bank,

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Speaker 1: uh lie or manipulation might be able to escape any

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Speaker 1: criminal prosecution. Civil would be different. So long term, the

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Speaker 1: US has tried to work with foreign jurisdictions in rooting

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Speaker 1: out criminal behavior. Why has that been difficult and how

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Speaker 1: could this decision make it more difficult. It's always difficult

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Speaker 1: because you have different procedures in other countries. And where

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Speaker 1: the real impact of this is going to be I

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Speaker 1: think is that the Department of Justice is going to

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Speaker 1: have to look and say, when we work with a

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Speaker 1: foreign regulatory authority or foreign prosecutors, we have to make

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Speaker 1: sure that their procedures work in our system. And so

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Speaker 1: if someone is compelled to come in and give a statement,

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Speaker 1: which is the case throughout much of Europe, that if

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Speaker 1: they're compelled to come in, then that puts their statement

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Speaker 1: and any evidence derived from that at risk in a

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Speaker 1: US prosecution. So the Justice Department at a minimum is

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Speaker 1: going to have to be a lot more careful when

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Speaker 1: it works with foreign regulators. Peter. In the UK, eight

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Speaker 1: former traders have been acquitted of criminal charges related to librory.

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Speaker 1: What makes it so difficult to prosecute these cases? Well,

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Speaker 1: in the serious Broad Office has had some issues in

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Speaker 1: its cases. One of the challenges is and where the

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Speaker 1: procedures are a little bit different. And also the type

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Speaker 1: of proof that is admissible at trial is not as

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Speaker 1: broad as it is in the United States, even though

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Speaker 1: we share a common law background. Um, federal prosecutors in

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Speaker 1: the United States have more freedom to bring in evidence.

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Speaker 1: So it has really been a challenge in the UK

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Speaker 1: to obtain convictions, and so there's a fear that defendants

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Speaker 1: can get away with it in the UK. And now

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Speaker 1: with this ruling that the Justice Department may not be

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Speaker 1: able to pursu who charges, or at least it's going

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Speaker 1: to be hamstrung in pursuing charges in the future. Peter,

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Speaker 1: just about thirty seconds left. But what would you expect

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Speaker 1: from the Justice Department Now? Do you imagine they will ask, say,

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Speaker 1: the full Appeals Court to review this decision? Um A

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Speaker 1: very interesting question. There is certainly a chance. I'm not

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Speaker 1: sure this is a case that will get to the

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Speaker 1: Supreme Court, but they could ask. The problem for them

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Speaker 1: is the Second Circuit grants uh full rehearing before the

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Speaker 1: entire bench about once a year, and so that is

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Speaker 1: a very much of a long shot. As always, thank

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Speaker 1: you for being on Bloomberg Law. That's Professor Peter Henning

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Speaker 1: of Wayne State University Law School does it for the

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Speaker 1: decision of Bloomberg Law. Will be back Monday at one

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Speaker 1: pm Wall Street Time, thanks to our producer Mark Sinniscounty

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Speaker 1: and our technical director Chris Strike. Comey. Coming up next

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Speaker 1: Bloomberg Markets with Carol Master and Corey Johnson. And Carol

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Speaker 1: is here to tell us what's coming up. Another busy Friday, June.

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Speaker 1: I've got to earnings. Investor is not too happy. We're

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Speaker 1: gonna take a look at Airbnb in Mexico, trying to

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Speaker 1: work it out. Confidence back in the art market and

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Speaker 1: CEO perks pizza, clothes, other stuff. I like the clothes

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Speaker 1: part of that. All right. That's coming up next Bloomberg

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Speaker 1: Markets with Carol Masster and Corey Johnson. You've been listening

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Speaker 1: to Bloomberg Law here on Bloomberg Radio. Have a great weekend,

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Speaker 1: and please join us again on Monday at one pm

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Speaker 1: four more Bloomberg Law. I'm June Grasso with Michael Best

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Speaker 1: and Greg Store. This is Bloomberg,