WEBVTT - Henning on Tossed Convictions for Rabobank Traders  (Audio)

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<v Speaker 1>Bloomberg Laws, brought you by Commonwealth Financial Network, the broker

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<v Speaker 1>are head over heels about them. Visit Commonwealth dot com. Well,

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<v Speaker 1>it's a major setback in a seven year government investigation

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<v Speaker 1>of rigging in the library market, and it already seems

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<v Speaker 1>to be undermining prosecutions of cross border crimes. The case

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<v Speaker 1>against former London Rebel Bank traders Anthony Allen and Anthony

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<v Speaker 1>Conti was the first time US prosecutors put bankers on

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<v Speaker 1>trial for manipulating the Liebord ban, but will it be

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<v Speaker 1>the last. A jury convicted the men of conspiracy and fraud,

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<v Speaker 1>but the Second Circuit Court of Appeals has tossed their convictions,

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<v Speaker 1>saying their Fifth Amendment rights were violated when prosecutors used

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<v Speaker 1>testimony they were forced to give to a UK financial

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<v Speaker 1>regulator to former Deutsche Bank traders are already using the

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<v Speaker 1>decision to challenge charges against them for library rigging, joining US.

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<v Speaker 1>It's professor Peter Henning of Wayne State University Law School.

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<v Speaker 1>Peter first tell us about this testimony they were forced

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<v Speaker 1>to give to the UK's Financial Conduct Authority and how

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

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<v Speaker 1>not used to here in the United States, that a

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<v Speaker 1>regulator can force any UK citizen to come in and

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<v Speaker 1>give testimony. If the deal, though, is that you then

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<v Speaker 1>receive immunity from having that testimony used against you. They

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<v Speaker 1>were required to come in. What ended up happening is

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<v Speaker 1>the testimony of the two defendants was shown to a

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<v Speaker 1>cooperating witness who reviewed their testimony and then testified at

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<v Speaker 1>their trial. In the United States and in the US,

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

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<v Speaker 1>But the Second Circuits that is this is the same rule.

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<v Speaker 1>We're going to apply it here as if you were

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<v Speaker 1>given immunity by the US government. In this case that

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<v Speaker 1>was given by the Financial Conduct Authority. It's treated as

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<v Speaker 1>the same and therefore violated their Fifth Amendment rights. Peter,

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<v Speaker 1>what was the argument the other way? Judge Rakoff upheld

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<v Speaker 1>these convictions, and I gather he disagreed with with the

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

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<v Speaker 1>he said that the community granted by another jurisdiction doesn't

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<v Speaker 1>apply in the US. But even if it does, the

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<v Speaker 1>government's key cooperating witness testified that I was not affected

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<v Speaker 1>by the review of their statements that they gave in

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<v Speaker 1>um Great Britain. Now with the Court of Appeal said

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

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<v Speaker 1>with Judge Rakoff saying you came to the wrong conclusion

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<v Speaker 1>that in fact his testimony was affected by the immunized

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<v Speaker 1>statements that the two defendants made and therefore the convictions

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

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<v Speaker 1>immediate and long term. Immediately, two former Deutsche Bank traders

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<v Speaker 1>are already trying to use the decision to challenge charges

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

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<v Speaker 1>only one of the two defendants made a statement of

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<v Speaker 1>the Financial Conduct Authority, so it will only directly affect

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<v Speaker 1>his case, and it's not clear whether that statement was

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<v Speaker 1>used by investigators or any witnesses in the case. So

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

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<v Speaker 1>not clear what the impact will be, but it's certainly

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<v Speaker 1>is going to raise a question for prosecutors of what

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<v Speaker 1>prosecutors hate to have to deal with is going after

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<v Speaker 1>someone who has been immunized. And so now whenever you

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<v Speaker 1>have one of these situations, they're going to have to

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<v Speaker 1>be very very careful about their evidence to make sure

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<v Speaker 1>they avoid the impact of the immunized testimony, Peter one

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<v Speaker 1>other immediate consequence or potential consequence. How about the cooperate

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<v Speaker 1>cooperating witnesses in this case, Um, they testified against Allen

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<v Speaker 1>and County Uh in exchange for and they pleaded guilty.

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<v Speaker 1>Is that deal? Are those deals likely to be scuttled

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

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<v Speaker 1>chance that they'll challenge them. Now that the Justice Department

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<v Speaker 1>could refile the charges against Allen and CONTI with the

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<v Speaker 1>Second Circuits, that is that the indictment was painted by

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<v Speaker 1>the immunized testimony and therefore dismissed the indictment. The government

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<v Speaker 1>could reindice I. That's going to be tough to do

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<v Speaker 1>because their key witness appears to now be knocked out. Um,

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<v Speaker 1>if that is in fact the case and the Justice

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

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<v Speaker 1>chance you'll see that other cooperating witnesses are going to

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<v Speaker 1>have to have their guilty please canceled and um, there's

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<v Speaker 1>a real possibility that everyone relays go to the rabble bank,

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<v Speaker 1>uh lie or manipulation might be able to escape any

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<v Speaker 1>criminal prosecution. Civil would be different. So long term, the

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<v Speaker 1>US has tried to work with foreign jurisdictions in rooting

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<v Speaker 1>out criminal behavior. Why has that been difficult and how

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<v Speaker 1>could this decision make it more difficult. It's always difficult

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<v Speaker 1>because you have different procedures in other countries. And where

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<v Speaker 1>the real impact of this is going to be I

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<v Speaker 1>think is that the Department of Justice is going to

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<v Speaker 1>have to look and say, when we work with a

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<v Speaker 1>foreign regulatory authority or foreign prosecutors, we have to make

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<v Speaker 1>sure that their procedures work in our system. And so

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<v Speaker 1>if someone is compelled to come in and give a statement,

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<v Speaker 1>which is the case throughout much of Europe, that if

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<v Speaker 1>they're compelled to come in, then that puts their statement

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<v Speaker 1>and any evidence derived from that at risk in a

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<v Speaker 1>US prosecution. So the Justice Department at a minimum is

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<v Speaker 1>going to have to be a lot more careful when

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<v Speaker 1>it works with foreign regulators. Peter. In the UK, eight

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<v Speaker 1>former traders have been acquitted of criminal charges related to librory.

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<v Speaker 1>What makes it so difficult to prosecute these cases? Well,

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<v Speaker 1>in the serious Broad Office has had some issues in

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<v Speaker 1>its cases. One of the challenges is and where the

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<v Speaker 1>procedures are a little bit different. And also the type

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<v Speaker 1>of proof that is admissible at trial is not as

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<v Speaker 1>broad as it is in the United States, even though

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<v Speaker 1>we share a common law background. Um, federal prosecutors in

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<v Speaker 1>the United States have more freedom to bring in evidence.

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<v Speaker 1>So it has really been a challenge in the UK

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<v Speaker 1>to obtain convictions, and so there's a fear that defendants

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<v Speaker 1>can get away with it in the UK. And now

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<v Speaker 1>with this ruling that the Justice Department may not be

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<v Speaker 1>able to pursu who charges, or at least it's going

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<v Speaker 1>to be hamstrung in pursuing charges in the future. Peter,

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<v Speaker 1>just about thirty seconds left. But what would you expect

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

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<v Speaker 1>the full Appeals Court to review this decision? Um A

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<v Speaker 1>very interesting question. There is certainly a chance. I'm not

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<v Speaker 1>sure this is a case that will get to the

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<v Speaker 1>Supreme Court, but they could ask. The problem for them

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<v Speaker 1>is the Second Circuit grants uh full rehearing before the

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<v Speaker 1>entire bench about once a year, and so that is

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<v Speaker 1>a very much of a long shot. As always, thank

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<v Speaker 1>you for being on Bloomberg Law. That's Professor Peter Henning

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<v Speaker 1>of Wayne State University Law School does it for the

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<v Speaker 1>decision of Bloomberg Law. Will be back Monday at one

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<v Speaker 1>pm Wall Street Time, thanks to our producer Mark Sinniscounty

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<v Speaker 1>and our technical director Chris Strike. Comey. Coming up next

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<v Speaker 1>Bloomberg Markets with Carol Master and Corey Johnson. And Carol

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

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<v Speaker 1>gonna take a look at Airbnb in Mexico, trying to

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<v Speaker 1>part of that. All right. That's coming up next Bloomberg

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<v Speaker 1>Markets with Carol Masster and Corey Johnson. You've been listening

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