Prosecutors in the U.S. and the U.K. have sought to hold individual traders responsible for rigging Libor, which is used to value financial products from mortgages to car loans but is being phased out because of bank manipulation. But while a handful of traders have been convicted and sentenced to prison terms, a dozen others have been cleared of charges.
The Justice Department, which prosecuted the case against Connolly and Black, declined to comment specifically on the ruling but “stands by the work of its prosecutors on the numerous corporate and individual matters that were charged in the wake of the Libor scandal,” spokesman Joshua Stueve said in a statement. “The department’s unwavering commitment to prosecuting individuals and corporations responsible for white-collar crimes is unchanged, and we remain confident in our ability to detect, investigate, and prosecute market manipulation crimes to the fullest extent.”
‘Substantial’ Prison Time
Both men were sentenced in 2019, but their punishments were deferred pending appeal. Connolly was ordered to spend six months in home confinement and pay a $100,000 fine. Black received a sentence of nine months home confinement. The government had sought “substantial” prison sentences, but U.S. District Judge
“We are elated that Matt Connolly has been fully exonerated in this contrived case that never should have been brought,” said
“We have long maintained that Gavin Black committed no crime, and we are deeply appreciative that the Court of Appeals carefully reviewed the record and reached the same conclusion, as reflected in its thorough and well-reasoned decision,” said Black’s lawyer, Seth Levine of Levine Lee LLP, in a statement.
According to the prosecutors, Connolly and Black pushed peers at the bank to alter the rate or submit false data to benefit their trading positions. Deutsche Bank agreed in 2015 to pay $2.5 billion and fire seven traders, including Black, to resolve probes into its role in the scandal. But the two men maintained they were scapegoats for a practice that was common in the industry and encouraged by the bank’s leaders.
Libor was set by a panel of banks who made submissions to the British Banking Association. Though the association’s rules prohibited banks from collaborating on their submissions, nothing prevented them from considering input from their own employees, including derivatives traders, the appeals court said.
“While defendants’ efforts to take advantage of DB’s position as a Libor panel contributor in order to affect the outcome of contracts to which DB had already agreed may have violated any reasonable notion of fairness, the government’s failure to prove that the Libor submissions did not comply with the BBA Libor Instruction and were false or misleading means it failed to prove conduct that was within the scope of the statute prohibiting wire fraud schemes,” the appellate judges said.
The U.S. charged a dozen people in its Libor crackdown, four of whom went to trial, including Connolly and Black. Two former
The lower court case is U.S. v Connolly, 16-cr-370, U.S. District Court, Southern District of New York (Manhattan). The appellate case is U.S. v Connolly, 19-3806, U.S. Court of Appeals, Second Circuit.
(Updates with Justice Department statement in fourth paragraph.)
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