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Wednesday, July 24, 2024 | Back issues
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Libor-Manipulation Trial Kicks Off in New York

MANHATTAN (CN) - Opening the trial Wednesday against two bankers from the London office of Rabobank, a federal prosecutor said the British traders "exploited and abused [their] role over and over again to serve their own ends," handing currency swap traders an "unfair advantage."

"Year after year, these defendants manipulated Libor, one of the most important interest rates used over the world and in the U.S.," Justice Department prosecutor Carol Sipperly told the court.

Short for the London Interbank Offered Rate, Libor is the rate banks charge one another for short-term loans necessary to carry on their business. More than $300 trillion in financial derivatives are tied to Libor rates.

It has been more than a year since federal prosecutors indicted British bankers Anthony Allen and Anthony Conti for manipulating these rates on behalf of Rabobank, a Dutch bank also known as Cooperatieve Centrale Raiffeisen-Boerenleenbank BA.

Throughout her opening remarks, prosecutor Sipperly urged the jurors not to be "intimidated" by unfamiliar financial jargon.

There is "no need to think that all of these terms will instantly make sense," she said.

"Be assured that you'll see soon enough that the defendants' scheme is really simple," the prosecutor continued.

"To make money on those swaps, they manipulated the rates," Sipperly added.

Rabobank came under a harsh spotlight in early 2013 when several California counties filed a lawsuit accusing several other major banks of manipulating the global economy.

Later that year, Rabobank entered into a deferred prosecution agreement with the Department of Justice obligating the company to pay a $325 million penalty.

International investigations spiraled since then, leading to the April 28, 2014, federal indictment in Manhattan of Allen, Conti and three other men.

Prosecutors plan to call three cooperating witnesses at Rabobank for the trial.

The men, who have already pleaded guilty to their charges, are Lee Stewart, Takayuki Yagami and Paul Robson.

Known as "The Ambassador," Stewart had a "full personality," and could explain how the "frantic environment of the financial crisis" gave the defendants an opening to rig the Libor rates, Sipperly said.

Allen's lawyer Michael Schachter, from the Manhattan-based firm Willkie Farr & Gallagher, cautioned jurors not to take out their anger at the banks' behavior on his client.

"Banks are not on trial here," he said. "A man is on trial here, and his life is in your hands."

Insisting there was "no evidence" Allen joined the Rabobank conspiracy, Schachter said that his client's compensation was not tied to what the traders made and that he did not make a "nickel" on the scheme that the prosecutors have alleged.

"If Tony Allen was involved in a scheme, he would have done what he was asked to do," the lawyer said.

To illustrate this defense, Schachter pointed to an instant message that Allen received on Nov. 29, 2006, requesting a high three-month Libor rate.

Though Allen replied that he "will do [his] best," Schachter said: "You're going to see that he ignored the request completely."

"Ladies and gentlemen, asking ain't getting," the lawyer emphasized.

Conti's lawyer Tor Ekeland made a similar argument, noting that the government co-conspirators traded in Japanese yen and the co-defendants submitted the rates of U.S. dollars.

The government's cooperating witnesses "treated Libor like a joke, like a vending machine," Ekeland said.

Accusing the government of having "cherry-picked" 15 emails, Ekeland said that his client's 15,000 Libor submissions would tell a more complete picture.

"You'll see no evidence that Tony's submissions were skewed to the traders' advantage," he said.

Meanwhile, the Libor investigation and prosecution stretches far beyond the lower Manhattan courtroom, where Tetsuya Motomura, 42, and Paul Thompson, 48, still await trial.

The U.K., U.S. and European Union authorities have charged 22 people over the course of their joint investigation, netting $9 billion in fines against global banks, The Guardian newspaper reported.

Earlier this year, a British jury convicted millionaire trader Tom Hayes, who received a 14-year sentence in August.

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