Ex-Deutsche Bank traders avoid prison time for Libor scheme
Two former Deutsche Bank AG (DBKGn.DE) traders will serve no prison time for conspiring to manipulate the Libor benchmark interest rate between 2005 and 2011, a federal judge ruled on Thursday, sharply criticizing U.S. prosecutors for treating the two men as “proxy wrongdoers” for a much larger scheme.
Matthew Connolly, who once led Deutsche Bank’s pool trading desk in New York, was sentenced by U.S. District Judge Colleen McMahon in Manhattan to six months’ home confinement, while Gavin Campbell Black, who worked on the bank’s London desk, was sentenced to nine months’ home confinement, which he will be allowed to serve in England.
McMahon also ordered Connolly to pay a $100,000 fine, and Black to pay a $300,000 fine.
The sentence is a setback for U.S. prosecutors in one of the few criminal cases to emerge from a sweeping probe of Libor rigging. The prosecutors had asked the judge to order “substantial” prison time for both men, saying federal guidelines called for close to 10 years, along with a $3 million fine for Connolly and a $2 million fine for Black.
McMahon, however, said the prosecutors were trying to hold Connolly and Black responsible for behavior throughout the financial industry.
“I do think it is fair to say that the government has used Mr. Connolly and Mr. Black … as proxy wrongdoers,” she said.
“We’re pleased with the court’s ruling,” Kenneth Breen, Connolly’s lawyer, said after the sentencing. Black’s lawyer, Seth Levine, had no immediate comment.
A spokesman for the U.S. Department of Justice declined to comment.
Libor, or the London interbank offered rate, underpins trillions of dollars of financial products and is based on what banks say they believe they would pay if they borrowed from other banks. It is to be phased out by 2021.
Investigations into whether banks manipulated Libor have led to billions of dollars in global settlements with financial institutions and U.S. and UK cases against several people.
Two former Rabobank traders were sentenced to prison in the United States, but their convictions were thrown out on appeal.
Connolly was the first U.S. citizen charged with Libor rigging. In a 2016 indictment, prosecutors said that from 2005 to about 2011, he, Black and others conspired to submit false estimates for U.S. dollar Libor rates to manipulate the rate for their own gain.
Deutsche Bank agreed in April 2015 to pay $2.5 billion to resolve U.S. and UK investigations of Libor rigging.
November 15, 2019
Less than a month after Judge Colleen McMahon of the New York Southern District Court issued the judgments regarding two former Deutsche Bank traders convicted of LIBOR manipulation, one of the defendants – Matthew Connolly, has filed an appeal from the District Court’s judgment.
The appeal notice was filed with the District Court on November 14, 2019.
Let’s recall that Connolly was found guilty on two counts of wire fraud and one count of conspiracy to commit wire fraud and bank fraud. He managed to avoid prison term but was ordered to pay a fine of $100,000.
The Department of Justice had pushed for a much harsher penalty, arguing that Matthew Connolly, along with Gavin Black and numerous co-conspirators at Deutsche Bank, manipulated LIBOR “with callous and knowing disregard for the far-reaching effects of their actions”. As supervisor of the bank’s New York trading desk, Connolly was said to have leveraged his position of authority and explicitly directed his subordinate, Timothy Parietti, to email the London-based submitters with the desk’s positions so they could manipulate LIBOR in New York’s favor.
The Government noted that Connolly remains openly defiant, showing no signs of remorse or acceptance of responsibility.
He wrote a book (Matthew Connolly, Target: A Scapegoat’s Guide to the Federal Justice System) about his trial full of rather obscene expressions: referring (redactions are applied – Ed.) to the prosecution as “sneaky f***ers,” “the best scumbags in the world,” “slime,” and to Mr. Parietti as “the little f***er,” “a**clown,” “coward,” “feeble little a**hole.”
The Government has argued that the Court should impose a substantial term of incarceration – at offense level 34, by the government’s calculation, the Guidelines call for 151-188 months, as well as the maximum available fine of $3,000,000. This fine represents 3 x $1,000,000, with $1 million being the maximum criminal fine for each of the three counts of conviction pursuant to 18 U.S.C. §§ 1343, 1344, 1349, and 3571(b).