Ex-Currency Boss at HSBC Hopes to Be Rescued by Three-Legged Dog
Ex-Currency Boss at HSBC Hopes to Be Rescued by Three-Legged Dog
(Bloomberg) -- In a letter to the judge who could sentence Mark Johnson to as many as seven years for fraud, the former currency trader is described as a loving father who took his children for a last goodbye on the beach with their ailing three-legged Labrador, Batdog.
In an audiotape that helped convict him, the ex-head of global FX trading for HSBC Holdings Plc called a colleague a “f---ing moaning bastard -- I do all the work, he gets all the glory.”
U.S. District Judge Nicholas Garaufis in Brooklyn, New York, will choose which description of Johnson holds sway. He’ll decide April 26 if Johnson, a U.K. national, will be spared separation from his family in England or sent to a U.S. prison for leading almost a dozen traders in a scheme that “ramped” up the price of the pound.
Johnson, 52, was the first person to be tried and convicted after global banks paid more than $10 billion in penalties for currency rigging. Prosecutors say he deserves prison time and a $300,000 fine for front-running a client’s order, a practice in which bankers use inside knowledge of customer actions to profit. In an industry with “a culture of cheating,” sending Johnson away will serve as a deterrent for other traders thinking about manipulating prices, prosecutors said.
House Arrest
HSBC agreed in January to pay about $100 million in penalties to resolve a U.S. Justice Department investigation into rate rigging tied to Johnson’s case.
Johnson has asked to be spared from a term behind bars, submitting almost 130 letters of support from his family, friends and colleagues. The “mental torture” of separation from his family as a result of the American case has been “a hideous punishment,” wrote Johnson’s wife, Diane Minihane, with whom he has five of his six children. Johnson has offered to serve a term of house arrest in the U.K. while remaining under GPS monitoring.
“My fear is that he comes to represent an industry that is vilified,” said Minihane, who met Johnson when they worked together as senior foreign-exchange traders at Deutsche Bank AG in London. In a six-page letter, she describes parenting with an “innately decent and honest man,” and cites examples of his kindness to coworkers and community members.
Sympathy Bid
The letters aim to demonstrate Johnson’s “strong reputation for honesty and integrity” in an almost 30-year career in foreign exchange, during which he sought fair outcomes and supported colleagues, his lawyers said.
“The government’s effort to imprison Mark for a ‘culture of cheating’ in which he did not participate is both irrational and barbaric,” his lawyer, Frank Wohl, wrote in a memo to the court last week. “Mark is not a symbol to be punished for all manner of white-collar crime committed by others in the FX industry.”
Such bids for sympathy, usually solicited, are common in white-collar cases, but it’s unclear how successful they are in winning leniency. In 2012, former Goldman Sachs Group Inc. director Rajat Gupta submitted at least 200 letters of support from the likes of Bill Gates and former United Nations Secretary-General Kofi Annan attesting to his sound moral fiber. A federal judge sentenced Gupta to two years in prison for insider trading. Prosecutors had asked for as many as 10 years. The defense had preferred a term of community service in Rwanda.
The letters of support for Johnson seemingly clash with recorded phone calls played in court by the government, including one in which he said, “I think we got away with it,” while handling a currency order from Cairn Energy Plc in 2011. Johnson bought British pounds and tipped off HSBC traders to do the same, driving up the price to the detriment of their client, prosecutors said. Stuart Scott, HSBC’s head of foreign exchange cash trading in Europe, lost an extradition battle in the U.K. on charges relating to the transaction. He plans to appeal the decision.
‘Culture of Cheating’
“Rather than use his authority to ensure that traders on his desk played by the rules, Johnson helped to foster a culture of cheating by participating in a ploy to defraud Cairn that included subordinate traders,” prosecutors wrote. “This choice amounts to a disturbing moral shortcoming that speaks volumes about his character.”
The sentencing comes almost a year after the publication of a voluntary FX Global Code, created in an effort to clean up industry practices such as “pre-hedging” -- a euphemism for front-running. Johnson’s team was involved in HSBC’s contributions to the guidelines, according to a letter of support from a former colleague.
“Johnson’s criminal conduct was serious,” prosecutors said. “As a senior banker in one of the world’s largest and most prestigious financial institutions, he knowingly and intentionally betrayed his client in order to maximize profits for the bank, to the tune of millions of dollars.”
The case is U.S. v. Mark Johnson, 16-CR-457, U.S. District Court, Eastern District of New York (Brooklyn).
To contact the reporters on this story: Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net, Lananh Nguyen in New York at lnguyen35@bloomberg.net.
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Benjamin Purvis at bpurvis@bloomberg.net, Bob Ivry
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