Barclays Currency Trader Loses Bid to Toss Fraud Case

(Bloomberg) -- A Barclays Plc foreign exchange trader must face criminal charges he manipulated currency option markets to enrich the bank at the expense of its client, Hewlett-Packard Co.

U.S. District Judge Charles R. Breyer in San Francisco rejected Robert Bogucki’s bid to dismiss claims that he deliberately depressed the volatility, and thus the value, of Hewlett-Packard’s options.

The case stems from Hewlett-Packard’s hiring of Barclays as a financial adviser for its 2011 acquisition of Autonomy Corp., which at the time was the U.K.’s second-largest software business. Through the bank, Hewlett-Packard purchased options to buy 6 billion pounds ($7.9 billion) to comply with regulations requiring access to a reserve to complete the transaction.

By September, 2011, Hewlett-Packard no longer needed the options. According to prosecutors, Bogucki and a unnamed co-conspirator promised to quietly unwind its position to get the best price. Instead, the U.S. claims, they placed trades ahead of Hewlett-Packard’s sales to depress the price of the company’s so-called cable options.

“The scheme led HP to lose millions of dollars in the value of the cable options it had originally purchased and enabled Barclays to make millions of dollars by acquiring the options from HP at a discounted and favorable price,” according to the indictment.

‘Rigged’ Price

At a June 18 hearing, Breyer told lawyers that he didn’t understand some of the government’s claims. He also said he didn’t comprehend prosecutors’ claims that Bogucki owed a fiduciary duty to Hewlett-Packard; how the alleged fraud affected financial institutions; how the conspiracy was analogous to insider trading; or how it was a fraud on the market.

“But I do understand one thing, it looks to me like it’s an outright case in which you’ve alleged that Hewlett-Packard was defrauded,” Breyer said. “The price was rigged.”

The indictment, revised in March, quotes Bogucki’s telephone conversations and electronic chats at length. In one Sept. 29, 2011, phone conversation he allegedly warned his co-conspirator to keep sales of the cable options discreet to avoid the detection of senior Barclays executives.

“If it gets back to HP by some loose-lipped market monger that we’re selling cable off of them or we’re getting out of a six yard option (i.e., a six billion pound option) over the course of a week it will go straight to the head [head of Barclays’ United States operations],” Bogucki said, according to the indictment.

At the June hearing, Bogucki’s lawyer, Sean Hecker, told Breyer that prosecutors investigated and made an agreement with Barclays in which the bank made no admission of wrongdoing. Hecker also told the judge that Barclays agreed to make a “partial disgorgement” of some of the profit it made on the trades at issue.

Hecker declined to comment on the judge’s decision.

The case is U.S. v. Bogucki, 18-cr-00021, U.S. District Court for the Northern District of California (San Francisco).

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