Last of the Libor Riggers Face Judge -- and Are Spared Jail
Last of the Libor Riggers Face Judge in End to Uneven Crackdown
(Bloomberg) -- The global Libor-rigging prosecution sputtered toward its final chapter on Thursday when a federal judge in Manhattan said she wouldn’t jail two former Deutsche Bank AG traders convicted last year of manipulating the benchmark interest rate.
Matthew Connolly and Gavin Black were probably the last to be punished of 25 people charged in a massive transatlantic crackdown that began more than a decade ago. Overall, prosecutors managed to send only a handful of bankers to prison while winning billions of dollars in fines from the financial institutions they worked for.
They had asked U.S. District Judge Colleen McMahon to give Connolly and Black “substantial” prison sentences. The two said they were being blamed for behavior that was not only common in the industry but endorsed by senior management at Deutsche Bank.
“I cannot make Mr. Connolly and Mr. Black the scapegoats for the entire industry,” McMahon said before pronouncing their sentences. “The crime was serious and it was not victimless. But the defendants, these two men, were very minor participants in the crime.”
Connolly will have to spend six months in home confinement and pay a $100,000 fine. Black got nine months of home confinement and a $300,000 fine.
“The real sentence here began three years ago and will last the rest of your lives,” the judge told the defendants, deferring their sentences pending an appeal.
Connolly’s lawyer, Kenneth Breen, said he was “pleased” with the judge’s reckoning of his client’s punishment but would appeal the conviction. Black’s lawyer, Seth Levine, had no immediate comment.
Libor, short for London interbank offered rate, is based on a daily survey of short-term borrowing costs estimated by banks. It’s used to value trillions of dollars of financial products. The U.S. had persuaded a jury that Connolly and Black pushed peers 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.
Convictions of individual traders have been less dramatic. With some notable exceptions, like the 11-year prison term for former UBS Group AG and Citigroup Inc. trader Tom Hayes, the punishments don’t necessarily evoke what prosecutors in the current case called “one of the most appalling crimes in financial history.”
All told, the U.S. charged 12 people, four of whom went to trial, including the ex-Deutsche Bank traders. Two former Rabobank Groep traders were found guilty in 2015 and sentenced to prison, but their convictions were thrown out by an appeals court that determined the case was tainted by their forced testimony to the U.K.’s Financial Conduct Authority.
Of six defendants who pleaded guilty, only one received a prison sentence, of three months. Two who live in France haven’t shown up in the U.S.
The U.K., which closed its Libor investigation last week, charged 13. The results: one guilty plea, four trial convictions and eight acquittals. (Parts of its probe of the manipulation of the Euro interbank offered rate, or Euribor, remain open.)
That left Connolly and Black to face sentencing.
The government had asked McMahon to impose a “substantial term of incarceration” as well as a fine of $3 million for Connolly, of Basking Ridge, New Jersey, and $2 million for Black, of London, saying they “contributed to the fatal damage to Libor’s credibility and eroded public confidence in the integrity of the financial markets.” Prosecutors took special aim at Connolly for being “openly defiant,” noting he had self-published a book about his case.
The U.S. calculated that federal sentencing guidelines called for prison terms of 12 1/2 to 15 1/2 years for Connolly and nine to 11 years for Black. The judge calculated the guidelines at roughly a third of that.
In court on Thursday, she hammered at the government’s case.
“Matt Connolly was the person who had the least to do with Libor at all of Deutsche Bank,” McMahon said. She said trader Tim Parietti, who pleaded guilty and testified for the government, was the “most prolific Libor requester” at the bank.
Connolly, who joined Deutsche Bank in 1995, said the entire case against him was based on three email exchanges from more than a decade ago and that he didn’t trade Libor derivatives or submit the rate on the bank’s behalf.
He “did not stand to personally benefit from any extra gains in trades,” his lawyers told McMahon in a sentencing memo. “When Matt left Deutsche Bank in 2008, his peers went on to make tens of millions more in bonuses.”
Lawyers for Black, who spent his whole 21-year career working for Deutsche Bank, until he was fired as part of the Libor settlement, said sending him to prison would be “unnecessarily harsh.”
The two may have some hope on appeal, especially given the Rabobank traders’ overturned convictions. Throughout the trial, the judge lambasted prosecutors for legal missteps and signaled she was sympathetic to the traders’ requests to throw out the case after the verdict, although she eventually declined to do so.
Libor and similar benchmarks are being phased out.
The case is U.S. v. Connolly, 16-cr-370, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Bob Van Voris.
To contact the reporter on this story: Chris Dolmetsch in Federal Court in Manhattan at cdolmetsch@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey, Peter Blumberg
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