The first U.S. trial to result from a worldwide investigation into the manipulation of interest rates began Wednesday when a prosecutor told jurors that two British former bankers put themselves first at one of the world’s largest banks, while defense lawyers portrayed their clients as scapegoats.
Carol Sipperly, a Justice Department prosecutor, said in Manhattan federal court that Anthony Allen, 44, and Anthony Conti, 46, abused their positions at the Dutch bank Rabobank to influence the daily benchmarks of the London Interbank Offered Rate, or LIBOR, a measurement of London-based interbank interest rates that influence interest rates worldwide.
“They sought to rig the rate to benefit themselves,” Sipperly said, urging jurors to sift through the testimony of three former co-workers at Rabobank who have pleaded guilty to conspiracy in cooperation deals as well as voluminous email and other document evidence. “It will feel like putting a puzzle together.”
She said the men “exploited and abused” their responsibilities from 2005 to 2011 to report their bank’s cost of borrowing from other banks in London, as one of 16 banks that contribute the information that influences trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans. Conti was a senior banker who handled U.S. dollars; Allen was the global head of cash.
Two years ago, Rabobank agreed to pay about $1 billion to settle U.S., British and Dutch charges of manipulating the key global interest rate. The payout included a $325 million deal with the U.S. Justice Department to allow the bank to avoid criminal prosecution in exchange for cooperation.
The prosecutor said Allen and Conti manipulated the LIBOR rate so they and their employer could earn more money through interest-rate swaps, a derivative financial product that helps companies hedge against interest-rate swings.
Defense lawyers said the evidence will show their clients acted honestly and responsibly.
“He never put in fraudulent LIBOR rates,” said Michael Schachter, defense attorney for Allen.
Schachter cautioned jurors to keep in mind that the trial was not about the financial crisis even though the prosecutor claimed the men took advantage of the turmoil worldwide to manipulate interest rates even more.
“People are understandably angry at banks for the financial crisis. Banks are not on trial here. A man is on trial here,” he said.
Aaron Williamson, a lawyer for Conti, said it became extremely difficult to estimate interest rates between banks during the financial crisis because banks stopped making loans to one another.
Meanwhile, he said, Rabobank’s Japanese yen desk bankers were to blame for any crimes.
“Traders on the Japanese yen desk treated LIBOR like a joke, like a vending machine,” Williamson said. He added that those submitting interest-rate estimates from that desk hid their deviousness from his client because they knew he was honest.
Williamson said it was no accident that the investigation of LIBOR rates at Rabobank began on the yen desk.
Once charges were brought, “they panicked and they told a story to prosecutors,” he said.