16-898 (L) 16-939 (CON)
IN THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT ____________________
UNITED STATES OF AMERICA, Appellee,
v.
PAUL ROBSON, PAUL THOMPSON, TETSUYA MOTOMURA, TAKAYUKI YAGAMI, LEE STEWART,
Defendants,
ANTHONY ALLEN & ANTHONY CONTI, Defendants-Appellants. ____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
District Court No. 1:14-cr-00272-JSR (Rakoff, J.) ______________
BRIEF FOR THE UNITED STATES ______________
ANDREW WEISSMANN Chief, Fraud Section
CAROL SIPPERLY Senior Litigation Counsel Fraud Section
BRIAN R. YOUNG Senior Trial Attorney Fraud Section Criminal Division Additional Counsel Listed Inside
LESLIE R. CALDWELL Assistant Attorney General
SUNG-HEE SUH Deputy Assistant Attorney General
JOHN M. PELLETTIERI Attorney, Appellate Section Criminal Division U.S. Department of Justice 950 Pennsylvania Ave., N.W., Rm. 1260 Washington, D.C. 20530 (202) 307-3766
ADDITIONAL COUNSEL FOR THE UNITED STATES
MICHAEL T. KOENIG Trial Attorney Antitrust Division U.S. Department of Justice
i
TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................. i
TABLE OF AUTHORITIES ..................................................................... vii
INTRODUCTION ...................................................................................... 1
JURISDICTIONAL STATEMENT ............................................................. 2
STATEMENT OF THE ISSUES ................................................................. 2
STATEMENT OF THE CASE .................................................................... 4
I. Procedural Overview ................................................................. 4
II. Statement Of Facts .................................................................... 4
A. The LIBOR Is A Benchmark Interest Rate Devised By The British Bankers’ Association And Used In Financial Transactions Throughout The World.................. 4
B. Interest Rate Swaps Are Tied To The LIBOR .................... 6
C. Allen And Conti Are Responsible For Rabobank’s LIBOR Submissions ......................................................... 8
D. Allen And Conti Manipulate The LIBOR To Increase The Profitability Of Rabobank’s Interest Rate Swaps ........ 10
1. Manipulation Of The Dollar LIBOR ...................... 12
2. Manipulation Of The Yen LIBOR .......................... 15
3. The Scheme Continues Over Several Years ............. 16
III. Indictment And Trial ............................................................... 19
SUMMARY OF ARGUMENT ................................................................. 21
ARGUMENT ........................................................................................... 26
ii
I. Defendants’ Challenges To The Sufficiency Of The Evidence And The Jury Instructions On The Wire Fraud Counts Are Meritless ............................................................... 26
A. Background .................................................................... 26
1. The Wire Fraud Statute ......................................... 26
2. The Rule 29 Motions ............................................. 27
B. Standards Of Review ...................................................... 28
1. Sufficiency Of The Evidence .................................. 28
2. Jury Instructions .................................................... 29
3. The Sufficiency Of The Evidence Is Evaluated Against The Statutory Elements Of The Offense ..... 30
C. Argument ....................................................................... 31
1. There Were No Deficiencies In The Evidence Or Jury Instructions On The Scheme-To-Fraud Requirement Of The Wire Fraud Statute ................ 32
a. The Evidence Established That Allen And Conti Devised And Participated In A Scheme To Defraud ...................................... 33
b. The District Court Accurately Instructed The Jury On The Scheme-To-Defraud Requirement ................................................ 49
2. There Were No Deficiencies In The Evidence Or Jury Instructions On The Mental State Requirement Of The Wire Fraud Statute ................ 52
a. The Wire Fraud Statute Does Not Require Knowledge That The Conduct Was Unlawful .............................................. 53
iii
b. The Jury Instructions Accurately Conveyed The Requirements For Intent To Defraud .................................................. 56
c. Ample Evidence Established That Defendants Possessed The Requisite Mental State ................................................. 58
3. Ample Evidence Established Materiality................. 62
II. A Ten-Year Statute Of Limitations Applies To The Charged Offenses .................................................................................. 67
A. Background .................................................................... 67
B. Standard Of Review ........................................................ 68
C. Argument ....................................................................... 69
1. Ample Evidence Established That The Wire Fraud Affected An FDIC-Insured Institution .......... 69
2. The Jury Instructions Were Legally Correct And Any Error Was Harmless ....................................... 73
3. Defendants’ Statute-Of-Limitations Arguments Do Not Pertain To Their Conspiracy Convictions ........................................................... 76
III. There Was No Constructive Amendment Of The Indictment .... 76
A. Legal Standard ............................................................... 76
B. Standard Of Review ........................................................ 78
C. Argument ....................................................................... 78
IV. The District Court’s Evidentiary Rulings Were Not An Abuse Of Discretion Or Plainly Erroneous ................................ 81
A. Standard Of Review ........................................................ 81
B. Argument ....................................................................... 82
iv
1. The District Court Did Not Abuse Its Discretion in Controlling the Scope of Cross-Examination ....... 83
a. Background: Direct Examination Of The Counterparty Witnesses ................................ 83
b. Defendants Did Not Provide An Adequate Offer Of Proof For Much Of The Testimony They Now Claim Was Excluded ...................................................... 84
2. The Court’s In Limine Ruling Did Not Exclude Evidence That Defendants Now Contend They Would Have Introduced At Trial ........................... 91
a. Background: The Government’s Motion In Limine ..................................................... 91
b. The Parties Understood The Narrow Scope Of The Court’s In Limine Ruling ........ 93
c. The Court’s In Limine Ruling Did Not Preclude Expert Testimony Or Cross-Examination Of Michael DiTore ................... 94
3. The Evidence Defendants Now Claim They Would Have Introduced At Trial Would Not Have Made A Difference ....................................... 97
V. The District Court Did Not Abuse Its Discretion In Denying Defendants’ Motion To Compel John Ewan’s Deposition ....... 101
A. Standard of Review....................................................... 101
B. Background .................................................................. 101
1. Federal Rule Of Criminal Procedure 15 ................ 101
2. Defendants’ Motion To Compel A Deposition ...... 102
C. Argument ..................................................................... 103
v
VI. The District Court Correctly Denied Defendants’ Kastigar Motion .................................................................................. 107
A. Background .................................................................. 108
1. Legal Background: The Kastigar Decision ............. 108
2. U.K. And U.S. Authorities Separately Investigate Manipulation Of The LIBOR At Rabobank ............................................................ 109
3. The Justice Department Conducts Interviews And Enters Into A Deferred Prosecution Agreement With Rabobank .................................. 110
4. The FCA Temporarily Decides To Pursue Regulatory Proceedings Against Robson And Provides Him With Interview Transcripts ............. 111
5. Robson Is Indicted And Agrees To Plead Guilty And Cooperate With The Justice Department ....... 112
6. Defendants Are Indicted And The District Court Holds A Kastigar Hearing ........................... 113
7. The District Court Denies The Kastigar Motion ..... 114
B. Standard Of Review ...................................................... 116
C. Argument ..................................................................... 116
1. The Interviews Conducted By U.K. Authorities Do Not Implicate The Fifth Amendment .............. 118
2. Assuming The Fifth Amendment Applies, The District Court Correctly Concluded There Was No Violation ....................................................... 124
a. Robson’s Kastigar Testimony Established That His Trial Testimony And The Evidence Presented To The Grand Jury Were Not Tainted By His Exposure To Defendants’ FCA Testimony ...................... 124
vi
b. The Record Corroborated Robson’s Kastigar Testimony And Further Demonstrated A Lack Of Taint ................... 129
c. Comparisons Between Robson’s FCA Testimony And His Trial Testimony Do Not Demonstrate Taint ............................... 133
d. The District Court Applied The Correct Legal Standard ........................................... 137
3. Any Error Was Harmless Beyond A Reasonable Doubt ................................................................. 140
VII. There Is No Basis To Reassign This Case To A Different District Judge In The Event Of A Remand .............................. 141
CONCLUSION....................................................................................... 143
CERTIFICATE OF COMPLIANCE ....................................................... 144
CERTIFICATE OF SERVICE ................................................................ 145
vii
TABLE OF AUTHORITIES
Cases
Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 (2013)............... 62
Arizona v. Fulminante, 499 U.S. 279 (1991) ................................................. 121
Barber v. Thomas, 560 U.S. 474 (2010) ......................................................... 75
Bram v. United States, 168 U.S. 532 (1897) .................................... 120, 121, 122
Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) ............................... 98
Brulay v. United States, 383 F.2d 345 (9th Cir. 1967) .................................... 122
Bryan v. United States, 524 U.S. 184 (1998) ................................................... 53
Colorado v. Connelly, 479 U.S. 157 (1986) ............................................ 121, 122
Feldman v. United States, 322 U.S. 487 (1944) ............................................. 119
Fortunato v. Ford Motor Co., 464 F.2d 962 (2d Cir. 1972) ............................... 85
Garrity v. New Jersey, 385 U.S. 493 (1967) .................................................. 123
Gregory v. United States, 253 F.2d 104 (5th Cir. 1958) .................................... 46
Hammerschmidt v. United States, 265 U.S. 182 (1924) ..................................... 32
Hedgpeth v. Pulido, 555 U.S. 57 (2008) .......................................................... 75
Henry v. Wyeth Pharm., Inc., 616 F.3d 134 (2d Cir. 2010)............................... 82
Hoffa v. United States, 385 U.S. 293 (1966) .................................................. 118
In re Terrorist Bombings of U.S. Embassies in E. Africa, 552 F.3d 177 (2d Cir. 2008) ........................................................................ 118, 120, 122
Jackson v. Virginia, 443 U.S. 307 (1979) ........................................................ 30
Jones v. Berry, 880 F.2d 670 (2d Cir. 1989) .............................................. 85, 87
Kastigar v. United States, 406 U.S. 441 (1972) ...........................................passim
viii
Liparota v. United States, 471 U.S. 419 (1985) ................................................ 74
LoSacco v. City of Middletown, 71 F.3d 88 (2d Cir. 1995) .............................. 117
Loughrin v. United States, 134 S. Ct. 2384 (2014) ...................................... 32, 46
McNally v. United States, 483 U.S. 350 (1987) .......................................... 27, 32
Mickey v. Ayers, 606 F.3d 1223 (9th Cir. 2010) ............................................ 121
Miranda v. Arizona, 384 U.S. 436 (1966) ..................................................... 120
Musacchio v. United States, 136 S. Ct. 709 (2016) ..................... 30, 31, 68, 72, 76
Neder v. United States, 527 U.S. 1 (1999) ..................................................passim
O’Rourke v. United States, 587 F.3d 537 (2d Cir. 2009) ................................... 97
Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318 (2015) ............................................................................ 43
Oregon v. Elstad, 470 U.S. 298 (1985) ......................................................... 120
Pasquantino v. United States, 544 U.S. 349 (2005)................................ 33, 46, 98
Pereira v. United States, 347 U.S. 1 (1954) ..................................................... 27
Smith v. United States, 133 S. Ct. 714 (2013) ................................................. 75
Sprint/United Mgmt. Co. v. Mendelsohn, 552 U.S. 379 (2008) .......................... 82
Stewart v. Wyoming Cattle Ranche Co., 128 U.S. 383 (1888) ............................ 46
United States ex rel. O’Donnell v. Countrywide Home Loans, Inc., 822 F.3d 650 (2d Cir. 2016) .......................................................................... 31
United States v. Agrawal, 726 F.3d 235 (2d Cir. 2013) ............................... 77, 78
United States v. Al Kassar, 660 F.3d 108 (2d Cir. 2011) ................................... 81
United States v. Altman, 48 F.3d 96 (2d Cir. 1995) ......................................... 33
United States v. Amrep Corp., 560 F.2d 539 (2d Cir. 1977).......................... 43, 44
United States v. Arboleda, 20 F.3d 58 (2d Cir. 1994) ....................................... 40
ix
United States v. Autuori, 212 F.3d 105 (2d Cir. 2000) ................................passim
United States v. Awadallah, 436 F.3d 125 (2d Cir. 2006) ............................... 143
United States v. Balsys, 524 U.S. 666 (1998) .......................................... 118, 119
United States v. Bell, 584 F.3d 478 (2d Cir. 2009) ........................................... 81
United States v. Binday, 804 F.3d 558 (2d Cir. 2015) ................ 26, 27, 74, 77, 80
United States v. Blau, 159 F.3d 68 (2d Cir. 1998) ......................................... 116
United States v. Bouyea, 152 F.3d 192 (2d Cir. 1998) ...................................... 69
United States v. Carlo, 507 F.3d 799 (2d Cir. 2007) ......................................... 52
United States v. Clemente, 22 F.3d 477 (2d Cir. 1994) ..................................... 76
United States v. Cloud, 872 F.2d 846 (9th Cir. 1989) ....................................... 54
United States v. Cohen, 260 F.3d 68 (2d Cir. 2001) ....................................... 101
United States v. Colton, 231 F.3d 890 (4th Cir. 2000) ...................................... 46
United States v. Corsey, 723 F.3d 366 (2d Cir. 2013) .................................. 63, 99
United States v. Crandall, 525 F.3d 907 (9th Cir. 2008) ................................... 53
United States v. Cuevas, 496 F.3d 256 (2d Cir. 2007) .................................... 116
United States v. David, 681 F.3d 45 (2d Cir. 2012) ....................................... 116
United States v. Delano, 55 F.3d 720 (2d Cir. 1995) ................................... 29, 58
United States v. DeMott, 513 F.3d 55 (2d Cir. 2008) ..................................... 141
United States v. Desposito, 704 F.3d 221 (2d Cir. 2013) ................................... 82
United States v. Dupre, 462 F.3d 131 (2d Cir. 2006)........................................ 76
United States v. Dynalectric Co., 859 F.2d 1559 (11th Cir. 1988) .................... 133
United States v. Facen, 812 F.3d 280 (2d Cir. 2016) ........................................ 31
United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011) .................................... 75
x
United States v. Finnerty, 533 F.3d 143 (2d Cir. 2008) ............................... 48, 49
United States v. Florez, 447 F.3d 145 (2d Cir. 2006) ................................... 68, 69
United States v. Friedman, 998 F.2d 53 (2d Cir. 1993) ............................. 61, 133
United States v. Gallo, 863 F.2d 185 (2d Cir. 1988)....................................... 133
United States v. Gay, 967 F.2d 322 (9th Cir. 1992) ......................................... 54
United States v. George, 386 F.3d 383 (2d Cir. 2004) ....................................... 53
United States v. Goldblatt, 813 F.2d 619 (3d Cir. 1987) ................................... 33
United States v. Golitschek, 808 F.2d 195 (2d Cir. 1986) ............................. 54, 55
United States v. Greenberg, No. 14- 4208, 2016 WL 4536514 (2d Cir. Aug. 31, 2016) ....................................................................................... 64
United States v. Greer, 631 F.3d 608 (2d Cir. 2011) ......................................... 28
United States v. Guadagna, 183 F.3d 122 (2d Cir. 1999) .................................. 27
United States v. Harris, 821 F.3d 589 (5th Cir. 2016) ...................................... 46
United States v. Harry, 816 F.3d 1268 (10th Cir. 2016) ................................... 82
United States v. Heinz, 790 F.3d 365 (2d Cir. 2015) ................................... 69, 73
United States v. Helmsley, 941 F.2d 71 (2d Cir. 1991) ..................................... 98
United States v. Hinton, 543 F.2d 1002 (2d Cir. 1976)................................... 133
United States v. Jackson, 196 F.3d 383 (2d Cir. 1999) ..................................... 30
United States v. James, 712 F.3d 79 (2d Cir. 2013) .......................................... 82
United States v. Johnpoll, 739 F.2d 702 (2d Cir. 1984) .................................. 101
United States v. Klein, 476 F.3d 111 (2d Cir. 2007) .................................... 26, 46
United States v. Kurlemann, 736 F.3d 439 (6th Cir. 2013) ............................... 46
United States v. Lanier, 520 U.S. 259 (1997) .................................................. 75
xi
United States v. Leonard, 529 F.3d 83 (2d Cir. 2008) ..................................... 100
United States v. Litvak, 808 F.3d 160 (2d Cir. 2015) ................................ 95, 106
United States v. Males, 459 F.3d 154 (2d Cir. 2006) ........................................ 52
United States v. Marcus, 560 U.S. 258 (2010) ................................................. 29
United States v. Martin, 411 F. Supp. 2d 370 (S.D.N.Y. 2006) ........................ 47
United States v. Massa, 740 F.2d 629 (8th Cir. 1984) ...................................... 56
United States v. McGinn, 787 F.3d 116 (2d Cir. 2015) ..................................... 55
United States v. Mechanik, 475 U.S. 66 (1986) .............................................. 140
United States v. Milstein, 401 F.3d 53 (2d Cir. 2005) ....................................... 80
United States v. Morgan, 385 F.3d 196 (2d Cir. 2004) ..................................... 29
United States v. Morgenstern, 933 F.2d 1108 (2d Cir. 1991) ............................. 47
United States v. Morrison, 153 F.3d 34 (2d Cir. 1998) ..................................... 60
United States v. Mullins, 613 F.3d 1273 (10th Cir. 2010) ............................ 70, 73
United States v. Murdock, 284 U.S. 141 (1931) ............................................. 119
United States v. Nanni, 59 F.3d 1425 (2d Cir. 1995) ....................... 108, 128, 140
United States v. Nemes, 555 F.2d 51 (2d Cir. 1977) ....................................... 129
United States v. North, 910 F.2d 843 (D.C. Cir. 1990) .................................. 139
United States v. North, 920 F.2d 940 (D.C. Cir. 1990) .................................. 128
United States v. O’Hagan, 521 U.S. 642 (1997) ............................................... 45
United States v. Orlandez-Gamboa, 320 F.3d 328 (2d Cir. 2003) ..................... 121
United States v. Parse, 789 F.3d 83 (2d Cir. 2015)........................................... 52
United States v. Patane, 542 U.S. 630 (2004) ................................................ 120
United States v. Pelletier, 898 F.2d 297 (2d Cir. 1990) ................................... 138
xii
United States v. Pierce, 224 F.3d 158 (2d Cir. 2000) ........................................ 33
United States v. Pimentel, 346 F.3d 285 (2d Cir. 2003) .................................... 30
United States v. Poindexter, 951 F.2d 369 (D.C. Cir. 1991) .............. 126, 127, 128
United States v. Porcelli, 865 F.2d 1352 (2d Cir. 1989) .................................... 53
United States v. Precision Med. Labs., Inc., 593 F.2d 434 (2d Cir. 1978) ............. 54
United States v. Quattrone, 441 F.3d 153 (2d Cir. 2006) ................................ 142
United States v. Quinones, 511 F.3d 289 (2d Cir. 2007) ................................... 29
United States v. Ragosta, 970 F.2d 1085 (2d Cir. 1992) .............................. 33, 46
United States v. Rahman, 189 F.3d 88 (2d Cir. 1999) ...................................... 60
United States v. Reifler, 446 F.3d 65 (2d Cir. 2006) ......................................... 33
United States v. Rigas, 490 F.3d 208 (2d Cir. 2007) ........................... 77, 81, 106
United States v. Rivera, 799 F.3d 180 (2d Cir. 2015) ....................................... 30
United States v. Rivieccio, 919 F.2d 812 (2d Cir. 1990) .................................. 140
United States v. Robin, 553 F.2d 8 (2d Cir. 1977) ......................................... 141
United States v. Sabhnani, 599 F.3d 215 (2d Cir. 2010) ........................ 28, 29, 30
United States v. Salameh, 152 F.3d 88 (2d Cir. 1998) ............................. 121, 122
United States v. Salmonese, 352 F.3d 608 (2d Cir. 2003) .................................. 77
United States v. Schlisser, 168 Fed. Appx. 483 (2d Cir. 2006) .......................... 56
United States v. Schmidgall, 25 F.3d 1533 (11th Cir. 1994) ............................ 135
United States v. Seidling, 737 F.3d 1155 (7th Cir. 2013) .................................. 65
United States v. Sewell, 252 F.3d 647 (2d Cir. 2001) ....................................... 52
United States v. Skelly, 442 F.3d 94 (2d Cir. 2006) .......................................... 48
United States v. Slough, 641 F.3d 544 (D.C. Cir. 2011) ........... 128, 129, 130, 139
xiii
United States v. Snow, 462 F.3d 55 (2d Cir. 2006) ........................................ 122
United States v. Solomon, 509 F.2d 863 (2d Cir. 1975) .................................. 123
United States v. Stavroulakis, 952 F.2d 686 (2d Cir. 1992) ............................... 27
United States v. Stevens, Nos. 97-1260, 97-1586 & 98-1348, 2000 WL 419938 (2d Cir. 2000) ..................................................................... 55
United States v. Stockheimer, 157 F.3d 1082 (7th Cir. 1998) ............................. 54
United States v. Tagliaferri, 648 Fed. Appx. 99 (2d Cir. 2016) ......................... 29
United States v. Tantalo, 680 F.2d 903 (2d Cir. 1982) ................................... 129
United States v. Thomas, 377 F.3d 232 (2d Cir. 2004) ................................ 27, 88
United States v. Trapilo, 130 F.3d 547 (2d Cir. 1997) ........................... 27, 32, 46
United States v. Vilar, 729 F.3d 62 (2d Cir. 2013) ........................................... 77
United States v. Weissman, 195 F.3d 96 (2d Cir. 1999) .................................. 126
United States v. Welch, 455 F.2d 211 (2d Cir. 1972) ..................................... 122
United States v. Whiting, 308 F.2d 537 (2d Cir. 1962) ................................... 101
United States v. Whitten, 610 F.3d 168 (2d Cir. 2010) ..................................... 91
United States v. Wilson, 699 F.3d 235 (2d Cir. 2012) .................................... 116
United States v. Wolf, 813 F.2d 970 (9th Cir. 1987) ...................................... 122
United States v. Worthington, 822 F.2d 315 (2d Cir. 1987)............................... 42
United States v. Yousef, 327 F.3d 56 (2d Cir. 2003) ....................................... 122
Williams v. United States, 458 U.S. 279 (1982) ............................................... 42
Statutes, Rules, and Constitutional Provisions
15 U.S.C. § 77k(a) ...................................................................................... 43
15 U.S.C. § 78ff .................................................................................... 53, 56
xiv
18 U.S.C. § 20(1) ....................................................................................... 68
18 U.S.C. § 924(a)(1)(D) ............................................................................ 53
18 U.S.C. § 1014 ........................................................................................ 42
18 U.S.C. § 1341 ................................................................................... 27, 53
18 U.S.C. § 1343 ................................................................................. passim
18 U.S.C. § 1344 ........................................................................................ 53
18 U.S.C. § 1344(1) .................................................................................... 27
18 U.S.C. § 1349 .................................................................................... 4, 19
18 U.S.C. § 3231 .......................................................................................... 2
18 U.S.C. § 3282 ........................................................................................ 67
18 U.S.C. § 3290 ........................................................................................ 68
18 U.S.C. § 3293(1) .................................................................................... 76
18 U.S.C. § 3293(2) ......................................................................... 67, 69, 74
18 U.S.C. § 6002 ...................................................................................... 108
18 U.S.C. § 6003 ...................................................................................... 108
22 U.S.C. § 2778(b)(2) ................................................................................ 54
28 U.S.C. § 1291 .......................................................................................... 2
Fed. R. App. P. 4 ......................................................................................... 2
Fed. R. Crim. P. 15 ......................................................................... 3, 24, 101
Fed. R. Crim. P. 29 ......................................................................... 27, 28, 31
Fed. R. Evid. 103 advisory committee’s note ............................................... 82
Fed. R. Evid. 103(a)(2) ............................................................................... 84
Fed. R. Evid. 103(e) ................................................................................... 82
xv
Fed. R. Evid. 403 ............................................................................ 82, 92, 97
Second Circuit Rule 32.1.1(b)(2) ................................................................. 55
U.S. Const. amend. V .............................................................................. 108
Other Authorities
1 Weinstein’s Federal Evidence § 103.20 (2d ed. 2016) ..................................... 85
2 Wayne R. LaFave, et al., Crim. Proc. § 6.10(d) (4th ed. 2015) ................... 122
3 Leonard B. Sand, et al., Modern Federal Jury Instructions: Criminal, Instruction 44-5 (2016) ........................................................................... 56
W. Page Keeton et al., Prosser & Keeton on Torts § 109 (5th ed. 1984) ............. 43
Restatement (Second) of Torts § 525 cmt. c (1977) ....................................... 43
Restatement (Second) of Torts § 525 cmt. d (1977) ................................. 43, 45
Restatement (Second) of Torts § 529 (1977) ................................................. 46
Restatement (Second) of Torts § 538 (1977) ................................................. 62
Restatement (Second) of Torts § 538A cmt. a (1977) .................................... 45
Restatement (Third) of Torts: Liab. for Econ. Harm § 14 Tentative Draft No. 2 cmt. a (2014) ....................................................................... 51
I Oxford English Dictionary 211 (2d ed. 1989) ................................................. 73
Chad Bray, Ex-Trader Tom Hayes Ordered to Pay $1.2 Million in Libor Case, N.Y. Times, Mar. 23, 2016 .......................................................... 102
1
INTRODUCTION
Defendants Anthony Allen and Anthony Conti devised and participated
in a scheme to manipulate the London Interbank Offered Rate (LIBOR), a
benchmark interest rate calculated by the British Bankers’ Association (BBA)
and used by participants in financial transactions throughout the world.
The fraudulent scheme was simple. Defendants were responsible for
submitting to the BBA a daily estimate of the interest rate that Rabobank (their
employer, a large international bank) could obtain if it were to borrow money
from another bank on that day. Their submission was then averaged with
submissions from other banks to calculate that day’s LIBOR. Every morning,
defendants arrived at a number that estimated Rabobank’s borrowing costs, as
required by the BBA, but they often did not convey that number to the BBA—
instead “biasing” or “bumping” the number in a direction that they knew
would benefit Rabobank traders who had entered into LIBOR-dependent
financial transactions. The deceptive submissions enriched Rabobank and its
traders but were costly to Rabobank’s counterparties in those transactions,
which included numerous institutions in the United States.
Allen and Conti were convicted of wire fraud and conspiracy to commit
wire fraud and bank fraud. Their convictions should be affirmed.
2
JURISDICTIONAL STATEMENT
The district court had jurisdiction over this criminal case under 18
U.S.C. § 3231. The court entered judgments on March 18, 2016. SPA 66-77.1
Defendants filed timely notices of appeal on March 23 and March 28, 2016. JA
715-20; see Fed. R. App. P. 4(b)(1)(A)(i). This Court has jurisdiction under 28
U.S.C. § 1291.
STATEMENT OF THE ISSUES
1. Whether the evidence sufficiently established the elements of wire
fraud, in violation of 18 U.S.C. § 1343, and whether the district court’s jury
instructions accurately conveyed the elements of wire fraud to the jury;
specifically:
a. Whether (i) a reasonable jury could conclude that
defendants devised or participated in a scheme to defraud, and (ii) the district
court properly instructed the jury on the requirements of a scheme to defraud.
1 “SPA” refers to the Special Appendix defendants submitted with their
appellate brief. “JA” refers to the Joint Appendix. “GSA” refers to the Government’s Supplemental Appendix, which contains the trial exhibits cited in this brief. “Dkt.” refers to a district court docket entry. “Tr.” refers to the consecutively-paginated trial transcript. “Kastigar Tr.” refers to the consecutively-paginated transcript of the Kastigar hearing, and “Kastigar GX” refers to a government exhibit at that hearing. “Br.” refers to defendants’ consolidated brief on appeal. “Amicus Br.” refers to the amicus brief filed by the New York Council of Defense Lawyers.
3
b. Whether (i) a reasonable jury could conclude that
defendants possessed an intent to defraud, and (ii) the district court properly
instructed the jury on the requisite mental state for wire fraud.
c. Whether a reasonable jury could conclude that the deceptive
misrepresentations underlying the scheme to defraud were material.
2. Whether a ten-year statute of limitations applied to defendants’
wire fraud offenses.
3. Whether the government’s trial evidence and the district court’s
jury instructions constructively amended the wire fraud charges alleged in the
indictment.
4. Whether the district court erroneously excluded evidence that was
important to the defense.
5. Whether the district court abused its discretion in denying
defendants’ motion under Fed. R. Crim. P. 15 to depose a potential witness in
the United Kingdom.
6. Whether the district court correctly denied defendants’ Kastigar
motion.
7. Whether the case should be reassigned to a different district judge
in the event of a remand.
4
STATEMENT OF THE CASE
I. Procedural Overview
After a jury trial in the United States District Court for the Southern
District of New York, defendants Anthony Allen and Anthony Conti were
convicted on one count of conspiracy to commit wire fraud and bank fraud, in
violation of 18 U.S.C. § 1349, and eight substantive counts of wire fraud, in
violation of 18 U.S.C. § 1343. SPA 66-67, 72-73. Allen was also convicted on
ten additional substantive counts of wire fraud. SPA 66-67. Allen was
sentenced to 24 months of imprisonment. SPA 68. Conti was sentenced to a
year and a day of imprisonment. SPA 74.
II. Statement Of Facts
The evidence at trial, construed in the light most favorable to the
verdicts, established the following.
A. The LIBOR Is A Benchmark Interest Rate Devised By The British Bankers’ Association And Used In Financial Transactions Throughout The World
Banks borrow cash (in different currencies) from other banks through
what is called the “interbank market.” Tr. 143-45, 320. The London Interbank
Offered Rate (LIBOR) is a benchmark interest rate that is intended to reflect
interest rates in the interbank market on any given day. Tr. 117, 138-39, 143.
During the time period relevant to this case, the LIBOR was administered by a
5
trade group, the British Bankers’ Association (BBA), which published the
LIBOR each day for a number of different currencies (including the dollar and
the yen) and a number of different loan durations (called “tenors”). Tr. 141.
As the administrator of the LIBOR, the BBA determined the method for
calculating the benchmark rate. Tr. 143. For each currency, the BBA picked a
panel of banks, typically established institutions that were active in the
interbank market and had a large presence in London. Tr. 143, 987. The dollar
LIBOR panel, for example, consisted of 16 banks, including Rabobank. Tr.
143, 146-47. Every day, the BBA required each panel member to submit an
honest and truthful estimate of the best interest rate the bank could obtain if it
were to borrow money from another bank at around 11 a.m. London time. Tr.
143-45, 1073. The BBA specifically instructed each panel member to report
“the rate at which it could borrow funds, were it to do so by asking for and
then accepting inter-bank offers in reasonable market size just prior to” 11:00
a.m. London time. GSA 96. The panel banks submitted that figure each
morning for loans of different tenors (e.g., one month, three months, six
months, and a year). Tr. 145, 155-56, 305.
Each panel bank designated someone within its organization to collect
the relevant information and send the figures to the BBA. Tr. 145. The BBA
sorted the submitted numbers by size, eliminated the four highest and the four
6
lowest submissions, and then averaged the remaining eight submissions. Tr.
146, 321. The resulting number became the LIBOR fixed rate and was released
to the public daily. Tr. 146. The BBA publicly published its method for
calculating the LIBOR, and that method remained the same throughout the
relevant period in this case. Tr. 147-49.
The LIBOR was (and is) used in transactions throughout the financial
system and across the world. Tr. 128-30, 139-40, 142-43. The LIBOR is often
used, for example, to set the terms of different types of financial products,
including certain types of derivative contracts, such as interest rate futures and
interest rate swaps. Tr. 137, 305, 321.
B. Interest Rate Swaps Are Tied To The LIBOR
An interest rate swap is an agreement between two parties in which one
agrees to pay a fixed interest rate on some agreed-upon notional amount, while
the other party agrees to pay a floating rate (usually tied to the LIBOR) on that
same amount. Tr. 122, 150, 304-05, 648-49. The two sides agree to exchange
payments on agreed-upon dates over the course of an agreed-upon time period.
Tr. 122, 305-06, 310-11. An interest rate swap agreement therefore will specify
the notional amount; the duration of the agreement; the fixed rate paid by one
party; the benchmark rate (typically the LIBOR) used to determine the floating
rate paid by the other party; the dates on which the floating rate is reset (often
7
called the “fixing” or “fixing date”); and the dates of the payments. Tr. 131-32,
140-41, 816-19; see, e.g., GSA 103-08 (swap agreement between Rabobank and
Citibank).
A trader might enter into an interest rate swap for speculative purposes,
i.e., to make money, if he or she thinks that interest rates will move in a
particular direction. Tr. 123-24. A trader who thinks interest rates are going to
fall would agree to pay the floating rate (LIBOR), while a trader who thinks
interest rates are going to rise would agree to pay the fixed rate. Tr. 123-26,
306, 309-10, 311.
A party may also enter into an interest rate swap in order to manage risk,
i.e., to “hedge.” Tr. 126-27, 135-36. A company that funds its operations
through a loan with a floating interest rate tied to the LIBOR, for example, is
exposed to the risk that the LIBOR will increase. Tr. 126-27. The company can
use an interest rate swap as, in effect, an insurance contract against the risk
that interest rates will increase, effectively transforming the company’s initial
loan agreement into a fixed rate loan. Tr. 127-28. Traders may also use interest
rate swaps to hedge, in an attempt to “balance their book” and reduce their
exposure to changing interest rates. Tr. 133, 135-36.
8
Interest rate swaps are widely used in the marketplace. Tr. 128-29, 132-
33. Between 2007 and 2010, the cumulative notional value of interest rate
swaps tied to the dollar or yen LIBOR averaged about $160 trillion. Tr. 142-43.
The LIBOR definition devised by the BBA did not allow a panel bank,
when submitting its honest estimate of its borrowing costs, to take into account
the submission’s effect on the profitability of interest rate swaps held by the
bank’s traders. Tr. 150, 250-52, 684, 1204, 1206, 1208-09, 1277-78. Rather, the
definition strictly provided that a panel bank’s submission should reflect an
honest and truthful estimate of the best interest rate the bank could obtain if it
were to borrow money from another bank at around 11 a.m. London time on
that particular day. Tr. 150, 1204.
C. Allen And Conti Are Responsible For Rabobank’s LIBOR Submissions
During the time periods relevant to this case, Rabobank was appointed
by the BBA to the yen and dollar LIBOR panels. Tr. 146-47. Anthony Allen
started at Rabobank in 1998 as a cash trader, borrowing and lending cash (U.S.
dollars) on behalf of the bank. Tr. 172-74, 1162-63. He was also responsible for
determining and submitting Rabobank’s dollar LIBOR submissions to the
BBA until his promotion in 2005, when he became Global Head of Liquidity
and Finance, with responsibility for supervising other cash traders at
Rabobank. Tr. 315-16, 650-51, 1162-64. Upon his promotion, Allen transferred
9
responsibility for Rabobank’s dollar LIBOR submissions to Anthony Conti.
Tr. 315-16, 1171-72.
Conti was a cash trader who worked under Allen’s supervision and, as
noted, was responsible for Rabobank’s dollar LIBOR submissions starting in
2005. Tr. 175-76, 183, 651-52. If Conti was out of the office or otherwise
unavailable, responsibility for the dollar LIBOR submission fell to another
cash trader, Damon Robbins. Tr. 191, 317-18. If neither Conti nor Robbins
was available, responsibility for the dollar LIBOR submission reverted back to
Allen. Tr. 184-85, 191, 235-36. Paul Robson also was a cash trader who
worked under Allen’s supervision and was responsible for Rabobank’s yen
LIBOR submissions. Tr. 300-02, 315-16, 599-600. When Robson was
unavailable, responsibility for the yen LIBOR submission fell to another cash
trader, Paul Butler. Tr. 335-36, 599.
The cash traders—including Allen, Conti, and Robson—often used
interest rate swaps to mitigate risk, but also for speculative purposes as well.
Tr. 175-77, 301-02, 307, 316-18, 650. Derivatives traders at Rabobank also
entered into (or “traded”) interest rate swaps agreements, generally on a
speculative basis with the hope of profiting from the transactions. Tr. 166-71,
317. Among the Rabobank derivatives traders who traded interest rate swaps
were Lee Stewart, who traded dollar-based swaps out of Rabobank’s London
10
office, Tr. 166, 317; Christian Schluep, who traded dollar-based swaps out of
the bank’s New York office, Tr. 178; Paul Thompson, who traded dollar- and
yen-based swaps out of the Hong Kong office, Tr. 201-02, 319, 650; and
Tetsuya Motomura and Takayuki Yagami, who both traded yen-based swaps
out of the Tokyo office, Tr. 318-19, 645-46, 751.2
D. Allen And Conti Manipulate The LIBOR To Increase The Profitability Of Rabobank’s Interest Rate Swaps
As described, Conti and Robson were principally responsible for
Rabobank’s dollar and yen LIBOR submissions to the BBA, with their
responsibilities occasionally covered by Butler, Robbins, or Allen. As also
described, the LIBOR submitter’s task was to convey to the BBA his estimate
of the rates at which Rabobank could borrow money in those currencies, for
different tenors, as of 11 a.m. London time. Rabobank’s LIBOR submissions
were transmitted electronically at around 11 a.m. each day. Tr. 320, 1165.
In order to accomplish that task, the dollar and yen LIBOR submitters—
usually Conti and Robson, but sometimes Allen—collected market
information each morning. Tr. 185. As cash traders, they possessed relevant
market knowledge and expertise. Tr. 1168. The LIBOR submitters also
2 Allen, Conti, Robson, Robbins, Butler, and Stewart all worked in close
proximity to each other at an open desk in Rabobank’s London office. Tr. 180-82, 313-15; GSA 93 (seating chart).
11
collected information from outside sources, including cash brokers, i.e., brokers
who acted as middlemen for banks borrowing and lending cash. Tr. 185, 354,
515-17, 1084-85, 1165-66. Armed with that information, the submitters arrived
at an estimate that would figure into the daily LIBOR. Tr. 183, 333-34.
According to Allen, the process was “straightforward.” Tr. 1168-69.3
Rabobank’s LIBOR submitters, however, did not always—or even
usually—transmit their honest estimate to the BBA, but instead sent in a
different number that would benefit Rabobank traders. Tr. 185-90, 252-53, 320-
22, 605. Before transmitting their interest-rate estimates, the submitters—
usually Conti and Robson, but sometimes Allen—received information from
traders whose positions (typically interest rate swaps) would be affected by that
day’s LIBOR. Tr. 187-88, 192, 324-27, 361, 391-93, 653. The submitters then
changed the number that they otherwise would have submitted to the BBA,
biasing their submission to the Rabobank trader’s advantage. Tr. 321-22, 414,
605; see, e.g., Tr. 203-04; GSA 14 (Conti to Thompson: “where do you like to
3 Rabobank did not necessarily borrow money from another bank on any
particular day, let alone borrow money shortly before 11 a.m. that day, see Tr. 514, 1169, and therefore determining Rabobank’s LIBOR submission required an estimate of the interest rates Rabobank would be able to obtain if it were to borrow money from another bank, rather than an evaluation of the interest rates another bank actually offered to Rabobank, Tr. 407-14; GSA 21, 73-78.
12
see” the LIBOR); Tr. 244-46; GSA 120 (Allen to Thompson: “[w]here do you
want” the LIBORs; Thompson to Allen: “[s]midgen lower”).4
1. Manipulation Of The Dollar LIBOR
The derivatives trader Lee Stewart (nicknamed the “Ambassador”)
traded interest rate swaps tied to the dollar LIBOR and regularly informed
Conti if he had a “fixing” that would benefit from either a high or low
LIBOR—meaning that, on that day, the floating rate on one of his swaps
would be “fixed” by reference to that day’s LIBOR. Tr. 167, 186-87, 191-95,
234-35, 246-47, 327. If Stewart held a position, for example, in an interest rate
swap in which a counterparty agreed to pay LIBOR, Conti—at Stewart’s
request, and in order to benefit Stewart—often sent in an inflated LIBOR
submission that did not reflect his honest estimate of Rabobank’s borrowing
costs. Tr. 187-89, 211-12, 257; GSA 20, 111, 119. According to Stewart, Conti
assisted him “quite a lot” in this manner. Tr. 189; see Tr. 211-12; GSA 20
(Conti email, stating that Stewart “had big fixing so we help him today”); Tr.
230-31; GSA 5 (Conti explaining that Stewart had a “fixing” and so the
4 Rabobank traders sometimes held positions that contradicted each
other, with one requesting a high LIBOR and another a low one. Tr. 239-40, 334. In that case, the submitter had to determine whose request to act upon, often giving preference to the trader with the greatest exposure. Tr. 189-90, 334-35, 653, 794.
13
LIBOR submission was “low”). If Conti or Robbins was unavailable, Allen
received and acted on Stewart’s requests. Tr. 191, 193, 235-37.5
Conti and Allen also received and accommodated requests from others
who traded dollar-based interest rate swaps, including Christian Schluep and
Paul Thompson. On August 13, 2007, for example, Schluep emailed Conti
saying he was “GONNA NEED A FRICKIN HIGH 6 MTH FIX
TOMORROW IF OK WITH U ..... 5.42?” GSA 15; Tr. 207-11. Conti
instructed Schluep to send him a reminder the next day. GSA 15. Schluep
complied, and again requested a submission of 5.41 or 5.42. GSA 16. Allen
knew about Schluep’s request, informing another trader, shortly after 10 a.m.,
that Rabobank’s six-month LIBOR submission would be 5.42, because “i think
thats [sic] what christian [Schluep] needs.” GSA 17. Rabobank’s submission
that day was, in fact, 5.42. Tr. 867-68; GSA 47.
Conti and Allen similarly accommodated trader requests on many other
occasions. For example:
5 Once, when Conti, Robbins, and Allen were all unexpectedly absent at
the 11 a.m. deadline, Robson (the yen LIBOR submitter) was required on short notice to determine and transmit the bank’s dollar LIBOR submissions. Tr. 401-02. Stewart later became angry when he learned that Robson had submitted the numbers without first consulting him. Tr. 402. Allen told Robson not to worry but instructed Robson to check with Stewart in the future. Tr. 402.
14
• On October 6, 2006, Schluep sent a message to Allen stating, “HELLO SKIPPER, CAN U PUT 3S AT 37 FOR ME TOMORROW PLS ..... MANY THANKS.” GSA 8; Tr. 236-37. Allen replied, “NEVER IN DOUBT!” GSA 8.
• On October 31, 2006, Schluep asked Conti for a “SMALL FAVOUR AS USUAL, LOW 2S HIGH 3S IF POSSIBLE MATEY,” meaning he wanted a low two-month LIBOR and a high three-month LIBOR. GSA 116; Tr. 199-200. Conti responded, “Will do matey on the libors.” GSA 116.
• On November 29, 2006, Schluep sent a message to Allen asking for a “LOW 1S HIGH 3S LIBOR PLS!!!” GSA 6; Tr. 239-40. Allen told Schluep “OK MATE,” he would “DO MY BEST,” and they would “SPEAK LATER.” GSA 6. Schluep later thanked Allen, because the submissions were “BANG ON THE MONEY!” GSA 6; Tr. 403-04. Allen told Schluep, “NO WORRIES” and joked that he “HAD TO WORK MY WAY OUT OF AN AMBASS HEADLOCK TO GET THOSE IN,” probably because Stewart (the Ambassador) had different needs that day with respect to the LIBOR. GSA 6; Tr. 239-40.
• On December 1, 2006, Schluep sent a message to Allen stating,
“APPRECIATE 3S GO DOWN, BUT A HIGH 3S TODAY WOULD BE NICE.” GSA 10; Tr. 242-43. Allen told Schluep, “I AM FAST TURNING INTO YOUR LIBOR BITCH!!!” GSA 10. Schluep responded that his request was “JUST FRIENDLY ENCOURAGEMENT” and that he “APPRECIATE[D] THE HELP.” GSA 10. Allen assured Schluep that he should have “NO WORRIES” and that he (Allen) was “GLAD TO HELP.” GSA 10.
• On July 17, 2007, Schluep asked Conti, “IF ANY CHANCE, A HIGH
3MTH TODAY PL!” GSA 26. Conti agreed to help, telling Schluep, “Ok matey ... high one today.” GSA 26.
• On August 13, 2007, Schluep sent a message to Conti, requesting “HIGH 3S AND 6S PLS TODAY MATE (ESP 6MNTHS!!) IF U WOULD BE SO KIND... GOTTA MAKE MONEY SOMEHOW!”
15
GSA 13; Tr. 203, 388-89. Conti responded, “cool,” and Schluep thanked him, noting that “EVERY LITTLE HELPS!” GSA 13.6
2. Manipulation Of The Yen LIBOR
Robson likewise altered his LIBOR submissions to benefit traders who
held positions in interest rate swaps tied to the yen LIBOR. Tr. 343, 662-63.
Robson sought and received confirmation from Allen (his supervisor) that the
practice was accepted. Tr. 323-24, 327-28, 335-36, 340-43; see Tr. 401-03.
Robson knew that a LIBOR submission outside a certain range would prompt
a phone call from the BBA questioning the submission. Tr. 328-33; see GSA
24. Consequently, when submitting an altered rate to accommodate a trader,
Robson generally chose a rate that appeared plausible on its face (to avoid
scrutiny), although he sometimes transmitted LIBOR submissions outside this
range when requested. Tr. 329, 333, 344-46, 445-47, 605-06; GSA 9, 112-15.
Robson regularly accommodated requests from Tetsuya Motomura,
Takayuki Yagami, and Paul Thompson. For example:
• On September 21, 2008, Robson told Yagami that market information supported a submission of 0.85 for the one-month yen LIBOR. GSA 19; Tr. 356-58. Yagami asked for a higher rate, specifically 0.90. GSA 18-19. Robson agreed, even though he would “probably get a few phone calls,”
6 For the sake of economy, we provide only illustrative examples and do
not detail all the evidence showing that Conti and Allen accommodated trader requests. See generally Tr. 196-246, 325-26, 403-05, 664-69; GSA 1-17, 26-27, 70-72, 79-87, 94, 100-02, 116, 118-22.
16
telling Yagami that there were “bigger crooks in the market than us guys!” GSA 18.
• On November 8, 2006, Thompson told Robson he had “a few big 3mth fixings in next 2 days” and asked Robson to “bump it up a couple,” despite what the three-month Yen LIBOR rate “actually” should have been. GSA 117; Tr. 358-59. Robson responded that he would “set them high and dry.” GSA 117.
• On March 19, 2008, Yagami told Robson “[w]e have loads of 6mth fixings today” and—conveying a request from Motomura—asked Robson to submit 1.10 for the six-month yen LIBOR. GSA 119; Tr. 659-62. Robson responded that market information supported a 1.03 submission for the six-month LIBOR but that he would submit 1.10 as asked, even though it would likely prompt a phone call. GSA 109-10.
3. The Scheme Continues Over Several Years
The biased LIBOR rates submitted by Allen, Conti, Robson, and others,
often had their intended effect, changing the LIBOR in a manner that benefited
Rabobank traders. Tr. 343-44. On May 10, 2006, for example, Robson had
determined, based on market information, that Rabobank’s six-month yen
LIBOR submission should be 0.33. Tr. 346-48; GSA 114. The derivatives
trader Paul Thompson, however, requested a low six-month yen submission
for that day. Tr. 346-49; GSA 112, 114. Robson submitted 0.26 to help
Thompson, although he was “embarrassed” by that very low submission. Tr.
346-49; GSA 114. The following chart demonstrates the submission’s effect on
the LIBOR for that day:
17
GSA 99; see Tr. 348-49.7
The scheme was well entrenched by 2006 and continued for several
years. Tr. 628-29, 654-56. There was an established culture of manipulating the
LIBOR at Rabobank, involving a core “circle” of participants that included
Allen, Conti, Robson, Robbins, Butler, Stewart, Thompson, Motomura, and
Yagami. Tr. 323-25, 629-31, 664-69, 685.
Accordingly, when Robson left Rabobank in 2008, and it was unclear to
Yagami who would be handling Rabobank’s yen LIBOR submissions, Yagami
7 The chart assumes a more conservative 0.30 honest submission by
Robson, rather than the 0.33 submission that the evidence demonstrates he otherwise would have provided. Tr. 348.
18
contacted other participants in the scheme—including Conti and Allen—to
make sure that his requests would be received and accommodated. Tr. 685-
700; GSA 4, 86, 94. Conti eventually conveyed the name of the new yen
LIBOR submitter to Yagami and assured him that they would proceed
“exactly the same as [Robson] did it previously.” GSA 87. Conti confirmed
that LIBOR submitters would still accept requests “to go a bit higher or a bit
lower.” GSA 80-81; Tr. 690-95.
Allen, Conti, and the others understood that these practices were
deceptive and provided Rabobank with an unfair advantage over its
counterparties. Tr. 252-53, 414, 697, 1278; GSA 71-72; see infra pp. 58-61.
They knew that it was improper to take into account trader profits to determine
Rabobank’s LIBOR submissions. Tr. 250-51, 322, 1204, 1277-78. And they
understood that there was a “true rate”—their honest estimate of Rabobank’s
borrowing costs—which was different than the rates they actually submitted to
the BBA. GSA 22; Tr. 253-55; see Tr. 333-34, 414 (Robson explaining that he
would use market information to come to a specific number and then “moved
it higher” if requested by a trader); Tr. 389-91; GSA 100 (Conti explaining that
his LIBOR submissions were “on the high side from where they should’ve
been”); see infra pp. 36-40.
19
III. Indictment And Trial
A federal grand jury returned an indictment charging Allen and Conti
with one count of conspiracy to commit wire fraud and bank fraud, in
violation of 18 U.S.C. § 1349, and eight substantive counts of wire fraud, in
violation of 18 U.S.C. § 1343. JA 77-110. Allen was also charged with ten
additional substantive counts of wire fraud. JA 106-10.
Allen and Conti were tried jointly by a jury and found guilty on all
counts. Tr. 1655-59. At trial, the government introduced, among other
evidence, communications between participants in the fraudulent scheme—
including emails, “instant chats,” and phone calls—and testimony from three
central participants: Lee Stewart, Paul Robson, and Takayuki Yagami. Tr.
165-286 (Stewart); Tr. 298-485, 510-643 (Robson); Tr. 643-814 (Yagami). The
government also introduced testimony from three witnesses whose companies
had entered into swap agreements with Rabobank. Tr. 494-510 (Timothy
Smith); Tr. 822-31 (Tracy Twomey); Tr. 831-43 (Michael DiTore). Expert
testimony from Lawrence Harris, Ph.D., provided background about the
LIBOR and about interest rate swaps. Tr. 115-61. A forensic accountant from
the FBI provided summary testimony regarding Rabobank’s LIBOR
submissions. Tr. 843-960.
20
Defendants offered testimony from two expert witnesses. Tr. 981-1029
(Edward Weinberger, Ph.D.); Tr. 1034-1156 (Marti Subrahmanyam, Ph.D.).
Conti’s expert (Weinberger) testified that he evaluated Rabobank’s LIBOR
submissions and did not observe a statistically significant benefit to certain
Rabobank traders, including Conti and Stewart. Tr. 1011-13. Subrahmanyam
testified that the dollar LIBOR submissions from Rabobank (on select dates he
examined) were “in line with” information from brokers on those dates and
submissions by other LIBOR panel banks. See, e.g., Tr. 1098-1102.
Subrahmanyam testified, however, that—on the basis of the data he
examined—he had “no ability to answer” whether defendants submitted an
altered LIBOR rate in order to accommodate a trader’s preferences and profit
that trader. Tr. 1037, 1040-41, 1075-76, 1083, 1122.
Allen also took the stand in his defense. Tr. 1157-1330. He testified that
the procedure for determining Rabobank’s LIBOR submissions was
“straightforward.” Tr. 1168-69. Allen testified that cash traders possessed the
relevant expertise and market knowledge and also had access to useful
information from cash brokers. Tr. 1165-67, 1169, 1175, 1277. He repeatedly
said that it would be improper to take into account a trader’s financial position
when determining Rabobank’s LIBOR submission. Tr. 1204, 1206, 1210-11,
1214-15, 1222, 1227, 1232-33, 1277-78, 1289, 1303. Allen acknowledged that
21
there were occasions when derivatives traders improperly asked him to alter a
LIBOR submission. Tr. 1201-03, 1205-06, 1208-12, 1219-23, 1274-75.
According to Allen, however, he never acted upon or accommodated those
requests. Tr. 1222, 1266-67, 1279, 1328.
SUMMARY OF ARGUMENT
1. Ample evidence supported defendants’ wire fraud convictions, and
the jury instructions accurately described the elements of the crime.
a. The district court correctly conveyed to the jury that a scheme to
defraud is a plan to deprive another of money or property through deceit. The
court also correctly instructed that the requisite deceit may be accomplished
by, among other things, outright lies or misleading half-truths.
The evidence established that Allen and Conti participated in a scheme
to deprive Rabobank’s counterparties of their money through deceitful LIBOR
submissions. Defendants were tasked with providing an estimate, every day, of
the best interest rate Rabobank would be able to obtain if it were to borrow
money from another bank at around 11 a.m. London time. Defendants
purported to provide that estimate each day and on some days, they did.
Oftentimes, however, defendants did not convey their honest estimate and
instead submitted a different number: They first arrived at an honest estimate
of the bank’s borrowing costs, but then “biased” or “bumped” the number in a
22
direction that would benefit a Rabobank trader’s position. These submissions
were false and misleading. They did not reflect defendants’ honestly held views
and they were also half-truths of the most classic sort: while purporting
allegiance to the LIBOR honest-estimate definition, defendants’ submissions
instead reflected benefits to Rabobank traders.
b. The district court correctly conveyed to the jury that an intent to
defraud means an intent to deprive another of money or property through
deceit and requires contemplated harm to the property rights of the victim.
Overwhelming evidence established that defendants possessed the requisite
fraudulent intent. The purpose of their scheme was to deprive counterparties of
their money and property, and defendants knew that the scheme was deceitful
and improper and that it harmed counterparties.
Under longstanding law, intent to defraud does not require knowledge
that the conduct is unlawful. But in any event, the jury instructions effectively
required the jury to make that finding, and ample evidence established that
defendants knew what they were doing was a crime.
c. The evidence also established that the deceptive LIBOR
submissions were material. The submissions were intended to affect the
payments that counterparties in swap agreements owed to or received from
Rabobank. As a number of Rabobank counterparties attested, a reasonable
23
person in their shoes would have attached importance to the deceptive
submissions. A counterparty would have wanted to know about the
submissions at the time he or she entered into a swap agreement with
Rabobank; on the “fixing dates” (when the deceptive submissions were
designed to cause the counterparty to pay more or receive less money from
Rabobank); and over the life of the swap agreement, when the counterparty
had the option to buy out of the agreement for a negotiated sum.
2. Ample evidence established that the fraud affected a bank insured
by the Federal Deposit Insurance Corporation (FDIC), triggering the ten-year
statute of limitations. Several FDIC-insured banks were counterparties with
Rabobank in swap agreements and were the intended object of defendants’
fraud. The evidence therefore established that the fraudulent scheme—to
deprive Rabobank’s counterparties of their money—exposed the banks to an
increased risk of loss, thereby affecting those institutions.
3. Neither the evidence nor the jury instructions constructively
amended the indictment. The indictment alleged, the jury was instructed, and
the evidence proved that defendants’ LIBOR submissions were “false and
fraudulent” because they deviated from the LIBOR definition and did not
reflect defendants’ honest estimate of Rabobank’s borrowing costs. If anything,
the evidence and jury instructions narrowed the charges in the indictment.
24
4. There was no abuse of discretion, let alone plain error, in the
district court’s evidentiary rulings. Defendants did not inform the district court
of the evidence they now claim they were precluded from eliciting from three
counterparty witnesses on cross-examination—namely, that the counterparties
would have transacted with Rabobank even had they known (or did know)
about defendants’ manipulation of the LIBOR. Indeed, the district court made
clear that it would have allowed such evidence. Moreover, there is no
indication that the counterparties would have provided this testimony—their
direct testimony was to the contrary—and defendants were of course free to
present their own counterparty witnesses to offer that proof (assuming they
could find a witness who would so testify). The court’s in limine ruling also
was narrow and did not preclude the questioning defendants now claim was
prohibited, including questioning of their expert.
In any event, any error in the court’s rulings did not prejudice
defendants. The evidence would have done little if anything to undermine the
overwhelming evidence of materiality and a scheme to defraud, particularly
because a scheme to defraud does not require proof of a completed fraud or
actual reliance, and materiality is an objective standard.
5. The district court acted well within its discretion in denying a
motion under Fed. R. Crim. P. 15 to depose a potential witness in the United
25
Kingdom. The testimony that the witness, John Ewan, provided at a LIBOR
manipulation trial in the United Kingdom demonstrates that his deposition
testimony would not have been material to Allen and Conti’s defense but
would, in fact, have bolstered the government’s case.
6. The district court correctly denied defendants’ Kastigar motion.
Witness Paul Robson’s exposure to testimony by defendants that was
compelled by regulatory authorities in the United Kingdom could not result in
a violation of the Fifth Amendment, because the United Kingdom is not
bound by our Constitution. Even assuming that compelled testimony by U.K.
authorities could result in a Fifth Amendment violation in an American
proceeding, the district court correctly found that Robson’s exposure to
defendants’ compelled testimony did not in any way affect his trial testimony
or the information he provided to U.S. investigators prior to trial. The district
court’s findings were not clearly erroneous. Far from it: The court meticulously
compared defendants’ immunized testimony with Robson’s trial testimony,
evaluated credibility, and carefully concluded that none of Robson’s testimony
or information was tainted. Finally, even assuming a Fifth Amendment
violation, the error was harmless beyond a reasonable doubt. The jury would
have reached the same verdict even without Robson’s allegedly tainted
testimony, and the verdicts cured any potential error in the grand jury.
26
7. Reassignment to a different district judge would not be warranted
in the event of a remand for additional proceedings. The court presided over
the trial fairly and impartially. Defendants fall far short of the demanding
showing required to justify reassignment.
ARGUMENT
I. Defendants’ Challenges To The Sufficiency Of The Evidence And The Jury Instructions On The Wire Fraud Counts Are Meritless
Allen and Conti mount a variety of challenges (Br. 37-50, 57-70) to the
sufficiency of the evidence and the jury instructions on the substantive wire
fraud counts. Their arguments are unavailing.
A. Background
1. The Wire Fraud Statute
The wire fraud statute makes it a crime to use the wires in furtherance of
a “scheme or artifice to defraud, or for obtaining money or property by means
of false or fraudulent pretenses, representations, or promises.” 18 U.S.C.
§ 1343. Although this Court has offered different formulations of the elements
of wire fraud, the government must prove (1) a scheme to defraud with money
or property as the object of the scheme, United States v. Binday, 804 F.3d 558,
569 (2d Cir. 2015); (2) the materiality of the deceptive conduct underlying the
scheme, United States v. Klein, 476 F.3d 111, 113 (2d Cir. 2007); (3) intent to
27
defraud, United States v. Trapilo, 130 F.3d 547, 551-53 (2d Cir. 1997); and (4)
use of the wires to further the scheme, Binday, 804 F.3d at 569.8
2. The Rule 29 Motions
The district court denied defendants’ motions for judgment of acquittal
under Fed. R. Crim. P. 29. Tr. 965-77, 1334; SPA 37-53. As relevant here, the
court concluded that sufficient evidence established a scheme to defraud,
materiality, and intent to defraud.
First, the court concluded that a reasonable jury could find that
defendants participated in a fraudulent scheme. SPA 38-42. A rational jury
could find, the court concluded, that defendants deceptively purported to
provide an honest estimate of Rabobank’s borrowing costs in accordance with
8 The wire fraud statute can be construed as containing two essential
elements: (1) a scheme to defraud, and (2) use of the wires in furtherance of the scheme. See Pereira v. United States, 347 U.S. 1, 8 (1954). The scheme-to-defraud requirement may then be further divided into (a) the existence of a scheme to defraud, United States v. Guadagna, 183 F.3d 122, 129 (2d Cir. 1999); (b) money or property as the object of the scheme, McNally v. United States, 483 U.S. 350, 356-58 (1987); (c) materiality, Neder v. United States, 527 U.S. 1, 21-23 (1999); and (d) intent to defraud, Guadagna, 183 F.3d at 129. Because the wire fraud statute, the mail fraud statute, and a provision of the bank fraud statute each contain identical “scheme or artifice to defraud” language, see 18 U.S.C. § 1341 (mail fraud); 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1344(1) (bank fraud), we follow this Court’s practice and cite decisions construing that phrase in each of those statutes. See United States v. Thomas, 377 F.3d 232, 242 n.5 (2d Cir. 2004); Trapilo, 130 F.3d at 551 n.7; United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992).
28
the BBA definition but instead provided submissions to benefit Rabobank
trader positions and obtain money from counterparties. SPA 39-42.
Second, the court concluded that defendants’ deceptive representations
were material. SPA 42-44. The court found that “there was more than
sufficient evidence from which a reasonable juror could conclude that
defendants’ representations were ‘capable of influencing’ Rabobank’s
counterparties.” SPA 43.
Third, the court rejected defendants’ sufficiency challenge to the
evidence on intent. SPA 45. The court found sufficient proof that defendants
contemplated actual harm to the victims of the fraud, i.e., Rabobank’s
counterparties. SPA 45.
B. Standards Of Review
1. Sufficiency Of The Evidence
This Court reviews de novo a district court’s denial of a motion for
judgment of acquittal under Fed. R. Crim. P. 29. See, e.g., United States v. Greer,
631 F.3d 608, 613 (2d Cir. 2011). The Court views the evidence in the light
most favorable to the government and evaluates whether “any rational trier of
fact could have found the essential elements of the crime beyond a reasonable
doubt.” United States v. Sabhnani, 599 F.3d 215, 241 (2d Cir. 2010) (citations
omitted). The evidence need “not exclude every possible hypothesis of
29
innocence.” United States v. Morgan, 385 F.3d 196, 204 (2d Cir. 2004) (citations
omitted).
A Rule 29 motion that identifies specific grounds for a judgment of
acquittal forfeits grounds it does not raise. See United States v. Delano, 55 F.3d
720, 726 (2d Cir. 1995). Unpreserved grounds for judgment of acquittal are
reviewed for plain error. Id.; see United States v. Tagliaferri, 648 Fed. Appx. 99,
101 (2d Cir. 2016) (summary order). To obtain reversal of a conviction on
plain error review, a defendant must demonstrate “that (1) there is an error; (2)
the error is clear or obvious, rather than subject to reasonable dispute; (3) the
error affected the [defendant’s] substantial rights, which in the ordinary case
means it affected the outcome of the district court proceedings; and (4) the
error seriously affect[s] the fairness, integrity or public reputation of judicial
proceedings.” United States v. Marcus, 560 U.S. 258, 262 (2010) (citation
omitted).
2. Jury Instructions
This Court also reviews de novo a preserved challenge to the district
court’s jury instructions. Sabhnani, 599 F.3d at 237. The defendant must show
both error in the instructions and ensuing prejudice. United States v. Quinones,
511 F.3d 289, 313 (2d Cir. 2007). The Court will find error only if it concludes,
after evaluating the challenged instruction in the context of the jury charge as a
30
whole, that the instruction “either fails to adequately inform the jury of the
law, or misleads the jury as to the correct legal standard.” Sabhnani, 599 F.3d
at 237. An erroneous instruction is harmless (i.e., not prejudicial) “if the verdict
would surely not have been different” absent the error. United States v. Rivera,
799 F.3d 180, 186 (2d Cir. 2015) (citations omitted). In assessing for harmless
error, the Court “begin[s] by asking whether the evidence in the record could
rationally lead to a finding favoring the defendant” on the affected element,
and if the answer is “yes,” the Court “ask[s] whether the verdict, absent the
error, would have been the same.” United States v. Jackson, 196 F.3d 383, 386
(2d Cir. 1999); see United States v. Pimentel, 346 F.3d 285, 302 (2d Cir. 2003).
3. The Sufficiency Of The Evidence Is Evaluated Against The Statutory Elements Of The Offense
Defendants erroneously argue (Br. 47, 70, 91-92) that the sufficiency of
the evidence should be measured against the jury instructions, the allegations
in the indictment, or the government’s closing arguments. The Supreme Court
has held, however, that a court evaluating the sufficiency of the evidence
conducts a “limited review” and “considers only the ‘legal’ question ‘whether,
after viewing the evidence in the light most favorable to the prosecution, any
rational trier of fact could have found the essential elements of the crime
beyond a reasonable doubt.’” Musacchio v. United States, 136 S. Ct. 709, 715
(2016) (quoting Jackson v. Virginia, 443 U.S. 307, 314-315 (1979)). “A
31
reviewing court’s limited determination on sufficiency review thus does not
rest on how the jury was instructed.” Id.; see United States v. Facen, 812 F.3d
280, 289-90 (2d Cir. 2016).
This Court’s decision in United States ex rel. O’Donnell v. Countrywide Home
Loans, Inc., 822 F.3d 650 (2d Cir. 2016), is not to the contrary. Countrywide was
a civil case, so the Court did not review the sufficiency of the evidence under
Fed. R. Crim. P. 29 or the constitutional standards that apply in a criminal
case. Moreover, to the extent the Court adverted to the jury instructions in
evaluating the sufficiency of the evidence, it merely concluded that it would
not sua sponte consider a factual theory that the government did not press at
trial or on appeal. 822 F.3d at 663. Countrywide should not be construed in a
broader manner that conflicts with authoritative Supreme Court precedent.
C. Argument
Defendants contend (Br. 37-47, 57-70) that the evidence was insufficient
to establish a scheme to defraud, intent to defraud, and materiality. They also
contend (Br. 47-50, 66-67) that the district court erroneously instructed the jury
with respect to the scheme-to-defraud and intent-to-defraud requirements.
Their arguments lack merit.9
9 Defendants contend (Br. 126-27) that their challenges to the substantive
wire fraud counts also support reversal of their conspiracy convictions. The government agrees that the conspiracy convictions stand or fall with the
32
1. There Were No Deficiencies In The Evidence Or Jury Instructions On The Scheme-To-Fraud Requirement Of The Wire Fraud Statute
The wire fraud statute makes it a crime to “devise[] or intend[] to devise
any scheme or artifice [1] to defraud, or [2] for obtaining money or property by
means of false or fraudulent pretenses, representations, or promises.” 18
U.S.C. § 1343. The second clause does not limit the first clause but merely
confirms that a scheme to defraud includes “certain conduct,” as outlined in
the second clause. Loughrin v. United States, 134 S. Ct. 2384, 2391 (2014).
As construed by the Supreme Court, “the words ‘to defraud’ commonly
refer ‘to wronging one in his property rights by dishonest methods or schemes,’
and ‘usually signify the deprivation of something of value by trick, deceit,
chicane or overreach.’” McNally, 483 U.S. at 359 (quoting Hammerschmidt v.
United States, 265 U.S. 182, 188 (1924)). A scheme to defraud is therefore a
plan to deprive another of money or property through deceit. United States v.
Autuori, 212 F.3d 105, 115 (2d Cir. 2000). The deceit need not take any
particular form, see Trapilo, 130 F.3d at 550 & n.3, but as a general matter
requires a “departure from community standards of ‘fair play and candid
substantive wire fraud charges, with one exception: The statute-of-limitations argument they assert (Br. 84-96) would not apply to their conspiracy convictions. See infra p. 76.
33
dealings,’” Autuori, 212 F.3d at 115 (quoting United States v. Ragosta, 970 F.2d
1085, 1090 (2d Cir. 1992), and United States v. Goldblatt, 813 F.2d 619, 624 (3d
Cir. 1987)); see also United States v. Altman, 48 F.3d 96, 101 (2d Cir. 1995)
(scheme to defraud is given a “broad interpretation”).
The wire fraud statute “‘punishes the scheme, not its success.’”
Pasquantino v. United States, 544 U.S. 349, 371 (2005) (quoting United States v.
Pierce, 224 F.3d 158, 166 (2d Cir. 2000)). The statute therefore does not require
proof of “justifiable reliance” or “damages.” Neder, 527 U.S. at 24-25. The
defendant “need not have completed or succeeded in his scheme to defraud,
and the scheme need not have resulted in actual injury to the scheme’s
victims.” United States v. Reifler, 446 F.3d 65, 96 (2d Cir. 2006).
a. The Evidence Established That Allen And Conti Devised And Participated In A Scheme To Defraud
Ample evidence established that Allen and Conti, along with others at
Rabobank, devised and participated in a scheme to obtain money from
counterparties who entered into financial transactions (namely, interest rate
swaps) with Rabobank traders. The plan was to obtain money from those
counterparties through deceitful manipulation of the LIBOR. See, e.g., GSA 13;
Tr. 252-53, 697, 801. As a bank named to the dollar and yen LIBOR panels,
Rabobank was supposed to report a figure that represented an honest estimate
of its daily borrowing costs. See, e.g., Tr. 145, 1069-70, 1072-73. Defendants
34
and others at Rabobank sometimes submitted that figure as required, but often
they submitted a different figure that impermissibly took into account the
profitability of the bank’s interest rate swap agreements. See supra pp. 11-15.
The purpose of submitting a different number—which did not represent
their honest estimate of the best interest rate Rabobank could obtain if it were
to borrow from another bank—was to obtain money and property from
counterparties. As discussed above, the amount of money that Rabobank
received from or paid to a counterparty in an interest rate swap was directly
tied to the LIBOR. For example, Rabobank entered into a swap agreement
with Citibank in 2007 in which Citibank agreed to periodically pay a fixed
interest rate on $18 million, while Rabobank agreed to periodically pay a
floating rate on that same amount as determined by the three-month dollar
LIBOR. GSA 105-06. One of the “fixing” dates for that swap, when the
floating rate owed by Rabobank was determined by reference to the LIBOR,
was January 24, 2008. GSA 68 (listing fixing dates for Rabobank swap
agreements); Tr. 816-18 (stipulation on fixing dates). On that day, Conti
estimated that Rabobank could borrow at 3.23 percent, but he offered to “go
lower” in order to benefit Schluep, who had a “big fix” that day, GSA 102,
and Conti ultimately submitted 3.22, Tr. 870. Had Conti’s false estimate
successfully decreased the final LIBOR for that day, Rabobank would have
35
paid less money to Citibank than it otherwise would have paid had Conti
conformed to the BBA definition and provided his honest estimate.
Deception was an essential component of this scheme. Defendants knew
that they were not allowed to submit LIBOR rates that took into account
trader profits. See, e.g., Tr. 1277-78, 1303. They knew that altering a LIBOR
submission in order to increase the profitability of a swap agreement was
contrary to the BBA definition, and that counterparties would not transact
with Rabobank if they knew about the altered submissions. See, e.g., Tr. 414,
697, 1210-11, 1278.
Defendants and others at Rabobank accordingly took measures to
conceal their conduct. Knowing that their submissions would not arouse
suspicion if within a reasonable range of their actual honest estimates, they
made facially plausible submissions that were at the same time surreptitiously
altered to profit Rabobank trader positions. See Tr. 328-33. Thus, Allen
publicly proclaimed fidelity to the BBA definition, Tr. 408-14; GSA 73-78,
while he and others actually deviated from that definition when providing
Rabobank’s LIBOR submissions, see supra pp. 11-18.
Defendants nonetheless contend (Br. 47-50) that the evidence did not
establish a scheme to defraud. Along with their amicus, they contend (Br. 44,
46; Amicus Br. 3, 5-6) that because their LIBOR submissions did not qualify as
36
“false statements” or “affirmative misrepresentations,” they did not violate the
wire fraud statute. These arguments are factually and legally flawed.
1. Defendants contend (Br. 47-48) that their LIBOR submissions
were not “actionable” under the wire fraud statute—i.e., could not support a
scheme to defraud—because defendants “estimated a range of rates in response
to the BBA’s hypothetical question, any of which fairly reflected their
understanding of Rabobank’s borrowing costs,” and then chose a number
within that range that “aligned with a trader’s request for a higher or lower
submission.” According to defendants (Br. 37, 48), their LIBOR submissions
were not false or fraudulent because any number within that range, even a
number that they arrived at in order to benefit a trader’s positions, “reflected
their honest perception of Rabobank’s borrowing costs” and therefore was
“accurate.”
The evidence, however, provided scant support for this “range” theory.
While defendants claim (Br. 1, 13) that it was “undisputed” that there was a
“range of rates” that “fairly reflected” the bank’s “estimated” or “perceived”
cost of interbank borrowing, even the most cursory review of the record refutes
this assertion. Indeed, when the district court was presented with this “range”
theory at the charge conference, see Tr. 1366, the court said it had “heard
nothing” at trial that would support it as a factual matter, and that defendants
37
did not “have a basis [i]n the evidence for arguing” that that was how the plan
worked, Tr. 1368.
The evidence instead established that defendants and other LIBOR
submitters were required (and able) to determine a single number that
represented their honest estimate of the interest rate Rabobank could obtain if
it were to borrow from another bank on the interbank market. In Allen’s own
words, it was “quite a straightforward process,” Tr. 1168, and defendants
followed the procedure, deriving a number that, if submitted to the BBA,
would have conformed to the LIBOR definition—but then often “bumped” or
“biased” that number in order to benefit a trader position, see, e.g., Tr. 322, 342,
359, 414. The LIBOR submitters knew that trader requests and the profitability
of Rabobank derivatives were not to be factored into their estimate of
Rabobank’s borrowing costs. See, e.g., Tr. 1277-78. The LIBOR submissions
that were “bumped” in this manner were therefore deceptive and misleading.
Allen’s testimony at trial established these facts. Allen never mentioned
a “range” and instead testified that he had no problem collecting market
information and determining Rabobank’s LIBOR submission. Tr. 1168-69.
Even during the financial crisis, when there was little borrowing on the
interbank market, Allen was able to apply the definition and determine the
bank’s LIBOR submission. Tr. 1266. He confirmed that trader positions
38
“[a]bsolutely” were not relevant in that process and claimed that “they weren’t
considered.” Tr. 1266. When Allen spoke with a representative from the BBA
during the financial crisis, he was adamant that the LIBOR definition was
administrable and expressed his willingness to defend specific LIBOR
submissions on certain dates. Tr. 408-14; GSA 24, 73-78. Never did Allen
mention a range of permissible submissions.
Conti’s contemporaneous phone conversations, emails, and chats
likewise refute defendants’ “reasonable range” theory. In a phone conversation
with Christian Schluep, for example, Conti made clear that he was able to
determine a single number for Rabobank’s LIBOR submission, admitting that
he made a “high” LIBOR submission (5.20) that was not “specifically
correct[]” and higher than it “should’ve been” because “Lee [Stewart] had a
fixing.” GSA 100-01; Tr. 389-91. Similarly, in a chat with Paul Thompson,
Conti stated that market information supported a particular LIBOR
submission (“seems to be 23”) but that he could “go lower if you like.” GSA
102; Tr. 362-63. Conti thus could, and did, determine a single number that
represented his estimate of Rabobank’s borrowing costs—but then biased the
number to favor the bank’s traders on fixing dates.
Defendants erroneously claim (Br. 48-49) that Lee Stewart testified that
Conti’s LIBOR submissions accurately reflected market conditions. In fact,
39
Stewart testified that Conti submitted a LIBOR figure in accordance with the
correct standard when “there weren’t any fixings around on that date.” Tr.
252. Conti would “take advice from brokers, what was going on in the
markets,” and then “make his mind up on where he felt he should be.” Tr.
267; see Tr. 183 (describing general LIBOR submission procedure). But if there
was a “fixing” that affected Stewart’s trading positions, Conti often altered
whatever number he came up with through market information, at Stewart’s
request, in order to benefit Stewart’s trading positions. Tr. 187-95. According
to Stewart, Conti “help[ed] [him] quite a lot” in this way. Tr. 188-89. Stewart
knew that there was a “true rate,” GSA 23, which was different than the rate
actually submitted when Conti granted him an accommodation on fixing
dates, see Tr. 187-95.
Defendants similarly contend (Br. 13, 19) that testimony from Paul
Robson supports their “range” theory. To the contrary, Robson flatly denied
that he thought there was “a range of reasonable fair LIBOR rates for [him] to
submit at the time.” Tr. 418; see Tr. 625-26. He also denied that he thought it
appropriate to take into account trader preferences as long as the LIBOR
submission was within a reasonable range. Tr. 423-24. Robson testified that he
determined the proper LIBOR submission based on market information and
then “biased th[at] number[] at the request of traders.” Tr. 322. Robson
40
mentioned a “range” of LIBOR submissions, but only because he generally
tried to keep the altered submissions within a range that was facially plausible
and would not invite scrutiny from the BBA. Tr. 329, 333, 614.
According to defendants (Br. 13), Yagami’s testimony supports their
“range” theory as well. But Yagami testified that “if you are the submitter”
and “have a responsibility to decide a level of the submission of LIBOR,” then
you “should have the rate come up in your mind and that should be the rate to
be submitted for the LIBOR.” Tr. 742. Once the “submitter decide[s] that
level,” Yagami testified, “the rate has to be submitted.” Tr. 742.
Defendants also rely (Br. 13-14, 23, 49) on parts of the record that do not
qualify as evidence and therefore are not relevant in evaluating the evidence’s
sufficiency. They suggest (Br. 49), for example, that the government
accepted—or at least did not dispute—their “range” theory during closing
arguments. At the threshold, a lawyer’s argument is not evidence, United States
v. Arboleda, 20 F.3d 58, 61 (2d Cir. 1994), but in any event, the government
made clear its view that “this range concept” was “completely inconsistent
with the evidence.” Tr. 1610; see Tr. 1470-72, 1608-09. The government
instead argued that submitting within a certain range was merely intended to
“make it subtle” so that defendants did “not get caught,” Tr. 1610, and that
41
Allen and Conti were culpable “[r]egardless of whether the submission was
inside or outside some so-called range,” Tr. 1609.
Defendants further turn the sufficiency standard on its head, construing
isolated evidence (and non-evidence) in the light most favorable to their
“range” theory. Defendants cite (Br. 13) an email from Conti, for example, in
which he used the word “range.” JA 457. As the district court concluded, it
was perfectly appropriate for defendants to urge the jury to accept their
interpretation of this email, even if, as the court apparently felt, it was a highly
strained interpretation. Tr. 1369-70. On appeal, however, the evidence must be
construed as a whole in the light most favorable to the verdict.
In the end, the evidence cited by defendants, including the ambiguous
email from Conti, does not support their “range” theory, let alone compel this
Court to adopt the range theory and reject the jury’s verdict.10 The jury was
entitled to conclude, on the basis of the evidence at trial, that defendants were
able to—and in fact did—determine a single number for their LIBOR
submissions in accordance with the established LIBOR definition. The jury
was also entitled to conclude that defendants sometimes submitted that
10 We note that only Conti urged this “range” theory to the jury. Tr.
1549-85. Allen instead claimed that he simply never accommodated a request from a trader, and so a “range” was never mentioned during his testimony or in his closing arguments. See Tr. 1487-1542.
42
number to the BBA but on many occasions instead weighted the number in
order to benefit trader positions. Despite defendants’ protestations, the actual
proof readily supports the verdicts.
2. In addition to being based on an erroneous view of the evidence,
defendants’ arguments also rest on a legally incorrect understanding of the wire
fraud statute. Defendants contend that the government was required to prove a
“false statement” or an “affirmative misrepresentation,” which they apparently
use synonymously. According to defendants (Br. 39), the government failed to
prove that their LIBOR submissions were false statements because the
government did not prove that Rabobank actually could not obtain a loan at
the rates submitted. Defendants suggest that if Rabobank could have obtained
a loan at the submitted rates, those submissions were “accurate” and therefore
not actionable under the wire fraud statute. Defendants are wrong.
A false statement requires, of course, a “statement,” which the Supreme
Court has characterized as an assertion of fact capable of confirmation or
contradiction. Williams v. United States, 458 U.S. 279, 284 (1982) (construing
“false statement” under 18 U.S.C. § 1014); see United States v. Worthington, 822
F.2d 315, 318 (2d Cir. 1987). A “‘fact’ includes not only the existence of a
tangible thing or the happening of a particular event,” but also an individual’s
“state of mind, such as the ..... holding of an opinion.” Restatement (Second)
43
of Torts § 525 cmt. d (1977); see W. Page Keeton et al., Prosser & Keeton on Torts
§ 109, at 755 (5th ed. 1984) (“[A]n expression of opinion is itself always a
statement of at least one fact—the fact of the belief, the existing state of mind,
of the one who asserts it.”). A statement of opinion is therefore false if the
person’s actual “state of mind ..... is otherwise than as represented.”
Restatement (Second) of Torts § 525 cmt. c (1977); see Omnicare, Inc. v. Laborers
Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318, 1326-27 (2015) (an
opinion is a false statement of fact “if the speaker did not hold the belief she
professed”) (interpreting 15 U.S.C. § 77k(a)). Or as this Court has put it, “[t]he
expression of an opinion not honestly entertained is a factual
misrepresentation.” United States v. Amrep Corp., 560 F.2d 539, 543-44 (2d Cir.
1977).
The government proved that defendants’ LIBOR submissions were false
statements. As described, defendants were able to—and did—evaluate market
information and arrive at an honest interest-rate estimate per the BBA
definition. They often, however, conveyed a different number to the BBA,
bumping their estimate to favor a trader’s position. Because the LIBOR
submissions did not reflect defendants’ actual opinions but, in fact,
“contradicted [their] honest view,” Autuori, 212 F.3d at 119, they were false
statements under the wire fraud statute.
44
Defendants and their amicus advocate a different standard. They
contend (Amicus Br. 7-8) that a statement of opinion can be actionable under
the wire fraud statute only if the statement “lack[s] a reasonable basis”—even
if the statement does not represent the speaker’s actual state of mind and is
made in order to deceive and obtain money and property from others. Under
the standard proposed by defendants and their amicus (Amicus Br. 8), the
government was required to prove that defendants’ “LIBOR submissions were
not accurate or fair estimates of the rate at which Rabobank could, in fact,
borrow in the interbank market.” That is not the law, nor should it be.
In order to be a false statement, and actionable under the wire fraud
statute, a statement of opinion need only contradict the speaker’s honest
view—i.e., it must misrepresent the speaker’s state of mind—as long as, of
course, the other requirements of the statute, such as materiality and intent to
defraud, are also satisfied. Autuori, 212 F.3d at 119. As the district court
explained, “the relevant issue was not the accuracy or inaccuracy of
defendants’ LIBOR submissions, but the intent with which these submissions
were made.” SPA 39 (citing Amrep, 560 F.2d at 544). Even if, hypothetically,
there may have been a bank that was willing to lend money to Rabobank at the
45
rates submitted, the LIBOR submissions were false nonetheless, because they
misrepresented defendants’ state of mind.11
Requiring proof that Rabobank could not actually obtain a loan at the
rates submitted by defendants would lead to absurd results. The evidence
established that traders often requested a high LIBOR submission, i.e., a
submission that was bumped up from the rate the submitter otherwise would
have submitted had he provided an honest estimate. But a lending bank would
obviously be willing to lend money at an inflated interest rate and reap the
profits from a bank willing to pay it. Thus, under the defense theory, because
Rabobank “could” obtain a loan at inflated rates, a LIBOR submitter could
also alter his LIBOR submission upwards to benefit a trader by any amount
whatsoever.
Defendants’ arguments also miss the fundamental point of the wire fraud
statute. The touchstone of fraud is “deception.” United States v. O’Hagan, 521
U.S. 642, 653 (1997). The “‘gist’” of the offense is “‘fraudulently producing a
11 Under the common law, a false statement of opinion may be treated
differently than other false statements for purposes of determining “justifiable reliance.” Restatement (Second) of Torts § 525 cmt. d (1977). Reliance on a false statement of opinion may be deemed unjustified in some circumstances. See Restatement (Second) of Torts § 538A cmt. a (1977). But the “common-law requirement[] of ‘justifiable reliance’ ..... ha[s] no place in the federal fraud statutes.” Neder, 527 U.S. at 24-25. These common law distinctions are therefore inapposite here.
46
false impression upon the mind of the other party.’” United States v. Kurlemann,
736 F.3d 439, 446 (6th Cir. 2013) (quoting Stewart v. Wyoming Cattle Ranche
Co., 128 U.S. 383, 388 (1888)). The deception need not, as defendants appear
to assert (Br. 44), be accomplished only by a false statement or silence (an
omission) in the face of a duty to speak. Loughrin, 134 S. Ct. at 2390 n.4
(identifying check kiting, which involves no false representations, as a scheme
to defraud); see Trapilo, 130 F.3d at 550 n.3; United States v. Colton, 231 F.3d
890, 897-901 (4th Cir. 2000).
In addition to a false statement, such as a statement of opinion not
honestly held, the deception may also be accomplished by a “half-truth,”
which is a “representation stating the truth so far as it goes” but nonetheless
misleading because of the “failure to state additional or qualifying matter.”
Restatement (Second) of Torts § 529 (1977); see Autuori, 212 F.3d at 118. The
deception may further be accomplished through an “implied representation,”
United States v. Harris, 821 F.3d 589, 599 (5th Cir. 2016), or even nonverbal
“conduct,” Klein, 476 F.3d at 113; see Ragosta, 970 F.2d at 1090-91. A
deception has thus been accomplished by illicitly smuggling goods into Canada
to avoid Canadian taxes, Pasquantino, 544 U.S. at 357-58; Trapilo, 130 F.3d at
549-50 & n.3; rigging a mail-in contest, Gregory v. United States, 253 F.2d 104,
47
109 (5th Cir. 1958); or fixing a horse race, United States v. Martin, 411 F. Supp.
2d 370, 372 (S.D.N.Y. 2006).
The plan to manipulate the LIBOR as devised and executed by
defendants was a quintessential scheme to deprive another of money or
property through deceit. The LIBOR was devised as an impartial market tool
for use by participants in financial transactions throughout the world. Tr. 342.
The LIBOR was intended to reflect the panel banks’ honest and truthful
estimates of their borrowing costs at around 11 a.m. London time each day.
Tr. 1072-73. Defendants instead used the LIBOR to profit Rabobank and its
traders, by purporting to comply with the established LIBOR definition while
actually (and surreptitiously) deviating from it. The LIBOR submissions were
precisely the type of deception prohibited by the wire fraud statute, whether
they are viewed as false statements, misleading half-truths, or merely a
“pattern of deceptive conduct” that was designed to “convey [a] misleading
impression.” United States v. Morgenstern, 933 F.2d 1108, 1113 (2d Cir. 1991).12
12 As the district court put it, each LIBOR submission carried an
assertion that the submitter arrived at the number “in accordance with the rules of the game,” namely the BBA-established definition. Tr. 1382-83; see Tr. 1386-90. The submissions were deceptive and misleading because, in fact, the submitters deviated from those rules by “bas[ing] their number in part on an illicit consideration,” Tr. 1383, namely the benefits to Rabobank trader positions, SPA 40-41.
48
Defendants’ reliance (Br. 41-42) on United States v. Skelly, 442 F.3d 94 (2d
Cir. 2006), is misplaced. In that case, the Court held that stock sellers accused
of engaging in a pump-and-dump scheme could be held liable under the wire
fraud statute for telling lies or misleading half-truths to a purchaser, but not for
“simply fail[ing] to disclose information,” because under “the common law
principle of caveat emptor,” a seller does not have “an obligation to disclose his
financial incentives for selling a particular commodity.” 442 F.3d at 97. In this
case, however, the government did not claim that defendants simply failed to
disclose financial incentives. See Tr. 1380-88. Rather, the government
consistently claimed that the LIBOR submissions were outright lies,
misleading half-truths, or deceptive conduct. Tr. 1388, 1632.
Defendants’ reliance (Br. 43-44) on United States v. Finnerty, 533 F.3d 143
(2d Cir. 2008), is likewise misplaced. In that case, the defendant failed to
comply with stock exchange rules that prohibited “interpositioning” at the
expense of customers, but he did not “communicate[] anything to his
customers, let alone anything false.” 533 F.3d at 148-49. There was thus no
proof of “a statement or conduct” by the defendant that deceived his
customers. Id. at 150 (no proof of “manipulation or a false statement, breach of
a duty to disclose, or deceptive communicative conduct”). The defendant’s
conviction for use of a “manipulative or deceptive device or contrivance” in
49
connection with the purchase or sale of securities, in violation of Section 10(b)
of the Securities Exchange Act, therefore could not stand. Id. at 148. In this
case, in contrast, Allen and Conti communicated to the BBA a deceptive
LIBOR submission, which was then incorporated into the final LIBOR and
disseminated throughout the business world, including to Rabobank’s
counterparties, with the object of depriving those counterparties of money and
property. In contrast to Finnerty, defendants affirmatively engaged in an “act
that [gave] the victim a false impression.” Id. at 148.
b. The District Court Accurately Instructed The Jury On The Scheme-To-Defraud Requirement
The district court instructed the jury that “a scheme to defraud is a plan
or design to obtain money or property by means of false or fraudulent
pretenses, representations, or promises.” Tr. 1632. It further instructed that
“[f]raudulent pretenses, representations or promises can take the form of
outright lies, but they can also consist of misleading half-truths.” Tr. 1632. “In
this case,” the court explained, “the government charges that the defendants
participated in a scheme to manipulate and attempt to manipulate LIBOR
interest rates to their advantage by submitting or causing to be submitted on
behalf of Rabobank LIBOR rate estimates that were not at the levels the
defendants would have honestly submitted otherwise but were instead at levels
50
reflecting, at least in part, an intent to benefit Rabobank’s trading positions and
thereby obtain profits that Rabobank might not otherwise realize.” Tr. 1632.
These instructions accurately conveyed the requirements of a scheme to
defraud. The court required the jury to find a scheme to deprive another of
money or property through deceit, and also to find deceit through “false or
fraudulent pretenses, representations, or promises”—which the court correctly
explained can take the form of outright lies or misleading half-truths.
Defendants contend (Br. 40) that the instructions were deficient because they
did not require the jury to find that their submissions were “false.” But, in
language taken verbatim from the wire fraud statute, see 18 U.S.C. § 1343, the
jury was instructed to determine whether the submissions amounted to “false
or fraudulent pretenses, representations, or promises,” Tr. 1632.
Defendants suggest (Br. 38) that the court erroneously rejected their
request for an instruction that a “statement of opinion or an estimate” may
“constitute a false statement or misrepresentation only if the government can
prove beyond a reasonable doubt that it was not honestly held by the person
making it at the time it was made.” Tr. 1392-93. The court correctly
concluded, however, that this proposition was already “contained within” the
court’s instructions. Tr. 1393. As discussed, a statement of opinion not
honestly held is a false representation. See also Restatement (Third) of Torts:
51
Liab. for Econ. Harm § 14 Tentative Draft No. 2 cmt. a (2014) (“[W]hen a
speaker claims to hold an opinion but does not, the claim is as contrary to the
truth as any other lie.”). Moreover, the court explained that the government
alleged that defendants submitted “LIBOR rate estimates that were not at the
levels the defendants would have honestly submitted” had they not taken into
account trader positions and profits. Tr. 1632 (emphasis added).
Other of the instructions further ensured that defendants would not be
convicted if, in the jury’s view, Conti and Allen believed their LIBOR
submissions were accurate. The court instructed that “a defendant’s good faith
is a complete defense to the charges in this case.” Tr. 1634. It also explained
that “[a] statement made with good-faith belief in its accuracy does not amount
to an intentional false or misleading statement and is not a crime.” Tr. 1634.
“This is so even if the statement is itself inaccurate or misleading,” the court
instructed, and so “[i]f a defendant believed in good faith that he was acting
properly in making such a statement or causing it to be made, even if he was
mistaken in that belief, and even if others were injured by his conduct, there
would be no crime.” Tr. 1634.
On behalf of their jury-instruction challenge, defendants also point to
(Br. 40) language contained in the district court’s decision denying their
motion for a new trial and judgment of acquittal. The quoted language,
52
however, was not conveyed to the jury, and therefore provides no basis for
faulting the instructions.
2. There Were No Deficiencies In The Evidence Or Jury Instructions On The Mental State Requirement Of The Wire Fraud Statute
Wire fraud is a specific intent crime. United States v. Parse, 789 F.3d 83,
121 (2d Cir. 2015); see United States v. Sewell, 252 F.3d 647, 650 (2d Cir. 2001)
(specific intent “is ‘a special mental element’ particular to the crime with which
defendant is charged”). The specific intent required for wire fraud is the
“conscious knowing intent to defraud,” sometimes referred to as “fraudulent
intent.” Autuori, 212 F.3d at 116 (citations omitted). The defendant must
possess the intent to deprive another of money or property through deceit.
United States v. Males, 459 F.3d 154, 157-58 (2d Cir. 2006). Contemplated harm
to the property rights of the victim is required. United States v. Carlo, 507 F.3d
799, 801 (2d Cir. 2007) (per curiam).
Despite this well-established law, Allen and Conti argue (Br. 57-60) that
a wire fraud defendant must additionally know his conduct was unlawful.
They contend that in light of this alleged requirement, the evidence was
insufficient to support their convictions, and the district court’s jury
instructions were erroneous. Defendants are wrong.
53
a. The Wire Fraud Statute Does Not Require Knowledge That The Conduct Was Unlawful
Many criminal statutes proscribe conduct committed “willfully.” See,
e.g., 15 U.S.C. § 78ff(a), 18 U.S.C. § 924(a)(1)(D). The term “willfully” is “a
word of many meanings whose construction is often dependent on the context
in which it appears.” Bryan v. United States, 524 U.S. 184, 191 (1998) (citation
omitted). “As a general matter, when used in the criminal context, a ‘willful’
act is one undertaken with a ‘bad purpose,’” i.e., “with knowledge that [the]
conduct was unlawful.” Id. at 191-92 (citation omitted). But in some contexts,
the term merely “denotes an intentional as distinguished from an accidental
act.” United States v. George, 386 F.3d 383, 389-390 (2d Cir. 2004).
The wire fraud statute does not use the term “willfully,” see 18 U.S.C.
§ 1343, nor do the mail or bank fraud statutes, see 18 U.S.C. §§ 1341, 1344.
These fraud statutes, as construed for decades by federal courts, create specific
intent crimes that require an intent to defraud, i.e., the intent to deprive another
of money or property through deceit. They do not require proof that the
defendant knew his conduct was unlawful. See United States v. Porcelli, 865 F.2d
1352, 1358 (2d Cir. 1989) (mail fraud does not require “intent to violate a
statute”); United States v. Crandall, 525 F.3d 907, 912 (9th Cir. 2008) (intent to
defraud does not require consciousness of criminal wrongdoing).
54
It is true that in describing the intent-to-defraud requirement, some
courts have stated that a defendant must act “willfully.” See, e.g., United States
v. Cloud, 872 F.2d 846, 852 n.6 (9th Cir. 1989). The judicial use of the term
“willfully” in this context, however, “simply means knowing and purposeful
conduct.” United States v. Stockheimer, 157 F.3d 1082, 1089 (7th Cir. 1998).
Although “a more expansive interpretation of the term ‘willfully’ may be
appropriate when Congress includes both the words ‘willfully’ and ‘knowingly’
in the text of the statute, such a method of interpretation is not reliable” when
the willfulness requirement “has been supplied by the courts instead of
appearing in the text.” Id.; see United States v. Gay, 967 F.2d 322, 327 (9th Cir.
1992) (noting that the mail fraud statute does “not even contain a willfulness
requirement”); cf. United States v. Precision Med. Labs., Inc., 593 F.2d 434, 443-44
(2d Cir. 1978) (if using “willfully” in an indictment charging mail fraud “had
any effect at all,” “it was to place a more exacting standard on what the
Government had to prove”).
This Court’s decision in United States v. Golitschek, 808 F.2d 195 (2d Cir.
1986), should not be read to break the rule. In that case, the defendant was
convicted of mail fraud and conspiracy to export defense articles without a
license, a violation of the Arms Export Control Act, 22 U.S.C. § 2778(b)(2).
The Court focused on the detailed regulatory scheme of the Arms Export
55
Control Act and its penalty provision, which applies to anyone who “willfully”
violates the statute. 808 F.2d at 197-98. The Court found erroneous an
instruction that ignorance of the law was no defense, because a violation of the
Arms Export Control Act “required knowledge of a legal obligation.” Id. at
203. Without explanation, the Court also reversed the defendant’s wire fraud
conviction, but the requirements of the Arms Export Control Act were plainly
the focal point of the decision. Id. at 202-03. Golitschek should not be construed
as adding a new mental state requirement to the wire fraud statute, which
would deviate from decades of law applying the intent-to-defraud requirement
in various fraud statutes. See, e.g., United States v. McGinn, 787 F.3d 116, 123
(2d Cir. 2015) (to prove wire fraud, the government must “establish that the
defendant had fraudulent intent or ‘a conscious knowing intent to defraud,’
and that some harm or injury to the property rights of the victim was
contemplated”).
The summary orders cited by defendants (Br. 58-60) are also inapposite.
See Second Circuit Rule 32.1.1(b)(2). In United States v. Stevens, Nos. 97-1260,
97-1586 & 98-1348, 2000 WL 419938 (2d Cir. 2000) (summary order), the
Court used the term “willfully” to describe the mental state requirement for
mail and wire fraud, but the Court specifically approved a jury instruction that
defined intent to defraud as acting “knowingly and with the intent to deceive,
56
for the purpose of causing some financial loss to another,” and made no
mention of knowledge that the conduct was unlawful. Id. at *1. And in United
States v. Schlisser, 168 Fed. Appx. 483, 485 (2d Cir. 2006) (summary order), the
Court construed the mental state requirement in 15 U.S.C. § 78ff, which
expressly reaches only those who act “willfully.”13
b. The Jury Instructions Accurately Conveyed The Requirements For Intent To Defraud
The district court instructed the jury that in order to convict defendants
of wire fraud, it had to find they “knowingly and willfully participated at some
point in the scheme to defraud, with knowledge of its fraudulent nature and
with a specific intent to defraud.” Tr. 1631. “[T]o act knowingly,” the court
instructed, “means to act consciously and deliberately rather than mistakenly
or inadvertently.” Tr. 1633. “This includes,” the court explained, “a
requirement that the defendant have knowledge that he was engaged in a
fraudulent scheme.” Tr. 1633. “To act willfully,” the court instructed, “means
to act voluntarily and with an improper purpose.” Tr. 1634. And “[t]o act with
13 In 3 Leonard B. Sand, et al., Modern Federal Jury Instructions: Criminal,
Instruction 44-5 (2016), the authors propose a mail fraud instruction that requires a finding of willfulness and a “bad purpose either to disobey or to disregard the law.” But as authority, they cite United States v. Massa, 740 F.2d 629, 643 n.8 (8th Cir. 1984), which merely recites the district court’s instructions in a footnote and does not sanction the instructions in full, let alone approve the portion requiring bad purpose to disobey the law.
57
a specific intent to defraud goes further and requires that the defendant .....
intended, at least in part, to deceive one or more of his trading counterparties
in order to obtain money or property or deprive one or more of the
counterparties of material information ..... and to thereby harm one or more
victims.” Tr. 1634.
These instructions accurately conveyed the wire fraud statute’s intent-to-
defraud requirement, as described above. See supra pp. 52-56. And as
defendants’ reading of the requirement fails, so, too, does their objection (Br.
60) to the jury instructions.
Even if a wire fraud offense were to require knowledge of unlawfulness,
the court’s failure to explicitly reference that idea in its intent-to-defraud
instruction was harmless error, because the instructions, considered as a
whole, effectively required the jury to make that finding. See Neder, 527 U.S. at
15-16 (jury instruction that omits element of offense is subject to harmless-error
analysis). As to the conspiracy charge, the jury was instructed that, to convict,
it had to find that defendants “participated in the conspiracy with knowledge
of its unlawful purpose and with intent to aid in the accomplishment of its
unlawful purpose.” Tr. 1639. “In short,” the court explained, “you must find
beyond a reasonable doubt that the defendant you are considering, with an
understanding of the unlawful character of the charged conspiracy, knowingly and
58
willfully joined in the conspiracy for purpose of furthering one or both of its
unlawful objects.” Tr. 1639-40 (emphasis added). The court also provided a
good faith instruction, explaining that “a defendant’s good faith is a complete
defense to the charges in this case.” Tr. 1634-35.
In light of these instructions, there is no reasonable probability that the
jury found defendants guilty without concluding that they knew their conduct
was unlawful. The omission of the specific language regarding knowledge of
unlawfulness would have had no effect on the guilty verdicts in this case.
c. Ample Evidence Established That Defendants Possessed The Requisite Mental State
Defendants have never previously claimed that the evidence at trial was
insufficient because it failed to establish that they knew their conduct was
unlawful. See Dkt. 185 (Rule 29 motion); SPA 45 (rejecting different intent
argument). Defendants’ current sufficiency argument should therefore be
reviewed for plain error. Delano, 55 F.3d at 726. The well-established intent-to-
defraud requirement of the wire fraud statute, together with the record
evidence of defendants’ mental state, precludes a finding of error, let alone
clear or obvious error that affected defendants’ substantial rights and
undermined the integrity of judicial proceedings.
Overwhelming evidence established that defendants possessed the
requisite intent to defraud. The whole point of the scheme was to reap profits
59
from counterparties through deceitful LIBOR submissions. Tr. 188-89 (Stewart
testimony). As one coconspirator put it, “GOTTA MAKE MONEY
SOMEHOW,” and “EVERY LITTLE HELPS[.]” GSA 13; Tr. 203, 388-89.
The most profitable traders were given greater priority to request biased
LIBOR submissions. Tr. 751. Defendants knew they were tricking the
counterparties to gain a financial advantage. Tr. 252-53, 281 (Stewart
testimony); see GSA 71 (Conti and Robbins “winking at each other” when
discussing low LIBOR submissions). They knew that what they were doing
was unfair and that counterparties would feel aggrieved about the trickery, and
so they kept the scheme under wraps. Tr. 414 (Robson); Tr. 697 (Yagami).
They knew their conduct was wrong and improper. Tr. 322-24, 336, 342-43,
625 (Robson); Tr. 800-01 (Yagami). It was “pretty much common sense,”
Robson explained, because they had “privileged access to a number, a
reference number, and ..... were using it to [their] own benefit.” Tr. 322. As
another participant described the scheme, it was like “free money” and was
“not right to do.” Tr. 801 (Yagami).
Allen’s testimony itself was highly damning. He acknowledged that he
knew it was improper to take into account trader preferences when
determining a LIBOR submission. Tr. 1204, 1206-11, 1277-78, 1288-89, 1303.
He knew it was wrong for traders even to request a biased submission. Tr.
60
1274-75. He also conceded that counterparties would have felt that Rabobank
had an unfair advantage and therefore would not have entered into swap
agreements with Rabobank had they known about attempts to manipulate the
LIBOR. Tr. 1278. Allen never claimed that he thought it was proper or lawful
to change a LIBOR submission to benefit a trader. He instead testified that he
never acted improperly and never actually changed a LIBOR submission to
benefit a trader. Tr. 1266-67, 1266, 1278, 1328.
Allen struggled to explain documents that showed he participated in the
manipulation scheme. On August 2, 2005, for example, Allen received an
email from swap trader Justin Sliney asking if he (Allen) could “please set
tomorrow’s [six-month LIBOR] as high as possible” because Sliney had a
“large reset” that day. GSA 7; Tr. 405. Allen forwarded the email to Conti and
Lee Stewart with an “FYI.” GSA 7. When confronted with the email, which
showed a coordinated effort to manipulate LIBOR submissions to benefit
Rabobank traders, Allen simply dissembled. See Tr. 1206-08, 1301-03.
Allen’s testimony alone sufficed to demonstrate that he acted with guilty
intent. The jury was entitled to “assess [Allen’s] credibility,” “conclude that
[his] testimony was fabricated,” and decide that “the opposite [of what he said]
was true.” United States v. Morrison, 153 F.3d 34, 50 (2d Cir. 1998); see United
States v. Rahman, 189 F.3d 88, 128 (2d Cir. 1999) (“In light of [the defendant’s]
61
sometimes false and often strained testimony during the trial, the jury could
also have concluded that he gave such testimony because he was conscious of
his guilt.”); United States v. Friedman, 998 F.2d 53, 57 (2d Cir. 1993) (when a
defendant takes the stand, the jury may conclude that his “version of the events
was false and thereby infer his guilt”).
Against all that, defendants nonetheless contend (Br. 60-66) that the
evidence demonstrated that they never thought that what they were doing was
inappropriate, or at least unlawful. Their claims, however, find no grounding
in the record.
For example, Allen now claims (Br. 64-65) that he thought it was
perfectly appropriate to take into account trader requests, ostensibly because
(Br. 61-62) the rules were insufficiently clear and he received inadequate
training. But at trial, he was adamant that he knew it was not appropriate to
take trader requests into account in determining the LIBOR, and he testified
that he simply never accommodated such a request. Both defendants similarly
claim (Br. 63-64) that the free and open discussion of LIBOR preferences at the
trading desk shows that they thought what they were doing was not wrong.
But the more likely explanation was that the traders’ boss (Allen) sanctioned
the accommodation of requests (being an active participant himself) and so the
traders felt free to discuss it openly. Defendants also suggest (Br. 65-66) that
62
they thought their behavior was appropriate because everybody else in the
industry did the same thing. But they do not suggest that there is evidence that
they personally believed that their conduct was, as they put it, an acceptable
“industry practice.” Defendants’ claims are belied by the overwhelming
evidence at trial.
3. Ample Evidence Established Materiality
Materiality is an element of the wire fraud statute. Neder, 527 U.S. at 25.
As a general matter, a misrepresentation is material “if it has a natural
tendency to influence, or [is] capable of influencing, the decision of the
decisionmaking body to which it was addressed.” Id. at 16 (citation omitted).
Actual reliance on the misrepresentation is not required. Id. at 24-25.
Materiality is “judged according to an objective standard,” Amgen Inc. v. Conn.
Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1191 (2013), which asks whether a
reasonable person would attach importance to the misrepresentation in
determining his course of action, or whether the maker of the representation
has reason to know that the recipient “‘is likely to regard the matter as
important in determining his choice of action,’” Neder, 527 U.S. at 22-23 & n.5
(quoting Restatement (Second) of Torts § 538 (1977)). As this Court has put it,
“a misrepresentation is material if it is capable of influencing the
63
decisionmaker, no matter what the victim decides to do.” United States v.
Corsey, 723 F.3d 366, 373 n.3 (2d Cir. 2013) (per curiam).
Substantial evidence established the materiality of the misrepresentations
(the false LIBOR submissions) in this case. At three decision points (at least), a
reasonable counterparty in an interest rate swap with Rabobank would have
attached importance to those misrepresentations in determining a course of
action.
1. First, a reasonable counterparty would have wanted to know
about the deceitful LIBOR submissions at the time it entered into an interest
rate swap agreement with Rabobank. As Allen testified, counterparties would
not have entered into interest rate swap agreements if they had known
Rabobank traders were trying to manipulate the LIBOR, because they would
have felt (rightly) that Rabobank held an unfair advantage. Tr. 1278. Given the
very nature of their scheme, Allen and Conti had reason to know that
counterparties would have attached importance to the deceitful submissions in
deciding a course of action.
Witnesses from actual counterparties confirmed Allen’s admission. See
Tr. 499-500, 827-28, 836-37. Tim Smith, from Dean Foods, testified that he
would have wanted to know about the manipulation when he entered a swap
agreement with Rabobank: Had he known about Rabobank’s advantage, he
64
said, he would have considered an alternative method for reducing his
company’s interest rate exposure. Tr. 499-500. Tracy Twomey, from Super
Stores Industries, similarly testified that she likely would not have entered into
an interest rate swap agreement with Rabobank had she known that
defendants were endeavoring to manipulate the LIBOR. Tr. 827-28.
Coconspirators agreed. Tr. 252-53, 414, 697. Robson testified, for
example, that he knew counterparties “would have been aggrieved about” the
deceitful LIBOR submissions and he, therefore, would not have told
counterparties about the manipulation. Tr. 414. Yagami similarly testified that
he did not tell counterparties about the deceitful LIBOR submissions because
“it was [an] unfair advantage,” and if he “ma[d]e money by manipulating
LIBOR, that means the other party lost the money.” Tr. 697.
Defendants contend (Br. 68-69) that their misrepresentations could not
have been material at the time counterparties entered into the interest rate
swaps because the misrepresentations were not directly addressed to the
counterparties at that time. As the district court concluded, however,
defendants had commenced their scheme “before counterparties executed” the
swap agreements. SPA 44. Moreover, a material misrepresentation need not be
directed contemporaneously to the victim of the fraud. See United States v.
Greenberg, No. 14-4208, 2016 WL 4536514, at *7 (2d Cir. Aug. 31, 2016)
65
(misrepresentations directed to credit card processing company and used to
obtain money from cardholders); United States v. Seidling, 737 F.3d 1155, 1160-
61 & n.2 (7th Cir. 2013) (misrepresentations material where directed to court
to obtain default judgments, and then used to obtain money and property from
victims).
2. A reasonable counterparty in an interest rate swap also would
have wanted to know about the deceitful LIBOR submissions on the fixing
dates, when the floating rate was “fixed” by reference to the LIBOR. On those
days, a manipulated LIBOR meant that the counterparty would have either
made a payment to Rabobank that was higher than it otherwise would have
made or received a payment lower than it would otherwise would have
received had the LIBOR been honestly set. As the district court concluded,
“the jury could reasonably have inferred that counterparties would have
terminated swap contracts with Rabobank, or otherwise changed their
behavior, had they known of defendants’ allegedly fraudulent scheme.” SPA
44.
Defendants contend (Br. 69-70) that the deceitful LIBOR submissions
could not have been material on the fixing dates because, according to them,
the counterparties were irrevocably locked into the swap agreements at that
point in time. Defendants thus suggest that counterparties simply had to
66
passively accept the monetary losses inflicted on them by defendants’
manipulation of the LIBOR. Even putting aside the merits of their claim, the
evidence also established that counterparties had available recourse. Tracy
Twomey, from Super Stores Industries, testified that her company purchased
its way out of a swap agreement with Rabobank. Tr. 827. The company paid
the market value of the swap as determined by Rabobank, which turned out to
be $4.5 million. Tr. 827. Tim Smith, from Dean Foods, similarly testified that
he would have pursued “alternative forms of financing” had he known about
the deceitful LIBOR submissions. Tr. 500. The jury could reasonably infer
from this testimony that there were exit options available to counterparties and
that they would not have been irrevocably stuck with swaps that they later
learned might be disadvantaged by deceitful LIBOR submissions. At the very
least, the counterparties could buy their way out of the unfair agreements.
Defendants contend (Br. 70) that some of the counterparties’ testimony
should not be considered in the sufficiency analysis because it was not
referenced in the government’s closing arguments. The sufficiency of the
evidence is determined, however, with reference to the evidence—not a
lawyer’s arguments.
3. The deceitful LIBOR submissions were also material at a third
point in a Rabobank-counterparty relationship. As noted, after entering into an
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interest rate swap with Rabobank, a counterparty had the option of purchasing
its way out of the agreement. Tr. 827. To exercise this buy-out option, the
parties had to first determine the “market value” of the swap. Tr. 827. In that
way, the swap agreement was effectively an asset with a market value. The
jury could have reasonably concluded defendants’ deceit would have affected
that market value—and that a counterparty negotiating the value of a swap
agreement would surely have wanted to know that Rabobank was
manipulating the LIBOR.
II. A Ten-Year Statute Of Limitations Applies To The Charged Offenses
Defendants contend (Br. 84-95) that the government failed to prove that
their scheme to defraud affected a financial institution, which was necessary in
order to trigger a ten-year statute of limitations for the substantive wire fraud
charges. Defendants also contend (Br. 96) that the district court erroneously
instructed the jury on the standard for determining whether their scheme
affected a financial institution. These arguments lack merit.
A. Background
A five-year statute of limitations generally applies to wire fraud offenses,
see 18 U.S.C. § 3282, except “if the offense affects a financial institution,” in
which case a ten-year statute of limitations applies, 18 U.S.C. § 3293(2). The
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definition of “financial institution” includes a bank insured by the Federal
Deposit Insurance Corporation (FDIC). 18 U.S.C. § 20(1).
The district court concluded that the government presented sufficient
evidence that the scheme to defraud “affected” a financial institution, namely
an FDIC-insured bank. SPA 47-50. The court concluded that the evidence
demonstrated that FDIC-insured banks “would, if they had known of
defendants’ alleged fraud, have made different investment decisions or would
have been otherwise ‘affected.’” SPA 48-49.
B. Standard Of Review
Although the jury was instructed to determine whether a financial
institution was affected by the scheme to defraud in this case, Tr. 1635-36, the
district court was actually required to make that determination, applying a
preponderance-of-the-evidence standard, and reviewable for clear error. See
United States v. Florez, 447 F.3d 145, 150 n.2 (2d Cir. 2006) (applying 18 U.S.C.
§ 3290). The statute that extends the limitations period for wire fraud offenses
is analogous to the statute that tolls the limitations period while a defendant is
“fleeing from justice.” 18 U.S.C. § 3290. Neither statute creates an “element of
the charged” offense, see Musacchio, 136 S. Ct. at 717-18, and therefore the facts
69
necessary to extend the limitations period are “properly determined by the trial
court rather than the jury,” Florez, 447 F.3d at 150.14
If this Court concludes that the determination was properly submitted to
the jury, however, it should review under the generally-applicable sufficiency
standard. See supra pp. 28-29. The Court should likewise apply the usual
standard for evaluating jury instructions. See supra pp. 29-30.
C. Argument
1. Ample Evidence Established That The Wire Fraud Affected An FDIC-Insured Institution
This Court has stated that 18 U.S.C. § 3293(2) “broadly applies to any
act of wire fraud that affects a financial institution.” United States v. Bouyea, 152
F.3d 192, 195 (2d Cir. 1998) (per curiam) (citations omitted). A bank, of
course, is affected by a fraud if it is the object of that fraud, but “[t]he plain
language of § 3293(2) [also] makes clear that ‘Congress chose to extend the
statute of limitations to a broader class of crimes’ than those in which ‘the
financial institution is the object of fraud.’” United States v. Heinz, 790 F.3d 365,
367 (2d Cir. 2015) (quoting Bouyea, 152 F.3d at 195). Defendants agree (Br. 88-
14 Once a district court makes a finding that extends the statute of
limitations, the government must then prove to the jury “beyond a reasonable doubt that the defendant committed the charged criminal conduct within that period.” Florez, 447 F.3d at 150 n.2. There is no dispute here, however, that the wire fraud offenses were committed within the ten-year statute of limitations.
70
90; Tr. 1405-06) that, at the very least, proof of an increased risk of loss is
sufficient to prove that a fraud affects a financial institution. See United States v.
Mullins, 613 F.3d 1273, 1278-79 (10th Cir. 2010).
Whether the court or the jury was the appropriate factfinder, and
regardless of the standard of review, ample evidence established that
defendants’ wire fraud offenses affected an FDIC-insured institution. The
parties stipulated that Bank of America, Citibank, JPMorgan Chase, Morgan
Stanley, Wachovia, U.S. Bank, and PNC Bank were insured by the FDIC. Tr.
814-15. The government introduced evidence that Rabobank entered into
interest rate swap agreements with those institutions. Tr. 816-18; GSA 68-69.
The government also introduced evidence that defendants schemed to
manipulate the LIBOR on the “fixing” dates for those interest rate swaps,
plainly creating a risk of loss to those FDIC-insured banks. See GSA 68-69
(chart listing swaps with FDIC-insured banks, with fixing dates).
In July 2007, for example, Rabobank entered into an interest rate swap
agreement with Citibank. GSA 103-08. Citibank agreed to pay a fixed rate
(5.388) on the notional amount of $18 million, while Rabobank agreed to pay
a floating rate (LIBOR) as determined on specified fixing dates, one of which
was January 24, 2008. GSA 68, 105-06; Tr. 816-18. On that date, Conti
provided a low LIBOR submission (3.22) to benefit Rabobank traders. Tr. 362-
71
63, 870; GSA 102. Citibank’s money was thus put at risk—for a lower LIBOR
would translate into a lower payment to Citibank than otherwise would have
been the case absent the fraudulent submission.
Rabobank similarly entered into an interest rate swap agreement with
U.S. Bank, agreeing to pay a floating rate (determined by the one-month dollar
LIBOR) on a notional amount of $10 million. GSA 88-92. The agreement had
a fixing date on November 29, 2006. GSA 68; Tr. 816-18. On that date, Allen
provided a low submission for the one-month dollar LIBOR, accommodating
a request from Christian Schluep. Tr. 239-40, 403-04, 1219; GSA 6. Again, the
fraudulent submission put U.S. Bank’s money at risk, as its obligation to
Rabobank on the swap was tied directly to the LIBOR.
The evidence therefore established that FDIC-insured banks were both
the object of defendants’ fraud and were exposed, at a minimum, to an
increased risk of loss. Defendants nonetheless contend (Br. 92-95) that the
evidence was insufficient because the government did not present testimony
from employees of Citibank or any of the other FDIC-insured institutions. As
an initial matter, defendants waived this argument by pledging not to raise it if
the government (in order to conserve judicial resources) did not call witnesses
from the FDIC-insured institutions. Dkt. 196-1 (email exchange between
counsel); see SPA 49 n.4. But in any event, the interest rate swap agreements
72
with those FDIC-insured institutions, as well as the evidence that defendants
schemed to manipulate the LIBOR on the relevant fixing dates, was more than
adequate to establish that the fraud affected those institutions.
Defendants further contend (Br. 91-95) that the evidence was insufficient
when measured against the jury instructions. The sufficiency of the evidence,
however, is not evaluated against the jury instructions, but against the elements
of the crime. Musacchio, 136 S. Ct. at 715-16. But even if measured against the
instructions, the evidence was sufficient. The jury was instructed that fraud
affected a bank if it exposed the bank to an increased risk of loss or if the bank’s
investment decisions would have been different had it known about the fraud.
See Tr. 1636. As described above, ample evidence established that the fraud
exposed the banks to an increased risk of loss. That evidence alone was
sufficient to extend the limitations period. The government did not have to
also prove that the fraud affected a bank’s investment decisions. Nevertheless,
as the district court correctly concluded, the evidence also established that the
investment decisions of the FDIC-insured institutions would have been
different had they known about the fraud. SPA 48-49 & n.4. Allen himself
conceded, for example, that financial institutions would not have entered into
swap agreements with Rabobank had they known that the bank’s traders were
trying to manipulate the LIBOR. Tr. 1278.
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2. The Jury Instructions Were Legally Correct And Any Error Was Harmless
The district court instructed the jury that the government had to prove
that the scheme to defraud “directly affected” one of the FDIC-insured banks.
Tr. 1635-36. The court informed the jury that the fraud directly affected a bank
if “the fraud created an increased risk of loss for that bank” or “the investment
decisions of that bank would have been different if the bank had known of the
fraud.” Tr. 1636; see Tr. 1404-09 (charge conference).
The instructions correctly conveyed the statutory requirements. As
noted, defendants agree (Br. 88-90) that a scheme to defraud affects a bank if it
exposes the bank to an increased risk of loss. Mullins, 613 F.3d at 1278-89. The
district court also correctly instructed that a scheme to defraud “affects” a bank
if it would have made different investment decisions had it known of the fraud.
The “plain language” of the statute supports this conclusion, as the “verb
‘to affect’ expresses a broad and open-ended range of influences.” Heinz, 790
F.3d at 367 (citations omitted). The term “affects” “means simply to ‘make a
material impression on; to act upon, influence, move, touch, or have an effect
on.’” Mullins, 613 F.3d at 1278 (quoting I Oxford English Dictionary 211 (2d ed.
1989)). Although “there may be some point where the ‘influence’ a defendant’s
wire fraud has on a financial institution becomes so attenuated, so remote, so
indirect that it cannot trigger the ten-year limitations period because it does not
74
in any meaningful sense ‘affect’ the institution,” id. at 1278-79, that is not the
case when the fraud directly affects a bank’s investment decision, i.e., changes
the manner in which the bank spends its capital with the hope that the
investment will generate income or appreciate in the future. In fact, there is
little if any difference between fraud that increases a bank’s risk of loss and
fraud that affects the bank’s investment decisions. Investment decisions are
intended to maximize gains while avoiding losses. A fraud that affects a bank’s
investment decision by its nature exposes the bank to an increased risk of loss,
because absent the fraud the bank would have allocated its capital in a different
manner that, in the bank’s view, would have increased the likelihood of profit
and decreased the potential for loss.
Defendants misplace their reliance (Br. 90-91) on cases construing the
wire fraud statute’s requirement of contemplated “harm or injury.” See, e.g.,
Binday, 804 F.3d at 569. Under 18 U.S.C. § 3293(2), the limitations period is
extended for wire fraud that “affects” a financial institution, not just fraud that
“harms or injures” an institution. Congress would have used different,
narrower language if it intended the limited scope suggested by defendants.
The rule of lenity (Br. 87) is also inapplicable. That rule “ensures that
criminal statutes will provide fair warning concerning conduct rendered
illegal.” Liparota v. United States, 471 U.S. 419, 427 (1985); see United States v.
75
Lanier, 520 U.S. 259, 266 (1997). A statute of limitations, however, “does not
render the underlying conduct noncriminal” and “does not call the criminality
of the defendant’s conduct into question.” Smith v. United States, 133 S. Ct. 714,
720 (2013). Moreover, the rule of lenity applies only in the face of “grievous
ambiguity or uncertainty” in a statute, Barber v. Thomas, 560 U.S. 474, 488
(2010), neither of which is present here.
Finally, even if it was error to instruct the jury that fraud affects a bank if
it affects the bank’s investment decisions, the error was harmless beyond a
reasonable doubt. The jury instructions were superfluous, because it was the
responsibility of the court—not the jury—to determine whether the wire fraud
affected a financial institution. See supra pp. 68-69. Moreover, when a jury is
instructed on two alternative theories of guilt, only one of which is improper,
the error is harmless if the verdict would have been the same absent the error.
See Hedgpeth v. Pulido, 555 U.S. 57, 58 (2008) (per curiam); United States v.
Ferguson, 676 F.3d 260, 276-77 (2d Cir. 2011).
Overwhelming evidence supported the jury’s finding on the theory that
defendants agree was proper, i.e., that a fraud affects an FDIC-insured bank if
it increases the risk of loss. In addition, the government did rely on the theory
that that the fraud affected bank investment decisions. See Tr. 1477-78 (closing
arguments); Dkt. 117, at 19; Dkt. 140, at 4 (government’s proposed
76
instructions). The jury would have reached the same result even if the district
court had omitted that aspect of the instruction.
3. Defendants’ Statute-Of-Limitations Arguments Do Not Pertain To Their Conspiracy Convictions
Even if the wire fraud charges were untimely, the conspiracy convictions
still stand. A ten-year statute of limitations applied to the conspiracy charges
because an object of the conspiracy was bank fraud. See 18 U.S.C. § 3293(1).
Defendants did not assert a statute-of-limitations defense to the conspiracy
charges at trial. Tr. 1631-36; see Tr. 1477. They therefore may not assert the
defense on appeal. Musacchio, 136 S. Ct. at 717-18.
III. There Was No Constructive Amendment Of The Indictment
Defendants contend (Br. 50-57) that the district court’s jury instructions
and the evidence presented by the government at trial constructively amended
the indictment. This argument lacks merit.
A. Legal Standard
A defendant has a Fifth Amendment right to be tried only on charges
contained in an indictment returned by a grand jury. United States v. Clemente,
22 F.3d 477, 482 (2d Cir. 1994). A variance “occurs when the charging terms
of the indictment are left unaltered, but the evidence at trial proves facts
materially different from those alleged in the indictment.” United States v.
Dupre, 462 F.3d 131, 140 (2d Cir. 2006) (citation omitted). A constructive
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amendment “occurs when the trial evidence or the jury charge operates to
broaden the possible bases for conviction from that which appeared in the
indictment.” Binday, 804 F.3d at 584 (citation omitted). The difference
between a variance and a constructive amendment is largely “one of degree,”
but a variance requires reversal only if the defendant shows prejudice, whereas
a constructive amendment is reversible error without inquiry into prejudice.
United States v. Salmonese, 352 F.3d 608, 621 (2d Cir. 2003).
This Court has “proceeded cautiously” in evaluating a constructive
amendment claim. United States v. Agrawal, 726 F.3d 235, 259-60 (2d Cir.
2013). A defendant must show “that the terms of the indictment are in effect
altered by the presentation of evidence and jury instructions which so modify
essential elements of the offense charged that there is a substantial likelihood
that the defendant may have been convicted of an offense other than that
charged in the indictment.” United States v. Vilar, 729 F.3d 62, 81 (2d Cir. 2013)
(emphasis and citation omitted). “The critical determination is whether the
allegations and the proof substantially correspond.” Binday, 804 F.3d at 584
(citation omitted). This Court “permit[s] significant flexibility in proof,” as
long as “the defendant was given notice of the core of criminality to be proven
at trial.” United States v. Rigas, 490 F.3d 208, 228 (2d Cir. 2007) (emphasis and
citation omitted).
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B. Standard Of Review
This Court reviews a preserved claim of constructive amendment de
novo. Agrawal, 726 F.3d at 259.
C. Argument
The indictment alleged that a panel bank’s LIBOR submission “was to
be an independent assessment of that bank’s perceived borrowing costs, and
not altered to reflect trading positions that stood to gain or lose based on
LIBOR rates.” JA 80. The indictment alleged that Rabobank derivatives
traders asked Rabobank LIBOR submitters, including defendants, “to make
USD [dollar] and Yen LIBOR submissions that favored the traders’ derivative
positions.” JA 87. The LIBOR submitters “accommodated those requests by
making USD and Yen LIBOR submissions that were intended to benefit
Rabobank’s traders rather than making submissions that reflected the perceived
rate at which Rabobank could borrow unsecured funds.” JA 87. In sum, the
indictment alleged that defendants, “intending to manipulate and attempt to
manipulate to their advantage the benchmark interest rates referenced by
derivative products throughout the financial industry, engaged in a scheme to
obtain money and property by making false and fraudulent USD and Yen
LIBOR submissions.” JA 86.
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The proof at trial and the court’s jury instructions were fully consistent
with these allegations. The government proved that defendants determined a
number that represented their estimate of Rabobank’s borrowing costs. They
sometimes provided that number to the BBA, but oftentimes they “bumped” or
“biased” that number in a direction that benefited a trader’s derivative
positions. In the language of the indictment, those LIBOR submissions did not
represent defendants’ “independent assessment” or “perce[ption]” of the
bank’s borrowing cost, but instead “reflect[ed] trading positions that stood to
gain or lose based on LIBOR rates.” JA 80.
As the court explained to the jury, the government charged that
defendants’ LIBOR submissions “were not at the levels the defendants would
have honestly submitted otherwise but were instead at levels reflecting, at least
in part, an intent to benefit Rabobank’s trading positions and thereby obtain
profits that Rabobank might not otherwise realize.” Tr. 1632. Consistent with
that description, the government argued that whether or not defendants’
LIBOR submissions were “inside or outside some so-called range,” Tr. 1609,
they did not reflect defendants’ honest estimate of Rabobank’s borrowing
costs, see Tr. 1470-72, 1608-11.
Defendants erroneously claim (Br. 52-55) that the evidence and jury
instructions allowed for conviction even if their LIBOR submissions matched
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their “perception” of Rabobank’s borrowing costs. The court instructed,
however, that “[a] statement made with good-faith belief in its accuracy does
not amount to an intentional false or misleading statement and is not a crime.”
Tr. 1634. And the government proved that defendants’ LIBOR submissions
did not, in fact, represent their honest view of Rabobank’s borrowing costs.
Had the jury concluded that defendants’ LIBOR submissions matched their
honest perceptions, it would have acquitted.
The indictment provided defendants with ample notice of the “core of
criminality to be proven at trial.” Binday, 804 F.3d at 585 (citation omitted).
This case is therefore far different from those in which this Court has found a
constructive amendment. In United States v. Milstein, 401 F.3d 53 (2d Cir.
2005), for example, the indictment alleged that drugs were misbranded because
they had been repackaged to look as if they were the original product from the
original manufacturer, but the government proved that the drugs were
misbranded because they were contaminated with bacteria and therefore not
sterile. Id. at 64-66. No such divergence between the indictment and proof was
present here.
If anything, the jury instructions and presentation of evidence at trial in
this case narrowed the allegations in the indictment. The indictment alleged
that the LIBOR submissions were “false and fraudulent.” JA 86. Fraudulent
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representations include false statements, omissions in the face of a duty to
speak, misleading half-truths, and deceptive conduct. See supra pp. 45-47. The
government did not pursue a theory that defendants remained silent in the face
of a duty to speak but argued that defendants deceived through “outright lies,”
“deceptive half truths,” or “deceptive conduct.” Tr. 1388 (charge conference).
There is no constructive amendment where “a generally framed indictment
encompasses the specific legal theory or evidence used at trial.” Rigas, 490 F.3d
at 228 (citation omitted).
IV. The District Court’s Evidentiary Rulings Were Not An Abuse Of Discretion Or Plainly Erroneous
Defendants contend (Br. 71-75, 80-84) that the district court abused its
discretion by excluding evidence at trial. Their arguments do not withstand
scrutiny.
A. Standard Of Review
When a party preserves an objection to a district court’s exclusion of
evidence, this Court reviews “under a deferential ‘abuse of discretion’
standard” and will reverse only if the ruling was “manifestly erroneous.”
United States v. Bell, 584 F.3d 478, 486 (2d Cir. 2009) (citation omitted). “Even
manifest error does not require reversal if the error was harmless,” i.e., if the
Court “can conclude with fair assurance that the evidence would not have
substantially influenced the jury.” United States v. Al Kassar, 660 F.3d 108, 123
82
(2d Cir. 2011). A district court’s exclusion of evidence under Fed. R. Evid. 403
is “particularly” entitled to deference, Sprint/United Mgmt. Co. v. Mendelsohn,
552 U.S. 379, 384 (2008), and will be reversed only if this Court “find[s] the
decision to be arbitrary and irrational,” United States v. Desposito, 704 F.3d 221,
234 (2d Cir. 2013). A district court also is afforded broad discretion in
controlling the scope and extent of cross-examination. United States v. James,
712 F.3d 79, 103 (2d Cir. 2013).
An unpreserved claim of evidentiary error is reviewed for plain error
only. Fed. R. Evid. 103(e). If a party has failed to provide an adequate offer of
proof in the face of a court’s exclusion of evidence, the plain error standard
generally cannot be satisfied, because “failure to comply with normal
requirements of offers of proof is likely to produce a record which simply does
not disclose the error.” Fed. R. Evid. 103 advisory committee’s note; see Henry
v. Wyeth Pharm., Inc., 616 F.3d 134, 151 (2d Cir. 2010); United States v. Harry,
816 F.3d 1268, 1282-83 (10th Cir. 2016).
B. Argument
Defendants contend that the district court abused its discretion by (1)
improperly curtailing cross-examination of three government witnesses (Br. 72,
73-74, 80-81); and (2) improperly excluding evidence (including testimony
83
from a defense expert) by granting a government motion in limine (Br. 80-81,
82-84). They are wrong on both scores.
1. The District Court Did Not Abuse Its Discretion in Controlling the Scope of Cross-Examination
Defendants contend (Br. 72, 73-74, 80-81) that the district court
prevented them from introducing essential evidence during cross-examination
of three counterparty witnesses. But defendants did not provide an offer of
proof or alert the district court about the evidence they now claim they would
have elicited, and as a result they failed to preserve these claims.
a. Background: Direct Examination Of The Counterparty Witnesses
Tim Smith, the former treasurer for Dean Foods, testified that his
company entered into two swap agreements with Rabobank in order to hedge
against the risk that interest rates would increase. Tr. 494-99. Smith testified
that he would have wanted to know if Rabobank was manipulating the
LIBOR, and would have considered different alternatives had he known,
because the manipulation would have provided an advantage to Rabobank and
because “it speaks to [the] integrity and the sanctity of the market that you are
dealing with.” Tr. 499-502.
Tracy Twomey, the CFO at Super Store Industries, similarly testified
that her company entered into a series of swap agreements with Rabobank in
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order to hedge against the risk of interest rate increases. Tr. 822-27. Twomey
testified that if she had known that Rabobank might manipulate the LIBOR,
“we probably wouldn’t have entered into [the swaps] because if the interest
rate could have been manipulated higher or lower, we wouldn’t have wanted
to be involved in it.” Tr. 827-28.
Michael DiTore, a former derivatives trader at Lehman Brothers,
testified that he entered into interest rate swap agreements both to hedge and to
turn a profit, and he would have wanted to know if Rabobank attempted to
manipulate the LIBOR to benefit its trading positions, because that would
have put him “at a disadvantage.” Tr. 831-37. DiTore testified that he would
have been “less inclined to trade with someone [who] had more information
than me.” Tr. 837-38.
b. Defendants Did Not Provide An Adequate Offer Of Proof For Much Of The Testimony They Now Claim Was Excluded
In order to preserve a claim of error in a ruling that “excludes evidence,”
a party must “inform[] the court of its substance by an offer of proof, unless the
substance was apparent from the context.” Fed. R. Evid. 103(a)(2). The
purpose of an offer of proof is to “inform the trial judge about what counsel
expected to prove by the excluded evidence,” and therefore an offer of proof
should “generally state a ground for admissibility, inform the court and
85
opposing counsel what the proponent expected to prove by the excluded
evidence, and demonstrate the significance of the excluded testimony.” 1
Weinstein’s Federal Evidence § 103.20[2] (2d ed. 2016). An offer of proof “has the
twofold benefit of (a) allowing the trial court to make its decision on a fully
informed basis and (b) allowing the reviewing court to make a reasoned
evaluation of the impact of the trial court’s decision.” Jones v. Berry, 880 F.2d
670, 673 (2d Cir. 1989). The “[p]resentation of an offer after the trial or on
appeal does not help the trial judge, and is too late.” Weinstein, supra,
§ 103.20[4]; see Fortunato v. Ford Motor Co., 464 F.2d 962, 969 (2d Cir. 1972)
(offer of proof “must be made at the trial”).
Defendants did not provide an offer of proof, as required, or otherwise
give the district court notice about the evidence they now claim they would
have elicited on cross-examination of the counterparty witnesses. Defendants’
appellate brief provides, for the first time, a description of the evidence they
allegedly would have elicited, along with a justification for admitting that
evidence at trial. Their proffer comes too late.
Defendants contend, for instance, that they would have elicited
testimony from Tim Smith that Dean Foods was indifferent to LIBOR
manipulation by Rabobank because “it was hedged against LIBOR-related
loss” and Dean Foods “made its decision to trade with Rabobank because
86
Rabobank was the safest counterparty in the market.” Br. 72-74. On behalf of
this claim, defendants refer to an email exchange with the government during
trial (JA 675) and an analysis performed by KPMG that Allen submitted to the
court at sentencing (JA 588, 597). But none of that was presented to the district
court at trial.
Instead, when Smith was on the stand, defense counsel asked him if
Dean Foods had entered into a $4.8 billion credit facility in April 2007. Tr.
504. After the court sustained the government’s objection, it called a sidebar
and said Smith’s testimony would be relevant to materiality “if [Smith] had
known what is alleged and, if it were true, whether it would have influenced
his investment decision,” but the court did not see the relevance of “whether
the investment decision was big or small.” Tr. 505. Defense counsel countered
that the size of the credit facility was relevant because Smith had allegedly
testified that “the significance of the move” or the “significance of the
conduct” would have influenced whether he would have entered into a swap
agreement with Rabobank had he known about the LIBOR manipulation. Tr.
506. The court allowed defense counsel to inquire further to determine whether
Smith had opened the door to the proposed questioning. Tr. 506. When
questioning resumed, however, defense counsel “[d]ecided to move in a
slightly different direction,” and instead asked about Rabobank’s financial
87
strength and AAA credit rating. Tr. 507-08. Defendants did not offer any
explanation for this shift after the court sustained the government’s objections
to these questions. Tr. 507-08.
Defendants now say (Br. 72-74) their different line of questioning about
Rabobank’s financial strength was relevant because, they claim, institutions
that used swap agreements to hedge only cared about the credit worthiness of
their swap counterparty and not whether that counterparty (e.g., Rabobank)
manipulated the LIBOR to its advantage. In light of the district court’s
“discretion to limit cross-examination,” however, defendants were required to
“make all reasonable efforts to alert the court to the relevance and importance
of the proposed questions.” Berry, 880 F.2d at 673. Defendants failed to meet
that requirement. In fact, when the district court later sustained a government
objection after defense counsel asked Tracy Twomey if she “perceive[d]
Rabobank as being a safe investment” and “credit worthy,” the district court
offered a sidebar to explain its ruling, but counsel declined the offer. Tr. 829.
There can be no abuse of discretion in limiting cross-examination when the
district court gave “counsel the chance to explain the legal relevance of the line
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of questioning and counsel demurred.” Thomas, 377 F.3d at 241. Defendants
cannot rectify that failure by providing an offer of proof on appeal.15
Defendants’ arguments vis-à-vis Michael DiTore are similarly
unavailing. Defendants contend (Br. 74) that, if allowed, they would have
elicited testimony that DiTore traded with Rabobank because it was the “safest
counterparty in the market.” But defendants merely asked Ditore if he
performed a “credit check” on counterparties. Tr. 839. They did not explain,
after the court sustained an objection, the purpose of the question or where
they might be going with it. Indeed, at no time did defendants put the court on
notice that they were trying to ask DiTore whether he would have transacted
with Rabobank, despite manipulation, in light of the bank’s credit rating.
Defendants also contend (Br. 80-81) that the district court barred them,
on relevance grounds, from asking DiTore if he “expected Panel Banks to take
their own interests into account” when making LIBOR submissions. But that
is not the case. Instead, after defense counsel questioned DiTore about his
understanding of how the LIBOR was set, the court asked counsel at a sidebar
15 We also note that, despite the court’s rulings during cross-
examination, defendants nonetheless introduced evidence that the financial strength of a counterparty was important to an institution entering into a swap agreement, Tr. 507-08, 829, and that Rabobank had a AAA credit rating, Tr. 272, 413, 988-95.
89
to explain why it mattered whether DiTore “had an understanding that
LIBOR was created in X, Y, Z way or any other way.” Tr. 840-41. Defense
counsel argued that DiTore had testified “that manipulation would be relevant
or material to him” and therefore “[w]hat he understands manipulation to be
is” relevant. Tr. 841. Based on that explanation, the district court said it
“would be fine” to ask DiTore “what do you understand manipulation to be in
this context.” Tr. 841.
When questioning resumed, however, defense counsel did not ask
DiTore about his understanding of manipulation; counsel instead pursued a
different line of questioning, asking DiTore if it was his “understanding .....
that LIBOR setters took their bank’s interest rate exposure into account when
they set rates.” Tr. 842. Defendants never explained the relevance of this
question, and nothing in the record suggests that the court disallowed DiTore’s
answer on relevance grounds. Tr. 841. To the extent defendants wanted to
elicit testimony that DiTore knew there was manipulation at Rabobank, the
court likely would have allowed the questioning: as the court recognized,
DiTore’s testimony was relevant to materiality insofar as DiTore testified that
“he would have been less likely to trade” with Rabobank had he “known that
the rate was being manipulated.” Tr. 841. Again, defendants should not be
heard to complain about the district court’s ruling when they shifted gears into
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a new area without explaining what information they sought to elicit, or
why.16
Defendants identify no error, let alone plain error, in the district court’s
rulings on cross-examination. The court made clear that it would have allowed
evidence that counterparties would have entered into swap agreements with
Rabobank even had they known about the LIBOR manipulation at Rabobank.
See Tr. 505, 841. But defendants failed to explain to the court how their
questions aimed to elicit any such answers. Indeed, in light of the testimony by
counterparty witnesses on direct examination, it is unlikely, despite what
defendants now suggest, that the counterparties would have testified to the
exact opposite on cross-examination. Moreover, nothing prevented defendants
from offering their own witnesses from a Rabobank counterparty to say that
they would have transacted with Rabobank even had they known of its LIBOR
manipulation, assuming of course defendants could find such a witness.
Defendants had the opportunity to offer what they now claim was essential
evidence. Their arguments that the district court improperly prevented them
16 Defendants’ response to the government’s motion in limine did not
explain the basis for the question posed to DiTore, because in that filing, defendants proposed cross-examination of witnesses from other panel banks about manipulation at those banks. JA 160. DiTore’s employer, Lehman Brothers, was not a member of the LIBOR panel, see GSA 28, and therefore could not influence the LIBOR through deceptive submissions.
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from introducing the evidence are without merit. See United States v. Whitten,
610 F.3d 168, 183 (2d Cir. 2010) (no abuse of discretion where defense counsel
did not “explain the significance of [the witness’s] potential answers” on cross-
examination, “did not request a sidebar conference to argue any basis upon
which the district court should have permitted this line of questioning,” and
there was “no reason to believe that the district court would have understood
the significance of [the witness’s] potential answers”).
2. The Court’s In Limine Ruling Did Not Exclude Evidence That Defendants Now Contend They Would Have Introduced At Trial
Defendants contend (Br. 80-84) that the court’s in limine ruling
prohibited them from eliciting evidence from a defense expert (Marti
Subrahmanyam) and Michael DiTore. The court’s narrow in limine ruling did
not, however, prevent defendants from offering this evidence.
a. Background: The Government’s Motion In Limine
Before trial, the government moved to exclude evidence that “some of
Rabobank’s counterparties admitted to, or were investigated for, manipulating
LIBOR.” JA 126. The in limine motion also asked the court to prohibit
argument that “a counterparty’s involvement in LIBOR manipulation
rendered the defendants’ conduct immaterial.” JA 126-27. The government
argued that evidence of counterparty manipulation had little relevance to the
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charges against defendants and that any probative value was substantially
outweighed by the danger of unfair prejudice, confusing the issues, and
wasting time. JA 128-33; see Fed. R. Evid. 403.
Defendants responded that if witnesses from banks on the LIBOR panel
testified that they would not have entered into a swap agreement with
Rabobank had they known that Rabobank’s submitters accommodated trader
requests, defendants “should be permitted to cross-examine these witnesses by
demonstrating that swap traders at their institutions themselves requested
LIBOR submitters to put in higher or lower LIBOR rates.” JA 160. According
to defendants, this evidence would demonstrate that panel banks were aware
that they could manipulate the LIBOR and yet continued to transact with
other panel banks. JA 160-61. Defendants also claimed that Allen’s expert
(Subrahmanyam) would testify that he had reviewed documents from panel
banks and had concluded that “these institutions were aware that LIBOR was
influenced by Panel Banks’ self-interest, but continued to engage in swap
transactions with other Panel Banks nonetheless.” JA 163. According to
defendants, Subrahmanyam would also testify that institutions that used swap
agreements to hedge were “indifferent to LIBOR movements and what is
behind them.” JA 163.
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b. The Parties Understood The Narrow Scope Of The Court’s In Limine Ruling
On the first day of trial, the court granted the motion to “exclude
evidence that some of Rabobank’s [counterparties] were also attempting to
manipulate the LIBOR rate.” Tr. 4. Thereafter, the court made clear that its
ruling only precluded defendants from arguing that they were not culpable
“because other people were doing it.” Tr. 526. Defendants were allowed to
introduce evidence that counterparties were manipulating the LIBOR, so long
as it was probative of an issue relevant to defendants’ culpability and not
merely used to argue that defendants should be acquitted because others were
also engaging in the same conduct. Tr. 526-29, 535-37.
Thus, during cross-examination of Paul Robson, the court permitted
defense counsel to ask Robson if he “believed that other banks were
manipulating the LIBOR rate.” Tr. 536; see Tr. 526-29, 537-51. The court
instructed the jury that Robson’s testimony “may be relevant to his state of
mind and why he took actions he did,” but “the fact that some others may
have been [manipulating the LIBOR] doesn’t make what [defendants] were
doing right if what they were doing was illegal.” Tr. 536-37.
94
c. The Court’s In Limine Ruling Did Not Preclude Expert Testimony Or Cross-Examination Of Michael DiTore
The cross-examination of Robson—by which the court allowed
testimony about attempted LIBOR manipulation by other banks—
demonstrated the parameters for any defense questions along these lines: such
evidence was admissible for purposes other than to say that defendants’
conduct was acceptable because other banks were doing the same thing.
Defendants simply did not attempt to offer any permissible justification for
eliciting such evidence during their examinations of Subrahmanyam and
DiTore.
1. Defendants contend (Br. 82-83) that they had intended to
introduce testimony from Subrahmanyam—as summarized in their expert
witness disclosure, JA 374—that many of Rabobank’s counterparties were
themselves members of the LIBOR panel, that “these institutions were aware
that LIBOR was influenced by Panel Banks’ self-interest,” and that these banks
still continued to engage in swap transactions with other panel banks.
Defendants claim (Br. 83) that the district court’s in limine ruling prohibited
this testimony.
It did not. As noted, the parties were well aware that the court’s in
limine ruling merely prohibited the use of evidence that other panel banks may
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have tried to manipulate the LIBOR as an “excuse” for conduct by defendants
that otherwise “violate[d] the law.” Tr. 527-28, 536-37. The in limine ruling
did not bar defendants from questioning Subrahmanyam, as relevant to
materiality, about whether counterparties knew about manipulation at
Rabobank and yet continued to transact with Rabobank. To the contrary, the
court made clear that it would allow evidence about whether a counterparty
“had known what is alleged and, if it were true, whether it would have
influenced [the counterparty’s] investment decision.” Tr. 505. Defendants
cannot claim that their counterfactual reading of the in limine ruling prohibited
them from pursuing a line of questioning that, by all indications, was open to
them. This Court’s decision in United States v. Litvak, 808 F.3d 160 (2d Cir.
2015), is therefore inapposite, because in that case the district court “excluded
the entirety of [the defense expert’s] proffered testimony.” Id. at 182.
Defendants also claim (Br. 72-73) that Subrahmanyam would have
testified—as again summarized in their expert witness disclosure, JA 373—that
counterparties who used interest rate swaps to hedge were “indifferent” to
manipulation of the LIBOR at Rabobank. Although defendants contend (Br.
73) that the district court “prohibited the defense from presenting this evidence
to the jury,” they cite no such ruling, and the court’s in limine ruling, again,
did not prohibit the testimony. As described, that ruling excluded, in limited
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circumstances, evidence that other panel banks attempted to manipulate the
LIBOR. The ruling left defendants free to pose questions to Subrahmanyam
about hedging, but they instead chose to focus on three discrete and different
topics. Tr. 1031-32. Defendants cannot claim that the court erroneously
excluded evidence that they never sought to introduce in the first place.
2. Defendants likewise claim that the court’s in limine ruling
prevented them from asking DiTore if it was his “understanding ..... that
LIBOR setters took their bank’s interest rate exposure into account when they
set rates.” Tr. 842. The question was ambiguous and lacked a foundation, and
those were the likely reasons the court sustained the government’s objection.
The court made no mention of its in limine ruling when it precluded this
question and had previously made clear that it would allow DiTore to testify
about how he would have responded “had [he] known that the rate was being
manipulated.” Tr. 841; see also Tr. 505 (“It is material if [the counterparty] had
known what is alleged and, if it were true, whether it would have influenced
his investment decision.”).
Without contemporaneous guidance from the defense explaining the
basis for the question posed to DiTore, as the defense provided during cross-
examination of Robson, see Tr. 525-29, the district court could not know how
the question would support a factual theory that defendants only now flesh out
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in their appellate brief. Defendants’ speculation about what a properly
informed court would (or would not) have done does not demonstrate error.17
3. The Evidence Defendants Now Claim They Would Have Introduced At Trial Would Not Have Made A Difference
Even had the district court abused its discretion in excluding the
evidence that defendants now claim was so important, no doubt would be cast
on the verdicts—for whether reviewed for plain or harmless error, the court’s
rulings did not affect the outcome.
Defendants contend (Br. 81-82) that if they were able to show that some
counterparties were on the LIBOR panel and, like them, also manipulated the
LIBOR, the evidence would have defeated the government’s proof of a scheme
to defraud, because it would have shown that the counterparties were not
actually deceived by defendants’ manipulation of the LIBOR. A number of
Rabobank’s counterparties were not members of the LIBOR panel, however,
so defendant’s notion, at the threshold, has no application to many of their
17 Defendants also suggest (Br. 81) that the in limine ruling excluded an
article from the Wall Street Journal, but they make no argument in support of this claim. A claim not adequately raised in an opening brief is waived. O’Rourke v. United States, 587 F.3d 537, 542 (2d Cir. 2009). In any event, the exclusion of the article was not an abuse of discretion: The article was not prohibited by the in limine ruling but rather, as the district court explained, was inadmissible hearsay and also excludable under Fed. R. Evid. 403. Tr. 1180-81; see Tr. 1243.
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victims. See, e.g., Tr. 495, 824; compare GSA 68 (partial list of counterparties),
with GSA 28 (panel banks). In fact, at least one counterparty thought the
LIBOR “couldn’t be manipulated.” Tr. 828. To the extent defendants suggest
that non-panel bank counterparties (e.g., DiTore, Smith, Twomey) might have
known of the manipulation (yet still transacted with Rabobank), they are even
further afield of the record. Not only did defendants not suggest such an idea
below, there is no reason to think these witnesses would have so testified. In
fact, as noted, they took the stand to say that, had they known of the
manipulation, they would have steered clear of Rabobank.
But more importantly, the wire fraud statute “punishes the scheme, not
its success.” Pasquantino, 544 U.S. at 371 (citation omitted); see United States v.
Helmsley, 941 F.2d 71, 94 (2d Cir. 1991). The government need not prove a
completed fraud or demonstrate actual reliance or damage. Bridge v. Phoenix
Bond & Indem. Co., 553 U.S. 639, 647 (2008) (the “gravamen of the offense is
the scheme to defraud”); Neder, 527 U.S. at 24-25. So even if some
counterparties were not actually deceived by defendants’ LIBOR submissions,
those submissions amounted to a scheme to defraud, because they were false
and misleading and were intended to obtain money and property through
deceit. See Bridge, 553 U.S. at 648-49 (“Using the mail to execute or attempt to
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execute a scheme to defraud is indictable as mail fraud ..... even if no one
relied on any misrepresentation.”).
Evidence that certain counterparties may have themselves manipulated
the LIBOR also was not, as defendants contend (Br. 82-83), critical to
materiality. As noted, many of Rabobank’s counterparties were not members
of the LIBOR panel. But moreover, materiality is an objective standard that
asks how a misrepresentation “would affect a reasonable person[.]” Corsey, 723
F.3d at 373. Materiality does not involve a “subjective inquiry” that looks to
the individual characteristics of the actual victim. Id. “The question is not
whether victims might smell a rotten deal before they hand over money,” but
whether a misrepresentation “is capable of influencing the decisionmaker, no
matter what the victim decides to do.” Id. at 373 n.3. Here, as Smith, Twomey,
and DiTore attested, a reasonable counterparty would have wanted to know if
it was on the disadvantaged side of a Rabobank deal. In fact, Allen himself
conceded that counterparties would not have transacted with Rabobank had
they known Rabobank traders were trying to manipulate the LIBOR. Tr. 1278.
Evidence that certain counterparties used swap agreements to hedge (Br.
71-75) also had little if any relevance to materiality. To begin with, the
evidence established that many of Rabobank’s counterparties did not use the
swaps to hedge but instead used them to generate profit. See Tr. 123-26, 135-
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36, 306-07, 835. And even for parties who used swaps to hedge, it was virtually
impossible to fully hedge against interest rate risk, and many that used swaps
to hedge did not even try to fully hedge against interest rate risk. Tr. 134-36,
501, 835-36. Moreover, a misrepresentation is actionable under the wire fraud
statute even if it causes no net loss to the victims, as long as it deprived them
“of the full information they needed to make refined, discretionary
judgments.” United States v. Leonard, 529 F.3d 83, 91 (2d Cir. 2008) (citation
omitted). A reasonable counterparty using a swap to hedge would have wanted
to know about potential manipulation in deciding whether to enter into the
swap or whether to sell the swap, and on what terms.
In light of the compelling evidence of deception and materiality, any
error in excluding defendants’ newly-proposed evidence did not affect the
outcome of the trial. Defendants’ manipulation of the LIBOR was intended to
cause counterparties to lose money in their deals with Rabobank. Any
reasonable counterparty would have wanted to know about defendants’
misrepresentations at the time they entered the swap, at the time their
payments came due on fixing dates, and when evaluating the market value of
the swap over the course of the swap’s duration. See supra pp. 62-67.
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V. The District Court Did Not Abuse Its Discretion In Denying Defendants’ Motion To Compel John Ewan’s Deposition
The district court acted well within its broad discretion in declining to
order a deposition of a potential witness in the United Kingdom. Defendants’
arguments to the contrary (Br. 76-80) are without merit.
A. Standard of Review
The decision to permit a deposition under Fed. R. Crim. P. 15 “rests
within the sound discretion of the trial court, and will not be disturbed absent
clear abuse of that discretion.” United States v. Johnpoll, 739 F.2d 702, 708 (2d
Cir. 1984) (citation omitted).
B. Background
1. Federal Rule Of Criminal Procedure 15
The Federal Rules of Criminal Procedure provide that “[a] party may
move that a prospective witness be deposed in order to preserve testimony for
trial,” and “[t]he court may grant the motion because of exceptional
circumstances and in the interest of justice.” Fed. R. Crim. P. 15(a)(1). A party
seeking a deposition has the burden of demonstrating that “(1) the prospective
witness is unavailable for trial, (2) the witness’ testimony is material, and (3)
the testimony is necessary to prevent a failure of justice.” United States v. Cohen,
260 F.3d 68, 78 (2d Cir. 2001); see United States v. Whiting, 308 F.2d 537, 541
(2d Cir. 1962) (burden on moving party).
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2. Defendants’ Motion To Compel A Deposition
Defendants moved to depose John Ewan, who had worked at the British
Bankers’ Association as its “LIBOR Manager” and “Secretary to the Foreign
Exchange and Money Markets Committee.” Dkt. 83. Defendants claimed that
Ewan’s testimony would be material because it would demonstrate that their
LIBOR submissions were not “false” or material. Dkt. 97, at 6-10. The
government did not dispute Ewan’s unavailability for trial but argued that that
the motion was untimely and that Ewan’s potential deposition testimony was
neither material nor necessary to prevent a failure of justice. SPA 3-4. In order
to demonstrate the likely content of Ewan’s deposition testimony, defendants
and the government each provided the court with select portions of Ewan’s
testimony from a criminal trial in the United Kingdom. Dkt. 93, 98.18
The district court concluded that the government had a “fair argument”
that the motion was untimely but instead denied the motion on the merits.
SPA 3; see Dkt. 103, at 36-81 (oral argument). The court concluded that
18 Ewan’s testimony was offered by the Crown in the criminal
prosecution of Thomas Hayes, in support of charges arising from manipulation of the LIBOR. Hayes, a former trader at UBS and Citigroup, was found guilty and sentenced to 11 years of imprisonment. See Chad Bray, Ex-Trader Tom Hayes Ordered to Pay $1.2 Million in Libor Case, N.Y. Times, Mar. 23, 2016, http://www.nytimes.com/2016/03/24/business/dealbook/ex-trader-tom-hayes-ordered-to-pay-1-2-million-in-libor-case.html.
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“[m]ost, if not all,” of the testimony defendants expected to elicit from Ewan
“would be inadmissible as hearsay and/or opinion evidence,” and even if
admissible, the testimony would be immaterial. SPA 5. The court explained,
for example, that Ewan would not testify that “he approved of personal
financial interests influencing [LIBOR] submissions,” let alone that he thought
such practices “were acceptable.” SPA 5.
The court subsequently denied a motion for reconsideration. SPA 7-10.
It first concluded that the motion was procedurally improper because it was
accompanied by hundreds of additional, new pages of Ewan’s trial testimony.
SPA 9-10; see Dkt. 106-1, 106-2, 106-3 (U.K. trial transcripts). The court also
denied the reconsideration motion on the merits, concluding that “the
additional material, even if considered at this belated stage, does not alter” the
court’s previous conclusion. SPA 10. The court found that the additional
excerpts did not support defendants’ assertions and, moreover, “much of the
new testimony is riddled with inadmissible hearsay, as well as the witness’s
own admissions of uncertainty.” SPA 10.
C. Argument
The district court acted well within its broad discretion in denying the
motion to depose Ewan. The contents of Ewan’s trial testimony in the United
Kingdom confirmed that his deposition testimony would be neither material
104
nor necessary to prevent a failure of justice under Rule 15. In fact, Ewan’s
United Kingdom testimony aligned with the government’s case, not Allen and
Conti’s defense. Ewan testified that the BBA never approved or endorsed any
deviation from the established LIBOR definition and was never prepared to let
panel banks ignore or not adhere to that definition. Dkt. 106-1, at 12; see Dkt.
106-1, at 24-25 (definition did not change). Ewan testified that it was “clearly
not within the spirit or the letter of the definition” for a submitter to take into
account benefits to a trader’s portfolio. Dkt. 106-1, at 13. Ewan confirmed that
it was “not remotely compatible” with the LIBOR definition to try to “get the
LIBOR to move” in a “particular direction” and at a “particular time” in order
to benefit a trader’s position. Dkt. 106-1, at 14. Ewan testified that through
2010 he did not have any suspicion or awareness that this type of conduct was
taking place and first became aware of it in 2012. Dkt. 106-1, at 14, 26-28.
Defendants nonetheless strain to interpret Ewan’s testimony in a manner
that suggests it would have been material and necessary to their defense. Their
efforts fall short.
1. Defendants contend (Br. 77) that Ewan’s deposition testimony
would have shown that he believed it was acceptable to deviate from the
“written” definition of LIBOR, as long as submitters remained consistent with
the “spirit” of the definition. But Ewan’s testimony in the United Kingdom
105
made clear that, in his view, neither the spirit nor letter of the definition
contemplated that a submitter could take into account the financial benefits
that a higher or lower submission would provide to a derivatives trader who
held a positon tied to the LIBOR. Dkt. 106-1, at 13.
2. Defendants contend (Br. 78) that Ewan would have testified that
the LIBOR definition allowed a submitter to select any number within a “wide
range of offered rates.” In his testimony in the United Kingdom, however,
Ewan explained that “there is a final component to the definition which is a
bank can’t submit a range, it has to submit one number.” Dkt. 106-3, at 8
(emphasis added). And “in order to arrive at that ..... one number,” Ewan
explained, the submitter must answer the question, “[W]here do you think you
would be lent money? And there can only be one answer to that and it should be
where you think an unnamed counterparty would offer you money.” Dkt.
106-3, at 8 (emphasis added). According to Ewan, the LIBOR submitter
“should be using all of the information available to [him] to get to that one
figure.” Dkt. 106-3, at 8 (emphasis added).
3. Defendants contend (Br. 78) that Ewan would have testified that
“virtually everyone responsible for LIBOR submissions engaged in conduct
similar” to defendants and yet “the BBA did not put a stop to that practice.”
106
To the contrary, Ewan made clear that he was unaware of this conduct until
2012. Dkt. 106-1, at 14, 26.
Defendants’ reliance on United States v. Litvak, 808 F.3d 160 (2d Cir.
2015), is misplaced. In that case, the Court held that evidence that managers at
the defendant’s company approved of other employees engaging in the same
conduct was relevant, under Federal Rule of Evidence 401, to the defendant’s
criminal intent. Id. at 188-89. Putting aside that relevance under Rule 401 is
different than materiality under Rule 15, cf. Rigas, 490 F.3d at 234
(“‘[R]elevance’ and ‘materiality’ are not synonymous.”), defendants’
contention falls on the facts. The permissible inference from the evidence in
Litvak was that the defendant knew the managers at his company sanctioned
the similar conduct of other employees, whereas here there is no suggestion
that Ewan would testify that defendants knew other banks engaged in similar
conduct, let alone that the BBA sanctioned defendants’ misrepresentations. In
fact, the evidence here demonstrated that Allen repeatedly assured Ewan
(falsely) that Rabobank’s LIBOR submissions conformed to the BBA
definition. See Tr. 408-14; GSA 73-78.
4. Defendants also contend (Br. 77) that the government attempted to
portray the LIBOR definition as “the equivalent of law,” and that Ewan’s
testimony would have established that LIBOR was produced by a trade
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organization and not legally binding. The evidence at trial established,
however, that the LIBOR definition was devised by the BBA, not a
government agency, and the government never claimed otherwise. See, e.g., Tr.
139-49 (government expert testifying that BBA established and published the
LIBOR definition).
In sum, defendants fail to establish the exceptional circumstances that
would warrant a deposition under Rule 15—and given the substance of Ewan’s
testimony, they surely do not show how it was material or, even more,
necessary to prevent an injustice. The district court did not abuse its discretion
in denying their motion. The district court carefully considered defendants’
claims and, in light of Ewan’s testimony at a criminal trial in the United
Kingdom, correctly concluded that his deposition testimony would not be
material.
VI. The District Court Correctly Denied Defendants’ Kastigar Motion
Defendants contend (Br. 96-126) that the district court erroneously
denied their motion for relief under Kastigar v. United States, 406 U.S. 441
(1972). Their arguments lack merit.
108
A. Background
1. Legal Background: The Kastigar Decision
The Fifth Amendment provides that “[n]o person ..... shall be compelled
in any criminal case to be a witness against himself.” U.S. Const. amend. V.
The federal immunity statute authorizes the government to obtain a court
order requiring a witness to provide testimony despite invocation of the
privilege against self-incrimination, “but no testimony or other information
compelled under the order (or any information directly or indirectly derived
from such testimony or other information) may be used against the witness in
any criminal case.” 18 U.S.C. §§ 6002-6003.
In Kastigar, the Supreme Court held that the scope of the immunity
provided by this statute, which prohibits both direct and derivative use of
immunized testimony, is coextensive with the protections of the Fifth
Amendment, and therefore the statute may be used to compel testimony over a
claim of the privilege. 406 U.S. at 453. Once a defendant demonstrates that he
has testified under a grant of immunity about matters related to the federal
prosecution, prosecutors have the burden of showing—by a preponderance of
the evidence—that their evidence is not tainted and derives from a legitimate
source wholly independent of the compelled testimony. Id. at 460; see United
States v. Nanni, 59 F.3d 1425, 1431-32 (2d Cir. 1995).
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2. U.K. And U.S. Authorities Separately Investigate Manipulation Of The LIBOR At Rabobank
As of 2012, the Justice Department and the United Kingdom’s Financial
Conduct Authority (FCA) had each commenced separate investigations into
manipulation of the LIBOR at Rabobank. Kastigar Tr. 133-36; SPA 15.19 The
FCA and the Justice Department separately received documents from
Rabobank and interviewed witnesses. Kastigar Tr. 134-37; SPA 26-27.
The FCA began interviewing witnesses around November 2012.
Kastigar Tr. 135. In accordance with U.K. law, the witnesses were granted
immunity from direct use of their testimony but not derivative use. Kastigar
GX 205, at 2. Refusal to provide testimony on these terms was punishable
through contempt sanctions. SPA 15-16. The FCA interviewed a number of
Rabobank witnesses under these procedures, including Paul Robson (on
January 17, 2013), Conti (on January 25, 2013), and Allen (on June 20 and 21,
2013). SPA 15-16; see Kastigar GX 205, 206 (Conti and Allen transcripts).
During his interview, Robson denied improper conduct at Rabobank. Tr.
418, 625-27, 638; Kastigar Tr. 75. Allen and Conti also “disavowed”
19 The FCA replaced the Financial Services Authority (FSA) on or about
April 2013. SPA 15 n.4. We refer to both U.K. agencies as the FCA.
110
misconduct during their interviews and frequently claimed a lack of
recollection. SPA 35; see generally Kastigar GX 205, 206 (interview transcripts).
3. The Justice Department Conducts Interviews And Enters Into A Deferred Prosecution Agreement With Rabobank
The Justice Department, out of an abundance of caution, requested that
the FCA not share the interviews or any information derived from the
interviews, emphasizing the importance of maintaining a “wall” between the
investigations conducted by the two countries in order to avoid potential Fifth
Amendment issues in the event of a criminal prosecution in the United States.
SPA 28-29; Dkt. 95-2, 190-6, 190-7. The FCA agreed to abide by this request
and agreed to procedures to maintain a wall, including a “day one/day two”
interview procedure in which the Justice Department interviewed witnesses
prior to the FCA. SPA 28-29; Dkt. 95-3; Kastigar Tr. 135-36.
The Justice Department separately interviewed witnesses in accordance
with these procedures. Kastigar Tr. 136-37. Between January and August
2013, the Department interviewed Conti, Lee Stewart, Paul Thompson,
Damon Robbins, Takayuki Yagami, and Christian Schluep, among others.
Kastigar Tr. 137-43. A number of the witnesses provided information that
incriminated Allen and Conti. SPA 27.
On October 29, 2013, the Justice Department entered into a deferred
prosecution agreement with Rabobank. SPA 18.
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4. The FCA Temporarily Decides To Pursue Regulatory Proceedings Against Robson And Provides Him With Interview Transcripts
In November 2013, the FCA sent Robson’s U.K. legal counsel a warning
notice informing him that the FCA intended to pursue regulatory proceedings
against Robson. SPA 16. In accordance with U.K. law, the FCA accompanied
the notice with materials supporting the charges against Robson, including
FCA interview transcripts. SPA 16; Kastigar Tr. 5. Among the materials sent
to Robson’s counsel were transcripts of the FCA’s interviews with Allen and
Conti. SPA 16-17.
Robson’s counsel sent the box of materials to Robson and instructed
him, in preparation for meeting with his lawyers, to read through the materials
and highlight anything that was relevant or raised questions. SPA 16-17;
Kastigar Tr. 5-6, 20, 76, 186. Robson read through the materials as instructed
over the course of about seven hours, spread over two afternoons. SPA 17;
Kastigar Tr. 6. He circled and underlined some passages in the transcripts,
including the transcripts of Allen’s and Conti’s testimony. SPA 17; Kastigar
Tr. 76, 185-86, 221; JA 742-851 (excerpts of transcripts with notations).
A number of days later, before Robson had the opportunity to discuss
the materials with counsel, his lawyer instructed him to “seal the box, mark it
with legal/professional privilege, and put it out of the way,” because the FCA
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regulatory proceedings had been stayed in favor of criminal proceedings. SPA
17; Kastigar Tr. 6-7, 78. Robson did as instructed and placed the box in his
attic. SPA 17; Kastigar Tr. 6, 20-22. He did not review the materials in the box
at any point afterwards. SPA 17-18; Kastigar Tr. 7, 23-24.
5. Robson Is Indicted And Agrees To Plead Guilty And Cooperate With The Justice Department
On April 18, 2014, a federal grand jury in New York returned an
indictment charging Robson and two other Rabobank employees (Thompson
and Motomura) with wire fraud and conspiracy to commit wire fraud and
bank fraud. SPA 18. Another Rabobank employee, Takayuki Yagami, had
previously agreed to cooperate with the U.S. government and, on June 10,
2014, pleaded guilty to conspiracy charges. SPA 18; Kastigar Tr. 247.
Robson also decided to plead guilty and cooperate. SPA 18, 24; Kastigar
Tr. 7-8. He met with U.S. investigators for the first time on July 17 and 18,
2014, and pleaded guilty on August 18, 2014. SPA 18; JA 852. Robson
provided the government with information about his involvement in
manipulating the LIBOR, as well as information about Allen’s and Conti’s
involvement. See JA 852-73. Robson was instructed not to share any
information that he may have learned from the FCA. SPA 29 & n.16; Kastigar
Tr. 8-10, 136-37, 145-46.
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6. Defendants Are Indicted And The District Court Holds A Kastigar Hearing
On October 16, 2014, a federal grand jury returned a superseding
indictment that for the first time charged Allen and Conti with wire fraud and
conspiracy to commit wire fraud and bank fraud. SPA 18-19. In obtaining the
indictment, the government presented evidence to the grand jury through FBI
Agent Jeffrey Weeks. SPA 32-33; see Kastigar GX 186 (grand jury transcript).
Agent Weeks testified about inculpatory documents and information from
witness interviews, including his interviews with Robson, Schluep, and
Yagami. SPA 33.
Defendants moved to dismiss the indictment or suppress Robson’s
testimony, arguing that the case against them was “irrevocably tainted” by
Robson’s exposure to their FCA testimony. Dkt. 76, at 5. The district court
concluded that a hearing was necessary to resolve the motion. Dkt. 111. After
consulting with counsel, the court decided that, “in accordance with prevailing
practice in the Second Circuit,” the hearing would take place after trial if still
necessary. JA 921.
Defendants were convicted after a jury trial, as described above, at which
the jury was presented with, among other things, testimony from Robson. See
supra pp. 19-21. At the ensuing Kastigar hearing, the government presented
testimony from Robson and Agent Weeks, along with supporting exhibits.
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Kastigar Tr. 4-257. Among the exhibits introduced at the hearing were charts
that catalogued Robson’s trial testimony and identified (1) any overlap
between Robson’s testimony and defendants’ FCA testimony, and (2) the
bases for concluding that Robson’s testimony derived from sources wholly
independent from defendants’ FCA testimony. JA 923-64.
7. The District Court Denies The Kastigar Motion
The district court denied the motion in a 25-page opinion. SPA 12-36.
The court declined to reach the government’s argument that Kastigar does not
apply when a foreign government compels a defendant’s testimony. SPA 20
n.8. The court concluded that “even assuming Kastigar applies to testimony
compelled by a foreign sovereign, the Government has met its Kastigar burden
on the facts here determined.” SPA 20 n.8. The court considered and rejected
each of the four claims of taint that, according to defendants, resulted from
Robson’s exposure to the transcripts of their FCA testimony. SPA 22-36.
First, the court concluded that Robson’s decision to cooperate was not
influenced by his review of defendants’ FCA testimony. SPA 23-24. The court
concluded that “the evidence the Government adduced at the Kastigar hearing
and at the trial” established that Robson’s cooperation was motived by the
strength of the evidence against him and his hope to receive sentencing
benefits. SPA 24.
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Second, the court concluded that the government’s decision to prosecute
Allen and Conti was not caused by information provided by Robson that was
tainted by his exposure to their FCA testimony. SPA 25-32. The court found
that the government had proved that its decision to prosecute had a basis
independent from defendants’ FCA testimony. SPA 26-32.
Third, the court concluded that the government did not present evidence
to the grand jury that was tainted by Robson’s exposure to defendants’ FCA
testimony. SPA 32-34. The court found that “a substantial portion of” Agent
Weeks’ grand jury testimony derived from sources other than Robson. SPA 32-
33. With respect to his testimony that derived from Robson, the court
concluded that the government demonstrated the source of that information
was independent from Allen’s and Conti’s FCA testimony, namely Robson’s
“personal experience and observations.” SPA 33-34.
Fourth, the court concluded that the evidence at trial, and in particular
Robson’s trial testimony, was not tainted by Robson’s exposure to defendants’
FCA testimony. SPA 34-36. The court credited “Mr. Robson’s testimony at
the Kastigar hearing” and found persuasive the government’s chart “comparing
Mr. Robson’s trial testimony with defendants’ compelled testimony.” SPA 34.
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B. Standard Of Review
This Court reviews legal conclusions de novo and findings of fact for
clear error. See, e.g., United States v. Wilson, 699 F.3d 235, 241 (2d Cir. 2012). A
district court’s finding that the government did not use immunized testimony is
a factual finding. United States v. Blau, 159 F.3d 68, 73 (2d Cir. 1998). The
Court will deem a factual finding to be clearly erroneous only if it reviews “all
of the evidence” and is “left with the definite and firm conviction that a
mistake has been committed.” United States v. David, 681 F.3d 45, 48 (2d Cir.
2012) (citation omitted). A factual finding based on witness testimony and the
district court’s observation of a witness is “entitled to particular deference,”
because “assessing the credibility of witnesses is distinctly the province of the
district court.” United States v. Cuevas, 496 F.3d 256, 267 (2d Cir. 2007)
(citations omitted).
C. Argument
It is undisputed that investigators and prosecutors from the Justice
Department never reviewed or otherwise saw the transcripts of Allen’s and
Conti’s FCA testimony. Defendants’ Fifth Amendment claim instead is
premised solely on Robson’s exposure to those transcripts. According to
defendants, Robson’s exposure to the transcripts affected (1) the information
he provided to Justice Department investigators (which was presented to the
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grand jury by Agent Weeks and used to procure the indictment), and (2) his
testimony at trial (which was used to procure the convictions).20
Defendants’ arguments fail for three independent reasons. To begin with,
a violation of the Fifth Amendment prohibition against compelled self-
incrimination requires compulsion by a sovereign bound by the Self-
Incrimination Clause, namely a state government of the United States or the
federal government. Second, even if testimony compelled by a foreign
sovereign could trigger Fifth Amendment protections, the district court
correctly found—on the basis of all the evidence presented to the court at trial
and at the Kastigar hearing—that Robson’s exposure to the FCA transcripts
had no effect on the information he provided to the Justice Department or on
his trial testimony. In other words, the court correctly found that the evidence
presented to the grand and petit juries was wholly independent from the
testimony that Conti and Allen provided to the FCA. The court’s findings,
grounded in its painstaking review of the “mass of materials” adduced at the
Kastigar hearing, as well as the court’s assessment of “the demeanor and
20 Defendants do not renew their claims, asserted in the district court,
that Robson’s decision to cooperate and the government’s decision to prosecute were tainted by Robson’s exposure to their FCA testimony. Appellate review of those claims is therefore waived. See LoSacco v. City of Middletown, 71 F.3d 88, 92 (2d Cir. 1995).
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credibility of the witnesses,” SPA 15, are not clearly erroneous. Finally, even
assuming there was error, it was harmless beyond a reasonable doubt.
1. The Interviews Conducted By U.K. Authorities Do Not Implicate The Fifth Amendment
“[A] necessary element of compulsory self-incrimination is some kind of
compulsion.” Hoffa v. United States, 385 U.S. 293, 304 (1966). In addition, a
violation of the Fifth Amendment’s right against self-incrimination occurs only
when a compelled statement is used in a criminal case against the defendant.
In re Terrorist Bombings of U.S. Embassies in E. Africa, 552 F.3d 177, 199 (2d Cir.
2008). Thus, the two necessary predicates for a violation of the Self-
Incrimination Clause are (1) compulsion and (2) use of the compelled
statement in a criminal case.
The Supreme Court has held that the use requirement is limited to use
“by the government whose power the Clause limits” and does not encompass a
foreign sovereign’s use of a compelled statement. United States v. Balsys, 524
U.S. 666, 669, 672-74 (1998). Although neither this Court nor the Supreme
Court has directly addressed whether the compulsion required by the Fifth
Amendment includes compulsion by a foreign sovereign, the weight of
authority establishes that only compulsion by sovereigns bound by the Fifth
Amendment (i.e., our country’s state and federal governments) can result in a
violation.
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Before the right against compelled self-incrimination was determined to
bind the states by incorporation through the Due Process Clause, the Supreme
Court held that a statement compelled under a grant of immunity by state
authorities (then not bound by the Fifth Amendment) could be used in a
federal criminal case (which of course has always been bound by the Fifth
Amendment). Feldman v. United States, 322 U.S. 487, 491-92 (1944). The Court
similarly held that the federal government could compel a witness to give
testimony that might incriminate him under state law. United States v. Murdock,
284 U.S. 141, 149 (1931). Reconsideration of this rule was necessitated by the
Court’s later conclusion that the Self-Incrimination Clause was binding on the
states, because “the Fifth Amendment limitation could no longer be seen as
framed for one jurisdiction alone, each jurisdiction having instead become
subject to the same claim of privilege flowing from the one limitation.” Balsys,
524 U.S. at 681. The logic of these early cases supports the conclusion that the
compelling authority and the using authority must both be “bound by” the
Self-Incrimination Clause. Id. at 681. At the “heart” of the Self-Incrimination
Clause “lies the principle that the courts of a government from which a witness
may reasonably fear prosecution may not in fairness compel the witness to
furnish testimonial evidence.” Id. at 682-83.
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Cases applying Miranda v. Arizona, 384 U.S. 436 (1966), buttress this
conclusion. Under Miranda, the government may not use unwarned statements
obtained from a suspect during custodial interrogation. Oregon v. Elstad, 470
U.S. 298, 306-07 (1985). Miranda establishes a prophylactic rule intended to
protect the suspect’s Fifth Amendment right against compelled self-
incrimination and in fact “sweep[s] beyond the actual protections of the Self-
Incrimination Clause.” United States v. Patane, 542 U.S. 630, 637-39 (2004).
This Court has held, however, that Miranda does not bar the use of statements
obtained through custodial interrogation conducted overseas by foreign
officials. In re Terrorist Bombings, 552 F.3d at 202-03.
It is true that the Supreme Court, in Bram v. United States, 168 U.S. 532
(1897), found a Fifth Amendment violation when testimony was coerced by
foreign police officers, but Bram did not address the distinction between
coercion by foreign and domestic authorities, and it has been undercut by
subsequent Supreme Court authority. In particular, although Bram determined
that a confession is involuntary if obtained by “any direct or implied promises,
however slight, [or] by the exertion of any improper influence,” 168 U.S. at
542-43, the Court has since made clear that “this passage from Bram ..... does
121
not state the standard for determining the voluntariness of a confession,”
Arizona v. Fulminante, 499 U.S. 279, 285 (1991).21
The “modern test for voluntariness is well established and multi-
faceted,” United States v. Orlandez-Gamboa, 320 F.3d 328, 332-33 (2d Cir. 2003),
and it requires, among other things, coercive state action resulting in a
confession by the defendant, Colorado v. Connelly, 479 U.S. 157, 166-67 (1986).
Accordingly, in United States v. Salameh, 152 F.3d 88 (2d Cir. 1998), this Court
held that the defendant had no viable constitutional claim that his statements
were involuntary when he made the statements to federal agents but the
alleged coercive conduct was perpetrated by foreign authorities abroad. Id. at
117; see also Mickey v. Ayers, 606 F.3d 1223, 1234 (9th Cir. 2010) (confession
could not be involuntary when allegedly coerced by Japanese police).
The cases cited by defendants (Br. 100-01) do not support a different
conclusion. Defendants rely on two cases in which this Court stated that
“statements taken by foreign police in the absence of Miranda warnings are
21 In addition, Bram located the right against use of involuntary
confessions in the Self-Incrimination Clause, 168 U.S. at 542-43, whereas later cases generally locate that right in the Due Process Clause, see Colorado v. Connelly, 479 U.S. 157, 163 (1986); United States v. Orlandez-Gamboa, 320 F.3d 328, 332 (2d Cir. 2003). To the extent the standard for voluntary confessions is grounded in due process, that standard should not determine whether a foreign grant of immunity triggers the government’s heavy burden under Kastigar and the Self-Incrimination Clause.
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admissible if voluntary.” United States v. Yousef, 327 F.3d 56, 145 (2d Cir.
2003); In re Terrorist Bombings, 552 F.3d at 203 (quoting Yousef). The “if
voluntary” language that appears in those cases, however, apparently derived
from Bram, see United States v. Welch, 455 F.2d 211, 213 (2d Cir. 1972) (cited in
both cases and relying on Bram), and was not necessary to the decisions
reached in those cases, see In re Terrorist Bombings, 552 F.3d at 198-215; Yousef,
327 F.3d at 144-46. The cases did not purport to, and could not, overrule prior
panel precedent (Salameh) or precedent from the Supreme Court (Colorado v.
Connelly). See United States v. Snow, 462 F.3d 55, 65 n.11 (2d Cir. 2006) (“[A]
prior decision of a panel of this court binds all subsequent panels ‘absent a
change in law by higher authority or by way of an in banc proceeding.’”); see
also United States v. Wolf, 813 F.2d 970, 972 n.3 (9th Cir. 1987) (recognizing
that “[t]he continuing vitality of [the Ninth Circuit’s] holding in [Brulay v.
United States, 383 F.2d 345, 348 (9th Cir. 1967), cited by defendants (Br. 100-
01)] was cast into serious doubt by Colorado v. Connelly”).22
22 To be sure, there may be some other constitutional doctrine apart from
the Fifth Amendment right against self-incrimination that would require exclusion of a confession coerced by foreign officials, such as a due process violation based on conduct that “shocks the judicial conscience.” Yousef, 327 F.3d at 146; see 2 Wayne R. LaFave, et al., Crim. Proc. § 6.10(d) (4th ed. 2015). But no such doctrine has been—or could be—claimed to apply in this case.
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Defendants’ argument is akin to a claim that the Self-Incrimination
Clause prohibits prosecutors from using statements obtained by a private
employer through a threat of adverse employment consequences. Although
statements provided by a government employee under threat of discharge may
not be used in a subsequent prosecution, Garrity v. New Jersey, 385 U.S. 493,
496 (1967), the same is not true when a private entity, such as the New York
Stock Exchange, obtains an employee’s statements through threat of discharge,
United States v. Solomon, 509 F.2d 863, 867-71 (2d Cir. 1975) (Friendly, J.). For
purposes of the Fifth Amendment, the British government is on the same
footing as a private entity such as the New York Stock Exchange.
In sum, a statement obtained by a foreign government through a grant of
immunity is not a “compelled” statement for purposes of the Fifth
Amendment. A holding to the contrary could seriously hamper the
prosecution of criminal conduct that crosses international borders. A foreign
government could inadvertently scuttle prosecutions in the U.S. by compelling
testimony and then making the testimony available to potential witnesses or
the public. Worse yet, a hostile government bent on frustrating prosecution of
a defendant would have to do no more than compel a witness to testify and
then publicize the substance of that testimony, unilaterally putting the United
States to its heavy Kastigar burden. Suffice it to say that it is not for a foreign
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sovereign to determine when to place such obstacles in the way of a U.S.
prosecution.
2. Assuming The Fifth Amendment Applies, The District Court Correctly Concluded There Was No Violation
The district court concluded that the government established that there
was a source of Robson’s testimony wholly independent from defendants’
FCA testimony, namely Robson’s personal experience and observations. The
court’s findings were not clearly erroneous.
a. Robson’s Kastigar Testimony Established That His Trial Testimony And The Evidence Presented To The Grand Jury Were Not Tainted By His Exposure To Defendants’ FCA Testimony
At the Kastigar hearing, Robson testified that when he met with federal
prosecutors for the first time in July 2014, he had no specific recollection of the
materials the FCA had provided to him, which he read through once in
November or December 2013. Kastigar Tr. 8; SPA 16 & n.6. Robson testified
that he had only an “[i]ncredibly vague” memory of the contents of the
transcripts, which included but were not limited to Allen’s and Conti’s
testimony. Kastigar Tr. 16; see Kastigar Tr. 126. According to Robson, he
recalled “kind of the background of the overall transcripts” and retained “more
a kind of an overall feel for what was being said,” namely that “some people
were saying it never happened, some people were saying they didn’t
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understand what was going on.” Kastigar Tr. 16. Robson testified that the
information he provided to government investigators after he decided to
cooperate derived from his personal knowledge and was not informed in any
way by defendants’ FCA testimony. Kastigar Tr. 126-28.
Robson also testified at the Kastigar hearing that defendants’ FCA
testimony did not in any way inform his testimony at trial, which commenced
in October 2015, almost two years after he reviewed the transcripts. Kastigar
Tr. 10-12, 126, 213-14. Robson testified that the bases for his trial testimony
about the scheme to manipulate the LIBOR were “my observations, personal
experiences, and my own professional understanding of the terminology in the
market at the time.” Kastigar Tr. 11. His testimony about the instructions he
received from Allen to accommodate trader requests was “based upon what I’d
been told at that time.” Kastigar Tr. 11-12. His testimony about Conti’s
participation in the scheme similarly was based on “what was happening at the
time, what I’d lived through at Rabobank and what I’d observed, again, my
understanding of terminology in the market.” Kastigar Tr. 12. Robson’s
testimony about chats, emails, and audio recordings also derived from his
personal experiences and his knowledge of market terminology, and was not in
any way informed by defendants’ FCA testimony. Kastigar Tr. 12-14.
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The district court credited Robson’s testimony. SPA 24 & n.13, 29, 31,
34. Defendants had ample opportunity to challenge Robson’s memory and
veracity. SPA 24 n.3. The court “carefully considered [the defense] arguments”
but found them “totally unpersuasive,” instead concluding that Robson’s
testimony “at the trial and at the Kastigar hearing” was “highly credible.” SPA
24 n.13; see United States v. Weissman, 195 F.3d 96, 99 (2d Cir. 1999) (district
court is “in the best position to evaluate [the] witness’s demeanor and tone of
voice as well as other mannerisms that bear heavily on one’s belief in what the
witness says”) (citation omitted).
The court’s finding was not clearly erroneous. The government thereby
sustained its burden of proving, by a preponderance of the evidence, that the
grand jury evidence and Robson’s trial testimony were untainted by
defendants’ FCA testimony. The D.C. Circuit’s decision in United States v.
Poindexter, 951 F.2d 369 (D.C. Cir. 1991), does not support a contrary
conclusion. In that case, John Poindexter provided immunized and highly
publicized testimony to Congress about the Iran/Contra affair, and Oliver
North, who was also charged with offenses arising from the same events and
was a witness at Poindexter’s trial, “had spent literally days with the testimony
as it happened, and then afterwards, and then again in preparation for his
[own] trial.” Id. at 375 (quotation omitted). At a Kastigar hearing, North
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testified that he could not rule out the possibility that his testimony about the
Iran/Contra events was a product of “having refreshed myself and having
studied [Poindexter’s immunized testimony] very carefully.” Id. The court of
appeals concluded that even if North’s assertion were “given no weight,” the
government would still have failed to meet its burden of demonstrating “that
the immunized testimony did not influence the witness.” Id. at 376 (emphasis
omitted). “[W]here a substantially exposed witness does not persuasively claim
that he can segregate the effects of his exposure,” the court ruled, “the
prosecution does not meet its burden merely by pointing to other statements of
the same witness that were not themselves shown to be untainted.” Id.
Poindexter is far different than this case. North’s exposure to the
immunized testimony was much more extensive and studied than Robson’s
single read-through. More important, whereas North was unable to say that his
trial testimony was unaffected by his exposure to Poindexter’s immunized
testimony, Robson was confident that his testimony was in no way affected by
his exposure to defendants’ FCA testimony. The record in this case therefore
contains what was missing in Poindexter: the witness’s “persuasive[]” testimony
that “he can segregate the effects of his exposure” to immunized testimony.
Poindexter, 951 F.2d at 376.
128
Defendants nonetheless suggest (Br. 108) that when a witness is exposed
to immunized testimony, the government can satisfy its Kastigar burden only
by obtaining the witness’s “canned” testimony (prior to exposure) and
demonstrating that the “canned” testimony is identical to the witness’s
subsequent trial testimony. Although defendants derive this argument largely
from D.C. Circuit precedent, that court has made clear that canned testimony
is not required. United States v. Slough, 641 F.3d 544, 550 (D.C. Cir. 2011);
United States v. North, 920 F.2d 940, 942-43 (D.C. Cir. 1990). “Where two
independent sources of evidence, one tainted and one not, are possible
antecedents of particular testimony, the tainted source’s presence doesn’t ipso
facto establish taint.” Slough, 641 F.3d at 551; accord Nanni, 59 F.3d at 1432.
The government need only show that the source of the testimony was “the
witness’s perceptions of what happened.” Slough, 641 F.3d at 551. The
government can satisfy that burden, as it did here, through the witness’s
“persuasive[]” testimony at a Kastigar hearing. Poindexter, 951 F.2d at 376.
Defendants erroneously contend (Br. 117-18) that Robson’s testimony is
akin to the “rote denials” that this Court has deemed insufficient to carry the
government’s Kastigar burden. The type of bare assertions rejected by this
Court, however, were assertions by prosecutors that they did not use or have
access to immunized testimony. See United States v. Nemes, 555 F.2d 51, 55 (2d
129
Cir. 1977); United States v. Tantalo, 680 F.2d 903, 908 (2d Cir. 1982). A
prosecutor’s mere denial of use or access is not sufficient to carry the
government’s burden (and avoid a Kastigar hearing) because although “[t]he
prosecutor may have never seen the witness’s testimony and may believe in
good faith that no one associated with the federal prosecution has seen it,”
“such a disclaimer does not preclude the possibility that someone who has seen
the compelled testimony was thereby led to evidence that was furnished to
federal investigators.” Nemes, 555 F.2d at 55 (2d Cir. 1977). This Court has
never concluded that credible testimony by an allegedly tainted witness is
insufficient to refute a claim of taint, let alone when that witness, as in this
case, is the only alleged source of the taint.
b. The Record Corroborated Robson’s Kastigar Testimony And Further Demonstrated A Lack Of Taint
Robson’s testimony was sufficient standing alone to sustain the
government’s Kastigar burden. The district court, however, did not rely solely
on Robson’s testimony and also concluded, appropriately, that other
components of the record further established an absence of taint.
1. Elements of a witness’s “testimony that do not overlap with the
content of the immunized statements” presumptively “could not have been
tainted.” Slough, 641 F.3d at 550. Thus, when a witness testifies about “specific
130
recollections with no referent ..... in defendants’ immunized statements,” and
therefore the testimony has “no antecedent in the immunized statements,” the
testimony “cannot be tainted,” “unless somehow the statements caused [the
witness’s] testimony in some subtler way.” Id. Moreover, a defendant must
“lay[] a firm foundation resting on more than suspicion that proffered evidence
was tainted by exposure to immunized testimony.” Id. at 551 (citations
omitted). A witness’s “exposure to immunized testimony can hardly be said to
meet that burden as to completely non-overlapping points.” Id.
The district court correctly observed that there was “no overlap between
the great bulk of Mr. Robson’s trial testimony and defendants’ compelled
statements.” SPA 35. The court specifically credited the charts composed by
the government that catalogued Robson’s testimony, dividing it into
component pieces by subject matter, and comparing it against Allen’s and
Conti’s FCA testimony. SPA 34-35. Those charts demonstrated that 31 of the
58 topics discussed during Robson’s testimony had no antecedent in Allen’s
FCA testimony, see JA 923-46, and 40 of the 58 topics had no antecedent in
Conti’s FCA testimony, see JA 947-64. Together with Robson’s testimony at
the Kastigar hearing, the charts further supported the court’s finding that
Robson’s trial testimony, and his evidence before the grand jury, had a “wholly
131
independent source” apart from defendants’ FCA testimony, SPA 31, 34,
namely Robson’s “personal experience and observations,” SPA 33-34.
Defendants attempt (Br. 109-12) to rebut this showing with what the
district court found were “unconvincing ..... speculations that certain aspects of
Mr. Robson’s testimony were derived from the defendants’ compelled
testimony.” SPA 35. For example, Allen testified before the FCA that he had
no recollection of compliance training at Rabobank, JA 761-62, whereas
Robson testified at trial about a discussion with Allen after they attended
compliance training on conflicts of interest, Tr. 340-42; see Tr. 469-82.
Defendants speculate that Allen’s FCA testimony affected Robson’s trial
testimony because Robson knew, from reviewing the FCA testimony, that
Allen “could not recall any conflicts-of-interest training, and therefore, could
not easily refute Mr. Robson’s story.” Br. 112.
Allen’s speculation does hold up to casual scrutiny, let alone compel
rejection of Robson’s credible testimony. As a general matter, if Allen’s
speculation were enough to show taint, it would categorically preclude
inculpatory testimony from Robson about any topic about which defendants’
claimed a lack of recollection. More specifically, Robson began cooperating
with the government in July 2014, but he did not disclose the information
about the compliance training until June 2015, which was when he recalled the
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events. Kastigar Tr. 68-76, 88-89; Tr. 474-75; JA 874. If it were the case that
Robson’s November 2013 review of Allen’s FCA testimony prompted that
information, one would have expected him to reveal the information earlier.
2. Substantial evidence from other witnesses also tended to show that
Robson’s testimony derived from his personal experiences, rather than
defendants’ FCA testimony. The government catalogued at length, in the
charts provided to the district court, the witness testimony that corroborated
Robson’s trial testimony. See, e.g., JA 930.
For example, at trial, Robson testified about a “heated” argument
between Lee Stewart and Damon Robbins. Tr. 399-401. Defendants speculate
(Br. 113) that Robson did not personally witness this argument but instead first
learned of it by reading Allen’s FCA testimony. Stewart himself, however,
testified about the argument, explaining that he and Robbins “were shouting at
each other” at the “desk,” Tr. 254-55, where Allen, Conti, Robson, Stewart,
Robbins, and others all worked in close proximity to each other, Tr. 179-83. As
the district court concluded, this, along with other similarly corroborative
testimony, “shows that the relevant information about defendants was known
by co-workers who had not been exposed to their compelled testimony, raising
the likelihood that Mr. Robson, through his years of personal experience at
Rabobank, had alternative sources for this information.” SPA 35.
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3. Also, much of Allen’s and Conti’s FCA testimony consisted of
cursory denials, ambiguous answers, or claimed failures of recollection. See
SPA 35-36 (citing examples). A defendant’s immunized testimony
“consist[ing] mostly of denials and ambiguous answers” provides “nothing to
use” against the defendant in a criminal case. United States v. Gallo, 863 F.2d
185, 190 (2d Cir. 1988).
Conti and Allen claim (Br. 119-20) that even their denials of wrongdoing
could be used against them. But “a defendant’s non-inculpatory testimony is
relevant to a Kastigar claim” only if it yields evidence against the defendant.
United States v. Dynalectric Co., 859 F.2d 1559, 1579 (11th Cir. 1988).
Defendants’ immunized testimony was not presented to a jury, allowing jurors
to “draw an inference” of guilt from their denials. United States v. Hinton, 543
F.2d 1002, 1009 (2d Cir. 1976); see Friedman, 998 F.2d at 57 (a jury can reject a
defendant’s exculpatory testimony as “false and thereby infer his guilt”). And
Robson’s exposure to defendants’ denials and claimed memory lapses did not
yield evidence.
c. Comparisons Between Robson’s FCA Testimony And His Trial Testimony Do Not Demonstrate Taint
Defendants’ principal submission (Br. 108-16) is that taint is
demonstrated by differences between Robson’s FCA testimony and the
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information he later provided to prosecutors and his later trial testimony.
Defendants contend (Br. 98) that these alleged differences make it “impossible
to prove” that Robson was unaffected by his review of defendants’ FCA
testimony. They particularly emphasize the following claimed differences:
• Before the FCA, Robson defended his LIBOR-related communications with derivatives traders as appropriate and the result of instructions from Allen to discuss “liquidity,” JA 734-36, whereas at trial he admitted the impropriety of those communications, Tr. 322.
• Robson told the FCA he was not aware of the definition of LIBOR, see
Kastigar Tr. 106, but he testified at trial that he “understood the rules about setting LIBOR, the definition,” Tr. 558.
• Robson told the FCA that his bonus depended on, among other things,
“how the bank had done,” and that Allen determined how the “pot would be divided up.” JA 727-28. At trial, Robson testified that a “sum of money” was set aside for bonuses if “the bank performed well,” and Allen “decide[d] how that sum of money was divided up.” Tr. 407.
• Robson told the FCA he could not “recall any specific compliance training,” JA 732, but he testified at trial about compliance training he attended with Allen, Tr. 340-42.
• Robson testified at trial about an argument between Stewart and
Robbins, Tr. 399-401, but did not mention that argument during his FCA testimony.
• Robson told the government during a proffer session that Schluep “submitted some requests regarding USD LIBOR,” and that Schluep’s requests were given lower priority, JA 858, but he did not mention those facts during his FCA testimony. Contrary to defendants’ claims, Robson’s FCA testimony does not
demonstrate that his trial testimony or the information he provided to
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prosecutors was tainted by his exposure to defendants’ FCA transcripts. At the
Kastigar hearing, the district court gave defendants wide latitude to confront
Robson with his FCA testimony. See Kastigar Tr. 35-37. After considering all
the evidence, however, the court concluded that Robson’s “testimony to the
FCA was ..... a fabrication designed to give the false appearance of
innocence.” SPA 31. Robson himself testified (both at trial and at the Kastigar
hearing) that he intentionally lied to the FCA. Tr. 418; Kastigar Tr. 75.
Robson said he wanted to “create some doubt and confusion,” Tr. 626; see Tr.
638, was “trying to be evasive” (to “create enough cloud and mystery”) and
told the FCA a “story,” a “yarn.” Kastigar Tr. 126, 185, 214. The court
deemed Robson’s admissions highly credible. SPA 24 n.13.
The speculation offered by defendants falls far short of demonstrating
that the district court’s credibility determination and factual findings were
clearly erroneous. The government “is not required to negate every abstract
possibility of taint.” United States v. Schmidgall, 25 F.3d 1533, 1538 (11th Cir.
1994).
Defendants contend (Br. 114-16), for example, that Robson could only
have learned about Schluep’s LIBOR requests from their FCA testimony
because Robson was not himself a recipient of the emails and chats that
Schluep sent to defendants containing the requests. Robson never claimed,
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however, that he possessed detailed knowledge about written communications
from Schluep. Robson merely told the government that Schluep “submitted
some requests regarding” the dollar LIBOR; Schluep’s requests received lower
priority, including lower priority than requests from Lee Stewart; and other
than Schluep, “there was no need for the people affected by [the dollar]
LIBOR to communicate in writing because most of them sat right next to each
other on the desk in London and could speak in person.” JA 858.
As the district court concluded, the information Robson provided about
Schluep’s requests (before and during trial) was grounded in his personal
experience and observations. SPA 30-31 & n.17. Robson shared an open desk
and sat in close proximity to Allen and Conti, as well as Stewart, who was a
loud and bold presence on the desk and who verbally conveyed his requests for
the dollar LIBOR. Tr. 179-94, 270 (Stewart); Tr. 327 (Robson). Stewart also
confirmed that requests from Schluep (who was located in New York) were
discussed at the desk. Tr. 268-69. In addition, Yagami observed the desk
during a visit to London and saw the open exchange of LIBOR requests. Tr.
653-55. Yagami knew that Allen, Conti, Stewart, and Robson, among others,
were members of a group that manipulated the LIBOR, Tr. 669, and he knew
that Stewart’s requests received priority, Tr. 653-54.
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Robson’s knowledge of Schluep’s requests is therefore corroborated by
the trial evidence. Robson never claimed that he received the written
communications between Schluep and defendants (containing the LIBOR
requests) or that he otherwise had contemporaneous knowledge of the specific
contents of the communications. To the contrary, Robson’s trial testimony
about Schluep was limited to providing context and explaining terminology in
the communications. See Tr. 325-26, 387-91, 403-04. Stewart provided similar,
more extensive testimony about those communications. Tr. 196-214, 232-44.
d. The District Court Applied The Correct Legal Standard
Defendants contend (Br. 97-98) that the court “refused” to consider
whether Robson’s exposure to their FCA testimony affected the information
Robson provided to the government and Robson’s trial testimony. According
to defendants, the court “focused on whether the Government could identify
another source, beyond Mr. Robson, that had provided information similar to
that provided by Mr. Robson,” rather than establishing “that Mr. Robson’s
testimony was ‘wholly independent’ of his review of [defendants’] compelled
statements.” Br. 105.
Defendants misconstrue the court’s decision. The court well understood
that the government had to prove that the evidence from Robson “derived
from legitimate sources wholly independent of defendants’ compelled
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testimony.” SPA 14. In concluding that the government satisfied its burden,
the court found that there was an “independent source” for the information
Robson provided to the government and that was conveyed to the grand jury,
namely Robson’s “personal experience and observations.” SPA 33-34. The
court likewise found that Robson’s trial testimony “had sources wholly
independent from defendants’ compelled testimony.” SPA 34. The court made
clear that the government had not merely proved “‘the availability of wholly
independent evidence from which it might have procured indictment or
conviction had it not used the immunized testimony,’” but rather had “proved
to the Court’s satisfaction that Mr. Robson did not actually rely on defendants’
compelled statements or use them in his testimony.” SPA 34-35 (quoting
United States v. Pelletier, 898 F.2d 297, 303 (2d Cir. 1990)).
Defendants further contend (Br. 106-07) that the court failed to apply the
D.C. Circuit’s standards. It is true that the court specifically applied precedent
from this Court, see SPA 20-21 n.9, but its decision is fully consistent with D.C.
Circuit case law as well.
The D.C. Circuit has held that the government “uses” immunized
testimony for purposes of Kastigar when a witness has been exposed to the
immunized testimony and that exposure refreshed the witness’s recollection or
otherwise “shaped, altered, or affected” the witness’s testimony. United States v.
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North, 910 F.2d 843, 861-63 (D.C. Cir. 1990). But the government can prove a
legitimate independent source for the witness’s testimony by demonstrating
that the testimony derives from “the witness’s perceptions of what happened.”
Slough, 641 F.3d at 551. A district court must “parse the evidence” and
“‘separate the wheat of the witnesses’ unspoiled memory from the chaff of
[the] immunized testimony.’” Id. at 550 (quoting North, 910 F.2d at 862). The
government may demonstrate a lack of taint with proof that “investigators
memorialized (or ‘canned’) a witness’s testimony before exposure,” but such
canning is not required. Id. Elements of the witness’s testimony “that do not
overlap with the content of the immunized statements,” for example, are
presumptively untainted. Id.
The district court performed the analysis required by the D.C. Circuit.
The court parsed Robson’s testimony, aided by the charts provided by the
government. See SPA 31, 34-35. The court did not “refus[e] to consider”
whether Robson’s testimony was affected by his exposure to defendants’ FCA
testimony, as defendants contend. Br. 107. To the contrary, the court
concluded that Robson’s testimony derived from a “wholly independent”
source, namely his personal experience and observations, and that Robson did
not in any way “use” or “rely” on defendants’ FCA testimony. SPA 33-35. In
reaching that conclusion, the court considered a lack of overlap between
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Robson’s testimony and defendants’ FCA testimony, as well as corroborative
evidence that buttressed the conclusion that Robson’s testimony derived from
personal observation. SPA 31, 34. The district court’s conclusions were legally
correct and grounded in substantial evidence.
3. Any Error Was Harmless Beyond A Reasonable Doubt
The appropriate remedy for a Kastigar violation is suppression of the
tainted evidence at trial. United States v. Rivieccio, 919 F.2d 812, 816 (2d Cir.
1990). When tainted evidence was presented at trial, the error is harmless if the
Court is “persuaded beyond a reasonable doubt that the jury would have
reached the same verdict even without consideration of the tainted evidence.”
Nanni, 59 F.3d at 1433. The record in this case considered as a whole
establishes beyond a reasonable doubt that the jury would have reached the
same verdict even without the testimony of Robson that defendants claim was
tainted. That nontainted evidence included extensive documentary proof of
defendants’ participation in LIBOR manipulation, testimony from two
coconspirators (Stewart and Yagami), and testimony from Allen himself.
The absence of reversible error at trial precludes dismissal of the
indictment, for a “petit jury’s verdict render[s] harmless any conceivable error
in the charging decision.” United States v. Mechanik, 475 U.S. 66, 73 (1986); cf.
Rivieccio, 919 F.2d at 817 n.5 (declining to reach whether Mechanik extends to
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Kastigar error). Moreover, even without the allegedly tainted information from
Robson, the grand jury was presented with ample evidence supporting
probable cause to charge defendants with wire fraud and conspiracy to commit
wire fraud and bank fraud. See SPA 32-33.
VII. There Is No Basis To Reassign This Case To A Different District Judge In The Event Of A Remand
Under 18 U.S.C. § 2106, this Court has discretion to reassign a case to a
different district judge when it remands for additional proceedings. United
States v. Robin, 553 F.2d 8, 9 (2d Cir. 1977) (per curiam). The Court considers
three factors: (1) whether “the original judge would reasonably be expected
upon remand to have substantial difficulty in putting out of his or her mind
previously-expressed views or findings determined to be erroneous,” (2)
whether “reassignment is advisable to preserve the appearance of justice,” and
(3) whether “reassignment would entail waste and duplication out of
proportion to any gain in preserving the appearance of fairness.” United States
v. DeMott, 513 F.3d 55, 59 (2d Cir. 2008) (citation omitted).
None of these factors would support reassignment here. A review of the
record demonstrates that Judge Rakoff was decidedly impartial throughout this
case. Defendants (Br. 128-29) cite one single portion of the record in this
lengthy case that they claim demonstrates a need for reassignment.
Specifically, at the end of Robson’s plea hearing, the court inquired about the
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status of defendants who had not yet been extradited. JA 899-900. When
informed that the paperwork was pending in the Justice Department’s Office of
International Affairs, the court said that bureaucratic delay would be
“unpalatable” in light of the size and significance of the case and, “assuming
the government’s allegations are correct, the need of people throughout the
world to see that some justice is done.” JA 900-04. These comments do not
suggest that the judge thought defendants guilty before hearing any evidence,
nor do they undermine the appearance of justice. The comments are far from
the exceptional circumstances needed to justify reassignment. See, e.g., United
States v. Quattrone, 441 F.3d 153, 192-93 (2d Cir. 2006) (the case had “already
endured two full trials” before the same judge, the “contentions of the parties
in th[e] difficult and complex matter [had] taken a toll on all involved,” and
“portions of the transcript raise[d] the concern that certain comments [by the
court] could be viewed as rising beyond mere impatience or annoyance”).
Defendants also contend (Br. 129) that reassignment would be required
because of the district judge’s public statements about matters of policy and
white collar prosecutions generally. Again, there is nothing in those statements
that suggests the district judge was not impartial and could not be impartial
again if the case were remanded for additional proceedings.
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Reassignment is a “serious request” that should be rarely made and that
this Court “rarely” grants. United States v. Awadallah, 436 F.3d 125, 135 (2d
Cir. 2006). Defendants have come nowhere close to demonstrating the special
and unique circumstances that would warrant reassignment, with all the waste
and duplication that reassignment would entail.
CONCLUSION
For the foregoing reasons, this Court should affirm the judgments of
conviction and sentence.
ANDREW WEISSMANN Chief, Fraud Section Criminal Division
CAROL SIPPERLY Senior Litigation Counsel Fraud Section
BRIAN R. YOUNG Senior Trial Attorney Fraud Section Criminal Division
MICHAEL T. KOENIG Trial Attorney Antitrust Division U.S. Department of Justice
Respectfully submitted, LESLIE R. CALDWELL Assistant Attorney General
SUNG-HEE SUH Deputy Assistant Attorney General
/s/John M. Pellettieri____ JOHN M. PELLETTIERI Attorney, Appellate Section Criminal Division U.S. Department of Justice 950 Pennsylvania Ave., N.W., Rm. 1260 Washington, D.C. 20530 (202) 307-3766 [email protected]
October 5, 2016
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CERTIFICATE OF COMPLIANCE WITH TYPEFACE AND LENGTH LIMITATIONS
1. On June 27, 2016, the Court entered an order establishing a 32,000
word limit for the government’s response brief. This brief contains 31,966
words, excluding the parts of the brief exempted by Fed. R. App. P.
32(a)(7)(B)(iii).
2. This brief complies with the typeface requirements of Fed. R. App.
P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because
this brief has been prepared in proportionally spaced, 14-point serif typeface
using Microsoft Office Word 2013.
/s/John M. Pellettieri____ JOHN M. PELLETTIERI Attorney, Appellate Section Criminal Division U.S. Department of Justice 950 Pennsylvania Ave., N.W. Rm. 1260 Washington, D.C. 20530 (202) 307-3766
145
CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing with the Clerk of
the Court for the United States Court of Appeals for the Second Circuit by
using the appellate CM/ECF system on October 5, 2016. I further certify that
all participants in the case are registered CM/ECF users and that service will
be accomplished by the appellate CM/ECF system.
/s/John M. Pellettieri____ JOHN M. PELLETTIERI Attorney, Appellate Section Criminal Division U.S. Department of Justice 950 Pennsylvania Ave., N.W. Rm. 1260 Washington, D.C. 20530 (202) 307-3766