Libor – the SFO on trial?

Win some, lose some. That might be the philosophical response from the Serious Fraud Office (SFO) to the news that two former Barclays traders, Ryan Reich and Stylianos Contogoulas, were acquitted by a jury of conspiracy to defraud by rigging Libor, the benchmark interbank lending rate. This was their second trial on a charge of conspiracy to defraud after the jury in the first trial failed to agree a verdict last July. But the win-lose ratio on Libor trials is beginning to put the SFO in the relegation zone of international prosecuting agencies. If it were a football club, the SFO might soon be looking for a new manager.
In their retrial, the jury at Southwark crown court returned unanimous not guilty verdicts on Reich and Contagoulas – delivered after only a few hours following six weeks of evidence. Commenting on the speed of the verdict, Jonathan Pickworth, a partner White & Case said: “Another lightning-quick acquittal following a lengthy trial, which tells us all we need to know about what the jury thought of the prosecution case”. White & Case was not acting for the defendants. 
‘Fresh blow to the SFO’ was a common theme in the media reports which followed. No doubt the fraud agency would respond by pointing to the four Barclays traders convicted last year of similar Libor-rigging charges: Jay Merchant, Peter Johnson, Jonathan Mathew and Alex Pabon. They received sentences ranging between two years and nine months and six and a half years. However, the retrial further demonstrates that the SFO’s over-zealous strategy in prosecuting Libor traders may be fundamentally flawed. 
Roland Ellis, the lawyer acting for Contogoulas, said in a statement: “The decision by the SFO to seek a retrial of my client after the jury had failed to reach a verdict following a four-month trial in 2016 was regrettable. We made strong representations to them that it was not in the public interest to do so and that the prospects of a conviction were slim. Unfortunately, they chose not to accede to those representations. The speed with which the jury reached their verdicts today would suggest that those representations had considerable merit.” 
The retrial also has wider ramifications in relation to last year’s conviction of the four Barclays traders. Matthew Frankland, a partner at Byrne and Partners, the law firm that acted for Mathew said that the retrial revealed significant developments: “Not least … the discovery that the Serious Fraud Office’s experts apparently and fundamentally failed to understand the Libor setting process.” This means that the firm is “actively considering whether the recent disclosure, which was not provided to us at trial, may now be reflected in a renewed appeal”.
Apart from the four Barclays traders, the only other person convicted of Libor rigging is Tom Hayes, who was tried in 2015 for offences of conspiracy to defraud through the manipulation of Yen Libor. His three-month trial resulted in a 14-year prison sentence – the longest given by a British court to any trader for such a crime. This was later reduced to 11 years on appeal – still a disproportionate term. Hayes was allegedly part of a conspiracy, although no other trader was convicted alongside him. Six other traders who had been accused of assisting him – Noel Cryan, Darrell Read, Colin Goodman, Danny Wilkinson, Terry Farr and James Gilmour – were found not guilty in January 2016.
Hayes and the Barclays traders will take comfort from the Bloomberg story the day after the trial, headlined: Libor Convictions at Risk as SFO Expert Witness Challenged. This revealed that the SFO’s chief expert witness, a former trader called Saul Haydon Rowe, was not really as expert as had been suggested at the four Libor-related trials at which he gave evidence for the SFO. These include giving evidence against Hayes and the former Barclays traders. 
In passing off other people’s knowledge as his own, Rowe acknowledged under cross-examination by Adrian Darbishire QC in the re-trial that during the Barclays traders’ first trial he had texted friends as he gave evidence asking for their help in explaining some of the technical terms and checking that he was answering basic questions correctly. In doing so, the SFO’s sole industry expert also admitted he had broken court rules.
Darbishire put it to Rowe in the witness box that “You have misrepresented your expertise to the SFO and to the juries. I suggest you have failed to comply with your basic duties of disclosure, and that you have concealed, rather than revealed, the sources of statements which you have presented as your own opinion.” Rowe denied that he misled the SFO and jurors about his expertise, but did acknowledge texting traders for help with terminology whilst giving evidence.
In summing up, Judge Anthony Leonard told jurors that they had to determine whether Rowe had “sufficient expertise” to testify and if they were not convinced then they should “disregard it.” The jury’s speedy and unanimous verdict is therefore as bad for Rowe’s credibility as it is for the SFO. It begs the obvious question: how can the agency have put forward an expert in multiple Libor trials when he was not up to the job?
Alongside Mathew, Tom Hayes has announced that he too is considering a further appeal following the Rowe disclosures. The combination of a key expert witness being devalued, two defendants being acquitted and potential fresh appeals from those convicted of rigging rates has left the SFO in disarray over Libor. It raises serious questions about how senior bankers have not been held to account (not one has ever been charged over Libor rigging) while relatively junior traders are being held accountable for alleged wrongdoing, only to be acquitted – partly as result of unreliable evidence from a man who was not quite the expert he claimed to be.  
The Libor trials have come to an end: the whistle has blown and time’s up. For now. Five men and one woman are due to face trial in September on charges of conspiracy to defraud in connection with the setting of Euribor, a Brussels-based euro benchmark. Pickworth commented on this: “No doubt there will be a post mortem at the SFO. There is going to need to be a lot of thought about the merit of pursuing other benchmark trials, such as Euribor.” 
A lot of thought may also be applied to the SFO itself. Senior executives who must bear the greatest responsibility for alleged Libor wrongdoing in their banks have evaded prosecution. Instead, the SFO avoided these more difficult targets by pursuing the low hanging fruit of relatively junior traders. Even here, the match record is poor. David Green, SFO director since April 2012, has said that he expects to be judged by the results of the Libor trials. Judging by the scoreline to date – eight defendants acquitted; five convicted with at least two subject to potential appeal because of a sub standard expert – the jury of public opinion may reach its own conclusion. 
Dominic Carman is a journalist, writer and legal commentato

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