United States v. Allen

160 F.Supp.3d 698

United States of America

v.Anthony Allen, Anthony Conti, et al., Defendants.

S4 14 Cr. 272

United States District Court, S.D. New York.

Signed February 16, 2016

Michael T. Koenig, Carol L. Sipperly, Brian Young, U.S. Department of Justice, Criminal Division, Washington, DC, for USA.

Michael Steven Schachter, Casey Ellen Donnelly, Willkie Farr & Gallagher LLP, Roland Gustaf Riopelle, Sercarz & Riopelle, L.L.P., New York, NY, for Anthony Allen.

Tor Bernhard Ekeland, Aaron Kyle Williamson, Tor Ekeland, P.C., Brooklyn, NY, for Anthony Conti.

OPINION AND ORDER

JED S. RAKOFF, UNITED STATES DISTRICT JUDGE.

On November 5, 2015, following a three-week jury trial, defendants Anthony Allen and Anthony Conti were convicted of conspiracy to commit wire fraud and bank fraud, as well as several substantive counts of wire fraud. See Verdict, Dkt. 147. The basic charge was that defendants, employees of the Dutch bank Coöperatieve Centrale Raiffeisen–Boerenleenbank B.A. (“Rabobank”), had participated in a scheme to manipulate the London Interbank Offered Rate (“LIBOR”) to favor the trading positions of Rabobank traders. Defendants Allen and Conti now move for a judgment of acquittal pursuant to Fed.R.Crim.P. 29(c) or, in the alternative, for a new trial pursuant to Fed.R.Crim.P. 33(a). For the reasons stated below, defendants' motion is hereby denied in its entirety.

Fed.R.Crim.P. 29(a) provides that “the court on the defendant's motion must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction.” In evaluating a motion for a judgment of acquittal, a court should consider 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.” Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). Fed.R.Crim.P. 33(a) provides that “[u]pon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires.” Here, defendants make six principal arguments in support of their motion.

First, defendants claim that no rational juror could find that they participated in a scheme to defraud by means of false or fraudulent representations, because defendants' LIBOR submissions were not actionable misstatements under the wire fraud statute. See Memorandum of Law in Support of Defendants' Post–Trial Motion for a Judgment of Acquittal or New Trial (“Defs. Br.”), Dkt. 185, at 1–9; see also 18 U.S.C § 1343 (“Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.”).

Defendants note that the indictment charged the defendants with “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.” Superseding Indictment dated June 25, 2015, Dkt. 62, ¶ 29(b); see Defs. Br. at 2. But, according to defendants, the Government did not produce evidence at trial as to defendants' perceptions of the real rate at which Rabobank could borrow funds on the days on which Rabobank's LIBOR submissions were allegedly false or fraudulent. See Defs. Br. at 2. Therefore, in defendants' view, the Government failed to show that defendants' estimates of Rabobank's borrowing costs did not genuinely answer the question asked of LIBOR submitters by the British Bankers' Association (“BBA”): “At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11am?” See Defs. Br. at 2–3; Reply Memorandum of Law in Further Support of Defendants' Post–Trial Motion for a Judgment of Acquittal or New Trial (“Defs. Reply Br.”), Dkt. 207, at 4–5; GX116A–G. Defendants further claim that because there was a range of accurate responses to the BBA's query, proof that a defendant was influenced by Rabobank traders' requests to submit a higher or lower rate does not constitute proof that the rates defendants submitted failed to reflect their honest opinions of Rabobank's costs of borrowing. See Defs. Reply Br. at 1–2.

In the Court's view, the relevant issue was not the accuracy or inaccuracy of defendants' LIBOR submissions, but the intent with which these submissions were made. See United States v. Amrep Corp., 560 F.2d 539, 544 (2d Cir.1977) (“The expression of an opinion not honestly entertained is a factual misrepresentation.”). And indeed, the Government's theory was that the fraud arose because “each LIBOR submission made the implicit statement that the number submitted was calculated according to the [BBA] definition,” while “in fact, the evidence showed that the submissions reflected what Rabobank's traders needed to make money at the expense of another party.” Memorandum in Opposition to Defendants' Motion for Judgment of Acquittal (“Gov't Opp. Br.”), Dkt. 196, at 3.¹ The Court finds that at trial, the Government presented ample evidence from which a juror could reasonably conclude that defendants participated in such a scheme to defraud. See Gov't Opp. Br. at 2 & nn.1–3 (citing numerous emails, chats, and testimony presented at trial).

But, defendants further contend, they had no duty to disclose the factors that informed their LIBOR submissions—including, if applicable, the positions of Rabobank traders. See Defs. Br. at 3. Moreover, defendants claim, the counterparty witnesses that the Government presented at trial did not testify as to their expectations about which factors defendants were considering in making LIBOR submissions. See Defs. Br. at 5. According to defendants, even if “implicit false statements” were actionable under the wire fraud statute—which they deny, see Defs. Reply Br. at 3–4—criminal liability cannot be imposed simply for failure to comply with failure to comply with industry rules, such as those of the BBA. See Defs. Br. at 5, citing United States v. Finnerty, 533 F.3d 143, 149 (2d Cir.2008) (rejecting an attempt by “the government ... to impose criminal liability based on a background assumption of compliance with [New York Stock Exchange] rules.”).

The Court finds defendants' arguments on this point to be unavailing. “A duty to disclose can also arise in a situation where a defendant makes partial or ambiguous statements that require further disclosure in order to avoid being misleading.” United States v. Autuori, 212 F.3d 105, 119 (2d Cir.2000). Here, the jury could reasonably find that in submitting LIBOR, defendants effectively represented that they were responding in good faith to the BBA's query about the rate at which Rabobank could borrow funds, and that this representation was false or fraudulent because defendants' submissions reflected, in material part, an intent to benefit Rabobank's trading positions.² Criminal liability in this case is being applied for making these false or fraudulent representations—not simply for the failure to follow BBA rules. See also United States v. Morgenstern, 933 F.2d 1108, 1113 (2d Cir.1991) (finding a fraudulent misrepresentation where “by mixing negotiation of legitimate checks with unauthorized deposits of fraudulently procured checks, Morgenstern sought to convey the misleading impression that he was acting within the scope of his legitimate authority and that there was nothing extraordinary about these transactions.”).

Put differently, “deception ... irreducibly entails some act that gives the victim a false impression,” United States v. Finnerty, 533 F.3d 143, 148 (2d Cir.2008) (internal quotation marks omitted), and in this case a jury could reasonably find that defendants gave counterparties the false impression that they were making good faith estimates of Rabobank's borrowing costs instead of making LIBOR submissions to benefit Rabobank's trading positions. For example, counterparty witnesses testified that they would likely not have entered into interest rate swaps with Rabobank had they known that defendants' LIBOR submissions were being manipulated in order to benefit Rabobank's trading positions. See, e.g., Trial Transcript (‘Tr.‘) 827:18-828:15 (testimony of Tracy Twomey); 837:21-838:1 (testimony of Michael DiTore); 499:17-500:10 (testimony of Timothy Smith). Since counterparties entered into, and remained in, these transactions, a reasonable juror could infer they did not expect defendants' LIBOR submissions to be influenced by an interest in benefiting Rabobank's trading positions. In sum, the Court determines that a rational juror could have found that defendants participated in a scheme to defraud by means of false or fraudulent representations or pretenses within the meaning of the wire fraud statute.

Second, defendants claim that the Government failed to prove materiality. See Defs. Br. at 10. “[M]ateriality of falsehood is an element of the federal mail fraud, wire fraud, and bank fraud statutes.” Neder v. United States, 527 U.S. 1, 25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). “A false statement 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, 119 S.Ct. 1827. Defendants argue, for example, that because counterparties decided to enter swap contracts with Rabobank several years before the LIBOR submissions that were claimed to have been affected by Rabobank traders' preferences, counterparties could not have been influenced by defendants' alleged fraud. See Defs. Br. at...