Tag Archives: Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank)

Two Former Rabobank Traders Indicted for Alleged Manipulation of U.S. Dollar, Yen Libor Interest Rates

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Two former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) derivative traders – including the bank’s former Global Head of Liquidity & Finance in London – have been charged in a superseding indictment for their alleged roles in a scheme to manipulate the U.S. Dollar (USD) and Yen London InterBank Offered Rate (LIBOR), a benchmark interest rate to which trillions of dollars in interest rate contracts were tied, the Justice Department announced today.  Six former Rabobank employees have now been charged in the Rabobank LIBOR investigation.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

Earlier today, a federal grand jury in the Southern District of New York returned a superseding indictment charging Anthony Allen, 43, of Hertsfordshire, England; and Anthony Conti, 45, of Essex, England, with conspiracy to commit wire fraud and bank fraud and with substantive counts of wire fraud for their participation in a scheme to manipulate the USD and Yen LIBOR rate in a manner that benefitted their own or Rabobank’s  financial positions in derivatives that were linked to those benchmarks.

The indictment also charges Tetsuya Motomura, 42, of Tokyo, Japan, and Paul Thompson, 48, of Dalkeith, Australia, who were charged in a prior indictment with Paul Robson, a former Rabobank LIBOR submitter.  In addition to adding as defendants Allen and Conti, the superseding indictment alleges a broader conspiracy to manipulate both the USD LIBOR and the Yen LIBOR.

Robson and Takayuki Yagami, a former Rabobank derivatives trader, each pleaded guilty earlier this year to one count of conspiracy in connection with their roles in the scheme.

“Today, we have charged two more members of the financial industry with influencing Dollar LIBOR and Yen LIBOR to gain an illegal advantage in the market, unfairly benefitting their own trading positions in financial derivatives,” said Assistant Attorney General Caldwell.  “LIBOR is a key benchmark interest rate that is relied upon to be free of bias and self-dealing, but the conduct of these traders was as galling as it was greedy.  Today’s charges are just the latest installment in the Justice Department’s industry-wide investigation of financial institutions and individuals who manipulated global financial rates.”

“With today’s charges against Messrs. Allen and Conti, we continue to reinforce our message to the financial community that we will not allow the individuals who perpetrate these crimes to hide behind corporate walls,” said Deputy Assistant Attorney General Snyder.  “This superseding indictment, with its charges against Mr. Allen, makes an especially strong statement to managers in financial institutions who devise schemes to undermine fair and open markets but leave the implementation – and often the blame – with their subordinates.”

“With today’s indictments the FBI’s investigation into Rabobank’s manipulation of LIBOR benchmark rates expands in scope to include the U.S. Dollar,” said Assistant Director in Charge McCabe. “I would like to thank the special agents, forensic accountants, and analysts, as well as the prosecutors who have worked to identify and stop those who hide behind complex corporate and securities fraud schemes.”

According to the superseding indictment, at the time relevant to the charges, LIBOR was an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believed they would be charged if borrowing from other banks.   LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.  LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The published LIBOR “fix” for U.S. Dollar and Yen currency for a specific maturity was the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.

LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.

Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.

According to allegations in the superseding indictment, Allen, who was Rabobank’s Global Head of Liquidity & Finance and the manager of the company’s money market desk in London, put in place a system in which Rabobank employees who traded in derivative products linked to USD and Yen LIBOR regularly communicated their trading positions to Rabobank’s LIBOR submitters, who submitted Rabobank’s LIBOR contributions to the BBA.  Motomura, Thompson, Yagami and other traders entered into derivative contracts containing USD or Yen LIBOR as a price component and they asked Conti, Robson, Allen and others to submit LIBOR contributions consistent with the traders’ or the bank’s financial interests, to benefit the traders’ or the banks’ trading positions.  Conti, who was based in London and Utrecht, Netherlands, served as Rabobank’s primary USD LIBOR submitter and at times acted as Rabobank’s back-up Yen LIBOR submitter.  Robson, who was based in London, served as Rabobank’s primary submitter of Yen LIBOR.  Allen, in addition to supervising the desk in London and money market trading worldwide, occasionally acted as Rabobank’s backup USD and Yen LIBOR submitter.  Allen also served on a BBA Steering Committee that provided the BBA with advice on the calculation of LIBOR as well as recommendations concerning which financial institutions should sit on the LIBOR contributor panel.

The charges in the superseding indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

The investigation is being conducted by special agents, forensic accountants and intelligence analysts in the FBI’s Washington Field Office.  The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section and Trial Attorney Michael T. Koenig of the Antitrust Division.  The Criminal Division’s Office of International Affairs has provided assistance in this matter.

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.  The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.  The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.   The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.  For more information about the task force visit: www.stopfraud.com [external link].

Former Rabobank LIBOR Submitter Pleads Guilty for Scheme to Manipulate Yen Libor

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A former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen London InterBank Offered Rate (LIBOR) submitter pleaded guilty today for his role in a conspiracy to commit wire and bank fraud by manipulating Rabobank’s Yen LIBOR submissions to benefit trading positions.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Acting Assistant Director in Charge Timothy A. Gallagher of the FBI’s Washington Field Office made the announcement.
Paul Robson, a citizen of the United Kingdom, appeared before United States District Judge Jed S. Rakoff in the Southern District of New York and pleaded guilty to count one of a 15-count indictment returned by a federal grand jury in the Southern District on April 28, 2014.    Sentencing is scheduled for June 9, 2017.
“ Paul Robson is the second employee at Rabobank, one of the world’s largest banks, to plead guilty to participating in a global fraud scheme,” said Assistant Attorney General Caldwell.  “The scope of the fraud was massive, but the scheme was simple.  By illegally influencing the LIBOR rates, Robson and his coconspirators rigged the markets to ensure that their trades made money.  Robson’s conviction demonstrates the Department of Justice’s continued resolve to hold individuals and institutions accountable for their involvement in fraud in the financial markets.”
“Today’s guilty plea demonstrates our continuing resolve to prosecute those who fraudulently manipulated the LIBOR rate for their own personal benefit and, in doing so, undermined free and fair markets,” said Deputy Assistant Attorney General Snyder.
“Fraudulently manipulating the LIBOR has far reaching effects on international financial markets and such criminal activity will not be tolerated,” said Acting Assistant Director in Charge Gallagher.    “The Washington Field Office has committed significant time and resources including the expertise of Special Agents, forensic accountants and analysts to investigate this case along with our Department of Justice colleagues.    While the crimes committed are complex, their expertise demonstrates our ability to bring justice to those that choose to commit these crimes.”
Robson, along with former Rabobank Yen LIBOR derivatives traders Paul Thompson, of Australia, and Tetsuya Motomura, of Japan, was charged with conspiracy to commit wire and bank fraud as well as substantive counts of wire fraud.    The indictment also alleges that the conspiracy involved numerous additional, unnamed individuals and entities.    Among those individuals and entities are:

Takayuki Yagami (described in the indictment as Trader-R), a Japanese national and former Rabobank trader who pleaded guilty on June 10, 2014, in the Southern District of New York to one count of conspiracy to commit wire and bank fraud for his involvement in the conspiracy alleged in the indictment; and

Lloyds Banking Group plc (LBG), a U.K.-based bank that, as part of a deferred prosecution agreement filed in the United States District Court for the District of Connecticut on July 28, 2014, admitted wrongdoing in connection with the alleged conspiracy’s overt acts, and agreed to pay an $86 million penalty.

According to court documents, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.    LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.    The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
At the time relevant to the charges, LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.    LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.    The published LIBOR “fix” for Yen LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.
Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.
According to court documents, Robson worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London and also served as Rabobank’s primary submitter of Yen LIBOR to the BBA; Thompson was Rabobank’s head of Money Market and Derivatives Trading Northeast Asia and worked in Singapore; Motomura was a senior trader at Rabobank’s Tokyo desk who supervised money market and derivative traders; and Yagami worked as a senior trader at Rabobank’s Money Market/FX Forwards desks in Tokyo and elsewhere in Asia.
Robson’s main role in the conspiracy was to submit Yen LIBOR rates at the requests of traders, including Thompson, Motomura and Yagami, who entered into derivatives contracts containing Yen LIBOR as a price component .    T he profit and loss that flowed from those contracts was directly affected by the relevant Yen LIBOR on certain dates.    If the relevant Yen LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.    When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.
As alleged in court filings, from about May 2006 to at least January 2011, the four defendants, a Yen LIBOR submitter at LBG, and others agreed to make false and fraudulent Yen LIBOR submissions for the benefit of selected trading positions.    According to the allegations, sometimes Robson submitted rates at a specific level requested by a co-defendant or other traders, and at other times Robson made a higher or lower Yen LIBOR submission consistent with the direction requested by a co-defendant or other traders.
For example, according to court filings, on Sept. 21, 2007, Yagami asked Robson by email, “where do you think today’s libors are?    If you can I would like 1mth higher today.” Robson responded, “bookies reckon .85,” to which Yagami replied, “I have some fixings in 1mth so would appreciate if you can put it higher mate.” Robson answered, “no prob mate let me know your level.” After Yagami asked for “0.90% for 1mth,” Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no worries mate… there’s bigger crooks in the market than us guys!”
Robson admitted that he accommodated the requests of his co-defendants and other traders.    For example, on Sept. 21, 2007, after Robson allegedly received a request from Yagami for a high one-month Yen LIBOR, Rabobank submitted a one-month Yen LIBOR rate of 0.90, which was seven basis points higher than the previous day and five basis points above where Robson said that “bookies” predicted it, and which moved Rabobank’s submission from the middle to the highest of the panel.
According to court documents, the defendants were also aware that they were making false or fraudulent Yen LIBOR submissions.    For example, on May 10, 2006, Robson admitted in an email to Yagami that “it must be pretty embarrasing to set such a low libor.   I was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].   Tomorrow it will be more like 33 from me.” At times, Robson referred to the submissions that he submitted on behalf of his co-defendants as “ridiculously high” and “obscenely high,” and acknowledged that his submissions would be so out of line with the other Yen LIBOR panel banks that he might receive a phone call about them from the BBA or Thomson Reuters.
On numerous occasions, Robson also passed along such requests to the LBG submitter, who altered LBG’s Yen LIBOR submission accordingly if doing so did not adversely affect selected trading positions at LBG.    Likewise, the LBG setter sent requests to Robson and he generally altered Rabobank’s Yen LIBOR to satisfy the requests.    For example, on July 28, 2006, Robson wrote to the LBG submitter: “morning skipper…..will be setting an obscenely high 1m again today…poss 38 just fyi.” The LBG submitter responded: “(K)…oh dear..my poor customers….hehehe!! manual input libors again today then!!!!” Both banks’ submissions on July 28 moved up one basis point, from 0.37 to 0.38.    As the LBG submitter explained, according to court documents filed in connection with Rabobank’s deferred prosecution agreement, to other LBG submitters, “We usually try and help each other out…but only if it suits.”
The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The investigation is being conducted by special agents, forensic accountants, and intelligence analysts in the FBI’s Washington Field Office.    The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section, and Trial Attorney Michael T. Koenig of the Antitrust Division.    The Criminal Division’s Office of International Affairs has provided assistance in this matter.
The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.    The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.    The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.      The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.    Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.   For more information about the task force visit: www.stopfraud.com.

 

Former Rabobank Trader Pleads Guilty for Scheme to Manipulate Yen Libor

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A former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen derivatives trader pleaded guilty today for his role in a conspiracy to commit wire and bank fraud by manipulating Rabobank’s Yen London InterBank Offered Rate (LIBOR) submissions to benefit his trading positions.
Attorney General Eric H. Holder, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
Today, a criminal information was filed in the Southern District of New York charging Takayuki Yagami, a Japanese national, with one count of conspiracy to commit wire fraud and bank fraud.   Yagami pleaded guilty to the information before United States District Judge Jed S. Rakoff in the Southern District of New York.
“With this guilty plea, we take another significant step to hold accountable those who fraudulently manipulated the world’s cornerstone benchmark interest rate for financial gain,” said Attorney General Eric Holder.  “This conduct distorted transactions and financial products around the world.  Manipulating LIBOR effectively rigs the global financial system, compromising the fairness of world markets.  This plea demonstrates that the Justice Department will never waver, and we will never rest, in our determination to ensure the integrity of the marketplace and protect it from fraud.
“Today, a former Rabobank trader has pleaded guilty to participating in a scheme to manipulate the global benchmark interest rate LIBOR to benefit Rabobank’s trading positions,” said Assistant Attorney General Caldwell.    “This was the ultimate inside job.    As alleged, traders illegally influenced the very interest rate on which their trades were based, using fraud to gain an unfair advantage.    Takayuki Yagami is the ninth person charged by the Justice Department in connection with the industry-wide LIBOR investigation, and we are determined to pursue other individuals and institutions who engaged in this crime.”
“Today’s guilty plea is a significant step forward in the LIBOR investigation and demonstrates the Department’s firm commitment to individual accountability,” said Deputy Assistant Attorney General Snyder.  “We will continue to pursue aggressively other individuals involved in this or other illegal schemes that undermine free and fair financial markets.”
“Manipulating financial trading markets to create an unfair advantage is against the law,” said Assistant Director in Charge Parlave.  “Today’s guilty plea further underscores the FBI’s ability to investigate complex international financial crimes and bring the perpetrators to justice.  The Washington Field Office has committed significant time and resources including the expertise of Special Agents, forensic accountants and analysts to investigate this case along with our Department of Justice colleagues.  Their efforts send a clear message to anyone contemplating financial crimes: think twice or you will face the consequences.”
According to court documents, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.    LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.    The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
At the time relevant to the charges, LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.    LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.    The published LIBOR “fix” for Yen LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.
Yagami admitted to conspiring with Paul Robson, of the United Kingdom, Paul Thompson, of Australia, and Tetsuya Motomura, of Japan.  Robson, Thompson and Motomura were charged with conspiracy to commit wire fraud and bank fraud as well as substantive counts of wire fraud in a fifteen-count indictment returned by a federal grand jury in the Southern District of New York on April 28, 2014.    All four are former employees of Rabobank.
Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013 and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.
According to allegations in the information and indictment, the four defendants traded in derivative products that referenced Yen LIBOR.    Robson worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London; Thompson was Rabobank’s head of Money Market and Derivatives Trading Northeast Asia and worked in Singapore; Motomura was a senior trader at Rabobank’s Tokyo desk who supervised money market and derivative traders; and Yagami worked as a senior trader at Rabobank’s Money Market/FX Forwards desks in Tokyo and elsewhere in Asia.    In addition to trading derivative products that referenced Yen LIBOR, Robson also served as Rabobank’s primary submitter of Yen LIBOR to the BBA.
Robson, Thompson, Motomura and Yagami each entered into derivatives contracts containing Yen LIBOR as a price component .    The profit and loss that flowed from those contracts was directly affected by the relevant Yen LIBOR on certain dates.    If the relevant Yen LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.    When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.
As alleged in court filings, from about May 2006 to at least January 2011, the four defendants and others agreed to make false and fraudulent Yen LIBOR submissions for the benefit of their trading positions.    According to the allegations, sometimes Robson submitted rates at a specific level requested by a co-defendant, including Yagami, and consistent with the co-defendant’s trading positions.    Other times, Robson made a higher or lower Yen LIBOR submission consistent with the direction requested by a co-defendant and consistent with the co-defendant’s trading positions.    On those occasions, Robson’s manipulated Yen LIBOR submissions were to the detriment of, among others, Rabobank’s counterparties to derivative contracts.    Thompson, Motomura and Yagami (described in the indictment as Trader-R) made requests of Robson for Yen LIBOR submissions through electronic chats and email exchanges.
For example, according to court filings, on Sept. 21, 2007, Yagami asked Robson by email, “wehre do you think today’s libors are?    If you can I would like 1mth higher today.” Robson responded, “bookies reckon .85,” to which Yagami replied, “I have some fixings in 1mth so would appreciate if you can put it higher mate.” Robson answered, “no prob mate let me know your level.” After Yagami asked for “0.90% for 1mth,” Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no worries mate… there’s bigger crooks in the market than us guys!”
The indictment alleges that Robson accommodated the requests of his co-defendants.    For example, on Sept. 21, 2007, after Robson allegedly received a request from Yagami for a high 1-month Yen LIBOR, Rabobank submitted a 1-month Yen LIBOR rate of 0.90, which was 7 basis points higher than the previous day and 5 basis points above where Robson said that “bookies” predicted it, and which moved Rabobank’s submission from the middle to the highest of the panel.
According to court documents, the defendants were also aware that they were making false or fraudulent Yen LIBOR submissions.    For example, on May 10, 2006, Robson admitted in an email to Yagami that “it must be pretty embarrasing to set such a low libor.  I was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].  Tomorrow it will be more like 33 from me.” At times, Robson referred to the submissions that he submitted on behalf of his co-defendants as “ridiculously high” and “obscenely high,” and acknowledged that his submissions would be so out of line with the other Yen LIBOR panel banks that he might receive a phone call about them from the BBA or Thomson Reuters.
The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The investigation is being conducted by special agents, forensic accountants, and intelligence analysts in the FBI’s Washington Field Office.    The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section, and Trial Attorney Michael T. Koenig of the Antitrust Division.    The Criminal Division’s Office of International Affairs has provided assistance in this matter.
The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.    The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.  The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.     The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.    Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.  For more information about the task force visit: www.stopfraud.com.

 

THREE FORMER RABOBANK TRADERS CHARGED WITH MANIPULATING YEN LIBOR

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WASHINGTON — Two former Coöperatieve Centrale  Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen derivatives traders and  the trader responsible for setting Rabobank’s Yen London InterBank Offered Rate  (LIBOR) were charged as part of the ongoing criminal investigation into the  manipulation of LIBOR.

Acting Assistant Attorney General Mythili Raman of the  Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent  Snyder of the Justice Department’s Antitrust Division and Assistant Director in  Charge Valerie Parlave of the FBI’s Washington Field Office made the  announcement.

Earlier today, a U.S. Magistrate  Judge sitting in the Southern District of New York signed a criminal complaint  charging Paul Robson of the United Kingdom, Paul Thompson of Australia, and Tetsuya  Motomura of Japan with conspiracy to commit wire fraud and bank fraud as well  as substantive counts of wire fraud.  All  are former employees of Rabobank, which on Oct. 29, 2013, entered into a  deferred prosecution agreement with the Department of Justice as part of the  department’s LIBOR investigation and agreed to pay a $325 million penalty.  Each defendant faces up to 30 years in prison  for each count upon conviction.

“Today, less than three months  after Rabobank admitted its involvement in the manipulation of LIBOR, we have charged  three of its senior traders with participating in this global fraud scheme,”  said Acting Assistant Attorney General Raman.  “As alleged, these three  traders – working from Japan, Singapore and the U.K. – deliberately submitted  what they called ‘obscenely high’ or ‘silly low’ LIBOR rates in order to  benefit their own trading positions.  The illegal  manipulation of this cornerstone benchmark rate undermines the integrity  of the markets; it harms those who are relying on what they expect to be an  honest benchmark; and it has ripple effects that extend far beyond the trading  at issue here.  The Justice Department has now charged eight individuals  and reached resolutions with four multi-national banks as part of our ongoing  and industry-wide LIBOR probe and, alongside our law enforcement and regulatory  partners both here and abroad, we remain committed to continuing to root out  this misconduct.”

“The  conspirators charged today conspired to rig the interest rates used by  derivative products throughout the financial industry to benefit their own  trading books,” said Deputy Assistant Attorney General Snyder. “Today’s charges  demonstrate the department’s commitment to hold individuals accountable for  schemes that undermine the integrity of markets that rely on competition to  flourish.”

“Manipulation  of benchmark rates that are routinely referenced by financial products around  the world erodes the integrity of our financial markets,” said Assistant  Director in Charge Parlave.  “The charges  against these individuals represent another step in our ongoing efforts to find  and stop those who hide behind complex corporate and securities fraud schemes.  I commend the Special Agents, forensic  accountants and analysts as well as the prosecutors for the significant time  and resources they committed to investigating this case.”

According to the complaint,  LIBOR is an average interest rate, calculated based on submissions from leading  banks around the world, reflecting the rates those banks believe they would be  charged if borrowing from other banks.   LIBOR is published by the British Bankers’ Association (BBA), a trade  association based in London.  At the time  relevant to the criminal complaint, LIBOR was calculated for 10 currencies at  15 borrowing periods, known as maturities, ranging from overnight to one  year.  The published LIBOR “fix” for Yen  LIBOR at a specific maturity is the result of a calculation based upon  submissions from a panel of 16 banks, including Rabobank.

LIBOR serves as the primary  benchmark for short-term interest rates globally and is used as a reference  rate for many interest rate contracts, mortgages, credit cards, student loans  and other consumer lending products.  The  Bank of International Settlements estimated that as of the second half of 2009,  outstanding interest rate contracts were valued at approximately $450 trillion.

According to allegations in the complaint,  all three defendants traded in derivative products that referenced Yen  LIBOR.  Robson worked  as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in  London; Thompson was Rabobank’s head of Money Market and Derivatives Trading  Northeast Asia and worked in Singapore; and Motomura was a senior trader at  Rabobank’s Tokyo desk who supervised money market and derivative traders employed  at Rabobank’s Tokyo desk.  In addition to  trading derivative products that referenced Yen LIBOR, Robson also served as  Rabobank’s primary submitter of Yen LIBOR to the BBA.

Robson, Thompson and Motomura  each entered into derivatives contracts containing Yen LIBOR as a price  component.  The  profit and loss that flowed from those contracts was directly affected by the  relevant Yen LIBOR on certain dates.  If  the relevant Yen LIBOR moved in the direction favorable to the defendants’  positions, Rabobank and the defendants benefitted at the expense of the  counterparties.   When LIBOR moved in the opposite direction, the defendants and  Rabobank stood to lose money to their counterparties.

The complaint alleges that from about May 2006 to at least  January 2011, Robson, Thompson, Motomura and others agreed to make false and  fraudulent Yen LIBOR submissions for the benefit of their trading positions.  According to the allegations, sometimes  Robson submitted rates at a specific level requested by a co-defendant and  consistent with the co-defendant’s trading positions.  Other times, Robson made a higher or lower  Yen LIBOR submission consistent with the direction requested by a co-defendant  and consistent with the co-defendant’s trading positions.  On those occasions, Robson’s manipulated Yen  LIBOR submissions were to the detriment of, among others, Rabobank’s  counterparties to derivative contracts.

In addition to allegedly manipulating Rabobank’s Yen LIBOR  submissions, Robson, on occasion and on behalf of one or more co-defendants,  coordinated his Yen LIBOR submission with the trader responsible for making Yen  LIBOR submissions at another Yen LIBOR panel bank.  At times, Robson allegedly submitted Yen  LIBOR at a level requested by the other trader, and, at other times, that trader  submitted Yen LIBOR at a level requested by Robson.

As alleged  in the complaint, Thompson, Motomura and another Rabobank trader described in  the complaint as Trader-R made requests of Robson for Yen LIBOR submissions  through electronic chats and email exchanges.   For example, on May 19, 2006, after Thompson informed Robson that his  net exposure for his 3-month fixes was 125 billion Yen, he requested by email  that Robson “sneak your 3m libor down a cheeky 1 or 2 bp” because “it will make  a bit of diff for me.”  On or about May  19, 2006, Robson responded: “No prob mate I mark it low.”

On Sept. 21, 2007, Trader-R  asked Robson by email, “where do you think today’s libors are?  If you can I would like 1mth higher  today.”  Robson responded, “bookies  reckon .85,” to which Trader-R replied, “I have some fixings in 1mth so would  appreciate if you can put it higher mate.”   Robson answered, “no prob mate let me know your level.”  After Trader-R asked for “0.90% for 1mth,”  Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no  worries mate… there’s bigger crooks in the market than us guys!”

As another example, on Aug. 4,  2008, in a Bloomberg chat, Motomura asked Robson, “Please set today’s 6mth  LIBOR at 0.96 I have chunky fixing.”  To this, Robson responded, “no  worries mate.”
The complaint alleges that  Robson accommodated the requests of his co-defendants.  For example, on Sept. 21, 2007, after Robson  received a request from Trader-R for a high 1 month Yen LIBOR, Rabobank  submitted a 1-month Yen LIBOR rate of 0.90, which was 7 basis points higher  than the previous day and 5 basis points above where Robson said that “bookies”  predicted it, and which moved Rabobank’s submission from the middle to the  highest of the panel.

According  to court documents, the defendants were also aware that they were making false  or fraudulent Yen LIBOR submissions.  For  example, on May 10, 2006, Robson admitted in an email that “it must be pretty  embarrasing to set such a low libor.  I  was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].  tomorrow it will be more like 33 from  me.”  At times, Robson referred to the  submissions that he submitted on behalf of his co-defendants as “ridiculously  high” and “obscenely high,” and acknowledged that his submissions would be so  out of line with the other Yen LIBOR panel banks that he might receive a phone  call about them from the BBA or Thomson Reuters.

A criminal complaint is a formal  accusation of criminal conduct, not evidence.   A defendant is presumed innocent unless and until convicted.

The investigation is being  conducted by special agents, forensic accountants, and intelligence analysts in  the FBI’s Washington Field Office.  The  prosecution is being handled by Trial Attorneys Carol L. Sipperly, Brian Young  and Alexander H. Berlin of the Criminal Division’s Fraud Section, and Trial  Attorneys Ludovic C. Ghesquiere and Michael T. Koenig of the Antitrust  Division.  Former Deputy Chief Glenn Leon  and Senior Counsel Rebecca Rohr of the Criminal Division’s Fraud Section, along  with Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and  Richard Powers of the Antitrust Division, have also provided valuable  assistance.  The Criminal Division’s  Office of International Affairs has provided assistance in this matter as well.

The broader investigation  relating to LIBOR and other benchmark rates has required, and has greatly  benefited from, a diligent and wide-ranging cooperative effort among various  enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and  expresses its deep appreciation for this assistance.  In particular, the Commodity Futures Trading  Commission’s Division of Enforcement referred this matter to the department  and, along with the U.K. Financial Conduct Authority, has played a major role  in the LIBOR investigation.  The department  has worked closely with the Dutch Public Prosecution Service and the Dutch  Central Bank in the investigation of Rabobank.   Various agencies and enforcement authorities from other nations are also  participating in different aspects of the broader investigation relating to  LIBOR and other benchmark rates, and the department is grateful for their  cooperation and assistance.  In  particular, the Securities and Exchange Commission has played a significant  role in the LIBOR series of investigations, and the department expresses its  appreciation to the United Kingdom’s Serious Fraud Office for its assistance  and ongoing cooperation.

This prosecution is  part of efforts underway by President Barack Obama’s Financial Fraud  Enforcement Task Force.  President Obama established the interagency  Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and  proactive effort to investigate and prosecute financial crimes.  The task  force includes representatives from a broad range of federal agencies,  regulatory authorities, inspectors general and state and local law enforcement  who, working together, bring to bear a powerful array of criminal and civil  enforcement resources.  The task force is working to improve efforts  across the federal executive branch, and with state and local partners, to  investigate and prosecute significant financial crimes, ensure just and  effective punishment for those who perpetrate financial crimes, combat  discrimination in the lending and financial markets and recover proceeds for  victims of financial crimes.  For more  information about the task force visit: www.stopfraud.gov.