The growth of global enforcement systems raises important policy issues and risks for enforcement authorities. In an interesting case, US v. Allen and Conti, copy here, the Second Circuit Court of Appeals reversed criminal convictions for two LIBOR traders.
The issue presented in the case is fascinating. Allen and Conti are UK citizens and were employed by Coöperatieve Centrale Raiffeisen‐Boerenleenban in the 2000s and participated in the LIBOR submission process. They were accused of price manipulation (price-fixing) of the LIBOR rate, and specifically wire fraud and conspiracy to commit wire fraud and bank fraud. Allen and Conti were convicted after a trial in the Southern District of New York. Allen was sentenced to two years imprisonment, and Conti was sentenced to one year (and one day) imprisonment.
On appeal, the Second Circuit reversed the convictions based on a violation of the Fifth Amendment. UK and US law enforcement authorities investigated Allen and Conti. The Financial Conduct Authority interviewed Allen, Conti and a number of co-workers at the bank. The FCA provided “direct use” immunity, meaning that their respective statements could not be used directly against them in any UK criminal prosecution. The FCA, however, did not provide “derivative use” immunity – the FCA could use the information to develop and follow investigative leads. Under UK law, if Allen and Conti did not answer the FCA’s questions, Allen and Conti faced imprisoned. FCA investigators interviewed Allen and Conti.
The FCA prosecuted Paul Robson, a co-worker at the bank but eventually dropped the case. The US Justice Department took up the case and prosecuted Robson, who plead guilty and agreed to cooperate against other defendants. Robson was a key cooperator, and Robson provided information presented by a case agent to the grand jury, and testified at trial.
During the investigation, US prosecutors took steps to avoid any awareness of the UK “compelled” testimony provided by Allen and Conti. They created an investigative “wall” to ensure that they did not use any information from the UK “compelled” testimony. For example, the US prosecutors interviewed Allen and Conti before the UK investigators interviewed Allen and Conti.
After Robson, the star witness, was charged in the UK, the FCA authorities, following UK procedure, provided Robson with copies of the testimony of other witnesses against him, including the compelled statements from Allen and Conti. Robson reviewed the documents and specifically Allen’s and Conti’s compelled testimony. This was the critical misstep, resulting in the reversible issue in the US prosecution. The UK prosecution was stayed in deference to the US criminal prosecution.
US prosecutors returned an indictment charging Robson (and others) for LIBOR price fixing. Robson plead guilty and agreed to cooperate. Based on information Robson provided, US prosecutors indicted Allen and Conti. After the trial, the district judge conducted a “Kastigar” hearing to determine if Robson’s testimony was derived from sources independent of Allen’s and Conti’s compelled testimony. The district court rejected the defendants’ respective challenges to Robson’s testimony.
The Second Circuit reversed the district judge. The Court of Appeals ruled that the Fifth Amendment barred the use of foreign compelled evidence against parties who provided such information in US criminal prosecutions. The Court ruled that foreign testimony could be used against defendants so long as the statement were voluntary. In this case, Allen’s and Conti’s statement were compelled under UK law, and therefore could not be used against them in trial.
The interesting twist to this case is the fact that Robson’s testimony was tainted by his detailed review of Allen’s and Conti’s compelled UK testimony.
The US argued on appeal that the Court’s holding could have a negative impact on global law enforcement investigations and prosecutions, and specifically on US prosecutions where evidence was collected by foreign law enforcement agencies that are not aware of or sensitive to US legal requirements. The Court was not persuaded and cited former Criminal Division AAG Caldwell’s speech touting US coordination with foreign law enforcement agencies in the new global enforcement scheme.
