Amazingly, more than six years since the scandal first broke - and more than three since Deutsche Bank took a guilty plea and paid $2.5 billion fine to settle allegations stemming from US and UK authorities - traders from the six bulge bracket banks that ultimately copped to charges that they conspired to manipulate Libor are still being put on trial.
While the highest profile convictions (and dismissals) mostly occurred in the UK, in the US, the DOJ is quietly working to secure convictions against a pair of middle-management Deutsche Bank traders responsible for overseeing one of the desks at which some of the rate-rigging activities allegedly took place. While senior executives (including former Deutsche CEO Anshu Jain) have avoided persecution (though a few, like Barclays' Bob Diamond ended up resigning under pressure) the consequences for what's widely believed to have been a systemic activity dating back to the early 1990s have largely fallen on low-level traders and managers like Matthew Connolly and Gavin Black, the two
traders scapegoats currently on trial.
To help bolster its case, the federal government has secured the cooperation of three traders who claimed that they only "manipulated" their Libor reportings at the behest of their superiors. But in an amusing exchange at Connolly's trial, which is currently underway in a federal courtroom in the Southern District of New York, the former trader's legal team exposed one of these witnesses for lying about the period of the alleged misconduct to shield his bonus from being seized by federal authorities.
As Bloomberg reported, prosecutors began by highlighting the initial plea agreement of the cooperating trader, Tim Parietti, where he said that the nefarious rate-rigging took place from "at least 2006 through at least in or around 2010."
Tim Parietti, a Deutsche Bank derivatives trader from 2000 to 2012, told a jury in Manhattan that his supervisor, Matthew Connolly, directed him to share his trading position with colleagues in London responsible for submitting data used to compile the London interbank offered rate. Connolly and Gavin Black are accused of rigging the benchmark, which tracks borrowing costs of the world’s biggest banks and is used to value trillions of dollars of financial products.
Parietti is the second of three former Deutsche Bank traders who have already pleaded guilty and agreed to testify against Connolly and Black. Defense lawyers, who have argued that there were no hard and fast rules about how banks submit their data for Libor calculations, assailed Parietti’s credibility, suggesting he tailored his version of events to accommodate the prosecution.
On Monday, the defense pointed to Parietti’s initial plea agreement with the U.S., which detailed crimes from 2006 through 2010, while in documents commemorating his cooperation with the government, Parietti said he conspired to manipulate the benchmark from "at least 2006 through at least in or about early 2010."
But in a 2016 guilty plea, the time frame detailed by Parietti shifted from 2006 to 2010 to 2006 to 2008. Connolly's defense attorney's pointed this out because Parietti. The motivation behind the shift was clear: Parietti received a $9 million bonus in 2010. If that time frame wasn't covered, he wouldn't need to pay restitution on the bonus. Connolly's defense attorneys apparently sprung this inconsistency on Parietti while they were cross examining him, leading to an amusing exchange.
"You recognize that’s a shorter period of time?" Ken Breen, a lawyer for Black, asked Parietti during cross examination. "Isn’t that beneficial for you? Wouldn’t that mean your $9 million bonus was outside of that range?"
"Yes, that is outside of the range," said Parietti, 52, who spent about six hours on the witness stand.
Seth Levine, Connolly’s lawyer, accused Parietti of being a habitual liar who was willing to testify to save himself.
"Isn’t it true what you’re doing is bearing false witness in order to get your deal?" Levine asked.
"No," Parietti said. "I’m not bearing false witness, so I do not believe that it will impact me."
Prosecutor Carol Sipperly showed jurors the full transcript of Parietti’s guilty plea, noting that he had corrected his initial statement to say, “the practice I engaged in occurred from early 2006 through approximately 2008, and I should have said, ‘at least 2008.’"
"So that would include the years after the later date?" Sipperly asked.
"Yes," Parietti said.
But this is just a minor hiccup, because the DOJ has only noble intentions for going after low-level traders, instead of senior executives who may not have been (though it's more likely they were) aware of the conduct. Connolly and Black aren't being scapegoated, right?