Last Friday, a US jury returned a verdict of not guilty for the three FX traders tried in the ‘Cartel’ case. It’s another random spin of the wheel in the casino of justice – a casino where, win or lose, everyone who is forced to enter faces ruin.
The three (Richard Usher – ex JPM, Rohan Ramchandani – ex Citi, and Christopher Ashton – ex Barcap) were alleged to have used a chat room to plot to manipulate FX, especially during fixings. The prosecution charged them with the single offense of ‘conspiracy to restrict trade’. In other words, it was an anti-trust case, presumably under the Sherman Act.
Now this is a tricky charge to prove ‘beyond reasonable doubt’ since, as anyone who has ever worked in trading could attest, the relationship between competitors is more nuanced than just being antagonists at all times and in all circumstances.
Liquidity in the market depends on some degree of cooperation between banks (for example, agreeing to make rates and absorb risk when called upon to do so) and so the lines defining inappropriate collusion are grey, not black and white. There are plenty of perfectly legitimate reasons for competitors to talk to each other.
Add to that the ‘banter’ factor (“we didn’t really mean it; these were in-jokes”) and the lines got more blurred still.
Anyway, they were blurred enough for the jury to acquit after less than a day’s deliberation. Naturally, even though I have never met them, I am pleased for the three guys involved. It must have been a huge relief.
But what all this does highlight is the total inconsistency in the outcomes of a series of what seem like rather similar cases in FX and in LIBOR.
In FX, the Cartel Three are not guilty. Whereas Mark Johnson (the HSBC FX trader accused and convicted of wire fraud even though the prosecution’s expert could come up with nothing Johnson should have done differently) was found guilty but then was sentenced to two years in jail, not the seven to nine that the prosecution demanded. What’s more, he’s out on bail pending appeal given the problematic nature of the prosecution’s legal theories.
In the matter of LIBOR, it’s even messier. You’ve had six UK money brokers walk free. On the other hand, a number of traders were found guilty in the UK courts and sentenced in 2016 – they got between two years nine months and a startling 14 years (later reduced to 11) for the unfortunate Tom Hayes. (For the historically minded, it’s worth pointing out that a sentence of 14 years is more than some Nazi defendants got at the Nuremburg war trials).
It’s a similar story in the US. Two Rabobank traders were convicted then released on appeal. Others have been found guilty and await sentencing, including a couple from my old shop of Deutsche Bank. Who knows how long in prison they’ll get?
I don’t think anyone is saying that criminality within banking should not be rooted out and punished. Certainly I’m not. It is crucial that the industry is, and is seen to be, honest (as I believe the overwhelming majority of its participants are).
But the sheer variance of outcomes for what are, in essence, cases revolving around very similar alleged offences is pretty astonishing. They’ve ranged from acquittal to utterly draconian, life destroying prison sentences.
And it isn’t as if the people who were acquitted can walk away from the whole process whistling happily as they go. Imagine if it happened to you. Court cases take years to reach a conclusion. During that period, you can’t work – certainly not in financial services – and so the interminable, grinding delays eat into your finances. Not to mention the continual stress and worry you must feel; feelings which must be doubled and redoubled again if you are a parent.
Then afterwards? My guess is that even if you were acquitted you would find it very difficult to find work again in financial services (typically, the only industry you will ever have known, I would guess). For one thing, you won’t have worked for several years in the build up to the case during which time others will have taken your slot. Your skills and connections wouldn’t be current.
Not only that: banks and funds tend to take a very risk averse view of employing anyone with a perceived taint arising from legal procedures, even those who are ‘winners’. It’s a further roadblock to stop you getting a job. Fair on you? No. How life works? Sadly, yes.
In short, you can be totally innocent and, regardless of that, totally ruined.
I suppose at a pinch you could argue that all this might be worth it at a societal level despite the individual human cost if, as a result, there was a sense that the financial services industry had gained some clarity about what was and was not acceptable practice. But has it?
I’m not so sure that anyone really has much of a clue. Certainly I feel that is the case for FX – what should FX professionals really take away from the Johnson and Cartel cases? Apart from the obvious lesson, ‘be careful of your language on taped lines and chats’, not much, I think.
And in LIBOR what is truly infuriating is that the really significant manipulation that went on – I refer to the systematic biasing of submissions lower at the behest of central banks during the crisis months of 2007 and 2008 – has not been investigated, let alone censured or punished. Given that central bankers were no doubt encouraged by senior politicians maybe that isn’t surprising. In the Monte Carlo of justice, it helps if you are a high roller.
That, or run the casino.