A federal appeals-court panel has overturned the convictions of two former Rabobank traders in the scandal over attempted manipulation of the London interbank offered rate, or Libor, saying the men's Fifth Amendment right against self-incrimination had been violated.
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The three-judge panel of the Second Circuit U.S. Court of Appeals in New York dismissed the charges against Anthony Allen and Anthony Conti, both former traders for the Dutch bank, who were convicted on conspiracy and wire-fraud charges in November 2015.
In a Wednesday ruling, the panel said the convictions of Messrs. Allen and Conti were tainted because a key witness against them had reviewed and may have been influenced by testimony that the two men had been forced to provide to authorities in their native U.K. about their actions regarding Libor. Without the evidence supplied by that witness, it isn't clear whether the two traders would have been indicted to begin with, the judges said.
Compelled testimony "cannot be used to secure a conviction in an American court," Second Circuit Judge Jose Cabranes wrote in the unanimous 81-page ruling. "This is so even when the testimony was compelled by a foreign government in full accordance with its own law."
Michael Schachter, Mr. Allen's attorney, called the ruling "a tremendous relief for Tony Allen and his family" and said they "now look forward to putting this stressful chapter of their lives behind them."
Mr. Conti's attorney, Aaron Williamson, said, "I'm thrilled, and I've just called my client and he's thrilled as well."
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A spokeswoman for the Justice Department declined to comment on the ruling.
While Wednesday's ruling focused narrowly on the Fifth Amendment issue, it amounts to a blow to authorities' attempt to pursue the traders and bankers involved in the scandal over Libor, a key interest rate that international banks charge each other and a global benchmark underpinning the costs of hundreds of trillions of dollars of financial products. More than a dozen major banks have acknowledged rigging Libor to benefit themselves and have paid billions of dollars in fines and settlements.
Messrs. Allen and Conti are the only defendants who have gone to trial on Libor-related charges in the U.S., though at least 11 others have been convicted or pleaded guilty in the U.S. and the U.K., and cases against other defendants are pending.
Rabobank agreed in 2013 to pay more than $1 billion in settlements to U.S., U.K. and Dutch authorities, including a $325 million settlement with the Justice Department. A Rabobank spokesman declined to comment on Wednesday's ruling.
Mr. Allen is Rabobank's former global head of liquidity and finance; Mr. Conti is a former Rabobank senior trader. Both are U.K. citizens, but they waived extradition to come to the U.S. and fight the allegations.
They were convicted on charges that they participated in a scheme to rig U.S. dollar and Japanese yen Libor rates to benefit Rabobank's trading positions. Prosecutors said they didn't submit honest estimates about Rabobank's costs to the British Bankers' Association, which calculates Libor based on banks' estimates.
Both men denied wrongdoing. Mr. Allen testified at trial that he didn't accommodate requests from Rabobank traders to submit Libor estimates favorable to their trading positions.
After their convictions, Mr. Allen was sentenced to two years in prison and Mr. Conti to a year and a day, though they have been free on bail pending the outcome of the appeal.
The appeal hinged on testimony that Messrs. Allen and Conti gave to U.K. regulators in their own investigation of Libor manipulation. The U.K. gave them a form of immunity for that testimony, so they could have been imprisoned under U.K. law if they refused to testify.
Paul Robson, another ex-Rabobank trader who pleaded guilty and cooperated with U.S. prosecutors in the case against Messrs. Allen and Conti, reviewed the two men's U.K. testimony, and his account of events was "significantly different" after that, Judge Cabranes said. U.S. prosecutors had to prove that Mr. Robson's review of the compelled testimony didn't affect the evidence he provided, and they failed to do so, the judge wrote.
With more world-wide cooperation in cross-border prosecutions, such issues could come up in the future, Judge Cabranes wrote. "We do not presume to know exactly what this brave new world of international criminal enforcement will entail. Yet we are certain that these developments abroad need not affect the fairness of our trials at home."
Write to Michael Rapoport at Michael.Rapoport@wsj.com
(END) Dow Jones Newswires
July 19, 2017 14:24 ET (18:24 GMT)