Markets by Trading view

‘Why I’m suing Deutsche Bank for $150 million’


In 2016, charges were brought against two former Deutsche Bank traders for allegedly rigging the London Interbank Offered Rate (LIBOR). Authorities in the United States charged Gavin Black, who was the Director of Deutsche Bank’s money markets and derivatives desk in London, and Matthew Connolly, his colleague in New York. Both were found guilty of fraud – though they immediately appealed on the basis that LIBOR “rigging” was not a criminal offence.

As DisruptionBanking covered in a three-part series earlier this year, those found guilty of “rigging” LIBOR in the United Kingdom are victims of one of the most egregious miscarriages of justice in modern times. Prosecutors successfully argued that submitting accurate rates with commercial considerations in mind was unlawful, despite that always being part of the system. Luckily for Black and Connolly, the Second US Circuit Court of Appeals in Manhattan realised this and overturned both of their convictions earlier this year:

Following this judgement, Connolly is suing Deutsche Bank and seeking compensation to the tune of $150 million. He is arguing that senior executives at the bank deliberately framed him, offering him to the authorities as a scapegoat who could be blamed for systemic failings. Connolly’s lawsuit claims that Deutsche Bank identified him as the “perfect fall guy.” His lawyers have come to the figure of $150 million to reflect lost earnings, lost earning potential, damaged reputation, and the emotional distress caused by long years spent going through the courts.

DisruptionBanking sat down with Connolly last week to discuss the case and what he’s hoping to achieve.

We started with the obvious question. What made him the “perfect fall guy?” Connolly said there were a few factors which made him an easy target for a malicious prosecution. The first was that he had already left the bank when the authorities first started to investigate the LIBOR issue, having not worked for the bank since 2008. He was well-paid, as practically every banker is, but relatively junior. In addition, he believes that the authorities needed “New York targets” for PR reasons:

“If you look at the big picture of US and UK prosecutions, the authorities took a “let’s make an example of Deutsche Bank” approach. They had six from the Frankfurt offices were brought to the UK (only one ended up on trial), three or four from London, then the US took me,” he said. “They needed somebody from the New York to make it look more balanced. And it made it seem that the US and UK were running a global investigation.”

Connolly believes that Deutsche Bank offered him as the “New York target” because he had long been “sand in their gears.” Because he was in charge of funding the global US Dollar funding sheet, he spoke to officials at the Federal Reserve on a daily basis. “That put me in a position to have to put the brakes on many of the “hairbrained” schemes that the senior executives tried to push past me,” he said. “Since I did not want to have to explain them to the Fed, I was always trying to put the kibosh on their reckless ideas that would make the bank unhealthier.”

“Let’s just say many senior people were happy when I quit.”

Most of these factors are shared with those convicted of LIBOR manipulation in the UK. None were senior management in their respective banks. Many worked abroad at the time of the alleged offences or had already left their banks completely. From a UK perspective, all worked either for foreign banks or Barclays, which had not been bailed out by the taxpayer and therefore implicated no taxpayer-funded officials. When you look at the profile both of Connolly and those convicted for LIBOR rigging, doesn’t it all look rather too convenient?

Connolly told DisruptionBanking that he’s doing this for two main reasons. The first is to seek justice for the fact that “my family suffered:”

“When you get charged, you cease to be a normal citizen. All my bank accounts and credit cards were closed. My kids’ bank accounts and college accounts were liquidated. Not to mention all the leaks that get into the press while I sat around being the good citizen, believing the system was “just” and I’d get a fair fight in court. 100% not how it works.”

Despite the damages he’s seeking, Connolly insists that it’s not about the money – “what I get or don’t get out of this is irrelevant to me.” Instead, he wants “to expose what happened here as an example of what banks, regulators, lawyers, and governments can get up to when they decide to throw somebody under the bus.”

If Connolly is successful, it could also place further pressure on the UK authorities to look again at the convictions that remain upheld against traders such as Tom Hayes, Carlo Palombo, Jay Merchant, and others. Hayes is currently battling to have his case referred to the Court of Appeal in the hope that the UK will follow the precedent set in the States – that LIBOR “rigging” was never criminal.

“I hope that this case can help other people down the road,” Connolly said. “It is going to be a long fight for me and my lawyers to get this to trial. But I’ve already been going for ten years, I’m driven to do it, and have more than the desire to do it.”

“I won’t stop until the UK victims get their justice.”

Author: Harry Clynch

#LIBOR #DeutscheBank #US

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