In the aftermath of the financial crisis, mindful of all the shit they took for throwing no one in jail for causing the biggest downturn since the Depression, the Justice Department took a new and somewhat counterintuitive tack: They’d go easy on the banks for all the bad shit they did, because nobody was impressed by even the largest fines they could levy—but only if the banks gave up as many actual human bodies as they could to throw in jail.
This arrangement was very attractive to federal prosecutors on a number of levels. First, it meant they didn’t have to do any real work: The banks would do it for them, in exchange for the said prosecutors not doing any more work on them. Second, it promised to push up their batting average in such cases, which sat at a pathetic .280, far below the roughly1.000 assistant U.S. attorneys prefer to expect before lifting a finger in front of a grand jury—and it did, all the way up to a more-than-respectable-for-a-baseball-player-if-not-a-prosecutor .370. And, finally, they’d get to parade many more flesh-and-blood human beings about to be demonized as the worst kind of financial fraudsters stealing from you and me in front of the cameras and a public baying for blood, or at least many years in a federal pound-me-in-the-ass prison. They liked it so much, in fact, that in 2015 Deputy Attorney General Sally Yates formalized it as policy, making clear that if banks didn’t betray their employees for even the slightest infraction, Justice would be all over them like a puma.
This, of course, created some problems of its own. For instance, defense attorneys say (as they of course would) that the Yates memo incentivizes companies to present as potentially criminal, or at least actionable, things that are pretty much S.O.P. on trading desks. This is probably not something prosecutors cared much about: A financier in jail’s a financier in jail, and the general public’s probably not going to care how he got there. But there is a second issue that they perhaps didn’t foresee, and which accounts for the irritating low batting average aforementioned: That judges and juries wouldn’t like it one goddamned bit.
“The government completely overreached,” the judge said as he dismissed the case. At the end of the trial, he said: “Lines have to be very clear, because when somebody crosses a line and is likely to end up in jail, you want that line to be clear….”
Some juries and judges in the cases found the DOJ tried to criminalize conduct that looked unseemly but wasn’t illegal. Other judges have faulted prosecutors for co-opting banks to build cases against employees in ways the employees describe as violations of their constitutional right against self-incrimination…. A federal judge in one case noted in 2019 that an accused trader “made a rather convincing showing” that the bank and its outside law firm “were de facto the Government.” The judge upheld the jury’s conviction but sentenced the trader and a colleague to no jail time and said prosecutors were trying to punish them as a proxy for much wider wrongdoing.
And, of course, wherever there’s overreach, there’s likely to be a backlash to the backlash, potentially balancing a bank’s interests in throwing its own employees under the bus, for after all, just like the Justice Department or the SEC, employees can sue.
A Manhattan federal jury in 2018 acquitted three currency traders of manipulating euro-dollar exchange rates, after their employers pleaded guilty and paid billions of dollars in related criminal penalties, deciding there wasn’t enough evidence they rigged the market.
One of those traders later sued Citigroup Inc., his employer, arguing that the bank tried to limit its liability by helping prosecutors build the case against him by decoding chat-room jargon in misleading ways. A federal judge in March denied Citigroup’s bid to dismiss the lawsuit. A bank spokeswoman said the claims were without merit.
On the bright side, some people can have a little fun with things. Take the dismissed case in the first pull quote. The beneficiary of the judge’s scorn for the case was former Barclays global heat of rates, currencies and commodities trading Robert Bogucki, accused of screwing over HP on an options deal. In the aftermath, Bogucki sued Barclays and won a tidy settlement. We of course don’t know the how tidy, but it was tidy enough given the evidence.
The defense brought a “Rule 29” motion—the number of the rule in the federal rules of criminal procedure—asking the judge for a dismissal before the defense presented, arguing the government hadn’t proven its case.
Judge Breyer granted it in March 2019—the first time he had dismissed an entire case before it went to the jury in his more than 20 years on the bench. The deal boiled down to a tough negotiation between savvy parties, he said, and “there was no expectation of full disclosure….”
Mr. Bogucki filed claims against Barclays related to his suspension and lost earnings, which the bank settled for an undisclosed sum last May. He bought a new boat and named it “Rule 29.”
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