The Libor scandal is now expected to result in more people being charged in the coming months. The Serious Fraud Office (SFO) is looking for more funding for its investigation into what happened. Here, Aziz Rahman, points out why the long-running scandal touches on so many business crime legal issues.
It is a notion that has been with us for decades, if not centuries. Success breeds money which, in turn, breeds further success. There are many fortunes whose proud owners will gladly tell you the merits of such a theory. The thinking is clear: make money, make success.
It is understandable, therefore, that making money is at the top – or, at the very least, near the pinnacle – of most people’s list of priorities. Even after they have earned that supposedly difficult first million, many will be just as determined to make that second million. Some may be even more determined than they were when they were comparatively less well off. Which can lead to some major consequences.
Let us look at, for example, Libor. The alleged fixing of Libor has led to a dozen people being charged in the UK and the SFO now stating that more will follow. The first senior banker to plead guilty in the UK over Libor did so in court on the seventh of this month – at a time when the SFO is seeking an extra 50% of its annual budget to pursue the investigation further. Last month, Lloyds Banking Group dismissed eight staff over activities linked to Libor.
At this stage, we don’t know the motivations behind what went on with Libor or even what the full picture is. But it is fair to say that, due to the very nature of what Libor is, it was most probably all about the money.
The questions that have been asked by investigators since the Libor scandal broke will also be the ones that prosecution and defence solicitors will consider prior to trial. And those questions are a certainty to be asked in court come trial time. They may be asked in a rather wordy form by extremely articulate barristers and the answers may occasionally be technical as the complexities of Libor are explained. But essentially, the main questions will be: Who did anything illegal? Why did they do it? And why was it not detected and stopped earlier?
Of course, we do not yet know what the answers will be. And yet, for all the attention being given to Libor on both sides of the Atlantic, it may well boil down to one central issue – honesty. There will certainly be a lot of people, activities, events and opinions that come under microscopic legal examination. But looming over them all will be honesty. Were those charged over Libor dishonest? Or did they simply exercise poor judgement? It is an issue that could well take in scrutiny of the defendants’ prior work, testimonials about the type of person they are and even the use of expert witnesses called to either commend or condemn the accused.
So what does the law mean when it talks of dishonesty? In the leading case of Ghosh (1982), the Court of Appeal said that someone was dishonest if “according to the standards of reasonable and honest people what was done was dishonest’’ and that the defendant “must have realised that what he was doing was, by their standards, dishonest.’’ In Libor, establishing such dishonesty may be far from straightforward. The issue of disclosure could prove crucial in any defence solicitor’s attempts to show a client’s honesty.
There is likely to be material that the prosecution has gathered as part of its investigation that could well prove of value to the defence. Some such material may even clearly contradict prosecution assumptions and claims of guilt. Yet defence teams cannot go on a free for all when it comes to disclosure. It is an issue that requires shrewd use of skill and tactics to obtain what is of value to the defence case without showing too much of their hand to the prosecution.
Under the 2003 Criminal Justice Act, the Crown has to disclose material which “might reasonably be considered capable of undermining the case for the prosecution…or of assisting the case for the defence’’. Yet the Act also places greater requirements on the defence; obliging them to disclose more of their case at an earlier stage. In a case such as Libor, which is likely to be complex and involve a large cast of characters and events spread over months if not years, disclosure could prove to be a very involved battleground. It may well prove the path that leads to the proving or disproving of honesty. But in doing so it could be a far from straightforward journey.
Part of the complication with Libor lies with it being a trans-Atlantic issue; with both the SFO and the US’ Department of Justice (DOJ) carrying out their own investigations. While the SFO has been making more noise this month about further charges, the DOJ has brought more of its own while announcing that it is widening the scope of its investigation into other aspects of Libor. It is almost inevitable that the two countries’ investigations will overlap – the DOJ has brought charges in relation to activities in London – and that the long-distance nature of them will mean there is no rapid end to the episode. But we live in an era when the technology and the spirit of cooperation between the likes of the SFO and DOJ make it far simpler for them to work together than it was 20 years ago. Similarly, the perceived need for them to show that they are responding adequately to the problem and being seen to be doing something about it will make sure that nothing falls between the cracks or becomes lost in international bureaucracy.
This means that any defence mounted has to have a number of qualities. It is perhaps stating the obvious to say that a defence team has to “cover all the bases’’ in responding to prosecution claims – from whichever side of the Atlantic they originate. As we mentioned earlier, they will also have to use the issue of disclosure perceptively. Equally important, however, is the level of experience and expertise within the defence team when it comes to dealing with national and international organisations such as those that are looking for convictions over Libor. At a time when the SFO and DOJ are seeking further charges over Libor, anyone caught up in an investigation needs a defence team that knows how to talk, negotiate and battle with such agencies.
The issue of honesty and tactics of disclosure may bring little success if a defence team is inexperienced in either dealing with one or more of these agencies in a case or in coordinating a defence that has international dimensions.
For those already charged as part of the Libor investigation, those expecting to be charged and those who fear they may be implicated, they have to prepare early and quickly with the most experienced defence solicitors available. If they are to preserve reputations and maintain careers they need defence teams who can produce and use evidence to its most potent effect, employ the right tactics at the right time and analyse prosecution claims immediately and effectively.
It may be that many of those brought to court over Libor claim they did not believe they were doing anything wrong. Others may argue that they are the victims of scapegoating; pointing to a culture of which they were a symptom rather than the cause. Such arguments may be valid. They may even prove to be successful…..but only if they are handled with skill and awareness by their legal representatives.
It would be surprising if the issue of compliance did not come up from now until the end of the Libor saga, regardless of whether any more people are charged or whether the SFO gains the extra cash it is keen to acquire to continue its investigation. Somewhere among all the trial testimony, we can be certain that compliance will raise its head. It may be prosecutors alleging a lack of compliance or at least a failure to enforce it. Equally, defence teams may point to a compliance-free working environment as an explanation, if not a justification, for anything untoward that may have happened. For those not in the dock, Libor could be a sharp reminder of the need for compliance.
But for those in the dock, their fate lies in the hands of their legal representatives – and those representatives’ ability to manage the issues discussed here.