On July 19, 2017, in United States v. Allen, et al. (16-cr-98) (Cabranes, Pooler, Lynch), the Second Circuit issued a decision reversing the convictions of defendants Anthony Allen and Anthony Conti for wire fraud and conspiracy to commit wire fraud and bank fraud. This was the first federal criminal appeal in connection with the London Interbank Offered Rated (“LIBOR”) prosecutions, which involved allegations that various individuals and banks manipulated the LIBOR. The LIBOR is a benchmark interest rate intended to reflect the available rates at which banks borrow money from other banks; the LIBOR is incorporated into the terms of financial transactions worldwide. We provided a brief summary of the opinion a few hours after the decision was rendered; here is our more detailed summary.
Although the defendants presented numerous issues on appeal, the Second Circuit’s decision focused on only one: the government’s use of a cooperator, Paul Robson, to obtain an indictment against, and ultimately convict, Allen and Conti. In the context of a parallel proceeding in the U.K., Allen and Conti had been compelled to give testimony to the U.K authorities. During that same investigation, Robson had reviewed the testimony of both Allen and Conti. Following his indictment in the U.S. in the Southern District of New York by the Department of Justice’s Fraud Section, Robson pleaded guilty and agreed to cooperate with the U.S. authorities. Robson provided evidence upon which the government relied to indict and then convict Allen and Conti (who were not indicted until after Robson became a cooperating witness).
The Second Circuit reversed the convictions, holding that the defendants’ Fifth Amendment rights against self-incrimination were violated when the government used the testimony of a cooperator who had substantial exposure to the defendants’ compelled testimony. The Court reaffirmed its prior rulings that only “voluntary” statements obtained overseas can be used at trial and agreed with defendants that this prohibition extends to any testimony compelled by a foreign government (even if no force or threats of force were used to compel the testimony). Citing Kastigar v. United States, the Court also held that, when a government witness had significant exposure to a defendant’s compelled testimony, the government must prove that the witness’s review of the compelled testimony did not affect the evidence used by the government. Consistent with the Oliver North decision by the D.C. Circuit in connection with the Iran-Contra prosecutions, the government is required “at a minimum . . . to prove that [the witness’s] exposure to the compelled testimony did not shape, alter, or affect the information that he provided and that the Government used.” This is most effectively proved by showing that the witness’s testimony was identical before and after his or her review of the immunized testimony. A “bare, generalized denial” by the witness or the government that the evidence was not tainted by the compelled testimony is not sufficient to meet the government’s burden. Ultimately, because it determined that the errors in admitting this testimony before the grand jury were not harmless beyond a reasonable doubt, the Court dismissed the indictment against the defendants.