Alex Julian Pabon v R
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross |
| Judgment Date | 13 March 2018 |
| Neutral Citation | [2018] EWCA Crim 420 |
| Court | Court of Appeal (Criminal Division) |
| Docket Number | Case No: 201603533 B2 |
| Date | 13 March 2018 |
[2018] EWCA Crim 420
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM SOUTHWARK CROWN COURT
JUDGE LEONARD QC
T20147239
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Gross
Mr Justice Sweeney
and
Mr Justice Haddon-Cave
Case No: 201603533 B2
James Hines QC and Emma Deacon QC (instructed by the Serious Fraud Office) for the Crown
Tom Allen QC and Nicholas James (instructed by IBB Solicitors) for the Appellant
Hearing date: 24 November 2017
INTRODUCTION
This is the judgment of the Court to which each member has contributed.
Procedural history: Two considerations loom large in these proceedings. First, the duty of an expert to the Court, in particular to stay within the area of his expertise. Secondly, the sole test for this Court when deciding whether to allow or dismiss an appeal against conviction: namely, whether that conviction is unsafe.
The Appellant, Alex Pabon, now aged 39, together with a number of co-defendants, all employees of Barclays Bank PLC (“Barclays”), Peter Charles Johnson (“Johnson”), Jonathan James Mathew (“Mathew”), Stylianos Contogoulas (“Contogoulas”), Jay Vijay Merchant (“Merchant”) and Ryan Michael Reich (“Reich”), faced a single Count of conspiracy to defraud, alleging that they dishonestly rigged LIBOR (as defined below).
The Particulars of the Offence on the Indictment alleged that the Appellant and co-defendants:
“….between 1 st June 2005 and 1 st September 2007 conspired together and with other employees of Barclays PLC and its associated entities (Barclays) to defraud in that:
1) knowing or believing that Barclays was a party to trading referenced to the London Interbank Offered Rate for US dollar (Dollar Libor);
2) they dishonestly agreed to procure or make submissions of rates by Barclays, a panel bank, into the Dollar Libor setting process which were false or misleading in that they:
a. were intended to create an advantage to the trading positions of employees of Barclays; and
b. deliberately disregarded the proper basis for the submission of those rates
thereby intending to prejudice the economic interests of others”
On the 29 th June 2016, in the Crown Court at Southwark, before HHJ Leonard QC, the Appellant was convicted (by a majority of 10 to 2) on the Count in question. On the 7 th July 2016, before the same Court, the Appellant was sentenced to 2 years and 9 months' imprisonment.
As to the co-defendants: Mathew and Merchant were convicted on the same Count. Mathew was sentenced to 4 years' imprisonment and Merchant to 6 1/2 years' imprisonment. Both sought leave to appeal against conviction and Merchant against his sentence as well. These applications were dealt with by a different constitution of this Court (Lord Thomas of Cwmgiedd CJ, Dingemans and William Davis JJ): R v Merchant [2017] EWCA Crim 60; [2018] 1 Cr App R 11. In the event, Mathew's application for leave to appeal against conviction was refused, as was Merchant's appeal against conviction. Merchant, however, succeeded in his appeal against sentence, which was reduced to 5 1/2 years' imprisonment. Johnson had earlier pleaded guilty to the same Count and was sentenced to 4 years' imprisonment. The jury were unable to agree verdicts in respect of Contogoulas and Reich; they were re-tried in April 2017 (“the retrial”) and were acquitted – a matter to which we shall return.
The Appellant's application for leave to appeal conviction was refused by the Single Judge and was not renewed before the full Court. No formal notice of abandonment was served, pursuant to the Criminal Procedure Rules (“Crim PR”), Part 36, r.13. Before us, the Appellant seeks to renew his application for leave to appeal, some seven months out of time, relying essentially on fresh evidence arising out of the retrial. The sole focus of the intended appeal concerns the conduct of an expert witness, called by the Prosecution (i.e., the SFO) at the Appellant's trial and the retrial, a Mr Saul Haydon Rowe (“Rowe”). At the retrial and following cross-examination on new material, not available at the Appellant's trial, Rowe fared disastrously. As already noted, both Contogoulas and Reich were acquitted.
LIBOR: LIBOR is the shorthand for the “London Inter-Bank Offered Rate”. It is a global benchmark interest rate for many types of financial transactions. LIBOR is set in London and is based on the rate of interest banks charge one another for loans of funds or, put another way, the interest rate at which banks could borrow money from each other on a particular day. The rate is published daily shortly before noon. The US$ LIBOR rate was calculated on the basis of daily submissions from a panel of 16 contributing banks; Barclays was on that panel. At the material times, the LIBOR setting process was run by the British Bankers' Association (“BBA”), a trade association, not a regulator. The 16 panel banks were asked “the LIBOR question”, namely:
“ At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?”
The responses to the LIBOR question were collected by Thomson Reuters and the LIBOR rate for the day was calculated by “trimming” off the highest 4 and lowest 4 submissions and then working out an average of the remaining middle 8 submissions. Panel banks were to make their submissions by 11.00 and those submissions could not be seen by other banks during the submission window. LIBOR submissions would be made in respect of 15 separate time periods: overnight, 1 week, 2 weeks, 1 month, 2 months and so on to 12 months. The present case was mostly concerned with 1 month (“1m”) and 3 month (“3m”) periods or “tenors”.
It may be noted that LIBOR was not based on actual transactions on the inter-bank loan market. Instead, as explained by Professor Ronald Anderson, Emeritus Professor of Finance at the London School of Economics, the other expert witness called by the prosecution and to whose evidence no controversy attaches, it is an estimate of the rate that a large, well-established bank would be charged if it were to borrow funds from a similar bank.
The present case is concerned with derivative (or swaps) trading, where the amount to be paid by a party to such a contract was derived from the published LIBOR rate. In every derivative trade referenced to LIBOR, there would be two parties. Movement in LIBOR would result in detriment to one of those parties to an equal and opposite extent as it profited the other party.
LIBOR has been widely adopted, worldwide, as a benchmark for wholesale money market transactions. Over time, however, it has also been adopted for use in retail financial contracts as well, for example, variable rate mortgages where the borrower's interest rate is referenced to LIBOR. According to Professor Anderson, one of the most widely quoted estimates of the size of LIBOR based financial contracts is US$300 trillion.
Dramatis Personae: The defendants at trial fell into two categories: traders and LIBOR submitters. The derivatives (or swaps) traders in the Barclays New York office were the Appellant, Merchant (to whom the Appellant reported) and Reich. There was, of course, a reporting structure or chain extending upwards from Merchant; more senior Barclays personnel included Messrs. Harrison, Bommensath and Bagguley. Contogoulas was a US$ fixed income swaps trader, based in London.
The Appellant had been employed by BNP Paribas between 2002 and 2004 as a trader in US$ short-term interest rate products. When he joined Barclays in March 2004, his first task was to develop a model to price the US$ short-term interest rate market. It comprised a set of mathematical curves in graph form that could be used to calculate and price where the LIBOR should be. The model could be used to predict where the LIBOR would be on any given future date and was to enable traders to price the market more accurately.
Turning to the LIBOR submitters in the Barclays London office, Johnson was the senior LIBOR submitter and was the Director of US$ Money Markets. Matthew was a LIBOR submitter and a junior trader on the Money Markets desk. Johnson was Matthew's line manager and had introduced him to the LIBOR submission process; there was no formal training.
The Money Markets or cash desk had a “Treasury function” within the bank and was responsible for balancing the bank's books each night. The desk's task was to ensure that the bank had sufficient cash to do its business; this involved lending money to departments within the bank and sometimes borrowing from or lending to other banks. Those on the cash desk were ideally placed to answer the LIBOR question each day as they dealt in cash and borrowed funds from other banks. There was evidence that in some banks, trading desks also acted as LIBOR submitters and, in other banks, the swaps traders and LIBOR setters sat on the same desk.
The rival cases and the issue for the jury at the trial: The SFO case was that the defendants defrauded their counterparties to their LIBOR referenced trades; they dishonestly agreed to procure or make false or misleading LIBOR submissions. The traders requested the LIBOR submitters to submit false rates and the submitters in turn provided rates that did not honestly and genuinely answer the LIBOR question. The manipulation of the rates was undertaken in order to increase the traders' profits or decrease their losses. Acceding to the traders' requests gave the LIBOR submitters status and standing within the bank. The traders were able to make larger profits for their desk, ultimately increasing their bonuses, their prospects of career advancement and their own status within the bank. The smallest movement in the...
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