There are so many interesting jurisdictional issues in the U.S. government’s prosecution of foreign bankers allegedly involved in the manipulation of benchmark London Interbank Offered Rates, calculated in London under the auspices of the British Bankers’ Association. Last December, Covington & Burling laid out at least three solid arguments for why U.S. courts shouldn’t hear the government’s criminal case against Roger Darin, a Swiss UBS interest-rate trader charged with one count of conspiracy to commit wire fraud by supposedly submitting false reports of UBS’ yen Libor, including the territorial limits of the U.S. wire fraud statute and Darin’s due process right not to be tried in U.S. courts for conduct that took place entirely outside of the United States.
But in an opinion issued Friday, U.S. Magistrate Judge James Francis of Manhattan made clear that Libor defendants aren’t going to be able to slough off U.S. criminal charges with jurisdictional arguments. The magistrate judge took quite a broad view of what constitutes a “nexus” between Darin and the United States. Under his interpretation, as long as an alleged Libor conspiracy participant was aware that the rates were published in the United States and were likely to affect trades with U.S. counterparties, the defendant can be tried in U.S. courts.
Darin’s motion to dismiss the government’s criminal complaint argued that the UBS trader had no connection with the United States. He’s a Swiss citizen who worked in UBS’ Zurich, Singapore and Tokyo offices. He reported a daily hypothetical rate for interbank yen loans via a British regulatory body. And according to his lawyers at Covington, Darin had no idea that submitting a false report could be construed as a crime in the United States. His emails, they said, reflect that his biggest concern was not that he’d face prosecution but that UBS would be kicked off the panel of 16 banks whose reports determined the daily yen Libor average.