On July 19, 2017, the Second Circuit vacated the convictions and dismissed the indictments of two individuals accused of playing a role in the manipulation of the London Interbank Offered Rate (LIBOR). United States v. Allen, No. 16-898-cr, Slip Op. at 3 (2d Cir. July 19, 2017). The ruling was based on the Fifth Amendment to the US Constitution, which provides that "[n]o person . . . shall be compelled in any criminal case to be a witness against himself." US Const. amend. V. The Second Circuit's decision clarifies that this protection against self-incrimination is an "absolute" "trial right" that applies to all criminal defendants in US courts (including non-citizens) and to all compelled testimony (including testimony given during a foreign government's investigation). United States v. Allen, No. 16-898-cr, Slip Op. at 55. The court's clarification of the Fifth Amendment's scope has important implications for US antitrust enforcers prosecuting international cartels and for individuals ensnared in cross-border criminal investigations alike.
The charges against the defendants in United States v. Allen stemmed from government investigations by the United States, the United Kingdom and others, concerning allegations that several banks had manipulated the LIBOR, a benchmark interest rate for short-term inter-bank loans that is also used as a reference rate for a variety of globally traded financial instruments. The defendants were initially investigated by the United Kingdom's Financial Conduct Authority (FCA) and made self-incriminating statements during compulsory interviews with FCA officials. The FCA provided transcripts of defendants' compelled testimony to a third individual under investigation, Paul Robson, who reviewed the transcripts in detail. For reasons unknown, the FCA then dropped the charges against Robson, and his case was picked up by the United States Department of Justice (DOJ). Robson pleaded guilty and then cooperated with the DOJ by providing information about the defendants that led to their indictment and by testifying against them at trial.
On appeal, the Second Circuit threw out both defendants' convictions and dismissed their indictments, holding that "the Fifth Amendment's prohibition on the use of compelled testimony in American criminal proceedings applies even when a foreign sovereign has compelled the testimony." Slip Op. at 80. The Fifth Amendment's protection against self-incrimination is an absolute "trial right" that applies in any American criminal proceeding, and so the defendants' status as non-citizens did not alter the court's analysis. Id. at 37-38. "In short," the court explained, "compelled testimony cannot be used to secure a conviction in an American court. This is so even when the testimony was compelled by a foreign government in full accordance with its own law." Id. at 38.
Cross-border government investigations into price-fixing and other matters of international scope are becoming increasingly common, and United States v. Allen serves as an important reminder that many jurisdictions outside the United States do not have the procedural safeguards in place that the United States Constitution demands. A foreign investigation that does not satisfy these safeguards may produce evidence that does not hold up in court. Where criminal proceedings have a foreign origin, discovery should be taken to reveal potential evidentiary shortcomings, such as witnesses who are "tainted" by exposure to compelled testimony. Consideration should also be given to the effect of such shortcomings, if any, in potential follow-on civil suits, where standards can be less demanding.
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