DEUTSCHE BANK SUBSIDIARY PLEADS GUILTY FOR ROLE IN LIBOR MANIPULATION CASE

FROM:  U.S. JUSTICE DEPARTMENT

Thursday, April 23, 2015

Deutsche Bank's London Subsidiary Agrees to Plead Guilty in Connection with Long-Running Manipulation of LIBOR

DB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world.  In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR.  Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

DB Group Services (UK) Limited has agreed to plead guilty to one count of wire fraud, and to pay a $150 million fine, for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions.

In addition, Deutsche Bank entered into a deferred prosecution agreement today and admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy in violation of the Sherman Act by rigging Yen LIBOR contributions with other banks.  The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement.

Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.

“For years, employees at Deutsche Bank illegally manipulated interest rates around the globe – including LIBORs for U.S. Dollar, Yen, Swiss Franc and Pound Sterling, as well as EURIBOR – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Assistant Attorney General Caldwell.  “Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation.”

“Deutsche Bank secretly conspired with its competitors to rig the benchmark interest rates at the heart of the global financial system,” said Assistant Attorney General Baer.  “Deutsche Bank’s misconduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”

“Deutsche Bank admitted to manipulating benchmark interest rates in currencies around the globe in order to benefit trading positions,” said Assistant Director in Charge McCabe.  “This wide reaching investigation represents yet another step in the FBI’s ongoing effort to find and stop those who deliberately participate in complex financial crimes to further their own bottom line.”

Deutsche Bank was a member of the panel of banks whose submissions were used to calculate the LIBORs for a number of currencies, including U.S. Dollar, Yen, Pound Sterling and Swiss Franc LIBOR, as well as EURIBOR (the Euro Interbank Offered Rate).

According to the agreements, from at least 2003 through early 2011, numerous Deutsche Bank derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts to move these benchmark rates in a direction favorable to their trading positions.  Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than rates that complied with the definition of LIBOR.  Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.  Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions.

Deutsche Bank further admitted that its employees engaged in this misconduct through face-to-face requests, electronic communications, which included both emails and electronic chats, and telephone calls.  For example, in an electronic chat on March 22, 2005, a Deutsche Bank U.S. Dollar LIBOR submitter explained how he would manipulate the rate for a trader in New York, stating, “if you need something in particular in the libors i.e. you have an interest in a high or a low fix let me know and there’s a high chance i’ll be able to go in a different level.  Just give me a shout the day before or send an email from your blackberry first thing.”

In another example described in the statement of facts, on May 17, 2006, the supervisor of LIBOR submissions in London received a request from a trader in New York asking, “If you can help we can use a high 3m fix tom.”  The supervisor replied to the trader and a U.S. Dollar LIBOR submitter, “I’m off but [submitter] is your libor man [] [submitter] could you take a look at 3s libor in the morning for [trader].”  The submitter agreed to accommodate the request, replying, “Will do chaps.”  The following morning, after he submitted the bank’s contribution, the submitter wrote to the trader, “I went in at 19+ for the 3m libor, as you’ll see it almost manage to reach 19.”

In an example from March 2007, a trader thanked one of Deutsche Bank’s EURIBOR submitters for his help in successfully manipulating EURIBOR, saying in an electronic chat: “Great job on this [Submitter], we can do more of this stuff,” to which the submitter replied, “WE CAN MY FRIEND. WE CAN….”  Later that day, the submitter bragged about Deutsche Bank’s manipulation by offices in Frankfurt and London in an email to the head of Deutsche Bank’s Global Finance Unit: “HAVE U SEEN THE 3MK FIXING TODAY? THAT WAS AN EXCELLENT CONCERTED ACTION FFT/LDN. CHEERS.”

Deutsche Bank also admitted to working with other banks to manipulate LIBOR contributions.  For instance, in a May 2009 electronic chat exchange, a UBS trader asked a Deutsche Bank trader, “cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix. . .”  The Deutsche Bank trader agreed.  The next day, the Deutsche Bank trader confirmed that the Yen LIBOR submission had been beneficial to the UBS trader, asking “u happy with me yesterday?”  The UBS trader acknowledged, “thx.”

By entering into a deferred prosecution agreement with Deutsche Bank, the Justice Department took several factors into consideration, including that Deutsche Bank’s cooperation with the government’s investigation was often helpful but also fell short in some important respects.  The department also considered the extensive remedial measures undertaken by Deutsche Bank’s management and its enhanced compliance program.  Deutsche Bank has agreed to continue cooperating with the government’s investigation, and the agreement does not prevent the Justice Department from prosecuting culpable individuals for related misconduct.  The documents will be filed in federal court in the District of Connecticut.

The Justice Department has previously announced resolutions with five other banks for their roles in manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Lloyds Banking Group plc.  The department has also charged 12 individuals as a result of this investigation, and three of those individuals have pleaded guilty.  The pending charges are merely accusations, and the defendants are considered innocent unless and until proven guilty.

This ongoing investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office.  The prosecution of Deutsche Bank is being handled by Assistant Chief Jennifer L. Saulino and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorney Richard A. Powers of the Antitrust Division’s New York Field Office.  Deputy Chief Benjamin D. Singer and Assistant Chief Sandra Moser of the Criminal Division’s Fraud Section, Trial Attorney Daniel Tracer of the Antitrust Division’s New York Office, Assistant U.S. Attorneys Liam Brennan and Christopher Mattei of the District of Connecticut and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.

The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FCA, has played a major role in the investigation.  The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations.  Various agencies and enforcement authorities in the United States and from other nations, including the United Kingdom’s Serious Fraud Office, BaFIN and the European Central Bank, are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

AG HOLDER'S REMARKS AT ABA MEETING REGARDING ANTITRUST LAW

FROM:  U.S. JUSTICE DEPARTMENT

Attorney General Holder Delivers Remarks at 63rd Spring Meeting of the American Bar Association Section of Antitrust Law

Washington, DCUnited States ~ Friday, April 17, 2015

Remarks as prepared for delivery

Thank you, Howard [Feller], for those kind words – and for your outstanding leadership of the ABA Section of Antitrust Law.  The Antitrust Section – and the Spring Meeting in particular – provides a vital channel for fostering dialogue between practitioners and scholars, for extending the collective expertise of Section members, and for enhancing overall compliance with antitrust laws in the United States and around the world.  I’m grateful to have this opportunity to be with you today and to be a part of this special gathering.

It’s an honor to stand with so many valued friends and colleagues; talented members of the antitrust bar; and distinguished public leaders representing enforcement authorities at all levels, domestic and international – including the panel members I know you are eager to hear from next.  And it’s a great privilege to join you at what is both an exciting moment for antitrust enforcement generally and a reflective moment for me personally.  Because my own professional path will soon lead me in a new direction, I have had the opportunity lately to take stock of all that the hardworking men and women of the Justice Department – and our remarkable Antitrust Division – have achieved over the last six years.

When I took office as Attorney General in 2009 – in the aftermath of a global financial crisis, and in the midst of deep and widespread economic uncertainty – one of my central priorities was to bring strength and fairness to the rules by which our commercial enterprises operate.  And a core focus was protecting our citizens and ensuring fair competition throughout the American marketplace.  As former Attorney General Robert Kennedy noted over half a century ago, the antitrust laws of this nation are designed to protect and to vindicate the principles of free enterprise – principles that, as he said, “underlie the whole structure of a free society.”  They are a vital safeguard for competition, fundamental to the structure of our economy, and they contribute directly to the prosperity of our nation and the economic freedom of our citizens.  Their enforcement is in the interest of all those who believe in free markets; their values bear no partisan stripe or political creed; and their promises of competition, innovation, and growth are woven into the fabric not only of this country, but of all those that have adopted antitrust regimes based on these shared values.

This Administration’s commitment to vigorous antitrust enforcement extends as far back as September 2007 when then-Senator Barack Obama vowed that, if he were elected President, he would step up enforcement activity in a comprehensive way “to ensure that the benefits of competition are fully realized by consumers.”  That’s exactly what we’ve done.  For the past six years, we have worked tirelessly to realize antitrust law’s promise of robust marketplaces and fair competition.  We have approached threats to that promise as level-headed law enforcers making considered judgments on the merits, always guided by economic common sense and fidelity to the law.  And where we have found violations, we have been prepared to litigate in full, no matter how complex the case, in defense of the American consumer and in pursuit of the cause of justice.

On the criminal side, the scale, the scope and the impact of our enforcement efforts are unprecedented.  In the most recent fiscal year, we obtained a record tally of fines and penalties – totaling nearly $1.3 billion.  We have undertaken the largest criminal investigation in antitrust history in order to root out price fixing and bid rigging in the auto parts industry.  And we have increased the average number of corporate executives sentenced to serve time for antitrust crimes to 29 per year, while lengthening their average sentence to over two years.  Whether it involves price fixing of computer components or bid rigging in real estate foreclosure auctions, we have pursued all forms of criminal conduct – running the gamut from local wrongdoing to transnational crime.

All told, through the extraordinary leadership of dedicated Assistant Attorneys General like Bill Baer – and former leaders of the Antitrust Division like Christine Varney, Sharis Pozen, Joe Wayland and Renata Hesse, who I’m delighted to have with us today – the Antitrust Division’s criminal program has prosecuted 385 individuals and 129 corporations over the course of the Obama Administration.  We have obtained more than $5 billion in fines and penalties, which have been a major contributor to the Justice Department’s Crime Victim Fund, helping victims of all types of crime access the medical, legal, financial and other services they need to move forward with their lives.  And through our tireless efforts, we have sent a clear and consistent message to all those who would take advantage of American consumers, exploit our markets, or subvert our laws:  the Antitrust Division will not tolerate their dishonest and destructive behavior.  In that regard, I expect that there will be more significant news on the criminal side within the next few weeks.

Of course, while the criminal program has proven itself as an intrepid and hard-charging component of our fight to maintain competition in the marketplace, there is no doubt that the civil side has kept pace at every juncture.  We have challenged numerous mergers that were likely to substantially reduce competition in critical sectors of the American economy, including mobile wireless, airlines and beer – a market in which Bill [Baer] demonstrated a deep interest and a curious expertise.  Two mergers foundered at trial, while many others were abandoned or entirely restructured as a result of our enforcement measures.

We also successfully challenged an array of non-merger business practices that distorted the competitive process and threatened to harm the marketplace.  Everyone in this room knows about some of the most prominent examples of our success, like our trial-court victory against Apple over the pricing of e-books and our more recent win against American Express, whose contractual restraints have long stifled competition between credit card companies.  But more important than the victories themselves is the message they send to businesses everywhere.  No matter how lengthy the investigation, no matter how challenging the environment and no matter how complex the practice or industry at hand, we will never shrink from litigation nor shirk our sacred responsibility to uphold the laws of our nation and protect the consumer.  For the United States Department of Justice, there is no unlawful conduct too complicated to pursue, and no company or individual too large or too powerful to be held accountable for actions that harm the American people.

I’m tremendously proud of the inspiring individual efforts and the collective accomplishments of the Antitrust Division these last six years, as well as those of our enforcement partners at the FTC, in state governments, and around the world.  We have been committed to smart, rigorous, and assertive antitrust enforcement across all sectors of our economy.  And as we move forward, executives worldwide surely know that this Antitrust Division and its partners stand ready to do what is necessary to protect consumer welfare.

Although my time at the Justice Department will soon draw to a close, the Department’s commitment to effective antitrust enforcement and to the critical values it advances will not waver.  As the Antitrust Division carries its work into the future – and resolves to continue building on the extraordinary record of achievement I’ve highlighted today – I urge you all to stay engaged, to adhere to the high standards of this important area of the law, and to never lose sight of this country’s founding commitments to liberty and to justice.

In the appropriate enforcement of the antitrust laws we make real the promise of our democracy and our founding documents.  Vigorous competition in all spheres is what makes this nation exceptional. It makes progress more likely and promotes the general welfare.  The desire to make the promise of competition real has been at the heart of our efforts these past six years.  I close by expressing again the pride I have in the women and men of our Antitrust this Division who have done truly historic things in service to the American people.  When the history of this era is written it will be said that this Division – at this time – made our nation more open, more just and more ready to confront the economic issues of the day.  That will be high praise – but because of my colleagues’ dedication, their vision – it will be well deserved.

EGG PRODUCER SETTLES WITH GOVERNMENT CASE INVOLVING WATER POLLUTION DISCHARGES IN MISSISSIPPI

FROM:  U.S. ENVIRONMENTAL PROTECTION AGENCY 

Major Egg Producer to Reduce Water Pollution Discharges at Mississippi Facility

Release Date: 04/13/2015

WASHINGTON - The U.S. Environmental Protection Agency (EPA) and Justice Department’s Environment and Natural Resources Division announced  a settlement with Cal-Maine Foods, Inc., one of the nation’s largest egg producers, that resolves Clean Water Act violations at the company’s poultry egg production facility in Edwards, Miss. Under the settlement, Cal-Maine will bring the facility into compliance with its state-issued water discharge permit, significantly reduce nutrient pollution discharges, and improve environmental data collection and reporting practices. The company will also pay a $475,000 penalty to be split evenly between the U.S. Federal and Mississippi governments.

“Clean Water Act violations from agricultural facilities can impair drinking water sources, transmit disease-causing bacteria, and endanger our lakes and rivers,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “When concentrated animal feeding operations discharge pollutants into U.S. waters, the law requires them to have a permit and comply with it. We’re committed to enforcing the law to protect water quality for communities like the one where this facility is located.”

“The Justice Department is committed to protecting clean water for all Americans, and ensuring large concentrated animal feeding operations are good neighbors to those communities living near them like Edwards,” said Assistant Attorney General John Cruden for the Justice Department’s Environment and Natural Resources Division. “This settlement will bring Cal-Maine into compliance with state and federal laws and cut nutrient pollution discharges into area waterways.”

“This is good news for water quality and health for the residents of Edwards by requiring that Cal-Maine's facilities operate in accordance with state and federal laws,” said U.S. Attorney Gregory K. Davis for the Southern District of Mississippi. “The settlement also represents the commitment by the Justice Department and our federal and state partners to protect water, air and land from health hazards and pollution.”

Today’s settlement, a consent decree filed in federal court in the Southern District of Mississippi Northern Division, resolves alleged violations of Cal-Maine’s Clean Water Act National Pollutant Discharge Elimination System (NPDES) permit at its facility in Edwards, Miss., a large concentrated animal feeding operation that houses more than 2 million chickens. Cal-Maine discharged pollutants from the production area into a tributary of a nearby creek without NPDES permit authorization, and applied nitrogen-laden wastewater on fields at the facility during winter months when land application was prohibited and sometimes at rates that exceeded their permit requirements. Cal-Maine also committed hundreds of water sampling, recordkeeping and reporting violations.

The facility is located in a community where close to half of the households have an annual income of less than $25,000. One of EPA's top priorities is to protect communities that are disproportionately affected by pollution.

Too much nitrogen and phosphorus in the water causes algae to grow faster than ecosystems can handle. Large growths of algae, known as algal blooms, contribute to the creation of hypoxia or “dead zones” in water bodies where oxygen levels are so low that most aquatic life cannot survive. Excessive nitrogen and phosphorus that washes into water bodies and is released into the air are often the direct result of human activities, and agricultural operations are one of the major sources of nutrient pollution.

Under the settlement, Cal-Maine is already developing and implementing: procedures for its egg production and land application areas to achieve compliance with its NPDES permit, an employee training policy, and improved recordkeeping and reporting practices. The procedures were submitted to, and reviewed and approved by EPA and Mississippi officials over the course of settlement negotiations. Cal-Maine has begun implementing these procedures and must comply with all the terms of the settlement by April 30, 2016.

Once the pollution controls required by the settlement are implemented, EPA estimates Cal-Maine will cut discharges of nitrogen by 89,000 pounds and phosphorous by 20,000 pounds per year. EPA estimates it will cost Cal-Maine approximately $418,000 to implement the settlement requirements and bring the Edwards, Miss., facility into compliance with state and federal clean water laws.

Cal-Maine Foods, Inc. and Cal-Maine Farms, Inc. merged into one corporate entity called Cal-Maine Foods, Inc., effective January 1, 2015.

This case is part of EPA’s National Enforcement Initiative to prevent animal waste from contaminating surface and ground water.