In Rate-Ritting Investigation, Which Bank Has Immunity?

Under the leniency program overseen by the U.S. Department of Justice's antitrust division, timing is everything. The first company to spill the details of an antitrust conspiracy to government lawyers is the one that reaps the rewards, most notably immunity from criminal prosecution for antitrust violations -- and no fine or penalty. Coming in second, even if it's a matter of minutes, doesn't bring a defendant any guaranteed benefits.

In the U.S. government's investigation into the manipulation of major interbank lending rates, including the London Interbank Offered Rate, or Libor, UBS has been widely believed to be the winner of the leniency sweepstakes. UBS disclosed in securities filings last year that it had received leniency or conditional immunity from various authorities, including the Justice Department's antitrust division, in connection with the rate-rigging probe.

So it was a bit of a head-scratcher last month when Barclays said it had also been granted conditional leniency from the antitrust division, which, as it happens, was not part of Barclays $453 million agreement with U.S. and British authorities to settle allegations that it manipulated key interest rates.  How can more than one company receive antitrust leniency in the same investigation? The answer may be that the Justice Department sees multiple rate-rigging conspiracies involving various different interbank lending benchmarks. That's what the UBS and Barclays disclosures suggest: UBS has said it received antitrust leniency for its submissions of Yen Libor and Euroyen Tokyo Interbank Offered Rates, or Tibor. Barclays, on the other hand, said its leniency deal involved instruments that reference the Euro Interbank Offered Rate, or Euribor.

And there may be more antitrust amnesty recipients yet to come. Under a program known as "Amnesty Plus," a company that is too late to receive leniency in one antitrust conspiracy can improve the terms of its plea deal by reporting its involvement in a separate conspiracy. If UBS beat Barclays to Yen Libor amnesty, for instance, Barclays might have reported Euribor manipulation under Amnesty Plus. You can imagine how the string could play out: a chain of banks receiving Amnesty Plus deals for reporting various conspiracies to manipulate different benchmark indexes. (Under such agreements, a company does not pay any fine for its role in the conspiracy it brought to the government's attention, and none of its employees, officers or directors are be subject to prison terms if they admit their participation in the scheme.)
It's unclear whether Barclays or UBS is a beneficiary of the Amnesty Plus program. An attorney at Sullivan & Cromwell, which represents Barclays, did not return a call seeking comment, and lawyers at Gibson, Dunn & Crutcher, which represents UBS in civil antitrust litigation, declined to comment.

It's also unclear what kind of protection the admitted leniency applicants will receive for cooperating with antitrust prosecutors. Historically, the antitrust division has showed a reluctance to enter into non-prosecution agreements with companies under investigation. The non-prosecution agreement that Barclays signed last month was with the Department of Justice's fraud section and did not involve the antitrust division. UBS has yet to make any settlements with the government.  What is clear is that both UBS and Barclays have potentially narrowed their liability relating to the scandal. So far, the antitrust division has not announced any settlements with any of the banks targeted in the investigation. If and when there are settlements over alleged conspiracies to manipulate interbank rates, we'll have a better understanding of the value of their leniency agreements.

(Reporting by Andrew Longstreth)


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