United States v. Sindzingre
| Decision Date | 29 May 2019 |
| Docket Number | 17-CR-0464(JS) |
| Parties | UNITED STATES OF AMERICA, v. DANIELLE SINDZINGRE and MURIEL BESCOND, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
APPEARANCES
For the United States
of America:
Matthew S. Amatruda, Esq.
United States Attorney's Office
Eastern District of New York
One Pierrepont Plaza
Brooklyn, NY 11201
Timothy A. Duree, Esq.
United States Department of Justice,
Criminal Division, Fraud Section
1400 New York Avenue
Washington, DC 20005
For Defendants
Danielle Sindzingre:
No appearance
Muriel Bescond:
Laurence S. Shtasel, Esq.
Blank Rome LLP
The Chrysler Building
One Logan Square
Philadelphia, PA 19103
Laurent Cohen-Tanugi, Esq.
Laurent Cohen-Tanugi Avocat
20, Boulevard Des Invalides
Paris, FR 75007
In August 2017, a grand jury returned a five-count indictment (the "Indictment") alleging that defendants Danielle Sindzingre ("Sindzingre") and Muriel Bescond ("Bescond" and together, "Defendants") participated in a scheme to manipulate the London Interbank Offered Rate ("LIBOR") for the U.S. Dollar ("USD"). (See generally Indict., D.E. 1.) Bescond moves to dismiss the Indictment on four grounds. For the following reasons, Bescond's motions are DENIED.
LIBOR is a benchmark interest rate that the British Bankers' Association ("BBA") administered during the relevant time. (Indict. ¶ 9.) LIBOR was calculated based on "Contributor Panel" banks' estimates of the rates at which they could borrow unsecured funds from other banks in ten currencies, including the USD, for fifteen different borrowing periods (called "maturities" or "tenors"), including a three-month maturity. (Indict. ¶¶ 9-10.) BBA rules required the Contributor Panel banks "to present an honest and unbiased estimate of [their] borrowing costs." (Indict. ¶ 10.)
Each London business day, Contributor Panel banks sent their estimated interest rate submissions to Thomson Reuters, which acted as an agent for BBA. (Indict. ¶ 10.) For USD LIBOR,Thomson Reuters received submissions from sixteen Contributor Panel banks. (Indict. ¶ 10.) It excluded the four highest and four lowest submissions and averaged the remaining eight to determine the official USD LIBOR rate, or "fix." (Indict. ¶ 11.) Thomson Reuters transmitted each Contributor Panel bank's LIBOR submissions, as well as the final averaged LIBOR rates, to three data centers--including one located in New York--for worldwide publication. (Indict. ¶ 11.)
Published LIBOR rates were used to settle trades in a variety of financial instruments, including Eurodollar futures contracts. (Indict. ¶ 12.) "The term 'Eurodollar' refers to USDs on deposit in foreign banks for a fixed duration with a fixed yield." (Indict. ¶ 12.) Eurodollar futures contracts are LIBOR-based derivatives traded as commodities on the Chicago Mercantile Exchange ("CME") in Chicago, Illinois. (Indict. ¶ 12.) "[T]heir price reflected the predicted LIBOR at the end of the term of a three-month, $1,000,000 offshore deposit." (Indict. ¶ 12.) The contracts allow "investors to trade on their predictions of increases and decreases in LIBOR and enable purchasers to hedge financial risk." (Indict. ¶ 12.)
Société Générale, S.A. ("Société Générale" or the "Bank") is a financial institution and global financial services company headquartered in Paris, France, with a branch in New York,New York. (Indict. ¶ 1.) Beginning February 2009, Société Générale was a member of the USD LIBOR Contributor Panel. (Indict. ¶ 9.)
Sindzingre, a French citizen, was the Global Head of Treasury for Société Générale. (Indict. ¶ 2.) She oversaw the determination and submission of Société Générale's USD LIBOR rates. (Indict. ¶ 15.) Bescond, also a French citizen, served under Sindzingre as the head of the Bank's Paris treasury desk. (Indict. ¶¶ 3, 15.) She supervised the "setters"--bank employees who prepared Société Générale's USD LIBOR submissions--and ensured that the Paris treasury desk carried out Sindzingre's directives. (Indict. ¶¶ 10, 15.) "Manager-1" was the Head of Treasury at Société Générale's treasury desk in London. (Indict. ¶ 4.) Manager-1, who reported directly to Sindzingre, was responsible for receiving USD LIBOR submissions from employees at the Paris treasury desk and sending them to Thomson Reuters. (Indict. ¶ 16.) "Setter-1," "Setter-2," Setter-3," and "Setter-4" (collectively, the "Setters") were traders at the Bank's treasury desk in Paris. (Indict. ¶¶ 5-8.)
In short, before May 2010, Société Générale made USD LIBOR submissions that were higher than those of many other members of the USD LIBOR Contributor Panel. (Indict. ¶ 13.) This indicated that Société Générale had to pay higher interest ratesthan other banks to borrow money, which harmed its "reputation for financial soundness." (Indict. ¶¶ 13, 18.) Between May 2010 and October 2011, Defendants, together with Manager-1, the Setters, and others, "engaged in a scheme to cause Société Générale to submit false and misleading USD LIBOR rates to the BBA via Thomson Reuters, so that it would appear to the public that Société Générale was able to borrow money at lower interest rates than the rates that were actually available to the Bank." (Indict. ¶ 14.) This scheme was designed "to avoid anticipated reputational harm to Société Générale had the Bank submitted honest estimates of its borrowing rates, which rates were publicized through the LIBOR rate setting process." (Indict. ¶ 14.) The Bank's false and misleading submissions artificially reduced the USD LIBOR fix and affected millions of USD LIBOR-based financial transactions. (Indict. ¶ 14.)
According to the Indictment, the scheme developed as follows: Outside analysts began to question the high level of Société Générale's LIBOR submissions. (Indict. ¶ 17.) By email on May 21, 2010, Sindzingre informed Bescond and others at the Paris treasury desk that she had met with members of Société Générale's General Directorate. (Indict. ¶ 18.) During the meeting, she had been required to discuss the fact that the Bank's high USD LIBOR submissions harmed its reputation for financial soundness. (Indict. ¶ 18.) Sindzingre instructed Bescond and herstaff to submit interest rate estimates that were lower than the highest of the middle eight estimates--that is, lower than Société Générale's actual estimated borrowing costs. (Indict. ¶ 18.)
By email to Sindzingre on May 23, 2010, Bescond agreed to do as Sindzingre ordered but cautioned that Société Générale's submissions would be false. (Indict. ¶ 19.) Bescond carried out Sindzingre's directive by instructing the Setters to make false and misleading USD LIBOR submissions, which Manager-1 caused to be sent to the BBA via Thomson Reuters. (Indict. ¶ 19.)
On numerous occasions in the following months, Bescond, Sindzingre, and others caused Société Générale to make false USD LIBOR submissions that were lower than the rates that it paid to borrow USDs. (Indict. ¶ 20.) For instance, on June 14, 2010, they caused Société Générale to submit a three-month USD LIBOR rate of 0.5525, when the interest rates at which the Bank borrowed funds on that day ranged from 0.59 to 0.62. (Indict. ¶ 20.) Similarly, on June 15, 16, and 17, 2010, the three-month USD LIBOR rates that Defendants and others caused the Bank to submit were lower than the interest rates at which Société Générale borrowed funds in the market. (Indict. ¶¶ 21-22, 24.)
In June 2010, Sindzingre became concerned that the Bank's manipulation of USD LIBOR could invite regulatory scrutiny. (Indict. ¶ 23.) By email on June 17, 2010, she advised her superiors that Société Générale had been submitting USD LIBOR ratesthat fell below the interest rates that the Bank was paying in the market. (Indict. ¶ 23.) She warned that the false submissions violated BBA rules and exposed Société Générale to accusations of market manipulation. (Indict. ¶ 23.) She suggested that the Bank begin to incrementally increase the rates it was submitting to accord with the actual rates at which Société Générale was borrowing money. (Indict. ¶ 23.)
Notwithstanding Sindzingre's suggestion, the Bank--with the participation of Defendants--continued to make false and misleading USD LIBOR submissions that were below its actual borrowing costs. (Indict. ¶ 25.) For example, on June 22 and 28, 2010 and January 17, 2011, Defendants and others caused the Bank to submit three-month USD LIBOR rates that were lower than the rates at which Société Générale borrowed money in the market. (Indict. ¶¶ 26-28.)
By email on February 15, 2011, Sindzingre informed high-level Société Générale executives that the Bank's USD LIBOR submission was three to five basis points2 below the accurate estimate of interest rates at which it could borrow funds. (Indict. ¶ 29.) She repeated her suggestion that the Bank increase its LIBOR submissions to reflect its actual borrowing costs.(Indict. ¶ 29.) A day later, one of the executives responded that Société Générale should incrementally increase its submissions to reach the Bank's actual borrowing costs. (Indict. ¶ 30.)
Despite this exchange, through at least October 2011, the Bank--with Defendants' knowing participation--continued to make false and misleading USD LIBOR submissions that were lower than its actual USD borrowing costs. (Indict. ¶ 30.) For instance, on October 26, 2011, Defendants and others caused Société Générale to submit a three-month USD LIBOR rate of 0.46 when the interest rates at which it borrowed funds on that day ranged from 0.75 to 1.27. (Indict. ¶ 31.)
The Indictment, which was filed on August 24, 2017, accuses Defendants of violating the Commodity Exchange Act ("CEA"). (Indict. ¶¶ 32-36.) Specifically, it charges Defendants with conspiracy to transmit false, misleading, and knowingly inaccurate...
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