Merchant & Anor v R.

A bank answering the LIBOR question was under a legal obligation to provide its genuine assessment of its borrowing rate. A rate deliberately adjusted to benefit the bank’s trading position was false, even if it fell within a permissible range of rates. The prosecution therefore need not prove that the rate lay outside that range.

An omission in a jury direction will not render a conviction unsafe where the jury’s necessary findings on the directions actually given establish the omitted element. A co-conspirator’s conviction may be admitted under the Police and Criminal Evidence Act 1984 where it proves the existence of an open conspiracy, without proving another defendant’s participation.

Merchant & Anor v R concerned appeals arising from convictions at the Crown Court at Southwark for conspiracy to defraud by manipulating US dollar LIBOR submissions.

Merchant, a swaps trader, and Mathew, a cash-desk employee who made LIBOR submissions, were convicted with another defendant. Merchant challenged his conviction and sentence. Mathew renewed his application for permission to appeal against conviction.

The principal issue was whether a LIBOR submission could be false if it remained within a possible range of borrowing rates but had been adjusted to favour Barclays’ trading positions. Further issues concerned an omitted direction on an indictment particular, the admission of a co-conspirator’s guilty plea, and sentence.

1. Merchant’s conviction appeal was dismissed. The court confirmed that a panel bank answering the LIBOR question was required to give an honest and genuine assessment of its borrowing rate. It approved the approach in R v H [2015] EWCA Crim 46 and R v Hayes [2015] EWCA Crim 1944. The obligation was implicit in the submission process and essential to the operation of a benchmark market.

   A statement concerning a present belief or intention may be a statement of fact. Consequently, a LIBOR submission was false if it was higher or lower than the rate which the bank genuinely assessed to be correct, even where it was within an acceptable range. The prosecution did not need to prove that the actual submission was outside that range.

2. The trial judge omitted a specific direction on the allegation that the defendants had deliberately disregarded the proper basis for submissions. That omission did not make Merchant’s conviction unsafe. The jury’s answers to the questions on genuineness and dishonesty necessarily established that he had agreed to disregard that proper basis. The remaining complaints about the summing up were unarguable.

3. Mathew’s renewed application for permission to appeal was refused. Johnson’s guilty plea was admissible under Police and Criminal Evidence Act 1984, section 74, to prove the existence of a conspiracy. It did not prove that Mathew was party to it, because the indictment alleged an open conspiracy and Johnson could have conspired with others. Its admission did not adversely affect trial fairness under section 78. The absence of a direction under section 74(2) could not have rendered any conviction unsafe.

4. Merchant’s sentence appeal was allowed. The sentencing judge was entitled to assess harm by reference to the wider effects of manipulation of a benchmark, including market confidence, rather than direct counterparties’ loss alone. However, further evidence of the exceptional effect of imprisonment on Merchant and his family justified reducing the sentence from six and a half years to five and a half years’ imprisonment.

• Court of Appeal (Criminal Division) — In Merchant & Anor v R [2017] EWCA Crim 60, Merchant’s conviction appeal was dismissed but his sentence appeal was allowed. Mathew’s renewed application for permission to appeal against conviction was refused.
• Crown Court at Southwark — Before HH Judge Leonard QC, Merchant and Mathew were convicted by a jury of conspiracy to defraud concerning US dollar LIBOR. Merchant received six and a half years’ imprisonment; Mathew received four years.