US Second Circuit Finds Testimony Compelled By UK Regulators To Be Inadmissible In Criminal Proceedings

Creating a potential new impediment for collaboration between UK and US investigators, the Court of Appeals for the Second Circuit in New York recently held that evidence derived from compelled testimony cannot be used in a criminal case in the United States, even if the testimony was lawfully obtained in the foreign jurisdiction. In overturning the convictions of two former Rabobank traders charged with manipulation of the London Interbank Offered Rate, the Second Circuit in United States v. Allen1 adopted a broad view of the Fifth Amendment right against involuntary self-incrimination as it applies to statements made to foreign regulators and law enforcement. The decision will make it more likely that compelled statements made to investigators in the UK and elsewhere will be inadmissible against criminal defendants in the US.

Background

The case arose out of parallel investigations conducted by the UK's Financial Conduct Authority ("FCA") and the US Department of Justice ("DoJ") into alleged manipulation of the London Interbank Offered Rate ("LIBOR") by employees of Rabobank.

In 2013, two former Rabobank traders and UK citizens, Anthony Allen and Anthony Conti, were interviewed by the FCA pursuant to its statutory authority to compel interviews (when such power is exercised the individual under investigation may be subject to a fine and/or imprisonment for non-compliance).2 Each provided statements regarding their roles in setting LIBOR while at Rabobank, and the FCA showed their testimony transcripts to a third trader, Paul Robson. The FCA ultimately stayed its investigation and any enforcement action of Rabobank employees, including Robson, while the DoJ pursued criminal charges against them.

The following year, Robson was indicted in the US on wire fraud charges. He subsequently pled guilty and entered into a cooperation agreement with the DoJ, providing evidence and testimony against other Rabobank employees. Several months later, Allen and Conti were indicted on multiple counts of wire fraud and conspiracy to commit wire fraud and bank fraud based on evidence Robson had provided to US authorities.

At trial, Allen and Conti sought to supress Robson's testimony under the US Supreme Court's ruling in Kastigar v. United States,3 which found that if a witness is compelled to testify, he must be granted immunity from use of the compelled testimony in subsequent criminal proceedings (so-called "direct use" immunity) and immunity from use of...