SocGen Executives at Risk in U.S. Libor Probe (Audio)

that's what's happening at societ A General. According to people familiar with the matter, the US Justice Department's investigation into interest rate manipulation at global banks is piercing the executive suite, with prosecutors scrutinizing the activities of senior officials of the

French bank. The case is one of three major US criminal investigations of sak Gen. The bank said today that it is in talks to settle the cases involving allegations that bank officials bribe lib Libyans to win investment deals and that it manipulated the live or interest rate. Joining us as one of our favorite guests, Robert Hockett, professor at Cornell Law School, bob the government has collected documents suggesting that executives were aware that bankers there were submitting

fake US dollar library rates. Tell us about those. Yeah, so this is actually very important, um, and it's it's full significance. I guess there are a couple of interpretations we can put on a pluggets that in the moment. So the key the key points are the key facts are. First of all, of course, the library rate is is what I've written about elsewhere as a systemically important price

or index, right, I call these things cities. These are highly important because they serve as benchmarks for many other pricing decisions that are made out there. And yet at the same time they're controlled by very small numbers of people, basically cartels or clubs. That means in turn that those things are highly manipulable. And when they're manipulated, they can be used of course, and the chief people essentially to engage in forms of fraud, insider trading, that kind of thing.

So the allegation is that lower downs down at at Sockton, we're actually doing this. We're manipulating a live board in in that kind of classic way. Uh. And that's not all that uncommon in there has been a lot of lification about this. Lots of banks have been used of doing this. The key point here, though, is that we now have a kind of smoking gun that suggests that people in the executive suite right at the very top we're at least aware or should have been aware of

the fact that this was going on. There is, in other words, no longer plausible deniability, because at least one person lowered down at Sawgen sort of blew the whistles and an email for an executive, and the executive acknowledged receipt of that email actually wrote back, and so we know then that there is at the very least constructive and probably actually you know, actual knowledge among the higher

ups about what was going down farther below. Well, Bob, the government's already indicted two lower level employees in this case, haven't Yeah, yeah, sorry, go ahead, go ahead. Yes. So we they've already indicted lower employees, and it seems highly unlikely that we're actually going to be able to prosecute them because France is not actually cooperating with extradition here.

They have various reasons that they give, and so it looks as though it's going to be very difficult for US authorities actually to kind of get custody of or jurisdiction personal jurisdiction over these people. But it's nevertheless helpful for the d o J to file indict it's not only against these people, but now against the higher ups as well, because the thought is that this will a bit more pressure on Softgen to settle with the d o J, rather than to continue to say, you know,

you know, Nana nona and you can't get me. I'm over in France. Are they actually saying no non in the negotiations because I think there was a normal so um, so today we have sucked Gen announcing that it is in negotiations. Um after it's set aside more than two point five billion dollars in reserves for a settling legal affairs. So did it did this do the trick then? Yeah? I think this suggests that the pressure strategy might be

paying law. The thing about Suntion is it's thus far managed to avoid having to deal with or to pay the piper so to speak, at the o J um not with sending the fact that many of its global competitors, such as Deutsche Bank and Barkley's have indeed had to do this, had they have had to pay the piper

so to speak. So it's look things as though they're that they themselves are feeling the pressure now too, and as you know, their share prices taking a significant hit ever since yesterday's announcement, and even more I think since this morning's uh SO, it might very well be at the strategy. The d ok strategy here is paying off, Bob. Why is France not really cooperating with the United States

in these cases? There are a couple of reasons. Of one of the reasons is a sort of an innocent reason or a really said the form of an innocent reason, and the other ones a little bit less so. But the innocent reason is that French claim to uh ball at some of our procedures, would say that some of our judicial procedures would say think are violative a certain basic human rights. I don't know that they're actually serious

about that. That might be textual, it looks as the real reason, or at least a less noble sound increcent at least as they've definitely been smarting over the fact that US prosecutors have been going after other French banks that have been accused of violating various legal provisions, and the French are are heard saying that this is harming our economy, harming our financial institutions and so forth. In that case, if that's I if that's the real motivators,

then it looks like kind of bear economic nationalism. Bob. This alleged misconduct happened from May of to October of and that is nearly a year after lib or manipulation was targeted by authorities at other banks. So is it it's true that they didn't deter them at all? I think it's oftentimes, Um, you know, one institution might think that it's somehow going to avoid scrutiny when other institutions

are nevertheless attracting it. Uh. This is a sort of a common I guess you could think of this as a sort of cognitive bias that oftentimes broadsters or manipulators, Um, they have maybe an overabundance of self confidence. Let's say that the same kind of arrogance that's required uh to impel you into engaging in these sorts of behaviors in the first place, oftentimes also have you thinking that you're above the law, or that you know you can outwit

your opponents and can't possibly be caught. Well, Bob, do you think that, I mean, do you think that the way that this is going to play out is that um despite French intransigence, and there you know, we may see more indictments or at least some kind of settlement in all these cases. I think we probably will, because if you think about it, ultimately, it really doesn't matter that much because we can actually get personal jurisdiction over

the individual human beings. Keep it's possible actually to indict the institutions themselves. Uh, that's very bad pressed for them, and then they tend to suffer in the markets, as we're seeing of course today and yesterday, and so they ultimately come around even if we're not able actually ultimately to attach personal jurisdiction to the individual human beings who are ultimately responsible. Bob. But what would be the impact of the view of the bank suck gen if some

senior officials were actually indicted. I think it would be it would be earth shaking. Maybe it might be a splitt exaggeration, but it would be. It would be highly significant, because as you know, it's very very rare. I think at the people at the top, because there are so many layers between them and those below that they usually have some kind of plausible deniability or it might not

be plausible, but it's at least legally classed. Well, even I thought sort of, you know, practically that's plausible, but now we have, you know, an actual smoking god where we can actually say people at the very top you definitely knew this, or at least are are are reasonably charged with knowledge of it, because you actually got noticed that we have it right here in Prince. It's it's it sounds like it's going to be an interesting case, and we'll be consulting with you as we go along.

Thanks as always, That's Robert Hockett, professor at Cornell Law School. That's it for this edition of Bloomberg Law. We'll be back Monday at one pm Wall Street time, and hope you will be as well. Thanks to our producer David Suckerman and our technical director Chris trike Comy. You can listen to the latest legal topics and news on our

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