Economy & Finance

When Wall Street meets antitrust enforcers

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NEW YORK (Reuters) – Antitrust enforcers are increasingly scrutinizing the world’s major banks.

The U.S. government’s investigation into a scheme to rig bids for investment contracts involving municipal bond proceeds has resulted in major monetary settlements with JPMorgan Chase & Co, UBS AG, Bank of America Corp and others. And there is a high-profile probe into the manipulation of the major interbank rates, including the London Interbank Offered Rate, or Libor.

The consensus of lawyers who gathered in Manhattan on Thursday at a panel hosted by the New York State Bar Association appeared to be that Wall Street should get used to the attention from antitrust enforcers. Some lawyers warned of potential complications as the trend widens.

A big concern is the application of the corporate leniency program overseen by the Department of Justice’s Antitrust Division.

The program, which began in 1978 and was revised in 1993, has been widely viewed as a huge success because it gives cartel members incentives to report illegal schemes to authorities. But the Antitrust Division has relatively little experience applying the program to the financial sector.

John Terzaken, an antitrust partner at Allen & Overy, said it was unclear just how that program would play out. Under the leniency program, the first company to admit to participating in an antitrust conspiracy to government lawyers is the one that obtains immunity from criminal prosecution for antitrust violations.


Coming in second does not guarantee anything and can expose a company to criminal prosecution. But given the importance that many major financial institutions play in society, Terzaken suggested that the Antitrust Division might be willing to forgo criminally prosecuting those banks that are not first in the door under the leniency program.

“It’s not clear in this case that that’s going to happen with respect to other financial institutions that might be colluding with a leniency applicant,” said Terzaken, referring to the company first to report.

Terzaken, who noted that the Antitrust Division does not have a history of negotiating nonprosecution agreements or deferred prosecution agreements with companies, said it was unclear how financial companies that do not receive immunity under the leniency program would be treated.

“It’s something they’re going to be challenged with,” said Terzaken, who in July left the antitrust division, where he was director of criminal enforcement.

The banks — and their lawyers — will also face tough choices as antitrust enforcement picks up, said Karen Yen, an in-house lawyer at UBS.

A bank’s various market regulators do not put the same emphasis on being first to report potential wrongdoing as the Antitrust Division, but they expect the same cooperation, Yen said.

That means once a bank commits to reporting potential wrongdoing to the Antitrust Division, it also has to agree to disclose the same information to other market regulators that do not offer the same protections, Yen said.

“This tension presents complications and potentially dilutes the Antitrust Division’s leniency program,” said Yen.

(Reporting by Andrew Longstreth- Editing by Howard Goller and Lisa Von Ahn)

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