'End this nightmare,' says Johnson's defence

The defence for Mark Johnson, the former HSBC banker whose trial is drawing to a close, has told jurors the prosecution lacks hard and reliable evidence that would be needed to convict the defendant on charges of nine counts of wire fraud and one of conspiracy.

Jurors began deliberations shortly after 11:30am on October 19.

In his closing argument on October 18, John Wing of law firm Lankler Siffert & Wohl, acting for the defence, repeatedly asked the government to show evidence that Johnson devised a scheme to defraud Cairn Energy on December 7, 2011. This, Wing asserted, is something the prosecution failed to do during the four weeks of the trial and he cautioned jurors against making a decision based on speculation.

“What kind of a conspiracy is this? Folks, we need you because without you there is no justice. Three weeks of living with this case and we ask you to do justice – free an innocent man of false charges,” he said.

“If this was a Shakespeare play, it would be Much Ado About Nothing. But, unlike Shakespeare, this is serious. Mr [Brian] Young mentioned the last laugh, but this is serious. In this country, we don’t send people to jail on surmise and speculation,” said Wing.

The US indicted Johnson last year on nine counts of wire fraud and one count of conspiracy. Prosecutors allege Johnson used inside information to front-run a $3.5 billion (£2.25 billion) currency order from Scottish oil and gas company Cairn Energy. They also claim Johnson tipped off his team of traders in London and New York to trade ahead of the transaction, masking their alleged wrongdoing with lies and scheming to gain $8 million in illicit profits and fees.

F-minus in fraud

Johnson, the former global head of foreign exchange cash trading at HSBC, has been on trial since September 25. He has denied the allegations and said all the sterling bought by members of the trading team went to Cairn.

During a phone call that has been played several times in court since the trial began, Johnson can be heard telling representatives at Cairn and Rothschild – its advisers – that the bank would slowly accumulate some pounds ahead of the transaction and try to control the market leading up to the fix as it executed the rest of the order. The embattled former banker also explained he would need a minimum of two hours’ notice so the order could be executed without creating too much “noise” in the market.

“Mark Johnson gets an F-minus in fraud. He doesn’t know how to do it. Why would Mark Johnson tell Cairn what he was going to do if he was going to defraud them?” Wing asked. “Why is an Englishman being prosecuted for defrauding a Scottish company if no one is aware? The fact that the government says it’s bad doesn’t make it so.” 

Not so unsophisticated

Wing told jurors the action of trading ahead, which prosecutors have described as front-running, is called pre-hedging – a standard industry practice for handling large fixing transactions – and there is no law, regulation or company policy against it. Moreover, he said Cairn was aware of how HSBC would execute the order and did not object to it.

The defence also said the way in which the company and its adviser, Francois Jarrosson at Rothschild, treated the order showed they were protecting Cairn’s interest from the start.

There are movements. There are risks. Guess who knew that, in addition to the traders at HSBC – that unsophisticated gentleman Robert Scriven at Cairn

John Wing, Lankler Siffert & Wohl

“There are movements. There are risks. Guess who knew that, in addition to the traders at HSBC – that unsophisticated gentleman Robert Scriven at Cairn,” Wing said.

Scriven, group treasurer at Cairn, testified early on in the trial that had he known HSBC would pre-hedge the order, the bank would never have got the business or Cairn would have used a full risk transfer to execute its order.

But the defence has dismissed that testimony, saying the deception came from Scriven and Jarrosson. Wing showed jurors emails of the two men discussing how they could softly try to get HSBC to share any profits made on the fix. Jarrosson would later contact Johnson to discuss it, and why two hours was needed for the fix, as opposed to half an hour.

“Ladies and gentlemen, this unsophisticated Mr Scriven was a tough, sharp businessman. And what he needed to do was limit the amount of time that anyone would know they were going to do the trade,” Wing said. “They figured out months earlier they were going to do a fix. That’s why they didn’t want anyone to know the time. They wanted to shorten that as much as possible.”

“Deserves a medal”

According to the defence, HSBC faced several obstacles in carrying out the alleged front-running scheme: the bank did not know the exact timing of the transaction or the full amount until half an hour before the actual 3pm fix; news of the successful Cairn India-Vedanta transaction had leaked to the press; and one day before Cairn called in its order, a Deutsche Bank employee figured out HSBC might have got the deal and contacted a currency trader at HSBC to ask about it.

When Johnson was alerted of Deutsche’s fishing exercise, he told his team to have Dipak Khot, then a HSBC salesman, warn Cairn.

Khot, whose role has been made redundant, was responsible for preparing the request for proposal to Cairn. Under a non-prosecution agreement, Khot testified he became concerned about the order when he saw what was happening to the price on the screen. Khot said the team told him that a “Russian name” was in the market – information he later passed on to Cairn because he said the company was calling at every uptick.

“There are no calls from Jarrosson to Dipak. There are no calls. None. Zero. Maybe that was a little embellishment – every uptick,” Wing said. “I respectfully submit that we have an insecure member of HSBC.”

Giving money back to the client – what kind of fraudsters are these?

John Wing, Lankler Siffert & Wohl

Wing later said “Dipak managed expectations poorly” when he shared misinformation on the size of an alleged £1.9 billion transaction carried out by HSBC the day before Cairn’s fixing order.

While Johnson had declined to give some money back on the fix, HSBC ended up doing better than expected and returned some money to Cairn, according to the defence.

“Giving money back to the client – what kind of fraudsters are these?” Wing asked. “If you’re out to get all this money, why give it back? They didn’t have to. They didn’t promise to. They didn’t have to do anything at all.”

He later said: “All of that is concrete evidence that Mark Johnson had no intent to hurt Cairn by steering them to the 3pm fix instead of the 4pm. Mark Johnson should get a medal for that because Cairn probably did better than if they had done it at 4pm because everybody got surprised.” 

‘End this nightmare’

The prosecution begged to differ, saying Johnson and his team intentionally bought the pounds at a low price and then ramped it up to make more money by breaching their fiduciary duty to Cairn and using the company’s information against it.

The defence showed an Isda agreement between the two, which stated Cairn Energy was entering each transaction as principal and not as the agent of any person or entity, and that the other party was not acting as fiduciary for, or as an adviser to, the firm in respect of the transaction.

“The big deal was they got through a very difficult trade and they were lucky. [The traders] did a lot of work, as you see from the evidence here. There was a lot going on,” said Wing, who has argued the government has taken pieces of information and neglected the whole picture.

“I ask you, ladies and gentlemen, to answer for Mark Johnson. What would Wing or [Frank] Wohl say about something that’s taken out of context?” Wing asked. “This case is not a joke. It’s not funny. It’s very serious. I wish I could ask each one of you what’s bothering you about the case, but I can’t. If you have questions, look for answers. It’s in the evidence.” 

“When [we leave here] we all go back to our homes and our families. For Mark Johnson, what you do here will impact the rest of his life. So please, take your time and do it right,” Wing added.

“We ask you to say the truth – that he is not guilty and to end this nightmare and send him home to his family,” Wing pleaded.