The US Department of Justice (DOJ) has hit the curb in its efforts to intervene in a lawsuit brought by ex-Deutsche Bank trader Matthew Connolly against his former employer.
In a rather surprising order issued on Tuesday, February 28, 2023, Judge Colleen McMahon of the New York Southern District Court sided with Connolly regarding the use of certain documents in the lawsuit.
Let’s recall that, on February 14, 2023, the DOJ filed a motion to intervene in the lawsuit which accuses Deutsche Bank of destroying the life of Mr Connolly.
The United States moved to intervene in this matter for the limited purpose of simultaneously moving to maintain the unredacted Amended Complaint under seal. The government argues that (1) Plaintiff Matthew Connolly’s civil counsel seems to have obtained and used grand jury transcripts (and perhaps other discovery) in violation of a protective order entered by Judge McMahon in United States v. Connolly, et al.; and (2) Mr. Connolly has not made, and may not be able to make, a “strong showing of particularized need” for grand jury materials for use in this civil case by petitioning for disclosure as required by Federal Rule of Criminal Procedure 6(e)(3)(F).
Further, the government urged the court to order Mr. Connolly and his civil counsel to sequester all documents—whether or not they are grand jury documents—subject to the protective order, and to refrain from using such documents, until the government has had an opportunity to raise the apparent violation of the protective order with Judge McMahon.
The Judge found that the transcripts and related exhibits are highly relevant to the prosecution of Mr. Connolly’s civil lawsuit. As outlined in Mr. Connolly’s letter of February 24, 2023, opposing the Government’s motion and asking the court to dissolve the protective order, there is no policy reason to keep the grand jury materials secret.
The reasons identified by the Second Circuit for grand jury secrecy are: ( 1) to prevent the escape of those whose indictment may be contemplated; (2) to insure the utmost freedom to the grand jury in its deliberations, and to prevent persons subject to indictment or their friends from importuning the grand jurors; (3) to prevent subornation of perjury or tampering with the witnesses who may testify before the grand jury and later appear at the trial or those indicted by it; (4) to encourage free and untrammeled disclosures by persons who have information with respect to the commission of crimes; and (5) to protect the innocent accused who is exonerated [by the grand jury] from disclosure of the fact that he has been under investigation, and from the expense of standing trial when there was no probability of guilt.
None of those reasons justifies continued grand jury secrecy, the Judge said.
Judge McMahon stated:
“I am, therefore, not at all inclined to participate in what Mr. Connolly undoubtedly perceives as the Government’s continued persecution of him by ordering him to certify that he has destroyed the grand jury materials he gave to his new attorneys”.
Fortunately, the Government has not gone so far as to ask for any other relief, such as holding Mr. Connolly in contempt of court for violating the protective order or sanctioning his new attorneys for using this material in their civil case. In the circumstances, the court would never grant such relief, the Judge noted.
The Judge, however, gave the Government an opportunity to make a particularized showing about why any of those grand jury materials should remain subject to the protective order. The Government has until March 14, 2023 to identify any grand jury material that is presently subject to the protective order and that the Government believes should remain confidential.
Absent such a showing, so much of the protective order as relates to the grand jury materials will dissolve at the close of business on March 15, 2023.
If the Government identifies anything that it believes should remain subject to a protective order, Mr. Connolly (or for that matter Mr. Black, if he wishes to be heard on this subject) will have ten business days to submit reasons why the Government’s application for continued protection should be denied. No reply papers from the Government will be accepted.
In January 2022, the Second Circuit exonerated Matthew Connolly in the criminal case brought against him related to LIBOR submissions. The Second Circuit found that none of Mr. Connolly’s actions constituted a crime – in other words, Mr. Connolly was actually innocent of any wrongdoing.
The trader alleges that he was the victim of a deliberate effort by his former employer, Deutsche Bank, to steer a Department of Justice (DOJ) investigation towards him and other lower-level employees and away from the senior executive decision makers. Connolly claims that Deutsche Bank did this to appear to cooperate with the DOJ while driving the investigation to a favorable result for the bank and its high ranking officers.
Mathew Connolly brings this action for malicious prosecution based on “Deutsche Bank’s calculated conduct, misstatements, and omissions to the DOJ, and the perjured testimony by a Deutsche Bank employee to the jury in the District Court at trial”.
Connolly says that, at all times, Deutsche Bank knew that its C-Suite and senior executives had directed Deutsche Bank’s LIBOR submission practices and policies. Mid-level traders, including Connolly, trusted and justifiably relied on that direction and those practices, understanding them to be vetted, legal and in compliance with the law.
But when the government began questioning LIBOR’s accuracy, Deutsche Bank allegedly gave the DOJ an incomplete and false map to protect itself and its elite upper-echelon from scrutiny, encouraging and inducing the DOJ to pursue, indict, scapegoat, and prosecute Connolly who: (a) had not been employed by Deutsche Bank since 2008, eight years before his indictment; (b) was much lower in the organizational structure; (c) had virtually nothing to do with LIBOR submissions; and (d) was not a member of the privileged club of Deutsche Bank executives worthy of protection.
The trader says that the investigation, indictment, and ensuing prosecution followed a well-trod and corrupt path. The institution and its senior management hired a prominent law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and paid the firm millions of dollars to conduct an “independent” investigation.
Connolly claims that the US government tacitly or openly approves of this (or even requests it), effectively outsourcing its investigation to the law firm, which becomes a quasi-deputized arm of the government (knowing that employers can secure the cooperation from current and former employees in ways the government cannot, for example by threatening to clawback previously paid compensation and because employees may not exercise Fifth Amendment rights in a private investigation). In short, the institution knowingly did the government’s bidding, the government relied on the information the employer obtained, and the quid pro quo is that the government gave the institution credit for cooperating by reducing the penalties imposed on the institution.
According to Connolly’s amended complaint, the results of that investigation were preordained. The law firm, doing its job to protect the institution and its senior management, glossed over, obscured, and erased from the record senior management’s conduct and instead targeted a low-level scapegoat, here Connolly.
Connolly, who was barely involved with LIBOR and who did not gain personally from any rate submission, despite, on information and belief, Deutsche Bank falsely leading DOJ to believe that he did, is handed to the government as a sacrifice. In exchange, the government fined the institution at a discount and the charade concluded, Connolly’s complaint alleges.
Deutsche Bank’s efforts were successful. Not a single person from its senior management was charged with any crime. Because of Deutsche Bank’s cooperation with the government (which included handing over Connolly as a scapegoat), the government gave Deutsche Bank a $750 million credit on an ultimate fine of $2.5 billion, a large amount without question but one that was very manageable for an institution like Deutsche Bank and which was paid by innocent shareholders, not senior management.
Connolly had his life ruined. In 2016, eight years after leaving Deutsche Bank, he was indicted in the Southern District of New York based on information provided and information concealed by Deutsche Bank and Paul Weiss. He fought through a trial where he was convicted of wire fraud and conspiracy to commit wire and bank fraud. He fought through an appeal and was ultimately exonerated in 2022, when the Second Circuit overturned his conviction, finding that the way banks reported LIBOR rates, the alleged misconduct, was not illegal. He was ultimately adjudged not “not guilty” but innocent.
Connolly has been unable to work in his profession since 2016. He has endured a criminal trial, the loss of free movement, the surrender of his passport, and the destruction of his personal and professional reputation. It has affected his health, his children, and his wife.
The ex-trader says that Deutsche Bank’s decision to scapegoat him to shield its senior management was shameful, wrong, and morally unconscionable.
Now, Connolly seeks redress for Deutsche Bank’s actions. He seeks a sum large enough, in excess of $150 million, to compensate him for his economic losses and the torment he and his family have suffered, including damage to his reputation and “to deter and punish Deutsche Bank for its role in directing the destruction of his life”.
