HSBC Holdings refuses to provide information about its communications with the DOJ concerning the fine assessed in the 2018 deferred prosecution agreement.
The parties in the FX benchmark rate fixing case targeting some of the world’s biggest banks, such as JPMorgan, Citi, Barclays, UBS and HSBC, have once again clashed over discovery.
A letter, submitted at the New York Southern District Court on August 21, 2020, and seen by FinanceFeeds, reveals that one of the points of disagreement between the plaintiffs and the defendants is the information sought by the plaintiffs from HSBC.
Let’s recall that, in June this year, the Court allowed the plaintiffs (a putative class of consumers and end-user businesses alleging that they paid inflated foreign currency exchange rates caused by an alleged conspiracy among some of the world’s biggest banks to fix prices of FX benchmark rates) to serve interrogatories on HSBC regarding its deal with the Department of Justice from 2018.
In January 2018, UK-based HSBC Holdings plc (HSBC) entered into a deferred prosecution agreement (DPA) and agreed to pay a $63.1 million criminal penalty and $38.4 million in disgorgement and restitution to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running.”
According to HSBC’s admissions, on two separate occasions in 2010 and 2011, traders on its foreign exchange desk misused confidential information provided to them by clients that hired HSBC to execute multi-billion dollar foreign exchange transactions involving the British Pound Sterling. After executing confidentiality agreements with its clients that required the bank to keep the details of their planned transactions confidential, traders on HSBC’s foreign exchange desk transacted in the Pound Sterling for the traders and HSBC’s own benefit in their HSBC “proprietary” accounts.
HSBC traders then caused the large transactions to be executed in a manner designed to drive the price of the Pound Sterling in a direction that benefited HSBC, and harmed their clients. HSBC also made misrepresentations to one of the clients, Cairn Energy, to conceal the self-serving nature of its actions. In total, HSBC admitted to making profits of approximately $38.4 million on the first transaction in March 2010, and approximately $8 million on the Cairn Energy transaction in December 2011.
Now, the plaintiffs in the FX benchmark rate fixing case are displeased with HSBC’s response to their interrogatories regarding the 2018 DPA.
The plaintiffs say that HSBC interposed a general objection to all the interrogatories and did not make any substantive responses whatsoever.
HSBC objected and refused to provide responses on the grounds that the 2018 DPA was signed by HSBC Holdings plc – not a defendant in this case. Defendant construes the “defendants in the case” to be only HSBC Bank USA, N.A. and HSBC North America Holdings, Inc. who are the named defendants in the complaint. HSBC Holdings plc. (the parent company of the two above) was originally named a defendant but was dismissed for lack of jurisdiction.
Since the 2018 DPA Agreement was signed by its parent company, HSBC HOLDINGS, PLC – HSBC now says it is insulated from responsibility to file meaningful responses. This position not only stands in direct derogation of this Court’s order, but is openly contrary to the stipulated recitations that Defendant agreed to in its 2018 DPA, the plaintiffs argue.
The defendants disagree with the plaintiffs. According to them, the plaintiffs’ requests for additional discovery from the HSBC defendants should be rejected.
According to the defendant banks, the plaintiffs are not entitled to information from the HSBC Defendants about their ultimate parent company HSBC Holdings plc’s communications with the DOJ concerning the fine assessed in the 2018 DPA because HSBC Holdings plc is not a defendant in this action, and the HSBC Defendants were not party to any of those communications.
“Plaintiffs may wish that the HSBC Defendants had communications with the DOJ regarding the calculation of the fine assessed against foreign parent company HSBC Holdings plc, but they did not”, the defendants say.
“The HSBC Defendants’ interrogatory responses are not somehow insufficient simply because plaintiffs had hoped for a different answer”, the defendant banks conclude.
The case continues at the New York Southern District Court.