Can a defendant's testimony that was compelled by a foreign government be admitted at trial in the United States? In United States v. Allen,—F.3d—, 2017 WL 3040201 (2d Cir. July 19, 2017), the U.S. Court of Appeals for the Second Circuit ruled that the Fifth Amendment bars the use of testimony by a criminal defendant that was compelled by a foreign power in the defendant's U.S. criminal trial and reversed the judgments of conviction against the defendants. In Allen, the panel wrestled with the modern world's reliance on foreign governments to help investigate and develop cases but declined to allow the government's investigatory needs to outweigh defendants' constitutional rights.

Background and Lower Court

Allen concerned alleged manipulation of London Interbank Offered Rates (LIBOR), a metric that is central to many complex financial transactions. LIBOR is calculated each day for each of the world's major currencies by the British Bankers Association, which relies on figures submitted by a panel of banks reflecting the interest rates at which they may borrow money from other banks. In 2013, the Financial Conduct Authority (FCA), a British enforcement agency, began a regulatory investigation of one panel bank, Rabobank, for its LIBOR submission practices. Rabobank submitted rates for the U.S. Dollar (USD) LIBOR and Japanese Yen (JPY) LIBOR. Anthony Allen and Anthony Conti, two Rabobank employees involved in submitting Rabobank's daily rate to LIBOR, were interviewed by the FCA during its investigation. Their failure to comply with interview requests could have resulted in imprisonment. The FCA later initiated an action against Paul Robson, one of Allen's and Conti's co-workers, who was involved in Rabobank's JPY LIBOR submission process. Following the agency's ordinary practice, the FCA sent Robson the transcripts of Allen's and Conti's compelled interviews, which Robson read and annotated in preparation for a later meeting with the FCA. Soon thereafter, however, the FCA dropped its case against Robson in favor of allowing the Fraud Section of the U.S. Department of Justice to criminally prosecute him. After being indicted for wire fraud and entering into a plea agreement, Robson became a significant source of information for the DOJ to build its case against Allen and Conti.

In October 2014, Allen and Conti were indicted for conspiracy to commit wire fraud and bank fraud, and wire fraud. The government alleged that Allen and Conti helped Rabobank derivative traders who entered into interest rate swap agreements and were reliant upon the LIBOR being higher or lower on particular dates. Allen and Conti, the government alleged, were influenced by requests from derivative traders when making their LIBOR submissions and failed to make honest estimates of the bank's borrowing rates. The government offered evidence demonstrating requests for accommodations, such as an email that Conti received from a derivative trader, which said: “GONNA NEED A FRICKIN HIGH 6 MTH FIX TOMORROW IF OK WITH YOU… 5.42?” That day, the Rabobank submission for the USD LIBOR was 5.42. In support of the DOJ's position, Robson testified that he, too, accommodated the derivative traders while working on JPY LIBOR submissions.

Prior to the trial, Allen and Conti moved to dismiss their indictment or suppress Robson's testimony and all evidence derived from his testimony pursuant to Kastigar v. United States, 406 U.S. 441 (1972). Under Kastigar, an individual can be compelled to testify for “use and derivative use” immunity, but the government bears the burden of demonstrating that the evidence presented at trial derives from a “wholly independent” source from the compelled testimony.