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JPMorgan witness in Australia cartel case says no collusion with Citi, Deutsche

Credit: REUTERS/AMR ALFIKY

A prosecution witness in an Australian criminal cartel case against Citigroup Inc and Deutsche Bank AG testified he had just 30 seconds' notice about an underwriting conference call and that there was no collusion.

By Byron Kaye

SYDNEY, Dec 12 (Reuters) - A prosecution witness in an Australian criminal cartel case against Citigroup Inc C.N and Deutsche Bank AG DBKGn.DE testified he had just 30 seconds' notice about an underwriting conference call and that there was no collusion.

The testimony from former JPMorgan Chase & Co JPM.N markets head Jeff Herbert-Smith appears to be at odds with the prosecution's case that the three banks and their client Australia and New Zealand Banking Group ANZ.AX agreed to withhold details about a A$2.5 billion ANZ share sale in 2015 to support the stock.

The case, in which JPMorgan has been given immunity in exchange for cooperating with the authorities, is being closely watched by investment banks around the world because it could influence how they are allowed to conduct capital raisings.

Prosecutors have argued that discussions on two conference calls in August 2015 between bankers on the deal amounted to an agreement to not tell investors that underwriters were buying some of the stock.

But Herbert-Smith, who was on the calls, told a Sydney court in a pre-trial hearing that the staff of the three banks decided to withhold information about the share sale independently and there was no agreement.

"I had 30 seconds' notice, and three seconds to make up my mind," Herbert-Smith said of one of the calls.

"I was flying blind on the phone call."

Seven months later, in March 2016, when he was told the Australian Competition and Consumer Commission (ACCC) wanted to speak to him, Herbert-Smith said, "I couldn't believe it, I was somewhat surprised".

Herbert-Smith's lawyer, Philip Strickland, asked: "You didn't consider that you were involved in cartel behaviour, is that correct?"

"That's correct," Herbert-Smith responded.

According to his lawyer, Herbert-Smith told other bankers on the call that "we are comfortable with our risk position (and) we are going to stand on it".

"There was no prior agreement ... relating to those lines you've just recited," Herbert-Smith said.

Herbert-Smith said that when he met an ACCC investigator in March 2016, the investigator found it hard to believe three people on the same call made the same decision independently.

"I disagreed. Maybe it was familiarity with capital markets," he said.

Defence lawyers have been questioning Herbert-Smith and two other JPMorgan staffers involved in the stock issue to determine how they came to give their sworn witness statements and who was involved. The defence has previously suggested the JPMorgan evidence may have been contaminated by the involvement of the ACCC and other regulators.

On Thursday, Herbert-Smith said he met the ACCC about six times before signing a statement that would be used to prosecute the other banks, he said.

The banks and their staff and former staff have declined to comment on the case outside of what is said in court. All of the accused have said they will defend the case, which is yet to go to trial, but none has entered a formal plea.

The hearing will resume on Friday.

($1 = 1.4736 Australian dollars)

Citigroup, Deutsche Bank face Australian court in landmark cartel case

(Reporting by Byron Kaye; Editing by Edwina Gibbs)

((byron.kaye@thomsonreuters.com ; +612 9321 8164; @byronkaye;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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