Issue
In this article I discuss the decision of Wigney J of the Federal Court in relation to the Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Limited (No 5 – Indictment) [2021] FCA 1345 (Citigroup case). The issue arising from this case was whether the new indictment filed by the Commonwealth Director of Public Prosecutions did not remedy the previously identified defects and deficiencies and as such should be quashed and that the defendants be discharged pursuant to s 23CP(2)(a) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).
Background to case
On 1 June 2018, the ACCC announced that criminal cartel charges were to be laid against ANZ Banking Group Limited and ANZ Group Treasurer Rick Moscati. While the details of the alleged conduct were initially quite scant, the ACCC did say that the alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015.[1]
Later, on 1 June 2018, the ACCC announced that criminal cartel charges were to be laid against Deutsche Bank AG[2] and Citigroup Global Markets Australia Pty Limited.[3]
On 5 June 2018, the ACCC announced that the anticipated criminal charges had been laid against the three companies and Mr Moscati and also against the following individuals:[4]
·
John McLean,
Citigroup
·
Itay
Tuchman, Citigroup
· Stephen Roberts, Citigroup
· Michael Ormaechea, formerly of Deutsche Bank and
· Michael Richardson, formerly of Deutsche Bank.
The ACCC explained in its media release that cartel conduct was alleged to have taken place following an ANZ institutional share placement in August 2015.
It subsequently transpired that this case had arisen following a decision by JP Morgan Chase & Co to seek immunity under the ACCC’s Immunity Policy for their role in the alleged criminal cartel.
Subsequent relevant news reports[5] explained that the cartel conduct arose as a result of an ANZ share placement of 80.8 million shares in August 2015. The underwriters to this share placement were Citibank, Deutsche Bank and JP Morgan. The role of underwriters is to agree to take on the risk of any unsold shares in a share offering or IPO (Initial Public Offering) and then on-sell the shares to the market.
In the present case there was a shortfall in the raising of approximately 25.5 million shares worth almost $800 million of a total placement of $2.4 billion. This meant that the underwriters had to take on the risk of sell this shortfall to the market.
The ACCC has alleged that the three banks came to an agreement with ANZ to progressively sell down the 80.8 million shares to the market rather than to dispose of the shares more rapidly. The effect of a slower sell down of these shares meant that the ANZ share price would remain stable. On the other hand, a rapid sell down of such a large number of shares may have had the effect of destabilising ANZ’s share price and leading to a rapid share price reduction.
It also became apparent in the news coverage that the alleged criminal cartel conduct which had been engaged in by the four banks may be a common occurrence in the finance industry in situations where there were more than one underwriter.[6] It appears that underwriters have for many years agreed between themselves on the orderly selling down of excess shares so as to not create a rapid decrease in the target company’s share price.
Background
to case
The relevant background is an earlier decision by Wigney J on 7 July 2021, where he ordered CDPP to file a new indictment which remedied a number of identified defects and deficiencies in the existing indictment: Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Limited (No 1 – Indictment) [2021] FCA 757 (Judgment No 1). The prosecutor eventually filed a new indictment in purported compliance with that order.
Decision
Wigney J held that the arguments by the accused that the indictment filed after, and as a consequence of, Judgment No 1 is deficient or defective must be accepted. However, he did not consider that the defects were such as to warrant an order quashing the indictment and discharging the accused. Wigney J concluded that the prosecutor should be given at least one more opportunity to file an indictment which both complies with r 3.01 of the Federal Court (Criminal Proceedings) Rules 2016 (Cth) and satisfies the common law requirements for a valid indictment.
Changes
The main changes
made to the indictment by the CDPP were a significant reduction in the number
of charges in the August Indictment. In particular the new indictment did not contain
any charges relating to, or arising from, two previously pleaded alleged
agreements - the Friday Understanding and
the Monday Understanding. The
prosecution case was now based entirely on allegations relating to the 5-7%
Understanding.
One consequence
of this change was that Mr Roberts, from Citigroup, who was only charged with
offences relating to the Friday Understanding, was no longer accused of
committing any offence and was discharged.
Significant changes were also made to the charged against ANZ and Mr Moscati. The CDPP amended the indictment to rely on s 11.2(3)(a) of the Criminal Code, Schedule to the Criminal Code Act 1995 (Cth), to establish that ANZ and Mr Moscati are liable as accessories to the alleged contravention of s 44ZZRG(1) by J.P. Morgan on the basis that they intended to encourage, and therefore counsel or procure, J.P. Morgan to give effect to a cartel provision “of the type” particularised as the cartel provision in the 5-7% Understanding.
Role
of Court
Wigney
J explained the role of the Court in considering applications to quash an
indictment. He stated at paragraph 43:
…it is not for the Court to compel a
prosecutor to particularise charges in a particular way, or to assist the
prosecutor in the drafting of the charges.
That said, the “overarching purpose” of the Rules is to “facilitate the
fair, efficient and timely determination of criminal proceedings in the Court”,
including the “efficient use” of “judicial and administrative resources”: r
1.04(1) and (2)(a) of the Rules.
However he added that it may be appropriate, in some circumstances, for the Court to express a view as to how charges in an indictment should best be framed so as to ensure not only that the proceedings are determined in a fair, efficient and timely fashion, but also to ensure that the indictment is able to be properly understood.
Balancing
exercise
In deciding whether to quash an indictment the Court must undertake a balancing exercise (at para 249):
The critical question in this case is
whether the prosecutor should be given another opportunity to file an
indictment that both complies with the Rules and satisfies the common law
requirements for a valid charge or statement of offence in an indictment. The only real alternative is for the
indictment to be quashed and for the accused to be discharged. If that course is taken, the accused would be
released from Court without any further action being taken against them. That would undoubtedly be a drastic step
given the seriousness of the charges.
Wigney J added at
para 267 that:
…the charges against the accused are undoubtedly serious criminal
charges. As the authorities referred to
earlier demonstrate, there is a significant public interest in those charges
being heard and determined by a trial by jury, as opposed to being summarily
terminated as a result of largely technical defects in the indictment. That is particularly the case in
circumstances where those defects should be able to be rectified without causing
any prejudice to the accused. This is
again a consideration which weighs heavily against discharging the accused.
Wigney J commented that the question of the appropriate relief in the case of ANZ and Mr Moscati was more finely balanced because of the radical change in the case against each of the defendants. Somewhat surprisingly Wigney J concluded that he would allow the CDPP a further opportunity to file an indictment as allowing that course action would not cause ANZ and Mr Moscati irremediable or ongoing prejudice.
Judge's conclusions
Wigney J found formal
defects in each of the charges against Citigroup and Deutsche Bank in terms of:
·
failing to properly identify the
cartel provision and
·
containing deficient and
inadequate particulars of knowledge
Wigney J did not agree that the
particulars of conduct contained formal defects on the face of the indictment
which would justify the quashing of these counts.
Wigney J found formal defects in
the August Indictment in respect of each of the charges against each of
Tuchman, McLean, Ormaechea and Richardson.
He concluded that the charges should include particulars of the relevant
principal offence. He also concluded that the particulars of the knowledge of
the facts that constitute the principal offences were also deficient.
Wigney J did not agree that the particulars of conduct contained formal defects on the face of the indictment which would justify the quashing of these counts.
The errors found in relation to the charges against ANZ and Moscati were more serious.
The particulars of Mr Moscati’s knowledge and intention (and therefore the knowledge and intention of ANZ) were found to be deficient and defective. Further particulars had to be provided of what Mr Moscati knew or believed about J.P. Morgan’s contravention and the nature of the contravention he intended to aid, abet, counsel or procure. It was not sufficient to simply repeat the words “of the type” used in s 11.2(3)(a) but rather characterise the type of conduct engaged in. The charge must also include a particular to the effect that Mr Moscati’s and ANZ’s conduct in fact aided, abetted, counselled or procured J.P. Morgan’s contravention.
Disposition
Wigney J ordered that the prosecutor
file, within 14 days of the date of this judgment a new indictment pursuant to
r 3.07(3) of the Rules which remedies the defects and deficiencies in the
August Indictment which are identified in the reasons for judgment.
Wigney J also made a guillotine order that the prosecutor not be permitted to file any new or amended indictment, save for the indictment filed in compliance with this judgment, without the prior leave of the Court or the written consent of all of the accused.
Criticisms
Wigney J was highly critical of both the CDPP and the legislation which each appeared to be partly responsible for the problems with the indictment.
In
relation to the state of the indictment, he commented at para 9:
It would not be unfair to characterise
the situation concerning the state of the indictment as a complete
shemozzle. It is, on just about any
view, an entirely unsatisfactory state of affairs for the indictment to be
unsettled well over three years after the accused were first charged and just
over six months before the trial has been listed to commence.
The CDPP also
came in for a degree of criticism (para 147):
The prosecutor’s conduct shortly prior to the hearing of the
interlocutory applications belied the prosecutor’s apparent unwillingness to
concede that the pleading and particularisation of charge 13 (and charge 26) in
the August Indictment was defective. As
has already been described, the prosecutor’s written submissions were
accompanied by a draft marked-up indictment.
That draft indictment suggested, in effect, that the prosecutor proposed
to make significant changes to, relevantly, the particulars in charge 13 (and
charge 26). Moreover, after the
prosecutor received the written submissions of the accused in reply, the
prosecutor sought to withdraw the draft indictment which had accompanied the
prosecutor’s written submissions and replace it with the Proposed
Indictment. The Proposed Indictment
included further substantive changes to the pleading and particularisation of
charge 13 (and charge 26). The Proposed
Indictment was provided to the Court, and presumably the accused, shortly
before the hearing of the interlocutory applications. It bears the hallmarks of a document prepared
in haste and with insufficient care and attention.
The fact remains, however, that the prosecutor has had over three
years in which to consider the appropriate way in which to plead and
particularise the charges. The
prosecutor has also had the benefit of countless rounds of correspondence and,
more significantly, a judgment of this Court which provided detailed guidance
as to the elements of the offences in question and what needs to be included in
the charges to satisfy the requirement of reasonable particularity.
However arguably
the strongest criticism was reserved for the authors of the criminal cartel
provisions ay para 246:
Those responsible for drafting the cartel offence provisions in
the C&C Act – none of whom could possibly have ever set foot in a criminal
trial court before – appear to have approached the drafting task as if it were
akin to producing a cryptic crossword.
The offence provisions, when read with the extensive definitions of the
terms used in them, are prolix, convoluted and labyrinthine. When coupled with
the general principles of criminal responsibility, including the extensions of
criminal responsibility in Ch 2 of the Criminal Code, the complexity of the
offences is multiplied. By the time the
maze of provisions is worked through, it is very easy to lose sight of exactly
what conduct the offence provisions are intended to bring to account and
punish.
Postscript
On 29 October 2021, the CDPP decided
to withdraw the charges against both ANZ and Mr Moscati.
On 1 February 2022, the CDPP
announced that it has withdrawn the charges against
Citigroup, Deutsche Bank AG and the remaining four senior banking executives.
Commentary
The ANZ Cartel case seems to go
from bad to worse. The main reasons for
this appear two fold.
First, the case has all the
hallmarks of one that was rushed with inadequate preparation. The delays in being able to draft the
indictment over a period of more than three years suggests that the case theory
was not carefully worked out before the charged were laid.
Secondly, and most crucially,
there appears to be an absence of criminality in relation to the conduct. Criminality is effectively a recognition that
the companies and individuals charged with criminal offences had an appreciate
that what they were doing was a crime when they were doing the doing it. It seems clear that the accused in this case
had no appreciation that the conduct they were engaging in was criminal but
rather standard industry behaviour of which the corporate regulator, the
Australian Securities and Investments Commission was well aware.
[1] ACCC, Criminal charges to be laid against ANZ,
1 June 2018 at https://www.accc.gov.au/media-release/correction-criminal-cartel-charges-to-be-laid-against-anz
[2] ACCC, Criminal charges to be laid against
Deutsche Bank, 1 June 2018 at https://www.accc.gov.au/media-release/update-criminal-cartel-charges-to-be-laid-against-deutsche-bank
[3] ACCC, Criminal charges to be laid against
Citigroup, 1 June 2018 at https://www.accc.gov.au/media-release/update-criminal-cartel-charges-to-be-laid-against-citigroup
[4] ACCC, Criminal cartel charges
laid against ANZ, Citigroup and Deutsche Bank, 5 June 2018 at https://www.accc.gov.au/media-release/criminal-cartel-charges-laid-against-anz-citigroup-and-deutsche-bank
[5] Patrick Durkin, James Eyers and Jonathan Shapiro, ‘ANZ,
Deutsche and Citigroup face criminal cartel charges”, Financial Review, 1 June 2018 at https://www.afr.com/business/banking-and-finance/jpmorgan-granted-immunity-in-anz-cartel-case-20180601-h10u5a
and Stephen Letts, ‘ ANZ,
Citigroup and Deutsche Bank executives charged with criminal cartel offences,
ABC News, 6 June 2010 at https://www.abc.net.au/news/2018-06-05/criminal-cartel-charges-against-anz-citigroup-deutsche/9837368
[6] Michael McGowen, “ANZ to face criminal cartel
charges”, The Guardian, 1 June 2018 at https://www.theguardian.com/australia-news/2018/jun/01/anz-bank-to-face-criminal-cartel-charges
Posts
No comments:
Post a Comment