Pabon [2018] EWCA Crim 420
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R v Pabon [2018] EWCA Crim 420 concerned an appeal against conviction for conspiracy to defraud arising from dishonest manipulation of US dollar LIBOR submissions, brought primarily on the basis of fresh evidence calling into question the conduct and competence of a prosecution expert witness.
Mr Alex Julian Pabon, a derivatives trader at Barclays Bank, was convicted by majority verdict of conspiracy to defraud between June 2005 and September 2007 and sentenced to two years and nine months’ imprisonment. The conspiracy alleged that he and his co-defendants, knowing that Barclays was party to trading referenced to US dollar LIBOR, dishonestly agreed to procure false or misleading rate submissions intended to advantage Barclays traders and disregarding the proper basis for submission. The central issue at trial was dishonesty. Co-defendants Johnson, Mathew and Merchant were also convicted or pleaded guilty. A subsequent retrial of two other defendants, Contogoulas and Reich, resulted in acquittal after dramatic developments concerning the expert witness.
The prosecution case was that the defendants conspired to manipulate the LIBOR rate for the benefit of their trading positions. The traders would request that LIBOR submitters in the London Money Markets desk submit rates advantageous to their books rather than genuinely answering the LIBOR question, which asked at what rate a bank could borrow funds in a reasonable market size just before 11 a.m. Manipulation of the published rate could generate profits or reduce losses on derivative contracts. The prosecution highlighted numerous email communications from Mr Pabon to submitters including requests for high or low rates in particular tenors and messages such as “We need high one month, we need to get kicked out” and “PJ’s gotta jam that shit tomorrow”.
Mr Pabon’s defence accepted that he made requests that would favour his book and benefit the bank, but denied that he agreed to procure false or misleading submissions or that he acted dishonestly. He contended that the practice of requesting rates to suit traders was widespread and must have been known to senior management, and that it was reasonable to believe the practice was acceptable. He argued he learnt the practice from his mentors and would not have used monitored email and telephone communications for dishonest purposes. In his original grounds of appeal, he expressly averred that he had sought to move rates to suit his book.
The prosecution called two expert witnesses. Professor Anderson, whose evidence was not controversial, explained banking concepts and the LIBOR setting process. Mr Saul Haydon Rowe, whose evidence became the focus of this appeal, was instructed to explain the workings of investment banks and related financial instruments and trading terms. Rowe had worked in finance between 1989 and 2000 and since then operated as an expert witness. He gave evidence using a slide presentation covering banking structure, types of trader, financial instruments and derivatives trading, including more technical areas such as STIR (short-term interest rate) trading. Prior to trial, the defence sought to exclude or restrict his evidence on grounds of lack of expertise, as he had no direct experience as an interest rate derivatives trader, cash trader or LIBOR submitter. Judge Leonard QC ruled that while Rowe’s expertise might be stronger in some areas than others, this could be tested in cross-examination and the jury could decide what weight to give his evidence. The Judge did, however, exclude an addendum in which Rowe opined that traders would have known LIBOR must be set independently, finding there was no admissible basis for that opinion.
At trial, Rowe gave evidence explaining banking terms and commenting on emails sent between defendants. The Judge gave the standard direction that expert evidence was permitted to assist with matters outside the jury’s experience but that it was for the jury to decide what to accept or reject, taking account of the expert’s qualifications and practical experience. By the summing up, Rowe’s evidence was given minimal attention, being mentioned only in the standard direction and in one later passage concerning the effect of one basis point on a loan.
The appellant’s application for leave to appeal was refused by the single judge and not renewed before the full court. Fresh evidence emerged, however, from the retrial of Contogoulas and Reich in April 2017. During that retrial, Rowe’s evidence was subjected to devastating cross-examination based on newly disclosed material revealing serious failings in his conduct as an expert. It emerged that Mr Dominic O’Kane, a partner in Rowe’s firm and part-time professor, had drafted sections of Rowe’s report without this being disclosed. More significantly, Rowe had sent case papers to Ms Signe Biddle, an interest rate derivatives trader, and Mr Michael Zapties, Head of Rates Trading at HSBC, seeking their assistance without informing them he was acting as an expert in a criminal trial or explaining the necessary caution. Between Rowe and these individuals, together with a third expert Mr Van Overstraeten, there were numerous text and email exchanges prior to and during the trial. Most remarkably, on the evening after Rowe concluded his first day of evidence at the original trial and despite having been expressly warned by the Judge not to discuss his evidence, Rowe contacted Ms Biddle asking for urgent interpretation of a STIR/OIS email, saying “I don’t know the usual trades STIR people put on but I am learning” and “it doesn’t help when I have to explain a few emails and look knowledgeable”. Between the two days of his evidence he exchanged some twenty-six messages with Ms Biddle and Mr Zapties. When questioned on the second day he made no mention of these contacts.
At the retrial, this material formed the basis of damaging cross-examination. Rowe admitted he had not read the Criminal Procedure Rules or the expert guidance booklet before signing declarations that he had done so. When asked why he did not simply decline instructions on matters beyond his expertise, he replied “So what else am I supposed to do as an expert?”. The SFO’s principal investigator gave evidence that Rowe had never told him he was unqualified to express an opinion on any issue in the case. Judge Leonard in summing up at the retrial described Rowe’s failings in detail, observing that the jury ought to be very careful before relying on his evidence on STIR trading and might think it safer to ignore it, though his evidence on general banking matters not in dispute might be of use. Both defendants at the retrial were acquitted.
Mr Pabon sought permission to renew his application for leave to appeal out of time, relying on this fresh evidence. The respondent initially resisted disclosure of retrial material and suggested recourse to the Criminal Cases Review Commission, but the Court of Appeal granted the necessary permissions and leave to appeal.
The Court examined Rowe’s failings in detail against the framework of expert duties established by Part 19 of the Criminal Procedure Rules. Rule 19.2 provides that an expert must give objective and unbiased opinion within the expert’s area of expertise, that this duty overrides any obligation to the instructing party, and that the expert must define his area of expertise and draw the court’s attention to questions outside that area. The Court referred to established authority that expert evidence is admitted to assist with matters outside the jury’s experience and knowledge, that a partisan expert cannot furnish such assistance, and that evidence must be confined to matters within the expert’s expertise. While English law takes a pragmatic approach to how expertise is acquired, the fundamental requirement is that the witness be genuinely skilled, with the risk otherwise being that a defendant may be asked to meet evidence from “a quack, a charlatan or an enthusiastic amateur”.
The Court concluded that Rowe signally failed to comply with his basic duties as an expert. He signed declarations knowing he had failed to comply with his obligations or at best recklessly. He obscured Mr O’Kane’s role in preparing his report. On the material available, he did not inform the SFO or the court of the limits of his expertise. He strayed into areas, particularly STIR trading, beyond his expertise or at its outer edge, as revealed by his need to consult others. In this regard he was no more than an enthusiastic amateur. He flouted the Judge’s admonition not to discuss his evidence while still in the witness box. The Court took a grave view of Rowe’s conduct and highlighted his failings for the consideration of others as to sanction. However, the Court accepted that Rowe did have general expertise in banking and finance and that many issues he dealt with involved basic, undisputed matters.
Turning to the safety of the conviction, the Court applied the test in section 2(1) of the Criminal Appeal Act 1968 that an appeal must be allowed if the conviction is unsafe and otherwise dismissed. The Court reviewed the authorities in Pendleton, Dial and Hakala establishing that the ultimate question is whether the court thinks the conviction unsafe, not what the jury might have done, though in a difficult case the court may test its view by asking whether fresh evidence might reasonably have affected the jury’s decision. The Court emphasised that this involves a risk assessment and that a mere risk of error does not suffice; the appellant must persuade the court the conviction is unsafe.
The Court identified the starting point as the issue for the jury at trial. In his original grounds of appeal, Mr Pabon had admitted seeking to move the LIBOR rate to favour his book and Barclays, and stated that to do so he had to conspire with a submitter who would input rates accordingly. He therefore faced insuperable difficulty with the question whether the submissions were genuine, which was in any event resolved against him by the jury’s verdict. The sole remaining issue was his dishonesty. The prosecution case on this issue was strong, both on the admissions and on email communications including “We have to have a low LIBOR”, references to Johnson looking ridiculous if rates were too low, and “PJ’s gotta jam that shit tomorrow”. The defence did not require or involve delving into technical details of STIR trading or related matters.
Against this background, the Court accepted that the principal reason for calling Rowe was to provide a human face to introduce essentially uncontroversial banking and trading concepts, for which he had sufficient general expertise. Where Rowe went gravely wrong was entering into debate on topics beyond or at the very edge of his expertise, principally STIR trading. Pressed in argument, counsel for the appellant complained specifically of inability to cross-examine on the “Stub”, being the risk attributed to points on the curve out to three months. The Court found this submission difficult. Counsel had made an entirely prudent decision to curtail cross-examination based on material then available. However, on the crucial issue of dishonesty, the appellant’s position would not conceivably have been assisted by more detailed technical examination of STIR or the Stub. The issue was a basic question of dishonesty. Further, there were other witnesses available with knowledge to answer detailed questions about derivatives trading, including Messrs Bommensath, Bagguley and Harrison from Barclays, all of whom had been STIR traders. There was also an agreed glossary of terms. By the conclusion of the trial, the paucity of references to Rowe in the summing up showed that the importance of his evidence could only have been of the most limited kind. The position might have been different had Rowe been permitted to give his opinion that it was impossible for a trader in a major bank to have been unaware that LIBOR was to be set independently, but the Judge had wisely excluded this evidence.
In these circumstances, notwithstanding firm conclusions as to Rowe’s failings, the Court was unable to conclude the conviction was unsafe. Conducting the risk assessment suggested in Pendleton, the Court did not think Rowe impacted at all or sufficiently on the key issue in the trial so as to affect the safety of the conviction. This conclusion was fact-sensitive and turned on consideration of Rowe’s evidence in the round, evaluated in the context of the trial as a whole.
The Court rejected reliance on the outcome of the retrial. There was no proper basis for assuming that the impact of the new material at the retrial would have been replicated at trial. If the fresh evidence had been available at trial, the most likely outcome was that Rowe would not have been called at all or that his evidence would have been tightly circumscribed. It would be pure speculation to transpose the retrial outcome to the trial. Regardless of events at the retrial, the Court was wholly unable to make a causal link between Rowe’s failings and the issue of dishonesty, which was the key focus of trial. Even considering Rowe’s presentation in the round, the Court judged that the issue of dishonesty was wholly unaffected by his evidence. Additionally, applying the jury impact test to test its view, the Court was satisfied that if the new material had been available at trial, it would not have reasonably affected the jury’s decision to convict.
In short, despite accepting that the expert witness Rowe gravely failed in his duties by straying beyond his expertise and breaching professional obligations, the Court of Appeal dismissed the appeal, finding that his evidence had minimal impact on the central issue of dishonesty at trial and that the conviction remained safe.
Merchant and another [2017] EWCA Crim 60
Ghosh [1982] EWCA Crim 2; [1982] QB 1053
Gohil; Preko [2018] EWCA Crim 140, [2018] 1 Cr App R 30, [2018] 1 WLR 3697
Harris & Ors [2005] EWCA Crim 1980; [2006] 1 Cr. App. R. 5
R v Robb [1991] 93 Cr App R 161
Pendleton [2001] UKHL 66, [2002] 1 WLR 72, [2002] 1 Cr App R 34
Stafford v Director of Public Prosecutions [1974] AC 878
Dial & Dottin [2005] UKPC 4
Burridge [2010] EWCA Crim 2847
Hakala [2002] EWCA Crim 730
Dial v State of Trinidad and Tobago [2005] 1 WLR 1660, [2005] UKPC 4, (2005) 65 WIR 410, [2005] 3 LRC 609, [2005] NR Uned 96
Bowman [2006] EWCA Crim 417
Ivey v Genting Casinos (UK) Ltd (t/a Crockfords) [2017] UKSC 67; [2018] Crim LR 395, [2018] AC 391