A prosecution witness in an Australian criminal cartel case against Citigroup Inc (C.N) and Deutsche Bank AG (DBKGn.DE) said on Friday that the banks never colluded, but that he helped a regulator build its case to get immunity.
The testimony from former JPMorgan Chase & Co (JPM.N) markets head Jeff Herbert-Smith in court is a blow to the prosecution, which is relying on JPMorgan to support a case that the three global investment banks engaged in criminal cartel behaviour in a A$2.5 billion share issue for Australia and New Zealand Banking Group (ANZ.AX) in 2015.
The Australian Competition and Consumer Commission (ACCC), which brought the charges, accuses Citi and Deutsche and their client, Australia’s fourth-largest bank, of withholding details of the sale to support the stock’s price. JPMorgan was given immunity in exchange for cooperating with the authorities.
In pretrial hearings in Sydney, three senior JPMorgan staffers said they began discussing possible immunity deals with the ACCC in 2016 and wrote witness statements months later.
Herbert-Smith said he first met the ACCC over the stock issue in March 2016, seven months after the capital raising, and agreed to provide a frank account of his role in it.
But he said he rejected an ACCC investigator’s suggestion that the three banks had colluded in a recorded phone call during the capital raising.
“I disagreed and stood my ground,” Herbert-Smith told a packed courtroom. “In relation to the part of the call (between the bankers) where people said they would stay out of the market of the day… it was not an agreement.”
“It was three independent positions which happened to be the same,” he added.
The three investment banks and ANZ have declined to comment on the matter outside of what is said in court. Herbert-Smith left the bank in February 2016, according to his LinkedIn page.
JPMorgan’s Australian head of trading, Mark Dewar, also spoke at the hearing, describing more than a year of meetings with the ACCC over drafting the witness statement he signed.
In a meeting over three days in October 2016, Dewar, who still holds his position at JPMorgan, said ACCC staff showed him a draft on a screen “so everybody could see”. He said he gave notes verbally while an ACCC staffer wrote them down.
After several more meetings, he signed the statement in April 2017, he said.
“I probably needed a holiday after that,” he added.
The ACCC ultimately brought the charges in June 2018 against Citi, Deutsche and ANZ, and their former executives.
All the banks have said they will defend themselves against the charges and declined to comment further on the case outside of court.