Ex-HSBC executive guilty of fraud

CURRENCY TRADE

BRENDAN PIERSON NEW YORK • A U.S. jury on Monday found a former executive guilty of defrauding Cairn Energy PLC in a US$3.5-billion currency trade in 2011.

U.S. prosecutors have said that Mark Johnson, formerly head of HSBC’s global foreign exchange cash trading desk, schemed to ramp up the price of British pounds before executing a trade for Cairn, making millions for HSBC at Cairn’s expense.

“They’ve convicted an innocent man,” John Wing, a lawyer for Johnson, told reporters.

Johnson, a 51-year-old British citizen, was the first banker to be tried in the U.S. as a result of worldwide investigations into the multitrillion-dollar-per-day currency market. The probes have led to about US$10 billion in fines against several banks and the firing of dozens of traders.

The judge ordered that he not seek a new passport from the British consulate. He will be sentenced at a later date. Each count carries a maximum 20-year prison sentence although Johnson is likely to receive a shorter sentence.

“This sends a signal to traders and banks that this type of behaviour is absolutely inappropriate and will be pursued by the government,” Michael Weinstein, a former Justice Department trial attorney, said. “That’s a big hammer over the banks — it may force them to monitor and self-regulate their people.”

According to court filings, Cairn hired HSBC in 2011 to convert US$3.5 billion into British pounds in connection with the sale of an India subsidiary.

Prosecutors said Johnson and another former HSBC executive also facing charges, Stuart Scott, devised a scheme to drive up the price of pounds by executing a series of trades before carrying out the trade for Cairn. Such trading in advance of a client’s order to make a profit is known as “front-running.”

During the trial, jurors heard tape-recorded phone calls between Johnson and others discussing the trade.

In one call, Scott and Johnson told Cairn and its financial adviser after the trade that a “Russian buyer” had been responsible for a spike in the price of pounds. Prosecutors said that was a lie.

A lawyer for Scott, who is in Britain and fighting extradition to the United States to face charges, declined to comment. An HSBC spokesman said Johnson left HSBC earlier this year, and Scott left in 2014.