RAND RIGGING: NET CLOSES

SA’S banks have sought to paint the competition probe into rand rigging as dead in the water. New affidavits show this is far from the case

If the banks thought that Tembinkosi Bonakele, the bespectacled competition commissioner, was going to be scared off by a squadron of jargon-wielding legal eagles, they seriously underestimated the studious MBA graduate.

Bonakele was a lawyer with Joburg-based Cheadle Thompson & Haysom before he joined the commission in 2007. So when, last February, he accused 18 banks of conspiring to rig the rand, he knew they’d lawyer-up and seize on every technicality.

Which is precisely what they did. Only, to hear them tell it, it was as if Bonakele’s team had whimsically filed charges in a senior moment of regulatory overreach, after a hard night on the tequila.

The accusations are “vague and embarrassing” the lawyers cried (lawyer-talk for “short on detail”), and the competition commission doesn’t have the jurisdiction to bring this case against the traders anyway.

With the deft legal artistry of a sort rarely witnessed outside the Union Buildings, the banks managed to avoid answering any of the merits of the currency rigging case. (Well, except for Barclays Africa and Citigroup, who struck deals with the commission.)

So this week, the competition commission upped the ante, filing a 61-page affidavit spelling out in painstaking detail what they believe went down.

Bonakele also added a number of banks to the charge sheet — British bank HSBC, Merrill Lynch, Bank of America, Investec Bank and Credit Suisse Securities — and 35 traders have now been named in all.

The affidavit contained some lurid stuff. For example, the new details reveal dates on which traders swapped information about the prices they would quote to customers for rand/dollar deals and how they’d co-ordinate trades to cause incremental shifts in the rate that would benefit them.

They also apparently set up “spoof trades” in which they’d agree to “post fake bids or offers on the Reuters platform to stimulate a reaction, with the intention of prompting a downward or upward movement in bids or offers”, the commission says.

There are now a number of tricky obstacles that the banks will have to surmount to win the war.

For a start, it isn’t just the SA authorities investigating them. If it were, you could (almost) rely on our authorities to forget which foot they’re falling over. But because this case deals with multinational banks operating in numerous countries, it is the US department of justice that has led the charge.

It’s been mighty successful too. Last year, two of the traders — Jason Katz (who worked at BNP Paribas and Standard Bank’s New York business) and Christopher Cummins (from Citigroup) — pleaded guilty in a New York court to currency price-fixing. And last week, French bank BNP Paribas joined four others — Jpmorgan, Barclays, Royal Bank of Scotland and Citigroup — who had already pleaded guilty.

Despite this, you can expect some of the other banks to fight all the way. Last year, Standard Bank’s lawyer, Jean Meijer, filed papers in which she admitted nothing, and seemed to grasp at every technicality imaginable. She argued that the commission had no “jurisdiction” to hear the complaint, and even denied that Katz represented the bank in New York because “the definition of [represented] is unclear here”.

It’s an interesting, if emotionally obtuse and overly legalistic tactic, since even Standard Bank’s CEO Sim Tshabalala has admitted Katz worked for them — though he says this wasn’t during the period in question. This doesn’t seem entirely clear cut, however.

In Katz’s plea in New York, he admitted to being part of a conspiracy to “suppress and eliminate competition by fixing prices” of currencies, such as the rand, “from as early as January 2007 and continuing until at least July 2013”. Yet Katz was still working for Standard Bank until 2010 — which could present some awkward moments for Tshabalala’s bank.

There is another interesting facet to this case. Until now, the story has largely been that individual traders were doing this off their own bat — rogue cowboys in the macho, big-swinging-dick trader culture.

But there is now a nuance in what Bonakele is saying that casts a new complexion on this debate.

In his papers, Bonakele says the banks “knew or ought to have known” what these rogue traders were getting up to. He argues that the banks either “encouraged their traders to communicate frequently” in this way with their peers, or “failed to take disciplinary action” when they should have done so.

If he can prove this, the consequences could be far graver than just a case of rogue traders gone wild.

In his papers, Bonakele says the banks ‘knew or ought to have known’ what these rogue traders were getting up to