BOE Lawyer Clashes With U.K. Politicians on FX-Rigging Probe

U.K. politicians questioned the thoroughness of an investigation that cleared Bank of England staff of condoning manipulation in the foreign-exchange market.

In increasingly testy exchanges at a parliamentary hearing Wednesday, Treasury Select Committee members quizzed Anthony Grabiner, the lawyer who led the probe, on whether he too readily accepted a former central bank employee’s version of key events. They also questioned the depth of his knowledge of the currency market and how long he spent on the report.

Grabiner, 69, said he had “complete support from the Bank of England” in his work. He repeatedly thumped the desk, and accused Conservative lawmaker Jesse Norman of “spinning,” being “offensive” and possibly “illegal.”

“I was surprised by what Grabiner had to say and even more so by the tone in which he said it,” Norman said in an interview after the London hearing.

The Bank of England’s Oversight Committee commissioned Grabiner to investigate whether BOE staff knew currency traders shared confidential client information with counterparts at other firms to rig key currency benchmarks. His report found the central bank’s chief currency dealer, Martin Mallett, had concerns about the practice and didn’t escalate them, but hadn’t acted “in bad faith.” It was published Nov. 12, the same day six banks were fined $4.3 billion by U.S. and U.K. regulators who found senior dealers colluded with one another to rig currency markets.

Legitimate Manipulation

The central bank separately announced that day that it fired Mallett, saying it wasn’t related to Grabiner’s report. Grabiner refused to comment on Mallett’s dismissal.

Norman took issue with Grabiner’s interpretation of a telephone call in October 2011 between Mallett and an unidentified currency trader that was included in his report.

The trader asked whether trying to “bully the fix” was problematic. “Well that’s market manipulation isn’t it?” Mallett responded.

“Yep absolutely,” the trader said, according to the report. Mallett asked the trader to follow up with him about the practice. The trader never did, and Mallett kept it to himself.

Grabiner then said it was wrong to interpret that they were talking about “illegal manipulation,” and said there were instances where market manipulation could be legitimate.

Norman disagreed, saying it was clear that he was talking about illegal manipulation. He also questioned why Grabiner relied on the written transcript rather than listen to the actual call to hear any nuances in the exchange.

‘Grubby World’

Grabiner said Norman was “wrong” and not equipped to form that judgment, saying that his own interpretation following interviews with Mallett was “right.” No one he spoke with challenged whether the transcripts gave a full picture of the exchanges, Grabiner said, so he didn’t need to hear recordings.

The committee asked for the notes of the interview with Mallett and said they may call Grabiner back for further questioning. Mallett didn’t respond to an e-mail seeking comment.

The committee’s chairman, Conservative politician Andrew Tyrie, opened the hearing by asking how much money Grabiner charged the bank for the probe and whether he’d been paid.

“Barristers don’t get into the grubby world of negotiating fees,” Grabiner said. He assured Tyrie that the bank got a “very attractive deal” and referred further questions to his clerk.

‘Fairly Surreal’

The BOE will contact Tyrie about the cost of the investigation, the central bank said in a statement. A clerk for Grabiner didn’t respond to a request for comment.

Grabiner is a top U.K. litigator. In 2011, News Corp. appointed him to look into phone hacking and bribing sources. He charges as much as 3,000 pounds ($4,500) an hour on cases, a person with knowledge of the matter said in September.

“It was a fairly surreal meeting that left more questions than answers,” Conservative committee member Mark Garnier said in an interview.

(A previous version was corrected to remove reference to BOE Governor Mark Carney commissioning Grabiner in fifth paragraph.)

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