Barclays Won't Face Criminal Case for Hewlett-Packard Trades

Barclays Plc will not face criminal charges over allegations that one of its traders defrauded Hewlett-Packard Co., signaling a new U.S. approach that results in lesser penalties for institutions that report securities fraud themselves.

The new position, similar to one implemented last fall on foreign corruption reporting, was announced on Thursday by Justice Department officials at a white-collar fraud conference in San Diego.

"When a company discovers misconduct, quickly raises its hand and tells us about it, that says something," said John Cronan, acting assistant attorney general of the criminal division. "It shows the company is taking misconduct seriously and not willing to tolerate it and we are rewarding those good decisions."

The approach isn’t a formal policy, but an incentive for companies to self-report misconduct, said Benjamin Singer, chief of the department’s securities and financial fraud unit. He said the new approach will be taken by his unit in Washington and isn’t binding on prosecutors in other parts of the country. He said there is less self-reporting of securities fraud than violations of the Foreign Corrupt Practices Act.

"The idea was maybe we can take some of those same principles that led to a little bit more self-reporting recently in the FCPA space to securities and financial fraud," Singer said.

Criminal Conduct

The Justice Department on Wednesday told Barclays that it wouldn’t be prosecuted for criminal conduct allegedly committed by Robert Bogucki, who was head of the bank’s currency trading desk in New York in 2011, according to a letter sent to the firm. Bogucki was indicted last month by a grand jury in San Jose, California, on conspiracy and wire-fraud charges for his conduct when Hewlett-Packard sought to convert dollars to pounds as part of its planned $11 billion acquisition of Autonomy Corp.

Prosecutors have accused Bogucki and others of misleading Hewlett-Packard employees about the foreign-exchange market in an attempt to maximize the bank’s profit from the currency transaction. He pleaded not guilty and remains employed by Barclays.

Barclays Currency Trader Cries Foul on Indictment Tactic

Barclays declined to comment.

In making its decision not to pursue criminal action, federal prosecutors noted the bank made timely and voluntary self-disclosure of the misconduct and provided the government with full cooperation, including information about Bogucki and other individuals. Barclays was also rewarded for taking steps to fix internal controls that allowed the conduct to occur.

As part of the deal, Barclays agreed to pay about $13 million in restitution and disgorgement, according to the Justice Department.

‘Cooperated and Remediated’

"The approach we took toward the illegal front-running would have been very different if Barclays had not voluntarily self-disclosed, cooperated and remediated," Cronan said.

Singer compared the Barclays case to the Justice Department’s recent resolution with HSBC Holdings Plc over similar front-running allegations involving two clients.

"HSBC did not self-disclose," he said. "We found out about it by interviewing their employees, so that’s not good."

HSBC wound up with a $100 million penalty and a deferred prosecution agreement.

— With assistance by Greg Farrell