SPEAKER_01: 0:18

I want you to do something for me. I want you to close your eyes. Well, okay. If you are driving or operating heavy machinery, please keep them open. But for everyone else, just close your eyes and imagine a scenario. You are young, ambitious, and you've just landed a job at one of the biggest, most prestigious financial institutions on the planet. A true titan of industry.

SPEAKER_00: 0:39

We are talking about the kind of place that has its name on skyscrapers. The kind of place where if you get a job there, your parents brag about it to the neighbors.

SPEAKER_01: 0:48

Exactly. So you show up every day, you sit at your desk, you wear the suit, and you do your job exactly the way your boss taught you to do it. You follow the manual, you follow the culture, you watch the guys in the corner offices, the ones making 20 times your salary, and you do what they do because that's how you get ahead. You do this for years. You are a model employee. Eventually you leave, you move on with your life, you start a family, you are thinking about retirement, your record is clean.

SPEAKER_00: 1:14

It sounds like the typical American corporate success story. You played the game, you followed the rules, you cashed out.

SPEAKER_01: 1:21

Right. But then, eight years later, eight years after you packed up your photos and walked out the door, the Department of Justice comes knocking. And they aren't just asking questions. You are being indicted. A federal crime, wire fraud, conspiracy. You were looking at prison time, years of it. And when you finally get your hands on the evidence against you, the stuff they say proves you're a criminal mastermind, you realize something absolutely terrifying.

SPEAKER_00: 1:47

What's that?

SPEAKER_01: 1:47

It wasn't the FBI that dug this up. It wasn't some dogged government detective working late nights. It wasn't even a whistleblower. It was your old employer. The bank.

SPEAKER_00: 1:57

That is the nightmare scenario. And in the story we are covering today, the allegation isn't just that the bank handed over evidence. It's that they curated a narrative, highlighted your name, and handed you over on a silver platter to save themselves hundreds of millions of dollars.

SPEAKER_01: 2:12

Welcome back to the deep dive. Today we are unpacking a story that feels like it was ripped out of a John Grisham novel, but it is very, very real. We are talking about the saga of United States v. Connolly. But we aren't just replaying the criminal trial here. We are focusing on what came after: the counterpunch. We are looking at the massive civil lawsuit filed by Matthew Connolly against his former employer, Deutsche Bank, for malicious prosecution.

SPEAKER_00: 2:39

And this is a case that really pulls back the curtain on how modern corporate investigations work. We often think of the government versus the corporation, like it's Godzilla versus Kong, but this story asks a much more uncomfortable question. What happens when the government and the corporation team up? And who gets crushed in the gears when they do?

SPEAKER_01: 2:57

To help us navigate this, we have a serious stack of documents. We've got the Second Circuit Court of Appeals decision, which, spoiler alert, actually overturned Connolly's criminal conviction. We have the amended complaint filed by Connolly, which is just explosive in its allegations. We have Deutsche Bank's legal defense, and we have the district court's order allowing the case to move forward.

SPEAKER_00: 3:16

We are going to sift through all of it. And the mission today is to understand the mechanics of scapegoating. How does a financial institution allegedly outsource a DOJ investigation to a private law firm, shield its top executives, the so-called C-suite, and serve up a mid-level employee as a proxy wrongdoer? And why is that cooperation worth nearly a billion dollars?

SPEAKER_01: 3:39

It is a wild ride. So let's start at the beginning. Before we get to the lawsuit, we have to understand what Matthew Connolly was actually accused of. It all revolves around this thing called LIBOR. Now, whenever I say LIBOR at a dinner party, people tend to suddenly remember they need to refill their drinks.

SPEAKER_00: 3:55

It does have a reputation for being dry, but honestly, it's the plumbing of the entire global financial system. Or at least it was. LIBOR stands for the London Interbank Offered Rate. For a long time, this was the most important number in the financial world. It's the benchmark interest rate that banks charge each other for short-term loans.

SPEAKER_01: 4:12

And when you say most important number, you aren't exaggerating.

SPEAKER_00: 4:15

Not at all. Trillions of dollars in financial contracts, mortgages, student loans, complex derivatives, corporate debt were all tied to LIBOR. If LIBOR moved even a tiny fraction of a percent, vast sums of money changed hands globally. It was the temperature of the market.

SPEAKER_01: 4:31

So how was this number actually calculated? I think a lot of people assume it was just math. Like you look at the trades that happened, you average them, and there is your rate.

SPEAKER_00: 4:40

You would think so. And frankly, that's how a robust benchmark should work. But during the time period we're discussing, largely between 2004 and 2011, Labor wasn't based on actual completed trades. It was an estimate.

SPEAKER_01: 4:53

An estimate, like a guess.

SPEAKER_00: 4:55

Ideally, an educated guess. Here is the mechanism. There was a panel of 16 major global banks. Every morning in London, around 1100 AM, each bank had to submit a number to the British Bankers Association, the BBA. The question they had to answer was very specific.

SPEAKER_01: 5:11

I have the text of the question here. It asks, at what rate could you borrow funds were you to do so by asking for and then accepting interbank offers in a reasonable market size?

SPEAKER_00: 5:20

Notice the key word there.

SPEAKER_01: 5:21

Could.

SPEAKER_00: 5:21

Could. Not what rate did you borrow at, but what rate could you borrow at? It's a hypothetical. It's asking about capacity. So the 16 banks submit their estimates. The BBA takes those numbers, throws out the top four highest and the bottom four lowest. This is called trimming to eliminate outliers, and then averages the middle eight. That average becomes the daily LIBOR rate.

SPEAKER_01: 5:43

So the system itself acknowledges that there isn't one perfect price. That's why they trim the top and bottom. They expect a range.

SPEAKER_00: 5:50

Exactly. In any market, you might get a slightly different price from different lenders. Bank A might lend to you at 2.5%, bank D might lend at 2.55%. Both are valid.

SPEAKER_01: 6:01

So where does the crime come in? Matthew Connolly and his co-defendant Gavin Black were accused of manipulating this process. What exactly did the government say they did wrong?

SPEAKER_00: 6:11

The accusation was wire fraud and conspiracy. The government's theory was that Connolly, who was a supervisor in New York and Black, a trader in London, were asking the people who actually submitted the LIBOR numbers, the submitters, to nudge the numbers up or down.

SPEAKER_01: 6:25

Nudge them why? Just for fun.

SPEAKER_00: 6:27

To benefit the bank's trading positions. Remember, Deutsche Bank had billions of dollars in derivatives that were tied to LIBOR. If you're betting that interest rates will go up and you can get the LIBOR submitter to submit a slightly higher number, you might make more money or lose less money on your bet.

SPEAKER_01: 6:44

So the theory was: hey, we have a big position paying off if rates are high, so please submit a high LIBOR today.

SPEAKER_00: 6:52

Exactly. And for years, the Department of Justice treated this as a slam dunk case of fraud. They argued that by considering the trading position, the submitters were sending in false numbers. They weren't sending in the true rate, they were sending in a manipulated rate.

SPEAKER_01: 7:07

And this is where we get to the pricer myth. Found this part of the Second Circuit decision absolutely fascinating. It really dismantles the idea that banks are these high-tech automated fortresses. At the criminal trial, the government kept talking about this pricer. It sounds like some omniscient supercomputer.

SPEAKER_00: 7:22

That was the picture the prosecution painted. They argued that Deutsche Bank had this automated software, the pricer, that sucked in market data and spit out the one true interest rate for the day. And the government's argument was that Connolly and his team ignored this true number and manually changed it to cheat.

SPEAKER_01: 7:40

But the Second Circuit, the appeals court, looked at the evidence and basically said, wait a minute, that's not how this worked at all.

SPEAKER_00: 7:47

Correct. When you dig into the actual testimony and the evidence, as the Second Circuit did, the pricer wasn't an Oracle, it was a spreadsheet, a fancy Excel sheet. And it was a spreadsheet designed to have manual inputs.

SPEAKER_01: 7:59

I have the source text here regarding the blue cells. This blew my mind. The spreadsheet had cells colored blue, and the instructions literally said cells needing manual input are in blue.

SPEAKER_00: 8:10

Right. It wasn't a hands-off machine. It required human judgment. The submitters, James King and Michael Kurtler, testified that they manually adjusted spreads every single day. They looked at the market, they called brokers, they looked at cash flow, they adjusted the numbers even on days when Connolly never said a word to them.

SPEAKER_01: 8:26

So the idea that there was one true number generated by a computer was just fiction.

SPEAKER_00: 8:32

According to the Second Circuit, yes, it was a false premise. And this leads to the aha moment that overturned the conviction. The appeals court looked at that BBA question again: at what rate could you borrow?

SPEAKER_01: 8:43

The hypothetical.

SPEAKER_00: 8:45

Yes. In the real world, a bank like Deutsche Bank could borrow money at different rates from different lenders. Maybe bank A offers 2.5% and bank B offers 2.5%, but both are rates at which Deutsche Bank could borrow. So if the submitter chooses 2.55% because it helps the trading desk, is that statement false?

SPEAKER_01: 9:05

The Second Circuit said no.

SPEAKER_00: 9:06

They said absolutely not. As long as the submitted rate was a rate at which the bank could borrow, it was a truthful statement. It didn't matter why they chose that specific number within the range. If it was a real market rate, it wasn't fraud.

SPEAKER_01: 9:17

That seems like a really distinct line in the sand. You can have a selfish motive, but if you tell the truth, it's not fraud.

SPEAKER_00: 9:24

Exactly. Federal wire fraud statutes require a false statement. You can be greedy, you can be aggressive, but if the number you write down is a number that is factually accurate, meaning a rate you could actually borrow at, you haven't lied. And if you haven't lied, you haven't committed wire fraud.

SPEAKER_01: 9:39

And they also noted that there was no rule against it, right?

SPEAKER_00: 9:42

But that's the kicker. At the time, between 2004 and 2011, the BBA rules banned banks from colluding with other banks. You couldn't call up Barclays and fixed a rate. But there was no rule prohibiting a bank's internal teams from talking to each other. The Second Circuit explicitly noted that the BBA rules didn't ban submitters from considering trading positions.

SPEAKER_01: 10:05

So Connolly was prosecuted, convicted, and had his life ruined for conduct that, legally speaking, wasn't a crime because the statements weren't false.

SPEAKER_00: 10:13

That is the conclusion of the Second Circuit. They didn't just order a new trial, they ordered an acquittal. They said no reasonable jury could find him guilty based on the evidence he was innocent.

SPEAKER_01: 10:23

But, and here's the massive bit. Because Connolly isn't just walking away with his acquittal, he is suing Deutsche Bank, claiming they set him up.

SPEAKER_00: 10:43

And this is where the story shifts from a technical financial dispute to a story about corporate power and betrayal. Connolly's lawsuit alleges malicious prosecution, and the foundation of that claim is how the investigation started.

SPEAKER_01: 10:55

Let's talk about the setup. We mentioned outsourcing earlier. When the government, the SEC, the DOJ, started sniffing around LIBOR in 2010, Deutsche Bank didn't just sit back and wait for subpoenas. They hired a massive law firm.

SPEAKER_00: 11:06

Paul, Weiss, Rifkind, Wharton and Garrison LLP, a heavyweight firm. And Deutsche Bank paid them over$100 million to conduct an internal investigation.

SPEAKER_01: 11:15

$100 million. That is an astronomical amount of money for an internal review. What did they get for that money?

SPEAKER_00: 11:21

They got a massive data mining operation. We're talking about the review of 158 million electronic documents. They listened to 850,000 audiophiles. They conducted nearly 200 interviews.

SPEAKER_01: 11:35

That sounds incredibly thorough. But Connolly's complaint argues that this wasn't an impartial search for the truth.

SPEAKER_00: 11:41

No. The complaint alleges that this was a curated process. Paul Weiss produced a document known as the White Paper. In it, they admitted that this volume of data would be virtually impossible to navigate without direction.

SPEAKER_01: 11:54

Without direction? That's a loaded phrase.

SPEAKER_00: 11:57

It is. The allegation is that the bank didn't just dump data on the DOJ, they processed it. They highlighted what they called notable documents. They created a blueprint or a roadmap for the prosecutors.

SPEAKER_01: 12:09

And this isn't just Connolly saying this. The trial judge in the criminal case, Judge Colleen McMahon, had some very strong words about this relationship, didn't she?

SPEAKER_00: 12:17

She did. She noted that the government effectively outsourced the investigation to the target of the investigation, the bank. She pointed out that the government didn't conduct a single interview without first using the roadmap Paul Weiss provided.

SPEAKER_01: 12:29

Think about the implications of that. The entity being investigated is telling the police where to look, who to talk to, and what documents matter.

SPEAKER_00: 12:37

It creates a massive conflict of interest. If you are the bank and you know the government wants a scalp, who are you going to give them? Are you going to hand over your global chief executive? Or are you going to find a mid-level manager who left the company years ago?

SPEAKER_01: 12:52

It's like being the fox in the hen house and the farmer asks you to find out who ate the eggs. You aren't going to turn yourself in. You're going to blame the badger down the road.

SPEAKER_00: 12:59

Or the chicken who used to work there but quit three years ago.

SPEAKER_01: 13:03

And that leads us perfectly into the scapegoat strategy. Why Connelly? Why did the spotlight land on him?

SPEAKER_00: 13:09

To understand why Connolly, you have to understand the cooperation credit. This is a standard part of corporate criminal settlements. If a company cooperates with the DOJ, which usually means admitting fault and helping prosecute individuals, they get a discount on their fine.

SPEAKER_01: 13:27

A discount coupon for justice.

SPEAKER_00: 13:30

In a way, Deutsche Bank eventually settled the LIBOR case for$2.5 billion, a huge number. But because they cooperated, because they served up individuals like Connolly, they received a$750 million discount.

SPEAKER_01: 13:45

Wait, let me wrap my head around that. Their cooperation, which included handing over Connolly, was worth three-quarters of a billion dollars to the bank.

SPEAKER_00: 13:53

Yes. That is the figure cited in the documents.$750 million. That creates a powerful financial incentive to find someone to blame.

SPEAKER_01: 14:01

And Connolly's complaint alleges that the people who should have been blamed were the ones running the show, the C-suite.

SPEAKER_00: 14:07

This is one of the most explosive parts of the amended complaint. Connolly alleges that senior executives, people like the global chief executive Anshu Jane, and the global head of finance David Nichols, didn't just know about the sharing of information between traders and submitters. They directed it.

SPEAKER_01: 14:23

There's a detail in the complaint about the office layout that I found striking. It says executives physically restructure the floor plan to seat traders and submitters closer together.

SPEAKER_00: 14:32

Right. To facilitate communication. The argument is: how can this be a rogue conspiracy by a mid-level guy like Connolly when the guys in the corner offices are literally moving desks around to make it easier for these teams to talk?

SPEAKER_01: 14:47

But when the settlement with the DOJ came out, were those executives named?

SPEAKER_00: 14:51

No. And that's the other side of the scapegoat strategy: protection. The complaint alleges that the DOJ's initial draft of the statement of facts, the document describing what happened, explicitly said senior managers were aware of and encouraged the conduct. It even used the word reckless. But the final version watered down significantly. The references to senior management's recklessness were removed. The final narrative pinned the blame on the traitors and submitters. The C-suite walked away clean. No senior management was charged.

SPEAKER_01: 15:21

Anne Connolly, who had left the bank in 2008 years before the investigation really heated up, becomes the face of the crime.

SPEAKER_00: 15:27

Even though, as Judge McMahon later said at his sentencing, he was barely a player at all, she called him the least culpable person I have heard about. She even said it was no secret that this was orchestrated by senior officials.

SPEAKER_01: 15:39

It's devastating. You have the judge at your own sentencing saying, I know you're the fall guy, but you're the one here in the courtroom.

SPEAKER_00: 15:45

Precisely. And to get him into that courtroom to get that conviction, Connolly alleges the bank did more than just cherry pick documents. He claims they manufactured a case out of thin air.

SPEAKER_01: 15:56

This brings us to part four the smoking gun. Or rather, the lack of one. When you look at the evidence against Connolly, it seems incredibly thin.

SPEAKER_00: 16:06

It was microscopic. Remember, Paul Weiss reviewed millions of documents, hundreds of thousands of audio files. Out of all of that, how many emails involving Connolly did they highlight to the DOJ?

SPEAKER_01: 16:18

Four.

SPEAKER_00: 16:18

Four emails over a period of several years.

SPEAKER_01: 16:21

And were these emails incriminating? Did they say, let's commit fraud today? Hardly.

SPEAKER_00: 16:25

There were emails where Connolly wrote things like, we would prefer it higher or low as possible, but crucially, he often used phrases like, if possible.

SPEAKER_01: 16:34

If possible. That sounds like a polite request, not a demand for fraud.

SPEAKER_00: 16:37

That was Connolly's defense. He argued these were requests to check the market. If the market supports a higher rate, we'd prefer that. And that was consistent with the BBA rules we discussed earlier. If there's a range of legitimate rates, asking for the high end of the legitimate range isn't a crime.

SPEAKER_01: 16:54

But the jury convicted him initially. And to get that conviction, the prosecution needed more than just four polite emails. They needed to show motive. They needed to show he profited. And this is where the story takes a dark turn into alleged perjury.

SPEAKER_00: 17:09

This is the ashamed moment. It involves a Deutsche Bank employee named Guy Weston Edwards.

SPEAKER_01: 17:14

This part of the transcript was jaw-dropping. Tell us what happened with Weston Edwards.

SPEAKER_00: 17:18

So the prosecution wanted to prove that Connolly had a financial motive to rig the rates. They introduced spreadsheets linking Connolly to specific trades. They needed to show that these trades would benefit from the rate changes.

SPEAKER_01: 17:29

Standard procedure, right. Follow the money.

SPEAKER_00: 17:32

Right. But these spreadsheets weren't standard reports. Weston Edwards, the DB employee, signed affidavits swearing that these were original business records kept in the ordinary course of business.

SPEAKER_01: 17:43

Meaning they were generated at the time of the trades.

SPEAKER_00: 17:45

That's what an original business record implies. But on the witness stand, under cross-examination, the truth came out. These weren't original records. They were created after the fact by an outside research firm specifically to build the case against Connolly.

SPEAKER_01: 18:00

They were made for trial evidence disguised as bank records.

SPEAKER_00: 18:03

Exactly. And it gets worse. Weston Edwards admitted on the stand that he knew they weren't original records. He admitted that he was directed to sign the false affidavits anyway.

SPEAKER_01: 18:13

Directed by whom?

SPEAKER_00: 18:14

He testified that he was directed by a Deutsche Bank lawyer, Jesse Crew, and a DOJ prosecutor.

SPEAKER_01: 18:20

He was told to lie.

SPEAKER_00: 18:21

He was told to sign a statement that was factually untrue. And when this came out in court, Judge McMahon was furious. I mean, judges usually stay pretty calm, but she let them have it. She told the prosecutors, you should be ashamed of yourselves. She called the situation appalling.

SPEAKER_01: 18:37

You should be ashamed of yourselves. You rarely hear a federal judge say that to the Department of Justice.

SPEAKER_00: 18:42

It highlights the lengths to which the alleged collaboration went. You have a bank employee, allegedly guided by a bank lawyer and a prosecutor, submitting false descriptions of evidence to ensure a conviction. This is the core of Connolly's malicious prosecution claim. It's not just that they were wrong, it's that they allegedly cheated to win.

SPEAKER_01: 19:01

So Connolly is convicted, sentenced, though importantly, Judge McMahon gave him no jail time, just home confinement, which was a huge signal of how she viewed the case, and then he spends years funning the appeal. He wins the appeal. He is exonerated, and now he strikes back. Let's look at the civil suit itself. Connolly v. Deutsche Bank, he is asking for over$150 million.

SPEAKER_00: 19:24

It's a massive claim. He's suing for malicious prosecution. To win, he has to prove that the bank initiated the proceedings with malice and without probable cause.

SPEAKER_01: 19:32

And what is Deutsche Bank saying in their defense? We have their answer to the complaint. They aren't just rolling over.

SPEAKER_00: 19:38

No, they are fighting tooth and nail. Their primary defense is what we call the independent government defense. They're arguing, look, we didn't indict you, the Department of Justice invited you, we just provided information. The grand jury made the decision, the prosecutors made the decision. You can't sue us for what the government decided to do.

SPEAKER_01: 19:57

That seems like a standard defense. Don't shoot the messenger.

SPEAKER_00: 20:01

It is standard. But Connolly's argument is that the messenger poisoned the message. If the information you provided was cherry-picked, misleading, and in some cases, like the affidavits, false, then you did influence the government. You manipulated the government.

SPEAKER_01: 20:17

Deutsche Bank also raised a defense about probable cause, right? They argue that because a jury eventually convicted him, even if it was later overturned, that proves there was probable cause to try him in the first place.

SPEAKER_00: 20:28

That is a very tricky legal area. Usually a conviction, even an overturned one, creates a presumption of probable cause. It suggests there was enough smoke to justify the fire. But that presumption can be rebutted if you can show the conviction was obtained through fraud, perjury, or withholding evidence.

SPEAKER_01: 20:44

And since Connolly is alleging perjury and manufactured evidence.

SPEAKER_00: 20:48

Exactly. That is his path through that defense.

SPEAKER_01: 20:51

Now Deutsche Bank tried to get this case thrown out immediately. They filed a motion to dismiss. But Judge Furman, the judge handling the civil case, said no.

SPEAKER_00: 21:01

Judge Furman's ruling is very significant. He acknowledged that Connolly faces large hurdles. It is very hard to win a malicious prosecution case against a party that didn't actually sign the indictment. But he ruled that the allegations are plausible.

SPEAKER_01: 21:16

He specifically mentioned the outsourcing aspect.

SPEAKER_00: 21:19

Yes. He found the allegations that the bank provided false information and that the government effectively outsourced the investigation to be sufficient to let the case go to trial. He rejected the bank's attempt to hold Connolly to a higher pleading standard Rule 9B, which is used for fraud cases. He said, no, this is malicious prosecution. We are using the standard rules.

SPEAKER_01: 21:39

So the case is moving forward, discovery is happening, Connolly is going to get to depose people. This is a nightmare for the bank, isn't it?

SPEAKER_00: 21:47

It keeps the story alive, and it potentially exposes more internal documents about how that investigation was run. Remember, the bank paid$2.5 billion to make this go away. Now, years later, it's back in the headlines.

SPEAKER_01: 22:01

Let's zoom out to part six the human cost and the bigger picture. Because it's easy to get lost in the legal maneuvering, but there is a real guy at the center of this.

SPEAKER_00: 22:11

Matthew Connolly. He lost his career, he lost his reputation, he spent years dealing with the stress of a federal indictment. A trial and the threat of prison. He was restricted to his home. He couldn't travel.

SPEAKER_01: 22:22

And meanwhile, the people he alleges were actually responsible, the senior managers who moved the desks and directed the info, sharing what happened to them.

SPEAKER_00: 22:30

They kept their jobs or moved on to other high-paying positions. The bank paid a fine using shareholder money, not the executive's own money, and business went on.

SPEAKER_01: 22:37

It really highlights the inequality of the system. The corporate veil seems to protect the people at the top, while the people in the middle are expendable.

SPEAKER_00: 22:45

And that brings us to the systemic implications. This Paul Weiss model of internal investigations is standard practice now.

SPEAKER_01: 22:52

Explain that model again for the listeners. Why is it dangerous?

SPEAKER_00: 22:55

When a company gets into trouble, the government effectively says, go investigate yourselves and tell us what you find. If you do a good job, we'll go easy on you.

SPEAKER_01: 23:04

So the company hires a law firm.

SPEAKER_00: 23:06

Right. But that law firm is paid by the company. Their duty is to the company, the entity, not the employees. So the company has a massive incentive to protect the entity and its top decision makers. The easiest way to do that is to say, we found the problem. It was these rogue employees over here. Here are their emails. We fired them. We are good now.

SPEAKER_01: 23:27

It creates a uniquely coercive position, to quote the legal documents.

SPEAKER_00: 23:32

It does. Employees are squeezed. If they don't cooperate with the internal investigation, they get fired. If they do cooperate, that info is handed to the DOJ. And unlike a police interrogation, you don't have Miranda rights in a corporate conference room with a private lawyer.

SPEAKER_01: 23:47

It feels like the privatization of the justice system, but with all the incentives aligned against the individual employee.

SPEAKER_00: 23:52

That is the crux of it. If the government relies entirely on the target of the investigation to tell them what happened, the truth is likely to be distorted by self-interest. In the Connolly case, the allegation is that the distortion was deliberate, malicious, and worth$750 million.

SPEAKER_01: 24:10

It makes you wonder if Connolly hadn't had the resources and the will to fight this for a decade, to appeal, to win, and then to sue, we would probably still believe the narrative that he was a rogue fraudster.

SPEAKER_00: 24:22

We absolutely would. We would look at the headlines, Deutsche Bank Traitor Convicted, and move on. It's only because of this pushback that we are seeing the machinery underneath.

SPEAKER_01: 24:31

So what happens next for Connolly?

SPEAKER_00: 24:33

The civil case proceeds. Unless there is a settlement, which is always possible, this could go to a jury. And a jury would have to decide if Deutsche Bank's conduct crossed the line from aggressive defense to malicious prosecution.

SPEAKER_01: 24:44

If he wins, it sends a massive message to corporate America.

SPEAKER_00: 24:48

It would be a landmark ruling. It would warn companies that you can't just sacrifice employees to save the stock price. It would force a reevaluation of how these cooperation deals work.

SPEAKER_01: 24:57

We're going to keep a close eye on this one. It feels like a turning point.

SPEAKER_00: 25:00

It certainly has the potential to be.

SPEAKER_01: 25:02

Okay, let's unpack this a bit more. We've covered the narrative arc, but I want to drill down on a few specific details from the sources that really illustrate how this scapegoating works mechanically. We talked about the emails, the four emails. I won't read one of them again because the language is so normal. Go ahead. This is from August 2007. Connolly writes, if possible, we need an NY1 mo LIBOR as low as possible next few days. Tons of pays coming up overall. Thanks.

SPEAKER_00: 25:32

If possible, thanks.

SPEAKER_01: 25:33

Right. And the response from the submitter, James King, was we'll do our best, Matt.

SPEAKER_00: 25:38

Compare that to the government's narrative of a high-pressure conspiracy. This sounds like two colleagues coordinating within the bounds of what they thought was allowed. And remember, the Second Circuit said that asking for a rate within the legitimate range was allowed.

SPEAKER_01: 25:52

But here's where it gets really interesting. The bank highlighted this email to the DOJ, but what didn't they highlight?

SPEAKER_00: 25:58

The context. The context that everyone was doing this, that senior management knew that the floor plan was changed. By isolating these four emails from the thousands of other communications, the bank creates a false reality. They create a rogue actor narrative out of routine business.

SPEAKER_01: 26:15

It's editorializing by omission.

SPEAKER_00: 26:17

Exactly. And that's what the white paper was. It wasn't a raw data dump. It was an editorial. It said, look here, don't look there.

SPEAKER_01: 26:23

And the government bought it.

SPEAKER_00: 26:25

They bought it, paid for it, and built a case on it. Judge McMahon's comment that the government didn't conduct a single interview without the roadmap is damning. It implies the DOJ didn't even know where to look until the bank told them.

SPEAKER_01: 26:37

It makes the DOJ look less like a watchdog and more like a client.

SPEAKER_00: 26:41

Or a partner. A junior partner, perhaps. The bank did the legwork, the bank drafted the narrative, the DOJ just put the stamp on the indictment.

SPEAKER_01: 26:50

And let's talk about the pricer again. I can't get over the blue cells.

SPEAKER_00: 26:54

It is a great detail.

SPEAKER_01: 26:55

If I'm a prosecutor and the bank tells me we have this supercomputer that gives the true rate, shouldn't my first question be, can I see the manual or can I see the spreadsheet?

SPEAKER_00: 27:05

You would think so. But complex financial cases are complex. Prosecutors aren't always traders, they rely on experts. And if the expert explaining the system to you is the bank's lawyer, you might accept their explanation. Oh, it's an automated system. You might not ask, does it have blue cells for manual input until it's too late?

SPEAKER_01: 27:25

It took a trial and an appeal to unravel that simple fact.

SPEAKER_00: 27:29

And this is why the perjury allegation regarding Weston Edwards is so critical. It suggests that when the facts didn't fit the automated system narrative, they tried to force them. They tried to make the spreadsheets look like automated records when they weren't.

SPEAKER_01: 27:42

Let's revisit that courtroom scene. Weston Edwards is on the stand. He says, I was told to sign this. Judge McMahon says, you should be ashamed. But the trial continued. Connolly was still convicted.

SPEAKER_00: 27:54

That shows the momentum of a prosecution. Even when a witness implodes, even when the judge is furious, the train is already moving so fast it's hard to stop. The jury still sees a guy who asks for low as possible rates. They see a complex scheme. They see a big bank. It's hard to acquit in that environment, especially when the defense is trying to explain the nuances of the BBA could standard. Trevor Burrus, Jr.

SPEAKER_01: 28:17

Which is why the appeals court is so important. They have the luxury of time. They can read the transcript. They can look at the definitions.

SPEAKER_00: 28:24

And they apply the law dispassionately. The Second Circuit's ruling was technical but profound. They basically said, you can't lie if you are telling the truth. If the rate was a real rate, it wasn't a lie, no matter what you were thinking when you sent it.

SPEAKER_01: 28:36

Aaron Powell, you can't lie if you are telling the truth. That's a good bumper sticker for this case.

SPEAKER_00: 28:40

It really is.

SPEAKER_01: 28:41

I want to touch on the independent government defense again because that's the main hurdle Connolly faces now. Deutsche Bank says, we didn't force the DOJ to indict you.

SPEAKER_00: 28:51

It's a causation argument. In law, you have to prove that the defendant's actions cause the harm. Deutsche Bank is arguing that the chain of causation was broken by the government. They are saying, sure, maybe we gave them info, but the prosecutor decided to indict and the grand jury decided to charge. That's on them, not us.

SPEAKER_01: 29:09

It's a convenient way to wash your hands.

SPEAKER_00: 29:11

It is. But the law recognizes that if you poison the well, if you give the prosecutor false evidence or withhold exculpatory evidence, then you are responsible for what happens next. You can't hand a loaded gun to someone, tell them it's a water pistol, and then say, I didn't pull the trigger.

SPEAKER_01: 29:27

And Connolly's argument is that the white paper and the false affidavits were the poison.

SPEAKER_00: 29:32

Correct. He argues the government never would have indicted him if they had known the full truth. That the C-suite directed this, that the pricer was manual, and that the emails were standard requests.

SPEAKER_01: 29:42

It's a battle of narratives. Deutsche Bank says, we cooperated. Connolly says, you framed me.

SPEAKER_00: 29:48

And the jury in this civil case will have to decide which version is true.

SPEAKER_01: 29:52

There's another angle here I want to explore. The concept of malicious prosecution. It sounds aggressive, malicious. Does that mean the bank hated Connolly?

SPEAKER_00: 30:03

Not necessarily hate in the emotional sense. In the legal sense, malice often means acting with an improper purpose. Connolly argues the improper purpose was saving money.

SPEAKER_01: 30:13

The$750 million discount.

SPEAKER_00: 30:15

Right. If they sacrifice Connolly to save$750 million, that is an improper purpose for initiating a criminal prosecution. You aren't doing it to serve justice, you are doing it to serve your bottom line.

SPEAKER_01: 30:27

So greed can count as malice.

SPEAKER_00: 30:29

In this context, absolutely. If you knowingly accuse an innocent person to save a buck, that is malicious.

SPEAKER_01: 30:35

It's chilling. It really reduces the employee to a line item on a balance sheet.

SPEAKER_00: 30:39

Yeah.

SPEAKER_01: 30:40

Cost of cooperation, won Matthew Connolly.

SPEAKER_00: 30:43

And remember, Connolly wasn't a random choice. He was perfect. He was gone. He left in 2008. He was mid-level high enough to matter, low enough not to be famous. He was the perfect offering.

SPEAKER_01: 30:53

If he had been the CEO, they never would have done it.

SPEAKER_00: 30:55

The CEO was on Sujane. He was one of the most powerful bankers in the world. You don't hand him over. You protect the king. You sacrifice the knight.

SPEAKER_01: 31:04

Let's talk about the judge in the civil case, Judge Furman. He denied the motion to dismiss. Why is that significant procedurally?

SPEAKER_00: 31:12

So a motion to dismiss is the defendant saying, even if everything the plaintiff says is true, he still loses legally. It's a way to kill a case before it starts. By denying it, Judge Furman is saying, if Connolly can prove what he alleges, he has a valid legal claim.

SPEAKER_01: 31:27

So he hasn't won yet, but he's been allowed onto the playing field.

SPEAKER_00: 31:30

Exactly. And now comes discovery. This is where Connolly's lawyers get to demand documents, emails, memos. They get to ask, who decided to put Connolly's name in the white paper? Who told Weston Edwards to sign the affidavit?

SPEAKER_01: 31:42

It must be terrifying for the bank.

SPEAKER_00: 31:44

It opens up the closet where all the skeletons are hiding. And that's why many of these cases settle. The risk of what comes out in discovery is often higher than the cost of writing a check.

SPEAKER_01: 31:53

But Connolly seems motivated. He's already cleared his name legally. Now he wants vindication.

SPEAKER_00: 31:58

And$150 million, don't forget the number.

SPEAKER_01: 32:02

That's a lot of vindication.

SPEAKER_00: 32:04

It is. But think about the lost earning potential. He was a director at Deutsche Bank. He had decades of higher earning years ahead of him. That was wiped out. Plus the legal fees, plus the emotional distress. The number is high, but the damages are real.

SPEAKER_01: 32:20

It's not just hurt feelings, it's total destruction of a livelihood.

SPEAKER_00: 32:24

And think about the chilling effect on other employees. If you are working at a bank today and you see what happened to Connolly, what do you do? Do you write anything in an email? Do you trust your compliance department?

SPEAKER_01: 32:36

I would probably buy a burner phone and never write anything down again.

SPEAKER_00: 32:40

It breeds a culture of paranoia. And ironically, it might make it harder for banks to actually comply with regulations because nobody wants to take responsibility for anything.

SPEAKER_01: 32:49

We're coming up on the end of our deep dive here, but I want to circle back to the provocative thought we promised.

SPEAKER_00: 32:54

Let's do it.

SPEAKER_01: 32:54

We live in a world where corporate responsibility is a buzzword. Companies are supposed to be good citizens. They're supposed to cooperate with the government. But this case suggests that cooperation has morphed into something else.

SPEAKER_00: 33:07

It has. It suggests that cooperation has become a transactional exchange, a marketplace.

SPEAKER_01: 33:13

Aaron Powell You buy your way out of trouble with information.

SPEAKER_00: 33:16

And if you don't have real incriminating information against the people who actually made the decisions, you might be tempted to manufacture it against the people who just followed orders.

SPEAKER_01: 33:25

So the question for you, the listener, is this if a company can buy its way out of criminal liability by handing over a list of lower-level employees and a roadmap for prosecution, does cooperation actually serve justice? Or does it just privatize the scapegoating process?

SPEAKER_00: 33:44

Are we cleaning up the system or are we just helping the powerful clean up their messes by throwing the little guys under the bus?

SPEAKER_01: 33:50

It's a question that Matthew Connolly has spent the last 10 years answering the hard way. And it's a question that Deutsche Bank and the Department of Justice might have to answer in court.

SPEAKER_00: 34:00

It's a story that isn't over yet.

SPEAKER_01: 34:02

Absolutely not. We will keep tracking Connolly v. Deutsche Bank. But for now, that's the deep dive on the case of the scapegoated trader. Thanks for listening.

SPEAKER_00: 34:11

Stay curious and read the fine print.

SPEAKER_01: 34:13

See you next time.