Johnson Bid to Vacate Conviction Denied

Former HSBC head of cash FX trading Mark Johnson’s petition to have his conviction overturned has been denied by a judge in a New York court.

Johnson was found guilty of wire fraud by a jury in 2017 and lost a subsequent appeal and a submission to have his case heard by the US Supreme Court – he served a two-year sentence, including an extended period in a US jail. This latest attempt to clear his name came after the US Department of Justice dropped its attempts to extradite Johnson’s co-accused Stuart Scott from the UK. In dropping that attempt, the DoJ stated that a recent Supreme Court ruling that the “right to control” theory was invalid for wire fraud, meant it was unlikely to secure a conviction. A central plank in the DoJ’s case against Johnson was based upon “right to control”, hence the petition.

The petition was denied by US District Judge Nicholas Garaufis, who oversaw the original trial at which Johnson was convicted. In his memorandum denying the petition Judge Garaufis observes that “The writ of error coram nobis is an extraordinary remedy that issues only in extreme cases” and that “the burden is on the defendant to show that relief is warranted”.

In a discussion on the case, the judge writes that there is “grave doubt” as to whether Johnson was convicted on the ‘Right to Control” theory, because the jury instructions also stated that the “misappropriation theory” could also be used. “If there is not grave doubt that the jury would have convicted Johnson under the misappropriation theory based on a review of the trial record, the error is harmless and the first coram nobis factor is not met,” the memorandum states.

The case related to a takeover by Cairn Energy in December 2010 that would involve an FX trade in Cable of some GBP 2.25 billion. HSBC provided different options to Cairn for executing the trade, the company selected using the 3pm London WMR Fix. At the time of the trade, the fixing window was one minute long, so HSBC’s traders bought pounds leading up to the Fix, something that is accepted as a normal practice in markets, and continues to this day.

Whilst Cairn Energy was not explicitly told that HSBC would buy ahead of the window, HSBC had won the trade via an RFP process and as such, when it was told it was going ahead, its actions would have been in line with the principles of the future FX Global Code (with the exception of that Code recommending client acceptance of the practice). During the hearings, evidence was presented that Cairn’s treasurer, Robert Scriven, had told colleagues that HSBC would make money out of the trade by buying ahead of the Fix window, although during the trial he said he testified he did not know that and had given no instructions to the bank as to how to execute the trade.