Mark Johnson’s legal team has filed a petition to have his appeal reheard or reheard “en banc”, before the entire bench of active appeal circuit judges, as he seeks to have his conviction for wire fraud overturned.
In September Johnson lost an appeal in front of three appeal court judges, however his team has filed the en bancpetition to allow the court to address what it terms the threat the conviction poses to the financial markets’ stability. Noting that the US government “often wields fraud statutes as “meat axes” in hopes of criminalising a staggeringly broad swath of behaviour”, the petition observes that the Supreme Court rejects this approach and insists on narrow constructions “to avoid trampling due process”, and “then the government tries again.”
The petition goes on to argue that Johnson’s case is the latest example of the US Department of Justice’s efforts to police transactions between commercially sophisticated businesspeople, using expansive fraud definitions to rewrite their contracts. It adds that many cases involve bluffing and other standard “deceptive” negotiating tactics between “big boys” who know they shouldn’t trust each other. The criminal charges often shock industry participants and raise serious fair notice issues, creating what one judge termed “a massive due process problem.”
In filing the en banc petition, Johnson’s team observes, “This Court has considered a few such cases but has not squarely confronted the threat they pose to the financial markets’ stability. It is exceptionally important that this Court, given its historic role in this area, draw clear lines ensuring that arms-length counterparties can enter contracts without risking that federal prosecutors will later label their negotiating positions fraud.”
Such hearing can be requested, but do not have to be granted under US law, however the petition argues, “This case presents an ideal vehicle in which to do so en banc.”
In terms of the threat to market stability, the petition takes aim at the decision by the appeal panel that Johnson’s purported “misrepresentation” on the post-fix call was “material” because “Cairn was not stuck with the FX Transaction once it was completed” and “could have sought to unwind the transaction before settlement, [or] withhold payment.”
The petition notes the panel cited no authority for this proposition and that it surfaced for the first time (unsupported) in the government’s appellate brief and was not part of the original case against Johnson. It adds that the Federal Reserve Bank and US Securities and Exchange Commission (SEC) have warned that the threat of non-payment creates systemic risks undermining financial markets’ stability. “Sophisticated parties – especially foreign parties transacting on foreign soil – must be able to rely on written agreements without worrying that US prosecutors will try to imprison them by inserting terms they intentionally excluded,” the petition states.
An appeal for re-hearing would be heard by the original panel of three judges who heard the case this year, the decision to grant an en banc re-hearing is taken by the active circuit court judges and requires a simple majority in favour to proceed.
Something that may assist the petition is the discovery of errors in the documentation presented by the prosecution. A separate motion filed on Johnson’s behalf reveals that in preparing the petition, it was discovered that the government had included two documents in its Appendix that were labelled as trial exhibits, but which were never used at trial.
The motion, which not contested by the Government, seeks to correct the record for purposes of any further appellate review by this Court or the Supreme Court, and to replace those two documents with the exhibits that were actually used at Johnson’s trial.
The first document is one that purports to reflect the transcript of a telephone call between Johnson and HSBC’s then head of spot FX in Hong Kong, Ed Carmichael on December 8, 2011. The version of the transcript appearing in the Government’s Appendix does not accurately transcribe the recorded telephone call, and is not the version of the transcript used at trial, the motion points out, adding that the error is “significant” because the panel quoted an inaccurate portion of the transcript that was not part of the trial record but was in the incorrect version contained in the Government’s Appendix.
Specifically, the opinion states that “Johnson later told a colleague that his team had to ‘make sure the fix [was] below [1.5730] or [Cairn was] going to be sure [it had] been ripped off.’” However, the version that was used at trial transcribes Johnson’s words differently: “And so that’s so we must make sure the fix is below 5730 or they’re gonna feel they’ve been ripped off.” (emphasis added).
Johnson’s team continues, “The error is important because the erroneous transcript—“going to be sure [it had] been ripped off” – suggests that Johnson thought Cairn suspected it had been “ripped off” – a conclusion that a price over 5730 would confirm—whereas the accurate transcript—“they’re gonna feel they’ve been ripped off” – indicates that Johnson wanted to avoid a price that would cause Cairn – erroneously – to conclude it had been “ripped off.”
The second errot is a graphic representation of trading activity on December 7, 2011 which was labelled “Cahill Buying Period” to signify when HSBC FX trader Frank Cahill purchased sterling. The version that appears in the Government’s Appendix incorrectly omits the “Cahill Buying Period” label, which is important, the motion argues, because the government asserted in its appellate brief that Cahill “waited to purchase approximately £2 billion of the £2.25 billion order until 2:50 p.m.”
“That statement was untrue,” the motion says. “The absence of the “Cahill Buying Period” label from the chart deemphasises that Cahill began purchasing significant amounts of pounds as early as 1:51 p.m.”