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Two Ex-Citi Bankers Drawn into London Insider-Trading Appeal

Jonathan Browning
·5 min read

(Bloomberg) -- Lawyers for two people convicted of insider trading told a London appeals court that prosecutors failed to disclose at trial that a pair of former Citigroup Inc. bankers were possible sources for corporate merger tips that benefited a group of investors.

Attorneys for Walid Choucair, one of the convicted traders, said that the failure to properly investigate the role of the two bankers at the trial last year was unfair to their client. That revelation would have helped Choucair argue that the trading tips came from someone other than the former UBS Group AG compliance officer who was convicted with him.

During an appeals court hearing in London Thursday, the lawyers said that David Basra, who was previously a leveraged finance executive at Citigroup, and David Johnson were in a position to know the information at the heart of the insider-trading trial last year.

“Having been prompted about its involvement, it became apparent that Citigroup was a common denominator,” Julian Christopher, a lawyer for Fabiana Abdel-Malek, the UBS employee, told the court.

Neither Basra nor Johnson has been accused of any wrongdoing by the Financial Conduct Authority and the agency hasn’t said that there is an investigation into them. Choucair and Abdel-Malek learned the bankers’ identities for the first time because they were given to them by the regulator before the appeal.

No Involvement

A lawyer for Johnson said the banker “has never been involved in any insider trading of any nature.” Johnson “has never been contacted by the FCA (in respect of any matter) and it is reasonable to assume therefore that had they had any concerns they would have sought to make contact with him by now.”

Basra didn’t return messages left on a mobile phone number and sent via LinkedIn on Thursday and Friday. An official at his last employer said they would pass a message to him.

Citigroup said in a statement that it has “cooperated with the FCA in relation to its enquiries into this matter.”

FCA Investigation

Choucair and Abdel-Malek were serving three-year sentences before being released early ahead of the appeal. Their trial opened a window into a loose network of traders from London to Dubai as well as a multinational investigation into suspected insider trading.

Choucair and Abdel-Malek were convicted of a conspiracy to use inside information on five mergers. The FCA said that Abdel-Malek leaked data from a confidential UBS database to Choucair, who traded on the information within minutes.

Choucair has always insisted that the tips came from other traders and journalists and that the FCA didn’t go far enough in investigating alternate sources for the information he traded on. Because he was charged with conspiring with Abdel-Malek, the case would have to be dropped against both of them if the court decides that there was reason for the jury to doubt that she was the source of the data.

The defense case centers on a startling disclosure during the closing days of the trial last year that the FCA had been told by an informant that a Citigroup banker had some indirect communication -- through an intermediary -- with another trader that Choucair knew. While the identities of Basra and Johnson weren’t given to the jury or the defense at the time, the FCA disclosed them as part of the appeal.

The lawyers for Choucair and Abdel-Malek said that the FCA disclosed that information too late for them to make an effective defense.

‘Alleged Intermediary’

Lawyers for Choucair and Abdel-Malek said that Basra may have given the tips to Johnson, who then passed it on to other traders. Richard Wormald, Choucair’s lawyer, said a jury needed to consider the possibility that Basra was the initial source of the information.

“Take one look at his senior position, his intimate knowledge of M&A,” Wormald said.

The jury at the trial needed to know consider the possibility that “there really was a different channel, a back channel,” he said.

Johnson’s lawyer denied that the ex-banker was the “alleged intermediary.”

The FCA said in a legal filing at the appellate hearing that the disclosure of the two bankers’ identities didn’t change the fundamental case against Choucair and Abdel-Malek. The key evidence included phone records that showed conversations between the pair, while she was looking at deal data, just before he entered trades.

The prosecution case was “a strong circumstantial one” and the disclosure of the bankers’ identities “does not threaten the safety of the convictions,” the regulator’s attorney. John McGuinness, said in the filing.

“It extends the point, it doesn’t make the point a new one,” McGuinness told the court Friday.

Home Shares

In addition, the agency has consistently argued that the Citigroup banker didn’t have computer access to the transactions Choucair was convicted of trading on.

Basra, who left the bank in the summer of 2016, co-owned a chalet in the Swiss Alps with Johnson. Johnson, in turn, lived in a 12 million-pound ($15.9 million) London house owned by an offshore company controlled by Alshair Fiyaz. Fiyaz is a businessman and trader that Choucair testified he was friends with at the trial.

That Johnson was staying in a home owned by Fiyaz was “not evidence of Fiyaz rewarding Johnson for acting as an intermediary,” McGuinness said. There were payments from Johnson to Fiyaz “consistent with a commercial rent.”

A spokeswoman for Fiyaz declined to comment Thursday, citing the ongoing proceedings. Earlier this year, a spokeswoman said Fiyaz “vehemently” denied ever trading on inside information and emphasized that he had never been “questioned or charged with any offense relating to insider dealing or indeed, any other form of misconduct.”

Allegations

And Justice Nigel Davis was quick to remind Wormald that he was only dealing with allegations, and not facts.

“You’re in no position to say Mr. Fiyaz was probably an insider trader,” Davis said. “You’ve got suspicions.”

(Updates with Choucair attorney’s quote in 16th paragraph.)

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