By Nate Raymond
NEW YORK (Reuters) - Two former Rabobank [RABO.UL] traders urged a U.S. judge on Thursday to dismiss an indictment accusing them of engaging in a scheme to manipulate Libor, the benchmark interest rate at the center of a global investigation into misconduct at several banks.
Lawyers for Anthony Allen and Anthony Conti told a Manhattan federal judge that prosecutors could not show the British citizens' compelled testimony to a U.K. regulator was not used against them despite U.S. rights against self-incrimination.
Michael Schachter, Allen's lawyer, said the case was tainted because a former Rabobank trader who became a cooperating witness had previously reviewed Allen and Conti's compelled 2013 testimony to the UK's Financial Conduct Authority in a related probe.
As a result, any information provided by the trader, Paul Robson, to U.S. authorities may have been influenced by reviewing Allen and Conti's testimony, he said, causing their statements to be used against them in violation of the U.S. Constitution.
"It offends our system of justice," Schachter said.
But prosecutor Brittain Shaw argued the Fifth Amendment right against self-incrimination was not implicated when a foreign government rather than the United States compels testimony.
"The United States is the only country bound by the Constitution," she said.
U.S. District Judge Jed Rakoff said the case appeared to raise a novel, "very interesting issue," and said he would issue a ruling "promptly."
Libor, or the London interbank offered rate, is a short-term interest rate that underpins hundreds of trillions of dollars of financial products.
U.S. and European authorities have been probing whether banks attempted to manipulate the rate to benefit their own trading positions.
The investigations have resulted in $9 billion in settlements with banks and brokerages and several people being charged.
Rabobank agreed in 2013 to pay $1 billion to resolve U.S. and European Libor-related probes, including $325 million as part of a deferred prosecution agreement with the Justice Department.
Conti and Allen are expected to face trial Oct. 5 after pleading not guilty to charges that they participated in a scheme to manipulate U.S. dollar and yen Libor rates.
Three other employees including Robson have pleaded guilty, while two others have not appeared in U.S. court.
The case is U.S. v. Robson, U.S. District Court, Southern District of New York, No. 14-cr-00272.