Inside the fraud case in which candidate was named 'unindicted co-conspirator'

While he worked on Wall Street in the early 2010s, Democratic congressional candidate Conor O'Callaghan helped carry out securities trades that federal prosecutors later scrutinized as part of a criminal fraud case, court records show.

The case was one facet of a sweeping set of allegations that the company, Nomura Securities International, has since paid millions of dollars in fines and restitution to resolve.

O'Callaghan never was charged with a crime, but the episode was a turbulent period in O'Callaghan's multidecade career in finance.

The government accused employees at Nomura of using illegal tactics to boost their profits from buying and selling residential mortgage-backed securities during the early 2010s.

In the years since, Nomura has agreed to pay $25 million in restitution to customers, plus a $1.5 million fine, to settle the Securities and Exchange Commission’s charges that Nomura failed to properly supervise traders' conduct. And last year, Nomura agreed to pay a $35 million fine to resolve a U.S. Justice Department criminal fraud probe.

Authorities have said the company knew what it was doing wrong.

Nomura "with full knowledge and participation of its supervisors, lied to victims who detected or suspected that they had been the victims of fraud," and then "concealed" that conduct from customers and some of its own employees "in order to prevent or delay discovery," the Justice Department wrote announcing a non-prosecution agreement in 2023.

O’Callaghan, who worked at Nomura for almost a decade until 2020, was an “unindicted co-conspirator” in a criminal case against some of his colleagues. He disclosed the fact in an op-ed published in October about the legal issues surrounding a Trump ally also named as an unindicted co-conspirator.

Evidence introduced during the 2017 trial shows O’Callaghan, then a salesperson, passing along information to a prospective buyer that the government termed a “misrepresentation,” such as overstating how much Nomura had paid for bonds the buyer was interested in.

"We've already had testimony during the course of the trial from (another Nomura trader) that Mr. O'Callaghan was someone who participated at least in some of these lies," a government lawyer said, according to a transcript of the trial proceedings.

The prosecution presented electronic messages between O’Callaghan, Tyler Peters — one of the three traders who was charged — and a prospective buyer with whom O’Callaghan was negotiating.

In one of the exchanges, Peters told O’Callaghan that he bought several bonds at a price of “39.” O’Callaghan responded that he would tell the prospective buyer that the company had gotten a higher price.

“I'm going (with) 39-08 story and see what she pays us," O’Callaghan wrote to Peters, according to the trial documents.

After O’Callaghan relayed that message, the buyer increased her bid and the two went through with the sale.

Prosecution of the Nomura traders didn't get far. Twenty-three of the 27 charges resulted in acquittals, and the jury wasn’t able to reach a verdict for another three charges.

Only one resulted in a conviction: In 2017, a jury found Michael Gramins, one of the three traders, guilty of conspiracy to commit securities and wire fraud.

O’Callaghan never was charged with a crime nor called to testify.

O’Callaghan declined to be interviewed for this article but provided a statement to The Arizona Republic saying he never was accused of wrongdoing, and his involvement in the case was better understood as an uncalled witness.

A lawyer for O'Callaghan wrote that the "unindicted co-conspirator" label "is not at all an indication that he engaged in any unlawful or even untoward activity.”

The U.S. Attorney's Office in Connecticut prosecuted the case. Reached for comment, spokesperson Tom Carson said the office could not discuss charging decisions and declined to comment further.

O’Callaghan describes issue: 'A potential witness who cooperated fully'

O'Callaghan is among the six Democrats hoping to challenge incumbent U.S. Rep. David Schweikert, R-Ariz., who is widely seen as one of the most vulnerable incumbent Republicans in Congress.

In October, O'Callaghan, already a candidate, publicly disclosed that he, like the Trump ally Sidney Powell, had been an "unindicted co-conspirator."

"The whole 'unindicted co-conspirator' label catches my attention. I’ve been there myself, thanks to a case tied to the early part of my career at Nomura Securities," he wrote in the guest column in the Arizona Capitol Times.

O’Callaghan wrote in the column that he was “simply an employee of the firm” and “a potential witness who cooperated fully” who was eventually promoted within the company.

"Quite the legal rollercoaster, I must say," O'Callaghan wrote. "I remained at the firm for many years after these events and was eventually promoted to Managing Director, but the whole episode was a dark time for all involved, including those of us who were quite literally 'unindicted.'"

He reiterated those views in a written statement to The Republic.

“Witnesses are not defendants. Defendants don’t get promoted. As I shared in an opinion piece last year, I was a potential witness in a federal investigation into a company with over 25,000 employees. I was a mid-level employee who was never called by the government or by the defense,” O’Callaghan wrote.

“I was never charged, never signed any cooperation or non-prosecution agreements, was never indicted, and was never involved in any settlements. I was never accused of any wrongdoing, was never the target of any investigation, and fully cooperated with all internal and external investigations,” he continued.

“In the years following, I remained at the firm and was promoted to Managing Director. My unblemished FINRA regulatory record speaks for itself,” O’Callaghan wrote, referring to the financial industry’s self-regulatory organization. “I don’t have any additional insights beyond what I’ve shared publicly in this decade-old investigation.”

Media inquiries about O’Callaghan’s history at Nomura have been returned with correspondence from his legal team.

In an email to The Arizona Republic and Executive Editor Greg Burton, a lawyer for O’Callaghan, Craig Morgan, wrote that "any suggestion of wrongdoing, any suggestion of formal allegations, and any suggestion that being a (uncalled) witness is somehow synonymous with a crime in the headline or body of the piece will harm Conor's reputation in an industry where he still works and represents clientele."

O’Callaghan’s lawyer also sent a letter to the hosts of a podcast about the 1st Congressional District race in May, when the podcast hosted Arizona Republic columnist Abe Kwok as a guest. Kwok had alluded to O’Callaghan’s history at the company in a recent column.

Anita Malik, a co-host of the "Who's the 1?" podcast, said the podcasters did not respond to the letter.

In the letter, which copied Kwok, O’Callaghan’s lawyer warned against drawing a “false equivalence” between O’Callaghan’s experience at Nomura and his campaign rival, Andrei Cherny, who co-founded a green banking company that is now under federal scrutiny over its eco-friendly claims, or to former President Donald Trump, who is an unindicted co-conspirator in Arizona’s fake elector case.

“If, however, there is any inference that Mr. O’Callaghan somehow committed a crime, was involved in criminal activity, or acted unlawfully, or did something that is equivalent to the ordeal of Mr. Cherny or Mr. Trump, then those who perpetuate those falsities will be held accountable,” the letter continued.

What does 'unindicted co-conspirator' mean?

There are several possible reasons why the prosecution might label someone an “unindicted co-conspirator,” said Dennis Burke, a former U.S. attorney for Arizona.

Burke, based on his experience as a federal prosecutor, discussed in general terms potential reasons for prosecutors using the label.

While making no inference to the Nomura case, Burke said prosecutors could have believed such a person was involved in the crime, but they don’t think they had enough evidence to successfully convict the person; or they weren't interested in charging the person for some other reason, he said.

Alternatively, Burke said prosecutors might have agreed not to press charges against individuals in exchange for their testimony.

O’Callaghan has said he signed no such agreement.

Another possibility: Naming someone a “co-conspirator” is a tactic that could allow the prosecution to use testimony that otherwise wouldn’t be admissible, Burke said. In this situation, he said, the label reflects an evidentiary step rather than an association of guilt.

Burke said it was hard to determine which of those possibilities applied to O’Callaghan’s case and said they could be indistinguishable in court proceedings. But he said he was inclined to believe it was a purely evidentiary step.

Burke said it was noteworthy that O’Callaghan was promoted at Nomura after the investigation, and that O’Callaghan was open to testifying without striking a deal with the government.

Joseph Roth, a lawyer whose practice focuses on governmental investigations and litigation, pushed back on O’Callaghan’s claim that the label wasn’t any indicator of wrongdoing. But he said it depended on the facts of a particular case.

"I don’t think I agree that being labeled an 'unindicted co-conspirator' is 'not at all an indication' of anything at all, but I think it is hard to give too much weight to the label alone without knowing the details of the case," Roth wrote in an email.

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Laura Gersony covers national politics for The Arizona Republic. Reach her at [email protected] or 480-372-0389.

This article originally appeared on Arizona Republic: Conor O’Callaghan 'unindicted co-conspirator' in Nomura fraud case