Top banks named in ex-trader Hayes' Libor charges

LONDON Thu Jun 20, 2013 11:27am EDT

1 of 4. Former UBS trader Tom Hayes leaves Westminster Magistrates Court in London June 20, 2013.

Credit: Reuters/Neil Hall

LONDON (Reuters) - Former UBS (UBSN.VX) and Citigroup (C.N) trader Tom Hayes conspired with employees from at least 10 financial institutions to manipulate benchmark interest rates over four years, British prosecutors alleged in court on Thursday.

Hayes is the first suspect to be brought before a court in a inquiry stretching from North America to Asia into how traders rigged crucial benchmark rates such as Libor (London interbank offered rate), against which trillions of dollars of loans are priced.

The scandal, which has sparked public and political outrage and laid bare the failings of authorities and bank bosses, has to date seen UK and U.S. regulators fine three banks a total of $2.6 billion and prosecutors and police charge two men, including Hayes.

Dressed in a blue, open-necked shirt and cream trousers, 33-year-old Hayes stood in the dock at London's Westminster Magistrates' Court as eight offences were read out relating to his employment in Japan at UBS and Citigroup between August 2006 and September 2010.

Prosecutors allege that together with employees from institutions including UBS, Citigroup, Royal Bank of Scotland (RBS.L), Deutsche Bank (DBKGn.DE), JPMorgan Chase (JPM.N), HSBC (HSBA.L), Rabobank and interdealer brokers ICAP (IAP.L), Tullett Prebon (TLPR.L) and RP Martin, Hayes conspired to defraud.

Hayes spoke only to confirm his name and address and that he understood the charges against him. He was granted bail on condition that he does not leave or attempt to leave the UK and was ordered to appear at the higher Southwark Crown Court on July 4 for further proceedings.

COOPERATION

Hayes joined Swiss bank UBS in Tokyo in 2006, becoming a senior trader of interest-rate derivatives indexed to yen-denominated Libor. In late 2009, he left UBS to join Citigroup in Tokyo. He left the U.S. bank less than a year later.

Charges against him include conspiring with others "to defraud in dishonestly seeking to manipulate yen London interbank offered rates and other interbank offered rates ... with the intention that the economic interests of others would be prejudiced and/or to make personal gain for themselves or another."

In a statement after the hearing, ICAP said although an unnamed employee at one of its global subsidiaries had been referred to in one of the charges against Hayes read out in court, no ICAP company had been charged.

"ICAP has provided information to the SFO (Serious Fraud Office) and continues to cooperate with its investigation," it said.

Dutch Rabobank also reiterated it was cooperating with global investigations and that it would defend itself against civil litigation pending in the U.S. The bank said in February it expected to settle allegations of interbank rate rigging with U.S. and UK regulators.

Tullett Prebon said it was cooperating with UK authorities, adding that it had not been informed that it or its brokers were under investigation.

RP Martin, UBS, Citigroup, Deutsche Bank, JPMorgan, HSBC and RBS declined to comment.

UNDER PRESSURE

The SFO has been under pressure to launch proceedings against Hayes since he was charged by the U.S. Department of Justice with conspiracy, wire fraud and an antitrust violation last December.

The SFO, a cash-strapped agency that narrowly avoided being scrapped in 2011, would have faced severe criticism had U.S. prosecutors extradited Hayes, a Briton, before he faced UK justice.

British politicians have said a UK trial for British Libor suspects will help show the UK justice system is as capable of tackling white-collar crime as its U.S. counterpart.

Having named some of the world's largest banks and brokers in its charges, lawyers say the SFO is now under increasing pressure to make more prosecutions.

"Without further prosecutions, now that a number of financial entities have been named in court, it is inconceivable to think that the public faith in Libor and the UK financial system as a whole will be fully restored," said James Carlton of law firm Fox Williams, who is not involved in the case.

($1 = 0.6407 British pounds)

(Additional reporting by Clare Hutchison, Steve Slater, Laura Noonan and Matt Scuffham in London and Sara Webb in Amsterdam, editing by Alex Smith and Erica Billingham)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
breezinthru wrote:
The CEO’s and upper level managers knew nothing of the CDO shenanigans that crippled economies around the world in late 2007. They knew nothing of collusion between credit rating agencies and international finance. They were publicly scolded, but scolding is a small price to pay when weighed against large financial gains.

Surely this time when the CEO’s and upper level managers claim they knew nothing about LIBOR manipulation, we won’t believe them and someone will have their assets seized under RICO laws and they accompany Tom Hayes to prison for many years.

If we fall short of that, we are encouraging more illegal and unethical behavior by the money barons.

Jun 20, 2013 12:23pm EDT  --  Report as abuse
davext wrote:
I think this is more of a reflection of the lack of ethics for people that go into these types of finance/investment banking careers. This is surely to happen when there is limited education on ethics starting from University/College to Career life.

Jun 20, 2013 1:55pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

A tourist takes a plunge as she swims at Ngapali Beach, a popular tourist site, in the Thandwe township of the Rakhine state, October 6, 2013. Picture taken October 6, 2013. REUTERS/Soe Zeya Tun (MYANMAR - Tags: SOCIETY) - RTR3FOI0

Where do you want to go?

We look at when to take trips, budget considerations and the popularity of multigenerational family travel.   Video