Ex-Barclays trader stood to gain $172.50 bonus from alleged Libor fixing, court hears

LONDON (Reuters) - An ex-Barclays BARC.L trader accused of fixing a key financial benchmark for personal gain stood to earn a bonus of only $172.50 for his role in alleged rate-rigging in 2007, a London court heard on Friday.

Adrian Darbishire, lawyer for Ryan Reich, one of five men on trial for conspiracy to defraud by manipulating U.S. dollar Libor rates between June 2005 and September 2007, shared the estimated sum with the jury, in response to prosecution allegations that huge sums were involved.

“So what’s the loot? What’s the possible cash incentive?” Darbishire said on the opening day of defence arguments.

Britain’s Serious Fraud Office (SFO) has alleged that Reich, Barclays’ former rate submitter Jonathan Mathew and ex-traders Stylianos Contogoulas, Jay Merchant and Alex Pabon dishonestly agreed to procure or make false or misleading submissions of rates into the dollar Libor-setting process.

The five men have pleaded not guilty. Each count carries a maximum jail sentence of 10 years.

Reich, who joined Barclays in August 2006 on the New York swaps desk, graduated from Princeton University, where he was a baseball star, and was described as ambitious and hard working by Darbishire.

On the 180 Libor-setting days between January and August 2007, there were only eight requests made that could have affected the Libor rate, which would have earned Reich a $172.50 cut of the potential Libor profits, Darbishire told the court, based on his own calculations and assumptions.

“They are said to be motivated by greed,” said Darbishire. “If the practice was such a big part of the trading strategy, why is it done so infrequently?”

The London interbank offered rate (Libor) is a benchmark for about $450 trillion of financial contracts worldwide, from complex derivatives to student loans.

Lawyer Hugh Davies, counsel for Merchant, a British citizen born to Indian parents in Calcutta, told the court his client was never schooled in the rights and wrongs of Libor setting and the practice of making requests was widespread in the industry.


“It’s hardly surprising the Libor question was misunderstood,” Davies told the court. “Barclays did nothing to educate the traders about what could be allowed in the submitting process ... At no point did compliance raise any issue about this.”

Mathew, 24, who was living with his parents during the indictment period, was standing trial for doing what his boss told him to do, his lawyer William Clegg said, adding that he was taught by his boss how to handle Libor requests from traders.

Mathew was not in charge of submissions and only made dollar Libor requests when his boss was away, said Clegg, adding that out of 500 Libor submissions during the indictment period, only 30 were submitted by Mathew, 26 of which are said to have been adjusted following requests from traders.

“That’s what he was told, that’s what he was taught and that’s what, unsurprisingly, he did,” Clegg told the court. “He’s in the dock for doing what at work he was told to do.”

Co-defendant Pabon was also told by his boss, Merchant, to put in Libor requests that suited his positions, his lawyer Tom Allen said.

“He openly and completely accepts he made Libor requests,” said Allen. “He had no idea it was wrong or in some way committing an offence. He was instructed to by his boss.”

By 2006 Pabon was burnt out by banking and resigned, moving back to Texas, where he subsequently worked for a software company.

“If he was so driven by money, to what extent does that square with his departure and arrival back home in Texas?” Allen asked the court.

Pabon was never told any rules about requesting Libor submissions and Barclays was incredibly casual about the practice, Allen said. “A monumental failure by Barclays is being visited on an individual.”

Lawyers for Contogoulas will lay out their defence on Monday.

Barclays declined to comment. The high-profile trial, the third rate-rigging case brought by the SFO, is expected to last about 12 weeks.

Editing by Sinead Cruise and David Holmes