NEW YORK (Reuters) - More than a dozen current and former employees of several large banks under investigation for allegedly trying to manipulate benchmark interest rates have hired defense lawyers over the past year, according to people familiar with the matter.
The individuals, some whom were employed in either New York or London by Barclays, UBS and Citigroup, have retained lawyers as a federal grand jury in Washington, D.C. gathers evidence for potential criminal charges, these people said.
In the case of Barclays and UBS, multiple law firms are representing individuals who have worked at those banks, sources said.
The U.S. Commodity Futures Trading Commission is treating the Libor investigation as one of its top priorities. One person said CFTC Chairman Gary Gensler has been getting regular briefings every few weeks on the status of the probe into the possible manipulating of the London Interbank Offered Rate - or LIBOR - which underpins some $550 trillion in loans, securities and derivatives.
An indication of just how important the investigation is for the CFTC is that the lead enforcement attorney Anne Termine is now working on Libor full-time, said individuals close to the CFTC. Her team also includes experts specifically brought in by the CFTC to help on the LIBOR case, including trial attorneys and people to help manage the database of emails turned over by the banks.
The sources discussing the investigation did not want to be identified because the probe, which began about four years ago, is continuing and no individuals have been charged with any wrongdoing.
The Libor investigation became an international banking scandal in June when Barclays agreed to pay $453 million to settle charges by U.S. and British authorities that some of its employees had attempted to manipulate the benchmark Libor lending rate.
Barclays admitted it submitted false information to the British Bankers Association as part of the complex process of setting Libor, in order to influence the pricing of derivatives and also rebut speculation about the weakness of the bank’s balance sheet during the financial crisis.
CFTC and federal prosecutors in Washington, D.C. have led the Libor investigation in the U.S. As part of its settlement with regulators, Barclays entered into a nonprosecution agreement with federal prosecutors, which insulates the bank from criminal charges but not necessarily its employees.
Officials with the Department of Justice and the CFTC declined to comment.
Representatives for Barclays, which has hired Sullivan & Cromwell, declined to comment, as did UBS. A Citi spokesman said it is not uncommon for the bank to retain outside counsel to represent individual employees “who are witnesses in relation to complex matters,” adding it in no way suggests any misconduct by that individual.
Barclays’ settlement led to the swift resignation of the bank’s chief executive Robert Diamond Jr. and sparked a political fire storm in England. Within days of resigning, Diamond was called before the British Parliament to testify on the bank’s role in the interest rate fixing scandal.
Lawmakers on Capitol Hill are gearing up for potential hearings in Washington, D.C. The chairman of a House Financial Services subcommittee has given the New York Fed until Friday to turnover transcripts of any communications it had with Barclays regarding the setting of Libor rates from August 2007 to November 2008.
The CFTC settlement with Barclays covers attempts to manipulate Libor from as far back as 2005 and ending in 2008.
Meanwhile, other people familiar with the inquiry, including private defense lawyers, cautioned that it is too soon to say whether other banks will be penalized in the investigation and if individual traders will face either civil or criminal charges.
They said U.S. investigators are looking for evidence that traders at the banks under scrutiny tried to manipulate Libor in order to increase their own profits, not to make the bank as a whole look healthier.
These sources said many of the individuals who have retained lawyers have signed waivers with the Justice Department extending the statute of limitations for bringing charges until the end of year.
It’s not uncommon in long-running criminal investigations for individuals to agree to so-called “tolling agreements” to avoid having federal prosecutors make a rush to judgment in bringing an indictment.
As a global benchmark interest rate, Libor is used to set prices on a wide range of financial instruments from home loans to municipal bonds and derivatives contracts.
Panels of banks report their borrowing costs each weekday to the BBA, which compiles them to publish benchmark borrowing rates for a range of currencies, including U.S. dollars, euros, UK pounds and yen.
Those benchmark rates are then used by lenders around the world to determine interest rates for loans and other financial products.
The dollar Libor panel consists of 16 banks, which have all been probed by regulators for their roles in a scheme to artificially fix the Libor rate sometime between 2005 and 2008.
Outside of Barclays, the other bank that has drawn the most attention in the rate probe is UBS.
Last year, UBS agreed to cooperate with the Justice Department in an antitrust investigation looking into whether the banks on the panel colluded to manipulate the Libor setting. In return, the DOJ granted UBS antitrust immunity. But experts say the immunity does not extend to other potential avenues of criminal prosecution.
Several UBS employees, located not just in London but in the U.S., Asia and Europe, have retained lawyers, sources said. In the U.S., UBS headquarters are in Stamford, Conn. (Reporting by Emily Flitter and Sarah Lynch; editing by Matthew Goldstein, Jennifer Ablan and Edward Tobin)