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Bankers are having a tough time right now. Robert Kiyosaki rails against them. Most Americans blame them for the Great Recession. The South African competition authorities are hunting them on allegations of colluding on forex trades to gouge profit from their clients.The global blood lust for crooked bankers has now claimed a major victim in Tom Hayes, a star trader at global banking group UBS. He is to serve 14 years in a British jail after being convicted of rigging the key Libor interest rate. UBS has already paid a staggering $1.5bn in fines after admitting to its part in manipulating the benchmark that underpins a staggering $350 trillion in derivatives. Hayes, a 35 year old derivatives trader who specialised working with the Japanese currency, is the first on a long list of bankers who stand accused of conspiracy and manipulation of Libor – a scandal that forced former Barclays CEO Bob Diamond to resign. His conviction is regarded as a victory for the UK’s Serious Fraud Office. More bankers are expected to join him behind bars. This story is the focus ot today’s News in 90 Seconds. Click here to listen. – Alec Hogg
By Lindsay Fortado and Caroline Binham
Tom Hayes, the first person to stand trial for rigging benchmark interest rates, has been convicted eight counts of conspiring with other traders and brokers to manipulate Libor, a decision that could embolden prosecutors to file charges against some of his alleged co-conspirators.
The 12-person jury gave their verdicts on Monday on Mr Hayes, a 35-year-old former yen derivatives trader at UBS and Citigroup, after nine-week trial in London.
The case – which centred on whether Mr Hayes’s intent in rigging the rate was dishonest – is a major victory for the UK’s Serious Fraud Office, which has several related Libor investigations in the works. There are already two further trials of other defendants scheduled to begin in the coming year, and the agency is also probing manipulation of forex rates.
Prosecutors alleged that Mr Hayes acted as the ringleader in manipulating yen Libor by asking rate setters and traders at UBS and several other banks who were on the panel that set the daily rate, and external brokers, to move the rate up or down depending on what would benefit his trading positions.
He was further alleged to have encouraged brokers to help him influence other banks to move the rate by asking “favours” of their mates, or by altering their daily run-through emails, which had suggestions of where Libor should be set on a given day. Mr Hayes rewarded the brokers by paying them extra commission through wash trades, a system prosecutors said amounted to paying bribes.
During two weeks of evidence during the nine-week trial in London, Mr Hayes portrayed himself as a numbers-obsessed, awkward trader – teased by his colleagues for being “different” – who cared only about doing a good job for UBS.
“I wanted to do my job as perfectly as I could,” he testified. “It doesn’t matter if I was cleaning a deep fat fryer or picking chicken off the bone, those jobs were left to me because I’d do them the best possible.”
Mr Hayes referred to his requests to traders and brokers for help in rigging the rate as “a probability exercise” that would increase his chance of it being manipulated.
The conviction follows a two-and-a-half year criminal investigation by the SFO, which arrested him in December 2012, moments before the US Department of Justice filed a sealed indictment naming him in its own parallel criminal probe.
In the months following his arrest, Mr Hayes gave the SFO 82 hours of taped interviews in which he admitted to trying to influence the submissions made by banks, both those of his employers and of others, in order to boost his trading book.
But Mr Hayes testified that he only co-operated with the SFO because he was terrified of extradition to the US and wanted to face trial in his home country, where sentencing guidelines are markedly lower. When he became angered by the process, he reversed his decision to plead guilty, he said. He never believed he was being dishonest, despite his admission to the SFO that he was, he told the jury.
Mr Justice Cooke, who presided over the case, clearly never warmed to Mr Hayes. In a packed court hearing before the trial began, he said Mr Hayes “is, by nature, a gambler.”
The feeling was mutual. Mr Hayes tried to have the judge thrown off the case before the trial began for allegedly showing too much bias. He argued that Mr Justice Cooke – a high-court judge with 14 years’ experience on the bench – had demonstrated that he could not fairly try Hayes’s case as he had a “closed mind” to his defence arguments.
“There was dishonesty,” Mr Justice Cooke said in open court. “It’s an open-and-shut case.” Another comment to which Mr Hayes took exception was the judge telling his former barrister that it was not too late “for your client to plead guilty.”
“The judge absolutely hates me,” Hayes wrote in a note to his legal team at the time, according to Mr Justice Cooke’s decision that dismissed the trader’s argument for a recusal.
“A fair-minded and fully informed observer would be, in my judgment, appalled at the public expense incurred and to be incurred in this matter, if he was aware that the defendant had, as it appears, fully admitted his part in the offences,” the judge wrote in his decision.
Mr Hayes was charged with conspiring with more 25 other brokers and traders, seven of whom worked at UBS. That included Mike Pieri, Simon Oddie, Mirhat Alykulov, Roger Darin, Joachim Ruh, Rolf Keiser andYugo Matsumoto. Only Mr Darin has been charged in the investigation, by US authorities. Mr Darin has not yet been arraigned in the US.
(c) 2015 The Financial Times Ltd.
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