Trader jailed for Libor rigging

A “greedy” City trader has become the first man to be jailed for rigging Libor rates in a scandal that shook financial markets.

Tom Hayes, 35, was yesterday handed a 14-year prison term for his role as the “ringmaster” in an enormous fraud to manipulate the benchmark interest rates.

Sentencing him at London’s Southwark Crown Court, Mr Justice Cooke said: “What this case has shown is the absence of that integrity which ought to characterise banking.

“You, as a regulated banker, succumbed to temptation in an unregulated activity because you could.”

Hayes, a highly-paid ex-trader at UBS and Citigroup, orchestrated a scheme to interfere with the rate to boost his own six-figure earnings.

In an audio clip, he said “influencing” Libor was “commonplace” and he admitted he was a “serial offender”.

Hayes, of Fleet, Hampshire, was found guilty of eight counts of conspiracy to defraud, from 2006 to 2010, when he worked for UBS and Citigroup.

It took jurors just over a week to reach their verdicts following a two-month trial.

The judge said: “You played a leading role in the manipulation of Libor.

“You exerted pressure on others, essentially trained those junior to you in the activity, made corrupt payments to brokers for their assistance.

“The conduct involved here is to be marked out as dishonest and wrong, and a message sent to the world of banking, accordingly.

“The reputation of Libor is important to the City, as a financial sector, and the banking institutions of this City. Probity and honesty is essential, as is trust.

“The Libor activity, in which you played a leading role, put all that in jeopardy.”

A string of banks, including Barclays, Lloyds Banking Group, Royal Bank of Scotland and Deutsche Bank, were fined billions of pounds for their part in the Libor scandal. Dozens of traders were fired and one person, whose name and bank cannot be reported, pleaded guilty to their role.

A two-month trial heard Hayes, who has been on legal aid, was at the helm of a plot to rig Libor that “struck at the very integrity of that system”.

Described by Mr Justice Cooke as “by nature a gambler”, he was driven by a thirst for money.

He told investigators after his arrest in December 2012: “You want every little bit of money you can possibly get.”

However, the judge said it was no excuse to claim other traders were also manipulating Libor.

He said: “Though the type of activity you were involved in was commonplace and common practice, not considered as wrong by those involved... the fact that others were doing the same as you is no excuse. Nor is the fact that your managers saw the benefits of what you were doing and condoned it, embraced it, even encouraged it.”

Hayes’s mother, who attended much of the trial, looked tearful as her son was led from the dock, while his father and wife looked to Hayes as he was sentenced.

Mukul Chawla QC, prosecuting, said Hayes would “cajole”, “beg” and “bribe” brokers through “corrupt” trades to help manipulate Libor.

Mr Chawla said: “He was the ringmaster at the very centre, telling others around him what to do and, in a number of cases, rewarding them for their dishonest assistance.”

He built up a network of traders to help him carry out the fraud, even attempting to drag in his younger stepbrother Peter O’Leary.

He once offered a contact US$100,000 if he kept the Libor rate as low as possible.

Hayes, described as “extremely intelligent”, worked for Royal Bank of Scotland and Royal Bank of Canada before joining UBS in 2006 as a traderin Tokyo. He was paid £1.3m before tax in salary and incentives by UBS from September 2006 to December 2009.

He joined Citi in 2009, as he “felt that UBS were not paying him enough”, and received £3.5m before tax for nine months’ work.

The prosecutor said Hayes immediately set about rigging Libor in his new job. He sent a message on his first day with UBS, on September 29, in 2006, saying: “Do me a favour and get the Libor rate up?”

A trader in yen Libor derivatives, he effectively bet on movements of the daily rate at which banks borrow from each other.

He rigged the submissions made by the panel banks used to calculate that rate.

He was sacked after his methods were formally reported to senior management. He was arrested in the UK in December 2012.

Hayes, who has mild Asperger’s syndrome, admitted his part but claimed it was not dishonest and his bosses knew what he was doing.

He could be extradited to the US, where he was charged over Libor riggingin December 2012.

UBS said: “UBS was not a party to this case. It was a matter between the SFO and Mr Hayes and UBS has no comment. The bank has resolved this legacy matter with most authorities and is committed to reducing operational risks and upholding a culture of doing the right thing.”

Citigroup said in a statement: “Tom Hayes was terminated in September 2010 following an incident that was reported to compliance. Citi also reported the matter to the appropriate regulators at the time.”Hayes was at UBS from August 2006 to December 2009, and at

Citigroup from December 2009 to September 2010.