Tom Hayes is found guilty on all counts of rigging Libor rates 

Former trader Tom Hayes has been convicted of manipulating Libor rates for personal gain

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  • Hayes was described as 'the ringmaster' in an enormous fraud
  • In an audio clip, he said 'influencing' Libor was 'commonplace'
  • He denied eight counts of conspiracy to defraud, but was found guilty of all
  • He becomes the first person to be convicted by a jury of rigging Libor rates

 

The first banker to stand trial over the Libor rate fixing scandal faces years behind bars after being found guilty of manipulating the global system of interest rates.

Former UBS and Citigroup trader Tom Hayes, 35, conspired to rig the London interbank offered rate (Libor), which helps set borrowing costs worldwide.

Hayes, a derivatives trader, was the 'ringmaster' of a group of bankers who 'cajoled', 'begged' and 'bribed' rate setters at other banks into submitting false data on an almost daily basis to manipulate the rate between 2006 and 2010, prosecutors said. 

During his four years at UBS he made the bank almost £200million and was paid £1.3million in total.

But 'dissatisfied' he quit for Citigroup in 2009, where he earned £3.5million before being sacked after nine months when his methods were discovered.

Prosecutor Mukul Chawla QC said: 'Mr Hayes's desire was to earn and make as much money as he could.

'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.'

Hayes, from Fleet in Hampshire, conspired with traders at other banks including JP Morgan, RBS and major financial brokers as well as with colleagues, Southwark Crown Court heard, 

He even asked his stepbrother Peter O'Leary - a junior trader at HSBC - to become friendly with the rate setter so that he procure favours.

In recorded emails and telephone calls Hayes first checked whether Mr O'Leary knew the man in charge of setting Libor.

In the telephone call played to the jury Hayes asked: 'Mate, can you do me a big favour and ask him if he will set three month Libor on the low side in the next few days.'

He added: 'Get to know him, it would be a real help for me, I have $1million of risk, I could come out with half a million bucks if he sets Libor low.

'I just need low yen three month Libor, help your brother out.' 

Giving evidence Hayes said: 'Everything I did was with complete transparency. Everything I did my managers knew about... sometimes going up all the way to the CEO.'

 

Shortly before the trial he had been diagnosed with mild Asperger syndrome and had been nicknamed 'Rainman' and 'Tommy Chocolate' for preferring hot chocolate while other traders drank beer.

Hayes once offered to pay a contact 100,000 US dollars if he kept the Libor rate as low as possible.

Hayes and his wife Sarah arrived at Southwark Crown Court ahead of the verdicts today

Hayes and his wife Sarah arrived at Southwark Crown Court ahead of the verdicts today

Mr Chawla said: 'He behaved in a thoroughly dishonest and manipulative manner by repeatedly cheating those with whom he had entered into huge financial transactions. The motive was a simple one: it was greed.' 

Hayes, described as 'extremely intelligent', worked for Royal Bank of Scotland and Royal Bank of Canada before joining UBS in 2006 as a trader in Tokyo.

WHAT IS THE LIBOR RATE? 

The London Interbank Offered Rate is used as the basis for hundreds of trillions of dollars of loans and transactions around the world from complex derivatives to mortgages.

It is a benchmark that indicates the interest rate that banks charge when lending to each other and is seen as fundamental to the operation of UK and world markets.

Interbank rates were first thrust into the spotlight during the 2007 and 2008 credit crunch when rates shot up as nervous lenders stopped lending to each other.

Alleged rigging is said to have involved the submission of false figures in order either to make more money or to paint a false picture of a bank's health.

The scandal which meant consumers face higher interest charges saw eight banks and brokerages fined billions by regulators in the US and the UK. 

He was paid £1.3 million before tax in salary and incentives by UBS from September 2006 to December 2009.

He joined Citi in 2009 after he 'felt that UBS were not paying him enough', and received £3.5 million before tax for just nine months' work.

The prosecutor said Hayes immediately set about rigging Libor in his new job. He sent a message on his first day trading with UBS, on September 29 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 are able to borrow from each other.

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

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

He initially admitted to the Serious Fraud Office that he had been dishonest but said this was simply an attempt to get charged in the UK and avoid extradition to the US for fraud.

Hayes was found guilty on all eight counts of conspiracy to defraud by manipulating the global system of interest rates which each carries a maximum sentence of 10 years in jail.

He stared straight ahead emotionless as the verdicts were read out. His wife and parents sat with their heads bowed as they heard the verdicts.

The court heard Hayes made £3.5million in nine months while working for Citigroup in London

The court heard Hayes made £3.5million in nine months while working for Citigroup in London

Prior to the trial, Hayes's then-barrister George Carter-Stephenson QC suggested that while his actions may have been 'morally reprehensible', they were not crimes. He suggested that the rules governing the submission of Libor fell short of a legal duty.

The legal situation has since been clarified under the Financial Services Act 2012 which enacted a specific crime of manipulating benchmarks which carries a maximum sentence of seven years.

In June, Bank of England governor Mark Carney backed plans laid out by the Fair and Effective Markets Review for the lengthening of the maximum sentence for market abuse from seven to 10 years.

After the allegations about rate-rigging came to light, oversight of Libor was passed from the British Bankers' Association to the Intercontinental Exchange and rates are now based on actual transactions not estimates. 

THE MATHS GRADUATE DUBBED 'RAINMAN' WHO WENT ON TO COMMAND HUGE SALARIES FROM CITY BANKS: WHO IS TOM HAYES?

A banker with mild autism, superhero bedding and a penchant for hot chocolate; on the surface Tom Hayes is an unlikely criminal mastermind. 

Hayes hit out at what he said were attempts to cast him as the 'Jesse James' of corrupt Libor markets during his trial.

Far from being like the Wild West outlaw, Hayes told how he was dubbed 'Rain Man' by colleagues - a reference to the Dustin Hoffman film about an autistic man.

Tom Hayes described himself as an 'obsessive' and told how making money to him was like 'solving an equation'

Tom Hayes described himself as an 'obsessive' and told how making money to him was like 'solving an equation'

And he was teased for his superhero bedding, telling jurors: 'They used to laugh at me, I had the same superheroes duvet cover I had since I was eight. I didn't see the point buying a new one when that one was perfectly adequate.'

He told how he shunned the City's drinking culture, preferring to sip on a hot chocolate while his workmates drank beer - earning him the nickname Tommy Chocolate.

He said: 'I didn't know of that nickname, didn't think anyone would be bothered if I drank hot chocolate and they drank beer.'

But behind his quirks and unassuming demeanour Hayes was at the heart of a massive fraud to rig Libor which undermined the integrity of financial markets, prosecutor Mukul Chawla QC said.

He was 'greedy' and driven by a desire for money, London's Southwark Crown Court heard.

Not satisfied with his large salary, he rigged Libor so he could impress his bosses and make millions, jurors heard.

Hayes, 35, a married father-of-one who has a mild form of Asperger's Syndrome, told how his 'love-hate job' was like a rollercoaster.

He said: 'It could be the worst job in the world, could make you want to jump off a bridge and make you feel physically sick when you went into work.

'But the success when you got it right. That's like solving that equation, it's like seeing that number pop up on your screen. There's no subjectivity, you make money or lose money - it's so pure.'

Hayes, from Fleet in Hampshire, graduated from the University of Nottingham in 2001 with a degree in maths and engineering.

From 2001 to 2004 he worked for Royal Bank of Scotland, before moving to Royal Bank of Canada for two years.

In 2006 he joined the Swiss bank UBS in Tokyo as a trader, before moving to America's Citigroup in 2009, remaining in Tokyo. 

A self-confessed obsessive, Hayes told jurors: 'I very much miss my old job and my career. It was a big part of my identity.' 

Staff Afeni
By Staff Afeni 03/08/2015 12:49:00