Former UBS Group AG (UBS) and Citigroup Inc. (C) trader Tom Hayes, the first person to stand trial for manipulating Libor, was sentenced to 14 years in prison after being found guilty of conspiracy to rig the benchmark rate.
After a week of deliberations, jurors unanimously found that the 35-year-old worked with traders and brokers to game the London interbank offered rate to benefit his own trading positions. Judge Jeremy Cooke’s sentence after the verdict is among the longest for financial crime in the U.K.
“Probity and honesty are essential, as is trust. The Libor activities of which you took part in put that in jeopardy,” Cooke said as he handed out the sentence in London Monday. “A message needs to be sent to the world of banking.”
Prosecutors said during the nine-week trial that Hayes was the “ringmaster” of a global network of 25 traders and brokers from at least 10 firms who tried to manipulate Libor on an industrial scale. He would bribe, bully, cajole and reward his contacts for their help in skewing the benchmark, used to price more than $350 trillion of financial contracts from mortgages to credit cards and student loans.
The scruffy, blond-haired Hayes has been the public face of the global scandal over Libor rigging since he was first charged by U.S. officials in 2012. Authorities have levied $9 billion in fines against banks and brokerages, including a $1.5 billion penalty for UBS. Citigroup has been censured by Japanese regulators over its involvement.
Before sentencing, Hayes’s lawyers reiterated their defense that benchmark manipulation was widespread in the industry.
“The conduct Mr. Hayes has been convicted of was prevalent” for at least five years prior to his joining UBS, Neil Hawes, his lawyer, told Cooke. There were “others above him who were aware of the activity.”
The sentence was double the seven-year term that was given to Kweku Adoboli, another UBS banker, who was convicted of fraud in 2012 in relation to a $2.3 billion trading loss.
Libor rigging “erodes public confidence and undermines the integrity of financial markets,” prosecutor Mukul Chawla said before the punishment was handed out. “Hayes played a leading role” in the scandal.
Central to the case against Hayes were 82 hours of interviews with the U.K. Serious Fraud Office in 2013, during which he detailed his methods and even named co-conspirators. One of the traders he fingered was his own step-brother, Peter O’Leary, then a graduate trainee at HSBC Holdings Plc in London.
In the SFO interviews, Hayes coolly explained how the scam started soon after he joined UBS as a yen interest-rate swap trader in Tokyo in the summer of 2006 and continued through to his firing by Citigroup in September 2010.
“I probably deserve to be sitting here because, you know, I made concerted efforts to influence Libor,” Hayes said in a Feb. 1, 2013, SFO interview. “Although I was operating within a system or participating within a system in which it was commonplace, you know, ultimately I was someone who was a serial offender.”
‘Catalog of Mistakes’
After cooperating and being admitted into the SFO’s whistle-blower program, Hayes had a change of heart and pleaded not guilty.
In court, Hayes called the interviews a “catalog of mistakes,” half-truths and falsehoods. He said he had exaggerated his culpability to avoid extradition to the U.S., where he was facing a possible 60-year sentence.
I wanted to say “I don’t think I’ve done anything” wrong, Hayes said during his fourth day of testimony, before breaking down in tears in front of his wife and family in the public gallery. “I had to say I was doing something wrong. I had to get charged. I was pretty much having a breakdown.”
One lawyer said the contradictions between the SFO interviews and the courtroom testimony was one of the keys to the unanimous verdict.
“In this case, Hayes’ pivotal decision to testify has proven disastrous,” said David Corker, a partner at Corker Binning in London. “In this case, it would have been better for Hayes to have remained silent.”
The judge told the jury that Hayes had been diagnosed with a form of mild, or very mild, Asperger’s Syndrome. For that reason he didn’t have to sit in the dock during the trial and had an intermediary sat next to him to offer assistance should he need it.
The intermediary regularly told Hayes to “calm down” and “stop it” when he took issue with something and started shaking his head or waving his hands around.
UBS said in a statement that it wasn’t a party in the case.
“It was a matter between the SFO and Mr. Hayes,” the Zurich-based bank said in a statement. “The bank has resolved this legacy matter with most authorities.”