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August 03, 2015 at 09:04 AM
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.
Libor Fines
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.
SFO Interviews
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.
