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Libor Manipulation – Tom Hayes Convicted

3 August 2015

Tom Hayes, a former trader at UBS and Citigroup, who was one of three individuals arrested in December 2012 by the Serious Fraud Office and the City of London Police, has been found guilty of eight separate counts of conspiring to rig Libor interest rates.

The offences took place between August 2006 and December 2009, when he was an employee of UBS, and December 2009 and September 2010, when he was an employee of Citigroup.

He has been sentenced to 14 years imprisonment by Mr. Justice Cooke at Southwark Crown Court.

The prosecution said that Hayes repeatedly asked rival traders and brokers, as well as submitters in his own banks, to move Yen Libor submissions up or down to suit his needs, often by offering to reward them for their efforts.  After his arrest Hayes himself admitted in interviews with the SFO that he tried to influence Libor interest rate submissions made by banks so that his trading profits were amplified.

In his sentencing remarks, Mr. Justice Cooke noted: “In the course of two interviews on 31 Jan and 1 Feb 2013, in order to be accepted on a SOCPA [Serious Organised Crime and Police Act] programme, you admitted your part in conspiring with others to influence the submissions at the banks which employed you, and of other banks, by whatever means you and the brokers could use . . . Having signed a SOCPA co-operation agreement on 23 March 2013, in a series of further interviews between then and June 2013, you descended into greater detail about those activities and those involved with you in them.  In short, in those interviews you admitted each and every ingredient of the offences.

However, in an attempt to explain away his admissions, in Court Hayes said, under oath, that the reason he co-operated with the SFO was because he was terrified of extradition to the US and wanted to face trial in the UK.

In sentencing Mr. Justice Cooke noted that:“Having pressed the SFO to be charged in this country in order to minimise the likelihood of extradition to the US to face charges there, following charge on 18 June 2013, you changed lawyers in August and withdrew from the SOCPA process on 9th October.  You made use of the SOCPA process, agreeing to plead guilty and to give evidence against co- conspirators before opting out of it, when the threat of extradition had diminished.  Thereafter, every legal argument that could be made has been made.”

In sentencing Hayes, Mr. Justice Cooke noted that the maximum sentence is 10 years for a count of conspiracy, but which is generally recognised as too low.  He stated that the starting point for a Category A case of high culpability based on a loss figure of £1m is 7 years, though the figures in Hayes’s case were much higher and there were a number of counts which “must drive the sentence up.”  The Judge stated that he would look at the four counts when Tom Hayes was at UBS as distinct from the four counts relating to the time when he was employed by Citigroup.

Mr. Justice Cooke sentenced Hayes to 9 years and 6 months on Counts 1 to 4 concurrent on each and 4 and a half years on Counts 5 to 8 concurrent on each, but consecutive to the first four counts — making 14 years in total.  He stated, “You will serve up to half your sentence in custody before you are released on licence: you must abide by the terms of the licence and commit no further offence or you will be liable to be recalled and you will then serve the rest of the sentence in custody.”

The trial of some of Tom Hayes’s alleged co-conspirators begins on 21 September 2015.   A further trial of individuals charged with the manipulation of US Dollar Libor begins on 11 January 2016.

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Note: This is a general briefing and not an exhaustive treatment of the subject.