City traders’ Libor rate-rigging criminal convictions quashed by Supreme Court
Former City traders convicted of the rate-rigging scandal have had their criminal charges overturned by the top UK court after years of fighting.
The Libor scandal involved the manipulation of the London Interbank Offered Rate by traders at major financial institutions. The 54-year-old benchmark borrowing rate was permanently retired by the City regulator back in October.
Former UBS and Citigroup trader Tom Hayes was found guilty in August 2015 of conspiracy to defraud by ‘rigging’ the Libor. He was sentenced to 11 years in prison and was released after five and a half years.
A former Barclays trader, Carlo Palombo, was found guilty in March 2019 of conspiracy to defraud by rigging the Euro Interbank Offered Rate (Euribor). Palombo served four years in prison.
Both Hayes and Palombo, along with others, were investigated by the Serious Fraud Office (SFO).
In January 2022, the United States Court of Appeal for the Second Circuit reversed the conviction of two former US traders for fraud in the manipulation of Libor rates. The former traders contend that, in doing so, the US court adopted a different definition of Libor to that used by the English courts in their convictions.
The Criminal Cases Review Commission (CCRC) referred these cases to the Court of Appeal, after concluding there was a ‘real possibility’ that the court would find their convictions unsafe.
However, last March, the Court of Appeal justices upheld both convictions. The court also rejected their application to appeal to the Supreme Court, but certified their case.
Hayes and Palomo applied directly to the Supreme Court, which accepted their case, and the hearing took place back in March.
The top court had to consider two legal issues.
Firstly, whether a Libor or Euribor submission is automatically deemed dishonest if it is influenced by a trade made to profit from the movement.
The second was whether a Libor or Euribor submission was the single cheapest rate at which the panel or prime bank could borrow at the time of the submissions, or whether it was a rate selected from within a range of potential borrowing rates.
Top court overturns convictions
Speaking at the Supreme Court today, Mr Justice Leggatt, said the top court allowed the appeal, agreed on by all the Justices, resulting in both convictions being quashed.
He explained that, at the time, the prosecution’s case alleged that defendants dishonestly agreed to submit false or misleading rates to create a trading advantage.
Hayes admitted to trying to influence submitters to put forward rates advantageous to his trading but denied agreeing to submit false rates.
At his trial, the judge’s instructions to the jury was that any consideration of commercial advantage made the rate submitted false or misleading were legally inaccurate and unfair.
However, the Supreme Court found that the judge’s directions effectively instructed the jury to find Hayes guilty of procuring false or misleading rates, which was a question of fact.
As such, Mr Justice Leggatt said Hayes, and Palombo, were deprived of a fair trial due to these legally inaccurate and unfair directions. The Supreme Court deemed the convictions to be unsafe and ordered them to be quashed.
Commenting on the ruling, Hayes said: “My faith in the criminal justice system at times was likely destroyed and it has been restored by the justices from the Supreme Court today and I think it’s only right that more criminal appeals should be heard at this level.”
His lawyer Karen Todner said: “What Tom [Hayes] and the other bankers have gone through is a horrendous miscarriage of justice.”
“There have been massive legal errors by both the Judges involved in the initial conviction and, I would say, the SFO and those who represented it. The case highlights numerous issues about our criminal justice system all of which I believe meet the criteria for a public inquiry,” she added.
A spokesperson for the SFO said: “We have considered this judgment and the full circumstances carefully and determined it would not be in the public interest for us to seek a retrial.”