Libor rigging special: Calls grow to review all convictions of City traders as ‘UK’s position is absurd’
A major City scandal that most bankers in London had left behind years ago seems to be coming back with a vengeance.
In a new twist in one of the Square Mile’s biggest-ever scandals, the Libor rate-fixing case, British former trader Tom Hayes has had the long-running case against him in the United States thrown out.
As a result, he and others are urging the UK to review all convictions of City traders.
US case dismissed
Hayes, who had always maintained that he was wrongfully convicted in the UK, now awaits an imminent decision from the Criminal Cases Review Commission on whether his case will be referred back to the Court of Appeal.
A New York district judge has approved a motion by prosecutors to dismiss an indictment against Hayes, the former trader sentenced to 11 years in prison in the UK for manipulating the Libor interest rate.
Following the United States Court of Appeal’s overturning of the convictions of two Deutsche Bank traders for the same offence, prosecutors who filed charges against Hayes accepted that there was no longer a provable case, and petitioned the court to dismiss the case.
The timing of the decision sharpens focus on the UK’s Criminal Cases Review Commission (CCRC), whose final decision on whether to refer Hayes’s case back to the Court of Appeal is imminent.
Hayes, who has always maintained his innocence, had previously been told by the CCRC that they had made a provisional decision not to refer his case, but it agreed to hear further submissions from his legal team before making a final ruling.
The overturning of the convictions of the Deutsche Bank traders, coupled with the subsequent decision to drop charges against Hayes, makes the decision to convict Hayes in the UK appear more unsafe than ever, especially since the US Court of Appeal found that there had been no rules in place governing Libor-setting for any trader to break.
Hayes has previously stated that he was scapegoated by the Serious Fraud Office (SFO) to satisfy the public’s clamour for a scalp in the wake of the 2008 financial crisis, despite the paucity of evidence against him.
The US rulings mean that the United Kingdom is now the only country to still maintain that there was a criminal element involved in the Libor affair, despite even the British Banking Association’s own Libor instructions not prohibiting traders from taking their own positions into account when submitting rates to the panel.
The lack of regulations being in place at the time was a key reason for the US Court of Appeal’s decision to quash the convictions of the Deutsche Bank traders, and consequently this was recognised by the Southern District of New York when petitioning for Hayes’s indictment to be dismissed.
Should the CCRC take a different stance, Hayes’s legal team are considering seeking a judicial review of his case in order to clear his name.
Speaking to City A.M., Hayes said he is “pleased to confirm that, after years of tireless work by my solicitor Karen Todner, the Department of Justice in the USA has now dismissed my charges in their entirety, explicitly acknowledging the flawed legal theory pursued in the cases of so called Libor ‘rigging’.”
“At last, after ten years the threat of extradition to the USA for doing my job legitimately as a trader has been lifted,” a visibly relieved Hayes said.
“It is now time for the UK to examine the convictions of all traders. The UK is now the sole jurisdiction that deems our conduct to have been criminal.”Tom Hayes
“The US Department of Justice has seen fit to dismiss charges based on the same facts, evidence and case in law that the UK courts used to justify my 11 year prison sentence,” he added.
“That alone should be grounds enough for these cases to be referred back to the Court of Appeal in the UK, and if need be to the Supreme Court, which is yet to hear the case,” Hayes said.
He argued that “it is high time the UK courts re-examined the evidence that the Second Circuit in the USA heard in reaching their decision. The UK’s legal position is now demonstrably absurd. “
Hayes pointed out that “British citizens trading exclusively in the UK have had their guilty pleas in the USA expunged, whilst American citizens trading exclusively in the USA have been imprisoned in the UK for conduct now acknowledged to be legal in their home country. Justice for all those incorrectly prosecuted by the Serious Fraud Office is paramount.”
In total, SFO probes led to prison sentences of approximately 50 years for allegedly rigging Libor.
The scandal that rocked the City
The evidence against Tom Hayes and other traders consisted of messages and emails asking for interest rates to be submitted “high” or “low” to suit their bank’s trades, which could make or lose money if the Libor average rose or fell.
In 2012, the US Department of Justice claimed this was corrupt. Defendants said it was normal commercial practice to ask for high or low estimates, within a range of interest rates on offer from lenders in the market.
There were no laws or written regulations about Libor at the time the traders made the requests.
In late 2014, lawyers for Tom Hayes argued that because there was no rule against the traders’ requests, the case should be dismissed.
In January 2015, Lord Justice Davies ruled that it was “self-evident” that the requests were against the rules.
Banks were not allowed to take into account commercial interests, such as trading positions linked to the Libor rate, when making their estimates. That ruling was used to prosecute 24 traders in the UK.
However, US judges decided in January 2022 that far from being “self-evidently” corrupt, the requests did not break any rules or laws in either the US or the UK.
Long list of convictions
Those sentenced in the UK who were trading in the UK and were UK citizens
Johnathan Matthew on 07/07/2016 was sentenced to 4 years. Submitted USD Libor.
Peter Johnson on 07/07/2016 was sentenced to 4 years following guilty plea. Submitted USD Libor and was subject of The Lowballing Tapes series on BBC Radio 4.
Colin Birmingham on 31/03/19 was sentenced to 5 years submitted EUR Euribor.
Those sentenced in the UK who were trading in the UK and were not UK citizens
Carlo Palombo on 31/03/19 was sentenced to 4 years traded EUR Euribor Italian citizen.
Christian Bittar sentenced on 19/07/18 to 5 years 4 months following guilty plea. Traded EUR Euribor. French Citizen (French court ruled conduct did not amount to criminal offence but served full sentence in UK despite this).
Philippe Moryoussef sentenced on 19/07/18 to 8 years in absentia traded EUR Euribor French Citizen (French court ruled conduct did not amount to criminal offence). Remained in France European arrest warrant not executed by the French on basis his conduct was not criminal.
Those sentenced in the UK who were not trading in the UK but were UK citizens
Tom Hayes on 03/08/15 was sentenced to 14 years (reduced to 11 on appeal) traded JPY Libor.
British citizen worked exclusively in Tokyo was only defendant convicted in conspiracy following acquittal of co-defendants at separate trial.
Those sentenced in the UK who were not UK citizens nor trading in the UK
Alex Pabon on 07/07/2016 was sentenced to 33 months. Traded USD Libor exclusively in New York. Is a US citizen as is his family. Did not spend a single indictment day in the UK. (Note Alex Pabon would now not face trial in the U.K. as no longer a crime in his home country).
Those sentenced in the UK who were not trading in the UK and were green card holders in the USA
Jay Merchant on 07/07/2016 was sentenced to 6.5 years (reduced to 5.5 years on appeal). Traded USD Libor exclusively in New York. Was a UK citizen and had a US Green card. Wife and both children US citizens. Did not spend a single indictment day in the UK. He was always based in the US and was eligible for US citizenship after being charged in 2014 but before the 2016 trial.
He did not change citizenships because he did not want to muddy the waters with the SFO. Voluntarily renounced UK citizenship in 2018 at end of his sentence because of this corrupt ruling and became an Indian citizen again.
Two British citizens working in the UK who pled guilty and were convicted in the USA who have had their plea and conviction overturned in the USA on the basis that it is not a crime.
Gavin Black U.K. citizen worked in U.K. as a USD Libor trader. Convicted at trial overturned as not a crime.
Mike Curtler U.K. citizen worked in U.K. as a USD Libor trader/submitter. Pled guilty later overturned as not a crime.
11 acquitted following trial in the UK
Darrell Read U.K. citizen worked in New Zealand. JPY Libor Broker.
Daniel Wilkinson U.K. citizen worked in U.K. JPY Libor Broker.
Colin Goodman U.K. citizen worked in U.K. JPY Libor Broker.
Noel Cryan U.K. citizen worked in U.K. JPY Libor Broker.
Terry Farr U.K. citizen worked in U.K. JPY Libor Broker (since deceased).
James Gilmore U.K. citizen worked in U.K. JPY Libor Broker.
Sisse Bohart Danish citizen worked in U.K. EUR Euribor submitter.
Andreas Hauschild German citizen worked in Germany EUR Euribor submitter (Germany refused to exercise European arrest warrant, was subsequently arrested overseas and extradited for trial).
Achim Kraemer German worked in Germany EUR Euribor submitter (came to U.K. voluntarily despite Germany not recognising it as a criminal offence and continued working for Deutsche Bank including throughout the trial).
Stylianos Contogoulas Greek citizen worked in the U.K. traded USD Libor.
Ryan Reich American citizen worked in the USA traded USD Libor (note would now not face trial in U.K. as no longer a crime in home country).
Four charges and European Arrest Warrants dropped following refusal to extradite by home nations as not criminal
Stephane Esper French citizen worked in France and traded EUR Euribor.
Joerg Vogt German citizen worked in Germany submitted and traded EUR Euribor.
Ardalan Gharagozlou German citizen worked in Germany submitted and traded EUR Euribor.
Kai-Uwe Kappauf German citizen worked in Germany submitted and traded EUR Euribor (still employed by Deutsche Bank in compliance capacity).