Thursday 7 April 2016 7:56 pm

Libor scandal: Top bosses must have known about rate rigging, alleges former Barclays trader

A former Barclays banker who is currently standing trial accused of offences related to manipulating Libor has alleged that his bosses must have known about the rate-rigging scandal, a court was told today.

Former Barclays traders Stylianos Contogoulas, Jay Merchant, Alex Pabon and Ryan Reich, along with one of Barclays' former Libor submitters Jonathan Mathew, have been charged with conspiracy to defraud on allegations of conspiring to manipulate US-dollar linked Libor between June 2005 and September 2007.

Bloomberg reported that prosecution lawyer James Hines QC said that Merchant had told the Serious Fraud Office (SFO) in a 2014 interview that the operating chief of the investment bank Mike Bagguley, former global head of fixed income Eric Bommensath and executive Harry Harrison all must have known about the alleged activities.

According to the SFO interview, Bommensath is alleged to have told Merchant over lunch "to introduce the New York swaps desk to these new practices" and to "teach them how to communicate with the cash desk in London and make the New York desk more profitable".

Bagguley, Bommensath and Harrison, who all deny Merchant's accusations and are not on trial, will be testifying for the prosecution later on in the case.

Reuters reported that Hines added: "All three are alleged by Merchant to have known, approved and instructed the practice. All three deny this was an industry practice and they deny this practice was condoned or approved."

Merchant, who worked in both London and New York during his career with Barclays, was the highest paid of all the five currently on trial during the period concerned. The court heard yesterday that Merchant's pay packet in 2007 was worth £2.2m in salary and bonuses.

Merchant also acted as line manager for Pabon and Reich.

Bloomberg also reported that Hines told the court that the defendants decided to give up on their alleged conspiracy once the financial crisis hit, as it became too difficult to cover up.

"People became very interested in Libor," Hines said. "They became very interested in the setting process, they became very interested in the submissions made by each bank, and so the conspiracy was at an end."

The trial, which is currently being heard at Southwark Crown Court and is scheduled to last around 12 weeks, is the third brought by the SFO in relation to their ongoing investigation into Libor.

The defence lawyers are expected to start delivering their opening arguments tomorrow morning.