Hayes was fully aware his actions were dishonest – Libor trial

Ex-UBS and Citibank trader Tom Hayes admitted in 2013 to his role in manipulating Libor, a London court was told today

Tom Hayes was dismissed from Citi in 2010

In the months following his arrest in December 2012, Tom Hayes signed a co-operation agreement with the Serious Fraud Office (SFO) to assist in its Libor investigation, Southwark Crown Court heard today (June 1). Transcripts show his admission that he "acted dishonestly" in manipulating – or attempting to manipulate – Libor submissions, according to the prosecution.

"He gave a full and frank account of his actions," Mukul Chawla, for the prosecution, told the jury, adding that Hayes also named senior management at both UBS and Citi involved in the scheme, as well as traders at other banks and brokers.

However, Hayes then changed his mind about the agreement – which is usually used to make suspects eligible for a reduction in any sentencing – and now pleads not guilty to eight counts of conspiracy to defraud. He is the first trader to stand trial for the manipulation of the London interbank offered rate (Libor).

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The court heard Hayes say on a voice recording: "There was one occasion where there was a very deliberate attempt by me and the guy at Deutsche [Bank] called Guillaume Adolph to align our positions and make the arrangement to keep Libor high and then low."

"And that was probably for me the most dishonest thing because at the end of the day ... it is basically price-fixing, as the US likes to call it, anti-trust."

Hayes went on to say: "Libor wasn't regulated. We'd had no compliance training, we'd had no rules outlined to us, either internally or externally." But he admitted that he knew he was operating "in a grey area". "I know I was trying to move the rates up and down." But he maintained that influencing the Libor rate was an industry-wide practice. "It pre-dated my arrival at UBS and post-dated my departure."

In the fourth day of laying out its case against Hayes, the prosecution also explained the events that led up to the now 35-year-old's dismissal from Citibank in 2010, when his attempts to influence a trader in charge of the bank's Libor submission were discovered.

The prosecution is arguing that between 2006 and 2010 Hayes conspired with a large number of individuals at banks and brokers to rig the Japanese yen Libor, and was the "ringmaster at the very centre" of the scheme.

Chawla showed the court of a "strategic and co-ordinated plan" to lower UBS's Libor submissions gradually – rather than raise suspicion following a drastic drop – between July 22, 2009 and August 11, 2009, at the behest of Hayes.

The jury heard last week how Hayes often bribed his brokers to help him influence rate submitters at other banks in the form of extra cash generated from broker fees.

But Hayes also instructed brokers to incentivise those on the cash desks of other banks to manipulate Libor. He suggested the brokers should buy meals for the other traders, or take them to a strip club, the court heard today. A transcript of a July 9, 2009 phone call between Hayes and one of his brokers shows the two discussing why some traders weren't following requests. "The problem is I don't feel like you're rewarding them," said Hayes. "I don't feel like they've got any vested interest at the moment, you know, like apart from you hassling them ... what do they get from it?"

Hayes left UBS on September 3, 2009, taking a far higher salary at Citibank, where he received £3.5 million for the nine months he worked there. He started at Citi on December 3, 2009, still based in Tokyo, and started trading in February 2010.
Chawla told the jury that at Citi Hayes continued to use his contacts from his time at UBS. "His pattern of behaviour did not change at all. In his own words, 'it was just like business as usual'."

But in June 2010 the whistle was blown on Hayes's activities related to the yen Libor and an internal investigation was launched, leading to his dismissal in September 2010.

Hayes's boss Andrew Thursfield had in 2009 explained in an email to other senior management that the rules surrounding the setting of Libor were "strict". Although market activity could help as an input into the process, he wrote in an internal email, "any recommendation or suggestions as to where the rates should be set have to be disregarded".

The court was read a transcript from a March 3, 2010 phone call where Hayes was asking Hayato Hoshino, a Citi yen swaps trader, to persuade Burak Celtik, Citi's yen Libor submitter, to move his submissions according to Hayes's wishes. "Okay, when he is quiet just mention that we have a big three-month Libor set on the IMM [International Monetary Market] today so if they could move three-month lower by one basis point for a few weeks it would help."

According to the transcript, Hayes reminded Hoshino not to put the request in writing, and instead "just have a quiet word with him".

It took a few more months before Hoshino "plucked up the courage to ask Mr Celtik to move his submission", Chawla said. An internal memo later showed that Celtik did not accept the request, saying that it "contravenes compliance rules", and an internal investigation was launched.

Chawla reminded the jury that Hayes deliberately disregarded the Libor definition: "The Libor definition is all about the borrowing rates of banks, not the trading positions of an individual."

The trial continues.