Jury hears Hayes faced tougher regime at Citi than at UBS

Hayes had significant compliance training at Citi and was aware of the bank’s stance on Libor rules, but carried on with his scheme of influencing the rate regardless, London court hears

Tom Hayes: fired by Citi after nine months

Tom Hayes spent approximately two months undertaking regulatory and compliance training before he could trade at Citigroup's Tokyo office, Southwark Crown Court heard today (June 19). He also received a group email from senior management within days of his commencement date in 2009 which set out Citi's "strict" expectations for abiding by Libor rules.

But that did not stop him from continuing the scheme he started at UBS to influence submitters to move their fixes to suit his trading book, the prosecution said.

The training included modules for compliance, global policy and Citi's code of conduct, as well as a seminar on compliance for over-the-counter derivatives. Hayes also signed off on the bank's code of conduct on December 2, 2009, which was a requirement of all new hires to show they had read the rules and understood their obligations.

Hayes is the first individual to face trial for the alleged rigging of the Japanese yen London interbank offered rate (Libor). He faces eight counts of conspiracy to defraud covering 2006–2010, to which he has pleaded not guilty.

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Hayes left UBS, where he had worked as a derivatives trader for three years, in September 2009 because he was dissatisfied with his pay, according to the prosecution. His 2009 salary at UBS was £1.3 million for the nine months he worked, while Citi offered him £3.5 million for 2010.

Yesterday the prosecution showed conversations between Hayes and the Serious Fraud Office (SFO) in the months following his arrest in 2012, in which Hayes said he had noticed the differences between the two banks' cultures immediately on joining Citi.

For instance, an email was sent out at the beginning of December 2009 – and forwarded to Hayes days later – in which Andrew Thursfield, a Citi manager, wrote: "The rules for rate setting are very strict ... While additional information on relevant market activity can help as an input into the process, any recommendation or suggestions as to where rates should be set have to be disregarded."

Hayes told the SFO that nobody at UBS had ever explicitly sent out any such notices while he was an employee from 2006–2009.

The court was shown today a message Hayes sent to London-based Hayato Hoshino, a Citi yen swaps trader on December 14, days after Thursfield's email had landed in his inbox: "The rise in 6M [six-month] Libor was due to Citi. Do you know why they moved it high?" He then asked Hoshino if he talked to the cash desk and if he knew about Libor moves in advance. "If we know ahead of time we can take a position and scalp the market," he said according to the records.

Although Hayes officially joined the bank on December 3, 2009, he did not start trading until February 2010.

Throughout that time, Hayes set about meeting people across the Citi treasury desks. While he was in London January 27, 2010, his seniors organised a lunch for him to meet the office's cash desk – the details of which were described by Hayes to one of his brokers. In that conversation, shown to the court today, he admitted he was not sure he had won them over: "How much influence am I going to have in inverted commas? I don't know."

A later conversation was then shown between Hayes and the broker, dated March 3, 2010. Hayes is recorded as stating that "Citi moved 3M [Libor] down", to which the broker responded: "Is that a good thing?"

"Well let me put it this way," Hayes remarked, "that lunch I paid for was worth it."

The next day he thanked one of the traders on the London cash desk for the fix: "Thanks for your help yesterday, I appreciate it". He added that he may get in touch every now and then for assistance. But the trader warned him that they don't "look at individual positions" when setting the rate.

In June 2010 the whistle was blown on his tactics and an internal investigation was launched that resulted in his dismissal. The disciplinary action minutes were shown briefly in court today, as well as his termination notice, both dated September 6, 2010.

The trial continues.