Rate rigging was endemic – Libor trial

Hayes told investigators Libor fixing “definitely endemic” at certain institutions, court hears

Southwark Crown Court

Tom Hayes, the former UBS and Citigroup trader accused of rigging Libor, told investigators that attempted rate manipulation was "definitely endemic" at institutions with trading interests that depended on the benchmark, a London court heard today (June 2).

The jury at Southwark Crown Court heard that during Hayes's initial interview with the UK Serious Fraud Office (SFO) he believed he was not doing anything out of line with what was expected at UBS.

"It's entirely endemic ... it happens all over the place," he said during the recorded interview.

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After his arrest in December 2012, Hayes initially agreed to co-operate with the SFO's investigation.

On day five of the first criminal prosecution arising from Libor rigging, the jury was read a transcript of the subsequent interviews that took place at the beginning of 2013.

In the transcript, Hayes described the culture within UBS between 2006 and 2009 when he worked on the bank's Tokyo trading desk.

As the court heard in the previous day of the trial, Hayes would encourage brokers to buy traders at other banks meals or take them to strip clubs, potentially in exchange for help in manipulating Libor.

He said his actions were "pretty much standard operating procedure", and that senior managers were aware of what was going on.

Hayes claimed in the interview that he was seated next to the UBS Libor submitter specifically so that the two could communicate over how to set the rate, implying this arrangement was decided by more senior managers within the bank.

"I don't want to sound like a martyr, but that company, UBS, hung me out to dry," Hayes told the SFO, according to the transcript. "There's no way I'm the single Libor manipulator in the world. For them to say that I'm a rogue operator, when they sat me next to the bloke who set the bloody thing."

After Hayes moved to Citigroup in 2010 he attempted to forge similar information-sharing relationships with Libor setters and the cash desk at the US bank, but his behaviour was reported by a whistleblower, the court heard.

He was subsequently sacked by Citigroup when he was discovered to have "improperly attempted to influence Citigroup's yen Libor submission", according to documents relating to his disciplinary hearing presented at the trial.

"You attempted to manipulate the yen Libor and Tibor [the Japanese banks' equivalent of Libor] to benefit your trading positions," read his termination notice. The notice went on to outline how his actions violated Citibank's code of conduct.

In a response to his termination notice from Citigroup, Hayes again claimed his actions were not out of step with those of his peers.

In the note, dated September 9, 2010, Hayes wrote: "I refute that my actions constituted any wrongdoing ... I wish to reiterate that my actions were entirely consistent with those in senior positions of [Citigroup Global Markets Japan]."

Hayes subsequently withdrew from the co-operation agreement he signed with the SFO and now pleads not guilty to eight counts of conspiracy to defraud.

The prosecution is arguing that Hayes was the "ringmaster" at the centre of a widespread conspiracy to rig Libor.

The trial continues.