Trial hears of Citi senior manager's concerns about Hayes

Libor trial hears that Citi senior manager Andrew Thursfield was "concerned" in 2009 over Tom Hayes's openness that he routinely asked submitters to move Libor.

Andrew Thursfield, head of Citigroup's European risk treasury business, told the jury in the trial of ex-Citi and UBS trader Tom Hayes today (June 24) that he did not have a "good impression" of Hayes when he first met him in 2009.

The court heard that Hayes, who was due to start at Citi's Tokyo office in December 2009, had been in the London office to meet his new colleagues on October 8, 2009. A day later, Thursfield told his colleague Stephen Compton over the telephone that he was "concerned" about the new hire.

"He is obviously very confident, and very aggressive and active in the market," the jury heard Thursfield tell Compton in an audio recording of the conversation. "However it was the way that he was sort of ... openly talking about [the way he] just calls his cash guys and asks them to move Libors up and down depending on how his fixes are."

Thursfield went on to say he was "a hundred percent" sure that Hayes had suggested they form the same relationship. "If I had an interview with him, and he talked at all like that, it would have raised alarm bells," he told Compton. He also commented that it was worth being wary, when Citigroup had just "paid another $75,000 bill" to its lawyers in relation to an investigation into Libor fixing by the US Commodity Futures Trading Commission.

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Hayes, a former Tokyo-based yen derivatives trader, is on trial in London's Southwark Crown Court facing eight counts of conspiracy to defraud between 2006 and 2010. The prosecution, led by Mukul Chawla, is arguing that he conspired with a large number of tranders and brokers to rig the London interbank offered rate (Libor) to suit his own trading positions. Hayes has pleaded not guilty and has said that the practice of influencing Libor submitters was "widespread".

Prior to Hayes starting at Citigroup and while he was on gardening leave from UBS, emails were circulated between Citi's Tokyo and London offices regarding Libor, the court heard today.

In response to one such email chain, which involved the Tokyo team giving the Libor submitter in London some local "market colour" and indicating that the bank's rate should be lower, Thursfield intervened to make sure the team were "aware of the nuances in the guidelines", the court heard today.

"The rules for rate setting are very strict. The contribution does have to be formed independently by the trader/desk in London who is responsible," Thursfield wrote. "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."

Chawla showed Thursfield the email in court today, and pointed out how he had also copied in one of Citi's compliance officers.

"I had a slight uneasy feeling that a senior manager in Japan had been part of this message [which had suggested] that rates should be lower," Thursfield told the jury. "I wanted to make sure that compliance officers were made aware of these requests."

Thursfield, who has worked at Citi's treasury department for more than 20 years, was at the time also a member of the Foreign Exchange and Money Market Committee, the group tasked by the British Bankers' Association (BBA) to oversee the Libor submitting process. Membership was by invitation and mostly made up of middle- and senior-level managers representing panel banks.

He had joined the committee in May 2008, around the time an email was sent out to all members, drafted by BBA chief executive Angela Knight, about concerns over the inaccuracy of the USD Libor and calling for the need of a consultation on the submitting process.

The court heard today that despite widespread concerns – and reported evidence – of certain banks trading in the cash market at a rate higher than their Libor submissions, the committee did not at any point remove any bank from the panel, even though it had the powers to do so.

Hayes's employment with Citi was terminated in September 2010, following an internal investigation launched when he convinced a swaps trader in London to ask Citi's Libor submitter to increase the bank's rate on June 28 and 29, in line with fixes on his book, the court heard.

The trial continues.