Tom Hayes, the trader accused of trying to rig a key interest rate behind trillions of dollars in financial deals, was allowed to keep a £2.2m bonus despite being sacked by his bank for “attempting to manipulate” financial markets.
Southwark crown court heard on Tuesday that in 2010 a disciplinary committee investigating alleged rigging of the Libor interest rate at his then employer Citigroup was asked by Hayes: “How much are you going to pay me to go quietly?”
The committee then sacked Hayes without a payoff, but did not exercise an option to claw back his multimillion pound bonus.
In its letter dismissing the 35-year-old former trader, the bank wrote: “Citigroup has uncovered that you attempted to manipulate the Yen Libor and [the Tokyo equivalent] Tibor rates in order to benefit your trading position,” which it said was a clear breach of its code of conduct, “resulting in the possibility of serious regulatory actions”.
However, it added that it was not “exercising its right to demand repayment of Y292m [worth £2.2m at the time]” that it had paid Hayes when he joined the bank from rival UBS in late 2009.
The evidence emerged on day five of Hayes’s trial, Britain’s first for Libor manipulation, where the trader denies eight counts of conspiracy to defraud between 2006 and 2010. He has been diagnosed with mild Asperger’s syndrome and has been sitting in the well of the court during his trial rather than in the dock.
The court also heard how Hayes told investigators how he thought the decision to sack him by the Citigroup committee – which included Brian Mccappin, who was then running Citigroup’s Japanese investment bank – was ironic, with him telling Mccappin “you were involved in it up to your eyeballs as well”.
Hayes says that the bank’s legal counsel replied that Mccappin “didn’t have trading positions”, only for the trader to respond: “That’s not really true is it? As a CEO you have responsibility for every trading position the bank’s got.”
Prosecutors say that the trader, who earned more than £1m during his three years at UBS and then £3.5m in nine months at Citigroup, gave the Serious Fraud Office a “complete confession” that he manipulated Libor in exchange for the prospect of a lighter sentence, only to then change his mind and plead not guilty.
Hayes was arrested at 7.10am on 11 December 2012 and taken for interview at Bishopsgate police station in the City of London. He declined to answer questions, during a series of interviews spanning around three hours, but his lawyers then wrote to the SFO in January 2013 saying that Hayes would co-operate.
Portions of a transcript of Hayes’ subsequent “scoping interviews” with SFO officers were then read to the court, in which he answered “yes” to the question: “Do you admit that you acted dishonestly in the manipulation and attempted manipulation of submissions bring made for Libor?”
He also acknowledged: “There was one occasion when a very deliberate attempt was made by me and a guy at Deutsche Bank called Guillaume Adolph, to align our positions and make an agreement to keep our Libors, you know, high and then low. You know that was probably for me the most dishonest. I blatantly knew I shouldn’t have done that.”
He also argued that Libor was being rigged in other currencies, but that the guilty parties were harder to catch as agreements had been reached during face-to-face talks. He added: “There is no way that I’m the only Libor manipulator in the world. It’s just not possible. I might be the most open about it and I’ve left reams of evidence.”
The prosecution alleges Hayes was motivated by greed and acted as the “ringmaster” in an enormous fraud to rig the benchmark Libor interest rate, allowing him to make increased profits from his trading.
The case continues.
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